Aerohive Networks Reports Q1 2017 Results; Guides to Profitability in Q2

Record Software and Subscriptions Revenue, with 24% YoY Growth in Q1

Milpitas, Calif. — May 3, 2017 — Aerohive Networks® (NYSE:HIVE), a leader in cloud networking and enterprise Wi-Fi, today announced financial results for its first quarter ended March 31, 2017.

“We’re pleased to deliver results at the high end of our guidance for revenue and exceeding our guidance for gross margin and earnings per share, made possible by the actions we have taken to improve our execution and operational efficiency,” stated David Flynn, President and Chief Executive Officer. “While there is more work to do, we believe we have turned the corner on the major challenges that affected our results last year and are now back on a positive trajectory, guiding to non-GAAP EPS of breakeven to $0.01 in the second quarter and expecting to resume year-over-year growth in the second half of 2017.”

Financial Summary

Total revenue for the first quarter of 2017 was $36.4 million, compared with $40.1 million for the first quarter of 2016.  Software subscription and services revenue was $9.5 million, or 26% of total revenue for the quarter, compared with $7.7 million, or 19% of total revenue, for the first quarter of 2016.

On a GAAP basis, net loss was $9.0 million for the first quarter of fiscal year 2017, compared with a net loss of $12.5 million for the first quarter of fiscal year 2016.  GAAP gross margin was 67.2% for the first quarter of fiscal year 2017, compared with 66.8% for the first quarter of fiscal year 2016.

On a non-GAAP basis, net loss was $4.1 million for the first quarter of fiscal year 2017, compared with a net loss of $6.2 million for the first quarter of fiscal year 2016.  Non-GAAP gross margin was 68.2% for the first quarter of fiscal year 2017, compared with 67.5% for the first quarter of fiscal year 2016. 

Conference Call Information

Aerohive Networks will host a conference call and webcast for analysts and investors to discuss its first quarter 2017 results and outlook for its second quarter of 2017 at 2:00 pm Pacific Time today, May 3, 2017.  The call may be accessed by dialing 1-888-296-4302 (toll free) or 1-719-325-2496 (international) and providing the passcode 6077504.  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 at the same location after completion of the live call.

Safe Harbor Statement

This press release contains forward-looking statements, including statements regarding new Aerohive product and service offerings and statements regarding their expected performance, market receptiveness and competitive advantage. 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: general demand for wireless networking in the industry verticals targeted or demand for Aerohive products in particular, 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, technological change, product development delays, 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, 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 results for its first quarter 2017 reported in this press release and the related earnings conference call 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 service gross margin;
  • non-GAAP operating expenses and non-GAAP functional expenses;
  • non-GAAP operating expense percentage and non-GAAP functional expense percentage;
  • non-GAAP operating loss and non-GAAP operating loss percentage; and
  • non-GAAP net loss and non-GAAP net loss per share.

The Company defines non-GAAP financial measures to exclude share-based compensation, adjustments to internal-use software amortization, and certain charges related to litigation and restructure.

The Company has included non-GAAP financial measures in this press release because the Company believes 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 expense related to stock-based compensation, which is an ongoing expense for the Company;
  • although amortization of internal-use software is a non-cash charge, the assets being amortized often will have to be replaced in the future, and non-GAAP net loss and non-GAAP loss per share do not reflect any cash requirement for such replacements;
  • excluding certain expenses associated with litigation in the quarter does not reflect the impact on our ongoing operations over this period of the cash requirement to defend such litigation;
  • restructuring charges include costs associated with restructuring and primarily relates to employee termination costs and benefits, and excluding those will provide a useful measure for period-to-period comparisons; and
  • other companies, including companies in our 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.

A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis due to the high variability and low visibility with respect to the charges that are excluded from these non-GAAP measures.

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 customers worldwide, every access point is a starting point. Aerohive was founded in 2006 and is headquartered in Milpitas, 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.

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“Aerohive” is a registered trademark and “Aerohive Networks” is a 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:

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

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

Three Months Ended March 31,
2017 2016
Revenue:
     Product $  26,870 $  32,456
     Software subscriptions and service 9,481 7,672
          Total revenue 36,351 40,128
Cost of revenue (1):
     Product 8,736 10,439
     Software subscriptions and service 3,176 2,903
          Total cost of revenue 11,912 13,342
Gross profit 24,439 26,786
Operating expenses:
     Research and development (1) 9,550 10,210
     Sales and marketing (1) 17,439 21,068
     General and administrative (1) 6,297 7,895
          Total operating expenses 33,286 39,173
Operating loss  (8,847) (12,387)
    Interest income 140 119
    Interest expense (130)  (126)
    Other income (expense), net (85) 16
Loss before income taxes  (8,922)  (12,378)
Provision for income taxes 97 145
Net loss $ (9,019) $ (12,523)
    Net loss per share, basic and diluted $  (0.17) $  (0.25)
    Weighted-average shares used in computing net loss per share, basic and diluted 52,439,039 49,140,340
(1) Includes stock-based compensation as follows:
Cost of revenue $  271 $  272
Research and development 688 1,345
Sales and marketing 1,294 1,768
General and administrative 1,300 1,511
     Total stock-based compensation $  3,553 $  4,896

 

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

March 31, 2017 December 31, 2016
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents $  28,907 $  34,346
     Short-term investments 45,926 42,408
     Accounts receivable, net 21,628 26,190
     Inventories 11,668 12,629
     Prepaid expenses and other current assets 6,927 6,289
          Total current assets 115,056 121,862
     Property and equipment, net 8,206 9,008
     Goodwill 513 513
     Other assets 5,158 5,100
TOTAL ASSETS $  128,933 $  136,483
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
     Accounts payable $  9,694 $  10,762
     Accrued liabilities 9,444 9,300
     Debt, current 20,000
     Deferred revenue, current 31,847 31,727
          Total current liabilities 50,985 71,789
     Debt, non-current 20,000
     Deferred revenue, non-current 33,060 34,177
     Other liabilities 1,780 1,829
TOTAL LIABILITIES 105,825 107,795
STOCKHOLDERS’ EQUITY:
     Preferred stock
     Common stock 53 52
     Additional paid-in capital 261,730 258,063
     Treasury stock (2,139) (2,139)
     Accumulated other comprehensive loss (37) (31)
     Accumulated deficit (236,499) (227,257)
          Total stockholders’ equity 23,108 28,688
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $  128,933 $  136,483

 

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

Three Months Ended March 31,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES: (As Adjusted)*
Net loss $  (9,019) $  (12,523)
Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization 842 896
     Stock-based compensation 3,553 4,896
     Other (15) 123
     Changes in operating assets and liabilities:
          Accounts receivable, net 4,562 1,940
          Inventories 961  (714)
          Prepaid expenses and other current assets (638) (3,636)
          Other assets (58) (350)
          Accounts payable (885) (684)
          Accrued liabilities 144 5,713
          Other liabilities (6) 7
          Deferred revenue (997) 1,010
                    Net cash used in operating activities  (1,556)  (3,322)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment  (223)  (337)
Maturities of short-term investments 4,200 4,200
Purchases of short-term investments (7,709) (2,406)
Investment in privately held company (1,500)
                    Net cash provided used in investing activities (3,732)  (43)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of vested stock options 218 108
Payment for shares withheld for tax withholdings on vesting of restricted stock units (326) (311)
Payment to repurchase common stock (785)
Payments on capital lease obligation (43)
                    Net cash provided by financing activities (151) (988)
Net decrease in cash and cash equivalents   (5,439) (4,353)
Cash and cash equivalents at beginning of period 34,346 45,741
Cash and cash equivalents at end of period $  28,907 $  41,388

 

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

Three Months Ended March 31,
2017 2016
Net Loss Reconciliation:    
GAAP net loss $  (9,019) $  (12,523)
     Cost of revenue – Product:
         Stock-based compensation 51 17
         Restructuring charges 51
     Cost of revenue – Software subscription and services:
        Stock-based compensation 220 255
        Stock-based compensation adjustment to internal-use software amortization 35 35
Total adjustment to Cost of Revenue 357 307
     Research and development:
         Stock-based compensation 688 1,345
         Restructuring charges 838
     Sales and marketing:
         Stock-based compensation 1,294 1,768
         Restructuring charges 243
     General and administrative
         Stock-based compensation 1,300 1,511
         Restructuring charges 195
         Charges related to securities litigation 1,376
Total adjustment to Operating Expenses 4,558 6,000
Non-GAAP net loss $  (4,104) $  (6,216)
Basic and diluted net loss per share on a Non-GAAP basis $ (0.08) $ (0.13)
Weighted average shares used in computing Non-GAAP basic and diluted net loss per share 52,439,039 49,140,340