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| Quantenna Communications |
| Fourth Quarter and Fiscal Year 2016 |
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| Financial Commentary | | |
| February 13, 2017 | | |
Key Financial Metrics from the Quarter l Revenue of $37.5 million grew 48% Y/Y l Gross margin 51.5% l GAAP operating margin 0.9% l Non-GAAP operating margin 3.2% l GAAP EPS $0.00 l Non-GAAP diluted EPS $0.03 l Cash from operations $0.6 million l Cash & equivalents $117 million l DSO 35 days, down 11 days Q/Q l Annualized inventory turns 4.6x down from 6.7x Q/Q Key Financial Metrics from FY2016 l Revenue of $129.1 million grew 54% Y/Y l Gross margin 49.9% l GAAP operating margin (0.6%) l Non-GAAP operating margin 1.8% l GAAP EPS ($0.30) l Non-GAAP EPS $0.04 l Cash from operations $2.3 million l Capital expenditures $2.7 million First Quarter FY 2017 Guidance l Revenue: $34.5 - $36.5 million l Non-GAAP gross margin: 48% - 50% l Non-GAAP OPEX: down 5% - 10% Q/Q l Stock based compensation: $1.8 million l Tax: $0.3 expense in addition to a 3-7% long-term rate l GAAP EPS: ($0.05) - ($0.03) l Non-GAAP EPS: $0.00 - $0.02 | | Key Highlights from the Quarter
l Commenced shipping production quantities of our QSR10G Wave 3 products, which we released in September 2015. l Announced industry's first 802.11ax Wi-Fi chipset, the QSR10G-AX. l Priced IPO of 6.7 million shares at a price of $16, raising approximately $100 million, net of underwriters discounts and commissions and the overallotment. l Record high gross margin of 51.5% l Received the "Most Respected Private Semiconductor Company" award at the 2016 GSA Awards Ceremony on December 8th.
Financial Results Call and Webcast Our Q4 and 2016 financial results webcast and call will commence on February 13, 2017 at 2:00 p.m. PT (5:00 p.m. ET). The webast may be accessed at http://ir.quantenna.com/.
An archive of the webcast will be available for 90 days from the date of this release.
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| | Quantenna Communications, Inc. | |
| | Revenue Segmentation by WiFi Technology | |
| | (in percentage of revenue, unaudited) | |
| | | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | |
| | 802.11n | 63 | % | 41 | % | 37 | % | 43 | % | 37 | % | 19 | % | 29 | % | 15 | % | |
| | 802.11ac Wave 2 | 27 | % | 47 | % | 52 | % | 47 | % | 61 | % | 80 | % | 71 | % | 84 | % | |
| | 802.11ac Wave 3 (10G) | — | % | — | % | — | % | — | % | — | % | — | % | — | % | 1 | % | |
| | Total Semi Revenue | 90 | % | 87 | % | 89 | % | 90 | % | 98 | % | 99 | % | 100 | % | 100 | % | |
| | Other | 10 | % | 13 | % | 11 | % | 10 | % | 2 | % | 1 | % | — | % | — | % | |
| | Total Revenue | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |
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| February 13, 2017 | Quantenna Q4 and Fiscal 2016 Financial Results | Page 1 of 5 |
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| | Quantenna Communications, Inc. | |
| | Consolidated Statements of Operations (GAAP) | |
| | (in thousands, unaudited) | |
| | | | | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | |
| | Revenue | $ | 18,384 |
| $ | 18,171 |
| $ | 21,806 |
| $ | 25,412 |
| $ | 24,437 |
| $ | 33,035 |
| $ | 34,105 |
| $ | 37,492 |
| |
| | | COGS | 9,831 |
| 8,903 |
| 11,395 |
| 12,425 |
| 12,534 |
| 16,671 |
| 17,247 |
| 18,188 |
| |
| | Gross Margin | 8,553 |
| 9,268 |
| 10,411 |
| 12,987 |
| 11,903 |
| 16,364 |
| 16,858 |
| 19,304 |
| |
| | | GM % of revenue | 46.5 | % | 51 | % | 47.7 | % | 51.1 | % | 48.7 | % | 49.5 | % | 49.4 | % | 51.5 | % | |
| | R&D | 9,762 |
| 8,681 |
| 7,587 |
| 9,545 |
| 10,227 |
| 11,524 |
| 11,162 |
| 13,691 |
| |
| | S&M | 1,848 |
| 1,681 |
| 1,490 |
| 1,625 |
| 1,630 |
| 1,769 |
| 2,172 |
| 2,520 |
| |
| | G&A | 1,427 |
| 1,305 |
| 1,178 |
| 1,302 |
| 1,562 |
| 2,993 |
| 3,248 |
| 2,757 |
| |
| | OPEX | 13,037 |
| 11,667 |
| 10,255 |
| 12,472 |
| 13,419 |
| 16,286 |
| 16,582 |
| 18,968 |
| |
| | | | | | | | | | | | | |
| | | OPEX % of revenue | 70.9 | % | 64.2 | % | 47.0 | % | 49.1 | % | 54.9 | % | 49.3 | % | 48.6 | % | 50.6 | % | |
| | Operating Income (loss) | $ | (4,484 | ) | $ | (2,399 | ) | $ | 156 |
| $ | 515 |
| $ | (1,516 | ) | $ | 78 |
| $ | 276 |
| $ | 336 |
| |
| | | OpInc % of revenue | -24.4 | % | -13.2 | % | 0.7 | % | 2 | % | -6.2 | % | 0.2 | % | 0.8 | % | 0.9 | % | |
| | | Interest & Other Income (loss) | (259 | ) | (221 | ) | (188 | ) | (50 | ) | (182 | ) | (291 | ) | (241 | ) | 10 |
| |
| | | Pretax Income (loss) | (4,743 | ) | (2,620 | ) | (32 | ) | 465 |
| (1,698 | ) | (213 | ) | 35 |
| 346 |
| |
| | | Taxes | 16 |
| 21 |
| 40 |
| 38 |
| 17 |
| 21 |
| 14 |
| 314 |
| |
| | | | Tax Rate | 0 | % | -1 | % | -125 | % | 8 | % | -1 | % | -10 | % | 40 | % | 91 | % | |
| | Net Income (loss) | (4,759 | ) | (2,641 | ) | (72 | ) | 427 |
| (1,715 | ) | (234 | ) | 21 |
| 32 |
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| | | | | | | | | | | | | |
| | Consolidated Statements of Operations (Non-GAAP ) | |
| | (in thousands, unaudited) | |
| | | | | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | |
| | Revenue | $ | 18,384 |
| $ | 18,171 |
| $ | 21,806 |
| $ | 25,412 |
| $ | 24,437 |
| $ | 33,035 |
| $ | 34,105 |
| $ | 37,492 |
| |
| | | COGS | 9,829 |
| 8,901 |
| 11,393 |
| 12,422 |
| 12,531 |
| 16,668 |
| 17,238 |
| 18,170 |
| |
| | Gross Margin | 8,555 |
| 9,270 |
| 10,413 |
| 12,990 |
| 11,906 |
| 16,367 |
| 16,867 |
| 19,322 |
| |
| | | GM % of revenue | 46.5 | % | 51 | % | 47.8 | % | 51.1 | % | 48.7 | % | 49.5 | % | 49.5 | % | 51.5 | % | |
| | R&D | 9,679 |
| 8,611 |
| 7,515 |
| 9,468 |
| 10,126 |
| 11,402 |
| 10,931 |
| 13,234 |
| |
| | S&M | 1,651 |
| 1,485 |
| 1,464 |
| 1,599 |
| 1,600 |
| 1,739 |
| 2,112 |
| 2,392 |
| |
| | G&A | 1,335 |
| 1,203 |
| 1,065 |
| 1,163 |
| 1,392 |
| 2,262 |
| 2,514 |
| 2,494 |
| |
| | OPEX | 12,665 |
| 11,299 |
| 10,044 |
| 12,230 |
| 13,118 |
| 15,403 |
| 15,557 |
| 18,120 |
| |
| | | OPEX % of revenue | 68.9 | % | 62.2 | % | 46.1 | % | 48.1 | % | 53.7 | % | 46.6 | % | 45.6 | % | 48.3 | % | |
| | Operating Income (loss) | (4,110 | ) | (2,029 | ) | 369 |
| 760 |
| (1,212 | ) | 964 |
| 1,310 |
| 1,202 |
| |
| | | OpInc % of revenue | -22.4 | % | -11.2 | % | 1.7 | % | 3 | % | -5 | % | 2.9 | % | 3.8 | % | 3.2 | % | |
| | | Interest & Other Income (loss) | (259 | ) | (221 | ) | (188 | ) | (50 | ) | (182 | ) | (291 | ) | (241 | ) | 10 |
| |
| | | Pretax Income (loss) | (4,369 | ) | (2,250 | ) | 181 |
| 710 |
| (1,394 | ) | 673 |
| 1,069 |
| 1,212 |
| |
| | | Taxes | 16 |
| 21 |
| 40 |
| 38 |
| 17 |
| 21 |
| 14 |
| 314 |
| |
| | | | Tax Rate | 0 | % | -1 | % | 22 | % | 5 | % | -1 | % | 3 | % | 1 | % | 26 | % | |
| | Net Income (loss) | $ | (4,385 | ) | $ | (2,271 | ) | $ | 141 |
| $ | 672 |
| $ | (1,411 | ) | $ | 652 |
| $ | 1,055 |
| $ | 898 |
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| | GAAP to Non-GAAP Reconciling Items | |
| | (in thousands, unaudited) | |
| | | | | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | |
| | Stock Based Compensation | | | | | | | | | |
| | | COGS | $ | 2 |
| $ | 2 |
| $ | 2 |
| $ | 3 |
| $ | 3 |
| $ | 3 |
| $ | 9 |
| $ | 18 |
| |
| | | R&D | 83 |
| 70 |
| 72 |
| 77 |
| 101 |
| 122 |
| 231 |
| 457 |
| |
| | | S&M | 197 |
| 196 |
| 26 |
| 26 |
| 30 |
| 30 |
| 60 |
| 128 |
| |
| | | G&A | 92 |
| 102 |
| 113 |
| 139 |
| 170 |
| 731 |
| 734 |
| 263 |
| |
| | | | Total | $ | 374 |
| $ | 370 |
| $ | 213 |
| $ | 245 |
| $ | 304 |
| $ | 886 |
| $ | 1,034 |
| $ | 866 |
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| February 13, 2017 | Quantenna Q4 and Fiscal 2016 Financial Results | Page 2 of 5 |
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| | Quantenna Communications, Inc. | |
| | Consolidated Balance Sheet & Cash Flows | |
| | (in thousands, unaudited) | |
| | | | | | | | | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | |
| | Period Ending | Mar 27 '16 | Jun 26 '16 | Sep 25 '16 | Jan 01 '17 | |
| | Assets | | | | | | | | |
| | Current assets | | | | | |
| | | Cash and cash equivalents | $ | 20,744 |
| $ | 16,943 |
| $ | 17,822 |
| $ | 117,045 |
| |
| | | Accounts receivable | 13,569 |
| 20,813 |
| 17,306 |
| 14,480 |
| |
| | | Inventory | 7,259 |
| 7,449 |
| 10,268 |
| 15,820 |
| |
| | | Restricted Cash | — |
| 1,500 |
| 1,559 |
| 59 |
| |
| | | Prepaid expenses and other current assets | 1,743 |
| 1,666 |
| 1,842 |
| 2,411 |
| |
| | | | Total current assets | 43,315 |
| 48,371 |
| 48,797 |
| 149,815 |
| |
| | Property and equipment, net | 2,828 |
| 3,548 |
| 3,842 |
| 4,742 |
| |
| | Other assets | 178 |
| 1,311 |
| 2,443 |
| 232 |
| |
| | | | Total assets | $ | 46,321 |
| $ | 53,230 |
| $ | 55,082 |
| $ | 154,789 |
| |
| | Liabilities, Redeemable Convertible Preferred Stock, and | | | | | |
| | Stockholders’ Equity (Deficit) | | | | | |
| | Current liabilities | | | | | |
| | | Accounts payable | $ | 5,927 |
| $ | 3,778 |
| $ | 6,038 |
| $ | 7,776 |
| |
| | | Accrued liabilities and other current liabilities | 7,517 |
| 10,626 |
| 11,910 |
| 11,801 |
| |
| | | Loan obligations, current portion | 3,552 |
| 2,102 |
| 2,218 |
| 2,257 |
| |
| | | | Total current liabilities | 16,996 |
| 16,506 |
| 20,166 |
| 21,834 |
| |
| | Loan obligations, long term portion | 1,386 |
| 7,967 |
| 4,342 |
| 3,680 |
| |
| | Other long term liabilities | | | 578 |
| 527 |
| |
| | Convertible preferred stock warrant liability | 265 |
| 300 |
| 364 |
| — |
| |
| | | | Total liabilities | 18,647 |
| 24,773 |
| 25,450 |
| 26,041 |
| |
| | | | | | | | | | | | | |
| | Convertible preferred stock | 184,704 |
| 184,704 |
| 184,704 |
| — |
| |
| | | | | | | | | | | | | |
| | Stockholders’ equity (deficit) | | | | | |
| | | Common stock | — |
| — |
| — |
| 3 |
| |
| | | Additional paid-in capital | 4,364 |
| 5,381 |
| 6,534 |
| 290,319 |
| |
| | | Accumulated deficit | (161,394 | ) | (161,628 | ) | (161,606 | ) | (161,574 | ) | |
| | | | Total stockholders’ equity (deficit) | (157,030 | ) | (156,247 | ) | (155,072 | ) | 128,748 |
| |
| | | | Total liabilities, conv prfrd stock and stockholders’ equity (deficit) | $ | 46,321 |
| $ | 53,230 |
| $ | 55,082 |
| $ | 154,789 |
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| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | Cash flows from operating activities | | | | | |
| | Net income (loss) | | | $ | (1,715 | ) | $ | (234 | ) | $ | 22 |
| $ | 32 |
| |
| | Adjustments to reconcile net income (loss) to net cash | | | | | |
| | provided by (used in) operating activities | | | | | |
| | | Depreciation and amortization | 269 |
| 268 |
| 343 |
| 398 |
| |
| | | Stock-based compensation expense | 304 |
| 886 |
| 1,009 |
| 866 |
| |
| | | Stock issued for services | — |
| — |
| 25 |
| — |
| |
| | | Non-cash interest expense | 34 |
| (4 | ) | 110 |
| 182 |
| |
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| February 13, 2017 | Quantenna Q4 and Fiscal 2016 Financial Results | Page 3 of 5 |
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| | | Remeasurement of preferred stock warrant liability | 10 |
| 35 |
| 64 |
| (22 | ) | |
| | | Changes in assets and liabilities | | | | | |
| | | | Accounts receivable | 2,148 |
| (7,244 | ) | 3,507 |
| 2,826 |
| |
| | | | Inventory | 148 |
| (190 | ) | (2,819 | ) | (5,552 | ) | |
| | | | Prepaid expenses and other current assets | (315 | ) | 273 |
| (241 | ) | (618 | ) | |
| | | | Other assets | 4 |
| (59 | ) | 71 |
| (66 | ) | |
| | | | Accounts payable | 10 |
| (3,599 | ) | 2,453 |
| 2,940 |
| |
| | | | Accrued liabilities | 1,900 |
| 3,109 |
| 1,127 |
| (379 | ) | |
| | | | | Net cash provided by (used in) operating activities | 2,797 |
| (6,759 | ) | 5,671 |
| 607 |
| |
| | Cash flows from investing activities | | | | | |
| | Restricted cash | — |
| (1,500 | ) | (59 | ) | 1,500 |
| |
| | Purchase of property and equipment | (14 | ) | (612 | ) | (995 | ) | (1,103 | ) | |
| | | | | Net cash provided by (used in) investing activities | (14 | ) | (2,112 | ) | (1,054 | ) | 397 |
| |
| | Cash flows from financing activities | | | | | |
| | Proceeds from issuance of common stock, net of issuance cost | 53 |
| 35 |
| 697 |
| 406 |
| |
| | Proceeds from initial public offering, net of issuance costs | — |
| — |
| — |
| 97,483 |
| |
| | Principal payments on debt | (942 | ) | (1,769 | ) | (554 | ) | (551 | ) | |
| | Other | | | | — |
| 6,804 |
| (3,881 | ) | 881 |
| |
| | | | | Net cash provided by (used in) financing activities | (889 | ) | 5,070 |
| (3,738 | ) | 98,219 |
| |
| | | | | Net increase (decrease) in cash and cash equivalents | 1,894 |
| (3,801 | ) | 879 |
| 99,223 |
| |
| | Cash and cash equivalents | | | | | |
| | | | | Beginning of period | 18,850 |
| 20,744 |
| 16,943 |
| 17,822 |
| |
| | | | | End of period | 20,744 |
| 16,943 |
| 17,822 |
| 117,045 |
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| February 13, 2017 | Quantenna Q4 and Fiscal 2016 Financial Results | Page 4 of 5 |
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| Quantenna Communications, Inc. |
Non-GAAP Financial Measures
In addition to GAAP reporting, Quantenna provides information regarding income, gross margin and operating expenses on a non-GAAP basis. This non-GAAP information excludes stock-based compensation expense, which the Company’s management believes is not reflective of the Company’s underlying performance. These non-GAAP measures are used by the Company’s management for 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, and 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 Financial Commentary contains forward-looking statements based on Quantenna’s current expectations, including statements regarding Quantenna’s financial results for the fourth quarter and fiscal year 2016 ended January 1, 2017, 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: adjustments to the preliminary financial results reported for the fourth quarter and fiscal year 2016 in connection with completion of the final closing process and procedures and preparation of our annual report of Form 10-K, risks that Quantenna may not be able to maintain its historical growth; quarterly fluctuations in revenues and operating results; ability to accurately predict future revenue and expenses; challenges developing new and leading edge products on a timely basis that achieve market acceptance; ability to attract and retain customers and service providers; dependence on a limited number of products and customers; intense market competition; intellectual property litigation risks; political uncertainty; potential changes in tax and other laws affecting Quantenna’s business; risks associated with acquisitions and divestitures; product liability risks; potential cancellation of customer orders; difficulties managing international operations; risks that Quantenna may not be able to manage strains associated with its growth; dependence on key personnel; stock price volatility; dependence on, and geographic concentration of, contract manufacturers, assembly and test providers, and other vendors that subject Quantenna's business and results of operations to risks of natural disasters, epidemics, war and political unrest; the cyclical nature of the semiconductor industry; and other factors that are detailed in the Securities and Exchange (“SEC”) filings of Quantenna Communications, Inc., which you may obtain for free at the SEC’s website at http://www.sec.gov. 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 is a global leader and innovator of leading-edge performance Wi-Fi solutions. Quantenna introduced the world's first 10G Wi-Fi technology for a new generation of access points in home, enterprise and public spaces and continues to innovate. Quantenna's Wi-Fi solutions offer superior performance, and establish benchmarks for speed, range, efficiency and reliability. With MAUI, Quantenna's cloud-based Wi-Fi analytics platform that complement its chipset solutions, service providers can deliver real-time, automated Wi-Fi monitoring, optimization, and self-healing to their customers around the clock to help achieve the best Wi-Fi experience. Quantenna is Wi-Fi perfected. For more information, visit www.quantenna.com. Follow us on Facebook, LinkedIn and Twitter.
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| February 13, 2017 | Quantenna Q4 and Fiscal 2016 Financial Results | Page 5 of 5 |
