Prospectus Summary
PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including “Risk Factors,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and our consolidated financial statements and related notes before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, the terms “Aerohive Networks,” “Aerohive,” “Company,” “we,” “us,” and “our” in this prospectus refer to Aerohive Networks, Inc. and our subsidiaries.AEROHIVE NETWORKS, INC.
Overview
Aerohive has designed and developed a leading cloud-managed mobile networking platform that enables enterprises to deploy a mobile-centric network edge. The point at which devices access the enterprise network is commonly referred to as the network edge. Managing the network edge is becoming more complex because of the proliferation of mobile devices and the ways in which such devices are used in business. Increasingly, employees and clients are using Wi-Fi-enabled smartphones, tablets, laptops and other mobile devices instead of desktop computers for mission-critical business applications. As the difficulty and complexity of managing the network edge expands, our platform offers cost-efficiency, scalability, reliability, manageability and ease-of-deployment and use. Additionally, our platform gives end-customers context-based visibility and policy enforcement, providing a high level of intelligence to the network. Our hardware products include intelligent access points, routers, gateways and switches. These products are managed by our Cloud Services Platform, which delivers cloud-based network management and mobility applications giving end-customers a single, unified and contextual view of the entire network edge.
As of September 30, 2013, we had approximately 11,500 end-customers worldwide. We define end-customers as the licensees of our products and software subscription and services. We sell through a network of certified resellers and distributors to a wide variety of industry verticals. Our efforts to date have focused on distributed enterprises, K-12 and higher education. Within distributed enterprises, we have operated with vertical market-specific focus on the healthcare and retail industries and state and local government, and we have operated with a general approach to other markets, including manufacturing, utilities, transportation, finance and other professional services.
Our revenue increased from $15.6 million in 2010 to $34.0 million in 2011 and to $71.2 million in 2012, representing a compound annual growth rate of 114%. Our revenue increased from $50.4 million for the first nine months of 2012 to $76.9 million for the first nine months of 2013. Our net loss increased from $11.8 million in 2010 to $14.8 million in 2011 and to $24.7 million in 2012. Our net loss increased from $15.8 million for the first nine months of 2012 to $25.4 million for the first nine months of 2013.
Our Industry
Trends in enterprise mobility, including the proliferation of mobile devices, increased bring your own device, or BYOD, utilization, enterprise adoption of cloud and the adoption of mobile-first applications are significantly increasing the importance of wireless inside the enterprise. Users expect ubiquitous and all high-quality connectivity to support their wireless devices, even while using high-bandwidth, latency-sensitive applications. Wi-Fi has become the standard for wireless access in the enterprise and is increasingly replacing wired Ethernet as the standard access technology. Enterprises want to deploy secure and reliable Wi-Fi ubiquitously across their distributed locations, from the corporate headquarters down to the smallest branch offices.
The network edge provides device connectivity and we believe is the ideal point to provide advanced functions such as authentication, security, quality of service, intelligence and client management. These functions can be provided at the edge using fewer networking resources than had they been applied at the core. For example, fewer processing resources are required to apply functions on the relatively small bandwidth at the network edge as compared to applying such functions at the network’s core. Moreover, security, including firewalls, can be applied at the edge, blocking unwanted traffic before it reaches the core, reducing bandwidth used within the network. Similarly, quality of service management, such as bandwidth limiting and resource prioritization, can be applied at the edge, either reducing bandwidth consumption further into the network, or prioritizing traffic to clients to more efficiently utilize scarce wireless spectrum, leading to improved performance. Historically, the network edge has been wired-centric, where wireless networks were deployed as an overlay network, added on top of existing wired networks, to support a small number of mobile devices. The mobile device explosion is changing the primary form of network access from wired to wireless. In addition, the increasing number of connected devices, the variety of individual users’ device types and ownership and the wide array of applications accessed by these devices are all creating the need for increased intelligence at the network edge.
As a result, enterprise networks need to transition from their existing wired-centric network edge to a mobile-centric network edge. This mobile-centric network edge provides a new level of mobile intelligence for the enterprise. It can also unify wireless and wired networks with integrated network and policy management.
Legacy networking products suffer from a number of key limitations including high cost, difficulty of scaling, complexity of deployment, lack of context, limited security enforcement and lack of unification. In response to these limitations, many vendors are attempting to adapt their existing products or add new alternative products. This leads to massive complexity with multiple approaches driven by customer size, scale and deployment plan.
As a result, enterprises are seeking a unified, intelligent and simplified mobile network that can be cost-effectively deployed across the enterprise. Enterprises already invest significantly in expanding their wireless networks as they become the primary form of access at the network edge. According to Dell’Oro Group, a market research firm, the Enterprise WLAN market, which includes enterprise-class access points, controllers and access management software, is projected to grow from $3.5 billion in 2012 to $6.0 billion by 2017, representing an 11% compounded annual growth rate. In order to deliver a fully unified mobile-centric network edge, a new networking platform would also need to address the Ethernet Edge Switch market, which has been estimated by Dell’Oro Group to be $9.8 billion in size in 2012, and the Branch Router market, which has been estimated by Infonetics, an international marketing research and consulting firm, to be $1.5 billion in size in 2012.
Our Platform
Our leading cloud-managed mobile networking platform enables enterprises to deploy a mobile-centric network edge. Our platform leverages the power of the cloud and our distributed, controller-less architecture to deliver unified, intelligent, simplified networks that can be cost-effectively deployed. Our scalable and flexible platform makes enterprise-class wireless available to enterprises regardless of their level of IT resources and enables a consistent network architecture to be deployed across enterprises of all sizes.
Our platform delivers the following key benefits to customers:
Our Strategy
Our objective is to maintain a leadership position in the enterprise wireless market while continuing to increase the penetration of our mobile-centric network edge solution. The key elements of our strategy to achieve this objective are:
Risks Affecting Us
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. These risks include the following:
Corporate Information
In March 2006, we incorporated our business in the State of Delaware. Our principal executive offices are located at 330 Gibraltar Drive, Sunnyvale, CA 94089. Our telephone number at that location is (408) 510-6100. Our website address is www.aerohive.com. Information on our website is not part of this prospectus and should not be relied upon in determining whether to invest in our common stock.
The Aerohive Networks design logo and the marks “Aerohive®,” “HiveManager™” and “HiveOS™” are the property of Aerohive Networks, Inc. This prospectus contains additional trade names, trademarks and service marks of other companies. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of, us by any of these companies.
Implications of Being an Emerging Growth Company
As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are otherwise applicable generally to public companies. These provisions include:
We will remain an emerging growth company until the earliest to occur of: the last day of the fiscal year in which we have more than $1.0 billion in annual revenue; the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; and the last day of the fiscal year ending after the fifth anniversary of our initial public offering.
We may choose to take advantage of some, but not all, of the available benefits under the JOBS Act. We are choosing to irrevocably “opt out” of the extended transition periods available under the JOBS Act for complying with new or revised accounting standards, but we intend to take advantage of the other exemptions discussed above. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.