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, 2019 |
|
April 1, 2018 |
| |
|
|
|
| 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, 2019 |
|
April 1, 2018 |
| |
|
|
|
| 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 |
| |
GAAP Measure |
Stock-based Compensation Expense |
Acquisition-Related Expenses** |
Income Taxes* |
Non-GAAP Measure |
GAAP Measure |
Stock-based Compensation Expense |
Income Taxes* |
Non-GAAP Measure |
| 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, 2019 |
|
December 30,2018 |
|
Assets |
|
|
|
| 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.669-209-5647vessi@quantenna.com
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