MILPITAS, Calif.--(BUSINESS WIRE)-- Aerohive Networks™ (NYSE: HIVE), a Cloud Networking Leader, today announced financial results for its fourth quarter and fiscal year ended December 31, 2017.

“We delivered fourth quarter results consistent with our preannouncement and believe we have taken appropriate actions to resolve recent sales execution issues,” stated David Flynn, President and Chief Executive Officer. “Despite revenue challenges in 2017, we improved our product offering and are now a full-stack cloud networking company poised to deliver innovative, new solutions. We also strengthened our financial foundation with increased recurring revenue, gross margins, and cash flow.”

Financial Summary

Total revenue for the fourth quarter of fiscal year 2017 was $37.2 million, compared with $41.7 million for the fourth quarter of 2016. Subscription and support revenue was $11.0 million, or 30% of total revenue for the quarter, compared with $8.8 million, or 21% of total revenue, for the fourth quarter of 2016.

On a GAAP basis, net loss was $3.4 million for the fourth quarter of fiscal year 2017, compared with a net loss of $7.3 million for the fourth quarter of 2016. GAAP gross margin was 68.0% for the fourth quarter of fiscal year 2017, compared with 68.0% for the fourth quarter of 2016.

On a non-GAAP basis, net income was $0.3 million for the fourth quarter of fiscal year 2017, compared with a net loss of $2.3 million for the fourth quarter of 2016. Non-GAAP gross margin was 68.8% for the fourth quarter of fiscal year 2017, compared with 68.8% for the fourth quarter of 2016.

Total revenue for fiscal year 2017 was $152.9 million, compared with $169.8 million for fiscal year 2016. Subscription and support revenue was $41.1 million, or 27% of total revenue for the year, compared with $33.3 million, or 20% of total revenue, for fiscal year 2016.

On a GAAP basis, net loss for fiscal year 2017 was $22.9 million, compared with $36.9 million in fiscal year 2016. GAAP gross margin was 67.1% for fiscal year 2017, compared with 67.4% in the year-ago period.

On a non-GAAP basis, net loss for fiscal year 2017 was $4.8 million, compared with $12.7 million in fiscal year 2016. Non-GAAP gross margin was 68.0% for fiscal year 2017, compared with 68.3% in the year-ago period.

Conference Call Information

Aerohive Networks will host a conference call and webcast for analysts and investors to discuss its fourth quarter and fiscal year 2017 results and outlook for its first quarter of fiscal year 2018 at 2:00 pm Pacific Time today, February 8, 2018. The call may be accessed by dialing 719-325-2170 and providing the passcode 1825507. A live and archived audio webcast of the conference call will be accessible from the “Investor Relations” section of the Company’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 momentum, including statements regarding the progress we are making to address challenges in our business, including sales execution issues, our ability to deliver innovative solutions as a full-stack cloud networking company, and our ability to strengthen our financial position. 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 revenue opportunities and sales capacity and improve the effectiveness of our channel, our ability to resolve challenges related to sales execution and improve our operating and sales execution, general demand for wireless networking in the industry verticals we target 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 our 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, 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, uses of Aerohive’s capital 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 fourth quarter of fiscal year 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 profit and non-GAAP product gross margin;
• non-GAAP subscription and support gross profit and non-GAAP subscription and support gross margin;
• non-GAAP operating income (loss) and non-GAAP operating margin;
• non-GAAP net income (loss) and non-GAAP net income (loss) per share;
• non-GAAP operating expenses and non-GAAP functional expenses; and
• non-GAAP operating expense percentage and non-GAAP functional expense percentage.

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

The Company has included certain non-GAAP financial measures in this press release because the Company believes they are key measures which can be 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 income (loss) and non-GAAP income (loss) per share do not reflect any cash requirement for such replacements;
• excluding certain expenses associated with litigation in the quarter or fiscal year does not reflect the impact on our ongoing operations over this period of the cash requirement to defend such or other litigation;
• excluding headquarter relocation expense in the quarter or fiscal year does not reflect the cash requirement relating to the one-time charges related to the lease abandonment costs incurred upon vacating buildings of our prior headquarters and double rent and utilities expense during the transition to our new headquarters facility;
• excluding restructuring charges in the quarter or fiscal year does not reflect the cash requirement relating to the costs associated with restructuring and primarily relates to employee termination costs and benefits; 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 and other 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 description of these non-GAAP financial measures and a reconciliation of the company’s historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

A reconciliation of non-GAAP guidance measures to corresponding GAAP guidance 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, or become a fan on our Facebook page.

“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.

AEROHIVE NETWORKS, INC.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except share and per share amounts)
		Three Months Ended December 31,								Year Ended December 31,
		2017				2016				2017				2016
Revenue:
Product		$	26,173			$	32,887			$	111,839			$	136,570
Subscription and support		11,007				8,810				41,060				33,255
Total revenue		37,180				41,697				152,899				169,825
Cost of revenue (1):
Product		8,577				10,309				37,337				43,231
Subscription and support		3,320				3,018				12,893				12,066
Total cost of revenue		11,897				13,327				50,230				55,297
Gross profit		25,283				28,370				102,669				114,528
Operating expenses:
Research and development (1)		8,386				10,047				36,418				41,504
Sales and marketing (1)		14,518				18,961				65,325				80,998
General and administrative (1)		5,608				6,704				23,094				28,839
Total operating expenses		28,512				35,712				124,837				151,341
Operating loss		(3,229		)		(7,342		)		(22,168		)		(36,813		)
Interest income		236				123				720				468
Interest expense		(155		)		(123		)		(567		)		(474		)
Other income (expense), net		(40		)		49				(308		)		177
Loss before income taxes		(3,188		)		(7,293		)		(22,323		)		(36,642		)
Provision for (benefit from) income taxes		234				(29		)		603				269
Net loss		$	(3,422	)		$	(7,264	)		$	(22,926	)		$	(36,911	)
Net loss per share, basic and diluted		$	(0.06	)		$	(0.14	)		$	(0.43	)		$	(0.73	)
Weighted-average shares used in computing net loss per share, basic and diluted		53,782,676				51,561,897				53,227,342				50,332,872
(1) Includes stock-based compensation as follows:
Cost of revenue		$	272			$	281			$	1,132			$	1,305
Research and development		1,089				1,106				4,171				5,393
Sales and marketing		742				1,933				5,103				8,269
General and administrative		1,611				1,617				6,269				6,735
Total stock-based compensation		$	3,714			$	4,937			$	16,675			$	21,702

AEROHIVE NETWORKS, INC.
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except share and per share amounts)
		December 31,				December 31,
		2017				2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	27,249			$	34,346
Short-term investments		57,675				42,408
Accounts receivable, net		17,662				26,190
Inventories		13,495				12,629
Prepaid expenses and other current assets		6,513				6,289
Total current assets		122,594				121,862
Property and equipment, net		6,381				9,008
Goodwill		513				513
Other assets		5,124				5,100
Total assets		$	134,612			$	136,483
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	11,946			$	10,762
Accrued liabilities		8,602				9,300
Debt, current		—				20,000
Deferred revenue, current		34,281				31,727
Total current liabilities		54,829				71,789
Debt, non-current		20,000				—
Deferred revenue, non-current		36,083				34,177
Other liabilities		1,769				1,829
Total liabilities		112,681				107,795
Stockholders’ equity:
Preferred stock		—				—
Common stock		55				52
Additional paid–in capital		278,528				258,063
Treasury stock		(6,216		)		(2,139		)
Accumulated other comprehensive loss		(30		)		(31		)
Accumulated deficit		(250,406		)		(227,257		)
Total stockholders’ equity		21,931				28,688
Total liabilities and stockholders’ equity		$	134,612			$	136,483

AEROHIVE NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)
		Year Ended December 31,
		2017				2016
Cash flows from operating activities
Net loss		$	(22,926	)		$	(36,911	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		3,083				3,534
Stock-based compensation		16,675				21,702
Other		(134		)		278
Changes in operating assets and liabilities:
Accounts receivable, net		8,528				(3,366		)
Inventories		(866		)		(1,854		)
Prepaid expenses and other current assets		(224		)		2,081
Other assets		(24		)		80
Accounts payable		1,322				(4,522		)
Accrued liabilities		(701		)		(2,643		)
Other liabilities		126				425
Deferred revenue		4,460				6,642
Net cash provided by (used in) operating activities		9,319				(14,554		)
Cash flows from investing activities
Purchases of property and equipment		(595		)		(2,161		)
Maturities of short-term investments		60,150				50,761
Purchases of short-term investments		(75,282		)		(46,824		)
Investment in privately held company		—				(1,500		)
Net cash provided by (used in) investing activities		(15,727		)		276
Cash flows from financing activities
Proceeds from exercise of vested stock options		759				870
Proceeds from employee stock purchase plan		4,001				5,326
Payment for shares withheld for tax withholdings on vesting of restricted stock units		(1,190		)		(1,121		)
Payment to repurchase common stock		(4,077		)		(2,139		)
Payment on capital lease obligations		(182		)		(53		)
Net cash provided by (used in) financing activities		(689		)		2,883
Net decrease in cash and cash equivalents		(7,097		)		(11,395		)
Cash and cash equivalents at beginning of period		34,346				45,741
Cash and cash equivalents at end of period		$	27,249			$	34,346

AEROHIVE NETWORKS, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited, in thousands, except share and per share amounts)
		Three Months Ended December 31,																Year Ended December 31,
		2017								2016								2017								2016
		Amount				Margin				Amount				Margin				Amount				Margin				Amount				Margin
Gross Profit and Gross Margin Reconciliations:
GAAP gross profit		$	25,283				68.0	%		$	28,370				68.0	%		$	102,669				67.1	%		$	114,528				67.4	%
Stock-based compensation			272				0.7	%			281				0.7	%			1,132				0.8	%			1,305				0.8	%
Amortization of internal-use software			35				0.1	%			35				0.1	%			140				0.1	%			140				0.1	%
Restructuring charges			—				—	%			—				—	%			51				—	%			—				—	%
Non-GAAP gross profit		$	25,590				68.8	%		$	28,686				68.8	%		$	103,992				68.0	%		$	115,973				68.3	%
Product Gross Profit and Product Gross Margin Reconciliations:
GAAP product gross margin		$	17,596				67.2	%		$	22,578				68.7	%		$	74,502				66.6	%		$	93,339				68.3	%
Stock-based compensation			25				0.1	%			57				0.1	%			190				0.2	%			298				0.3	%
Restructuring charges			—				—	%			—				—	%			51				—	%			—				—	%
Non-GAAP product gross margin		$	17,621				67.3	%		$	22,635				68.8	%		$	74,743				66.8	%		$	93,637				68.6	%
Subscription and Support Gross Profit and Subscription and Support Gross Margin Reconciliations:
GAAP subscription and support gross margin		$	7,687				69.8	%		$	5,792				65.7	%		$	28,167				68.6	%		$	21,189				63.7	%
Stock-based compensation			247				2.3	%			224				2.6	%			942				2.3	%			1,007				3.1	%
Amortization of internal-use software			35				0.3	%			35				0.4	%			140				0.3	%			140				0.4	%
Non-GAAP software subscription and support gross margin		$	7,969				72.4	%		$	6,051				68.7	%		$	29,249				71.2	%		$	22,336				67.2	%
Operating Income (Loss) and Operating Margin Reconciliations:
GAAP operating loss		$	(3,229	)			(8.7	)%		$	(7,342	)			(17.6	)%		$	(22,168	)			(14.5	)%		$	(36,813	)			(21.7	)%
Stock-based compensation			3,714				10.0	%			4,937				11.8	%			16,675				10.9	%			21,702				12.8	%
Amortization of internal-use software			35				0.1	%			35				0.1	%			140				0.1	%			140				0.1	%
Restructuring charges			—				—	%			—				—	%			1,327				0.9	%			—				—	%
Charges related to securities litigation			—				—	%			—				—	%			—				—	%			1,446				0.9	%
Charges related to headquarter relocation			—				—	%			—				—	%			—				—	%			890				0.5	%
Non-GAAP operating income (loss)		$	520				1.4	%		$	(2,370	)			(5.7	)%		$	(4,026	)			(2.6	)%		$	(12,635	)			(7.4	)%
		Amount				Per share				Amount				Per share				Amount				Per share				Amount				Per share
Net Income (Loss) and Net Income (Loss) per Share Reconciliations:
GAAP net loss		$	(3,422	)		$	(0.06	)		$	(7,264	)		$	(0.14	)		$	(22,926	)		$	(0.43	)		$	(36,911	)		$	(0.73	)
Stock-based compensation			3,714				0.07				4,937				0.10				16,675				0.32				21,702				0.43
Amortization of internal-use software			35				—				35				—				140				—				140				—
Restructuring charges			—				—				—				—				1,327				0.02				—				—
Charges related to securities litigation			—				—				—				—				—				—				1,446				0.03
Charges related to headquarter relocation			—				—				—				—				—				—				890				0.02
Non-GAAP net income (loss), basic and diluted		$	327			$	0.01			$	(2,292	)		$	(0.04	)		$	(4,784	)		$	(0.09	)		$	(12,733	)		$	(0.25	)
Shares Used in Computing non-GAAP Basic and Diluted Net Income (Loss) per Share:
Weighted average shares used in computing net income (loss) per share, basic			53,782,676								51,561,897								53,227,342								50,332,872
Weighted average shares used in computing net income (loss) per share, diluted			55,349,918								51,561,897								53,227,342								50,332,872
		Amount				% ofRevenue				Amount				% ofRevenue				Amount				% ofRevenue				Amount				% ofRevenue
Operating and Functional Expenses and Expenses Percentages Reconciliations:
GAAP research and development		$	8,386				22.6	%		$	10,047				24.1	%		$	36,418				23.8	%		$	41,504				24.4	%
Stock-based compensation			(1,089	)			(3.0	)%			(1,106	)			(2.7	)%			(4,171	)			(2.7	)%			(5,393	)			(3.1	)%
Restructuring charges			—				—	%			—				—	%			(838	)			(0.6	)%			—				—	%
Non-GAAP research and development		$	7,297				19.6	%		$	8,941				21.4	%		$	31,409				20.5	%		$	36,111				21.3	%
GAAP sales and marketing		$	14,518				39.0	%		$	18,961				45.5	%		$	65,325				42.7	%		$	80,998				47.7	%
Stock-based compensation			(742	)			(1.9	)%			(1,933	)			(4.7	)%			(5,103	)			(3.3	)%			(8,269	)			(4.9	)%
Restructuring charges			—				—	%			—				—	%			(243	)			(0.2	)%			—				—	%
Non-GAAP sales and marketing		$	13,776				37.1	%		$	17,028				40.8	%		$	59,979				39.2	%		$	72,729				42.8	%
GAAP general and administrative		$	5,608				15.1	%		$	6,704				16.1	%		$	23,094				15.1	%		$	28,839				17.0	%
Stock-based compensation			(1,611	)			(4.3	)%			(1,617	)			(3.9	)%			(6,269	)			(4.1	)%			(6,735	)			(4.0	)%
Restructuring charges			—				—	%			—				—	%			(195	)			(0.1	)%			—				—	%
Charges related to securities litigation			—				—	%			—				—	%			—				—	%			(1,446	)			(0.9	)%
Charges related to headquarter relocation			—				—	%			—				—	%			—				—	%			(890	)			(0.5	)%
Non-GAAP general and administrative		$	3,997				10.8	%		$	5,087				12.2	%		$	16,630				10.9	%		$	19,768				11.6	%
GAAP operating expenses		$	28,512				76.7	%		$	35,712				85.6	%		$	124,837				81.6	%		$	151,341				89.1	%
Stock-based compensation			(3,442	)			(9.3	)%			(4,656	)			(11.1	)%			(15,543	)			(10.2	)%			(20,397	)			(12.0	)%
Restructuring charges			—				—	%			—				—	%			(1,276	)			(0.8	)%			—				—	%
Charges related to securities litigation			—				—	%			—				—	%			—				—	%			(1,446	)			(0.9	)%
Charges related to headquarter relocation			—				—	%			—				—	%			—				—	%			(890	)			(0.5	)%
Non-GAAP operating expense		$	25,070				67.4	%		$	31,056				74.5	%		$	108,018				70.6	%		$	128,608				75.7	%

View source version on businesswire.com: http://www.businesswire.com/news/home/20180208006310/en/

Investor Relations Contact:

The Blueshirt Group

Melanie Solomon, 408-769-6720

[email protected]

Source: Aerohive Networks, Inc.

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