AEROHIVE NETWORKS, INC - FORM 8-K - EX-99.1 - May 20, 2014

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Exhibit 99.1

Aerohive Networks, Inc.

Aerohive is providing the accompanying summarized historical financial information for the benefit of the investment community. This financial information details our historical quarterly financial results on both a GAAP basis and a non-GAAP basis, with a reconciliation included. The information is intended to supplement the historical financial information provided in the Prospectus related to the initial public offering of common stock filed with the Securities and Exchange Commission (“SEC”) on March 28, 2014, and 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.

Non-GAAP Financial Measures

Aerohive’s accompanying financials and financial measures include certain non-GAAP financial measures, including:

 

  •   Non-GAAP product gross profit and non-GAAP product gross margin percentage;

 

  •   Non-GAAP software subscriptions and service gross profit and non-GAAP software subscriptions and service gross margin percentage;

 

  •   Non-GAAP gross profit and non-GAAP gross margin percentage;

 

  •   Non-GAAP research and development expense;

 

  •   Non-GAAP sales and marketing expense;

 

  •   Non-GAAP general and administrative expense;

 

  •   Non-GAAP operating income/(loss) and non-GAAP operating income/(loss) percentage; and

 

  •   Non-GAAP net income/(loss).

The Company defines non-GAAP financial measures to exclude share-based compensation, amortization of acquired intangibles and the periodic fair value re-measurements related to convertible preferred stock warrants.

The Company has included non-GAAP financial measures in this document because they are 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 non-cash 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 product gross profit and non-GAAP product gross profit percentage, non-GAAP software subscriptions and service gross profit and non-GAAP software subscriptions and service gross profit percentage, non-GAAP gross profit and non-GAAP gross profit percentage, non-GAAP operating income/(loss) and non-GAAP operating income/(loss) percentage, and non-GAAP net income/(loss) do not reflect any cash requirement for such replacements;

 

  •   non-GAAP net income/(loss) does not reflect the periodic fair value re-measurements related to convertible preferred stock warrants; and

 

  •   other companies, including companies in the industry in which we participate, 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.

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 Prospectus related to the initial public offering of common stock filed with the SEC on March 28, 2014 pursuant to Rule 424(b) under the Securities Act of 1933 (Registration Statement No. 333-193939).

Aerohive Networks, Inc.

Historical Financials

Consolidated Statement of Operations - GAAP

FY2010 to FY2013

Preliminary Unaudited

(in thousands, except percentages)

 

    FY2010     FY2011     Q1FY12     Q2FY12     Q3FY12     Q4FY12     FY2012     Q1FY13     Q2FY13     Q3FY13     Q4FY13     FY2013  

Revenue

                        

Product Revenue

     15,607        31,846        11,676        15,256        20,394        19,305        66,631        18,037        25,883        26,376        27,268        97,564   

Software subscriptions and service

     —          2,110        826        977        1,279        1,502        4,584        1,790        2,149        2,628        3,005        9,571   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total Revenue

     15,607        33,956        12,502        16,233        21,673        20,807        71,215        19,827        28,032        29,004        30,272        107,135   

QoQ %

         10.8 %      29.8 %      33.5 %      -4.0 %        -4.7 %      41.4 %      3.5 %      4.4 %   

YoY %

     324.1 %      117.6 %      139.4 %      126.2 %      110.9 %      84.5 %      109.7 %      58.6 %      72.7 %      33.8 %      45.5 %      50.4 % 

COGS

                        

Product COGS

     7,125        12,049        4,076        5,891        7,234        7,002        24,203        6,155        8,059        8,652        8,565        31,431   

Service COGS

     —          1,544        338        347        502        610        1,797        835        1,010        1,111        1,294        4,249   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total COGS

     7,125        13,593        4,414        6,238        7,736        7,612        26,000        6,990        9,069        9,763        9,859        35,681   

Total Gross Profit

     8,482        20,363        8,088        9,995        13,937        13,195        45,215        12,837        18,963        19,241        20,413        71,454   

% of Revenue

     54.3 %      60.0 %      64.7 %      61.6 %      64.3 %      63.4 %      63.5 %      64.7 %      67.6 %      66.3 %      67.4 %      66.7 % 

Operating Expenses

                        

Total Research and Development

     5,491        9,595        3,160        3,437        4,581        4,903        16,081        5,757        6,674        6,510        6,801        25,742   

% of Revenue

     35.2 %      28.3 %      25.3 %      21.2 %      21.1 %      23.6 %      22.6 %      29.0 %      23.8 %      22.4 %      22.5 %      24.0 % 

Total Sales & Marketing

     10,835        22,396        7,742        10,821        11,094        13,108        42,765        12,900        14,604        14,507        15,762        57,773   

% of Revenue

     69.4 %      66.0 %      61.9 %      66.7 %      51.2 %      63.0 %      60.1 %      65.1 %      52.1 %      50.0 %      52.1 %      53.9 % 

General & Admin

     1,791        2,953        1,229        1,744        2,089        3,459        8,521        3,889        3,926        4,858        5,016        17,689   

% of Revenue

     11.5 %      8.7 %      9.8 %      10.7 %      9.6 %      16.6 %      12.0 %      19.6 %      14.0 %      16.7 %      16.6 %      16.5 % 

Total Operating Expenses

     18,118        34,944        12,131        16,002        17,764        21,470        67,367        22,546        25,204        25,875        27,579        101,204   

% of Revenue

     116.1 %      102.9 %      97.0 %      98.6 %      82.0 %      103.2 %      94.6 %      113.7 %      89.9 %      89.2 %      91.1 %      94.5 % 

Operating Income/(Loss)

     (9,635 )      (14,581 )      (4,043 )      (6,007 )      (3,827 )      (8,275 )      (22,152 )      (9,709 )      (6,241 )      (6,634 )      (7,166 )      (29,750 ) 

% of Revenue

     -61.7 %      -42.9 %      -32.3 %      -37.0 %      -17.7 %      -39.8 %      -31.1 %      -49.0 %      -22.3 %      -22.9 %      -23.7 %      -27.8 % 

Interest Income/(Expense), Net

     (1,241 )      (243 )      (23 )      (11 )      (74 )      (103 )      (212 )      (96 )      (98 )      (139 )      (257 )      (589 ) 

Other Income/(Expense), net

     (894 )      87        (138 )      (135 )      (1,355 )      (408 )      (2,036 )      (383 )      (486 )      (1,305 )      (289 )      (2,462 ) 

Income Before Taxes

     (11,771 )      (14,737 )      (4,204 )      (6,153 )      (5,256 )      (8,786 )      (24,399 )      (10,188 )      (6,824 )      (8,078 )      (7,711 )      (32,801 ) 

Provision for Taxes

     —          (64 )      (73 )      (37 )      (39 )      (190 )      (339 )      (130 )      (155 )      (58 )      (83 )      (426 ) 

Net Income/(Loss)

     (11,771 )      (14,801 )      (4,277 )      (6,190 )      (5,295 )      (8,976 )      (24,738 )      (10,318 )      (6,979 )      (8,136 )      (7,795 )      (33,227 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

% of Revenue

     -75.4 %      -43.6 %      -34.2 %      -38.1 %      -24.4 %      -43.1 %      -34.7 %      -52.0 %      -24.9 %      -28.1 %      -25.7 %      -31.0 % 

Aerohive Networks, Inc.

Historical Financials

GAAP to Non-GAAP Reconciliations

FY2010 to FY2013

Preliminary Unaudited

(in thousands, except percentages)

 

    FY2010     FY2011     Q1FY12     Q2FY12     Q3FY12     Q4FY12     FY2012     Q1FY13     Q2FY13     Q3FY13     Q4FY13     FY2013  

Product Gross Profit Reconciliations:

                        

GAAP Product Gross Profit

     8,482        19,797        7,600        9,365        13,160        12,303        42,428        11,881        17,824        17,724        18,703        66,132   

Stock-based compensation

     2        —          —          —          —          —          —          —          —          —          10        10   

Amortization of acquired intangible assets

     —          14        40        40        41        41        162        40        40        41        41        162   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP Product Gross Profit

     8,484        19,811        7,640        9,405        13,201        12,344        42,590        11,921        17,864        17,765        18,754        66,304   

Non-GAAP Product Gross Margin Percentage

     54.4 %      62.2 %      65.4 %      61.6 %      64.7 %      63.9 %      63.9 %      66.1 %      69.0 %      67.4 %      68.8 %      68.0 % 

Software subscriptions and service Gross Profit Reconciliations:

                        

GAAP Software subscriptions and service Gross Profit

     —          566        488        630        777        892        2,787        956        1,139        1,517        1,710        5,322   

Stock-based compensation

     —          29        2        3        4        4        13        9        11        17        17        54   

Amortization of acquired intangible assets

     —          —          —          —          —          —          —          —          —          —          —          —     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP Software subscriptions and service Gross Profit

     —          595        490        633        781        896        2,800        965        1,150        1,534        1,727        5,376   

Non-GAAP Service Gross Margin Percentage

       28.2 %      59.3 %      64.8 %      61.1 %      59.7 %      61.1 %      53.9 %      53.5 %      58.4 %      57.5 %      56.2 % 

Gross Profit Reconciliations:

                        

GAAP Gross Profit

     8,482        20,363        8,088        9,995        13,937        13,195        45,215        12,837        18,963        19,241        20,413        71,454   

Stock-based compensation

     2        29        2        3        4        4        13        9        11        17        27        64   

Amortization of acquired intangible assets

     —          14        40        40        41        41        162        40        40        41        41        162   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP Gross Profit

     8,484        20,406        8,130        10,038        13,982        13,240        45,390        12,886        19,014        19,299        20,482        71,680   

Non-GAAP Gross Margin Percentage

     54.4 %      60.1 %      65.0 %      61.8 %      64.5 %      63.6 %      63.8 %      65.0 %      67.8 %      66.5 %      67.7 %      66.9 % 

Research and Development Expense Reconciliations:

                        

GAAP Research and Development

     5,491        9,595        3,160        3,437        4,581        4,903        16,081        5,757        6,674        6,510        6,801        25,742   

Less: Stock-based compensation

     (57 )      (123 )      (57 )      (52 )      (69 )      (86 )      (264 )      (150 )      (197 )      (193 )      (389 )      (929 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP Research and Development

     5,434        9,472        3,103        3,385        4,512        4,817        15,817        5,607        6,477        6,317        6,412        24,813   

Sales and Marketing Expense Reconciliations:

                        

GAAP Sales & Marketing

     10,835        22,396        7,742        10,821        11,094        13,108        42,765        12,900        14,604        14,507        15,762        57,773   

Less: Stock-based compensation

     (103 )      (200 )      (64 )      (90 )      (119 )      (210 )      (483 )      (287 )      (332 )      (324 )      (630 )      (1,573 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP Sales & Marketing

     10,732        22,196        7,678        10,731        10,975        12,898        42,282        12,613        14,272        14,183        15,132        56,200   

General and Admin Expense Reconciliations:

                        

GAAP General & Admin

     1,791        2,953        1,229        1,744        2,089        3,459        8,521        3,889        3,926        4,858        5,016        17,689   

Less: Stock-based compensation

     (31 )      (155 )      (32 )      (62 )      (98 )      (154 )      (346 )      (259 )      (305 )      (420 )      (737 )      (1,721 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP General & Admin

     1,760        2,798        1,197        1,682        1,991        3,305        8,175        3,630        3,621        4,438        4,279        15,968   

Operating Income/(Loss) Reconciliations:

                        

GAAP Operating Income/(Loss)

     (9,635 )      (14,581 )      (4,043 )      (6,007 )      (3,827 )      (8,275 )      (22,152 )      (9,709 )      (6,241 )      (6,634 )      (7,166 )      (29,750 ) 

Stock-based compensation

     193        507        155        207        290        454        1,106        705        845        954        1,783        4,287   

Amortization of acquired intangible assets

     —          14        40        40        41        41        162        40        40        41        41        162   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP Operating Income/(Loss)

     (9,442 )      (14,060 )      (3,848 )      (5,760 )      (3,496 )      (7,780 )      (20,884 )      (8,964 )      (5,356 )      (5,639 )      (5,342 )      (25,301 ) 

Non-GAAP Operating Loss Percentage

     -60.5 %      -41.4 %      -30.8 %      -35.5 %      -16.1 %      -37.4 %      -29.3 %      -45.2 %      -19.1 %      -19.4 %      -17.6 %      -23.6 % 

Net Income/(Loss) Reconciliations:

                        

GAAP Net Income/(Loss)

     (11,771 )      (14,801 )      (4,277 )      (6,190 )      (5,295 )      (8,976 )      (24,738 )      (10,318 )      (6,979 )      (8,136 )      (7,795 )      (33,227 ) 

Stock-based compensation

     193        507        155        207        290        454        1,106        705        845        954        1,783        4,287   

Amortization of acquired intangible assets

     —          14        40        40        41        41        162        40        40        41        41        162   

Periodic remeasurement of convertible preferred stock warrants

     814        (82 )      91        60        1,310        401        1,862        355        447        1,200        223        2,225   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP Net Income/(Loss)

     (10,764 )      (14,362 )      (3,991 )      (5,883 )      (3,654 )      (8,080 )      (21,608 )      (9,218 )      (5,646 )      (5,941 )      (5,748 )      (26,553 ) 

Aerohive Networks, Inc.

Historical Financials

Trended GAAP Revenue by Geography

FY2010 to FY2013

Preliminary Unaudited

(in thousands, except percentages)

 

     FY2010     FY2011     Q1FY12     Q2FY12     Q3FY12     Q4FY12     FY2012     Q1FY13     Q2FY13     Q3FY13     Q4FY13     FY2013  

Revenue

                         

Americas

      11,681        24,817        8,645        11,335        15,161        12,868        48,009        13,637        20,426        17,264        18,469        69,796   

Europe, Middle East and Africa

      3,272        7,408        3,423        4,401        4,861        6,168        18,853        4,377        6,068        8,696        8,723        27,864   

Asia Pacific

      654        1,731        434        497        1,651        1,771        4,353        1,813        1,538        3,044        3,080        9,475   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

      15,607        33,956        12,502        16,233        21,673        20,807        71,215        19,827        28,032        29,004        30,272        107,135   

QoQ %

          10.8 %      29.8 %      33.5 %      -4.0 %        -4.7 %      41.4 %      3.5 %      4.4 %   

YoY %

      324.1 %      117.6 %      139.4 %      126.2 %      110.9 %      84.5 %      109.7 %      58.6 %      72.7 %      33.8 %      45.5 %      50.4 % 

Aerohive Networks, Inc.

Historical Financials

Consolidated Balance Sheet -GAAP

FY2010 to FY2013

Preliminary Unaudited

(in thousands)

 

     FY2011     FY2012     FY2013  

Assets

       

Cash

      14,540        29,585        35,023   

Accounts Receivable

      4,644        12,724        17,578   

Inventory

      5,153        6,848        6,817   

Prepaid and Other Current Assets

      929        2,637        6,376   
  

 

 

    

 

 

    

 

 

  

Total Current Assets

      25,266        51,795        65,794   

Property and equipment - Net

      865        2,151        3,281   

Other Assets

      1,084        927        782   

Total Assets

      27,215        54,873        69,857   
  

 

 

    

 

 

    

 

 

  

Liabilities & Equity

       

Current Liabilities

       

Accounts Payable

      4,462        8,081        10,802   

Accruals & Other Current Liabilities

      3,745        4,736        7,561   

Current Portion of Loans

      799        —          10,000   

Deferred Revenue, current portion

      2,424        9,204        15,915   
  

 

 

    

 

 

    

 

 

  

Total Current Liabilities

      11,430        22,021        44,278   

Long Term Liabilities

       

Debt - noncurrent

      —          10,000        9,624   

Warrant liability

      1,490        3,352        3,903   

Deferred Revenue, non-current

      1,813        7,500        14,655   

Other liabilities - non-current

      149        445        742   
  

 

 

    

 

 

    

 

 

  

Total Long Term Liabilities

      3,452        21,297        28,924   

Total Liabilites

      14,882        43,318        73,202   

Equity

       

Stockholders’ Equity

      74,702        98,662        116,989   

Accumulated Deficit

      (62,369 )      (87,107 )      (120,334 ) 
  

 

 

    

 

 

    

 

 

  

Total Equity

      12,333        11,555        (3,345 ) 

Total Liabilities & Equity

      27,215        54,873        69,857   
  

 

 

    

 

 

    

 

 

  

Aerohive Networks, Inc.

Historical Financials

Consolidated Statement of Cash Flows - GAAP

FY2010 to FY2013

Preliminary Unaudited

(in thousands)

 

     FY2011     FY2012     FY2013  

Operating Activities:

       

Net Income (Loss)

      (14,801 )      (24,738 )      (33,227 ) 

Adjustments to Net Income

       

Depreciation

      354        840        1,570   

Stock Compensation

      507        1,106        4,288   

Amortization of debt discount and non-cash interest expense

      24        16        145   

(Gain)/loss on sale or abandonment of fixed assets

      —          —          —     

Change in fair value of warrant liability

      (82 )      1,862        2,225   

(Incr) Decr in Accts Recievable

      (2,143 )      (8,080 )      (4,861 ) 

(Incr) Decr in Inventory

      (3,611 )      (1,695 )      33   

(Incr) Decr in Prepaid expenses

      (408 )      (1,709 )      (241 ) 

Other Assets

      28        (6 )      27   

Incr (Decr) in Accounts Payable

      3,108        3,144        1,002   

Incr (Decr) in Accrued Expenses

      —          868        2,494   

Incr (Decr) in Accrued Payroll

      —          —          —     

Incr (Decr) in Deferred Revenue

      2,315        12,467        13,868   

Incr (Decr) in Other Liabilities

      1,889        296        297   
  

 

 

    

 

 

    

 

 

  

Total Operating Activities

      (12,820 )      (15,629 )      (12,380 ) 

Investing Activities:

       

Purchase of Equipment

      (1,696 )      (1,488 )      (2,910 ) 
  

 

 

    

 

 

    

 

 

  

Total Investing Activities

      (1,696 )      (1,488 )      (2,910 ) 

Financing Activities:

       

Issuance of Convertible Prefered Stock

      25,000        22,500        10,000   

Cost related to issuance of convertible preferred stock

      (106 )      (99 )      (57 ) 

Proceeds from exercise of warrants for convertible preferred stock

      90        —          692   

Proceeds from early exercise of employee stock options, net of repurchases

      —          181        814   

Payment for Deferred IPO costs

      —          —          (1,408 ) 

Bank Borrowing (repayment)

      —          10,000        9,519   

Proceeds from exercise of options

      134        395        1,169   

Repayments of debt

      (1,817 )      (815 )      —     
  

 

 

    

 

 

    

 

 

  

Total Financing Activities

      23,301        32,162        20,728   

Operating Cash Burn

      (12,820 )      (15,629 )      (12,380 ) 

Equity/Debt Cash Burn

      21,605        30,674        17,818   

Total Increase (Decrease) in Cash

      8,785        15,045        5,438   

Cash @ Beginning of Period

      5,755        14,540        29,585   

Cash @ End of Period

      14,540        29,585        35,023   

AEROHIVE NETWORKS, INC Reports