aq-ex991_6.htm

San Jose, Calif. – February 12, 2019 – 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.

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.”

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.

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.

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.

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.

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.

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.

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.

	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.

	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	)

	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	$	114,423		$	110,366