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Quantenna Announces First Quarter 2019 Financial Results

1154 Days ago

Wave 3 10G Strategy Results in 28% Year-Over-Year Quarterly Revenue Growth

SAN JOSE, Calif., April 29, 2019 (GLOBE NEWSWIRE) -- Quantenna Communications, Inc. (NASDAQ:QTNA) today announced preliminary unaudited financial results for the first quarter ended March 31, 2019, with revenues of $57.7 million; GAAP net loss per share of $(0.03) and non-GAAP diluted earnings per share of $0.15.

Financial Summary

  Three Months Ended
  March 31,
  April 1,
Revenue $ 57,678     $ 45,117  
Gross Profit 29,508     22,765  
Gross Margin 51.2 %   50.5 %
Net income (loss):      
GAAP $ (1,105 )   $ (3,247 )
Non-GAAP 6,240     1,160  
Net income (loss) per share - diluted:      
GAAP $ (0.03 )   $ (0.09 )
Non-GAAP 0.15     0.03  
(in thousands except per share data, unaudited)    

Please see the note regarding the use of non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.

First Quarter Company Highlights

  • Revenue of $57.7 million, representing year-over-year growth of 28% over the first quarter of 2018.
  • GAAP net loss per share of ($0.03) compared to ($0.09) in the first quarter of 2018. Non-GAAP dilutive EPS $0.15 compared to $0.03 in the first quarter of 2018.
  • GAAP gross margin of 51.2% compared to 50.5% in the first quarter of fiscal year 2018. Non-GAAP gross margin of 51.3% compared to 50.5% in the first quarter of fiscal year 2018.
  • Announced Qdock, a software framework enabling easy integration of third-party applications with Quantenna’s Wi-Fi solutions.
  • Partnered with NXP Semiconductors N.V. to develop comprehensive platforms for the Wi-Fi 6 market. 
  • Set a new bar for Wi-Fi network performance by achieving over 2Gbit/s total throughput with Intel Wireless-AC client devices.
  • Announced that Quantenna’s Spartan architecture enables high-capacity mesh Wi-Fi to TIME’s Malaysian Customers.
  • Announced that Moscow City Telephone Network (MGTS), the fixed network division of Russian cellco Mobile TeleSystems (MTS), has adopted Quantenna’s high-performance 4x4 MIMO solution for its new GPON gateway.
  • Announced that Cognitive Systems’ patented Aura WiFi Motion™ technology will become a standard option for customers developing products based on the Quantenna platform. 
  • Announced with Plume the world’s first OpenSync™ Wi-Fi 6 integration for the delivery of cloud services to the consumer, leveraging in-home Wi-Fi infrastructure.

Proposed Acquisition of Quantenna by ON Semiconductor

As previously announced on March 27, 2019, ON Semiconductor has agreed to acquire Quantenna for $24.50 per share in an all cash transaction. The acquisition consideration represents equity value of approximately $1.07 billion and enterprise value of approximately $936 million, after accounting for Quantenna’s net cash of approximately $136 million at the end of the fourth quarter of 2018. The acquisition is expected to significantly enhance ON Semiconductor’s connectivity portfolio with the addition of Quantenna’s industry leading Wi-Fi technology and software capabilities.

The transaction has been approved by ON Semiconductor’s and Quantenna’s boards of directors and is currently expected to close in the second half of 2019. No approval of the stockholders of ON Semiconductor is required in connection with the proposed transaction. On April 22, 2019, early termination of the waiting period under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, was granted. Completion of the proposed acquisition remains subject to approval by Quantenna’s stockholders, other regulatory approvals and other customary closing conditions.

Due to the pending acquisition by ON Semiconductor, Quantenna management will not be hosting an investor conference call and will not provide forward looking guidance.

In addition, in light of the pending acquisition by ON Semiconductor, Quantenna’s board of directors has postponed its regular 2019 Annual Meeting of Stockholders, which typically occurs in June 2019. It is expected that the 2019 Annual Meeting of Stockholders would be held (and the meeting date, record date and related matters announced) later in 2019 if the acquisition by ON Semiconductor is not consummated before the end of 2019.

Non-GAAP Financial Measures

In addition to GAAP reporting, Quantenna provides information regarding net income, gross profit, gross margin, and operating expenses on a non-GAAP basis. This non-GAAP information excludes stock-based compensation expense, expenses incurred in connection with the pending acquisition of the Company by ON Semiconductor Corporation, and changes to deferred tax balances. These non-GAAP measures are used by the Company’s management for the purposes of evaluating the underlying operating performance of the Company, establishing internal budgets, comparing performance with internal forecasts and goals, strategic planning, benchmarking against other companies, to provide a more consistent basis of comparison and to enable more meaningful period to period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial tables included in this press release.

Forward-Looking Statements

This press release contains forward-looking statements based on Quantenna’s current expectations, including statements regarding Quantenna’s preliminary financial results for the first quarter ended March 31, 2019, expected future business and financial performance, growth opportunities, product technologies and customer relationships. The words "believe," "estimate," "expect," "intend," "anticipate," "plan," "project," "will" and similar phrases as they relate to Quantenna are intended to identify such forward-looking statements. These forward-looking statements reflect the current views and assumptions of Quantenna and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are the following: challenges developing new and leading edge products on a timely basis that achieve market acceptance; the complexity of the products, including integration requirements with components from other third parties that are outside of Quantenna's control; quarterly fluctuations in revenues and operating results; intense market competition, including competition from other companies that are larger and have greater resources and broader product ecosystem offerings; ability to accurately predict future revenue and expenses; potential cancellation of customer orders; risks that Quantenna may not be able to maintain its historical growth or achieve similar levels of success with respect to new products; ability to attract and retain customers and service providers; dependence on a limited number of products and customers; intellectual property litigation risks; industry consolidation and risks associated with acquisitions, divestitures and strategic partnerships with respect to Quantenna as well as third parties; product liability risks; risks related to international operations, including the impact of increased tariffs and escalating trade tensions among countries on Quantenna and its customers, end customers, vendors and partners; dependence of Quantenna's customers on components from other third parties; risks that Quantenna may not be able to manage strains associated with its growth; dependence on key personnel; stock price volatility; the cyclical nature of the semiconductor industry; changes in tax and other laws affecting Quantenna’s business and operations; cyberattacks; adjustments to the preliminary financial results reported in this press release for the first quarter of 2019 in connection with completion of the final closing process and procedures and preparation of our Quarterly Report on Form 10-Q; and other factors that are detailed in the Securities and Exchange (“SEC”) filings of Quantenna, which you may obtain for free at the SEC’s website at http://www.sec.gov. Additionally, there are risks and uncertainties in connection with the proposed acquisition of us by ON Semiconductor which may adversely affect our business, future opportunities, employees and common stock, including without limitation, (i) the proposed transaction may not be completed in a timely manner, or at all, (ii) the effect of the announcement or pendency of the proposed transaction, (iii) the failure to satisfy any of the conditions to the consummation of the proposed transaction, including the approval of the merger agreement by our stockholders and the receipt of required regulatory approvals, (iv) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, including a termination fee payable to ON Semiconductor, (v) risks related to diverting management’s attention from our ongoing business operations, (vi) the outcome of any legal proceedings that may be instituted against us related to the merger agreement or the proposed transaction, and (vii) additional costs, charges or expenses resulting from the proposed transaction. Quantenna disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About Quantenna Communications

Quantenna (Nasdaq:QTNA) is the global leader and innovator of high performance Wi-Fi solutions. Founded in 2006, Quantenna has demonstrated its leadership in Wi-Fi technologies with many industry firsts. Quantenna continues to innovate with the mission to perfect Wi-Fi by establishing benchmarks for speed, range, efficiency and reliability. Quantenna takes a multidimensional approach, from silicon and system to software, and provides total Wi-Fi solutions. For more information, visit www.quantenna.com.

Quantenna Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share data, unaudited)

  Three Months Ended
  March 31,
  April 1,
Revenue $ 57,678     $ 45,117  
Cost of revenue 28,170     22,352  
Gross profit 29,508     22,765  
Operating expenses:      
Research and development 19,059     17,601  
Sales and marketing 4,357     4,495  
General and administrative 9,275     4,198  
Total operating expenses 32,691     26,294  
Loss from operations (3,183 )   (3,529 )
Other income, net 697     334  
Loss before income taxes (2,486 )   (3,195 )
Benefit (provision) for income taxes 1,381     (52 )
Net loss $ (1,105 )   $ (3,247 )
Net loss per share - basic and diluted $ (0.03 )   $ (0.09 )
Shares used in computing net loss per share - basic and diluted 38,080     35,848  

Quantenna Communications, Inc.
Unaudited reconciliation of GAAP to Non-GAAP Financial Measures
(in thousands, except per share data)

Non-GAAP Income Statement Items Three months ended March 31, 2019 Three months ended April 1, 2018
Acquisition-Related Expenses** Income Taxes* Non-GAAP
Income Taxes* Non-GAAP
Revenue $ 57,678         $ 57,678   $ 45,117       $ 45,117  
Gross profit 29,508   85   2     29,595   22,765   34     22,799  
Gross margin 51.2 % 0.1 %     51.3 % 50.5 % 0.1 %   50.5 %
Research and development 19,059   2,890   26     16,143   17,601   2,393     15,208  
Sales and marketing 4,357   749   6     3,602   4,495   984     3,511  
General and administrative 9,275   1,506   3,966     3,803   4,198   1,181     3,017  
Income (loss) from operations (3,183 ) 5,230   4,000     6,047   (3,529 ) 4,592     1,063  
Benefit (Provision) for income taxes 1,381       (1,885 ) (504 ) (52 )   (185 ) (237 )
Net income (loss) $ (1,105 ) $ 5,230   $ 4,000   $ (1,885 ) $ 6,240   $ (3,247 ) $ 4,592   $ (185 ) $ 1,160  
Basic shares outstanding 38,080         38,080   35,848       35,848  
Basic earnings per share $ (0.03 )       $ 0.16   $ (0.09 )     $ 0.03  
Diluted shares outstanding 38,080         40,642   35,848       38,703  
Diluted earnings per share $ (0.03 )       $ 0.15   $ (0.09 )     $ 0.03  

*Income tax adjustment relating to change in US Federal and State deferred tax assets.
** Expenses incurred in connection with the pending acquisition of the Company by ON Semiconductor Corporation.

Quantenna Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands, unaudited)

  March 31, 
  December 30,
Current assets      
Cash and cash equivalents $ 40,750     $ 38,881  
Marketable securities 95,729     97,268  
Accounts receivable 35,096     28,326  
Inventory 18,203     20,218  
Prepaid expenses and other current assets 2,465     5,325  
Total current assets 192,243     190,018  
Deferred tax assets 37,425     35,563  
Property and equipment, net 21,610     13,691  
Intangible and other assets, net 6,681     6,384  
Total assets $ 257,959     $ 245,656  
Liabilities and Stockholders’ Equity      
Current liabilities      
Accounts payable $ 8,962     $ 9,852  
Accrued liabilities and other current liabilities 28,193     25,946  
Total current liabilities 37,155     35,798  
Other long-term liabilities 8,642     3,371  
Total liabilities 45,797     39,169  
Stockholders’ equity      
Common stock 4     4  
Additional paid-in capital 337,813     331,551  
Accumulated other comprehensive loss (417 )   (935 )
Accumulated deficit (125,238 )   (124,133 )
Total stockholders’ equity 212,162     206,487  
Total liabilities and stockholders’ equity $ 257,959     $ 245,656  

Quantenna Communications, Inc.
Condensed Consolidated Cash Flows
(in thousands, unaudited)

  Three Months Ended
  March 31, 2019   April 1, 2018
Cash flows from operating activities      
Net loss $ (1,105 )   $ (3,247 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization 1,995     1,125  
Stock-based compensation expense 5,230     4,592  
Deferred income taxes (2,009 )    
Other 136     (50 )
Changes in assets and liabilities:      
Accounts receivable (6,770 )   476  
Inventory 2,015     (5,758 )
Prepaid expenses and other assets 2,294     (147 )
Accounts payable (910 )   8,725  
Accrued liabilities and other current liabilities (6 )   1,053  
Non-current liabilities (635 )    
Net cash provided by operating activities 235     6,769  
Cash flows from investing activities      
Purchase of property and equipment (941 )   (924 )
Purchase of long-term investment     (590 )
Purchase of marketable securities (21,480 )   (13,211 )
Proceeds from sales and maturities of marketable securities 23,211     11,515  
Net cash provided by (used in) investing activities 790     (3,210 )
Cash flows from financing activities      
Proceeds from issuance of common stock 2,964     1,438  
Payments of taxes withheld for vested stock awards (1,932 )   (601 )
Payments related to intangible asset purchase (272 )   (272 )
Repayments of long-term debt     (3,943 )
Net cash provided by (used in) financing activities 760     (3,378 )
Effect of exchange rates on cash and cash equivalents 84      
Net increase in cash and cash equivalents 1,869     181  
Cash and cash equivalents      
Beginning of period 38,881     24,432  
End of period $ 40,750     $ 24,613  

Quantenna Communications, Inc.
Vernon Essi, Jr.

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