Aquantia Announces Fourth Quarter and Full Year 2018 Results

SAN JOSE, Calif.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24AQ&src=ctag” target=”_blank”gt;$AQlt;/agt; lt;a href=”https://twitter.com/hashtag/80211ax?src=hash” target=”_blank”gt;#80211axlt;/agt;–Aquantia Corp., (NYSE: AQ), a leader in high-speed, Multi-Gigabit
Ethernet connectivity solutions, today announced financial results for
its fourth quarter and full year ended December 31, 2018.

Fourth Quarter 2018 Highlights:

  • Revenue for the three months ended December 31, 2018 of $29.1 million,
    a decrease of 12 percent sequentially and an increase of 5 percent
    year-over-year;
  • Revenue by market for the three months ended December 31, 2018: Data
    Center revenue of $14.7 million, Enterprise Infrastructure revenue of
    $9.0 million, Access revenue of $5.4 million, and Automotive revenue
    of $113 thousand;
  • Gross margin of 54 percent for the three months ended December 31,
    2018, compared to 58 percent for the three months ended September 30,
    2018;
  • Operating loss of $5.3 million for the three months ended December 31,
    2018, and non-GAAP operating loss of $3.1 million for the same period;
    and
  • Net loss per diluted share of $0.16 for the three months ended
    December 31, 2018, and non-GAAP net loss per diluted share of $0.09
    for the same period.

Fourth Quarter 2018 Results

Total revenue for the fourth quarter 2018 was $29.1 million, a decrease
of 12 percent compared to $32.9 million in the prior quarter, and an
increase of 5 percent compared to $27.8 million in the fourth quarter
2017. Total revenue by market for the fourth quarter 2018 consisted of
Data Center revenue of $14.7 million, Enterprise Infrastructure revenue
of $9.0 million, Access revenue of $5.4 million, and Automotive revenue
of $113 thousand. Total revenue by market for the fourth quarter 2017
consisted of Data Center revenue of $17.1 million, Enterprise
Infrastructure revenue of $9.0 million, Access revenue of $1.7 million
and Automotive revenue of $55 thousand.

Gross profit for the fourth quarter 2018 was $15.7 million, or 54
percent of revenue, compared to $19.0 million, or 58 percent of revenue,
in the prior quarter, and $16.1 million, or 58 percent of revenue, in
the fourth quarter 2017. Operating expenses in the fourth quarter 2018
were $21.1 million, compared to $21.3 million in the prior quarter and
$17.1 million in the fourth quarter 2017.

Loss from operations for the fourth quarter 2018 was $5.3 million, or 18
percent of revenue, compared to $2.2 million, or 7 percent of revenue,
in the prior quarter, and $1.0 million, or 4 percent of revenue, in the
fourth quarter 2017. Non-GAAP loss from operations for the fourth
quarter 2018 was $3.1 million, or 11 percent of revenue, compared to
$0.1 million, 0.3 percent of revenue in the prior quarter and $0.3
million, 1 percent of revenue in the fourth quarter 2017.

Fourth quarter 2018 net loss was $5.5 million, or a loss of $0.16 per
diluted share, compared to third quarter 2018 net loss of $2.1 million,
or a loss of $0.06 per diluted share, and fourth quarter 2017 net loss
of $1.1 million, or a loss of $0.05 per diluted share.

Non-GAAP net loss for the fourth quarter 2018 was $3.2 million, or a
loss of $0.09 per diluted share. This compares to non-GAAP net income of
$0.1 million, or breakeven per diluted share, for the third quarter 2018
and non-GAAP net loss of $0.7 million, or $0.03 per diluted share for
the fourth quarter 2017.

We are certainly disappointed in our fourth quarter results and outlook
for the first quarter of 2019 due to the challenging Data Center
end-market conditions,” said Faraj Aalaei, Chairman and CEO.
Nevertheless, we are encouraged by the growth prospects of our
Enterprise Infrastructure and Access businesses in 2019.”

Full Year 2018 Results:

Total revenue in the full year 2018 was $120.8 million, an increase of
17 percent compared to $103.4 million in 2017. Total revenue by market
for the full year 2018 consisted of Data Center revenue of $63.5
million, Enterprise Infrastructure revenue of $42.5 million, Access
revenue of $14.1 million, and Automotive revenue of $0.7 million. Total
revenue by market for the full year 2017 consisted of Data Center
revenue of $64.8 million, Enterprise Infrastructure revenue of $35.2
million, Access revenue of $3.1 million, and Automotive revenue of $0.3
million.

Gross profit for the full year 2018 was $68.4 million, or 57 percent of
revenue, compared to $59.0 million, or 57 percent of revenue, in 2017.
Operating expenses for the full year 2018 were $78.9 million, compared
to $62.0 million in 2017. Non-GAAP operating expenses for the full year
2018 were $72.5 million, compared to $60.3 million in 2017.

Loss from operations for the full year 2018 was $10.5 million, or 9
percent of revenue, compared to $3.0 million, or 3 percent of revenue,
in 2017. Non-GAAP loss from operations for the full year 2018 was $4.0
million, or 3 percent of revenue, compared to non-GAAP loss from
operations of $1.2 million, or 1 percent of revenue, in 2017.

Full year 2018 net loss was $9.8 million, or a loss of $0.29 per diluted
share, compared to 2017 net loss of $5.4 million, or a loss of $0.59 per
diluted share.

Non-GAAP net loss for the full year 2018 was $3.2 million, or $0.09 per
diluted share. This compares to non-GAAP net loss of $2.7 million, or
$0.30 per diluted share for 2017.

Balance Sheet

Cash, cash equivalents and short-term investments totaled $67.4 million
at December 31, 2018, compared to $67.3 million as of September 30, 2018.

Business Outlook

For the first quarter 2019, the Company expects revenue to be in the
range of $19 million to $21 million, gross margin to be in the range of
53.5 percent to 55.5 percent and operating expenses to be in the range
of $20.5 million to $23 million, which includes stock-based compensation
expenses in the range of $2.3 million to $2.5 million.

Non-GAAP Financial Measures

In addition to GAAP reporting, the Company provides non-GAAP financial
measures on income (loss) from operations and net income (loss). These
non-GAAP financial measures exclude the income statement effects of
stock-based compensation expense, amortization of acquired intangibles
resulting from business combination, and change in fair value of
convertible preferred stock warrant liability. The Company believes that
these non-GAAP financial measures help analyze the Company’s financial
results, establish budgets and operational goals for managing its
business and to evaluate performance. The Company also believes that the
presentation of these non-GAAP financial measures provides an additional
tool for investors to use in comparing Aquantia’s core business and
results of operations over multiple periods with other companies in the
industry, many of which present similar non-GAAP financial measures to
investors. However, the non-GAAP financial measures presented may not be
comparable to similarly titled measures reported by other companies due
to differences in the way that these measures are calculated. The
non-GAAP financial measures presented should not be considered as the
sole measure of our performance and should not be considered in
isolation from, or as a substitute for, comparable financial measures
calculated in accordance with GAAP.

(AQ-INV)

About Aquantia

Aquantia is a leader in the design, development and marketing of
advanced, high-speed communications ICs for Ethernet connectivity in the
Data Center, Enterprise Infrastructure, Access and Automotive markets.
Aquantia products are designed to cost-effectively deliver leading-edge
data speeds for use in the latest generation of communications
infrastructure to alleviate network bandwidth bottlenecks caused by the
growth of global IP traffic and in emerging and demanding applications
such as autonomous driving. Aquantia is headquartered in Silicon
Valley. For more information, visit www.aquantia.com.

Conference Call Information

The Company will hold its fourth quarter 2018, earnings conference call
at 1:30 PM Pacific time (4:30 PM Eastern time) on Tuesday, February 22,
2019. To access the call in the U.S., please dial 786-460-7199 or
1-800-263-0877, approximately 15 minutes prior to the start of the
conference call.

A live audio webcast of the conference call and an archive for the
replay will be available on the investor section of Aquantia’s website
at https://investors.aquantia.com/.
To access the replay, please dial + 719-457-0820, and the access code is
2197295.

Forward-Looking Statements

Statements in the press release for the fourth quarter 2018 regarding
the Company, which are not historical facts, constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements may be identified
by terms such as “outlook,” “believe,” “expect,” “may,” “will,”
“provide,” “continue,” “could,” and “should,” and the negative of these
terms or other similar expressions. These statements include statements
relating to: the Company’s business outlook and current expectations for
upcoming quarter and year, including with respect to the financial
guidance provided; the Company’s expectations regarding growth
opportunities, including in the Data Center, Enterprise infrastructure,
Access and Automotive markets; and the Company’s expectations regarding
product adoption. These statements are subject to significant risks and
uncertainties and actual results could differ materially from those
projected. The Company cautions investors not to place undue reliance on
the forward-looking statements contained in this release. These risks
and uncertainties include, without limitation, risks and uncertainties
related to: the Company’s ability to achieve or sustain profitable
operations due to its history of losses and accumulated deficit; the
Company’s dependence on a limited number of customers for a substantial
portion of revenue and lack of long-term purchase commitments therefrom;
the Company’s ability to achieve design wins in competitive selection
processes; the Company’s ability to develop new or enhanced products in
a timely manner; the size and growth potential of the markets that the
Company targets and the Company’s ability to compete therein; market
demand for the Company’s products, including by customers of its direct
customers; reliance on third parties to manufacture, assemble and test
our products as well as their ability to achieve cost and yield
improvements; lengthy and expensive qualification processes; product
defects; the Company’s ability to obtain and maintain intellectual
property protection for its technology; developments in regulation and
industry standards in the United States and other jurisdictions; and
other risks inherent to the fabless semiconductor business. For a
discussion of these and other related risks, please refer to the
Company’s recent SEC filings which are available on the SEC’s website at www.sec.gov.
These forward-looking statements are based on the Company’s expectations
and assumptions as of the date of this press release. Except as required
by law, the Company undertakes no duty or obligation to update any
forward-looking statements contained in this press release as a result
of new information, future events or changes in the Company’s
expectations.

     

AQUANTIA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2018   2017 2018   2017
 
Revenue $ 29,092 $ 27,846 $ 120,784 $ 103,371
 
Cost of revenue 13,374 11,773 52,395 44,348
               
Gross profit   15,718   16,073   68,389   59,023
Gross Profit Margin 54.0 % 57.7 % 56.6 % 57.1 %
 
Operating expenses
Research and development 14,976 12,307 56,023 44,763
Sales and marketing 2,862 1,852 10,117 7,235
General and administrative   3,219   2,928   12,754   9,975
Total operating expenses   21,057   17,087   78,894   61,973
 
Loss from operations (5,339 ) (1,014 ) (10,505 ) (2,950 )
Other income (expense)   358   173   1,208   (2,584 )
 
Loss before income tax expenses (4,981 ) (841 ) (9,297 ) (5,534 )
Provision for (benefit from) income taxes   525   214   475   (117 )
 
Net loss $ (5,506 ) $ (1,055 ) $ (9,772 ) $ (5,417 )
 
Net loss per share
Basic $ (0.16 ) $ (0.05 ) $ (0.29 ) $ (0.59 )
Diluted $ (0.16 ) $ (0.05 ) $ (0.29 ) $ (0.59 )
 
Weighted – average shares used in computing net income per share:
Basic(1)   34,940   22,858   34,181   9,204
Diluted   34,940   22,858   34,181   9,204
 

(1) The number of shares for 2017 does not reflect the
conversion of convertible preferred stocks to common shares.

 
     
AQUANTIA CORP.
RECONCILIATION OF GAAP NET LOSS
TO NON-GAAP NET LOSS
(in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended Twelve Months Ended
December 31, December 31,
2018   2017 2018   2017
 
GAAP net loss $ (5,506 ) $ (1,055 ) $ (9,772 ) $ (5,417 )
 
Stock-based compensation expense:
Cost of revenue 66 21 156 47
Research and development 1,373 429 3,793 973
Sales and marketing 331 87 843 197
General and administrative   487   179   1,728   456
Total stock-based compensation expense   2,257   716   6,520   1,673
 

Amortization of acquired intangibles resulting from business
combination

9 9 34 34

Change in fair value of convertible preferred stock warrant
liability

    (393 )     990
 
Non-GAAP net loss $ (3,240 ) $ (723 ) $ (3,218 ) $ (2,720 )
 
GAAP basic earnings per share $ (0.16 ) $ (0.05 ) $ (0.29 ) $ (0.59 )
Effect of non-GAAP adjustments on basic earnings per share   0.07   0.02   0.20   0.29
Non-GAAP basic earnings per share $ (0.09 ) $ (0.03 ) $ (0.09 ) $ (0.30 )
 
GAAP diluted earnings per share $ (0.16 ) $ (0.05 ) $ (0.29 ) $ (0.59 )
Effect of non-GAAP adjustments on diluted earnings per share   0.07   0.02   0.20   0.29
Non-GAAP diluted earnings per share $ (0.09 ) $ (0.03 ) $ (0.09 ) $ (0.30 )
 
Weighted – average shares used in computing net income per share:
Basic(1)   34,940   22,858   34,181   9,204
Diluted   34,940   22,858   34,181   9,204
 
(1) The number of shares for 2017 does not reflect the
conversion of convertible preferred stocks to common shares.
 
 
GAAP loss from operations $ (5,339 ) $ (1,014 ) $ (10,505 ) $ (2,950 )
 
Stock-based compensation expense 2,257 716 6,520 1,673

Amortization of acquired intangibles resulting from business
combination

  9   9   34   34
 
Non-GAAP loss from operations $ (3,073 ) $ (289 ) $ (3,951 ) $ (1,243 )
 
       
AQUANTIA CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
December 31, December 31,
2018 2017
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $ 6,684 $ 8,040
Short-term investments 60,730 48,362
Accounts receivable, net 16,927 15,012
Inventories 14,474 18,469
Prepaid expenses and other current assets   2,018   5,623
Total current assets 100,833 95,506
 
Property and equipment, net 9,225 9,973
Intangible assets, net 3,748 4,556
Other assets   617   331
Total assets $ 114,423 $ 110,366
 
 
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable $ 5,495 $ 7,059
Accrued liabilities   13,907   9,217
Total current liabilities 19,402 16,276
 
Other long-term liabilities   1,799   3,176
 
Total liabilities   21,201   19,452
 
Stockholders’ equity:
Common stock
Additional paid-in capital 300,791 288,719
Accumulated comprehensive loss (123 ) (96 )
Accumulated deficit   (207,446 )   (197,709 )
Total stockholders’ equity   93,222   90,914
 
Total liabilities and stockholders’ equity deficit $ 114,423 $ 110,366
 

Contacts

Public Relations Contact:
Diane Vanasse
408-242-0027
[email protected]

Investor Relations Contact:
Deborah Stapleton
650-815-1239
[email protected]