Aerohive Networks Reports Second Quarter 2015 Financial Results Revenue Grew 43% sequentially

Sunnyvale, Calif. — August 5, 2015 — Aerohive Networks® (NYSE:HIVE), a leader in controller-less Wi-Fi and cloud-managed mobile networking for the enterprise market, today announced financial results for its second quarter of 2015, ended June 30, 2015.

Financial Summary

Total revenue for the second quarter of 2015 was $36.8 million, an increase of 43% compared with $25.8 million for the first quarter of 2015 and a decrease of 2% compared with $37.6 million for the second quarter of 2014.  Software subscription and services revenue was $6.1 million, or 17% of total revenue for the quarter, compared with $3.8 million, or 10% of total revenue for the second quarter of 2014.

For the second quarter of 2015, GAAP net loss was $11.4 million, compared with $6.3 million in the second quarter of 2014. GAAP gross margin was 67.0%, compared with 67.5% in the year-ago period. Non-GAAP net loss for the second quarter of 2015 was $7.0 million, compared with $4.3 million in the second quarter of 2014.  Non-GAAP gross margin was 67.7%, compared with 67.8% in the year-ago period.

A description of the non-GAAP calculations and a reconciliation to comparable GAAP financial measures are provided in the accompanying table entitled “Reconciliation of GAAP to Non-GAAP Financial Measures.”

”Our second quarter results validate our confidence in Aerohive’s underlying business, with good growth in enterprise and a return towards more typical education buying patterns,” stated David Flynn, President and Chief Executive Officer. “We look forward to continued diversification and growth based on improving sales execution, partnerships and further development of channel opportunities.”

Conference Call Information

Aerohive Networks will host a conference call and webcast for analysts and investors to discuss its second quarter 2015 results and outlook for its third quarter of 2015 at 2:00 pm Pacific Time today, August 5, 2015.  The call may be accessed by dialing 1-888-312-3048 (toll free) or 1-719-325-2428 (international) and providing the passcode 3200026. A live audio webcast of the conference call will be accessible from the “Investor Relations” section of the Company’s website at http://ir.aerohive.com. An audio replay of the call may be accessed via dial-in at 1-888-203-1112 with the passcode 3200026 or by webcast on the Investor Relations section of Aerohive’s website at http://ir.aerohive.com.

Safe Harbor Statement

This press release contains forward-looking statements, including statements regarding Aerohive Networks’ financial expectations and operating performance and expectations for continued growth in 2015, including statements regarding progress on our sales execution, our efforts and investments to increase capacity and revenue diversification, our expectations regarding growth in the Wi-Fi market and our ability to capitalize on that growth and specifically from expanding education opportunities, our new product offerings and new sales leadership. These forward-looking statements are based on current expectations and are subject to inherent uncertainties, risks and changes in circumstances that are difficult or impossible to predict. The actual outcomes and results may differ materially from those contemplated by these forward-looking statements as a result of these uncertainties, risk and changes in circumstances, including, but not limited to, risks and uncertainties related to: our ability to continue to attract, integrate, retain and train skilled personnel, especially skilled R&D and sales personnel, in general and in specific regions, our ability to develop and expand our sales capacity and improve the effectiveness of our channel, our ability to improve our operating and sales execution, general demand for wireless networking in the industry verticals targeted or demand for Aerohive products in particular, our ability to benefit from our participation in the E-Rate program, unpredictable and changing market conditions, risks associated with the deployment, performance and adoption of new products and services, risks associated with our growth, competitive pressures from existing and new companies, including pricing pressures, changes in the mix and selling prices of Aerohive products, technological change, product development delays, reliance on third parties to manufacture, warehouse and timely deliver Aerohive products or international operations, our inability to protect Aerohive intellectual property or to predict or limit exposure to third party claims relating to its or Aerohive’s intellectual property, Aerohive’s limited operating history, particularly as a public company, and general market, political, regulatory, economic and business conditions in the United States and internationally.

Additional risks and uncertainties that could affect Aerohive’s financial and operating results are included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company’s recent annual report on Form 10-K and quarterly report on Form 10-Q. Aerohive’s SEC filings are available on the Investor Relations section of the Company’s website at http://ir.aerohive.com and on the SEC's website at www.sec.gov. All forward-looking statements in this press release are based on information available to the Company as of the date hereof, and Aerohive Networks disclaims any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.

Non-GAAP Financial Measures

Aerohive’s reported Q2 results include certain non-GAAP financial measures, including:

  • non-GAAP gross profit and non-GAAP gross margin
  • non-GAAP product gross margin and non-GAAP software subscription and services gross margin
  • non-GAAP operating expenses and non-GAAP functional expenses
  • non-GAAP operating expenses percentage and non-GAAP functional expenses percentage
  • non-GAAP operating loss and non-GAAP operating loss percentage
  • non-GAAP net loss and non-GAAP net loss per share

The Company defines non-GAAP financial measures to exclude share-based compensation, adjustment to internal-use software amortization, amortization of acquired intangibles, payroll taxes on certain stock-based compensation expense, one-time charges related to pending securities litigation, and the periodic fair value re-measurements related to convertible preferred stock warrants.

The Company has included non-GAAP financial measures in this press release because they are key measures used to evaluate the business, measure performance, identify trends affecting the business, formulate financial projections and make strategic decisions. In particular, the exclusion of certain expenses in calculating these non-GAAP financial measures can provide a useful measure for period-to-period comparisons of the Company’s core business.

Although non-GAAP financial measures are frequently used by investors in their evaluations of companies, these non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. Some of these limitations are:

  • the non-GAAP measures do not consider the dilutive impact of stock-based compensation, which is an ongoing expense for the Company;
  • although amortization is a non-cash charge, the assets being amortized often will have to be replaced in the future, and non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, non-GAAP operating loss percentage, non-GAAP net loss, and non-GAAP loss per share do not reflect any cash requirement for such replacements;
  • non-GAAP net loss and non-GAAP net loss per share do not reflect the periodic fair value re-measurements related to convertible preferred stock warrants;
  • the pending securities litigation may continue for an extended duration and excluding the associated expense does not reflect the impact on our ongoing operations over this period of the cash requirement to defend the litigation; and
  • other companies, including companies in this industry, may calculate these non-GAAP financial measures differently, which reduces their usefulness as a comparative measure.

Because of these limitations, you should consider non-GAAP financial measures only together with other financial performance measures, including various cash flow metrics, net loss and other GAAP results.

About Aerohive Networks

Aerohive (NYSE: HIVE) enables our customers to simply and confidently connect to the information, applications, and insights they need to thrive. Our simple, scalable, and secure platform delivers mobility without limitations. For our over 22,000 end customers worldwide, every access point is a starting point. Aerohive was founded in 2006 and is headquartered in Sunnyvale, CA. For more information, please visit www.aerohive.com, call us at 408-510-6100, follow us on Twitter @Aerohive, subscribe to our blog, join our community or become a fan on our Facebook page.

“Aerohive” is a registered trademark of Aerohive Networks, Inc. All product and company names used herein are trademarks or registered trademarks of their respective owners. All rights reserved.

Investor Relations Contract:

The Blueshirt Group
Suzanne Schmidt or Melanie Solomon
(408) 769-6720
ir@aerohive.com

[tables follow]

 

AEROHIVE NETWORKS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)

  March 31, 2015 December 31, 2014
ASSETS (unaudited)  
CURRENT ASSETS:
     Cash and cash equivalents $  85,365 $  98,044
     Accounts receivable, net of allowance for doubtful accounts of $108 and $106 as of June 30, 2015 and December 31, 2014, respectively 20,783 24,695
     Inventory 11,942 8,360
     Prepaid expenses and other current assets 3,903  2,610
     Deferred cost of goods sold 772 1,001
          Total current assets 122,765 134,710
     Property and equipment, net  10,075 8,862
     Goodwill  513 513
     Other assets 311 169
TOTAL ASSETS $  133,664 $  144,254
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
     Accounts payable $  12,001 $  10,154
     Accrued liabilities  8,992 9,181
     Long-term debt, current portion  12,451
     Deferred revenue, current portion 23,978 22,014
          Total current liabilities 44,971 53,800
     Long-term debt, non-current 20,000  7,301
     Deferred revenue, non-current 27,003 24,141
     Other liabilities 738 857
TOTAL LIABILITIES  92,712 86,099
 
STOCKHOLDERS’ EQUITY:  
     Preferred stock, par value of $0.001 per share - 25,000,000 and 25,000,000 shares authorized as of June 30, 2015 and December 31, 2014, respectively; no shares issued and outstanding as of June 30, 2015 and December 31, 2014
     Common stock, par value of $0.001 per share-500,000,000 and 500,000,000 shares authorized as of June 30, 2015 and December 31, 2014, respectively; 47,585,043 and 46,028,908 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively 48 46
     Additional paid-in capital 219,288 208,998
     Accumulated deficit (178,384) (150,889)
          Total stockholders’ equity 40,952 58,155
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $  133,664 $  144,254

 

AEROHIVE NETWORKS, INC.
Condensed Consolidated Statements of Operations
(unaudited; in thousands, except share and per share amounts)

  Three Months Ended June 30, Six Months Ended June 30,
  2015 2014 2015 2014
Revenue:
     Product $  30,751 $  33,721 $  51,231 $  58,582
     Software subscriptions and service 6,085  3,833 11,422 7,204
          Total revenue 36,836 37,554 62,653  65,786
Cost of revenue (1):
     Product  9,619 10,560  16,427 18,442
     Software subscriptions and service 2,526  1,639  4,354  3,005
          Total cost of revenue 12,145 12,199 20,781 21,447
Gross profit 24,691 25,355 41,872 44,339
Operating expenses:
     Research and development (1) 8,883  6,833 16,393  12,971
     Sales and marketing (1) 20,804  19,011  39,574  35,580
     General and administrative (1) 6,206 5,135 12,453  9,972
          Total operating expenses 35,893 30,979 68,420 58,523
Operating loss  (11,202) (5,624)  (26,548)  (14,184)
Interest income 19 8 33 9
Interest expense (173)  (459)  (927)  (924)
Other income (expense), net 19 (58) 154 59
Loss before income taxes  (11,337)  (6,133)  (27,288) (15,040)
Income tax provision  (99)  (135)  (207) (155)
Net loss $ (11,436) $ (6,268) $  (27,495) $  (15,195)
 
Net loss per share, basic and diluted $  (0.24) $  (.14) $  (0.59) $  (.58)
Weighted-average shares used in computing net loss per share, basic and diluted 46,888,236 44,751,354 46,595,172 26,295,717
 
(1) Includes stock-based compensation as follows:
Cost of revenue $  217 $  73 $  382 $  118
Research and development 1,001 502  1,987  853
Sales and marketing 1,727 798  3,224 1,419
General and administrative  1,419  566  2,593  1,115
     Total stock-based compensation expense $  4,364 $  1,939 $  8,186 $  3,505

 

AEROHIVE NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited; in thousands)

  Six Months Ended June 30,
  2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $  (27,495) $  (15,195)
Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization  1,602 1,019
     Stock-based compensation  8,186 3,505
     Amortization and write-off of debt discount and debt issuance cost 296 97
     Re-measurement of convertible preferred stock warrant liability (90)
     Changes in operating assets and liabilities:
          Accounts receivable, net  3,912  (6,073)
          Inventory  (3,582)  (5,244)
          Prepaid expenses and other current assets (1,064) (385)
          Other assets (142) (73)
          Accounts payable  1,791  7,636
          Accrued liabilities  189 1,693
          Other liabilities (119)  (126)
          Deferred revenue 4,826  6,890
                    Net cash used in operating activities  (11,600)  (6,346)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, equipment and intangible assets  (936)  (1,131)
Capitalized software development costs (1,913) (2,016)
                    Net cash used in investing activities  (2,849)  (3,147)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net of underwriting discount 80,213
Payment of offering costs  (3,852)
Proceeds from exercise of convertible preferred stock warrants 907
Proceeds from issuance of common stock under stock-based compensation plans   3,137  1,115
Payments for shares repurchased for tax withholdings on vesting of restricted stock units (1,367)
Proceeds from debt borrowings 10,000
Repayments of debt (10,000)
                    Net cash provided by financing activities  1,770  78,383
Net increase (decrease) in cash and cash equivalents   (12,679)  68,890
Cash and cash equivalents-beginning of period 98,044 35,023
Cash and cash equivalents-end of period $  85,365 $  103,913

 

AEROHIVE NETWORKS, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(unaudited; in thousands, except share and per share amounts)

  Three Months Ended June 30, Six Months Ended June 30,
  2015 2014 2015 2014
Gross Profit Reconciliations:
GAAP gross profit $  24,691 $  25,355 $  41,872 $  44,339
          Stock-based compensation $217 $73 $382 $118
          Adjustment to internal-use software amortization 35 35
          Amortization of acquired intangible assets 40 81
Non-GAAP gross profit $  24,943 $  25,468 $  42,289 $  44,538
 
Gross Margin Reconciliations:
GAAP gross margin 67.0 % 67.5 % 66.8 % 67.4 %
          Stock-based compensation 0.6 % 0.2 % 0.6 % 0.2 %
          Adjustment to internal-use software amortization 0.1 % 0.1 %
          Amortization of acquired intangible assets 0.1 % 0.1 %
Non-GAAP gross margin 67.7 % 67.8 % 67.5 % 67.7 %
 
Product Gross Margin Reconciliations:
GAAP gross margin 68.7 % 68.7 % 67.9 % 68.5 %
          Stock-based compensation 0.1 % 0.1 % 0.2 % 0.1 %
          Amortization of acquired intangible assets 0.1 % 0.1 %
Non-GAAP product gross margin 68.8 % 68.9 % 68.1 % 68.7 %
 
Software Subscription and Services Gross Margin Reconciliations:
GAAP software subscription and services gross margin 58.5 % 57.2 % 61.9 % 58.3 %
          Stock-based compensation 3.0 % 1.5 % 2.8 % 1.2 %
          Adjustment to internal-use software amortization 0.6 % 0.3 %
Non-GAAP software subscription and services gross margin 62.1 % 58.7 % 65.0 % 59.5 %
 
Operating Expenses Reconciliations:
GAAP operating expenses $  35,893 $  30,979 $  68,420 $  58,523
          Stock-based compensation (4,147) (1,866) (7,804) (3,387)
          Payroll taxes on certain stock-based compensation expense (17) (17)
          One-time charges related to pending securities litigation (86) (86)
Non-GAAP operating expenses $  31,643 $  29,113 $  60,513 $  55,136
 
GAAP research and development $  8,883 $  6,833 $  16,393 $  12,971
          Stock-based compensation (1,001) (502) (1,987) (853)
Non-GAAP research and development $  7,882 $  6,331 $  14,406 $  12,118
 
GAAP sales and marketing $  20,804 $  19,011 $  39,574 $  35,580
          Stock-based compensation (1,727) (798) (3,224) (1,419)
          Payroll taxes on certain stock-based compensation expense (17) (17)
Non-GAAP sales and marketing $  19,060 $  18,213 $  36,333 $  34,161
 
GAAP general and administrative $  6,206 $  5,135 $  12,453 $  9,972
          Stock-based compensation (1,419) (566) (2,593) (1,115)
          One-time charges related to pending securities litigation (86) (86)
Non-GAAP general and administrative $  4,701 $  4,569 $  9,774 $  8,857
 
Operating Expenses Percentage Reconciliations::
GAAP operating expenses percentage 97.4% 82.5% 109.2% 89.0%
          Stock-based compensation (11.3)% (5.0)% (12.5)% (5.2)%
          Payroll taxes on certain stock-based compensation expense
          One-time charges related to pending securities litigation (0.2)% (0.1)%
Non-GAAP operating expenses percentage 85.9% 77.5% 96.6% 83.8%
 
GAAP research and development percentage 24.1% 18.2% 26.2% 19.7%
          Stock-based compensation (2.7) % (1.3) % (3.2) % (1.3) %
Non-GAAP research and development percentage 21.4 % 16.9 % 23.0 % 18.4 %
 
GAAP sales and marketing percentage 56.5 % 50.6 % 63.2 % 54.1 %
          Stock-based compensation (4.8) % (2.1) % (5.2) % (2.2) %
          Payroll taxes on certain stock-based compensation expense
Non-GAAP sales and marketing percentage 51.7 % 48.5 % 58.0 % 51.9 %
 
GAAP general and administrative percentage 16.8 % 13.7 % 19.9 % 15.2 %
          Stock-based compensation (3.8) % (1.5) % (4.2) % (1.7) %
          One-time charges related to pending securities litigation (0.2) % (0.1) %
Non-GAAP general and administrative percentage 12.8 % 12.2 % 15.6 % 13.5 %
 
Operating Loss Reconciliations:
GAAP operating loss $  (11,202) $  (5,624) $  (26,548) $  (14,184)
          Stock-based compensation 4,364 1,939 8,186 3,505
          Adjustment to internal-use software amortization 35 35
          Amortization of acquired intangible assets 40 81
          Payroll taxes on certain stock-based compensation expense 17 17
          One-time charges related to pending securities litigation 86 86
Non-GAAP operating loss $  (6,700) $  (3,645) $  (18,224) $  (10,598)
 
Operating Loss Percentage Reconciliations:
GAAP operating loss percentage (30.4) % (15.0) % (42.4) % (21.6) %
          Stock-based compensation 11.9 % 5.2 % 13.1 % 5.4 %
          Adjustment to internal-use software amortization 0.1 % 0.1 %
          Amortization of acquired intangible assets 0.1 % 0.1 %
          Payroll taxes on certain stock-based compensation expense
          One-time charges related to pending securities litigation 0.2 % 0.1 %
Non-GAAP operating loss percentage (18.2) % (9.7) % (29.1) % (16.1) %
 
Net Loss Reconciliations:
GAAP net loss $  (11,436) $  (6,268) $  (27,495) $  (15,195)
          Stock-based compensation 4,364 1,939 8,186 3,505
          Adjustment to internal-use software amortization 35 35
          Amortization of acquired intangible assets 40 81
          Payroll taxes on certain stock-based compensation expense 17 17
          One-time charges related to pending securities litigation 86 86
          Periodic re-measurement of convertible preferred stock warrants (90)
Non-GAAP net loss $  (6,934) $  (4,289) $  (19,171) $  (11,699
 
Shares Used in Computing non-GAAP Basic and Diluted Net Loss per Share
Weighted average shares used in computing non-GAAP basic and diluted net loss per share 46,888,236 44,751,354 46,595,172 26,295,717
 
Earnings Per Share Reconciliations:
Basic and diluted net loss per share on a GAAP basis $  (0.24) $  (0.14) $  (0.59) $  (0.58)
          Stock-based compensation 0.09 0.04 0.18 0.13
          Adjustment to internal-use software amortization
          Amortization of acquired intangible assets
          Payroll taxes on certain stock-based compensation expense
          One-time charges related to pending securities litigation
          Periodic re-measurement of convertible preferred stock warrants
Basic and diluted net loss per share on a Non-GAAP basis $  (0.15) $  (0.10) $  (0.41) $  (0.45)