10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
	Form 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018.

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to        

Commission file number: 001-36355

Aerohive Networks, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-4524700
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1011 McCarthy Boulevard

Milpitas, California 95035

(408) 510-6100

(Address, including zip code, and telephone number,

including area code, of registrant's principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ¨	Accelerated filer   x
Non-accelerated filer   ¨ (Do not check if a smaller reporting company)	Smaller reporting company   ¨
	Emerging growth company  x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

The number of shares of the registrant's common stock, par value $0.001, outstanding as of April 27, 2018 was 54,629,170.

TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Loss	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 4.	Controls and Procedures	36
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70
	Signatures	71

The Aerohive Networks design logo and the marks “Aerohive^®,” “HiveManager^®,” “HiveOS^®,” "Aerohive Networks^TM, "Aerohive Atom AP30^TM,” “Aerohive Connect^TM,” “HiveManager Connect^TM,” “Aerohive Select^TM,” and “HiveCare Select^TM” are the property of Aerohive Networks, Inc. All Rights Reserved. This Quarterly Report on Form 10-Q contains additional trade names, trademarks and service marks of other companies.

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PART I. FINANCIAL INFORMATION

ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AEROHIVE NETWORKS, INC.

Condensed Consolidated Balance Sheets

(unaudited, in thousands, except share and per share amounts)

	March 31,			December 31,
	2018			2017
ASSETS				(As Adjusted)*
CURRENT ASSETS:
Cash and cash equivalents	$	21,484		$	27,249
Short-term investments	56,388			57,675
Accounts receivable, net of allowance for doubtful accounts of $120 and $127 as of March 31, 2018 and December 31, 2017, respectively	19,474			17,662
Inventories	13,558			13,495
Prepaid expenses and other current assets	6,205			6,396
Total current assets	117,109			122,477
Property and equipment, net	6,988			6,381
Goodwill	513			513
Other assets	5,009			4,900
Total assets	$	129,619		$	134,271
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	12,020		$	11,946
Accrued liabilities	7,811			8,602
Debt, current	20,000			—
Deferred revenue, current	33,885			33,279
Total current liabilities	73,716			53,827
Debt, non-current	—			20,000
Deferred revenue, non-current	33,993			33,761
Other liabilities	1,734			1,769
Total liabilities	109,443			109,357
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, par value of $0.001 per share - 25,000,000 shares authorized as of March 31, 2018 and December 31, 2017; no shares issued and outstanding as of March 31, 2018 and December 31, 2017	—			—
Common stock, par value of $0.001 per share - 500,000,000 shares authorized as of March 31, 2018 and December 31, 2017; 54,625,924 and 54,171,498 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively	55			55
Additional paid–in capital	281,146			278,528
Treasury stock - 1,361,243 shares as of March 31, 2018 and December 31, 2017, respectively	(6,216		)	(6,216		)
Accumulated other comprehensive loss	(69		)	(30		)
Accumulated deficit	(254,740		)	(247,423		)
Total stockholders’ equity	20,176			24,914
Total liabilities and stockholders’ equity	$	129,619		$	134,271

See notes to condensed consolidated financial statements.

* The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition.

(See Note 1)

2

AEROHIVE NETWORKS, INC.

Condensed Consolidated Statements of Operations

(unaudited, in thousands, except share and per share amounts)

	Three Months Ended March 31,
	2018			2017
Revenue:				(As Adjusted)*
Product	$	25,066		$	26,967
Subscription and support	10,701			9,362
Total revenue	35,767			36,329
Cost of revenue (1):
Product	8,671			8,815
Subscription and support	3,404			3,176
Total cost of revenue	12,075			11,991
Gross profit	23,692			24,338
Operating expenses:
Research and development (1)	9,279			9,550
Sales and marketing (1)	15,670			17,437
General and administrative (1)	5,954			6,297
Total operating expenses	30,903			33,284
Operating loss	(7,211		)	(8,946		)
Interest income	289			140
Interest expense	(164		)	(130		)
Other expense, net	(173		)	(85		)
Loss before income taxes	(7,259		)	(9,021		)
Provision for income taxes	58			97
Net loss	$	(7,317	)	$	(9,118	)
Net loss per share, basic and diluted	$	(0.13	)	$	(0.17	)
Weighted-average shares used in computing net loss per share, basic and diluted	54,332,767			52,439,039
(1) Includes stock-based compensation as follows:
Cost of revenue	$	246		$	271
Research and development	1,046			688
Sales and marketing	997			1,294
General and administrative	1,382			1,300
Total stock-based compensation	$	3,671		$	3,553

See notes to condensed consolidated financial statements.  

* The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition

(See Note 1).

3

AEROHIVE NETWORKS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited, in thousands)

	Three Months Ended March 31,
	2018			2017
				(As Adjusted)*
Net loss	$	(7,317	)	$	(9,118	)
Unrealized loss on available-for-sale investments, net of tax	(39		)	(6		)
Comprehensive loss	$	(7,356	)	$	(9,124	)

See notes to condensed consolidated financial statements.  

* The Company has adjusted certain amounts have been adjusted for the retrospective change in accounting policy for revenue recognition (See Note 1).

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AEROHIVE NETWORKS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited, in thousands)

	Three Months Ended March 31,
	2018			2017
Cash flows from operating activities				(As Adjusted)*
Net loss	$	(7,317	)	$	(9,118	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	708			842
Stock-based compensation	3,671			3,553
Other	(116		)	(15		)
Changes in operating assets and liabilities:
Accounts receivable, net	(1,812		)	4,562
Inventories	(63		)	961
Prepaid expenses and other current assets	191			(562		)
Other assets	(109		)	(57		)
Accounts payable	(56		)	(885		)
Accrued liabilities	(792		)	144
Other liabilities	12			(6		)
Deferred revenue	838			(975		)
Net cash used in operating activities	(4,845		)	(1,556		)
Cash flows from investing activities
Purchases of property and equipment	(1,185		)	(223		)
Maturities of short-term investments	22,950			4,200
Purchases of short-term investments	(21,587		)	(7,709		)
Net cash provided by (used in) investing activities	178			(3,732		)
Cash flows from financing activities
Proceeds from employee stock option exercises and employee stock purchase plan	28			218
Payment for shares withheld for tax withholdings on vesting of restricted stock units	(1,080		)	(326		)
Payment on capital lease obligations	(46		)	(43		)
Net cash used in financing activities	(1,098		)	(151		)
Net decrease in cash and cash equivalents	(5,765		)	(5,439		)
Cash and cash equivalents at beginning of period	27,249			34,346
Cash and cash equivalents at end of period	$	21,484		$	28,907
Supplemental disclosure of cash flow information
Income taxes paid	$	36		$	99
Interest paid	$	168		$	126
Supplemental disclosure of noncash investing and financing activities
Unpaid property and equipment purchases	$	196		$	22

See notes to condensed consolidated financial statements.

* The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition.

(See Note 1).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Aerohive Networks, Inc. was incorporated in Delaware on March 15, 2006, and, together with its subsidiaries (the "Company"), has designed and developed a leading cloud and enterprise Wi-Fi solution that enables the Company's customers to use the power of the Wi-Fi, cloud, analytics and applications to transform how they serve their customers. The Company's products include Wi-Fi access points, access switches and SD-WAN capable routers required to build an edge-access network; a cloud-based services platform for centralized management; data collection and analytics; and applications that leverage the network to provide additional capabilities to the business and IT organizations. Together, these products, service platforms and applications create a simple, scalable, and secure solution to deliver a better-connected experience.

The Company has offices in North America, Europe and Asia Pacific and employs staff around the world.

Basis of Presentation and Consolidation

The Company prepared the accompanying consolidated financial statements in accordance with generally accepted accounting principles in the United States (GAAP), which includes the accounts of Aerohive Networks, Inc. and its wholly owned subsidiaries. The Company has eliminated all intercompany accounts and transactions in consolidation.

Use of Estimates

When preparing the accompanying consolidated financial statements in conformity with GAAP, management makes estimates and assumptions that affect the amounts the Company reports in the consolidated financial statements and accompanying notes. Those estimates and assumptions include, among others, the determination of standalone selling price (SSP) of product, software and related support and subscriptions, determination of fair value of stock-based awards, inventory valuation, accounting for income taxes, including the valuation reserve on deferred tax assets and uncertain tax positions, allowance for sales reserves, allowance for rebate reserves, allowance for doubtful accounts, and warranty costs. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. As the Company cannot determine future events and their effects with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the consolidated financial statements.

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. The Company remeasures the transactions denominated in currencies other than the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, the Company remeasures its subsidiaries’ monetary assets and liabilities to the U.S. dollar using exchange rates in effect at the end of the reporting period. The Company remeasures its non-monetary assets and liabilities at historical exchange rates. The Company records gains and losses related to remeasurement in other income (expense), net in the consolidated statements of operations. Foreign currency exchange losses have not been significant in any period presented and the Company has not undertaken any hedging transactions related to foreign currency exposure.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from contracts with customers (Topic 606), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605) and most industry-specific guidance. This standard requires entities to recognize revenue when they transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 deferring the effective date of this standard by one year to December 15, 2017. In the first quarter of 2018, the Company adopted ASC 606, using the full retrospective method, which required the Company to restate its historical financial information to be consistent with the standard. The most significant impact of the standard related to the way the Company accounts for arrangements with its stocking distributors. The Company previously deferred the recognition of revenue and the cost of revenue from sales to these stocking distributors until the stocking distributors had sold the products to their customers (known as “sell-through” revenue recognition). Under the new standard, the Company recognizes all revenue and related cost of revenue on sales to stocking distributors upon shipment and transfer of control (known as “sell-in” revenue

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recognition), rather than deferring recognition until the stocking distributors report that they have sold the products to their customers, provided that all other revenue recognition criteria have been met. The Company also attributes the impact to its revenue and deferred revenue balance to the removal of the limitation on contingent revenue, which accelerates revenue recognition for certain contracts. Further, the adoption of this standard also resulted in differences in the timing of recognition of contract costs, such as sales commissions.    

The Company has finalized the adoption of the standard and product revenue was $113.1 million and $134.6 million for fiscal years ended December 31, 2017 and 2016, respectively, and subscription and support revenue was $40.4 million and $33.3 million for fiscal years ended December 31, 2017 and 2016, respectively. The adoption of the standard resulted in a decrease in total deferred revenue of $3.3 million as of December 31, 2017, driven by the Company's recognition in the period of revenue related to stocking distributors upon shipment and also the removal of the limitation on contingent revenue accelerating revenue recognition for certain contracts. The adoption of the standard resulted in a decrease of $0.3 million in capitalized contract costs as of December 31, 2017. The adoption of this standard did not have a significant impact on the revenue or the related costs and sales commission for the three months ended March 31, 2017. In addition, the adoption of the standard had no significant impact on the provision for income taxes and the net cash provided by (used in) operating, investing, or financing on the Company's consolidated statements of cash flows.

ASC 606 Adoption Impact to Previously Reported Results

The following tables present the impacts to reported results from the Company's adoption of the standard on the Company's condensed consolidated balance sheets and condensed consolidated statements of operations.

Consolidated Balance Sheet (in thousands)
	As of December 31, 2017
	As Reported			Impact of Adoption			As Adjusted
Prepaid expenses and other current assets	$	6,513		$	(117	)	$	6,396
Total current assets	122,594			(117		)	122,477
Other assets	5,124			(224		)	4,900
Total assets	134,612			(341		)	134,271
Deferred revenue, current	34,281			(1,002		)	33,279
Total current liabilities	54,829			(1,002		)	53,827
Deferred revenue, non-current	36,083			(2,322		)	33,761
Total liabilities	112,681			(3,324		)	109,357
Accumulated deficit	(250,406		)	2,983			(247,423		)
Total stockholders' equity	21,931			2,983			24,914
Total liabilities and stockholders' equity	$	134,612		$	(341	)	$	134,271

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Consolidated Statements of Operations (in thousands, except per share amounts)
	Three Months Ended March 31, 2017
	As Reported			Impact of  Adoption			As Adjusted
Product revenue	$	26,870		$	97		$	26,967
Subscription and support	9,481			(119		)	9,362
Total Revenue	36,351			(22		)	36,329
Cost of revenue - Product	8,736			79			8,815
Total cost of revenue	11,912			79			11,991
Gross profit	24,439			(101		)	24,338
Sales and marketing	17,439			(2		)	17,437
Total operating expenses	33,286			(2		)	33,284
Operating loss	(8,847		)	(99		)	(8,946		)
Net loss	$	(9,019	)	$	(99	)	$	(9,118	)
Net loss per share, basic and diluted	$	(0.17	)	$	—		$	(0.17	)

Effect on certain items in the Statement of Cash Flows (operating activities, in thousands)
	Three Months Ended March 31, 2017
	As Reported			Impact of Adoption			As Adjusted
Cash flows from operating activities:
Net loss:	$	(9,019	)	$	(99	)	$	(9,118	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Prepaid expenses and other current assets	(638		)	76			(562		)
Other assets	(58		)	1			(57		)
Deferred revenue	(997		)	22			(975		)

Revenues by geographic location, based on the billing address of the respective channel partner’s bill-to location, which reflect the adoption of ASC 606, are as follows: (in thousands)
	Three Months Ended March 31, 2017
	As Reported		Impact of Adoption			As Adjusted
Americas	$	23,918	$	(22	)	$	23,896
Europe, Middle East and Africa	9,832		—			9,832
Asia Pacific	2,601		—			2,601
Total revenues	$	36,351	$	(22	)	$	36,329

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Under ASC 606, the Company recognizes revenue as of the time of transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to from those goods or services. As shown on the condensed consolidated statement of operations, the Company derives revenue from two sources: (i) product, which includes hardware and software revenue, and (ii) subscription and support, which includes post-contract customer support (PCS) and software delivered as a service (SaaS).

Beginning with its first quarter, fiscal year 2018, the Company follows the following five-step approach in recognizing revenue:

• Identification of the contract, or contracts, with a customer - A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which the Company bases on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

• Identification of the performance obligations in the contract - The Company identifies performance obligations promised in a contract based on the goods or services that the Company will transfer to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or services either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, the Company applies judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract.

• Determination of the transaction price - The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer.

• Allocation of the transaction price to the performance obligations in the contract - If the contract contains a single performance obligation, the Company allocates the entire transaction price to the single performance obligation. The Company allocates the transaction price of contracts that contain multiple performance obligations to each performance obligation based on a relative SSP. The Company determines SSP based on the price at which the performance obligation is sold separately. If the Company cannot observe SSP through past transactions, the Company estimates the SSP by taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

• Recognition of revenue when, or as, we satisfy a performance obligation- The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. The Company recognizes revenue at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.

Revenue Recognition

The Company’s product revenue consists of sales to distributors, and value-added resellers, or VARs and an OEM partner. The Company considers purchase orders such distributors, VARs and OEM partner issue to the Company, which are in some cases governed by master sales agreements, to be the Company's contracts with such customers, as such documents provide enforceable rights and obligations between the Company and distributor, VAR or OEM partner. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer goods or services to be the identified performance obligation. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company allocates the transaction price to each distinct performance obligation based on its respective and relative standalone selling price. The Company recognizes revenue when control of the product or service is transferred to the customer (i.e., when the Company has met its performance obligation is satisfied). Further, in determining whether control has transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer.

The Company makes sales of products to most distributors under terms allowing certain price adjustments and limited rights of return (known as “stock rotation”) of the Company’s products held in their inventory. The Company recognizes

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revenue from sales to distributors upon the transfer of control of the product to the distributor. Frequently, distributors need to sell product at a discounted price lower than the standard distribution price in order to win business. After the Company verifies that the distributor had obtained the Company's pre-approval for the discount claim, the Company may issue a credit memo to the distributor representing a rebate of the amount of the discount. In determining the transaction price, the Company considers these price adjustments to be variable consideration. The Company estimates such price adjustments using the expected-value method based on an analysis of actual credit claims and at the distributor level, over a period of time the Company considers adequate to account for current pricing and business trends. Historically, actual price adjustments relative to those the Company estimates and includes when determining the transaction price have not materially differed. Stock rotation rights provide distributor with the ability to return certain specified amounts of inventory. Stock rotation adjustments are an additional form of variable consideration which the Company also estimates using the expected-value method based on historical return rates. Historically, distributor stock rotation adjustments have not been material.

The Company makes sales to certain distributors, VARs and its OEM partner under terms that do not include rights of return or price concessions after the product is shipped. Accordingly, upon application of steps one through five above, the Company recognizes product revenue is recognized upon shipment and transfer of control.

The Company generally provides a limited lifetime warranty that its products will substantially conform to the published specifications. The Company limits its liability to either a credit equal to the purchase price or replacement of the defective part. The Company does not consider activities related to such warranty a separate performance obligation.

Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 90 days. In instances where the timing of the Company's revenue recognition differs from the timing of its invoicing, the Company has determined that its contracts generally do not include a significant financing component.

The Company records accounts receivable at the invoiced amount, net of an allowance for doubtful accounts. The Company recognizes a receivable in the period the Company deliver goods or provide services or when its right to consideration is unconditional.

Significant Judgments

The Company's contracts with customers often include promises to transfer multiple products and services to a customer. The Company may exercise significant judgment when determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together. The Company may also exercise judgment to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the hardware and recognized upon transfer of control.

The Company may further require judgment to determine the SSP for each distinct performance obligation. The Company determines SSP for the purposes of allocating the arrangement, primarily based on historical transaction pricing. The Company segregates historical transactions based on its pricing model and go-to-market strategy, which includes factors such as type of sales channel (VAR, OEM or distributor), the geographies in which the Company sells its products and services (domestic or international) and offering type (product series, software subscriptions and level of support for PCS).

Disaggregation of Revenue

Product Revenue - The Company’s product revenue consists of revenue from the sale of the Company’s hardware products, which each contain embedded software related to the Company's proprietary operating system that is not considered to be distinct in the context of the contract, HiveOS. Therefore, the Company considers its hardware appliances together with related embedded HiveOS software (collectively, “the hardware”) as a single performance obligation. The Company transfers these items to the customer concurrently. The Company recognizes hardware revenue upon transfer of control to its customers, which occurs upon shipment. The Company’s product revenue includes the sales of software licenses of HiveManager, a license-based unified networking management system, which consists of the purchase of a perpetual license of the HiveManager software. The Company generally recognizes revenue from its software licenses upon transfer of control to its customers.

Subscription and Support Revenue - The Company’s subscription and support revenue consists of revenue from SaaS and PCS arrangements. SaaS arrangements with customers do not provide the right to take possession of the software at any time during the hosting period and have a defined contract term. PCS arrangements include software updates, access to technical support personnel, and expedited replacement of defective hardware products. Each of the promised services is

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distinct in the context of the contract as the services are not inputs to a combined output for which the Company provides any significant integration service, the provision of each service does not significantly modify or customize the other, and the Company could provide each service independently of the other. Though the Company has identified that each of the performance obligations are distinct, as each of the performance obligations represents a series of distinct services that have the same pattern of transfer (stand ready obligations) and the same measure of progress of transfer (days of service) the Company will account for the all series as a single performance obligation. The Company recognizes revenue from SaaS and PCS arrangements on a straight-line basis over the service contract term, which is typically one, three or five years. The contract term typically commences upon transfer of control of the corresponding products to our customer.

See the condensed consolidated statement of operations for the Company's product revenue and subscription and support revenue amounts for the three months ended March 31, 2018 and 2017, respectively.

Costs to Obtain and Fulfill a Contract

The Company capitalizes certain contract acquisition costs consisting primarily of commissions paid and the related payroll taxes when customer contracts are signed. The Company capitalizes commission expenses earned by sales personnel and the related payroll taxes that are incremental to obtaining customer contracts. The Company amortizes deferred sales commission amounts based on the expected future revenue streams under the customer contracts. The Company includes amortization of deferred sales commissions in sales and marketing expense in the accompanying consolidated statements of operations. The Company classifies deferred commissions as current or non-current based on the timing of when the Company expects to recognize the expense. The Company periodically reviews these costs for impairment.

The Company records deferred revenue when it invoices the customer, collection is probable, and the associated revenue has not yet been earned. The current portion of deferred revenue represents the amounts the Company expects to be recognized as revenue within one year of the condensed consolidated balance sheet date. See Note 3, Consolidated Balance Sheet Components, for the changes in the deferred revenue and deferred commissions during the three months ended March 31, 2018 and 2017, respectively.

Contracted-but-not-recognized revenue

The Company's contracted but not invoiced performance obligations do not include the option for its customers to cancel. The Company's revenue allocated to remaining performance obligations represents contractedrevenue that the Company has not yet recognized (“contracted not recognized”), which includes deferred revenue and non-cancelable amounts that the Company will invoice and recognize as revenue in future periods. Contracted-but-not-recognized revenue was $72.3 million as of March 31, 2018, of which the Company expects to recognize approximately 53% of the revenue over the next 12 months and the remainder thereafter.

Other Recently Adopted Accounting Pronouncements

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments, to clarify certain aspects of ASU No. 2016-01. We adopted these standards effective January 1, 2018. The Company's adoption of these standards did not have a material impact on the Company's financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which provides guidance to decrease the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company adopted ASU 2016-15 in the first quarter of 2018. The Company's adoption of this standard did not have a material impact on the Company's financial statements.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the lease accounting requirements in Topic 840. This standard requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The standard also requires qualitative and quantitative disclosures to supplement the amounts recorded in the financial statements so that

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users can understand more about the nature of an entity’s leasing activities, including the Company's significant judgments and changes in judgments. This standard is effective beginning in fiscal year 2019. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. An impairment charge will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The standard is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company plans to adopt this standard in 2021 when it becomes effective.

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. The Company maintains cash equivalents in money market funds. The Company maintains short-term investments in U.S. treasuries, corporate securities, and commercial paper.

The Company sells its products primarily to channel partners, which include value-added resellers, or VARs, distributors, Managed Service Providers, or MSPs, and Original Equipment Manufacturers, or OEMs. The Company’s accounts receivable are typically unsecured and are derived from revenue earned from customers located in the Americas, Europe, the Middle East and Africa, and Asia Pacific. The Company performs ongoing credit evaluations to determine customer credit, but generally does not require collateral from its customers. The Company maintains reserves for estimated credit losses and these losses have historically been within management’s expectations. 

The Company has entered into separate agreements with certain individual distributors that are part of a consolidated group of entities which collectively constitutes greater than 10% of the Company’s total revenue or gross accounts receivable balance for certain periods, as presented in the tables below.

The percentages of revenue from a consolidated group of entities (Distributor A and Distributor B) greater than 10% of total consolidated revenue were as follows:

	Three Months Ended March 31,
	2018		2017
			(As Adjusted)
Distributor A	17.2	%	15.1	%
Distributor B	35.1	%	19.6	%

The percentages of receivables from Distributor A and Distributor B greater than 10% of total consolidated accounts receivable were as follows:

	March 31,		December 31,
	2018		2017
Distributor A	22.9	%	27.9	%
Distributor B	32.0	%	29.4	%

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2. FAIR VALUE MEASUREMENTS

The Company records its financial assets and liabilities at fair value. The Company categorizes these assets and liabilities based upon the level of judgment associated with inputs the Company uses to measure the fair value. The categories are as follows:

Level 1	Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2	Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3	Unobservable inputs are used when little or no market data is available.

The Company classified its cash equivalents and short-term marketable investments within Level 1 and Level 2 in the fair value hierarchy as of March 31, 2018 and December 31, 2017, respectively. Level 1 assets include highly liquid money market funds that the Company includes in cash equivalents. The Company classifies these instruments within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. Level 2 assets include U.S. treasuries, corporate securities, agency securities and commercial paper. The Company classifies these instruments within Level 2 of the fair value hierarchy because they are valued based on pricing obtained from an independent pricing service, which may use quoted market prices for identical or comparable instruments or model driven valuations using observable market date or inputs corroborated by observable market data. The Company classifies these instruments as short-term investments unless their maturities are three months or less when purchased, in which case the Company includes them in cash and cash equivalents. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency, which the Company obtains from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets.

The components of the Company’s Level 1 and Level 2 assets are as follows:

	March 31, 2018
	Amortized Cost		Gross Unrealized Gain (Loss)			Estimated Fair Value		Cash equivalents		Short-term investments
	(in thousands)
Level 1:
Money market funds	6,937		—			6,937		6,937		—
	$	6,937	$	—		$	6,937	$	6,937	$	—
Level 2:
U.S. treasuries	9,411		(13		)	9,398		—		9,398
Corporate securities	19,911		(56		)	19,855		—		19,855
Commercial paper	29,133		—			29,133		1,998		27,135
	$	58,455	$	(69	)	$	58,386	$	1,998	$	56,388
Total	$	65,392	$	(69	)	$	65,323	$	8,935	$	56,388

	December 31, 2017
	Amortized Cost		Gross Unrealized Gain (Loss)			Estimated Fair Value		Cash equivalents		Short-term investments
	(in thousands)
Level 1:
Money market funds	7,538		—			7,538		7,538		—
	$	7,538	$	—		$	7,538	$	7,538	$	—
Level 2:
U.S. treasuries	9,480		(3		)	9,477		—		9,477
Corporate securities	15,293		(27		)	15,266		—		15,266
Commercial paper	32,932		—			32,932		—		32,932
	$	57,705	$	(30	)	$	57,675	$	—	$	57,675
Total	$	65,243	$	(30	)	$	65,213	$	7,538	$	57,675

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All short-term investments the Company held as of March 31, 2018 and December 31, 2017 contractually mature within one year from these respective dates.

Unrealized gains and losses related to these investments are due to interest rate fluctuations as opposed to credit quality. In addition, the Company does not intend to sell, and it is not more likely than not that the Company would be required to sell, these investments before recovery of their cost basis. As a result, there was no other-than-temporary impairment for these investments as of March 31, 2018 and December 31, 2017.  

3. CONSOLIDATED BALANCE SHEET COMPONENTS

Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following:

	March 31,		December 31,
	2018		2017
			(As Adjusted)
	(in thousands)
Deferred sales commissions, current portion	$	3,100	$	3,072
Prepaid expenses	2,543		2,543
Other	562		781
Total prepaid expenses and other current assets	$	6,205	$	6,396

Property and Equipment, net

Property and equipment, net consists of the following:

		March 31,			December 31,
	Estimated Useful Lives	2018			2017
		(in thousands)
Computer and other equipment	3 years	$	1,714		$	1,713
Manufacturing, research and development laboratory equipment	3 years	4,888			4,630
Software	2 to 5 years	9,230			8,182
Office furniture and equipment	3 to 7 years	2,061			2,061
Leasehold improvements	shorter of useful life or lease term	1,025			1,017
Property and equipment, gross		18,918			17,603
Less: Accumulated depreciation and amortization		(11,930		)	(11,222		)
Property and equipment, net		$	6,988		$	6,381

The software category includes the capitalized software for the Company's cloud service platform. The Company amortizes these capitalized costs to cost of subscription and support revenue on a straight-line basis over an estimated useful life of the software of five years.

Depreciation and amortization expense was $0.7 million and $0.8 million for the three months ended March 31, 2018 and 2017, respectively.

Office furniture and equipment classified under capital lease was $1.2 million at March 31, 2018 and December 31, 2017 respectively, and the related accumulated depreciation was $0.5 million and $0.4 million at March 31, 2018 and December 31, 2017, respectively.

Other assets

Other assets consist of the following:

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	March 31,		December 31,
	2018		2017
			(As Adjusted)
	(in thousands)
Deferred sales commissions, non-current portion	$	2,985	$	2,947
Investment in privately held company	1,500		1,500
Other	524		453
Total other assets	$	5,009	$	4,900

Deferred Commission

The current portion of deferred commission represents the amounts that the Company expects to be recognized as commission expense within one year of the consolidated balance sheet date. Significant changes in the balance of total deferred commission (contract asset) during the three months ended March 31, 2018 and March 31, 2017 are as follows:

	Three Months Ended March 31,
	2018			2017
				(As Adjusted)
	(in thousands)
Beginning balance	$	6,019		$	5,766
Recognized	(3,018		)	(3,224		)
Additions	3,084			3,416
Ending balance	$	6,085		$	5,958
Current portion	$	3,100		$	2,928
Non-current portion	$	2,985		$	3,030

Of the $6.1 million total deferred commission balance as of March 31, 2018, the Company expects to recognize approximately 51% as commission expense over the next 12 months and the remainder thereafter.

In January 2016, the Company paid $1.5 million in cash to purchase a convertible note issued by a privately held company, which provides Wi-Fi application and analytics. In June 2017, the convertible note and accrued interest on the note converted into shares of preferred stock of the privately held company and the note was canceled. The accrued interest on the note was immaterial. The Company currently has no significant voting rights, investor rights or influence over the privately held company. Since the investment has no readily determinable market value, the Company elected the measurement alternative. As of March 31, 2018, the Company carried the investment at the value of original principal and the Company reviews such carried value quarterly for indicators of fair value changes when there are observable prices less any potential impairment. The Company did not recognize a change in value or impairment for the three months ended March 31, 2018 and 2017, as there were no identified events or changes in circumstances that might have a significant impact on the carrying value. The Company has classified the investment as other assets on the condensed consolidated balance sheet.

Accrued Liabilities

Accrued liabilities consist of the following:

	March 31,		December 31,
	2018		2017
	(in thousands)
Accrued compensation	$	6,691	$	6,971
Accrued expenses and other liabilities	903		1,385
Warranty liability, current portion	217		246
Total accrued liabilities	$	7,811	$	8,602

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Deferred Revenue

The current portion of deferred revenue represents the amounts that the Company expects to recognize as revenue within one year of the consolidated balance sheet date. Significant changes in the balance of total deferred revenue (contract liability) during the three months ended March 31, 2018 and March 31, 2017 are as follows:

	Three Months Ended March 31,
	2018			2017
				(As Adjusted)
	(in thousands)
Beginning balance	$	67,040		$	63,239
Recognized	(10,701		)	(9,362		)
Additions	11,539			8,387
Ending balance	$	67,878		$	62,264
Current portion	$	33,885		$	30,326
Non-current portion	$	33,993		$	31,938

Of the $67.9 million total deferred revenue balance as of March 31, 2018, the Company expects to recognize approximately 50% as revenue over the next 12 months and the remainder thereafter.

Warranty Liability

The following table summarizes the activity related to the Company’s accrued liability for estimated future warranty:

	Three Months Ended March 31,
	2018			2017
	(in thousands)
Beginning balance	$	577		$	975
Charges to operations	126			121
Obligations fulfilled	(153		)	(197		)
Changes in existing warranty	(4		)	(42		)
Total product warranties	$	546		$	857
Current portion	$	217		$	516
Non-current portion	$	329		$	341

Changes in existing warranty reflect a combination of changes in expected warranty claims and changes in the related costs to service such claims.

4. DEBT

Financing Agreements

In June 2012, the Company entered into a revolving credit facility with Silicon Valley Bank (the "Revolving Credit Facility"). The Revolving Credit Facility is collateralized by substantially all of the Company’s property, other than intellectual property. Since January 1, 2016, the Revolving Credit Facility bears interest rate at the lesser of (i) LIBOR rate plus 1.75% or (ii) prime rate minus 1.0%. In March 2017, the Company further amended the Revolving Credit Facility to extend the maturity date by two years and reduce the minimum cash requirements. The weighted-average interest rate of the Revolving Credit Facility was 3.28% and 2.57% for the three months ended March 31, 2018 and 2017, respectively.

The Revolving Credit Facility contains customary negative covenants which, unless waived by the bank, limit the Company’s ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets or engage in merger and acquisition activity, including merge or consolidate with a third party. The Revolving Credit Facility also requires the Company to maintain a minimum adjusted quick ratio of 1.25 to 1.00 and a minimum cash balance with the bank as of the last day of each month of $35.0 million and to demonstrate the absence of

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defined events of default in order to assure full access to the available borrowing. The Revolving Credit Facility also contains customary events of default, subject to customary cure periods for certain defaults, that include, among other things, non-payment defaults, covenant defaults, material judgment defaults, bankruptcy and insolvency defaults, cross-defaults to certain other material indebtedness, and defaults due to inaccuracy of representation and warranties. Upon an event of default, the lender may declare all or a portion of the outstanding obligations payable by the Company to be immediately due and payable and exercise other rights and remedies provided for under the Revolving Credit Facility. During the existence of an event of default, interest on the obligations under the Revolving Credit Facility could be increased by 5.0%. As of March 31, 2018, the Company was in compliance with these covenants.

The Revolving Credit facility currently provides, among other things (i) a maturity date of March 31, 2019; and (ii) a revolving line up to $20.0 million, subject to certain conditions.

As of March 31, 2018, $20.0 million remains outstanding under the Revolving Credit Facility, and the Company classifies this amount as a current liability in the condensed consolidated balance sheet.

5. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company currently leases its main office facility in Milpitas, California, which lease is set to expire in June 2023. In addition, the Company leases office space for its subsidiaries in the United Kingdom, the Netherlands, Korea and China under non-cancelable operating leases that expire at various times through September 2022. The Company has also entered into various lease agreements in other locations in the United States and globally to support its sales and research and development functions.

The Company recognizes rent expense on a straight-line basis over the respective lease period. Future minimum lease payments by year under operating leases as of March 31, 2018 are as follows:

	Amount
Year Ending December 31,	(in thousands)
2018 (remaining nine months)	$	1,185
2019	1,471
2020	1,103
2021	1,090
2022	999
Thereafter	445
Total	$	6,293

Rent expense was $0.5 million for the three months ended March 31, 2018 and 2017.

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Capital Lease Obligations

The Company has certain office furniture and equipment that it classifies under capital leases. The terms of the capital leases range from three years to seven years. The interest expense is immaterial in any particular period. Future minimum lease payments by year under capital lease obligations as of March 31, 2018 are as follows:

	Amount
Year Ending December 31,	(in thousands)
2018 (remaining nine months)	$	141
2019	178
2020	172
2021	170
2022	162
Thereafter	83
Total	$	906

Manufacturing Commitments

The Company subcontracts with manufacturing companies to manufacture its hardware products. The contract manufacturers procure components based on non-cancelable orders the Company places with them. If the Company cancels all or part of an order, the Company is liable to the contract manufacturers for the cost of the related components they purchased under such orders.

As of March 31, 2018 and December 31, 2017, the Company had manufacturing commitments with contract manufacturers for inventory totaling approximately $3.9 million and $6.0 million, respectively.

Contingencies

The Company may be subject to legal proceedings and litigation arising from time to time. The Company will record a liability when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. The Company expects periodically to evaluate developments in its legal matters that could affect the amount of liability that it has previously accrued, if any, and make adjustments as appropriate. The Company exercises significant judgment to determine both likelihood of there being, and the estimated amount of, a loss related to such matters, and the Company’s judgment may be incorrect. The Company cannot reasonably determine in advance the outcome of any litigation proceeding. Until the final resolution of any such matter for which the Company may be required to accrue, the Company may have an exposure to loss in excess of the amount the Company has accrued, and such excess amount could be significant.

The Company is currently engaged in the following separate security litigations:

In January 2018, three purported class actions were filed in the United States District Court for the Northern District of California against the Company and two of its officers.  The actions are McGovney v. Aerohive Networks, Inc., et al., Case No. 5:18-cv-00435, Beyerbach v. Aerohive Networks, Inc., et al., Case No. 5:18-cv-0544 and Panjabi v. Aerohive Networks, Inc., et al., Case No. 5:18-cv-00656.  The complaints allege that the defendants made false and misleading statements, in particular regarding the Company’s financial outlook for the fourth quarter of 2017. The complaints assert claims for violations of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 on behalf of those who purchased the Company’s common stock between November 1, 2017 and January 16, 2018, inclusive. The complaints seek monetary damages in an unspecified amount.  On March 20, 2018, three shareholders filed respective motions to consolidate the three cases and to be appointed lead plaintiff for a class.  The Company anticipates that these cases will be consolidated and that a court-appointed lead plaintiff will file a consolidated complaint later this year.

On March 26, 2018, a purported shareholder derivative complaint was filed in the California Superior Court for the County of Santa Clara against the Company’s board of directors and two of its officers.  The action is titled Flores v. Flynn, et.al, Case No. 18CV325517.  The complaint alleges that the same general conduct alleged in the securities class actions also constituted a breach of fiduciary duty, waste of corporate assets, abuse of control, mismanagement, and unjust enrichment.  The complaint seeks monetary damages in an unspecified amount, restitution, and certain changes to the Company’s corporate governance and internal procedures.

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The outcomes of the legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to the Company's operating results and cash flows for any particular period.

The Company intends to defend these lawsuits vigorously, and is not able to predict or estimate any range of reasonably possible loss related to these lawsuits. If these matters have an adverse outcome, they may have a material impact on the Company’s financial position, results of operations or cash flows.       

Guarantees

The Company typically enters into agreements with its customers that contain indemnification provisions in the event of claims alleging that the Company’s products infringe the intellectual property rights of a third party. The Company has at its option and expense, the ability to resolve any infringement, replace product with a non-infringing product that is equivalent-in-function, or refund to the customers the total product price. These agreements also typically include guarantees of product and service performance. The Company has not recorded a liability related to these indemnification and guarantee provisions and the Company’s indemnification and guarantee provisions have not had any impact on the consolidated financial statements to date.

6. STOCKHOLDERS' EQUITY

Common Stock reserved for Future Issuance

As of March 31, 2018, the Company had the following reserved shares of common stock for future issuance:

	March 31,
	2018
Common stock reserved for future grant under the 2014 Equity Incentive Plan	11,033,424
Common stock reserved for future purchase under the 2014 Employee Stock Purchase Plan	2,169,988
Options and Restricted Stock Units issued and outstanding	7,559,655
Total reserved shares of common stock for future issuance	20,763,067

Stock Repurchase Program

In February 2016, the Company's board of directors authorized a stock repurchase program of up to $10.0 million, with stock purchases made from time to time in compliance with applicable securities laws in the open market or in privately negotiated transactions. The timing and amounts of any purchases will be based on market conditions and other factors including price, regulatory requirements and capital availability. The authorization does not require the purchase of any minimum number of shares, and the Company may suspend, modify or discontinue the program at any time without prior notice. In August 2017, the Company's board of directors extended this program to June 30, 2018. In November 2017, the Company's board of directors increased the authorized amount under this program to $20.0 million.

During the three months ended March 31, 2018 and the three months ended March 31, 2017, the Company did not repurchase any shares. As of March 31, 2018, the Company had repurchased under this program 1,361,243 shares of its common stock at a total price $6.2 million with an average purchase price $4.57 per share of our common stock. Approximately $13.8 million remains available to the Company as of March 31, 2018 for repurchases under this program.

7. STOCK-BASED COMPENSATION

2014 Equity Incentive Plan

On March 26, 2014, the Company's 2014 Equity Incentive Plan ("2014 Plan") became effective. On March 27, 2014, the Company terminated its earlier 2006 Global Share Plan ("2006 Plan"), added all reserved-but-unissued shares under the 2006 Plan to the 2014 Plan and rolled into the 2014 Plan all shares underlying stock awards granted under the 2006 Plan that otherwise would return to the 2006 Plan. The Company may not grant additional awards under the 2006 Plan, but the 2006 Plan will continue to govern outstanding awards previously granted under the 2006 Plan.

The 2014 Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code, only to employees of the Company or any parent or subsidiary of the Company, and for the grant of

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nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to employees, directors and consultants of the Company, and the employees and consultants of any parent or subsidiary of the Company.

In January 2018, the Company effected an increase of 2,708,575 shares reserved under the 2014 Plan. As of March 31, 2018, the Company had 11,033,424 total shares of common stock reserved and available for grant under the 2014 Plan.

The following table summarizes the total number of shares available for grant under the 2014 Plan as of March 31, 2018:

	Shares Available for Grant
Balance, December 31, 2017	7,997,691
Authorized	2,708,575
Options granted	—
Options canceled	94,449
Awards granted	(304,188	)
Awards canceled	536,897
Balance, March 31, 2018	11,033,424

Stock Options

The following table summarizes the information about outstanding stock option activity:

	Options Outstanding
	Number of Shares Underlying Outstanding Options		Weighted Average Exercise  Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
						(in thousands)
Balance, December 31, 2017	4,247,911		$	6.03	5.80	$	4,472
Options granted	—		—
Options exercised	(7,125	)	1.22
Options canceled	(94,449	)	6.43
Balance, March 31, 2018	4,146,337		$	6.03	5.54	$	2,602
Options exercisable, March 31, 2018	3,607,547		$	5.94	5.24	$	2,602

There were no options granted during the three months ended March 31, 2018 and 2017.

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2018 and 2017 was $0.03 million and $0.4 million, respectively. The intrinsic value for each share underlying an option represents the difference between the option exercise price per share and the closing stock price of a share of the Company’s common stock. The total grant-date fair value of the options vested was $0.7 million and $4.8 million, respectively, during the three months ended March 31, 2018 and 2017, respectively.

Restricted Stock Units

The Company currently grants Restricted Stock Units (RSUs) to certain employees and directors. The RSUs typically vest over a period of time, generally one to three years, and are subject to the participant’s continuing service to the Company over that period. Until vested, RSUs do not have the voting and dividend participation rights of common stock and the shares underlying the awards are not considered issued and outstanding.

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The following is a summary of the Company’s RSU grant activity and related information for the three months ended March 31, 2018:

	Restricted Stock Units Outstanding
	Shares		Weighted-Average Grant-Date Fair Value Per Share
Balance, December 31, 2017	4,089,067		$	6.47
Awards granted	304,188		4.30
Awards vested	(699,069	)	5.29
Awards canceled	(280,868	)	5.45
Balance, March 31, 2018	3,413,318		$	5.32

The weighted-average grant-date fair value of RSUs the Company granted during the three months ended March 31, 2018 and 2017 was $4.30 and $5.00 per share, respectively. The aggregate grant-date fair value of RSUs the Company granted during the three months ended March 31, 2018 and 2017 was $3.7 and $4.0 million, respectively. The aggregate fair value of shares vested as of the respective vesting dates during the three months ended March 31, 2018 and 2017 was $1.3 and $2.2 million, respectively.

The number of RSUs vested during a particular period includes shares that the Company withheld during the period on behalf of certain employees to satisfy the minimum statutory tax withholding requirements, as determined by the Company. During the three months ended March 31, 2018 and 2017, the Company withheld 256,029 and 70,368 shares of stock, respectively, for an aggregate value of $1.1 million and $0.3 million, respectively. The Company returned such withheld shares to the 2014 Plan, which were then available under the plan terms for future issuance.

In the three months ended March 31, 2017, Company granted 378,644 shares of RSUs as performance-based restricted stock units (PBRSUs) to certain executives pursuant to the 2014 Plan. Each PBRSU represents the right to receive one share of the Company's common stock upon vesting, subject to the Company's achievement of certain performance conditions. 251,037 of these PBRSU awards vested in the three months ended March 2018. The Company did not grant any PBRSUs during the three months ended March 31, 2018.

The Company granted 358,000 market-based restricted stock units (MBRSUs) to certain executives in June 2017 pursuant to the 2014 Plan. Each MBRSU represents the right to receive one share of the Company's common stock upon vesting subject to the Company's achievement of certain stock price targets. The Company estimated the fair value of the MBRSUs using the Monte Carlo option-pricing model as of the date of grant as the MBRSUs contain both market and service conditions. The weighted-average grant-date fair value of these MBRSUs was $4.18 per share. The Company will record the total expense related to all of the MBRSUs on a graded-vesting method over the estimated term.  36,625 of these MBRSU awards vested in the three months ended March 31, 2018. The Company did not grant any MBRSUs during the three months ended March 31, 2018 and March 31, 2017.     

2014 Employee Stock Purchase Plan

The 2014 Employee Stock Purchase Plan ("ESPP") is a ten-year plan, effective in March 2014. The ESPP authorizes the Company to issue shares of common stock pursuant to purchase rights it grants to its employees and those of its designated subsidiaries. In January 2018, the Company effected an increase of 541,715 shares reserved under the ESPP. As of March 31, 2018, the Company had 2,169,988 total shares of common stock reserved and available for issuance under the ESPP.

Under the ESPP, the Company grants stock purchase rights to all eligible employees, currently covering a one-year offering period ending December 1, 2018, with purchase dates at the end of each interim six-month purchase period. Employees purchase shares using employee payroll deductions at purchase prices equal to 85% of the lesser of the fair market value of the Company’s common stock at either the first day of each offering period or the date of purchase. The ESPP currently has a reset provision: If the closing price of the Company’s common stock on the last day of any purchase period during an offering period is lower than the closing sales price on the first day of the related offering period, that offering period will terminate upon the purchase of shares for such purchase period and participants will be automatically re-enrolled in the immediately following offering period. As a result, the reference price for purposes of determining the purchase price of shares for subsequent purchase periods for all participants of the new offering period resets to such lower price. No participant may purchase more

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than $25,000 worth of common stock in any calendar year, or 5,000 shares of common stock in any six-month purchase period. The Company did not issue any shares under the ESPP during the three months ended March 31, 2018 and March 31, 2017.

Determination of Fair Values

Weighted-average assumptions to value employee stock purchase rights under the Black-Scholes model were as follows:

	Three Months Ended March 31,
	2018	2017
ESPP purchase rights:
Expected term (in years)	0.50 - 1.00	0.50 - 1.00
Expected volatility	46% - 48%	34% - 39%
Risk free interest rate	1.45% - 1.62%	0.60% - 0.82%

Stock-based Compensation Expense

The Company recognized total stock-based compensation for stock-based awards in the condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
	2018		2017
	(in thousands)
Cost of revenue	$	246	$	271
Research and development	1,046		688
Sales and marketing	997		1,294
General and administrative	1,382		1,300
Total stock-based compensation	$	3,671	$	3,553

The following table presents stock-based compensation expense by award-type:

	Three Months Ended March 31,
	2018		2017
	(in thousands)
Stock Options	$	541	$	883
Restricted Stock Units	2,792		2,270
Employee Stock Purchase Plan	338		400
Total stock-based compensation	$	3,671	$	3,553

The stock-based compensation expense the Company recorded for restricted stock units for the three months ended March 31, 2018 and 2017 includes the amount of stock-based compensation recorded for PBRSUs of approximately $0.2 million and $0.1 million, respectively and MBRSUs of approximately $0.2 million and $0.01 million, respectively.

As of March 31, 2018, unrecognized stock-based compensation related to outstanding stock options, RSUs, including performance-based and market-based RSUs and ESPP purchase rights, was $1.7 million, $14.3 million and $0.9 million, respectively, which the Company expects to recognize over weighted-average periods of 1.24 years, 1.72 years and 0.67 years, respectively.

8. NET LOSS PER SHARE

The Company calculates basic and diluted net loss per share by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive.

The following table presents the computation of basic and diluted net loss per share:

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	Three Months Ended March 31,
	2018			2017
				(As Adjusted)
	(in thousands, except for share and per share data)
Numerator:
Net loss	$	(7,317	)	$	(9,118	)
Denominator:
Weighted-average shares used to compute net loss per share, basic and diluted	54,332,767			52,439,039
Net loss per share:
Basic and diluted	$	(0.13	)	$	(0.17	)

The Company excluded the following period-end outstanding common stock equivalents from its computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	As of March 31,
	2018	2017
Shares of common stock issuable under the Equity Incentive Plan	7,559,655	9,465,157
Employee Stock Purchase Plan	456,426	470,217
Total	8,016,081	9,935,374

9. INCOME TAXES

The Company's provision for income taxes was approximately $0.1 million, for the three months ended March 31, 2018 and 2017. The Company's provision for income taxes consisted primarily of state taxes and foreign income taxes.

For the three months ended March 31, 2018 and 2017, the Company's provision for income taxes differed from the statutory amount primarily due to the Company's maintaining a full valuation allowance against the U.S. net deferred tax assets, partially offset by foreign and state taxes.

The Company has intercompany services agreements with its subsidiaries located in the United Kingdom, the Netherlands, New Zealand, Australia, Canada and China, which require payment for services rendered by these subsidiaries at an arm’s-length transaction price. The foreign tax expense represents foreign income tax payable by these subsidiaries on profit generated on intercompany services agreements.

The Company's realization of deferred tax assets depends on future taxable income, the existence and timing of which is uncertain. Based on the Company’s history of losses, management has determined it cannot conclude that it is more likely than not that the deferred tax assets will be realized and, accordingly, management has placed a full valuation allowance against its domestic deferred tax assets, including net operating loss carryforwards and research and development and other tax credits, as of March 31, 2018 and December 31, 2017, respectively.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one‑time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; (6) creating the base erosion anti‑abuse tax (“BEAT”), a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

The Company has not completed its accounting assessment for the effects of the Tax Act; however, based on its initial assessment, the Company has determined that the Tax Act did not have a material effect on its consolidated financial statements for the three months ended March 31, 2018. 

10. SEGMENT INFORMATION

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The Company’s chief operating decision maker (CODM) is its Chief Executive Officer. The Company derives its revenue primarily from sales of products and subscription and support services. The Company’s CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company determined that it operates as one reportable and operating segment.

The following table represents the Company's revenue based on the billing address of the respective channel partners:

	Three Months Ended March 31,
	2018		2017
			(As Adjusted)
	(in thousands)
Americas	$	20,830	$	23,896
Europe, Middle East and Africa	11,900		9,832
Asia Pacific	3,037		2,601
Total revenues	$	35,767	$	36,329

     The Company has included within Americas in the above table revenue from sales in the United States of $19.0 million and $22.0 million, respectively, for the three months ended March 31, 2018 and 2017. Aside from the United States, no country comprised 10% or more of the Company's total revenue for each of the three months ended March 31, 2018 and 2017, respectively.

Property and equipment, net by location is summarized as follows:  

	March 31,		December 31,
	2018		2017
	(in thousands)
United States	$	6,366	$	5,323
People's Republic of China	512		875
United Kingdom	110		183
Total property and equipment, net	$	6,988	$	6,381

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements reflecting our current expectations and involves risks and uncertainties. We intend to identify forward-looking statements when we use the words “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” and similar expressions that convey uncertainty of future events or outcomes. Our actual results and the timing of events may differ materially from those we discuss in our forward-looking statements as a result of various factors, including those we discuss below and those we discuss in the section entitled "Risk Factors" included in this Quarterly Report on Form 10-Q.

These forward-looking statements include, but are not limited to, statements concerning the following:

• our ability to predict our revenue, operating results and gross margin accurately;

• our ability to timely develop, deliver and transition to new product offerings and pricing strategies, and transition existing and new end-customers to such offerings and strategies, while maintaining existing revenue and margins and our existing service level commitments to end-customers;

• our ability to continue to secure orders from larger customers and any potential loss of or reductions in orders from such larger customers;

• our ability to maximize sales to our education vertical, including in conjunction with opportunities from the U.S. Federal Communications Commission’s E-Rate program and the timing and uncertainty of the availability of such funding, the level of available funding and the decisions by end-customers to purchase our products using such funding;

• the length and seasonal unpredictability of our sales cycles, including with service provider end-customers;

• the effects of increased competition in and consolidation of our market and our ability to compete with larger competitors with greater financial, technical and other resources;

• our ability to continue to enhance and broaden our product and solutions offerings and bring new products, product functionality and solutions to market;

• our ability to attract new end-customers within the verticals and geographies in which we currently operate;

• changes in global consumer confidence and demand for our products internationally, due to changes to foreign currency exchange rates and other factors;

• our ability to continue to build and enhance relationships with channel partners and to derive revenue from our investments in those partnerships, particularly with our strategic partners;

• our ability to protect our intellectual property and our exposure to third party claims that we or our customers or channel partners infringe their intellectual property; and

• other risk factors included under the section titled “Risk Factors.”    

These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in “Risk Factors” included in Part II, Item 1A and elsewhere in this report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances we discuss in this report may not occur, and our actual results could differ materially and adversely from those we anticipate or imply in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, we caution you not to place undue reliance on such forward-looking statements.

Overview

Our goal is to be a leading independent cloud networking company by simplifying and transforming the connected experience through information, applications and insights. We have designed and developed a leading cloud-managed networking platform that enables enterprises to deploy and manage a mobile-centric network edge. Our platform builds on the foundation of our Wi-Fi and wired network infrastructure. Our platform also connects and stores valuable data about the

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network and network users that can enable better IT and business applications. Customers around the world, from Fortune 500 businesses to small schools, have chosen our products.

For the three months ended March 31, 2018, our revenue was $35.8 million, a decline of $0.6 million, compared to $36.3 million for the three months ended March 31, 2017. In the three months ended March 31, 2018 and 2017, our net losses were $7.3 million and $9.1 million, respectively.

We primarily conduct business in three geographic regions: (1) Americas, (2) Europe, the Middle East and Africa, or EMEA, and (3) Asia Pacific, or APAC. From a geographic perspective, year-over-year revenue decreased in the three months ended March 31, 2018, compared to the three months ended March 31, 2017 by 12.8% in the Americas, and increased by 21.0% in EMEA and 16.8% in APAC. For the three months ended March 31, 2018, we generated 58.2% of our total revenue from Americas, 33.3% from EMEA and 8.5% from APAC.

We believe that the growth of our business and our future success depends upon many factors, including our ability to continue to develop innovative technologies and timely provide new product offerings to the marketplace; increase our sales capabilities and develop our channel partner program; acquire new end customers, expand our end customer base and increase penetration within our existing end customer base (including through new product offerings); and demonstrate revenue growth to our investors and financial analysts while also demonstrating that we can achieve profitability on an acceptable timeline and predictably maintain profitability thereafter.

We operate in the highly competitive wired and wireless network access products market, which is characterized by rapid technological innovation. We will need to continue to innovate in order to achieve market adoption of our products and services. We have continued the expansion of our product portfolio with the release of new Wi-Fi access points, access switches, SD-WAN routers and management software to allow us to deliver a unified wired and wireless network edge.

In the wireless market, we have seen almost all customer demand shift to the 802.11ac standard, which uses new radio hardware to deliver substantially higher wireless performance. In 2016, we continued the push towards higher performance with the release of our 802.11ac "wave2" access points. We also continue to develop new functionality in our product offerings to take advantage of the changes to industry standards, including continued evolution of "Wave 2" and we plan to release products based on the emerging 802.11ax standard this summer.

We believe we have a unique market opportunity based on our ability to deliver unified Wi-Fi, switch and SD-WAN router solutions operating on a single, unified management platform, with subscription-based SaaS solutions and data analytics, at a low entry and operating cost, and the ability to tailor and expand based on each user's needs. We have developed a cloud-based services platform to provide network management and support additional value-added applications. HiveManager (which we formerly called HiveManager NG), the newest version of our network management application, HiveManager Classic, provides a single management interface that customers use to configure network policies, monitor and troubleshoot performance, manage access and security, and run reports on network operations. We will continue to sell and support the legacy version of HiveManager Classic. However, our focus is to continue to transition our business to HiveManager and make our cloud-services platform and applications available to customers in either a subscription-based public cloud or on-premises private cloud deployment. We announced in January 2017, HiveManager Connect, a simplified version of HiveManager included as a part of our new Aerohive Connect product line. Under the Aerohive Connect program, customers may purchase a less complex, connectivity-oriented solution at attractive entry-point pricing. Aerohive Connect customers can expand their Connect deployment, as needed, and can add subscriptions or licenses to upgrade to our full-featured Select offering and premium support services. Our Aerohive Connect and Select offerings are available across our entire portfolio of access points and switches. We believe that separating our product line into these two offerings deliver compellingly priced cloud-managed hardware for connectivity-oriented deployments and enables us to capture more subscription and software license revenue from those customers who require a more advanced feature set and support. In November 2017, we announced that we had entered an OEM agreement with Dell EMC to deliver Aerohive's Wi-Fi access point hardware and HiveManager cloud services platform. The agreement includes joint sales, marketing, support services and logistic investments, and combines Aerohive's technology with Dell EMC's go-to-market and support capabilities through Dell EMC sales teams, Dell EMC channel partners, and Dell EMC services offerings. We also announced later in 2017 our SD-WAN solution for highly distributed commercial enterprises, retail chains and long-term healthcare providers which, when combined with our existing SD-LAN offering, enables organizations to simplify branch deployments with a unified cloud-managed Wi-Fi, switching, and SD-WAN VPN routing solution. In addition, in early 2018 we announced our A3 secure access management and authentication product, Aerohive Atom AP30 pluggable access point and development of a family of enterprise-class 802.11ax access points.

Our business is seasonally driven by annual budget cycles in the enterprise and spending seasonality in the education vertical. The buying cycle for K-12 schools in the United States historically has driven strong sequential growth for us in the second quarter. We expect this seasonality to continue into 2018, as well.

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A substantial portion of our revenue has, historically, depended on the volatile education market, which has brought uncertainty to our results in particular quarters. For this reason, a priority for our business continues to be to expand and diversify our offerings and revenue opportunities into other verticals, with particular focus on enterprise customers. We also intend to continue to invest significant resources in developing our innovative technologies and new product offerings, acquiring new end customers in new and existing geographies, and to increase penetration within our existing end customer base. As a result, we increased in our first quarter of our fiscal year, non-K-12 education contribution to approximately 75% of our overall business, up from approximately 70% in the prior quarter and approximately 60% percent in the first quarter of our fiscal year 2017.

In November 2017, we announced that we had changed our sales leadership, following which we, uncovered underlying sales execution issues which became fully apparent in the last month of the fourth quarter. We have taken actions to replace underperforming sales team members, and we expect to continue to invest in our organization and our channel and strategic partnerships to meet the needs of our customers and to pursue opportunities in new and existing markets. In particular, we are continuing to invest in our sales efficiency and expand and improve our channel program. As such, we will continue to incur expenses in the near term, due to our continuing investments to grow our business, including internationally, in advance of and in preparation for, our expected increase in sales and expansion of our customer base. We believe that over the long term, we will be able to leverage these investments in the form of a higher revenue growth rate compared to the growth rate of our operating expenses.

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Results of Operations

The following table sets forth our results of operations for the periods presented, in dollars (in thousands):

	Three Months Ended March 31,
				(As Adjusted)
	2018			2017
Revenue:
Product	$	25,066		$	26,967
Subscription and support	10,701			9,362
Total revenue	35,767			36,329
Cost of revenue(1):
Product	8,671			8,815
Subscription and support	3,404			3,176
Total cost of revenue	12,075			11,991
Gross profit	23,692			24,338
Operating expenses:
Research and development(1)	9,279			9,550
Sales and marketing(1)	15,670			17,437
General and administrative(1)	5,954			6,297
Operating loss	(7,211		)	(8,946		)
Interest income	289			140
Interest expense	(164		)	(130		)
Other income (expense), net	(173		)	(85		)
Loss before income taxes	(7,259		)	(9,021		)
Income tax provision	58			97
Net loss	$	(7,317	)	$	(9,118	)

⁽¹⁾Includes stock-based compensation as follows:    

	Three Months Ended March 31,
	2018		2017
	(in thousands)
Cost of revenue	$	246	$	271
Research and development	1,046		688
Sales and marketing	997		1,294
General and administrative	1,382		1,300
Total stock-based compensation expense	$	3,671	$	3,553

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The following table sets forth our results of operations for the periods presented, as a percentage of our total revenue:

	Three Months Ended March 31,
	2018		2017
Revenue:
Product	70	%	74	%
Subscription and support	30		26
Total revenue	100		100
Cost of revenue:
Product	24		24
Subscription and support	10		9
Total cost of revenue	34		33
Gross profit	66		67
Operating expenses:
Research and development	26		26
Sales and marketing	44		48
General and administrative	17		18
Operating loss	(21	)	(25	)
Interest income	1		—
Interest expense	—		—
Other income (expense), net	—		—
Loss before income taxes	(20	)	(25	)
Income tax provision	—		—
Net loss	(20	)%	(25	)%

Revenue

We derive revenue from the sales of our products and services and we recognize revenue when we have identified the contract with the customer, identified the performance obligations in the contract, determined the transaction price, allocated the price to the performance obligations, and the performance obligations have been satisfied.

Our total revenue comprises the following:

Product Revenue.  We derive product revenue primarily from sales of our hardware products, which include wireless access points, SD-WAN routers, and switches, all of which are embedded with our proprietary operating system, HiveOS, and perpetual licenses for our unified network management system, HiveManager, and other software applications, as well as related accessories. We recognize product revenue at the time of shipment, provided that all other revenue recognition criteria have been met.

Subscription and Support Revenue.  We derive subscription and support revenue primarily from sales of our subscription and support offerings that we deliver over a specified term. These offerings primarily include post-contract customer support, or PCS, related to our perpetual software licenses and subscriptions to HiveManager and other software applications delivered as SaaS, including related customer support, and from subsequent renewals of those contracts. To benefit fully from potential contract renewals, we plan to continue to invest in systems to better track existing customer support commitments and renewal opportunities and provide offerings which continue to be attractive to our customers. Our PCS includes tiered maintenance and support services under renewable, fee-based maintenance and support contracts, which include technical support, bug fixes, access to priority hardware replacement services and unspecified upgrades on a when-and-if available basis. Our SaaS subscriptions include comparable maintenance and support services. The higher the percentage of our end-customers that purchase SaaS subscriptions, as opposed to HiveManager and PCS, the higher our subscription and support revenue will be as a percentage of our total revenue. We recognize subscription and support revenue ratably over the term of the contract, which is typically one, three or five years. As a result, our recognition of subscription and support revenue lags our recognition of related product revenue.

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	Three Months Ended March 31,
	2018			2017			$ Change			% Change
	(dollars in thousands)
Revenues:
Product	$	25,066		$	26,967		$	(1,901	)	(7	)%
Subscription and support	10,701			9,362			1,339			14	%
Total revenue	$	35,767		$	36,329		$	(562	)	(2	)%
Percentage of revenues:
Product	70		%	74		%
Subscription and support	30		%	26		%
Total	100		%	100		%

	Three Months Ended March 31,
	2018			2017			$ Change			% Change
	(dollars in thousands)
Revenue by geographic region:
Americas	$	20,830		$	23,896		$	(3,066	)	(13	)%
EMEA	11,900			9,832			2,068			21	%
APAC	3,037			2,601			436			17	%
Total revenue	$	35,767		$	36,329		$	(562	)	(2	)%
Percentage of revenue by geographic region:
Americas	58		%	66		%
EMEA	33		%	27		%
APAC	9		%	7		%
Total	100		%	100		%

Revenue decreased $0.6 million for the three months ended March 31, 2018, compared to the three months ended March 31, 2017, primarily due to a decrease in product revenue, partially offset by an increase in software and subscriptions revenue.

The decrease in our product revenue of $1.9 million in the three months ended March 31, 2018, compared to the same period last year, was due to the decrease related to our Connect and Select offering in the list prices of our hardware products.

The increase in our subscription and support revenue of $1.3 million in the three ended March 31, 2018, compared to the same period last year, was primarily due to an increase in sales of PCS and SaaS offerings, including our cloud-management platforms, and our recognition of deferred revenue.

The Americas accounted for the majority of our total revenue in the three months ended March 31, 2018 and March 31, 2017. The decrease in revenue in our Americas region for the three months ended March 31, 2018, compared to the same period in 2017, was primarily due to the decrease related to our Connect-to-Select strategy in list prices of our hardware products we sold in that region.

Cost of Revenues

Our cost of revenue includes the following:

Cost of Product Revenue.  Our cost of product revenue primarily includes manufacturing costs of our products payable to third-party manufacturers. Our cost of product revenue also includes personnel costs, including stock-based compensation, shipping costs, third-party logistics costs, provisions for excess and obsolete inventory, warranty and replacement costs, the depreciation and amortization of testing and imaging equipment, inbound license fees, certain allocated facilities and information technology infrastructure costs, and other expenses associated with logistics and quality control.

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Cost of Subscription and Support Revenue.  Our cost of subscription and support revenue primarily includes personnel costs, including stock-based compensation, certain allocated facilities information technology infrastructure costs, costs associated with our provision of PCS and SaaS activities and datacenter costs. Our cost of subscription and support revenue also includes amortization of capitalized costs related to HiveManager, our internally developed, cloud-services platform, which we completed and launched in April 2015.

	Three Months Ended March 31,
	2018		2017		$ Change			% Change
	(dollars in thousands)
Cost of revenues:
Product	$	8,671	$	8,815	$	(144	)	(2	)%
Subscription and support	3,404		3,176		228			7	%
Total cost of revenues	$	12,075	$	11,991	$	84		1	%

Cost of revenue increased $0.1 million for the three months ended March 31, 2018, compared to the three months ended March 31, 2017. We primarily attribute the decrease in our cost of product revenue for the three months ended March 31, 2018 to changes in the mix of the products we sold in the period. We primarily relate the increase in our cost of subscription and support revenue to an increase in software and services revenue and an increase in the cost of our cloud operations as we scale to support more managed devices.

Gross Margin

Our gross margin or gross profit has been and will continue to be affected by a variety of factors, including product shipment volumes, average sales prices of our products, discounts we offer to our VAR, OEM and distributor partners, the mix of revenue between products and subscription and support services, and the mix of products we sold in the period, because our products have varying gross margins depending on the product offering and the lifecycle of the product. We expect our subscription and support gross margin to increase over the long term because we expect our subscription and support revenue to increase more quickly than our cost of subscription and support revenue. We expect our gross margin to be volatile and may decrease at any given time as we experience additional competitive pricing pressure. Further, we believe the pricing of our new Connect and Select offerings may dampen our product gross margin; however, we expect these offerings to generate improvements in our subscription and support gross margin as well as to increase our deferred revenue over the period.

	Three Months Ended March 31,
	2018				2017
	Amount		GM		Amount		GM
	(dollars in thousands)
Gross margin:
Product	$	16,395	65.4	%	$	18,152	67.3	%
Subscription and support	7,297		68.2	%	6,186		66.1	%
Total gross margin	$	23,692	66.2	%	$	24,338	67.0	%

Total gross margin decreased from 67.0% to 66.2% for the three months ended March 31, 2018, as compared to the same period in the prior year, primarily due to the decrease related to our Connect-to-Select strategy in list prices of our hardware products, accompanied by the increase in software and subscription prices.

Product gross margin decreased from 67.3% to 65.4% for the three months ended March 31, 2018, compared to the three months ended March 31, 2017. The decrease in our product gross margin was primarily due to the decrease related to our Connect-to-Select strategy in list prices of our hardware products and the mix of products sold to our OEM partner in the period. A result of our planned pricing shift related to our Connect-to-Select strategy, revenue shifted from hardware products and increased our subscription and support revenue. Subscription and support gross margin increased from 66.1% to 68.2% for the three months ended March 31, 2018, compared to the three months ended March 31, 2017. The increase in our subscription and support gross margin was primarily due to higher growth in our subscription and support revenue than our related cost of delivering these subscription and support services.

Research and Development

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Our research and development expenses consist primarily of personnel costs, including bonuses, stock-based compensation, recruiting fees and travel expenses for employees engaged in research, design and development activities. Research and development expenses also include costs for prototype-related expenses, product certification, consulting services, depreciation and certain allocated facilities and information technology infrastructure costs. We believe that continued investment in research and development is important to attaining our strategic objectives. Over time, we expect our research and development expenses to continue to increase in absolute dollars for the foreseeable future as we continue to invest in the development of our products and services. Our research and development expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our research and development expenses.

	Three Months Ended March 31,
	2018			2017			$ Change			% Change
	(dollars in thousands)
Research and development	$	9,279		$	9,550		$	(271	)	(3	)%
% of revenue	26		%	26		%

Research and development expense decreased $0.3 million for the three months ended March 31, 2018, compared to the three months ended March 31, 2017. The decrease was primarily due to a decrease of $0.8 million in personnel and related costs, offset by an increase of $0.3 million in stock-based compensation expense, and an increase of $0.2 million in other expenses, primarily due to increases in professional services and prototype expenses.

Sales and Marketing

Our sales and marketing expenses consist primarily of personnel costs, including commission costs, stock-based compensation, recruiting fees and travel expenses for employees engaged in sales and marketing activities. Sales and marketing expenses also include the cost of trade shows, marketing and training programs, promotional materials, demonstration equipment, consulting services, depreciation and certain allocated facilities and information technology infrastructure costs. Over time, we expect our sales and marketing expenses to continue to increase in absolute dollars as we increase the size of our sales and marketing organization, expand into new markets and further develop our channel program. Our sales and marketing expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our sales and marketing expenses.

	Three Months Ended March 31,
	2018			2017			$ Change			% Change
	(dollars in thousands)
Sales and marketing	$	15,670		$	17,437		$	(1,767	)	(10	)%
% of revenue	44		%	48		%

Sales and marketing expense decreased $1.8 million for the three months ended March 31, 2018, compared to the three months ended March 31, 2017. The decrease was primarily due to decreases of $1.5 million in personnel and related costs and $0.3 million in stock-based compensation, each due to lower headcount.     

General and Administrative

Our general and administrative expenses consist primarily of personnel costs, including bonuses, stock-based compensation and travel expenses for our executive, finance, human resources, legal and operations employees, as well as compensation for our board of directors. General and administrative expenses also include fees for outside consulting, legal, audit, investor relations, and accounting service and insurance, as well as depreciation and certain allocated facilities and information technology infrastructure costs. Over time, we expect our general and administrative expenses to continue to increase in absolute dollars due to the additional legal, accounting, insurance, investor relations, information technology and other costs that we will continue to incur as a public company, as well as other costs associated with growing our business. Our general and administrative expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our general and administrative expenses.

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	Three Months Ended March 31,
	2018			2017			$ Change			% Change
	(dollars in thousands)
General and administrative	$	5,954		$	6,297		$	(343	)	(5	)%
% of revenue	17		%	18		%

General and administrative expense decreased $0.3 million for the three months ended March 31, 2018, compared to the three months ended March 31, 2017. The decrease was primarily due to a decrease of $0.2 million in personnel and related costs, primarily due to lower headcount and a decrease of $0.2 million in professional services due to a decrease in consulting and legal expenses.

Interest Income

Our interest income primarily consists of interest earned on our cash, cash equivalents and short-term investments. We have invested our cash in money-market funds and other short-term, high quality investments. Historically, our interest income has not been material.

	Three Months Ended March 31,
	2018		2017		$ Change		% Change
	(dollars in thousands)
Interest income	$	289	$	140	$	149	106	%

Interest income increased for the three months ended March 31, 2018, compared to the three months ended March 31, 2017, primarily due to higher rates we earned on our short-term investments.

Interest Expense

Our interest expense consists primarily of interest on our indebtedness.

	Three Months Ended March 31,
	2018			2017			$ Change			% Change
	(dollars in thousands)
Interest expense	$	(164	)	$	(130	)	$	(34	)	26	%

The change in our interest expense was not significant.

Other Income (expense), Net

Our other income, net primarily consists of gains and losses from foreign currency exchange transactions.

	Three Months Ended March 31,
	2018			2017			$ Change			% Change
	(dollars in thousands)
Other income (expense), net	$	(173	)	$	(85	)	$	(88	)	104	%

The change in our other income (expense) primarily related to changes due to foreign currency fluctuations.

Provision for Income Taxes

Our provision for income taxes consists primarily of foreign tax expense due to our cost-plus agreements with our foreign entities, which guarantee our foreign entities a profit, and to a lesser extent federal and state income tax expense. We expect our provision for income taxes to increase in absolute dollars in future periods.

	Three Months Ended March 31,
	2018		2017		$ Change			% Change
	(dollars in thousands)
Provision for income taxes	$	58	$	97	$	(39	)	(40	)%

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The change in our provision for income taxes primarily related to foreign and state income taxes and was not significant. As of March 31, 2018 and March 31, 2017, respectively, we maintained a full valuation allowance against our domestic deferred tax assets, including net operating loss carryforwards and research and development and other tax credits.

Liquidity and Capital Resources

As of March 31, 2018, we had cash and cash equivalents of $21.5 million and short-term investments of $56.4 million. As of March 31, 2018, we held $76.4 million of our cash, cash equivalents and short-term investments within the United States.

In June 2012, we entered into the Revolving Credit Facility with Silicon Valley Bank, which matures on March 31, 2019. We have been using the amount drawn under the Revolving Credit Facility for working capital and general corporate purposes. As of March 31, 2018 we had $20.0 million of outstanding debt, under the Revolving Credit Facility, and we were in compliance with all covenants under our loan agreement. See Note 4 to the Condensed Consolidated Financial Statements included in this Form 10-Q for more information about our debt.

We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our spending to support our research and development efforts, the expansion of our sales and marketing activities, the introduction of new and enhanced product and service offerings, the costs to ensure access to adequate manufacturing capacity, and the level of market acceptance of our products. However, we may be required to raise additional funds in the future through public or private debt or equity financing to meet additional working capital requirements.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

	Three Months Ended March 31,
	2018			2017
	(in thousands)
Net cash provided by (used in) operating activities	$	(4,845	)	$	(1,556	)
Net cash provided by (used in) investing activities	178			(3,732		)
Net cash provided by (used in) financing activities	(1,098		)	(151		)
Net decrease in cash and cash equivalents	$	(5,765	)	$	(5,439	)

Operating Activities

We have had in the past negative cash flows from operating activities as we continue to invest in our business. Our largest uses of cash from operating activities are for employee-related expenditures and purchases of finished products from our contract manufacturers. Our primary source of cash flows from operating activities is cash receipts from our channel partners. Our cash flows from operating activities will continue to be affected principally by the extent to which we grow our total revenue and our operating expenses, primarily in our sales and marketing and research and development functions, in order to grow our business.

For the three months ended March 31, 2018, cash used in operating activities was $4.8 million as a result of our net loss of $7.3 million, partially offset by non-cash charges of $4.3 million and a net change of $1.8 million in our net operating assets and liabilities. Non-cash charges consisted primarily of stock-based compensation of $3.7 million and depreciation and amortization expense of $0.7 million. The net change in our net operating assets and liabilities was primarily due to a $1.8 million increase in accounts receivable primarily due to the timing of shipments, $0.8 million decrease in accrued liabilities, a $0.1 million increase in cash used for inventory purchases, a $0.2 million decrease in prepaid expenses, $0.1 million increase in other assets, and a $0.1 million increase in accounts payable, partially offset by a $0.8 million increase in deferred revenue. Our days sales outstanding, or DSO, was 49 days as of March 31, 2018, which we calculate by dividing net accounts receivable at the end of the quarter by revenue recognized during the quarter, multiplied by the total days in the quarter. The decrease in DSO to 49 days as compared to 54 days for the same period last year is primarily due to the timing of shipments.

For the three months ended March 31, 2017, cash used in operating activities was $1.6 million as a result of our net loss of $9.1 million, partially offset by non-cash charges of $4.4 million and a net change of $3.2 million in our net operating assets and liabilities. Non-cash charges consisted primarily of stock-based compensation of $3.6 million and depreciation and amortization expense of $0.8 million. The net change in our net operating assets and liabilities was primarily due to a $4.6 million decrease in accounts receivable, $1.0 million decrease in inventory, and $0.1 million increase in accrued liabilities,

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partially offset by a $1.0 million increase in deferred revenue, $0.9 million decrease in accounts payable, $0.6 million increase in prepaid expenses and other current assets, and $0.1 million increase in other assets. Our days sales outstanding, or DSO, was 54 days as of March 31, 2017.

Investing Activities

Our investing activities have primarily consisted of purchases of property and equipment, an investment in a privately held company and purchases and sales of marketable securities.

For the three months ended March 31, 2018, cash provided by investing activities was $0.2 million, primarily attributable to maturities of marketable securities of $23.0 million offset by cash used for purchases of marketable securities of $21.6 million, and cash used for purchases of property and equipment of $1.2 million, relating primarily to purchase of software.

For the three months ended March 31, 2017, cash used in investing activities was $3.7 million, primarily attributable to cash used for purchases of marketable securities of $7.7 million, cash used for purchases of property and equipment of $0.2 million, relating primarily to manufacturing and research and development lab equipment, offset by maturities of marketable securities of $4.2 million.

Financing Activities

Our financing activities have primarily consisted of proceeds from and repayments against our Revolving Credit Facility, proceeds from our employees' exercises of stock options and proceeds from employee purchases under our stock purchase plan offset by our repurchases of treasury shares.

For the three months ended March 31, 2018, cash used in financing activities was $1.1 million, primarily as a result of $1.1 million of cash used to satisfy our estimate of minimum employee tax withholding requirements on vesting of restricted stock units.

For the three months ended March 31, 2017, cash used in financing activities was $0.2 million, primarily as a result of a $0.3 million of cash used to satisfy our estimate of minimum employee tax withholding requirements on vesting of restricted stock units, offset by $0.2 million in proceeds from employee exercises of stock options.

Off-Balance Sheet Arrangements

Through March 31, 2018, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity

Our exposure to market risk for changes in interest rates relates primarily to our cash, cash equivalents, short-term investments and our outstanding debt obligations. We had cash, cash equivalents and short-term investments of $77.9 million and $84.9 million as of March 31, 2018 and December 31, 2017, respectively. We held these amounts primarily in bank deposits, money market funds, certificates of deposit, commercial paper and bonds issued by corporate institutions and U.S. government agencies. Such interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in our interest income have not been significant.

We have outstanding debt of $20.0 million as of March 31, 2018, consisting of our borrowing under our Revolving Credit Facility. The Revolving Credit Facility bears interest at a variable rate.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. We have not been exposed to material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods we present in this report would not have had a material impact on our financial statements.

Foreign Currency Risk

We denominate all of our sales in U.S. dollars and, therefore, our revenues are not currently subject to significant foreign currency risk. However, when the exchange rate of the U.S. dollar to foreign currencies is strong, the price of our

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products outside the United States may become less competitive, reducing our sales or requiring us to lower pricing for our products outside the United States in order to maintain sales and revenue performance. Our operating expenses are denominated in the currencies of the countries in which our operations are located, including in EMEA and APAC, and may be subject to fluctuations due to changes in foreign currency exchange rates. However, to date, we have not used derivative financial instruments to mitigate our exposure to foreign currency exchange risks. A hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our consolidated financial statements in any of the periods presented.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2018. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2018, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable-assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

The information set forth under the “Contingencies” subheading in Note 5 - Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

ITEM 1A.    RISK FACTORS

In evaluating Aerohive and our business, you should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including our condensed consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. If any of the following or other risks occur, our business, financial condition, operating results, and prospects could be materially harmed. In that event, the price of our common stock could decline, and you could lose part or all of your investment.

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Risks Related to Our Business

We have a history of losses and we may not achieve profitability in the future.

We manage our ongoing operating expenses in an effort to position us to achieve non-GAAP operating profitability at certain target levels of quarterly revenue, which we may announce publicly from time-to-time. We may subsequently take actions which could raise or lower the level of quarterly revenue we would need to achieve non-GAAP profitability in any period. Nonetheless, we have a history of losses. We have never achieved GAAP profitability on a quarterly or annual basis, and we cannot predict with certainty whether or when we might be profitable in the foreseeable future, even at these revenue levels. We experienced net losses on a GAAP basis of $38.2 million, $22.1 million and $7.3 million for fiscal years 2016, 2017 and the three months ended March 31, 2018, respectively. As of March 31, 2018, our accumulated deficit was $255 million. We expect to continue to incur expenses associated with the continued development and expansion of our business, including expenditures to hire additional personnel: specifically, personnel costs relating to sales, marketing and engineering, and investments in channel and product development and support. As such, we may not control our expenses sufficiently to achieve operating profitability on a non-GAAP basis even if we achieve quarterly revenue in the indicated range. If we fail to increase our revenue and manage our cost structure, we may not achieve profitability in the future. Once achieved, we may not be able to sustain or increase our profitability, at all or at levels our investors or industry analysts expect, or we may choose to continue to make investments in our operations which we feel will promote long-term growth but which will reduce near-term profitability. This could also require us to continue to use available cash to support our investments and ongoing operations. As a result, our business and prospects, and how investors view and value our common stock, would be harmed.

Our operating results may fluctuate significantly from period to period, which makes our future operating results difficult to predict and could cause our operating results in any particular period or over an extended period to fall below expectations of investors or analysts.

Our operating results have fluctuated significantly in the past and we expect will continue to fluctuate significantly in the future. In particular, the timing and size of sales of our products and services, including results across regions, are highly variable and difficult for us to predict and can result in significant fluctuations in our revenue from period to period. Other participants in our industry have also experienced these fluctuations. As a result, our future results in any particular period or over any extended period may be difficult for us, our investors and analysts to predict.

In addition, our planned expense levels depend in part on our expectations of future revenue. We may choose to maintain or increase levels of investment in areas such as R&D and sales and marketing, despite near-term fluctuations in revenue, in order to position us for continued growth. We also may reduce product prices in order to increase revenue growth and/or penetration of our products into targeted verticals. For example, in January 2017, we announced HiveManager Connect, a simplified version of HiveManager included as part of our new Aerohive Connect product line designed for customers with less complex connectivity-oriented requirements. Under the Aerohive Connect program, customers may purchase access points at lower list prices. Aerohive Connect customers can expand their Connect deployment, as needed, and can add subscriptions or licenses to upgrade to our full-featured Select offering and premium support services. In May 2017, we announced that our Aerohive Connect and Select offerings are available across our entire portfolio of access points and switches. We believe that separating our product line into these two offerings will deliver compellingly priced cloud-managed hardware for connectivity-oriented deployments and enables us to capture more subscription and software license revenue from those customers who require a more advanced feature set and support. This program may reduce our revenue, or the rate of our revenue growth, as purchasers take advantage of the lower entry pricing for our products. In addition, it may be difficult and take time for us to adjust expenses sufficiently to compensate for a shortfall in revenue, even when we may anticipate the shortfall. In such instances, even a small shortfall or seasonal fluctuation in revenue could disproportionately and adversely affect our overall operating margin, operating results and use of cash for a given quarter.

Our operating results may also fluctuate due to a variety of other factors, both within and outside of our control and which we may not foresee, or which we may foresee but not effectively manage, including the changing and volatile domestic and international economic environments, and demand for our products in general and from any particular vertical which may be a target market for our products. Such factors may cause our operating results and stock price to fluctuate. In addition to other risks listed in this “Risk Factors” section, factors that may affect our operating results include:

• fluctuations in demand for our products and services, including seasonal variations, especially in the education vertical where purchasing in the United States has typically been stronger in the second and third quarters and weakest in the first and fourth quarters, and where purchasing at any time may depend on the availability of funding, including fluctuations based on the timing and availability of funding for schools under the Federal Communications Commission's ("FCC") E-Rate program and the decisions of schools to defer purchases in anticipation of the availability of such funding or due to a decision to delay product deployments;

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• our ability to forecast and provide guidance to our investors and industry analysts regarding our revenue and operating results in any particular period, or to achieve results consistent with the guidance we provide;

• our ability to control operating expenses in order to achieve non-GAAP operating profitability in any particular quarterly period;

• our ability to hire, train, develop, integrate and retain a sufficient number of skilled sales and engineering employees to support our continued growth, including, specifically, in Silicon Valley and Hangzhou, China, and to replace turn-over of our employees in these functions and locations;

• the complexity, length and associated unpredictability of our sales cycles for our products and services;

• changes in end customers’ budgets for technology purchases and delays in their purchasing decisions and cycles;

• technical challenges in end customer networks, which may be unrelated to our products, and which could delay adoption and installation and impact the operation of our products and purchases of our services;

• delay in development and availability of component parts needed for development and timely introduction of our next-generation products and product features and continued availability of legacy products at volumes we need to meet demand;

• our ability to develop, increase and sustain sales capacity and effective sales execution across all our sales territories;

• changes in the competitive dynamics of our target markets, including new entrants, further consolidation and pricing trends which suggest commoditization of certain product segments;

• variation in sales channels, product costs, prices or the mix of products we sell;

• our contract manufacturers’ and component suppliers’ ability to meet our product demand forecasts on time, at acceptable prices, or at all, particularly with respect to our newer products;

• our ability to develop and make more productive relationships with our channel and strategic partners, including specifically Dell, and such partners’ ability to effectively develop sales opportunities for us and distribute our products;

• the timing of product releases or upgrades by us or by our competitors, such as next-generation products or product features;

• our ability to successfully expand the suite of products we sell and services we offer to existing end customers and channel partners, to timely introduce new product introductions and to manage the transition both of existing products and operating platforms and our end customers to these new products and services, including timely transition of our end customers to HiveManager and our Connect offering, and to limit disruption to our end customers’ ordering practices and the pricing environment for our legacy products and services while maintaining levels of revenue, gross margin and operating performance which we or our investors and analysts expect;

• our transition to a channel-focused "Go-to-Market" selling model and our ability to maintain levels of revenue growth our investors and analysts may expect through this transition;

• our ability to identify and attract new customers for our products, while maintaining relationships with our existing customers, which is necessary to continued future revenue growth;

• the potential need to record additional inventory reserves for products that may become obsolete or slow-moving due to our new product introductions, changes in end customer requirements, new competitive product or service offerings or our over-estimation of demand for such products as of any particular period;

• our decision to continue or increase our investments in sales, marketing, engineering and other activities in response to changes in the marketplace or perceived marketplace opportunities or in anticipation of or to position us for future growth;

• our ability to control costs, including our operating expenses and the costs of the components we purchase while continuing to derive benefits from our investments in sales, marketing, engineering and other activities;

• periods of continuing strength of the U.S. dollar relative to the currencies of the countries of our distributors or end customers who purchase our products, or of our contract manufacturers or the component suppliers to our contract manufacturers, which may require us to reduce pricing for our products outside the United States in order to maintain sales and revenue performance, or raise the cost we must pay to our manufacturers for our products, resulting in either case in lower revenue and/or gross margins for those products;

• volatility in our stock price, which may lead to higher stock compensation expenses or harm our ability to effectively attract, incentivize and retain our employees using stock-based compensation;

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• the ability of our competitors, including those with greater financial resources, to introduce new products, product features and services more quickly and in response to end customer demand and to drive down pricing on our products and services, which could materially reduce our revenue and gross margins;

• our ability to achieve as of any particular period or over time a level of financial performance consistent with the expectations of our investors and industry analysts; and

• general economic or political conditions in our domestic and international markets, including, specifically, in Europe, where the determination of the United Kingdom to exit the European Union has dampened economic activity and growth in the market for our products.

The effects of these factors, individually or in combination, create unpredictability in our operating results, our ability to forecast those results and our ability to achieve those forecasts. As a result, you should not rely on our past results as an indication of our future performance and comparing our operating results on a period-to-period basis, or anticipating our future results based on our public forecasts, may not be meaningful. This variability and unpredictability could also result in our failing to meet the expectations of our investors or financial analysts for any period. We may release guidance in our quarterly earnings conference calls, quarterly earnings releases, or otherwise, based on management predictions, which are necessarily speculative in nature. Our guidance may vary, and has varied, materially from actual results. For example, on January 16, 2018, we announced preliminary revenue results for our fourth quarter of fiscal year 2017, which was below the revenue outlook we had provided for the period in November 2017. Similarly, on February 14, 2017, we announced our revenue results for our fourth quarter of fiscal year 2016, which was below the revenue outlook we had provided for the period in November 2016. In each of these instances, our revenue results were below the estimates of financial analysts at that time for the period. We believe that different factors contributed to our disappointing revenue results in these periods. For example, we believe poor sales execution issues were primarily responsible for our revenue short-fall in the fourth quarter of our fiscal year 2017 and lower-than-expected U.S. education business during the quarters was a primary driver of our lower revenue performance and outlook in the fourth quarter of our fiscal year 2016. If our revenue or operating results, or the rate of growth of our revenue or operating results, fall below the expectations of our investors or financial analysts, or below any forecasts or guidance we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met our own or other publicly stated revenue or earnings forecasts. Our failure to meet our own or other publicly stated revenue or earnings forecasts, or even when we meet our own forecasts but fall short of analyst or investor expectations, could cause our stock price to decline and expose us to costly lawsuits, including securities class action suits. For example, three purported class action law suits were filed in January 2018 asserting that statements we made in conjunction with our financial outlook for the fourth quarter of 2017 were false or misleading, or failed to include material information. See Note 5 - Commitments and Contingencies in this Quarterly Report on Form 10-Q for additional information regarding these class action law suits. These suits and other potential such litigation against us could impose substantial costs and divert management’s attention and resources.

Our results are subject to quarterly seasonal variances, which make it difficult to compare or forecast our financial results on a quarter-by-quarter basis.

Our revenue fluctuates on a seasonal basis, which affects the comparability of our results between periods. For example, our total revenue has historically decreased from our fourth quarter to the first quarter of our next fiscal year due to seasonal buying patterns and budget cycles within both our education vertical and general enterprise end customers. Demand in the education vertical tends to be weakest in the first and fourth quarters. However, we also historically have seen a sequential increase in end-of-year purchases by enterprise customers in our fourth quarter, which we believe is mainly due to an expectation to complete purchases within their calendar-year budget cycle. These seasonal variations are difficult to predict accurately and at times may be entirely unpredictable or subject to our operating performance in any particular period. Our ability to sustain that expansion in subsequent quarters, particularly in our less-developed sales territories, or where we have experienced recent turn-over, introduces additional risk into our business and our ability to accurately provide our own publicly stated revenue and earnings forecasts. In addition, we rely upon forecasts of end customer demand to build inventory in advance of anticipated sales. We believe our seasonal business pattern has become more difficult to predict, making it more difficult for us to forecast product demand, inventory requirements and our financial results, including on a quarter-to-quarter basis. Moreover, part of our strategy is to increase our sales in non-education verticals, and if the mix of products we sell in any particular period changes the seasonal nature of our revenue may change in an unpredictable way, which could increase the volatility of both our financial results and stock price.

The market and demand for our products and services may not develop as we expect.

Our revenue decreased 9% from 2016 to 2017. Historically, our revenue has grown. However, this rate of growth has been slowing over the last several years, and this slowing rate of our revenue growth may continue, and may even be negative,

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as it did for our fiscal year 2017. As the general demand for wireless networking in the industry verticals that we target, or demand for our products in particular, slows, our revenue may also grow at a slower rate than we anticipate or not at all.

Part of our strategy depends upon expanding sales of our cloud-managed wireless networking, switching and routing products to medium and large enterprise headquarters, branch offices and teleworkers. We intend to continue to direct resources to improve HiveManager as the basis for data services and data analytics applications. Sales of such products, services and applications to enterprise end customers typically require long sales cycles and are subject to price sensitivity. Moreover, many potential end customers in the enterprise market have substantial network expertise and experience, which may require a more-costly and sophisticated marketing and sales strategy. It is unclear whether our end customers will pay for data analytics or other SaaS services we expect to provide or, instead, require us to provide them as enhancements to our support offerings (at no cost to them or incremental revenue to us).

In January 2017, we announced HiveManager Connect, a simplified version of HiveManager included as part of our new Aerohive Connect product line designed for customers with less complex connectivity-oriented requirements. Under the Aerohive Connect program, customers may purchase access points with a simplified version of HiveManager, and community/email-based customer support, at lower list prices. Aerohive Connect customers can expand their Connect deployment, as needed, and can add subscriptions or licenses to upgrade to our full-featured Select offering and premium support services. Our Aerohive Connect and Select offerings are available across our entire portfolio of access points and switches. We believe that separating our product line into these two offerings will deliver compellingly priced cloud-managed hardware for connectivity-oriented deployments and will enable us to capture more subscription and software license revenue from those customers who require a more advanced feature set and support. This program may reduce our revenue, or the rate of our revenue growth, as purchasers take advantage of the lower entry pricing for our products. In addition, it is unclear whether our customers will choose the simplified Connect product offering, even at the lowest list prices offered, as an alternative to our current offering, or whether we will be able to manage the transition amongst our customers and in our market to our Connect offering.

In addition, the rate at which shipments of our Connect business convert to revenue differs significantly from shipments of our Select business. It is difficult for us to predict for any period the mix of Connect and Select shipments. As such, even if we accurately forecast the total shipments for our products and services, the ultimate mix between Connect and Select shipments can lead to a significantly different revenue we will recognize in the period which could bring volatility and uncertainty to our operating results. The third quarter of our fiscal year 2017 was the first full quarter that our customers could choose between these two offerings. We believe that this difficulty to predict the specific mix of Connect and Select shipments during the quarter added uncertainty to our operating results for this quarter.

Furthermore, if our competitors offer services or provide technologies or application platforms superior to our current cloud-managed platform, or the new products and services we introduce, alone or as part of a more-integrated offering or at reduced pricing, it would have a material adverse effect on our business, operating results and financial condition. As a result, demand for our products, services and applications may not continue to develop as we anticipate, or at all. In addition, if new customers do not purchase our Connect products, or having purchased our Connect products they do not also purchase subscriptions to our Select offering, or if our existing customers migrate toward Connect products without also continuing to purchase our Select services and support offerings, in each case at all or at the levels greater than we assume, our overall revenue, operating performance and margins could decline, perhaps significantly, making more difficult our ability to demonstrate growth and achieve profitability at expected revenue levels, and the value of our stock could decline.

A significant portion of our sales is concentrated in the education vertical, which may cause us to have longer sales cycles, and be subject to program funding uncertainties and constraints.

A significant portion of our revenue is concentrated in the education vertical. The majority of our sales in education is concentrated in both public and private K-12 institutions. This vertical is characterized by long sales cycles and often requires additional sales efforts. In addition, this vertical typically operates on limited budgets, and depends on annual budget approvals, which add additional uncertainty to the sales cycle. For example, the U.S. federal government is providing supplemental funding to local school districts in conjunction with its E-Rate initiative to assist districts to upgrade their technical infrastructure, including Wi-Fi infrastructure. The announced incremental federal funding is significant and available over a five-year period, which began in the second half of 2015. However, this program continues to be subject to uncertainty regarding its eligibility criteria, the timing and specific amount of federal funding actually available during each annual funding cycle, and federal program guidelines and funding appropriations, each of which can change from year-to-year. Corresponding funding appropriation by respective states and local districts is also uncertain and, even upon such appropriation, local districts must still then submit and have approved applications consistent with the final timing and eligibility requirements of the federal program for that annual funding cycle. We also believe that the prospect of federal funding available each annual cycle continues to cause some K-12 institutions to delay or defer near-term transactions they might otherwise make during the cycle to purchase our products.

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The United Service Administrative Company ("USAC"), experienced significant administrative challenges during 2016 and 2017 E-Rate cycles, causing the pace of release of approved funds and resulting availability of those funds to schools to continue to be significantly reduced. For example, the Federal Communications Commission publicly acknowledged USAC's continuing management of the E-Rate program by letter dated April 18, 2017, noting serious and persistent flaws in critical E-Rate processes which have caused persistent delays in funding commitments to schools and libraries. We believe that the significantly slower pace of E-Rate funding and other operation program execution issues were the primary drivers of our weaker-than-expected order volume and lower revenue performance from our educational vertical in recent quarters. We expect these delays, deferrals and lower levels of E-Rate-funded transactions to continue into 2018. These are specific examples of the many factors which add additional uncertainty to our future revenue from our educational end customers.

Our sales cycles often require significant time, effort and investment and are subject to risks relating to our operating performance.

Our sales efforts can take several quarters, and involve educating our potential customers about the applications and benefits of our products, including the technical capabilities of our products and associated applications and services, and recruiting and developing our channel partners. We may experience slower-than-expected sales productivity or poor sales execution in certain territories, especially in those where we experience turn-over. We continue to invest in these territories, but such further investment may take significant time and effort in order to realize growth. In addition, poor sales execution may reduce our revenue performance in 2018, as it did in our fourth quarter of our fiscal year 2017. For example, we changed our sales leadership in November 2017 and made additional personnel and other changes in our sales organization as we continued to identify underlying sales execution issues which became fully apparent in the last month of the fourth quarter. As we respond to turn-over or transition personnel in response to poor execution, newly hired personnel may also require several quarters to gain experience and develop their territories before achieving capacities we have assumed in our sales forecasts. Sales to the education vertical are an important channel for us, and can involve an extended sales cycle. In addition, sales to our enterprise customers may also involve an extended sales cycle, and often initial purchases are small. Purchases of our products are also frequently subject to our end customers’ budget constraints, multiple approvals, unplanned administrative processing and other risks and delays. Such end customers, in particular larger enterprise customers, also may hesitate to place orders with us, instead preferring our larger and longer-established competitors. In addition, the evolving nature of the market may lead prospective end customers to postpone their purchasing decisions pending resolution of wireless networking or other standards, or wait for adoption of technology developed by others.

We need to develop new products and continue to make enhancements to our existing products to remain competitive in a rapidly changing market.

The technology and end customer demands in the wireless networking market change rapidly, which requires us to continuously develop and release new products and product features and associated applications and services. We must continuously anticipate and adapt to our end customers’ needs and market trends, and continue to make investments to develop or acquire new products, applications and services that meet market demands, technology trends and regulatory requirements. If our competitors introduce new products, applications and services that compete with ours, we may be required to reposition our product offerings or introduce new products in response to such competitive pressure. We may also offer products and services, and/or combinations thereof at lower price points in order to broaden our penetration in the enterprise market.

Developing our products is challenging and involves substantial commitment of resources and significant development risk. Each phase in our product development presents serious risks of failure, rework or delay, any one of which could impact the timing and cost-effective development of products, and each of which could affect our ability to take advantage of a business opportunity or could jeopardize end customer acceptance of the product. Compared to our larger and longer-established competitors, our ability to develop and timely deliver new products and product functionality is limited. We also have experienced in the past and may in the future experience design, manufacturing, marketing and other difficulties that could delay or prevent the development, introduction or marketing of new products and enhancements. For example, we are currently bringing to market our family of next-generation Wi-Fi products, including our .11ax, SD-WAN and SD-LAN portfolio of products, and our HiveManager cloud-services platform providing cloud-delivered network management applications and on-premises network management, as well as supporting data structures, analytics and APIs. We also have announced programs to develop new data analytics services and API platforms. In addition, in early 2018 we announced our A3 secure access management and authentication product, Aerohive Atom AP30 pluggable access point and development of a family of enterprise-class 802.11ax access points. These are complex technical undertakings and subject to many variables and risks of delay.

If we fail to develop new products, product enhancements applications or services, or fail effectively to manage the transition of our end customers to these new products, product enhancements, applications or services, or our end customers or

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potential end customers do not perceive our products, product enhancements, applications or services to have compelling technical or cost-based advantages, our business and prospects could be adversely affected, particularly if our competitors are able to introduce solutions at lower prices and/or with increased functionality. In addition, our introduction of new or enhanced products requires that we carefully manage the transition from older products to minimize disruption in customer ordering practices, and ensure that new products can be timely delivered to meet our end customers’ demand and to limit inventory obsolescence. For example, in January 2017, we announced HiveManager Connect, a simplified version of HiveManager included as part of our new Aerohive Connect product line designed for customers with less complex connectivity-oriented requirements. Under the Aerohive Connect program, customers may purchase access points with a simplified version of HiveManager, and community/email-based customer support, at lower list prices. Aerohive Connect customers can expand their Connect deployment, as needed, and can add subscriptions or licenses to our full-featured Select offering and premium support services. In May 2017, we announced that our Aerohive Connect and Select offerings are available across our entire portfolio of access points and switches. We believe that separating our product line into these two offerings will deliver compellingly priced cloud-managed hardware for connectivity-oriented deployments and enables us to capture more subscription and software license revenue from those customers who require a more advanced feature set and support. This program may reduce our revenue, or the rate of our revenue growth, as purchasers take advantage of the lower entry pricing for our products. In addition, it is unclear whether new customers will purchase our Connect products, or having purchased our Connect products will also purchase subscriptions to our Select offering, or whether our existing customers will continue to purchase our Select services and support offerings, in each case at all or at the levels we assume. If our customers, both new and existing, choose the simplified and lower-priced Connect product offering, as an alternative to our Select offering, we could see a shift in the mix of these product offerings, thus reducing overall revenue, gross margins and ability to achieve profitability.

Further, after delivering new products we may identify and must then timely address performance issues as the products are used in the field in a particular environment or at a scale which we could not replicate or did not anticipate during development. For example, we believe that we introduced our new HiveManager product to some of our larger and more complex customers before its feature set was able fully to address their requirements, which resulted in elongated sales cycles and reduced revenue opportunities, which specifically contributed to our lower revenue performance in the fourth quarter and our outlook for the first quarter of our fiscal year 2017. We believe that the lengthier sales cycle associated with our HiveManager offering, and its impact on our revenue opportunities and operating results, continued through 2017. Our end customers may also defer decisions to purchase our existing products in anticipation of our expected release of a next-generation product. We also may not correctly anticipate customer interest in or demand for our data analytics services or API platforms, or our customers may expect that we provide these additional services as part of our existing product support (and at no cost to them or incremental revenue to us). If we do not carefully manage the timing of our new products or product feature releases, and effectively support the new products and product feature releases, we could interfere with our end customers’ purchases and disrupt the pricing environment for our new and legacy products, which could drive down our revenues and operating margins.

As a result of these and other risks, we may not be successful in modifying our current products or introducing new products in a timely or appropriately responsive manner, or at all. If we fail to address these changes successfully, our business and operating results and prospects would be materially harmed.

Our gross margin will vary over time and may decline in the future.

Our gross margin was 67.4% and 67.3% for fiscal years 2017 and 2016, respectively. Our gross margin will vary over time, may be difficult to predict and may decline in future periods. Our gross margin also varies across our product lines and, therefore, a change in the mix of products our end customers purchase in any period would likely have a significant impact on our overall gross margin in the period. During periods where our subscription and support services and deferred revenue we recognize if the quarter may disproportionately contribute to our overall revenue mix our overall gross margins for the period may similarly exceed our public guidance or internal forecasts. This may be true even where our gross margins from product revenue may be declining, whether due to competitive product or pricing pressures or our end customers choosing lower-priced products, including our own, such as our Connect offering.

When the exchange rate of the U.S. dollar relative to foreign currencies is strong, we may reduce pricing for our products outside the United States in order to maintain sales and revenue performance, or incur higher manufacturing costs, each of which would lower gross margins for those products.

The market for wireless networking products is also characterized by rapid innovation and declining average sales prices as products mature in the market place. Even if we are successful in launching new products, competition may continue to increase in the market segments in which we compete, which would likely result in increased pricing competition. To retain our average gross margin, we are required to continuously update our products and introduce new products and reduce our manufacturing costs and expenses, and we could fail to accomplish this. In addition, the sales prices for our products and

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services may decline for a variety of reasons, including sales strategy, competitive pricing pressures, customer demand, discounts, a change in the mix of products and services we sell, including seasonal changes in our end customers’ ordering practices, anticipation of the introduction of new products or services and decisions by end customers to defer purchases, or promotional programs. Larger competitors, such as Cisco/Meraki, Hewlett-Packard/Aruba, Arris/Ruckus, Ubiquiti, Extreme Networks, Riverbed/Xirrus and Huawei, each with significantly greater financial, sales, and engineering resources and/or more diverse product and service offerings, may reduce the price of their products or services that compete with ours or may bundle them with other products and services. If we do not similarly reduce our product manufacturing costs, or if we reduce our prices for such products or services in order to remain competitive, our gross margin and revenue will decline. Any such declines in our gross margins or revenue could have an adverse impact on the value of our common stock.

As a result of being a public company, we need to further develop and maintain our internal control over financial reporting. If our internal control over financial reporting is not effective, it may adversely affect investor confidence in our company.

We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting, which would include a disclosure of any material weaknesses our management identifies in our internal control over financial reporting.

We continue to develop our system and documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete on an annual and ongoing basis our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. Further, our independent registered public accounting firm is not required to report on the effectiveness of our internal control over financial reporting until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an "emerging growth company," as defined by the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.

We cannot be certain that we will not discover, or that we will timely discover, material weaknesses or control deficiencies in the future. If our remediation efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting of trading of our common stock on the New York Stock Exchange, or cause the trading price of our common stock to decline. If we are unable to conclude that our internal control over financial reporting is effective or, if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls when it is required to do so by the applicable rules, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC. We would also be in violation of certain covenants under our debt facilities, which could accelerate payment obligations and/or increase our borrowing costs significantly.

In order to generate revenue growth, we must service our existing customers while also continuing to identify and secure revenue from new customers.

A substantial portion of our revenue is from existing end customers. However, our revenue growth is dependent upon our ability to identify and secure new customers who will provide additional revenue going forward. As such, our future revenue may also be negatively impacted by lower new-customer-acquisition levels in earlier periods. We believe our rate of customer acquisition slowed in fiscal years 2016 and 2017 as we began to transition our customers to new products and platforms. For example, we introduced our new HiveManager product to some of our larger and more complex customers before its feature set was able to fully address their requirements. We believe this resulted in elongated sales cycles and reduced revenue opportunities, and also contributed to lower new-customer-acquisition levels. Lower customer-acquisition rates in prior periods has contributed to lower current rates of revenue growth, which we believe may continue to affect for several quarters our ability to generate revenue growth. We primarily look to our channel partners to identify and secure new customer opportunities. Unless we are able, through these partnerships, to increase our rate of customer acquisition, our rate of revenue growth and future actual revenue performance may fall short of investor expectations and analyst forecasts, which would cause the price of our stock to decline.

Our products utilize cloud-managed solutions, and our future growth relies in significant part in continued demand for cloud-managed solutions and our ability to develop and deliver such services.

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Most of our end customers utilize our cloud-managed networking platform to access our applications through the Internet, rather than access our application through a physical device or virtual machine that our end customers host on their premises. As our business grows, we must increase the capacity of our cloud-managed solutions and continue to develop new and innovative solutions that meet the needs of our end customers. Demand for our cloud-managed solutions could decline if we are not able to offer sufficient capacity or if confidence in the security of cloud-managed solutions in general, or our platform in particular, were to decline. In addition, a significant feature of our platform will increasingly be the ability to collect and analyze user data through applications specific to particular industry vertical and use cases. Regulatory changes in the U.S. and internationally relating to the use of end customer data, including requirements relating to data privacy and security, or shifting societal norms regarding data privacy and security, could affect market demand for, and our ability to deploy, our platform. Moreover, although our end customers do not immediately lose network functionality if cloud-connectivity fails, if our ability to deliver services through the cloud were interrupted repeatedly or for an extended period, our reputation could be damaged and confidence in our platform would likely decline, causing our revenue to decline.

We plan to target new industry verticals and geographies to diversify our end customer base and expand our channel relationships, which could result in higher research and development and sales and marketing expenses, and which may not be successful and could reduce our operating margin.

Part of our strategy is to target new industry verticals and geographies. Currently, we are focusing a significant portion of our business on the education, hospitality and retail verticals, and to a lesser extent on finance and healthcare, which may depend on developing new products targeted to such sectors. Specifically, we intend to invest in the development of data applications and analytics capabilities which we feel may be attractive to our end customers, particularly in the retail vertical. In addition, we also plan to continue to expand to additional countries beyond those in which we currently operate. We also intend to invest in existing and new channel relationships to reach additional end customers to further diversify our revenue base. Targeting new industry verticals and geographies and developing customized products, data applications and partnerships, including channel partners targeting these industry verticals and geographies, may be expensive, require us to attract, train, develop, integrate and retain qualified employees and key sales personnel, and increase our research and development costs, as well as our sales and marketing expenditures. We may need to develop new product features or target new market segments, which could divert resources and attention from our existing products and target markets. We must also further develop and make more productive relationships with our channel partners and our channel partners’ ability to effectively market, distribute and support our products, which require specific investments and additional dedicated resources. Because we have limited experience in developing and managing such channels and markets, we may not be successful in further penetrating certain geographic regions or reaching a broader customer base. Failure to develop or manage additional sales channels effectively would limit our ability to succeed in these markets and could adversely affect our ability to grow our business.

We announced in April 2015 a new relationship with Dell, whereby Dell became a reseller of Aerohive’s Wi-Fi and cloud services. In November 2017, we announced we had an OEM agreement with Dell which significantly expanded the scope of our resale relationship. In February 2016, we announced a partnership with SYNNEX Corporation, as a distributor of our products in the United States and Canada. To support these and other relationships, we will need to continue to identify and invest in additional and dedicated resources and, potentially, new product, service and support offerings, which could distract management’s attention and divert existing resources from our current business. We do not know if we will be successful in any of these efforts, or whether the level of success we achieve will justify the additional spending and specific investments and dedicated resources required. In addition, increasing the significance to us of Dell as a channel partner, including through broader partner relationships, could undermine the success of our other channel partners. For example, through our OEM relationship, Dell may have access to favorable pricing or integrated product offerings which may give them an advantage in identifying and securing customer opportunities. This could cause our product margins and associated revenue to decrease. Our other channel partners may also be less willing to continue to invest in and dedicate resources toward the marketing, distribution and support for our products, which could reduce the associated revenue we receive from them and our revenue overall.

It will also take time for us to fully realize the benefits from our continued channel relationships, including with Dell, in particular as we negotiate the transition from a reseller to an OEM relationship. In addition, we cannot be certain that these partners, such as Dell, will continue to invest in the success of our partnership or, instead, choose to direct their resources to other partnerships, including potentially with our competitors. For example, in February 2018 Ruckus Wireless announced that it had signed an OEM agreement with Dell whereby Dell will also become a reseller of Ruckus’ portfolio of wireless solutions. If our channel partners fail to effectively market, distribute and support our products, or if our channel strategy, or particular channel partner initiatives or investments, such as with Dell or others we may identify, are otherwise unsuccessful, our revenue performance and operating margin would be harmed, which could adversely affect the value of our common stock.

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We base our inventory purchasing decisions on our forecasts of customers’ demand, and if these forecasts are inaccurate our revenue, gross margin and liquidity could be harmed.

We place orders with our manufacturers based on our forecasts of our end customer demand. We base our forecasts on multiple assumptions, including internal and channel partner sales forecasts, each of which may cause our estimates to be inaccurate, affecting our ability to fulfill demand for our products. When demand for our products increases significantly, we may not be able to meet demand on a timely basis, or we may incur additional expediting costs to assure we meet demand. If we underestimate demand, we may forgo revenue opportunities, lose market share and damage our reputation and our relationship with our channel partners and our end customer relationships. Conversely, if we overestimate demand, we may purchase more inventory than we are able to sell at any given time, or at all, which would increase our reserves and risk of potential write-offs.

Our distributors stock inventory of our products, and are entitled in certain circumstances to stock rotation rights, which could cause us to accept the return of products and expose us to the risks of higher costs.

We grant our distributors stock rotation rights, which could require us to accept stock back from a distributor’s inventory under certain circumstances. Under certain agreements, a distributor may have or retain a right to return a portion of products which the distributor purchased, typically within the prior six months. We typically recognize revenue upon shipment to the end customer; however, if we are required to accept returns of obsolete or slower-moving inventory, our costs would increase and our operating results could be harmed. If our forecasts were inaccurate we could have higher costs, lower revenue or otherwise suffer adverse financial consequences, including holding or having to write-off the value of obsolete or slower moving inventory.

We outsource the manufacturing of our products to third parties, and we therefore do not have the ability to completely control quality over the manufacturing process. In addition, if our contract manufacturers refuse or are unable to manufacturer our products, we may be unable to qualify new manufacturers in a timely manner, which would result in our being unable to sell our products.

We outsource the manufacturing of our products to third-party original design manufacturers located in China and Taiwan, where they perform quality inspections, and conduct reliability tests, before they ship finished products to our warehouse centers for managing inventory and delivery logistics located in the U.S., the Netherlands, Malaysia and China. We operate these logistics centers currently for all end customer shipments, whether destined to locations in North, South and Central America ("the Americas"), Europe, the Middle East and Africa ("EMEA"), or Asia Pacific and Japan ("APAC").

Our reliance on these third-party manufacturers reduces our control over the manufacturing process and exposes us to risks, including reduced control over quality assurance, product costs, product supply and timing. Any manufacturing or shipping disruption by these third parties could severely impair our ability to fulfill orders. If we are unable to manage effectively our relationships with these third parties, or if these third parties suffer delays or manufacturing disruptions for any reason, experience increased manufacturing lead-times, capacity constraints or quality control problems in their manufacturing operations, or fail to meet our future requirements for timely delivery and quality purposes, our ability to ship products to our end customers would be severely impaired and our reputation and our relationship with our channel partners and end customers would be seriously harmed. Additionally, labor unrest or disruption to trade or the expected movement of our product could delay delivery of our products by third parties, or by us to our channel partners and end customers, which could significantly delay revenue or increase our costs and in ways we cannot currently anticipate. Any natural disaster, political instability, disruption in labor or foreign relationships could also disrupt our relationships with our manufacturers or delay their ability to timely deliver our products.

Our original design manufacturers typically fulfill our supply requirements on the basis of individual orders. We also do not have long-term contracts with our third-party manufacturers that guarantee capacity, the continuation of particular pricing terms or the extension of credit limits. Accordingly, our third-party manufacturers are not obligated to continue to fulfill our supply requirements, which could result on short notice to us of supply shortages and increases in the prices we are charged for manufacturing services. In addition, as a result of global financial market conditions, natural disasters, labor disruption or other causes, it is possible that any of our manufacturers could experience interruptions in production, cease operations or alter our current arrangements. If our manufacturers are unable or unwilling to continue manufacturing our products in required volumes, or on current or acceptable terms, we will be required to identify one or more acceptable alternative manufacturers. In addition, we may reduce orders with our design manufacturers in response to volatile market conditions or fluctuating demand for our products. Lower order levels for our products, in particular which continue over several quarters, may cause our manufacturing partners to increase their manufacturing costs to us, shift their resources to other partners or discontinue their partnership with us.

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It is time-consuming and costly, and could be impractical, for us to begin to use new manufacturers, and changes in our third-party manufacturers may cause significant interruptions in supply if the new manufacturers have difficulty manufacturing products to our specification. As a result, our ability to meet our scheduled product deliveries to our end customers could be adversely affected, which could cause the loss of sales to existing or potential end customers, delayed revenue or an increase in our costs. We also do not currently require all our manufacturers to maintain and demonstrate robust disaster recovery capabilities. Any production interruptions for any reason, such as due to a contractual disagreement, natural disaster, epidemic, capacity shortages or quality problems, at one of our manufacturers would negatively affect sales of our product lines manufactured by that manufacturer and adversely affect our business and operating results.

Our manufacturing partners purchase component parts for our products based on estimates we provide, which may not be accurate. In addition, our manufacturing partners purchase some of the components and technologies used in our products from a single source or a limited number of sources. If our estimates were to be inaccurate, or if our manufacturing partners were to lose any of these sources as suppliers, we might incur additional transition costs, resulting in delays in the manufacturing and delivery of our products, excess or obsolete inventory, or the need to redesign our products.

We rely on our manufacturing partners to select and source the component parts within our products. We do not choose or contract directly with the component parts providers and do not have manufacturing contracts that guarantee us any fixed access to such component parts, or at specific pricing. This absence of any relationship between us and the component suppliers or direct and long-term component supply contracts may increase the risk of issues relating to the quality, performance or operability of such component parts and our exposure to shortages of component availability and to price fluctuations related to the raw material inputs for such components, foreign exchange adjustments and other factors.

Moreover, we currently depend on a single source or limited number of sources for several components for our products. For example, each of our products typically incorporates third-party components that have no more than two suppliers. In some instances, we may have a sole source for critical components, such as semiconductor chip sets or other components critical to product functionality. We have also recently seen consolidation amongst component manufacturers, in particular of semiconductor chip set suppliers, and rises in component prices and more restrictive component availability as a result. If our manufacturing partners were unable to obtain such components for any reason, or on a limited basis or at increased prices, they would be unable to manufacture such product at all, or in the quantities we need or at pricing we expect. We have also entered into license agreements with some of our suppliers for technologies used in our products, and the termination of these agreements, which can generally be done on relatively short notice, could have a material adverse effect on our access to these technologies and, thus, on our business. Termination of these agreements could also make technology used in or developed for our products available to our competitors. If any of those manufacturing agreements was terminated, we could experience significant supply disruptions and be required to redesign some of our products in order to incorporate technology from alternative sources, and any such termination of the agreement, disruption in supply and redesign of certain of our products could materially and adversely affect our business and operating results.

We have not currently identified and qualified other sources for certain of our components. If we lose any of our existing suppliers or licensors we could be required to transition to a new supplier or licensor, which could increase our costs, result in delays in the manufacturing and delivery and increase in the cost of our products or cause us to carry excess or obsolete inventory. Poor quality and delays in availability of any of the components in our products, including especially those with limited or sole sourcing, could also result in lost sales or lost sales opportunities. If the quality of the components does not meet our or our end customers’ requirements, if we are unable to obtain components from our existing suppliers on commercially reasonable terms, or if any of our limited or solely sourced component suppliers ceases to remain in business or to continue to manufacture such components, we could be required to redesign our products in order to incorporate components or technologies from alternative sources. The resulting stoppage or delay in selling our products and the expense of securing and qualifying alternative sources or redesigning our products could result in significant manufacturing and development costs, delayed or lost sales opportunities and damage to customer relationships, which would adversely affect our reputation, business and operating results. For example, in August 2015, we announced that our AP250 and AP245X access points, which were our initial Wave 2 access point products, would not be commercially available until early 2016. This delayed release was due to delays in the products' development and the availability to us of a component part essential to our development and release of the products. Such as with the AP250 and AP245X access points, limited availability in component parts may affect the ability of our manufacturing partner and component suppliers to timely deliver sufficient quantities of a product to meet our demand and sales forecasts. There is a risk that existing or potential customers (including customers in our important education vertical) may elect not to purchase our products or defer purchases they otherwise would make of our products.

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We rely upon third parties for the warehousing and delivery of our products, and we therefore have less control over these functions than we otherwise would.

We outsource the warehousing and delivery of all of our products to third-party logistics providers for worldwide fulfillment. As a result of relying on third parties, we have reduced control over shipping and logistics. Any shipping delays, disruptions or mismanagement by these third parties could severely impair our ability to fulfill orders. For example, at the end of our first quarter of fiscal year 2015, a third-party logistics provider was not able to ship product and, as a result, we were not able to take revenue in the quarter on all the orders that we had received and processed. If we are unable to have our products shipped in a timely manner, we may suffer reputational harm, and lose revenue.

We rely significantly on channel partners to sell and support our products, and the failure of this channel to be effective could materially reduce our revenue.

Our channel partners consist primarily of distributors, VARs and an OEM. We believe that establishing and maintaining successful relationships with these channel partners are, and will continue to be, important to our financial success. Recruiting and retaining qualified channel partners and training them in our technology and product offerings require significant time, resources and investment. Additionally, we need to recruit and develop different qualified channel partners for different geographic regions and markets. To develop and expand our channel, we must continue to scale and improve our processes and procedures that support our channel partners, including investment in systems and training. Additionally, we will increasingly focus our resources and attention on those channel partners best able to help us meet our growth expectations. As a result, the total number of our channel partners over time may decline.

Existing and future channel partners will only work with us if we are able to provide them with competitive products at prices and on terms that are attractive to them. If we fail to maintain the quality of our products or to update and enhance them, and at reasonable pricing, existing and future channel partners may elect to work instead with one or more of our competitors. We are in the process of reviewing and redirecting our internal sales and marketing activities and investments to support a channel-focused "Go-to-Market" strategy.

We sell to our channel partners typically under a contract with an initial term of one or three years, with one-year renewal terms, based on compliance with our program requirements. Our contracts generally require payment by the channel partner to us within 30 to 45 calendar days of the date we issue an invoice for such sales. We typically do not have minimum purchase commitments from our channel partners, and our contracts with channel partners do not prohibit them from offering products or services that compete with ours, including products they currently offer or may develop in the future and incorporate into their own systems. Some of our competitors may have stronger relationships with our channel partners than we do and we have limited control, if any, as to whether those partners use our products, rather than our competitors’ products, or whether they devote resources to market and support our competitors’ products, rather than our offerings.

For example, we announced in April 2015 a new relationship with Dell Inc., whereby Dell became a reseller of Aerohive’s Wi-Fi and cloud services. In November 2017, we announced we had an OEM agreement with Dell which significantly expanded the scope of our resale relationship. In February 2016, we announced a partnership with SYNNEX Corporation as a distributor of our products in the United States and Canada. To support these and other relationships, we are continuing to identify and invest in additional and dedicated resources and, potentially, new product, service and support offerings. In addition, we have cannot be certain that these partners, such as Dell, will continue to invest in the success of our partnership or, instead, choose to direct their resources to other partnerships, including potentially with our competitors. In addition, increasing the significance to us of Dell as a channel partner, including through broader partner relationships, could undermine the success of our other channel partners. For example, through our OEM relationship, Dell may have access to favorable pricing or integrated product offerings which may give them an advantage in identifying and securing customer opportunities. This could cause our product margins and associated revenue to decrease. Our other channel partners may also be less willing to continue to invest in and dedicate resources toward the marketing, distribution and support for our products, which could reduce the associated revenue we receive from them and our revenue overall.

It will take time for us to fully realize the benefits from our continued channel relationships, including with Dell, in particular as we negotiate the transition from a reseller to an OEM relationship. In addition, we cannot be certain that these partners, such as Dell, will continue to invest in the success of our partnership or, instead, choose to direct their resources to other partnerships, including potentially with our competitors. For example, in February 2018 Ruckus Wireless announced that it had signed an OEM agreement with Dell whereby Dell will also become a reseller of Ruckus’ portfolio of wireless solutions. If our channel partners fail to effectively market, distribute and support our products, or if our channel strategy, or particular channel partner initiatives or investments, such as with Dell or others we may identify, are otherwise unsuccessful, our revenue performance and operating margin would be harmed, which could adversely affect the value of our common stock.

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Our products are subject to U.S. export controls; where we fail to comply with these laws, we could suffer monetary or other penalties.

Our products are subject to U.S. export controls, specifically the Export Administration Regulations, and economic sanctions enforced by the Office of Foreign Assets Control. We incorporate standard encryption algorithms into our products, which, along with the underlying technology, we may export outside of the United States only with the required export authorizations, including by license, license exception or other appropriate government authorizations. Each of these authorizations may require us to file an encryption registration and classification request. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments and persons targeted by U.S. sanctions. We take precautions to prevent our products and services from being exported in violation of these laws and, in many instances, we rely on our channel partners, in particular our distributor, VAR and MSP partners, to assure compliance when selling, distributing and/or using our products outside the United States. In certain instances, we have shipped encryption products prior to obtaining the required export authorizations and/or submitting the required requests, including a classification request and request for an encryption registration number. As a result, we previously filed a Voluntary Self Disclosure with the U.S. Department of Commerce’s Bureau of Industry and Security concerning these violations. In January 2018, we provided a voluntary disclosure to the U.S. Customs and Border Protection service relating to the value of merchandise we imported to the United States relating to the manufacture of certain of our products. A repeat of these past instances could result in monetary or other penalties assessed against us. Additionally, even though we take precautions to ensure that our channel partners comply with all relevant regulations, any failure by our channel partners to comply with such regulations could have negative consequences for us, including reputational harm, government investigations and penalties and interruptions in our ability to distribute and sell our products.

Furthermore, various countries regulate the import of certain encryption technology and operation of our products, including through import permitting, certification and licensing requirements, and have enacted laws that could limit our ability to distribute our products or our end customers’ ability to operate our products in those countries, or could impose additional expense on us to meet these requirements as a condition to distribute our products. Encryption products and the underlying technology may also be subject to export control restrictions. Governmental regulation of encryption technology and regulation of imports or exports of encryption products, or our failure to obtain required import or export approval for our products, when applicable, could harm our international sales and adversely affect our revenue. Compliance with applicable regulatory laws and regulations regarding the export or import of our products, including with respect to new releases of our products, may create delays in the introduction of our products in international markets, prevent our end customers with international operations from deploying our products throughout their globally distributed systems or, in some cases, prevent the export or import of our products to some countries altogether.

In addition, because our sales are made through channel partners, if these channel partners fail to obtain appropriate import, export or re-export licenses or authorizations, we may also be adversely affected, including potentially being liable for penalties under government restrictions and regulations, even where the channel partner failed to obtain the appropriate licenses or authorizations. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. Changes in our products or changes in applicable export or import laws and regulations may also create delays in the introduction and sale of our products in international markets, prevent our end customers with international operations from deploying our products or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether. Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations, could also result in decreased use of our products, or in our decreased ability to export or sell our products to existing or potential end customers with international operations. Any decreased use of our products or limitation on our ability to export or sell our products could adversely affect our business, financial condition and results of our operations.

U.S. export control laws and economic sanctions programs also prohibit the shipment of certain products and services to targeted countries, governments and persons that are subject to U.S. economic embargoes and trade sanctions. If we or our channel partners ship products to those targets or third parties provide our products to these targets, we could be subject to government investigations, penalties and reputational harm. Furthermore, any new embargo or sanctions program, or any change in the countries, governments, persons or activities targeted by such existing programs, could result in decreased use of our products, or in our decreased ability to export or sell our products to existing or potential end customers, which could adversely affect our business and our financial condition.

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Regulations related to conflict minerals may cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of our products.

As a public company, we are subject to the requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") to diligence, disclose and annually report whether our products contain conflict minerals. The implementation of these requirements could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our products. We have incurred and will continue to incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used in or necessary to the production of our products and, if applicable, potential changes to products, processes or sources of supply as a consequence of such verification activities, and we expect to incur additional costs in the future to comply with these disclosure requirements. We do not choose or contract directly with the component parts providers and do not have contracts with these component parts suppliers. We rely, instead, on our manufacturing partners to select, source, diligence and report to us the component parts within our products. This absence of any relationship between us and the component suppliers makes significantly more difficult our ability to determine and report whether our products contain conflict minerals. Consequently, we may face reputational harm if our channel partners incorrectly determine or report whether certain of our products contain minerals not determined to be conflict-free or if we are unable to alter our products, processes or sources of supply to avoid use of such materials.

Our products incorporate complex technology and may contain defects or errors. We may become subject to warranty claims, product returns, product liability and product recalls as a result, any of which could cause harm to our reputation, impose costs and increase expenses, expose us to liability and adversely affect our business.

Our products incorporate complex technology and must support a wide variety of devices and new and complex applications in a variety of environments that use different wireless networking communication industry standards. Our products have contained, and may contain in the future, undetected defects or errors or may not perform as we expect in certain environments. We may discover some errors in our products only after a product has been installed and used by end customers. These issues are most prevalent when we introduce new products into the market or, once introduced, when the products experience significant loads in actual use environments or at scale which we could not create or did not anticipate during development. We have delayed and may in the future delay the introduction of our new products due to such defects and errors. Since our products contain components that we purchase from third parties, we also expect our products to contain latent defects and errors from time to time related to those third-party components.

Defects and errors may also cause our products to be vulnerable to security attacks. The techniques used by computer hackers to access or sabotage networks are becoming increasingly sophisticated, change frequently and generally are not recognized until after they have been launched against a target. As we increasingly collect, store, analyze, use and transmit data, and provide data analytics solutions to our end customers, these risks become more significant to us. We may be unable to anticipate these techniques or provide a solution in time to protect our and our end customers’ networks. In addition, we might not be able to timely develop and provide updated products and software to our end customers, thereby leaving our end customers vulnerable to attacks. Finally, if our employees, or others who have access to end customer data, misuse this information, our reputation would be harmed and we could be subject to claims for damages.

Real or perceived defects or errors in our products could result in claims to return product or that we reimburse losses that our end customers or channel partners sustain and we may be required, or may choose for customer or partner relations or other reasons, to expend additional resources in order to help correct the problem, including incurring additional warranty and repair costs, process management costs and costs associated with remanufacturing our inventory. We typically offer a limited warranty on our Wi-Fi access points and other products. We also provide certain service commitment guarantees for our cloud-managed platform, pursuant to which our end customers may receive service credits in connection with service outages. Liability limitations in our standard terms and conditions of sale may not be enforceable under some circumstances or may not fully or effectively protect us from claims and related liabilities and costs. In addition, regardless of the party at fault, errors of these kinds which would divert the attention of our engineering personnel from our product development efforts, damage our reputation and the reputation of our products, cause significant customer relations problems, and can result in product liability claims. We do not maintain insurance which would protect against many of these types of claims associated with the use of our products. Even where claims ultimately are unsuccessful we may have to expend funds in connection with litigation, including on behalf of our end customers and channel partners, and divert management’s time and other resources. We also may incur costs and expenses relating to a recall of one or more of our products. The process of identifying and recalling products that have been widely distributed may be lengthy and require significant resources, and we may incur significant replacement costs, contract damage claims from our end customers and channel partners and significant harm to our reputation. The occurrence of any of these problems could result in substantial costs to us and the delay or loss of market acceptance of our products and could adversely impact our business, operating results, reputation and financial condition.

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The loss of key personnel or an inability to attract, retain and motivate qualified personnel may impair our ability to expand our business.

Our success substantially depends on the continued service and performance of our senior management team and other key personnel, including, in particular, David K. Flynn, who is our Chief Executive Officer. Our employees, including our senior management team, are at-will employees and, therefore, may terminate employment with us at any time with no advance notice. The loss of members of our senior management team or other key personnel, whether through resignation, illness, disability or death, our failure to attract replacement personnel, as needed, or the transition of newly hired senior management may significantly delay or prevent us from achieving our business objectives. In addition, if any of our executives or other key employees were to join a competitor or form a competing company, we could lose customers, suppliers, know-how and key personnel, and our business and product strategies and capabilities could be at risk and subject to disclosure, including to our competitors.

Our future success also depends on our ability to continue to attract, integrate and retain highly skilled personnel, especially skilled executives and sales and engineering employees. We have experienced in the past higher than normal turn-over, especially amongst our sales and engineering personnel, and continue to replace personnel where we think needed to improve our operations and product development capabilities and processes. We also continue to replace personnel as part of our ongoing performance and expense management initiatives. Turn-over is highly disruptive to our operations and has had and could continue to have an adverse effect on our revenue. In addition, competition for highly skilled personnel is frequently intense, especially in Silicon Valley, where we maintain our headquarters and a substantial operating and sales presence, and Hangzhou, China, where we currently maintain a significant research presence and highly skilled product development and engineering personnel. Volatility or lack of performance in our stock price may also affect our ability to attract and retain our key employees. The lack of performance in our stock price may affect our ability to attract new employees or retain existing employees by decreasing the perceived value of any stock-based compensation we may offer or they may hold. Prolonged periods of low performance or volatility in our stock price could negatively impact our appeal as an employer, harm employee morale or increase employee turnover, including amongst our Silicon Valley and China-based employees. Any failure to successfully attract, integrate or retain qualified personnel to fulfill our current or future needs may negatively impact our growth. Also, to the extent we hire personnel from our competitors, we may be subject to allegations that we have improperly solicited these employees, that they have divulged to us proprietary or other confidential information of their former employers, or that their former employers own their inventions or other work product. This may expose us to significant liability and litigation risk.

Our ability to sell our products is highly dependent on the quality of our support offerings, and our failure to offer high quality support would have a material adverse effect on our sales and results of operations.

Once our products are deployed, our end customers depend on our support organization and support our channel partners provide to resolve any issues relating to our products. Our support delivery organization comprises employees in various geographic locations and an outside service provider, which provides general technical support to our end customers. A high level of support is important for the successful marketing and sale of our products. If we do not effectively help our end customers quickly resolve issues or provide effective ongoing support, it would adversely affect our ability to sell our products to existing end customers as well as demand for continued support and renewal contracts, and could harm our reputation with existing and potential end customers.

We are subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection and other matters and violations of these complex and dynamic laws, rules and regulations may result in claims, changes to our business practices, monetary penalties, increased costs of operations, and/or other harms to our business.

A wide variety of provincial, state, national and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other processing of data, including personal data. Foreign data protection, privacy and other laws and regulations are often more restrictive than those in the United States. These data protection and privacy-related laws and regulations are varied, evolving, can be subject to significant change, may be augmented or replaced by new or additional laws and regulations, and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. The European Union, for example, has adopted various directives regulating data protection, privacy and security and the collection, storage, analysis, use and transmission of content using the Internet involving European Union residents, including those directives known as the Data Protection Directive, the E-Privacy Directive, and the Privacy and Electronic Communications Directive. The European Union may adopt similar directives and regulations in the future.

The European Union model has been replicated substantially or in part in various jurisdictions outside the U.S., including in certain Asia-Pacific Economic Cooperation countries. Changes in European Union data protection regulations, including the General Data Protection Regulation ("GDPR") may also introduce new or additional operational requirements for

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companies that receive personal data, which may differ from than those currently in effect in the European Union, which may also include significant additional compliance requirements and increased penalties for non-compliance. For example, the GDPR, which will become fully effective on May 25, 2018, will supersede existing European Union data protection laws, includes more stringent operational requirements for companies processing European Union personal data, and imposes significant penalties for non-compliance. Further, some countries may require separate and local storage and processing of data that could limit certain of our product applications and solutions and increase the cost and complexity of selling our solutions or maintaining our business operations in those jurisdictions. California has also introduced broad rules, which may or may not anticipate and be consistent with rules expected to be adopted by our federal government. Our introduction of new data platforms, applications and solutions or expansion of our activities in certain jurisdictions may subject us to additional laws and regulations. For instance, participation in the federal E-Rate funding program may subject us to additional privacy and data use restrictions under U.S. federal, state, and local laws and regulations relating to the processing of data relating to students or children.

The application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate, and these laws and regulations may be interpreted and applied inconsistently from within a country or country to country, and inconsistently with our current policies and practices, and may be contradictory with each other. Additionally, various federal, state, and foreign regulatory or other governmental bodies may issue rulings that invalidate prior laws, regulations, or legal frameworks in manners that may adversely impact our business. For example, the Court of Justice of the European Union in October 2015 issued a ruling invalidating the EU-U.S. Safe Harbor Framework, which facilitated personal data transfers to the U.S. in compliance with applicable European Union data protection laws. The U.S. and EU have implemented a replacement for the EU-U.S. Safe-Harbor Framework (known as the EU-U.S. Privacy Shield), but the EU-U.S. Privacy Shield has been subject to challenge and some regulatory uncertainty remains regarding the future of data transfers from the European Union to the U.S. Also, in June 2016, the United Kingdom held a referendum and voted in favor of leaving the European Union, and in March 2017, the government of the United Kingdom formally initiated the withdrawal process, which has created uncertainty with regard to the regulation of data protection in the United Kingdom. A Data Protection Bill has been introduced to the United Kingdom's House of Lords that proposes to substantially implement the European Union's General Data Protection Regulation. Nevertheless, the Data Protection Bill must complete the legislative process, so it remains unclear what modifications will be made to the final legislation. In addition to government regulation, privacy advocacy and industry groups have adopted and are considering the adoption of various self-regulatory standards and codes of conduct that, if applied to our, our partners or our end customers’ businesses, may place additional burdens on us and our partners and end customers, which may further reduce demand for our products, data platforms, applications and solutions and harm our business.

Our failure to comply with all applicable privacy and data protection laws, regulations, standards, and codes of conduct, as well as our own privacy policies and contractual commitments to the extent possible, could result in enforcement actions against us, including fines, imprisonment of company officials and public censure, claims for damages by end customers and other affected individuals, demands that we modify or cease existing practices, damage to our reputation and loss of goodwill (both in relation to existing and prospective end customers), any of which could have a material adverse effect on our operations, financial performance and business. Privacy and data protection regulators within the United States, the European Union and other jurisdictions have the power to fine non-compliant organizations significant amounts and seek injunctive relief, including the cessation of certain data processing activities. The GDPR provides for European Union regulators to be able to impose fines in some cases of the greater of €20 million or 4% of a company’s worldwide annual sales. Such fines are in addition to the rights of individuals to sue for damages in respect of any data privacy breach which has caused them to suffer loss. Such actions against our partners, including third-party providers of data analytics services, could also affect our operating performance, including demand for our products and cloud-managed solutions, and if these or other third-party vendors violate applicable laws or our policies, such violations may also put our end customers’ information at risk and could in turn have a material and adverse effect on our business. Additionally, there is a risk that failures in systems designed to protect private, personal or proprietary data we may hold will allow such data to be disclosed to or seen by others, resulting in potential regulatory investigations, enforcement actions or penalties, remediation obligations and/or private litigation by parties whose data were improperly disclosed. There is also a risk that we could be found to have failed to comply with U.S. or foreign laws or regulations regarding the collection, storage, handling, analysis, use, transfer, or disposal of such privacy, personal or proprietary data, or consent to the same, which could subject us to fines or other sanctions, as well as adverse reputational impact.

Evolving and changing privacy and data protection laws, regulations and societal norms, including evolving and changing definitions of personal data and personal information, within the United States, European Union, and elsewhere, especially relating to classification of IP addresses, MAC addresses, machine identification, location and tracking, data analytics and other information, may limit or inhibit our ability to operate or expand our business, including limiting our product and data application development and our strategic partnerships that may involve the collection, storage, handling,

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analysis, use, transfer or disposal of end-user data, thus reducing our and our stockholders' opportunity to benefit from the significant investments we are making in these areas. Even the perception of privacy concerns, failures to secure data, or inadequate data protection, whether valid and whether owing to any action or inaction on our part, may harm our reputation and inhibit adoption of our products, applications and services by current and future end customers.

Our international operations expose us to additional business risks and failure to manage these risks may adversely affect our international revenue.

We derive a significant portion of our revenue from end customers and channel partners outside the United States. For the three months ended March 31, 2018 and 2017, we attributed 47% and 39% of our revenue to our international end customers and channel partners. As of March 31, 2018, approximately 45% of our full-time employees were located outside of North America, with 27% located in China. We expect that our international activities will be dynamic over the foreseeable future as we continue to pursue opportunities in international markets, which will continue to require significant management attention and our financial investment.

Given the extent of our international operations, we are subject to other inherent risks and our future results could be adversely affected by a number of factors, including:

• tariffs and trade barriers, which could include tariffs imposed by the U.S. on goods from countries and tariffs imposed by other countries on U.S. goods, as well as export regulations and other regulatory or contractual limitations, such as import, technical and other certification requirements and restrictions on our ability to sell or develop our products in certain foreign markets;

• regulatory requirements or preferences for domestic products, which could reduce demand for our products;

• differing technical standards, existing or future regulatory and certification requirements and required product features and functionality;

• management communication and integration problems related to entering new markets with different languages, cultures, commercial practices and political systems;

• difficulties in enforcing contracts and collecting accounts receivable, and longer payment cycles, especially in emerging markets;

• heightened risks of unfair competition or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, and irregularities in, our financial statements;

• difficulties and costs of staffing and managing foreign operations, and retaining key personnel;

• differing labor standards;

• the uncertainty of protection for our intellectual property rights and the enforceability of our rights and third-party rights in some countries;

• potentially adverse tax consequences, including regulatory requirements regarding our ability to repatriate profits to the United States;

• uncertainties and instability in economic and market conditions following the decision of the United Kingdom to withdraw from the European Union;

• added legal compliance obligations and complexity, including complying with varying local labor, compensation and tax and securities laws as well as specific and evolving local requirements regarding data protection;

• foreign currency exchange risk;

• the increased cost of terminating employees in some countries; and

• political and economic instability and terrorism.

To the extent, we continue to expand our business globally, our success will depend, in large part, on our ability to effectively anticipate and manage these and other risks and expenses associated with our international operations. Political instability and uncertainty in the European Union and, in particular, Britain's recent decision to exit the European Union has slowed economic growth and created significant economic disruption and uncertainty in the region, which could continue to discourage near-term economic activity, including delay decisions to purchase Aerohive products. We believe this has had a significant and continuing impact of our expected revenue from our European operations, as the terms and circumstances of Britain’s exit and its impact on other countries of the European Union are resolved. Our failure to manage any of these risks timely and successfully could harm our international operations and reduce our international sales, and business generally, adversely affecting our business, operating results and financial condition.

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Our operations in certain emerging markets expose us to political, economic and regulatory risks.

Our growth strategy depends in part on our ability to expand our operations in emerging markets, including Asia Pacific, the Middle East and Africa, and Latin America. However, some emerging markets have greater political, economic and currency volatility, and greater vulnerability to infrastructure and labor disruptions than more-established markets. In many countries outside of the United States, particularly those with emerging economies, it may be common for others to engage in business practices prohibited by laws and regulations with extraterritorial reach, such as the U.S. Foreign Corrupt Practices Act ("FCPA"), the U.K. Bribery Act, or other local anti-bribery laws. These laws generally prohibit companies and their employees, contractors or agents from making improper payments to government officials, including in connection with obtaining permits or engaging in other actions necessary to do business. Failure to comply with these laws could subject us to civil and criminal penalties that could materially and adversely affect our reputation, financial condition and results of operations.

For example, under the FCPA, U.S. companies may be held liable for the corrupt actions taken by employees, strategic or local partners, or other representatives. Under the FCPA, we and our channel partners are required to maintain accurate books and records and a system of internal accounting controls. As such, if we or our intermediaries fail to comply with the requirements of the FCPA or similar legislation outside the United States, governmental authorities in the United States and elsewhere could seek to impose civil or criminal fines and penalties, which could have a material adverse effect on our business, operating results and financial conditions. While our employee handbook and other policies prohibit our employees from engaging in corrupt conduct, we do not yet have in place compliance measures and training to require both our employees and our third-party intermediaries to comply with the FCPA and similar anticorruption laws.

Establishing operations and distribution partners in these emerging markets may also require complex legal arrangements and operations to deliver services on global contracts for our end customers. Because of our limited experience with international operations and developing and managing sales and distribution channels in international markets, our international expansion efforts may not be successful. Additionally, we have established operations in locations remote from our more developed business centers. As a result, we are subject to heightened risks inherent in conducting business internationally, including the following:

• failure to comply with local regulations or restrictions;

• enactment of legislation, regulation or restriction, whether by the United States or in the foreign countries, including unfavorable labor regulations, tax policies or economic sanctions (such as potential economic sanctions arising from political disputes), and currency controls or restrictions on the transfer of funds;

• enforcement of legal rights or recognition of commercial procedures by regulatory or judicial authorities in a manner in which we are not accustomed, would not reasonably expect or with which we could reasonably comply;

• differing technical and environmental standards, data protection and telecommunications regulations and certification requirements, which could prevent the import, sale or use of our products or SaaS offerings in such countries;

• difficulties and costs associated with staffing and managing foreign operations;

• potentially longer payment cycles and greater difficulty collecting accounts receivable;

• the need to adapt and localize our services for specific countries, including conducting business and providing services in local languages;

• reliance on third parties over which we have limited control, such as our VARs, distributors, OEM partner or their resellers or agents, for marketing and reselling our products and solutions;

• availability of reliable broadband connectivity and wide area networks in areas we target for expansion;

• difficulties in understanding and complying with local laws, regulations, and customs in foreign jurisdictions or unanticipated changes in such laws;

• application of or changes in anti-bribery laws, such as the FCPA and UK Bribery Act, which may disrupt our staffing or ability to manage our foreign operations;

• changes in political and economic conditions leading to changes in the business environment in which we operate, as well as changes in foreign currency exchange rates;

• sanctions restricting local commercial activity, including retaliatory actions by local governments; and

• natural disasters, pandemics or international conflict, including terrorist acts or labor or political disputes, which could interrupt our operations or endanger our personnel.

In addition, our competitors may also expand their operations in these markets or others we may also target, and low-cost local manufacturers may also expand and improve products and their production capacities, thus increasing competition in

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these emerging markets. Our success in emerging markets is important to our growth strategy. If we cannot successfully increase our business in emerging markets and manage associated political, economic, regulatory and currency volatility, our product sales, financial condition and results of operations could be materially and adversely affected.

We conduct substantial R&D operations in China; risks associated with a business presence in China could negatively affect our business and results of operations.

We operate a large research and development center in Hangzhou, China, which subjects us to a number of risks relating to China’s political and legal systems, including;

• Uncertainty regarding the validity, enforceability, scope and ability to protect and secure our intellectual property rights and the practical difficulties or enforcing such rights;

• Extensive government regulation; and

• An uncertain legal system.

Any actions and policies taken or adopted by the government of the People’s Republic of China, particularly with regard to our intellectual property, products and legal rights, could have an adverse effect on our business, results of operations and financial condition.  For example, development in China or by entities supported by the China government of competing products or technologies using our intellectual property could significantly erode the market or pricing for our products.  In addition, actions or policies to incorporate technical capabilities into our products, without our knowledge or permission or the appearance or threat of the same, could undermine product or data security features of our products.  Whether any such actions or policies actually exist, or have been effected, the fact of a significant research and development presence in China could expose our products and data and security offerings to government or market scrutiny regarding the integrity of our product or data security features.  Any of the foregoing could similarly discourage the purchase or use of our products and cause significant harm to our reputation in the market.

We could be subject to additional income tax liabilities.

We are subject to income taxes in the United States and numerous foreign jurisdictions. We use significant judgment in evaluating our worldwide provision for income taxes, which could be adversely affected by several factors, many of which are outside our control. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than we anticipate in countries that have lower statutory rates and higher than we anticipate in countries that have higher statutory rates, by changes in foreign currency exchange rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations, including possible changes to the U.S. taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income or the foreign tax credit rules. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax against us as well as penalties and fines. As we operate in multiple taxing jurisdictions, the application of tax laws can be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. The time and expense necessary to defend and resolve a tax audit may be significant. Although we believe our tax estimates are reasonable, the final outcome of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals and may have a material effect on our operating results or cash flows in the period or periods for which we make such determination.

Our international operations and corporate structure subject us to potential adverse tax consequences.

We generally conduct our international operations through wholly owned subsidiaries and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations. We may not have adequate reserves to cover such a contingency.

In the future, we may reorganize our corporate structure or intercompany relationships, which would likely require us to incur expenses in the near term for which we may not realize related benefits, at all or within a reasonable period, to justify the expense. Changes in domestic and international tax laws, including enacted legislation to reform U.S. taxation of international business activities, may negatively impact our ability to effectively restructure, or reduce the benefits we expected from such corporate restructuring. Any such restructuring would likely involve sophisticated analysis, including analysis of U.S. and

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international tax regimes. Compliance with such laws and regulations may be difficult and expensive and subject our business to additional risks, costs and uncertainties.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

As of December 31, 2017, we had federal and state net operating loss carryforwards (NOLs) of $122.2 million and $75.3 million, respectively, due to current and prior period losses. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), a corporation that undergoes an “ownership change” (generally defined as a greater than 50-percentage-point cumulative change (by value) is subject to limitations on its ability to utilize its pre-change NOLs to offset post-change taxable income. Our existing NOLs may be subject to limitations arising from previous ownership changes, and if we undergo an ownership change in the future, our ability to utilize NOLs could be further limited by Section 382 of the Code. Future changes in our stock ownership, some of which may be outside of our control, could result in an ownership change under Section 382 of the Code.

On December 22, 2017, the U.S. government enacted new tax legislation commonly referred to as The Tax Cuts and Jobs Act (TCJA). The TCJA makes broad and complex changes to the U.S. tax code including changes to the uses and limitations of net operating losses. Specifically, the TCJA imposes an 80% limitation on the use of net operating losses that were generated in tax years beginning after December 31, 2017. As such, we may not be able to utilize a material portion of the NOLs.

Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value-added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.

We do not collect sales and use, value-added or similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are not applicable. Sales and use, value-added and similar tax laws and rates vary greatly by jurisdiction. Certain jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect such taxes in the future. Such tax assessments, penalties and interest or future requirements could be significant and may adversely affect the results of our operations.

We must improve our infrastructure to manage our growth, which could involve significant costs and could, if not properly managed, harm our operating results.

To manage any future growth effectively we must continue to improve and expand our information technology and financial and administrative infrastructure, our operating systems and administrative controls and our ability to manage headcount, capital and processes in an efficient manner. For example, we continue to evaluate upgrades to our existing business processes and systems to better manage licensing, renewals and order processing, and to transition to a global distribution platform. Such new processes and systems may significantly improve our transaction efficiency and ability to scale our revenue and operating performance, including through an ability to track, timely identify and manage increasing volumes of product, license and renewal opportunities and transactions. We may not be able to successfully implement improvements to these systems and processes in a timely or efficient manner, which could result in additional operating inefficiencies and lost business opportunities and associated revenue, and could cause our costs to increase more than planned. If we do increase our operating expenses in anticipation of the growth of our business and this growth does not meet our expectations, at all or sufficiently to justify the expense, our operating results may be negatively impacted. If we are unable to manage future expansion, our ability to develop and deliver high quality products and services and securely process increased transaction volumes could be harmed, which could damage our reputation and brand and impede expected growth, and any of which may have a material adverse effect on our business, operating results and financial condition.

Our business and operating results could be adversely affected by unfavorable economic and market conditions.

Our business depends on the overall demand for wireless network technology and on the economic health and general willingness of our current and prospective end customers to purchase our products. The conditions in the United States and global economies are volatile and if they deteriorate our business, operating results and financial condition may be harmed. In particular, we do not know whether spending on wireless network technology will increase or decrease in the future, or at what rate.

Investments in technology by educational institutions in particular could be related to budgetary constraints unrelated to overall economic conditions, or may be magnified by unfavorable economic conditions. The purchase of our products or willingness to replace existing infrastructure are discretionary and highly dependent on a perception of continued rapid growth in consumer usage of mobile devices and, in many cases, involve a significant commitment of capital and other resources. In addition, our small and medium enterprise end customers may also be more sensitive to adverse economic conditions than other

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potential customers, which could amplify the adverse impact of a deterioration of economic conditions. Therefore, weak economic conditions, uncertain availability of government funding, or a reduction in capital spending would likely adversely impact our business, operating results and financial condition. A reduction in spending on wireless network technology could occur or persist even if economic conditions improve.

In addition, if interest rates rise or U.S. dollar foreign exchange rates weaken for our international end customers and channel partners, overall demand for our products and services could decline and related capital spending may be reduced. For example, when the exchange rate of the U.S. dollar to foreign currencies is strong, the price of our products outside the United States may become less competitive, reducing our sales or requiring us to lower pricing for our products outside the United States in order to maintain sales and revenue performance (thus also reducing our gross margins). Furthermore, any increase in the U.S. dollar-value of worldwide commodity prices may result in higher component prices for us and increased manufacturing and shipping costs, each of which may negatively impact our financial results.

U.S. and global political, credit and financial market conditions may negatively impact or impair the value of our current portfolio of cash, cash equivalents and short-term investments, including U.S. treasury securities and U.S.-backed investment vehicles.

Our cash, cash equivalents and short-term investments were $77.9 million as of March 31, 2018, which we held as money market funds, U.S. treasury securities, commercial paper and investment-grade corporate debt securities with Moody's and S&P ratings of A-/A3 or better. As a result of the uncertain domestic and global political, credit and financial market conditions, investments in these types of financial instruments pose risks arising from liquidity and credit concerns. Any deterioration in the U. S. and global credit and financial markets could cause losses or significant deterioration in the value of our cash, cash equivalents or possible investments. If any such losses or significant deteriorations occur, it may negatively impact or impair our current portfolio of cash, cash equivalents and possible investments, which may affect our ability to fund future obligations. Further, it may be difficult for us to liquidate our investments prior to their maturity without incurring a loss, which would have a material adverse effect on our business, operating results and financial condition.

System security risks, data security incidents and cyber-attacks could compromise our or our end customers’ information including proprietary information and end customer information and disrupt our internal operations, which could cause our business and reputation to suffer and adversely affect our stock price.

In the ordinary course of business, we store sensitive data, as well as our proprietary business information and that of our end customers, suppliers and business partners. The secure maintenance of this information, and our ability to protect our network from interruption or damage from unauthorized entry, computer viruses or other events beyond our control, is critical to our operations, and business strategy, reputation and, ultimately, our success as a business and value to our investors. While we believe we use certain proven applications designed for data security and integrity, we are in the process of developing an information security program. Despite the implementation of security measures, our infrastructure or systems may be vulnerable to hackers, computer viruses, worms, malware, ransomware or other malicious software programs or similar disruptive problems caused by our customers, employees, consultants or other Internet users who attempt to invade public and private data networks. For example, we and many other companies were notified in October 2017 of a vulnerability in the protocol that secures all-protected Wi-Fi networks, which would enable an attacker to exploit weaknesses using key reinstallation attacks (the "KRACK Attack").

Increasingly, companies are subject to a wide variety of attacks on their networks on an ongoing basis. Our information technology and infrastructure may be vulnerable to persistent threats, penetration or attacks by computer programmers and hackers, software bugs or other technical malfunctions, or other disruptions. Due to our business model and the location of some of our development centers, we have faced and are likely to face threats that target both our internal systems and our products and data analytics solutions, which, in turn, may threaten our end customers' networks, devices, applications and data. In addition, our employees could breach our data security measures and misuse such data or other information, whether through error or misconduct. Any such data security incident, whether external or internal in origin, could compromise our networks, including our cloud-managed platform, creating system disruptions or slowdowns and exploiting security vulnerabilities of our products, and the information stored on our networks could be improperly accessed, publicly disclosed, lost or stolen, which could subject us to liability to our end customers, suppliers, channel and business partners and others, and cause us reputational and financial harm. Additionally, an effective attack on our systems, products or data analytics solutions could disrupt their proper functioning, allow unauthorized access to sensitive, proprietary or confidential information of ours or of our end customers, disrupt or temporarily interrupt customers' networking traffic, or cause other destructive outcomes, including the theft of information sufficient to engage in fraudulent financial transactions or compromise other sensitive information. Because the techniques used by computer programmers and hackers, many of whom are highly sophisticated and well-funded, to access or sabotage networks change frequently and generally are not recognized until after they are used, we may be unable to anticipate or immediately detect these techniques. This could delay our response or the effectiveness of our response and

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impede our sales, manufacturing, distribution or other critical functions and ability to limit our exposure to third-party claims and potential liability. If any of these types of data security incidents were to occur or to be believed to have occurred, or if we were unable to timely respond to protect sensitive data or other proprietary or non-public data, our relationships with our business partners and end customers could be materially damaged, our reputation and brand could be materially harmed, use of our solutions could decrease, and affected partners, end customers or government authorities could initiate legal or regulatory action against us in connection with such incidents, which could cause us to incur significant expenses and liability or could result in orders, judgments, or consent decrees forcing us to modify our business practices. The risk that these types of events could seriously harm our business is likely to increase as we expand the number of web-based products and data analytics solutions we offer, and as we operate in more countries.

In addition, if an actual or perceived data security incident occurs in our network or in the network of a partner or an end customer of one of our products and data analytics solutions (particularly our cloud-based offerings), regardless of whether the incident is attributable to our products and data analytics solutions, the market perception of the effectiveness of our products and data analytics solutions could be harmed. We may also be required to expend significant financial and operational resources in an effort to secure our systems and our and our partners' or customers’ data from security threats and hazards. Further, real or perceived defects or errors in our products and data analytics solutions (particularly in our cloud-based offerings, due to cloud-based offerings sometimes being perceived as being inherently less secure) could result in claims by channel partners and end customers for losses that they sustain, including potentially losses resulting from data security incidents affecting our systems, our end customers' networks and/or downtime of those networks. If channel partners or end customers make these types of claims, we may be required, or may choose for customer relations or other reasons, to expend additional resources in order to help correct the problem, including warranty and repair costs, process management costs, and costs associated with re-manufacturing our inventory and to respond to and resolve litigation and regulatory claims. The economic costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malware, ransomware or malicious software systems and security vulnerabilities and claims could be significant and may be difficult to anticipate or measure because the damage may differ based on the identity and motive of the programmer or hacker, which may be difficult for us to identify.

Undetected software errors or flaws in our cloud platform could harm our reputation or decrease market acceptance of our solution, which would harm our operating results.

Our platform may contain undetected errors or defects when introduced or as we release new versions. We have experienced these errors or defects in the past in connection with new releases and solution upgrades, and we expect that we or others will find errors or defects from time to time in future releases, even after we release them commercially. Since our end customers may use our platform for security and compliance reasons, any errors, defects, disruptions in service or other performance problems may damage our end customers’ business and could hurt our reputation. If that occurs, we may incur significant costs, the attention of our key personnel could be diverted, our end customers may delay or withhold payment to us or elect not to continue to use our products or renew our services, or defer further purchases, or other significant customer relations problems may arise. We may also be subject to government penalties and liability claims for damages related to errors or defects in our platform.

Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and interruptions by man-made problems, such as network data-security incidents, computer viruses or terrorism.

Our corporate headquarters are located in Silicon Valley, and substantially all of our contract manufacturers are located in Asia, both regions known for seismic activity. A significant natural disaster, such as an earthquake, a fire or a flood, occurring near our headquarters, or near the facilities of our contract manufacturers, could have a material adverse impact on our business, operating results and financial condition. Despite the implementation of network security measures, our networks also may be vulnerable to computer viruses, break-ins, denial of service attacks, malware, ransomware and other disruptions and data security incidents arising from unauthorized tampering with our systems or our products or our data analytic solutions or from internal or external threats. In addition, natural disasters, acts of terrorism or war could cause disruptions in our or our end customers’ or channel partners’ businesses, our suppliers’ and manufacturers’ operations or the economy as a whole. We also rely on information technology systems to communicate among our workforce and with third parties. Any disruption to our communications, whether caused by a natural disaster or by manmade problems, such as power disruptions, could adversely affect our business. We do not have a fully developed disaster recovery plan or policy or incident response plan or comprehensive written information or data security plans in place which cover all our installations and business operations, and do not currently require that all our manufacturing partners have such plans or policies in place. To the extent that such incidents or our failure to promptly or effectively respond result in delays or cancellations of orders or impede our suppliers’ and/or our manufacturers’ ability to timely deliver our products and product components, or the deployment of our products, our business, operating results and financial condition could be adversely affected. We do maintain what we believe are

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commercially reasonable levels of business interruption insurance. However, we cannot assure that such insurance would be available to us or adequately cover our losses in the event of a significant disruption in our business.

We may acquire other businesses or form partnerships or joint ventures that could require significant management attention, disrupt our business and dilute stockholder value.

We may make investments in complementary companies, products or technologies, or form partnerships or joint ventures with third parties. For example, in January 2016, we lent $1.5 million in cash in the form of a promissory note issued by a privately held company which provides Wi-Fi application and analytics, which converted into preferred shares of the privately held company in June 2017.

We have limited experience identifying, making investments in, purchasing and integrating third-party companies, technologies or other assets that could be complementary to our business or help advance our strategy, in particular, internationally. As a result, our ability as an organization to identify, invest in, acquire and integrate other companies, technologies or other assets in a successful manner is unproven. We may not be able to find suitable investment or acquisition candidates, and we may not be able to complete such investments or acquisitions on favorable terms, if at all. If we do complete investments or acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, and any investments or acquisitions we complete could be viewed negatively by our end customers, investors and financial analysts. In addition, if we are unsuccessful at integrating such acquisitions, or the technologies associated with such investments or acquisitions, the business prospects, operating results and financials of the combined company could be adversely affected. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. Cross-border transactions may involve complex regulatory, labor or government compliance requirements which we may not fully anticipate or which could impose ongoing cost and require significant management attention and resources. We may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition, including accounting charges. We may have to pay cash, assume liabilities, incur debt or issue equity securities to pay for any such investment or acquisition, each of which could adversely affect our financial condition or the value of our common stock. The sale of equity or issuance of debt to finance any such investment or acquisition could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

Our future capital needs are uncertain, and we may need to raise additional funds in the future. If we require additional funds in the future, those funds may not be available on acceptable terms, or at all.

Our cash, cash equivalents and short-term investments were $77.9 million as of March 31, 2018. We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated working capital and capital expenditure needs for at least the next 12 months. We may, however, need to raise substantial additional capital in the future to:

• fund our operations;

• continue our research and development;

• develop and commercialize new products;

• invest in or acquire companies, in-licensed products or intellectual property; or

• expand sales and marketing activities.

Our future funding requirements will depend on many factors, including:

• market acceptance of our products and services;

• the cost of our research and development activities;

• refinancing, extending or replacing existing obligations, including our existing credit facilities and lease obligations as they mature or where earlier repayment may be required;

• the cost of defending and resolving, in litigation or otherwise, claims that we infringe third-party patents or violate other intellectual property rights;

• the cost and timing of establishing additional sales, marketing and distribution capabilities;

• the cost and timing of establishing additional technical support capabilities;

• the effect of competing technological and market developments;

• the market for different types of funding and overall economic conditions; and

• continued investments we may make to fund anticipated future growth.

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We may require additional funds in the future, and we may not be able to obtain those funds on acceptable terms, or at all. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Upon any liquidation, our debt lenders and other creditors would be repaid all interest and principal then-outstanding prior to the holders of our common stock receiving any distribution. Any debt or additional equity financing that we raise may contain terms that are not favorable to us or our stockholders.

If we do not have, or are not able to obtain, sufficient funds, we may have to reduce our cash burn rate, delay development or commercialization of our products or license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or to grant licenses on terms that are not favorable to us. If we are unable to generate sufficient cash flows or to raise adequate funds to finance our forecasted expenditures, we may have to liquidate some or all of our assets, or delay, reduce the scope of or eliminate some or all of our development programs. We also may have to reduce sales, marketing, engineering, customer support or other resources devoted to our products, or cease operations. Any of these actions could impede our ability to achieve our business objectives and harm our operating results.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified members of our board of directors.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Dodd-Frank Act, the listing requirements of the New York Stock Exchange, the Financial Industry Regulatory Authority ("FINRA") and other applicable securities rules and regulations. Compliance with these rules and regulations increases our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increases demand on our systems and resources. For example, the Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results.

Being a public company has increased our ongoing expenses in general and specifically the cost for us to obtain director and officer liability insurance at levels we deem commercially reasonable, and we have incurred higher costs and accepted higher retentions to obtain such coverage. Being a public company also makes it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on its audit committee and compensation committee, and qualified executive officers.

As a result of disclosure of information in filings required by us as a public company, our business and financial condition is more visible, which might result in threatened or actual litigation, including by competitors and other third parties. For example, as described in Note 5 - Commitments and Contingencies in this Quarterly Report on Form 10-Q, we were recently sued in separate federal and state actions relating to our forecast for the fourth quarter of 2017. We will incur significant expenses to defend these actions and expend time and resources, including management resources, necessary to resolve them. This and similar future litigation could harm our business and operating results.

An increasing volume of our business is being delivered through our channel partners and distributors, thus increasing our credit exposure to those partners.

We will continue to increase our investment in our channel partners and distributors, and expect the level of our revenue to be delivered through those partners and distributors to increase as well. While utilizing our channel partners and distributors to a greater degree as a source of our revenue may reduce the credit risk we would otherwise have through direct sales to individual end customer transactions, it increases our overall credit risk to these individual partners and distributors. We attempt to monitor periodically the business conditions of our partners and distributors. However, we may not fully understand or be able to anticipate at any time difficult financial or market conditions that could affect or undermine their credit worthiness and ability to meet their obligations to us. This is particularly true for our partners located outside the United States and those who do not provide a level of financial reporting or disclosure consistent with U.S.-reporting companies. In the event one or more of these channel partners and distributors were to experience financial difficulties, slow their payments or default entirely on their obligations to us this could have a material effect on our revenue and overall business.

Our debt obligations contain restrictions that impact our business and expose us to risks that could adversely affect our liquidity and financial conditions.

On June 21, 2012, we entered into a revolving credit facility with Silicon Valley Bank, which we refer to, as amended, as our Revolving Credit Facility. As of March 31, 2018, we have $20.0 million drawn under the Revolving Credit Facility.

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Our obligations under the Revolving Credit Facility are secured by substantially all of our property, other than our intellectual property. The Revolving Credit Facility contains customary negative covenants that limit our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets or engage in merger and acquisition activity, including merge or consolidate with a third party. The Revolving Credit Facility also requires us to maintain a liquidity ratio of not less than 1.25 to 1.00 and a minimum cash balance with the bank of $35 million and to demonstrate the absence of defined events of default in order to assure full access to the available borrowing. Our Revolving Credit Facility also contains customary affirmative covenants, including requirements to, among other things, deliver audited financial statements, and it contains customary events of default, subject to customary cure periods for certain defaults, which include, among other things, non-payment defaults, covenant defaults, material judgment defaults, bankruptcy and insolvency defaults, cross-defaults to certain other material indebtedness, and defaults arising from inaccuracy of representations and warranties. The Revolving Credit Facility also includes a default upon the occurrence of a material adverse change to our business.

If our cash balances or cash flows decline due to any of the factors described in this “Risk Factors” section or otherwise, if we breach covenants under our Revolving Credit Facility or if there occurs a material adverse change in our business, we could be prohibited from further borrowing under the Revolving Credit Facility, our interest rates on the outstanding borrowings could increase and our obligation to repay principal amounts could be accelerated. Our failure to pay interest and principal amounts when due or comply with covenants could cause a default under the Revolving Credit Facility. Any such default could have a material adverse effect on our liquidity and financial condition. In the event of our liquidation, the lender would be repaid all outstanding principal and interest prior to distribution of assets to other creditors. Our holders of common stock would receive a portion of any liquidation proceeds only if all of our creditors were first repaid in full.

Risks Related to Our Industry

We compete in highly competitive markets, and competitive pressures from existing and new companies may harm our business, revenue, growth rates and prospects. In addition, many of our current or potential competitors have longer operating histories, greater brand recognition, larger customer bases and significantly greater resources than we do, and we may lack sufficient financial or other resources to maintain or improve our competitive position.

The markets in which we compete are highly competitive, and we expect competition to increase in the future, whether from established competitors or new market entrants. The markets are influenced by, among others, the following competitive factors:

• brand awareness and reputation;

• price and total cost of ownership;

• discounts and other incentives offered to resellers and channel partners;

• strength and scale of sales and marketing efforts, professional services and customer support;

• product features, reliability and performance;

• incumbency of the current provider, either for wireless or wired networking or other products;

• scalability of products;

• ability to integrate with other technology infrastructures; and

• breadth of product offerings.

Our main competitors are primarily general networking infrastructure vendors that include Wi-Fi products in their portfolio, such as Cisco/Meraki, Hewlett-Packard/Aruba Networks, Arris /Ruckus Wireless, Ubiquiti, Extreme Networks, Riverbed/Xirrus and Huawei. Their broad networking portfolios may include enterprise mobility solutions they have developed or acquired or may acquire in the future. Such vendors have significant sales and engineering resources and, along with the relationships they have formed, can offer customers and resellers a broader or more compelling portfolio of products and platform solutions than we can offer, which some customers may prefer, and can use their broader offerings to provide additional financial and technical incentives for customers to purchase their products. These companies may also expand their product offerings over time and, through such partnerships and acquisitions and with greater resources, are able more effectively and opportunistically to target emerging markets or market opportunities, becoming more difficult competitors for us. They are also able to develop broader suites of products, and provide a complete and integrated wired and wireless solution may be preferable to our end customers. We expect competition to intensify in the future as companies introduce new products into our markets, consolidate or broaden their product offerings or from partnerships or collaborations, including amongst our competitors and partners, which expand the breadth and compatibility of their product offerings. This competition could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses, and failure to increase, or the

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loss of, our market share, any of which would likely seriously harm our business, operating results or financial condition. If we do not keep pace with product and technology advances, or if we are unable to differentiate our products and services successfully from those of our competitors, including our total cost of ownership, there could be a material and adverse effect on our competitive position, revenue and prospects for growth.

A number of our current or potential competitors have longer operating histories, greater name recognition, larger customer bases, more resellers, and significantly greater financial, technical, sales, marketing and other resources. Our competitors may be better able to anticipate, influence or adapt more quickly to new or emerging technologies and changes in customer requirements, devote greater resources to the promotion and sale of their products and services, initiate or withstand substantial price competition, take advantage of acquisitions or other opportunities more readily and develop and expand their product and service offerings more quickly than we can. Such greater resource and operating histories of our larger and longer-established competitors may be particularly important to our larger enterprise customers when choosing our or a competing product solution. In addition, certain of our competitors may be able to leverage their relationships with customers based on other products or incorporate functionality into existing products to gain business in a manner that discourages customers from purchasing our products, including through selling at low or even negative margins, product bundling, or closed-technology platforms. Our competitors may also be able to offer a broader integrated product platform, or across platforms through partnerships, bringing together a unified product, security and applications offering. Potential end customers may prefer to purchase all of their equipment from a single provider, or may prefer to purchase wireless and wired networking products from an existing supplier rather than a new supplier, regardless of product performance or features.

We expect increased competition from our current competitors, as well as other established and emerging companies, to the extent our markets continue to develop and expand. Conditions in our markets could change rapidly and significantly as a result of technological advancements or other factors. These pressures could limit our growth and materially adversely affect our business, operating results and financial condition.

Industry consolidation and strategic partnerships lead to increased competition and may harm our operating results.

There has been a trend toward industry consolidation in our markets for several years as companies attempt to strengthen or hold their market positions in an evolving industry, and as companies are acquired or are unable to continue operations. Some of our competitors have made acquisitions or entered into partnerships or other strategic relationships to offer a more comprehensive solution than they individually had offered. For example, in November 2012, Cisco Systems acquired Meraki Networks. In 2014, Juniper Networks announced that it was exiting its wireless networking business as part of a strategic partnership with Aruba Networks. In April 2014, Zebra Technologies announced that it would buy the enterprise business of Motorola Solutions, which Zebra later sold to Extreme Networks in September 2016. In March 2015, Hewlett-Packard announced that it would acquire Aruba Networks. In July 2015, Fortinet, Inc. completed its acquisition of Meru Networks. Cisco and Apple announced in August 2015 a collaboration to improve the performance and experience of Apple iOS-based products when used on Cisco networks and operating systems. In October 2015, Ruckus announced its acquisition of CloudPath Networks, a provider of Wi-Fi onboarding technology. In April 2016, Brocade announced its acquisition of Ruckus. Brocade subsequently sold its Ruckus business unit to the Arris Group. In April 2017, Riverbed Technology announced its acquisition of Xirrus Networks. Such or similar consolidation or strategic partnerships may continue in the future. The companies or alliances resulting from these possible consolidations may create more compelling or bundled or integrated product platforms, bringing together unified product, security and application offerings, as well as being able to offer greater pricing flexibility, making it more difficult for us to compete effectively, including on the basis of price, sales and marketing programs, channel coverage, technology or product functionality. Continued industry consolidation may adversely impact customers’ perceptions of the viability of smaller and even medium-sized technology companies such as ourselves and, consequently, customers’ willingness to purchase from us. Such greater resource and operating histories of our larger and longer-established competitors may be particularly important to our larger enterprise customers when choosing our or a competing production solution. In addition, companies that are our strategic alliance or channel partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. For example, in February 2018 Ruckus Wireless announced that it had signed an OEM agreement with Dell whereby Dell will also become a reseller of Ruckus’ portfolio of wireless solutions. If our channel partners fail to effectively market, distribute and support our products, or if our channel strategy, or particular channel partner initiatives or investments, such as with Dell or others we may identify, are otherwise unsuccessful, our revenue performance and operating margin would be harmed, which could adversely affect the value of our common stock. We also believe that industry consolidation may result in stronger competitors, with more efficient cost structures that are better able to compete as sole-source vendors for our end customers. This could lead to more variability in our operating results and could have a material adverse effect on our business, operating results and financial condition.

Demand for our products and services depends in part on the continued growth of the industries in which we participate, as well as our ability to diversify into other verticals, and the failure of these industries to expand or of our ability to diversify our revenue opportunities, could harm our operating results.

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We currently target education, retail and distributed enterprise end customers, and we sell into verticals such as finance, healthcare, manufacturing, utilities, telecom, state and local government, transportation, legal, accounting, architecture, engineering and construction. In the event, any of the specific sectors we target fails to expand on wireless networking, or slows the rate of their spending, our operating results could be harmed. For example, the education sector is faced with limited resources to spend on technology purchases. In North America, the U.S. government's E-Rate program starting on July 1, 2015 was expected to continue to provide a significant portion over the next several years of the funding used by schools to purchase our solutions. If this sector does not continue to expand expenditures on technology in general, or the rate of funding slows or is delayed, our business could be harmed. If the E-Rate program is discontinued or receives a lower level of funding than we expect, or the share of funding our end customers secure or direct toward purchasing our products is lower than we expect, our business could also be harmed.

If functionality similar to that offered by our products is incorporated into existing network infrastructure products, enterprises may decide against adding our products to their network, which would have an adverse effect on our business.

Large, well-established providers of networking equipment may continue to introduce features that compete with our products, either in stand-alone products or as additional features or applications in their network platforms. For example, several of our larger competitors may be better able to integrate into a single platform a broader product, security and applications offering. The inclusion of, or the announcement of an intent to include, functionality perceived to be better or more cost-effective than our platform offering may have an adverse effect on our ability to market and sell our products. Furthermore, even if the functionality these providers offer is more limited or less cost-effective than our platform, end customers may elect to accept such products in lieu of adding platforms from an additional vendor such as ourselves. Many enterprises have invested substantial personnel and financial resources to design and operate their networks and have established deep relationships with other providers of networking products, which may make them reluctant to add new components to their networks, particularly from other vendors such as ourselves. In addition, an enterprise’s existing vendors or new vendors with a broad product offering may be able to offer concessions that we are not able to match. If enterprises are reluctant to add new vendors or otherwise decide to work with their existing vendors, our ability to maintain or improve our market share, our financial condition and operating results will be adversely affected.

We rely on revenue from subscription and support services that may decline. Because we recognize revenue from subscriptions and support over the term of the relevant service period, downturns or upturns in sales are not immediately reflected in full in our operating results.

Subscription and support revenue, consisting of sales of new or renewal subscription and support and maintenance contracts, accounts for a significant portion of our revenue, comprising 29.9% and 25.7% of our total revenue for the three months ended March 31, 2018 and 2017, respectively. Our service revenue may decline and fluctuate as a result of a number of factors, including end customers’ level of satisfaction with our offerings, the prices, pricing and changes in the scope of our offerings, the prices of products and services offered by our competitors and reductions in our end customers’ spending levels. We are developing and implementing systems to enable us better to track and timely identify renewal opportunities. If our sales of new or renewal subscription and support and maintenance contracts decline, or we are not able to manage efficiently increased support transaction volumes, including renewals, our revenue and revenue growth may decline and our business will suffer. In addition, we recognize service revenue ratably over the term of the relevant service period, which is typically one, three or five years. As a result, much of the service revenue we report each quarter is the recognition of deferred revenue from service contracts entered during previous quarters. Consequently, a decline in new or renewed subscription or support and maintenance contracts in any one quarter will not be fully reflected in revenue in that quarter but will continue to negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in new or renewed sales of our subscriptions or support and maintenance is not reflected in full in our operating results until future periods. Also, it is difficult for us to rapidly increase our services revenue through additional service sales in any period, as revenue from new and renewal service contracts must be recognized over the applicable service period. Furthermore, any increase in the average term of services contracts would result in revenue for services contracts being recognized over longer periods of time and the associated revenue we recognize could be lower in any particular quarter.

If we fail to comply with environmental requirements, our business, financial condition, operating results, and reputation could be adversely affected.

We are subject to various local, state, federal, and international environmental laws and regulations, including laws governing the hazardous material content of our products and laws relating to the collection of and recycling of electrical and electronic equipment. Examples of these laws and regulations include the European Union Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive ("RoHS"), and the European Union Waste Electrical and Electronic Equipment Directive ("WEEE Directive"), as well as the implementing legislation of the European Union member states. Similar laws and regulations have been passed or are pending in China, South Korea, Norway, and Japan and

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may be enacted in other regions in which we currently or expect to operate, including in the United States, and we are, or may in the future be, subject to these laws and regulations.

The RoHS and similar laws of other jurisdictions limit the content of certain hazardous materials, such as lead, mercury and cadmium, in the manufacture of electrical equipment, including our products. Currently, our products comply with the EU RoHS requirements. However, if there are changes to these or other laws (or their interpretation) or other jurisdictions pass new similar laws or requirements, we may be required to reengineer our products to use components compatible with these regulations. This reengineering and component substitution could result in additional costs to us or disrupt our operations or logistics or delay our ability to sell our products.

The WEEE Directive requires electronic goods producers to register as a WEEE producer and be responsible for the collection, recycling, and treatment of such products. Changes in interpretation of the directive may cause us to have additional regulatory requirements to meet in the future in order to comply with this directive, or with any similar laws adopted in other jurisdictions.

We are also subject to environmental laws and regulations governing the management of hazardous materials, which we use in small quantities in our engineering labs. Our failure to comply with these or past, present and future similar laws could result in reduced sales of our products, substantial product inventory write-offs, reputational damage, costs, penalties, third-party property damage, and other sanctions, any of which could harm our business and financial condition. We also expect that our products will be affected by new environmental laws and regulations on an ongoing basis, imposing greater compliance costs, and increasing risks and penalties associated with violations, which could harm our business. To date, our expenditures for environmental compliance have not had a material impact on our results of operations or cash flows, and although we cannot predict the future impact of such laws or regulations, they will likely result in additional costs and may increase penalties associated with violations or require us to change the content of our products or how they are manufactured, any of which could have a material adverse effect on our business, operating results, and financial condition.

New regulations or standards or changes in existing regulations or standards in the United States or internationally related to our products may result in unanticipated costs or liabilities, which could have a material adverse effect on our business, results of operations and future sales, and could place additional burdens on the operations of our business.

Our products are subject to governmental regulations in a variety of jurisdictions. In order to achieve and maintain market acceptance, our products must continue to comply with these regulations as well as a significant number of industry standards. In the United States, our products must comply with various regulations defined by the Federal Communications Commission ("FCC"), Underwriters Laboratories and others. We must also comply with similar international regulations in order for our products to be certified for use in such countries. For example, our wireless communication products operate through the transmission of radio signals and radio emissions are subject to regulation in the United States and in other countries in which we do business. In the United States, various federal agencies, including the Center for Devices and Radiological Health of the Food and Drug Administration, the FCC and various state agencies have promulgated regulations that concern the use of radio and electromagnetic emissions standards. Member countries of the European Union and individual countries in the Asia Pacific region have enacted similar standards concerning electrical safety and electromagnetic compatibility and emissions. In addition, our data analytics solutions, and the manner in which we collect, store, analyze, use or transmit end customer data, increasingly may be subject to regulation under the Federal Trade Commission.

As these regulations and standards evolve, and if new regulations or standards are implemented, we will be required to modify our products or develop and support new versions of our products, or change the manner in which we collect, store, analyze, use or transmit end customer data, and our compliance with these regulations and standards may become more burdensome and require significant investments. The failure of our products to comply, or delays in compliance, with the various existing and evolving industry regulations and standards could prevent or delay introduction of our products, which could harm our business. End customer uncertainty regarding future policies may also affect demand for communications products, including our products. Moreover, channel partners or end customers may require us, or we may otherwise deem it necessary or advisable, to alter our products to address actual or anticipated changes in the regulatory environment. Our inability to alter our products to address these requirements and any regulatory changes may have a material adverse effect on our business, operating results and financial condition.

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Risks Related to Our Intellectual Property

If we are unable to protect our intellectual property rights, our competitive position could be harmed or we could be required to incur significant expenses to enforce our rights.

We protect our proprietary information and technology through licensing agreements, third-party nondisclosure agreements and other contractual provisions, as well as through patent, trademark, copyright and trade secret laws in the United States and similar laws in other countries. As of March 31, 2018, we held 57 patents issued and 48 applications pending in the United States (as well as certain foreign equivalents issued and applications pending outside the United States). These patents issued in the U.S. will expire between 2028 and 2036.

We do not know whether these protections will be available in all cases or will be adequate to prevent our competitors from copying, reverse engineering or otherwise obtaining and using our technology, proprietary rights or products. The laws of some foreign countries, including countries in which our products are sold, used or manufactured, are in many cases not as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. In addition, third parties may seek to challenge, invalidate or circumvent our patents, trademarks, copyrights and trade secrets, or applications for any of the foregoing. Our competitors may independently develop technologies that are substantially equivalent or superior to our technology or design around our proprietary rights. We have focused patent, trademark, copyright and trade secret protection primarily in the United States. As a result, we may not have sufficient protection of our intellectual property in all countries where infringement may occur. In each case, our ability to compete or offer our products for sale could be significantly impaired.

To prevent substantial unauthorized use of our intellectual property rights, it may be necessary to prosecute actions for infringement and/or misappropriation of our proprietary rights against third parties. We currently have a limited portfolio of issued patents compared to our larger competitors and, therefore, may not be able to effectively utilize our intellectual property portfolio to assert against third parties. Any such action could result in significant costs and diversion of our resources and management’s attention and, in any case, we could fail to be successful in any such action. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights than we do. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.

Claims by others that we infringe their intellectual property rights could harm our business.

Companies that sell products in the wireless networking industry are often aggressive in protecting intellectual property rights and perceived rights, which has resulted in protracted and expensive litigation for some companies. In addition, non-operating entities have been increasingly aggressive in asserting intellectual property rights and perceived rights against operating companies in the Wi-Fi and networking industry, including ourselves. We currently are subject to claims and litigation by third parties that we infringe their intellectual property rights.

As our business expands, and the number of products and competitors in our market increases and overlaps occur, we expect that infringement claims against us or our partners or end customers may increase in number and significance. Any claims or proceedings against us, whether meritorious, will be time-consuming, result in costly litigation, require significant amounts of management time or result in the diversion of significant operational resources, any of which could materially and adversely affect our business and operating results.

Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we will be successful in defending ourselves against intellectual property claims. Our limited portfolio of issued patents may not provide defenses or counterclaims in response to patent infringement claims or litigation brought against us by third party competitors. Further, where non-operating entities or other adverse patent owners who have no relevant products or revenue bring such claims or litigation against us, our patents provide no deterrence or competitive risk. In any case, many potential litigants have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims than we could against them. Furthermore, a successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing certain products or performing certain services. We might also be required to seek a license and pay royalties for the use of such intellectual property, which may not be available on commercially acceptable terms, or at all. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense to redesign our product, which could delay our product offering and may ultimately not be successful.

See Part II, Item 1 “Legal Proceedings." for a discussion of the intellectual property litigation in which we are currently involved.

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Our use of open-source software could impose limitations on our ability to commercialize our products.

Our products utilize software modules licensed to us by third-party authors under open-source licenses, including as incorporated into software we receive from third party commercial software vendors. Use and distribution of open-source software may entail greater risks than use of third-party commercial software, as open-source licensors generally do not provide support, updates, warranties, or other contractual protections regarding infringement claims or the quality of the code. Furthermore, the terms of many open-source licenses have not been interpreted by U.S. or foreign courts, and these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products. In addition, some open-source licenses require the licensee, under certain circumstances, to make available source code for modifications or derivative works the licensee creates based upon such open-source software, and to allow further modification and distribution of such works. As a result, if we combine our proprietary software with open-source software or modify such software in a certain manner, we could be required to release certain source code we authored under license terms that freely permit third parties, including our competitors, to further modify, use and distribute our software. In some instances, this could allow our competitors to create similar products with lower development effort and time, create security vulnerabilities in our products, and ultimately result in a loss of product sales for us. Further, if we are held to have breached or otherwise failed to comply with the terms of an open-source software license, we could be required to pay damages, seek licenses from third parties to continue offering our products, re-engineer our products, or discontinue the sale of our products if re-engineering could not be accomplished on a timely basis, any of which could harm our business, operating results and financial condition.

We continue to review our usage of open-source software in our products, and to analyze the impact of such usage on our products and business. We may not be able to identify all of the risks regarding our use of open-source software and what steps we will need to take to come into compliance with applicable license terms. Moreover, our implementation of tools and policies designed to monitor our ongoing use of open-source software in our products may not be adequate or entirely effective in all instances. Depending on our determination of the impact on our business of compliance with applicable open-source license requirements, we may re-engineer certain aspects of our products and/or seek licenses from third parties in order to demonstrate compliance with applicable license terms. Our review to date has identified certain uses of third-party open-source software that, under the terms of applicable open-source licenses, will require us to provide certain additional notices, and to distribute and to offer to release certain of our source code under open-source software license terms, which we currently anticipate doing. We are also re-engineering certain portions of our products to limit the scope of and potential impact on our business of such disclosure and licensing requirements going forward. We do not know the full extent of such required disclosures or re-engineering efforts, or if and on what terms such alternative licenses could be available and whether our reengineering efforts will be sufficient to demonstrate substantial compliance with applicable licensing requirements. Even where we have reengineered new product or platform offerings, we will likely be required to support legacy products and platforms utilizing software which does not comply with applicable license requirements. In such instances, we may nonetheless have exposure to third-party claims regarding our ability to demonstrate compliance with applicable open-source license requirements.

We rely on the availability of third-party licenses. If these licenses are available to us only on less favorable terms or not at all in the future, our business and operating results would be harmed.

We have incorporated third-party licensed technology and intellectual property rights into our products. It may be necessary in the future to renew licenses relating to various aspects of these products or to seek additional licenses for existing or new products. These necessary licenses could be unavailable to us on acceptable terms, or at all. The inability to obtain certain licenses or other rights, or to obtain those licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could result in delays in product releases until such time, if ever, as we can identify, license or develop equivalent technology and integrate such technology into our products, which might have a material adverse effect on our business, operating results and financial condition. Moreover, the inclusion in our products of intellectual property licensed from third parties on a nonexclusive basis could limit our ability to differentiate our product offering or protect our proprietary rights in our products.

Risks Related to Ownership of Our Common Stock

We have experienced significant volatility in the price of our common stock, and you could lose all or part of your investment.

The trading price of our common stock has fluctuated substantially. From the date of our initial public offering in March 2014 through March 31, 2018, the high and low trading price for our common stock as reported by the New York Stock Exchange ranged between a high of $12.23 and a low of $3.02. The trading price of our common stock depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related

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to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock, since you might not be able to sell your shares at or above the price you paid.

Factors that could cause fluctuations in the trading price of our common stock include the following:

• price and volume fluctuations in the overall stock market from time to time;

• volatility in the market prices and trading volumes of high-technology stocks;

• changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

• sales of shares of our common stock by us or our stockholders, including through secondary offerings we may initiate to generate cash to fund our ongoing operations;

• failure of financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of our investors;

• the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections;

• announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments, or of delays in our product offerings;

• public analyst or investor reaction to our press releases, other public announcements and filings with the Securities and Exchange Commission, including specifically, concerning our operations, business initiatives or operating performance;

• rumors and market speculation involving us or other companies in our industry;

• vesting of shares under RSU awards to our employees and delivery of shares our employees purchase under our ESPP, and related selling of such shares into the market, whether by us or our employees, including to cover employee tax withholding obligations;

• actual or anticipated changes in our results of operations or fluctuations in our operating results, including any actual or perceived slowing in our rate of growth or ability to achieve profitability at all or on a schedule expected by our investors or industry analysts;

• actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

• litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;

• developments or disputes concerning our intellectual property or our products, or third-party proprietary rights;

• announced or completed investments in or acquisitions of businesses or technologies by us or our competitors, including the result of ongoing consolidation within our industry, and the performance of such investments or acquisitions;

• the partnerships we or our competitors may announce, and the performance of such partnerships;

• declines in our operating, margin or revenue growth or customer acquisition rates;

• new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

• changes in accounting standards, policies, guidelines, interpretations or principles;

• changes in our senior management or our board of directors;

• general economic conditions and slow or negative growth of our markets; and

• other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market prices of particular companies’ securities, securities class action litigations have often been instituted against these companies. Our industry has experienced significant consolidation recently, and the prices paid in such consolidations and the performance of such acquisitions could have a significant impact how analysts and investors view our stock and the price such investors are willing to pay. For example, in April 2016, Brocade announced its acquisition of Ruckus Wireless, one of our competitors. Brocade

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subsequently sold its Ruckus business unit to the Arris Group. What prices buyers paid in these or other similar transactions could have a significant and negative affect on our stock price or what a potential buyer would be willing to pay for our stock. In addition, if our revenue or operating results, or the rate of growth of our revenue or operating results, fall below the expectations of our investors or financial analysts, or below any forecasts or guidance we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. For example, the price of our common stock dropped significantly following our announcement on January 16, 2018 of preliminary revenue results for our fourth quarter of fiscal year 2017. Shortly thereafter, several federal stockholder class actions and a state derivative lawsuit were initiated alleging that Aerohive and certain of our officers made false and misleading statements, in particular regarding our financial outlook for our fourth quarter of fiscal year 2017. See Note 5 - Commitments and Contingencies in this Quarterly Report on Form 10-Q for additional information regarding these actions and lawsuit. Such stock price declines could occur and result in litigation against us even when we have met our own or other publicly stated revenue or earnings forecasts, and substantial costs and a diversion of our management’s attention and resources.

We utilize RSU awards as a significant component of the equity incentives we provide to our employees. Shares subject to these awards typically vest on March 1, June 1, September 1 and December 1 of each year. On each of these dates, we may direct the sale of such shares into the market to generate cash sufficient to satisfy our estimate of the minimum statutory employee tax withholding. Our employees are also able to purchase shares of our common stock twice per year under our ESPP, which purchase dates currently are June 1 and December 1 of each year. Employees may choose then to sell a portion or all of such shares, including to generate cash sufficient to satisfy statutory tax withholding requirements they may have under local law. The coincidence of such sales of our common stock, concentrating on specific dates, may increase the typical or average trading volume of our common stock, and increase the volatility and degree of fluctuation in the trading price of our common stock. For example, on each of March 1, June 1, September 1 and December 1, 2017, and for the several days thereafter, the average trading volume in our common stock, as reported by the NYSE, increased significantly, as did the degree of fluctuation in the trading price for our stock. We expect such increased trading volumes and related trading price volatility to be repeated, coinciding with future RSU vesting and ESPP purchase dates. Such trading volume and price volatility could create uncertainty amongst our investors or contribute to further stock price declines which may not be related to the actual performance of our business.

Insiders continue to have substantial control over us and will be able to influence corporate matters.

Our directors and executive officers, and stockholders holding more than 5% of our common stock and their affiliates, but excluding stockholders and affiliates holding between 5% and 10% of our common stock not affiliated with any of our officers or directors (and who do not otherwise possess any other indicia of control with respect to our company), beneficially owned, in the aggregate, as of December 31, 2017, approximately 21.4% of our outstanding common stock based on the number of shares outstanding as of December 31, 2017. As a result, these stockholders are able to exercise significant influence over all matters requiring stockholder approval, including the election of directors, and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit the ability of our other stockholders to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.

A small number of stockholders hold a substantial share of our common stock and their sales could increase the volatility of our stock price.

A small number of stockholders currently each holds more than 5% of our common stock. These stockholders include certain of our directors and executive officers, and their affiliates, but also stockholders with no affiliation with our company. The average daily trading volume in our stock is limited and any sales of our common stock by any of these stockholders (or, in the case where such stockholders are investment funds, distribution of our stock to their investors and their subsequent sale), could significantly increase trading volatility in and significantly lower the market price of our common stock, regardless of our actual operating performance.

Certain provisions in our charter documents and under Delaware law could limit attempts by our stockholders to replace or remove members of our board of directors or current management and may adversely affect the market price of our common stock.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our board of directors or management. These provisions include the following:

• our Board has the right to elect directors to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board;

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• our stockholders may not act by written consent or call special stockholders’ meetings; as a result, a holder or holders controlling a majority of our common stock would not be able to take certain actions other than at annual stockholders’ meetings or special stockholders’ meetings called by the Board, the chair of the Board, the chief executive officer or the president;

• our directors may only be removed for cause, which would delay the replacement of a majority of our Board;

• our Board is staggered in three tiers, with directors serving for three years, which could impede an acquiror from rapidly replacing our existing directors with its own slate of directors;

• our certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

• our stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to our Board or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and

• our Board may issue, without stockholder approval, shares of undesignated preferred stock; the ability to issue undesignated preferred stock makes it possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.

As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. For example, under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the Board has approved the transaction. Our Board could rely on Delaware law to prevent or delay an acquisition of us.

Our directors are entitled to accelerated vesting of their equity awards pursuant to the terms of their service arrangements upon a change of control of our company, and our executive officers in the event their employment is actually or constructively terminated in the context of a change of control. In addition to the arrangements currently in place with some of our executive officers, we may enter into similar arrangements in the future with other officers. Such arrangements could delay or discourage a potential acquisition of our company.

If financial or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our common stock, our stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that industry or financial analysts publish about us, our business, our competitors’ business or our industry. We do not control these analysts or the content and opinions included in their reports. We may not attract sufficient research coverage or maintain coverage of analysts that currently publish reports regarding our business. If any of the analysts who cover us issues an adverse or misleading opinion regarding our stock price, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

We have a share repurchase program, but we cannot guarantee that in fact that our repurchase of shares will enhance long-term stockholder value. Our share repurchases could also increase the volatility of the price of our common stock and could diminish our cash reserves.

In February 2016, our board of directors authorized a stock repurchase program. Under the program, we were authorized to repurchase shares of our common stock for an aggregate purchase price of up to $10 million. In August 2017, our board of directors extended this program through June 30, 2018, and we announced in November 2017 that our board had increased to $20 million the aggregate purchases permitted under this program. Under the program, we may purchase shares of our stock from time to time, in the open market or through private transactions, subject to market conditions, in compliance with applicable state and federal securities laws. However, the timing and number of our share repurchases, if any, will depend upon several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities available to us. We may also choose to defer or limit repurchases given other uses of our cash or our desire to preserve cash balances. As of March 31, 2018, we had repurchased under this program 1,361,243 shares of our common stock at a total price of $6.2 million and average purchase price of $4.57 per share of our common stock.

Although our board of directors authorized the program, we are not obligated to repurchase any minimum or specific number or dollar amount of shares. In addition, we may suspend or terminate the program at any time before its expiration as of June 30, 2018. Our repurchases of common stock could affect the market price of our common stock or increase its volatility. For example, the existence of a share repurchase program could cause our share price to be higher than it would be in the

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absence of such a program and could potentially reduce the market liquidity for our stock. Additionally, our repurchase program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. We also cannot assure that any share repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchase our stock, and short-term stock price fluctuations could reduce the program’s effectiveness.

We do not intend to pay dividends and under our loan agreements with our lenders we are not permitted to pay dividends. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

Pursuant to our Revolving Credit Facility, we are restricted from paying dividends while this facility is in place. Moreover, we have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes our Board may determine, in its discretion. Any determination to pay dividends in the future will be at the discretion of our Board. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

We are an “Emerging Growth Company,” and any decision on our part to comply only with certain reduced disclosure requirements applicable to Emerging Growth Companies could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act enacted in April 2012, and, for as long as we continue to be an “emerging growth company,” we choose to take advantage of exemptions from various reporting or compliance requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years after the completion of the IPO, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, we would cease to be an “emerging growth company” as of the end of that fiscal year. If we issue more than $1 billion in non-convertible debt in a three-year period, we would cease to be an “emerging growth company” immediately. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may be more volatile.

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sale of Unregistered Securities

None.

ITEM 3.     DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.    OTHER INFORMATION

None.

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ITEM 6.    EXHIBITS

See the Exhibit Index which follows the signature page of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

EXHIBIT INDEX

Exhibit No.		Description of Document
10.1		Amended and Restated Change in Control Severance Agreement, D. Flynn
10.2		Amended and Restated Change in Control Severance Agreement, A. Amrod
10.3		Executive Temporary Relocation Agreement dated April 19, 2018
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	+	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	+	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	*	XBRL Instance Document.
101.SCH	*	XBRL Taxonomy Extension Schema Document.
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	*	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document.

+    In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule; Management's Reports on Internal Control over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the Certification furnished in Exhibit 32.1 and 32.2 hereto is deemed to accompany this Form 10-Q and will not be filed for purposes of Section 18 of the Exchange Act. Such certification will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

*    XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Exchange Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under this section.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 2nd day of May 2018.  

AEROHIVE NETWORKS, INC.
By:	/s/ David K. Flynn
	David K. Flynn
	President and Chief Executive Officer

AEROHIVE NETWORKS, INC.
By:	/s/ John Ritchie
	John Ritchie
	Chief Financial Officer

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EX-10.1

AEROHIVE NETWORKS, INC.

AMENDED AND RESTATED

SEPARATION AND CHANGE IN CONTROL SEVERANCE AGREEMENT

This Change in Control Severance Agreement (the “Agreement”) is made and entered into by and between David K. Flynn (“you” or “Executive”) and Aerohive Networks, Inc., a Delaware corporation (the “Company”), effective as of April 1, 2018 (the “Effective Date”) and replaces and supersedes in all respects that Separation and Change in Control Severance Agreement between the Company and you dated effective October 1, 2013 (as amended December 31, 2014).

RECITALS

A.    It is expected that the Company from time to time will consider the possibility of a Change in Control (as defined herein). The Board of Directors of the Company (including as it may act through its Compensation Committee, the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities.

B.    The Board believes that it is in the best interests of the Company and its shareholders to provide Executive with an incentive to continue his or her employment and to maximize the value of the Company upon a Change in Control for the benefit of its shareholders.

C.    The Board also believes that it is appropriate to provide severance protection to Executive in certain circumstances outside of a Change in Control.

D.    In order to provide Executive with enhanced financial security and sufficient encouragement to remain with the Company notwithstanding the possibility of a Change in Control, or certain terminations of employment outside of a Change in Control, the Board believes that it is in the interests of the Company and its shareholders to provide Executive with certain severance benefits upon certain terminations of employment.

Certain capitalized terms used in the Agreement are defined in Section 8 below.

AGREEMENT

In consideration of the mutual covenants herein contained and the continued employment of Executive by the Company, the parties agree as follows:

1.Term of Agreement. This Agreement shall terminate upon the date that is two (2) years from the Effective Date (the “Initial Term”). On the last day of the Initial Term and on each one (1) year anniversary of such date thereafter while this Agreement remains in effect, this Agreement shall renew automatically for additional, successive one (1) year terms (each an “Additional Term”), provided that if either party provides the other party with written notice of non‑renewal at least ninety (90) days prior to the date of automatic renewal of an Additional Term, the Agreement shall terminate upon completion of the last applicable Additional Term (or the Initial Term, as applicable). Notwithstanding the foregoing provisions of this paragraph, if a Change in Control occurs when there is less than one (1) year remaining during the Initial Term or Additional Term, as applicable, this Agreement shall extend automatically for a period equal to one (1) year following the Change in Control, regardless of an earlier term which would have otherwise occurred upon giving effect to a written notice of non-renewal provided by the Company. (The period during which this Agreement remains in effect in accordance with this paragraph is referred to herein as the “Term.”) Provided, further, that if severance benefits for Executive have been triggered hereunder prior to the end of the Term, this Agreement shall terminate on the date upon which all obligations of the parties hereto under this Agreement have been satisfied. This Agreement may be extended beyond the Term by written mutual agreement by and between Executive and the Company.

2.At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and will continue to be at all times at-will, as defined under applicable law. As an at-will employee, either the Company or the Executive may terminate the employment relationship at any time, for any or no reason, with or without notice and with or without Cause. Upon any termination of employment, the Company will pay Executive all accrued but unpaid vacation (to the extent such exists), expense reimbursements, and wages and other benefits accrued and due to Executive as of the effective date of such termination under any Company-provided plans, policies and arrangements (“Accrued Compensation”). Nothing herein is intended to or will create a promise, representation, agreement or expectation of employment between you and the Company, including of continued employment for any minimum or particular period of time. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures applicable to you, may change from time to time, the “at-will” nature of your employment will not change and cannot be modified in any manner, express or implied, unless and to the extent in writing directed to you individually and signed by an authorized officer of the Company and confirmed by action of its Board of Directors.

3.Severance Benefits, Other than in Connection with a Change in Control. If the Company terminates Executive’s employment with the Company without Cause (excluding death or Disability) or if Executive resigns from his or her employment for Good Reason, and, in each case, such termination date occurs outside of the Change in Control Period, then Executive will receive the Accrued Benefits and, subject to Sections 5 through 7, below, shall be eligible to receive the following:

(a)Severance Payments. Executive will receive a lump-sum payment equal to 12 months of Executive’s annual base salary as then in-effect immediately prior to Executive’s termination date.

(b)Continuation Coverage. If Executive elects continuation coverage pursuant to COBRA within the time period prescribed pursuant to COBRA for Executive and Executive’s eligible dependents, then the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of 12 months from the date of termination or (B) the date upon which Executive and/or Executive’s eligible dependents become covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Company’s then-normal expense reimbursement policy. Notwithstanding the first sentence of this Section 3(b), if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will in lieu thereof provide to Executive a taxable monthly payment (less applicable withholdings), payable on the last day of a given month (except as provided by the following sentence), in an amount equal to twice the monthly COBRA premium that Executive would be required to pay to continue Executive’s group health coverage in effect on the termination of employment date (which amount will be based on the premium for the first month of COBRA coverage), which payments will be made regardless of whether Executive elects COBRA continuation coverage and will commence on the month following Executive’s termination of employment and will end on the earlier of (x) the date upon which Executive obtains other employment, or (y) the date the Company has paid an amount equal to 12 months COBRA continuation coverage. For the avoidance of doubt, any taxable payments in lieu of COBRA reimbursements may be used by Executive for any purpose, including, but not limited to, continuation coverage under COBRA, and will be subject to all applicable tax withholdings.

4.Severance Benefits, in Connection with a Change in Control.

(a)Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control. If the Company terminates Executive’s employment with the Company without Cause (excluding death or Disability) or if Executive resigns from his or her employment for Good Reason, and, in each case, such termination date occurs during the Change in Control Period, then Executive will receive the Accrued Benefits and, subject to Sections 5 through 7, below, Executive will be eligible to receive the following:

(i)Severance Payment. Executive will receive a lump-sum payment equal to the sum of (A) twelve (12) months of Executive’s annual base salary as then in-effect immediately prior to Executive’s termination date or, if greater, at the level in-effect immediately prior to the Change in Control, plus (B) the greater of (x) Executive’s most recent annual bonus actually paid, or (y) 100% of Executive’s on-target annual bonus for the year of termination.

(ii)Pro-Rata Bonus Payment. In addition to any bonus Executive has earned but not yet been paid (e.g., for an annual bonus, with respect to a termination made following year-end but prior to payment), Executive will receive a lump-sum payment equal to the greater of (x) Executive’s most recent annual bonus actually paid, or (y) 100% of Executive’s on-target annual bonus for the year of termination, in either case of (x) or (y) pro-rated for the partial year of service.

EXAMPLE: Executive receives an annual bonus of $250,000 in February 2014 for the 2013 Company fiscal year. Executive’s base salary in 2013 is $450,000 and in 2014 is increased to $500,000. Executive’s on-target annual bonus for 2014 is 60% of base salary, or $300,000. The Company is acquired in a Change in Control on June 30, 2014, and Executive is terminated without Cause on June 30, 2014. Subject to Sections 6(a) and (b) and Section 7 hereof, under Section 4(a)(i) of this Agreement Executive is due a lump-sum payment of $800,000 ($500,000 in annual base salary and $300,000 in on-target annual bonus). Subject to Sections 6(a) and (b) and Section 7 hereof, under Section 4(a)(ii) of this Agreement Executive is also due a lump-sum payment of $150,000 (50% of $300,000, reflecting pro-ration for the half-year of service through June 30, 2014).

(iii)Continuation Coverage. If Executive elects continuation coverage pursuant to COBRA within the time period prescribed pursuant to COBRA for Executive and Executive’s eligible dependents, then the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of twelve (12) months from the date of termination or (B) the date upon which Executive becomes covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Company’s then-normal expense reimbursement policy. Notwithstanding the first sentence of this Section 4(a)(ii), if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will in lieu thereof provide to Executive a taxable monthly payment (less applicable withholdings), payable on the last day of a given month (except as provided by the following sentence), in an amount equal to twice the monthly COBRA premium that Executive would be required to pay to continue Executive’s group health coverage in effect on the termination of employment date (which amount will be based on the premium for the first month of COBRA coverage), which payments will be made regardless of whether Executive elects COBRA continuation coverage and will commence on the month following Executive’s termination of employment and will end on the earlier of (x) the date upon which Executive obtains other employment, or (y) the date the Company has paid an amount equal to twelve (12) months COBRA continuation coverage. For the avoidance of doubt, any taxable payments in lieu of COBRA reimbursements may be used by Executive for any purpose, including, but not limited to, continuation coverage under COBRA, and will be subject to all applicable tax withholdings.

(iv)Accelerated Vesting of Equity Awards. One hundred percent (100%) of Executive’s then-outstanding and unvested equity awards covering shares of the Company’s common stock (“Equity Awards”) will become vested in full as of the termination date. If an outstanding Equity Award is to vest and/or the amount of the award to vest is to be determined based on the achievement of performance criteria, then the Equity Award will vest as to one hundred percent (100%) of the amount of the Equity Award assuming the performance criteria had been achieved in full at the target levels for the relevant performance period(s) (including future periods). Notwithstanding the foregoing in this Section 4(a)(iv), if any equity award provides for more favorable benefits under the applicable award agreements, plans and/or any other written arrangements, then in lieu of the benefits set forth in this Section 4(c)(iv), such more favorable benefits will be provided in accordance with the terms therein.

(v)Extended Stock Option/Stock Appreciation Right Post-Termination Exercise Period. With respect to any stock options or stock appreciation rights granted to Executive on or after the Effective Date (the “Affected Stock Option/SARs”), each such Affected Stock Option/SAR shall automatically have its post-termination exercise period extended to the later of (A) twelve (12) months following Executive’s termination date, or (B) the 90-days following the lapse of any underwriter lock-up period or Company-imposed insider trading blackout period then in-effect on the date of Executive’s termination date; provided, however, that any such extension shall be limited to the maximum original term of the Affected Stock Option/SAR (as provided under the respective award agreement or the plan under which such Affected Stock Option/SAR was granted) .

5.Exclusive Remedy.

(a)Sole Severance Benefits. In the event of a termination of Executive’s employment as set forth in Sections 3 or 4(a) of this Agreement, the provisions of Section 3 and 4 are, respectively, intended, understood and agreed by Employee and the Company to be and are exclusive and in lieu of and supersede any other rights or remedies to which Executive otherwise may be entitled, whether at law, tort or contract, in equity, or under this Agreement (other than the payment of Accrued Compensation). Executive will be entitled to no benefits, compensation or other payments or rights upon a termination of employment during the Term, other than those benefits expressly set forth in Sections 3 or 4, respectively, of this Agreement; and this Agreement supersedes in its entirety any prior agreements by and between the Company and Executive with respect to severance payments of any kind (whether to be made during the Term or otherwise).

(b)No Changes to Terms of Equity Awards. Except and only to the specific extent expressly provided in this Agreement, nothing herein shall otherwise change or amend the terms of any equity awards, which at all times shall remain subject to all terms and conditions of grant, the respective award agreement and of the equity plan from which such award issued. Notwithstanding the foregoing, nothing herein, including specifically any extension of the post-termination exercise period of Affected Stock Option/SAR as provided above, shall extend the term of any equity award, each of which shall be subject to automatic cancellation pursuant to the terms of the respective award agreement or the plan from which such award issued.

1.Conditions to Receipt of Severance

(a)Release of Claims Agreement. Receipt of the severance payments and any separation benefits specified herein (other than any Accrued Compensation) shall be contingent on Executive’s execution of a full release of all claims against the Company in form substantially consistent with the form attached to this Agreement as Exhibit A, and the lapse of any statutory period for revocation, and such release becoming effective in accordance with its terms within fifty-two (52) days following the termination date (the “Release Deadline Date”). Any severance payment to which Executive otherwise would have been entitled during such fifty-two (52) day period (other than any Accrued Compensation) shall be paid by the Company in cash and in full arrears on the fifty-third (53^d) day following Executive’s employment termination date or such later date as is required to avoid the imposition of additional taxes under Internal Revenue Section 409A (“Section 409A”).

(b)Confidential Information and Invention Assignment Agreements. Executive’s receipt of any severance payments or separation benefits specified herein (other than any Accrued Compensation) will be subject to Executive continuing to comply with the terms of this Agreement and of any confidential information and invention assignment agreement executed by Executive in favor of the Company.

(c)Section 409A.

(i)Notwithstanding anything to the contrary in this Agreement, no severance payments or benefits specified herein and to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable or separation benefits provided to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A‑1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

(ii)It is intended that none of the severance payments or separation benefits provided under this Agreement will constitute Deferred Payments but rather will be exempt from Section 409A as a payment that would fall within the “short-term deferral period” as described in Section 6(c)(iv), below, or resulting from an involuntary separation from service as described in Section 6(c)(v) below. In no event will Executive have discretion to determine the taxable year of payment of any Deferred Payment. Any severance payments or separation benefits provided under this Agreement that would be considered Deferred Payments will be paid on, or in the case of installments, will commence on the Release Deadline Date or, if later, such time as required by Section 6(c)(iii). Except as required by Section 6(c)(iii), any payments that would have been made to Executive during the fifty-two (52) day period immediately following Executive’s separation from service but for the preceding sentence will be paid to Executive on the Release Deadline Date and any remaining payments will be made as provided in this Agreement.

(iii)Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s separation from service (other than due to death), then the Deferred Payments, if any, that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, in the event of Executive’s death following Executive’s separation from service, but before the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment under Section 1.409A-2(b)(2) of the Treasury Regulations.

(iv)Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of Section 6(c)(i), above.

(v)Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations but which does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments for purposes of Section 6(c)(i), above.

(vi)The foregoing provisions are intended to comply with or be exempt from the requirements of Section 409A, such that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply or be exempt. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition before actual payment to Executive under Section 409A. In no event will the Company reimburse Executive for any taxes that may be imposed on Executive as result of Section 409A, or otherwise under applicable law (including in connection with any equity award existing as of the Effective Date or hereafter awarded, or any payments or benefits to be provided or payable to Executive hereunder).

2.Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) but for this Section 7, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s benefits under Section 4 will be either:

(a)delivered in full, or

(b)delivered as to such lesser extent which would result in no portion of such benefits being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. If a reduction in severance and other benefits constituting “parachute payments” is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: (i) reduction of cash payments in reverse chronological order (that is, the cash payment owed on the latest date following the occurrence of the event triggering the excise tax will be the first cash payment to be reduced); (ii) cancellation of awards granted “contingent on a change in ownership or control” (within the meaning of Code Section 280G), (iii) reduction of the accelerated vesting of full-value equity awards in the reverse order of date of grant of the awards (i.e., the vesting of the most recently granted full-value awards will be cancelled first); (iv) reduction of the accelerated vesting of stock options and stock appreciation rights in the reverse order of date of grant of the awards (i.e., the vesting of the most recently granted awards will be cancelled first); and (v) reduction of employee benefits in reverse chronological order (i.e., the benefit owed on the latest date following the occurrence of the event triggering the excise tax will be the first benefit to be reduced). In no event will Executive have any discretion with respect to the ordering of payment reductions.

Unless and only to the extent the Company and Executive otherwise agree in writing, any determination required under this Section 7 will be made in writing by a nationally recognized accounting firm (the “Firm”) reasonably agreed upon between the parties, whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 7, the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Firm such information and documents as the Firm may reasonably request in order to make a determination under this Section 7. The Company will bear all costs for payment of the Firm’s services in connection with any calculations contemplated by this Section 7.

3.Definition of Terms. The following terms referred to in this Agreement will have the following meanings:

(a)Cause. “Cause,” as used in this Agreement, will mean, as determined by the Board:

(i)engaging in misconduct that is demonstrably and materially injurious to the Company, or the commission of any act of fraud, misappropriation, or any other intentional, wrongful or unlawful act by you, including, without limitation, any intentional, wrongful or unlawful act of deceit, dishonesty, insubordination or other acts of moral turpitude, in connection with your employment with the Company;

(ii)your conviction of, or plea of guilty or nolo contendere to, a crime involving moral turpitude, or any felony (whether or not subject to an appeal);

(iii)an intentional, wrongful or unlawful breach by you of any fiduciary duty which you owe to the Company;

(iv)your commission of any acts of gross negligence or willful misconduct in connection with your employment with the Company;

(v)your willful or continued breach of a fiduciary duty or other duty or obligation under the Company’s then-existing code of business conduct;

(vi)your violation of a federal or state law or regulation applicable to the Company’s business, which violation has or is likely to be injurious to the Company in the reasonable determination of the Board;

(vii)any act of personal dishonesty taken by you in connection with your responsibilities as an employee which results in your substantial personal enrichment;

(viii)your criminal charge of a felony which the Board reasonably determines has had or will have a material detrimental effect on the Company’s reputation or business; or

(ix)a willful act by you that constitutes (A) a material breach of a material provision of any agreement between you and the Company, including this Agreement or accompanying agreements (including, specifically, your breach of any confidentiality or proprietary information agreement between you and the Company), or (B) your willful or continued failure to perform your duties or obligations as an employee, or (C) a material failure by you to comply with the Company’s written policies or rules of employment in good standing, in each case under this clause (ix) if such breach or failure has not been or, in the determination of the Board, cannot be cured within thirty (30) days after written notification to you of such breach or failure.

For purposes of this definition, “Company” will be interpreted to include any parent, subsidiary, affiliate or successor thereto, if appropriate.

(b)Change in Control. “Change in Control” means the occurrence of any of the following events:

(i)A change in the ownership of the Company shall be deemed to occur on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided that a Change in Control shall not include any transaction or series of related transactions principally for bona fide equity or project financing purposes in which cash is received by the Company or any successor, or indebtedness of the Company is cancelled or converted, or a combination thereof occurs; or

(ii)If the Company has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or

(iii)A change in the ownership, or transfer by exclusive license, of a substantial portion of the Company’s assets, or change in the ownership, or transfer by exclusive license, of all or substantially all of the assets of a subsidiary of the Company, which if held directly by the Company would constitute all or substantially all of the Company’s assets, which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

For purposes of this Section 8(b), persons will be considered to be acting as a group if they are owners of a corporation, investment entity or partnership that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.

Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.

(c)Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the jurisdiction of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

(d)Change in Control Period. “Change in Control Period” will mean the period beginning thirty (30) days prior to a Change in Control and ending twelve (12) months following the Change in Control.

(e)Code. “Code” will mean the Internal Revenue Code of 1986, as amended.

(f)Disability. “Disability” will mean your inability to perform substantially all of your duties for either one hundred twenty (120) consecutive calendar days or a total of one-hundred eighty (180) calendar days out of 365 consecutive calendar days as a result of a physical or mental illness, injury, disorder, or incapacity, all as determined in good faith by the Board of Directors and consistent with all applicable laws.

(g)Good Reason. “Good Reason” will mean Executive’s voluntary termination of employment with the Company within ninety (90) days following the expiration of any Company cure period (discussed below), following one or more of the following events occurring without Executive’s prior written consent:

(i)a material reduction of Executive’s duties, authority, or responsibilities, relative to Executive’s duties, authority, or responsibilities as in-effect immediately prior to such reduction; provided, however, that if, following a Change in Control, Executive remains the chief executive of a division or subsidiary of the acquirer comprising substantially all of the Company’s business, that shall not in and of itself constitute Good Reason;

(ii)a material reduction by the Company in Executive’s base salary, as in-effect immediately prior to such reduction, other than as agreed to by you in writing or in connection with a similar reduction for all similarly-situated executives of the Company;

(iii)a material reduction by the Company in Executive’s annual target bonus as a percentage of Executive’s base salary, as in-effect immediately prior to such reduction, other than in connection with a similar reduction for all similarly-situated executives of the Company;

(iv)relocation of Executive’s principal place of work to a location that is more than thirty (30) miles from Executive’s principal place of work immediately prior to such relocation; or

(v)the failure of the Company to obtain assumption of this Agreement by any successor as provided in Section 9, below.

Executive may not resign for Good Reason without first providing the Company with written notice within ninety (90) days of the Executive being aware of the initial existence of the condition that he or she believes constitutes Good Reason and within two years of the initial existence of such condition, specifically identifying in such writing the acts or omissions constituting the grounds for Good Reason and providing in such writing a reasonable cure period of not less than thirty (30) days following the date of such written notice, during which such grounds must not have been cured. For purposes of the “Good Reason” definition, the term “Company” will be interpreted to include any subsidiary, parent, affiliate or successor thereto, if applicable.

(h)Section 409A Limit. “Section 409A Limit” will mean two (2) times the lesser of: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Executive’s taxable year preceding the Executive’s taxable year of Executive’s termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive’s employment is terminated.

4.Successors.

(a)The Company’s Successors. Any successor to the Company (whether direct or indirect, and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the obligations and liabilities under this Agreement and agree expressly in writing to assume and perform in full the obligations and liabilities under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of such succession. For all purposes under this Agreement, the term “Company” will include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 9(a) or which becomes bound by the terms of this Agreement by operation of law.

(b)Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

5.Notice.

(a)General. Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when sent electronically or personally delivered when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or when delivered by a private courier service such as UPS, DHL or Federal Express that has tracking capability. In the case of Executive, notices will be sent to the e-mail address or addressed to Executive at the home address, in either case which Executive most recently communicated to the Company in writing. In the case of the Company, notices will be directed to the attention of its General Counsel.

(b)Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason will be communicated by a written notice of termination to the other party hereto given in accordance with Section 10(a) of this Agreement. Such notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than thirty (30) days after the giving of such notice).

6.Resignation. Upon the termination of Executive’s employment for any reason, Executive will be deemed to have resigned from all officer and/or director positions held at the Company and its affiliates, without any further required action by Executive, as of the end of Executive’s employment and Executive, at the Board’s request, will execute any documents reasonably necessary to reflect Executive’s resignation.

7.Miscellaneous Provisions.

(a)No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.

(b)Waiver. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c)Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d)Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless and only to the extent in writing and signed by duly authorized representatives of the parties hereto and which specifically mention this Agreement.

(e)Choice of Law; Jurisdiction and Venue. The validity, interpretation, construction and performance of this Agreement will be governed and enforced by the laws of the State of California (with the exception of its conflict of laws provisions). Any claims or legal actions by one party against the other arising out of the relationship between the parties contemplated herein (whether arising under this Agreement) will be commenced or maintained in any state or federal court located in Santa Clara County, California, and Executive and the Company hereby submit to the jurisdiction and venue of any such court. If any provision of this Agreement is determined by a court with jurisdiction to be invalid or unenforceable, all remaining terms shall remain in full force and effect.

(f)Arbitration. Any and all disputes that either party may have with the other party which arise out of this Agreement, or any right or obligation hereunder, shall be resolved through final, binding and non-appealable arbitration in Santa Clara County, California in accordance with the rules and regulations of the American Arbitration Association then in-effect. Both parties understand and agree that the arbitration shall be instead of any civil litigation and that the arbitrator’s decision shall be final, binding and, upon entry by a court of competent jurisdiction, non-appealable to the fullest extent permitted by law and enforceable by any court having jurisdiction thereof. If the parties cannot agree on an arbitrator, the Superior Court of the county of venue shall appoint the arbitrator. The arbitrator shall be empowered and authorized to award any equitable remedy, including specific performance. The arbitrator is not empowered and is without jurisdiction to award either party: (a) special, exemplary, indirect, consequential, incidental or punitive damages, or (b) its attorneys’ fees and/or costs and expenses incurred in the arbitration (whether such party is the prevailing party). Executive will be required in conjunction with this Agreement to sign the Company’s current form Agreement to Arbitrate Disputes and Claims, which will govern such arbitration of any disputes, claims, causes or controversies as provided therein, including whether arising from this Agreement, your employment or the termination of your employment.

(g)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.

(h)Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income, employment and other taxes.

(i)Waiver of Jury; Attorney’s Fees. The Company and Executive agree, to the fullest extent permitted by law, to waive any right or claim to adjudication by jury of any claim or cause asserted against the other and arising hereunder. In any judicial proceeding arising out of this Agreement neither party is entitled to recover its attorneys’ fees or costs incurred pertaining to such proceeding (whether such party is the prevailing party).

(j)Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first set forth above.

COMPANY    AEROHIVE NETWORKS, INC.

By:    

Title:    

Date:    ____________________________________

EXECUTIVE    By:    

Title:    Chief Executive Officer

Date:    ____________________________________

Attachments:     General Release of Claims (Exhibit A)

Confidential Information and Inventions Assignment Agreement

Agreement to Arbitrate Disputes and Claims

[signature page of the Separation and Change in Control Severance Agreement]

EXHIBIT A

AEROHIVE NETWORKS, INC.

GENERAL RELEASE OF CLAIMS

This General Release of Claims (“Agreement”) is made by and between Aerohive Networks, Inc. (the “Company”) and David K. Flynn (“Executive”).

WHEREAS, Executive has agreed to enter into a release of claims in favor of the Company upon certain events specified in the Separation and Change in Control Severance Agreement by and between Company and Executive (the “Separation Agreement”);

WHEREAS, Executive previously entered in conjunction with his or her employment or service with the Company an Confidential Information and Invention Assignment Agreement (“Proprietary Information Agreement”) and Agreement to Arbitrate Disputes and Claims (the “Arbitration Agreement”).

NOW THEREFORE, in consideration of the mutual promises made herein, the Parties hereby agree as follows:

1.Termination. Executive’s employment from the Company terminated on [________________].

2.Confidential Information. Executive shall continue to maintain the confidentiality of all confidential and proprietary information of the Company and shall continue to comply with the terms and conditions of the Proprietary Information Agreement between Executive and the Company. Executive shall return all the Company property and confidential and proprietary information in his possession to the Company on the Effective Date of this Agreement.

3.Payment of Salary. Executive acknowledges and represents that the Company has paid all salary, wages, bonuses, accrued vacation, commissions and any and all other benefits due to Executive.

4.Release of Claims. Executive agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Executive by the Company. Executive, on behalf of himself, and his respective heirs, family members, executors and assigns, hereby fully and forever releases the Company and its past, present and future officers, agents, directors, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, parents, predecessor and successor corporations, and assigns, from, and agrees not to sue or otherwise institute or cause to be instituted any legal or administrative proceedings concerning any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that he may possess arising from any omissions, acts or facts that have occurred up until and including the Effective Date of this Agreement including, without limitation,

(a)any and all claims relating to or arising from Executive’s employment relationship with the Company and the termination of that relationship;

(b)any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of shares of stock of the Company, including any economic benefit or loss of expected benefit thereunder, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

(c)any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; and conversion;

(d)any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, The Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, and Labor Code section 201, etseq. and section 970, etseq. and all amendments to each such Act as well as the regulations issued thereunder;

(e)any and all claims for violation of the federal, or any state, constitution;

(f)any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and

(g)any and all claims for attorneys’ fees and costs.

Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any severance obligations due Executive under the Separation Agreement. Nothing in this Agreement waives Executive’s rights to indemnification or any payments under any insurance policy, if any, provided by any act or agreement of the Company, state or federal law or policy of insurance.

5.Acknowledgment of Waiver of Claims under ADEA. Executive acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Executive and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Executive acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Executive was already entitled. Executive further acknowledges that he has been advised by this writing that (a) he should consult with an attorney prior to executing this Agreement; (b) he has at least twenty-one (21) days within which to consider this Agreement; (c) he has seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; (d) this Agreement shall not be effective until the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law. Any revocation should be in writing and delivered to the Vice-President of Human Resources at the Company by close of business on the seventh day from the date that Executive signs this Agreement.

6.Civil Code Section 1542. Executive represents that he is not aware of any claims against the Company other than the claims that are released by this Agreement. Executive acknowledges that he has been advised by legal counsel and is familiar with the provisions of California Civil Code 1542, below, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

Executive, being aware of said code section, agrees to expressly waive any rights he may have thereunder, as well as under any statute or common law principles of similar effect.

7.No Pending or Future Lawsuits. Executive represents that he has no lawsuits, claims, or actions pending in his name, or on behalf of any other person or entity, against the Company or any other person or entity referred to herein. Executive also represents that he does not intend to bring any claims on his own behalf or on behalf of any other person or entity against the Company or any other person or entity referred to herein.

8.Application for Employment. Executive understands and agrees that, as a condition of this Agreement, he shall not be entitled to any employment with the Company, its subsidiaries, or any successor, and he hereby waives any right, or alleged right, of employment or re-employment with the Company.

9.No Cooperation. Executive agrees that he will not counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Company and/or any officer, director, employee, agent, representative, shareholder or attorney of the Company, unless under a subpoena or other court order to do so.

10.No Admission of Liability. Executive understands and acknowledges that this Agreement constitutes a compromise and settlement of disputed claims. No action taken by the Company, either previously or in connection with this Agreement shall be deemed or construed to be (a) an admission of the truth or falsity of any claims heretofore made or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to the Executive or to any third party.

11.Costs. The parties shall each bear their own costs, expert fees, attorneys’ fees and other fees incurred in connection with this Agreement.

12.Authority. Executive represents and warrants that he has the capacity to act on his own behalf and on behalf of all who might claim through him to bind them to the terms and conditions of this Agreement.

13.No Representations. Executive represents that he has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Agreement.

14.Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

15.Entire Agreement. This Agreement, along with the Separation Agreement, the Proprietary Information Agreement, the Arbitration Agreement and Executive’s written equity compensation agreements with the Company, represents the entire agreement and understanding between the Company and Executive concerning Executive’s separation from the Company.

16.No Oral Modification. This Agreement may only be amended in writing signed by Executive and the Chairman of the Board of the Company.

17.Governing Law; Jurisdiction and Venue. The validity, interpretation, construction and performance of this Agreement will be governed and enforced by the laws of the State of California (with the exception of its conflict of laws provisions). Any claims or legal actions by one party against the other arising out of the relationship between the parties contemplated herein (whether arising under this Agreement) will be commenced or maintained in any state or federal court located in Santa Clara County, California, and Executive and the Company hereby submit to the jurisdiction and venue of any such court. If any provision of this Agreement is determined by a court with jurisdiction to be invalid or unenforceable, all remaining terms shall remain in full force and effect.

18.Arbitration. Any and all disputes that either party may have with the other party which arise out of this Agreement, or any right or obligation hereunder, shall be resolved through final, binding and non-appealable arbitration in Santa Clara County, California in accordance with the rules and regulations of the American Arbitration Association then in-effect. Both parties understand and agree that the arbitration shall be instead of any civil litigation and that the arbitrator’s decision shall be final, binding and, upon entry by a court of competent jurisdiction, non-appealable to the fullest extent permitted by law and enforceable by any court having jurisdiction thereof. If the parties cannot agree on an arbitrator, the Superior Court of the county of venue shall appoint the arbitrator. The arbitrator shall be empowered and authorized to award any equitable remedy, including specific performance. The arbitrator is not empowered and is without jurisdiction to award either party: (a) special, exemplary, indirect, consequential, incidental or punitive damages, or (b) its attorneys’ fees and/or costs and expenses incurred in the arbitration (whether such party is the prevailing party). All other terms and conditions of such arbitration shall be as set forth in an agreement to arbitrate disputes and claims then in-effect.

19.Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.

20.Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income, employment and other taxes.

21.Waiver of Jury; Attorney’s Fees. The Company and Executive agree, to the fullest extent permitted by law, to waive any right or claim to adjudication by jury of any claim or cause asserted against the other and arising hereunder. In any judicial proceeding arising out of this Agreement neither party is entitled to recover its attorneys’ fees or costs incurred pertaining to such proceeding (whether such party is the prevailing party).

22.Effective Date. This Agreement is effective eight (8) days after it has been signed by both Parties.

23.Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

24.Voluntary Execution of Agreement. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the parties hereto, with the full intent of releasing all claims. The parties acknowledge that:

(a)They have read this Agreement;

(b)They have been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

(c)They understand the terms and consequences of this Agreement and of the releases it contains;

(d)They are fully aware of the legal and binding effect of this Agreement.

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

AEROHIVE NETWORKS, INC.

Dated: _______________, 20__        By

David K. Flynn, an individual

Dated: _______________, 20__        

EX-10.2

AEROHIVE NETWORKS, INC.

AMENDED AND RESTATED

SEPARATION AND CHANGE IN CONTROL SEVERANCE AGREEMENT

This Change in Control Severance Agreement (the “Agreement”) is amended and restated and made and entered into by and between Alan Amrod (“you” or “Executive”) and Aerohive Networks, Inc., a Delaware corporation (the “Company”), effective as of April 1, 2018 (the “Effective Date”), and replaces and supersedes in all respects that Separation and Change in Control Severance Agreement between the Company and you dated effective November 16, 2015.

RECITALS

A.    It is expected that the Company from time to time will consider the possibility of a Change in Control (as defined herein). The Board of Directors of the Company (including as it may act through its Compensation Committee, the “Board”) recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities.

B.    The Board believes that it is in the best interests of the Company and its shareholders to provide Executive with an incentive to continue his or her employment and to maximize the value of the Company upon a Change in Control for the benefit of its shareholders.

C.    The Board also believes that it is appropriate to provide severance protection to Executive in certain circumstances in the event of terminations outside of a Change in Control.

D.    In order to provide Executive with enhanced financial security and sufficient encouragement to remain with the Company notwithstanding the possibility of a Change in Control, or certain terminations of employment outside of a Change in Control, the Board believes that it is in the interests of the Company and its shareholders to provide Executive with certain severance benefits upon certain terminations of employment.

Certain capitalized terms used in the Agreement are defined in Section 8 below.

AGREEMENT

In consideration of the mutual covenants herein contained and the continued employment of Executive by the Company, the parties agree as follows:

1.    Term of Agreement. This Agreement shall terminate December 31, 2019 (the “Initial Term”). On the last day of the Initial Term and on each one (1) year anniversary of such date thereafter while this Agreement remains in effect, this Agreement shall renew automatically for additional, successive one (1) year terms (each an “Additional Term”); provided that if either party provides the other party with written notice of non‑renewal at least ninety (90) days prior to the date of automatic renewal of an Additional Term, the Agreement shall terminate upon completion

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of the last applicable Additional Term. Notwithstanding the foregoing provisions of this paragraph, if a Change in Control occurs when there is less than one (1) year remaining during the Initial Term or Additional Term, as applicable, this Agreement shall automatically extend for a period equal to one year following the Change in Control, regardless of an earlier termination which would have otherwise occurred upon giving effect to a written notice of non-renewal provided by the Company. (The period during which this Agreement remains in effect in accordance with this paragraph is referred to herein as the “Term.”) Provided, further, that if severance benefits for Executive have been triggered hereunder prior to the end of the Term, this Agreement shall automatically extend but then terminate on the date upon which all obligations of the parties hereto under this Agreement have been satisfied. This Agreement may be extended beyond the Term by written mutual agreement by and between Executive and the Company.

2.    At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and will continue to be at all times at-will, as defined under applicable law. As an at-will employee, either the Company or the Executive may terminate the employment relationship at any time, for any or no reason, with or without notice and with or without Cause. Upon any termination of employment, the Company will pay Executive all accrued but unpaid vacation (to the extent such exists), expense reimbursements, and wages and other benefits accrued and due to Executive as of the effective date of such termination under any Company-provided plans, policies and arrangements (“Accrued Compensation”). Nothing herein is intended to or will create a promise, representation, agreement or expectation of employment between you and the Company, including of continued employment for any minimum or particular period of time. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures applicable to you, may change from time to time, the “at-will” nature of your employment will not change and cannot be modified in any manner, express or implied, unless and to the extent in writing directed to you individually and signed by the Company’s Chief Executive Officer.

3.    Severance Benefits, Other than in Connection with a Change in Control. If the Company terminates Executive’s employment with the Company without Cause (excluding death or Disability), and such termination date occurs outside of the Change in Control Period, then Executive will receive the Accrued Benefits and, subject to Sections 5 through 7, below, shall be eligible to receive the following:

(a)Severance Payments. Executive will receive a lump-sum payment equal to nine (9) months of Executive’s annual base salary as then in-effect immediately prior to Executive’s termination date.

(b)Continuation Coverage. If Executive elects continuation coverage pursuant to COBRA within the time period prescribed pursuant to COBRA for Executive and Executive’s eligible dependents, then the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of nine (9) months from the date of termination, or (B) the date upon which Executive and/or Executive’s eligible dependents become covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Company’s then-normal expense reimbursement policy. Notwithstanding the first sentence of this Section 3(b), if

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the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will in lieu thereof provide to Executive a taxable monthly payment (less applicable withholdings), payable on the last day of a given month (except as provided by the following sentence), in an amount equal to twice the monthly COBRA premium that Executive would be required to pay to continue Executive’s group health coverage in effect on the termination of employment date (which amount will be based on the premium for the first month of COBRA coverage), which payments will be made regardless of whether Executive elects COBRA continuation coverage and will commence on the month following Executive’s termination of employment and will end on the earlier of (x) the date upon which Executive obtains other employment or (y) the date the Company has paid an amount equal to nine (9) months, or COBRA continuation coverage. For the avoidance of doubt, any taxable payments in lieu of COBRA reimbursements may be used by Executive for any purpose, including, but not limited to, continuation coverage under COBRA, and will be subject to all applicable tax withholdings.

4.        Severance Benefits, in Connection with a Change in Control.

(a)Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control. If the Company terminates Executive’s employment with the Company without Cause (excluding death or Disability) or if Executive resigns from his or her employment for Good Reason, and, in each case, such termination date occurs during the Change in Control Period, then Executive will receive the Accrued Benefits and, subject to Sections 5 through 7, below, Executive will be eligible to receive the following:

(i)    Severance Payment. Executive will receive a lump-sum payment equal to the sum of (A) 12 months of Executive’s annual base salary as then in-effect immediately prior to Executive’s termination date or, if greater, at the level in-effect immediately prior to the Change in Control, plus (B) the greater of (x) 100% of Executive’s most recent annual bonus actually paid, or (y) 100% of Executive’s on-target annual bonus for the year of termination.

(ii)    Pro-rata Bonus Payment. In addition to any bonus Executive has earned but not yet been paid (e.g., for an annual bonus, with respect to a termination made following year-end but prior to payment), Executive will receive a lump-sum payment equal to the greater of (x) 100% of Executive’s most recent bonus actually paid, or (y) 100% of Executive’s on-target annual bonus for the year of termination, in either case of (x) or (y) pro-rated for the partial year of service.

EXAMPLE: Executive receives an annual bonus of $125,000 in February 2014 for the 2013 Company fiscal year. Executive’s base salary in 2013 is $250,000 and in 2014 is increased to $300,000. Executive’s on-target annual bonus for 2014 is 50% of base salary, or $150,000. The Company is acquired in a Change in Control on June 30, 2014, and Executive is terminated without Cause on September 30, 2014. Subject to Sections 6(a) and (b) and Section 7 hereof, under Section 4(a)(i) of this Agreement Executive is due a lump-sum payment of $450,000 ($300,000 for 12-months of annual base salary

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and $150,000 for 100% of on-target annual bonus). Subject to Sections 6(a) and (b) and Section 7 hereof, under Section 4(a)(ii) of this Agreement Executive is also due a lump-sum payment of $112,5000 (75% of $150,000, reflecting pro-ration for the nine (9) months of service through September 30, 2014).

(iii)    Continuation Coverage. If Executive elects continuation coverage pursuant to COBRA within the time period prescribed pursuant to COBRA for Executive and Executive’s eligible dependents, then the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) a period of 12 months from the date of termination or (B) the date upon which Executive becomes covered under similar plans. The reimbursements will be made by the Company to Executive consistent with the Company’s then-normal expense reimbursement policy. Notwithstanding the first sentence of this Section 4(a)(i), if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating, or being subject to an excise tax under, applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will in lieu thereof provide to Executive a taxable monthly payment (less applicable withholdings), payable on the last day of a given month (except as provided by the following sentence), in an amount equal to twice the monthly COBRA premium that Executive would be required to pay to continue Executive’s group health coverage in effect on the termination of employment date (which amount will be based on the premium for the first month of COBRA coverage), which payments will be made regardless of whether Executive elects COBRA continuation coverage and will commence on the month following Executive’s termination of employment and will end on the earlier of (x) the date upon which Executive obtains other employment or (y) the date the Company has paid an amount equal to 12 months COBRA continuation coverage. For the avoidance of doubt, any taxable payments in lieu of COBRA reimbursements may be used by Executive for any purpose, including, but not limited to, continuation coverage under COBRA, and will be subject to all applicable tax withholdings.

(iv)    Accelerated Vesting of Equity Awards. One hundred percent (100%) of Executive’s then-outstanding and unvested equity awards covering shares of the Company’s common stock (“Equity Awards”) will become vested in full as of the termination date. If an outstanding Equity Award is to vest and/or the amount of the award to vest is to be determined based on the achievement of performance criteria, then the Equity Award will vest as to one hundred percent (100%) of the amount of the equity award assuming the performance criteria had been achieved in full at the target levels for the relevant performance period(s) (including future periods). Notwithstanding the foregoing in this Section 4(a)(iv), if any Equity Awards provide for more favorable benefits under the applicable award agreements, plans and/or any other written arrangements, then in lieu of the benefits set forth in this Section (iv), such greater benefits will be provided in accordance with the terms therein.

(v)    Extended Stock Option/Stock Appreciation Right Post-Termination Exercise Period. With respect to any stock options or stock appreciation rights granted to Executive on or after the Effective Date (the “Affected Stock Option/SARs ”), each such Affected Stock

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Option/SARs shall automatically have its post-termination exercise period extended to the later of (A) twelve (12) months following Executive’s termination date, or (B) the 90-days following the lapse of any underwriter lock-up period or Company-imposed insider trading blackout period then in-effect on the date of Executive’s termination date; provided, however, that any such extension shall be limited to the maximum original term of the Affected Stock Option/SARs (as provided under the respective plan under which such Stock Option/SARs was granted).

5.        Exclusive Remedy.

(a)Sole Severance Benefits. In the event of a termination of Executive’s employment as set forth in Sections 3 or 4(a) of this Agreement, the provisions of Section 3 and 4 are, respectively, intended, understood and agreed by Employee and the Company to be and are exclusive and in lieu of and supersede any other rights or remedies to which Executive otherwise may be entitled, whether at law, tort or contract, in equity, or under this Agreement (other than the payment of Accrued Compensation). Executive will be entitled to no benefits, compensation or other payments or rights upon a termination of employment during the Term, other than those benefits expressly set forth in Sections 3 or 4, respectively, of this Agreement; and this Agreement supersedes in its entirety any prior agreements by and between the Company and Executive with respect to severance payments of any kind (whether to be made during the Term or otherwise).

(b)No Changes to Terms of Equity Awards. Except and only to the specific extent expressly provided in this Agreement, nothing herein shall otherwise change or amend the terms of any Equity Awards, which at all times shall remain subject to all terms and conditions of grant, the respective award agreement and of the equity plan from which such award issued. Notwithstanding the foregoing, nothing herein, including specifically any extension of the post-termination exercise period of Affected Stock Option/SARs as provided above, shall extend the term of any Equity Award, each of which shall be subject to automatic cancellation pursuant to the terms of the (as provided under the respective award agreement or the plan from which such award issued).

1.         Conditions to Receipt of Severance.

(a)Release of Claims Agreement. Receipt of the severance payments and separation benefits specified herein (other than any Accrued Compensation) shall be contingent on Executive’s execution of a full release of all claims against the Company in form substantially consistent with the form attached to this Agreement as Exhibit A, and the lapse of any statutory period for revocation, and such release becoming effective in accordance with its terms within fifty-two (52) days following the termination date (the “Release Deadline Date”). Any severance payment to which Executive otherwise would have been entitled during such fifty-two (52) day period (other than Accrued Compensation) shall be paid by the Company in cash and in full arrears on the fifty-third (53^d) day following Executive’s employment termination date or such later date as is required to avoid the imposition of additional taxes under Internal Revenue Section 409A (“Section 409A”).

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(b)Confidential Information and Invention Assignment Agreements. Executive’s receipt of any severance payments or separation benefits specified herein (other than any Accrued Compensation) will be subject to Executive continuing to comply with the terms of this Agreement and of any confidential information and invention assignment agreement executed by Executive in favor of the Company.

(c)Section 409A.

(i)    Notwithstanding anything to the contrary in this Agreement, no severance payments or benefits specified herein and to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable or separation benefits provided to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A‑1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

(ii)    It is intended that none of the severance payments or separation benefits provided under this Agreement will constitute Deferred Payments but rather will be exempt from Section 409A as a payment that would fall within the “short-term deferral period” as described in Section 6(c)(iv), below, or resulting from an involuntary separation from service as described in Section 6(c)(v) below. In no event will Executive have discretion to determine the taxable year of payment of any Deferred Payment. Any severance payments or separation benefits provided under this Agreement that would be considered Deferred Payments will be paid on, or in the case of installments, will commence on the Release Deadline Date or, if later, such time as required by Section 6(c)(iii). Except as required by Section 6(c)(iii), any payments that would have been made to Executive during the fifty-two (52) day period immediately following Executive’s separation from service but for the preceding sentence will be paid to Executive on the Release Deadline Date and any remaining payments will be made as provided in this Agreement.

(iii)    Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s separation from service (other than due to death), then the Deferred Payments, if any, that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, in the event of Executive’s death following Executive’s separation from service, but before the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment under Section 1.409A-2(b)(2) of the Treasury Regulations.

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(iv)    Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of Section 6(c)(i), above.

(v)    Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations but which does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments for purposes of Section 6(c)(i), above.

(vi)    The foregoing provisions are intended to comply with or be exempt from the requirements of Section 409A, such that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply or be exempt. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition before actual payment to Executive under Section 409A. In no event will the Company reimburse Executive for any taxes that may be imposed on Executive as result of Section 409A or otherwise under applicable law (including in connection with any equity award existing as of the Effective Date or here4after awarded, or any payments or benefits to be paid or provided to Executive hereunder).

2.    Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) but for this Section 7, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s benefits under Section 4 will be either:

(a)delivered in full, or

(b)delivered as to such lesser extent which would result in no portion of such benefits being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. If a reduction in severance and other benefits constituting “parachute payments” is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: (i) reduction of cash payments in reverse chronological order (that is, the cash payment owed on the latest date following the occurrence of the event triggering the excise tax will be the first cash payment to be reduced); (ii) cancellation of awards granted “contingent on a change in ownership or control” (within the meaning of Code Section 280G), (iii) reduction of the accelerated vesting of full-value equity awards in the reverse order of date of grant of the awards (i.e., the vesting of the most recently granted full-value awards will be cancelled first); (iv) reduction of the accelerated vesting of stock options and stock appreciation rights in the reverse order of date of grant of the awards (i.e., the vesting of the most

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recently granted awards will be cancelled first); and (v) reduction of employee benefits in reverse chronological order (i.e., the benefit owed on the latest date following the occurrence of the event triggering the excise tax will be the first benefit to be reduced). In no event will Executive have any discretion with respect to the ordering of payment reductions.

Unless and only to the extent the Company and Executive otherwise agree in writing, any determination required under this Section 7 will be made in writing by a nationally recognized firm (the “Firm”) reasonably agreed upon between the parties, whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 7, the Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Firm such information and documents as the Firm may reasonably request in order to make a determination under this Section. The Company will bear all costs for payment of the Firm’s services in connection with any calculations contemplated by this Section 7.

3.    Definition of Terms. The following terms referred to in this Agreement will have the following meanings:

(a)Cause. “Cause,” as used in this Agreement, will mean (as confirmed in writing by the C.E.O.):

(i)engaging in misconduct that is demonstrably and materially injurious to the Company, or the commission of any act of fraud, misappropriation, or any other intentional, wrongful or unlawful act by you, including, without limitation, any intentional, wrongful or unlawful act of deceit, dishonesty, insubordination or other acts of moral turpitude, in connection with your employment with the Company;

(ii)your conviction of, or plea of guilty or nolo contendere to, a crime involving moral turpitude, or any felony (whether or not subject to an appeal);

(iii)an intentional, wrongful or unlawful breach by you of any fiduciary duty which you owe to the Company;

(iv)your commission of any acts of gross negligence or willful misconduct in connection with your employment with the Company;

(v)your willful or continued breach of a fiduciary duty or other duty or obligation under the Company’s then-existing code of business conduct;

(vi)your violation of a federal or state law or regulation applicable to the Company’s business, which violation has or is likely to be injurious to the Company in the reasonable determination of the Board;

(vii)any act of personal dishonesty taken by you in connection with your responsibilities as an employee which results in your substantial personal enrichment;

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(viii)your criminal charge of a felony which the Board reasonably determines has had or will have a material detrimental effect on the Company’s reputation or business; or

(ix)a willful act by you that constitutes (A) a material breach of a material provision of any agreement between you and the Company, including this Agreement or accompanying agreements (including, specifically, your breach of any confidentiality or proprietary information agreement between you and the Company), or (B) your willful or continued failure to perform your duties or obligations as an employee, or (C) a material failure by you to comply with the Company’s written policies or rules of employment in good standing, in each case under this clause (ix) if such breach or failure has not been or, in the determination of the Board, cannot be cured within thirty (30) days after written notification to you of such breach or failure.

For purposes of this definition, “Company” will be interpreted to include any parent, subsidiary, affiliate or successor thereto, if appropriate.

(b)Change in Control. “Change in Control” means the occurrence of any of the following events:

(i)    A change in the ownership of the Company shall be deemed to occur on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided that a Change in Control shall not include any transaction or series of related transactions principally for bona fide equity or project financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted, or a combination thereof occurs; or

(ii)    If the Company has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, a change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or

(iii)    A change in the ownership, or transfer by exclusive license, of a substantial portion of the Company’s assets, or change in the ownership, or transfer by exclusive license, of all or substantially all of the assets of a subsidiary of the Company, which if held directly by the Company would constitute all or substantially all of the Company’s assets, which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions.

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For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

For purposes of this Section 8(b), persons will be considered to be acting as a group if they are owners of a corporation, investment entity or partnership that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.

Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.

(c)Exceptions. Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the jurisdiction of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

(d)Change in Control Period. “Change in Control Period” will mean the period beginning thirty (30) days prior to a Change in Control and ending twelve (12) months following the Change in Control.

(e)Code. “Code” will mean the Internal Revenue Code of 1986, as amended.

(f)Disability. “Disability” will mean your inability to perform substantially all of your duties for either one hundred twenty (120) consecutive calendar days or a total of one-hundred eighty (180) calendar days out of 365 consecutive calendar days as a result of a physical or mental illness, injury, disorder, or incapacity, all as determined in good faith by the Board of Directors and consistent with all applicable laws.

(g)Good Reason. “Good Reason” will mean Executive’s voluntary termination of employment with the Company within ninety (90) days following the expiration of any Company cure period (discussed below), following one or more of the following events occurring without Executive’s prior written consent:

(i)    a material reduction of Executive’s duties, authority, or responsibilities, relative to Executive’s duties, authority, or responsibilities as in effect immediately prior to such reduction; provided, however, that if, following a Change in Control, Executive remains in the same function in a division or subsidiary of the acquirer comprising substantially all of the Company’s business, that shall not in and of itself constitute Good Reason;

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(ii)    a material reduction by the Company in Executive’s base salary, as in-effect immediately prior to such reduction, other than as agreed to by you in writing or in connection with a similar reduction for all similarly-situated executives of the Company;

(iii)    a material reduction by the Company in Executive’s annual target bonus as a percentage of Executive’s base salary, as in-effect immediately prior to such reduction, other than in connection with a similar reduction for all similarly-situated executives of the Company;

(iv)    relocation of Executive’s principal place of work to a location that is more than thirty (30) miles from Executive’s principal place of work immediately prior to such relocation; or

(v)    the failure of the Company to obtain assumption of this Agreement by any successor as provided in Section 9, below.

Executive may not resign for Good Reason without first providing the Company with written notice within ninety (90) days of the Executive being aware of the initial existence of the condition that he or she believes constitutes Good Reason, and within two (2) years of the initial existence of such condition, specifically identifying in such writing the acts or omissions constituting the grounds for Good Reason and providing in such writing a reasonable cure period of not less than thirty (30) days following the date of such written notice, during which such grounds must not have been cured. For purposes of the “Good Reason” definition, the term “Company” will be interpreted to include any subsidiary, parent, affiliate or successor thereto, if applicable.

(h)Section 409A Limit. “Section 409A Limit” will mean two (2) times the lesser of: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Executive’s taxable year preceding the Executive’s taxable year of Executive’s termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive’s employment is terminated.

4.    Successors.

(a)The Company’s Successors. Any successor to the Company (whether direct or indirect, and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the obligations and liabilities under this Agreement and agree expressly in writing to assume and perform in full the obligations and liabilities under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of such succession. For all purposes under this Agreement, the term “Company” will include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 9(a) or which becomes bound by the terms of this Agreement by operation of law.

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(b)Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

5.    Notice.

(a)General. Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when sent electronically or personally delivered when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid or when delivered by a private courier service such as UPS, DHL or Federal Express that has tracking capability. In the case of Executive, notices will be sent to the e-mail address or addressed to Executive at the home address, in either case which Executive most recently communicated to the Company in writing. In the case of the Company notices will be directed to the attention of its General Counsel.

(b)Notice of Termination. Any termination by the Company for Cause or by Executive for Good Reason will be communicated by a written notice of termination to the other party hereto given in accordance with Section 10(a) of this Agreement. Such notice will indicate the specific termination provision in this Agreement relied upon, will set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and will specify the termination date (which will be not more than thirty (30) days after the giving of such notice).

6.    Resignation. Upon the termination of Executive’s employment for any reason, Executive will be deemed to have resigned from all officer and/or director positions held at the Company and its affiliates, without any further required action by Executive, as of the end of Executive’s employment and Executive, at the Board’s request, will execute any documents reasonably necessary to reflect Executive’s resignation.

7.    Miscellaneous Provisions.

(a)No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.

(b)Waiver. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c)Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

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(d)Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless and only to the extent in writing and signed by duly authorized representatives of the parties hereto and which specifically mention this Agreement.

(e)Choice of Law; Jurisdiction and Venue. The validity, interpretation, construction and performance of this Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions). Any claims or legal actions by one party against the other arising out of the relationship between the parties contemplated herein (whether arising under this Agreement) will be commenced or maintained in any state or federal court located in Santa Clara County, California, and Executive and the Company hereby submit to the jurisdiction and venue of any such court. If any provision of this Agreement is determined by a court with jurisdiction to be invalid or unenforceable, all remaining terms shall remain in full force and effect.

(f)Arbitration. Any and all disputes that either party may have with the other party which arise out of this Agreement, or any right or obligation hereunder, shall be resolved through final, binding and non-appealable arbitration in Santa Clara County, California in accordance with the rules and regulations of the American Arbitration Association then in-effect. Both parties understand and agree that the arbitration shall be instead of any civil litigation and that the arbitrator’s decision shall be final, binding and, upon entry by a court of competent jurisdiction, non-appealable to the fullest extent permitted by law and enforceable by any court having jurisdiction thereof. If the parties cannot agree on an arbitrator, the Superior Court of the county of venue shall appoint the arbitrator. The arbitrator shall be empowered and authorized to award any equitable remedy, including specific performance. The arbitrator is not empowered and is without jurisdiction to award either party: (a) special, exemplary, indirect, consequential, incidental or punitive damages, or (b) its attorneys’ fees and/or costs and expenses incurred in the arbitration (whether such party is the prevailing party). Executive will be required in conjunction with this Agreement to sign the Company’s current form Agreement to Arbitrate Disputes and Claims, which will govern such arbitration of any disputes, claims, causes or controversies as provided therein, including whether arising from this Agreement, your employment or the termination of your employment.

(g)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.

(h)Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income, employment and other taxes.

(i)Waiver of Jury; Attorney’s Fees. The Company and Executive agree, to the fullest extent permitted by law, to waive any right or claim to adjudication by jury of any claim or cause asserted against the other and arising hereunder. In any judicial proceeding arising out of this

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Agreement neither party is entitled to recover its attorneys’ fees or costs incurred pertaining to such proceeding (whether such party is the prevailing party).

(j)Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first set forth above.

COMPANY    AEROHIVE NETWORKS, INC.

By:    

Title:    

Date:    ____________________________________

EXECUTIVE    By:    

Title:    ____________________________________

Date:    ____________________________________

Attachments:     General Release of Claims (Exhibit A)

Confidential Information and Inventions Assignment Agreement

Agreement to Arbitrate Disputes and Claims

[signature page of the Separation and Change in Control Severance Agreement]

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EXHIBIT A

AEROHIVE NETWORKS, INC.

GENERAL RELEASE OF CLAIMS

This General Release of Claims (“Agreement”) is made by and between Aerohive Networks, Inc. (the “Company”) and _______________ (“Executive”).

WHEREAS, Executive has agreed to enter into a release of claims in favor of the Company upon certain events specified in the Separation and Change in Control Severance Agreement by and between Company and Executive (the “Separation Agreement”);

WHEREAS, Executive previously entered in conjunction with his or her employment or service with the Company a Confidential Information and Invention Assignment Agreement (“Proprietary Information Agreement”) and Agreement to Arbitrate Disputes and Claims (the “Arbitration Agreement”).

NOW THEREFORE, in consideration of the mutual promises made herein, the Parties hereby agree as follows:

1.Termination. Executive’s employment from the Company terminated on ________________.

2.    Confidential Information. Executive shall continue to maintain the confidentiality of all confidential and proprietary information of the Company and shall continue to comply with the terms and conditions of the Proprietary Information Agreement between Executive and the Company. Executive shall return all the Company property and confidential and proprietary information in his possession to the Company on the Effective Date of this Agreement.

3.    Payment of Salary. Executive acknowledges and represents that the Company has paid all salary, wages, bonuses, accrued vacation, commissions and any and all other benefits due to Executive.

4.    Release of Claims. Executive agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Executive by the Company. Executive, on behalf of himself, and his respective heirs, family members, executors and assigns, hereby fully and forever releases the Company and its past, present and future officers, agents, directors, employees, investors, shareholders, administrators, affiliates, divisions, subsidiaries, parents, predecessor and successor corporations, and assigns, from, and agrees not to sue or otherwise institute or cause to be instituted any legal or administrative proceedings concerning any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that he may possess arising from any omissions, acts or facts that have occurred up until and including the Effective Date of this Agreement including, without limitation,

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(a)    any and all claims relating to or arising from Executive’s employment relationship with the Company and the termination of that relationship;

(b)    any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for any economic benefit or loss of expected benefit thereunder or for fraud, misrepresentation, breach of fiduciary duty, breach of duty, under any applicable state or federal law;

(c)    any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; and conversion;

(d)    any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, The Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, and Labor Code section 201, etseq. and section 970, etseq. and all amendments to each such Act as well as the regulations issued thereunder;

(e)    any and all claims for violation of the federal, or any state, constitution;

(f)    any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; and

(g)    any and all claims for attorneys’ fees and costs.

Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any severance obligations due Executive under the Separation Agreement. Nothing in this Agreement waives Executive’s rights to indemnification or any payments under any insurance policy, if any, provided by any act or agreement of the Company, state or federal law or policy of insurance.

5.    Acknowledgment of Waiver of Claims under ADEA. Executive acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Executive and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Executive acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Executive was already entitled. Executive further acknowledges that he has been advised

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by this writing that (a) he should consult with an attorney prior to executing this Agreement; (b) he has at least twenty-one (21) days within which to consider this Agreement; (c) he has seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; (d) this Agreement shall not be effective until the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law. Any revocation should be in writing and delivered to the Vice-President of Human Resources at the Company by close of business on the seventh day from the date that Executive signs this Agreement.

6.    Civil Code Section 1542. Executive represents that he is not aware of any claims against the Company other than the claims that are released by this Agreement. Executive acknowledges that he has been advised by legal counsel and is familiar with the provisions of California Civil Code 1542, below, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

Executive, being aware of said code section, agrees to expressly waive any rights he may have thereunder, as well as under any statute or common law principles of similar effect.

7.    No Pending or Future Lawsuits. Executive represents that he has no lawsuits, claims, or actions pending in his name, or on behalf of any other person or entity, against the Company or any other person or entity referred to herein. Executive also represents that he does not intend to bring any claims on his own behalf or on behalf of any other person or entity against the Company or any other person or entity referred to herein.

8.    Application for Employment. Executive understands and agrees that, as a condition of this Agreement, he shall not be entitled to any employment with the Company, its subsidiaries, or any successor, and he hereby waives any right, or alleged right, of employment or re-employment with the Company.

9.    No Cooperation. Executive agrees that he will not counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Company and/or any officer, director, employee, agent, representative, shareholder or attorney of the Company, unless under a subpoena or other court order to do so.

10.    No Admission of Liability. Executive understands and acknowledges that this Agreement constitutes a compromise and settlement of disputed claims. No action taken by the Company, either previously or in connection with this Agreement shall be deemed or construed to

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be (a) an admission of the truth or falsity of any claims heretofore made or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to the Executive or to any third party.

11.    Costs. The Parties shall each bear their own costs, expert fees, attorneys’ fees and other fees incurred in connection with this Agreement.

12.    Authority. Executive represents and warrants that he has the capacity to act on his own behalf and on behalf of all who might claim through him to bind them to the terms and conditions of this Agreement.

13.    No Representations. Executive represents that he has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Agreement.

14.    Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

15.    Entire Agreement. This Agreement, along with the Separation Agreement, the Proprietary Information Agreement, the Arbitration Agreement and Executive’s written equity compensation agreements with the Company, represents the entire agreement and understanding between the Company and Executive concerning Executive’s separation from the Company.

16.    No Oral Modification. This Agreement may only be amended in writing signed by Executive and the Chief Executive Officer of the Company.

17.    Governing Law; Jurisdiction and Venue. The validity, interpretation, construction and performance of this Agreement will be governed and enforced by the laws of the State of California (with the exception of its conflict of laws provisions). Any claims or legal actions by one party against the other arising out of the relationship between the parties contemplated herein (whether arising under this Agreement) will be commenced or maintained in any state or federal court located in Santa Clara County, California, and Executive and the Company hereby submit to the jurisdiction and venue of any such court. If any provision of this Agreement is determined by a court with jurisdiction to be invalid or unenforceable, all remaining terms shall remain in full force and effect.

18.    Arbitration. Any and all disputes that either party may have with the other party which arise out of this Agreement, or any right or obligation hereunder, shall be resolved through final, binding and non-appealable arbitration in Santa Clara County, California in accordance with the rules and regulations of the American Arbitration Association then in-effect. Both parties understand and agree that the arbitration shall be instead of any civil litigation and that the arbitrator’s decision shall be final, binding and, upon entry by a court of competent jurisdiction, non-appealable to the fullest extent permitted by law and enforceable by any court having jurisdiction thereof. If

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the parties cannot agree on an arbitrator, the Superior Court of the county of venue shall appoint the arbitrator. The arbitrator shall be empowered and authorized to award any equitable remedy, including specific performance. The arbitrator is not empowered and is without jurisdiction to award either party: (a) special, exemplary, indirect, consequential, incidental or punitive damages, or (b) its attorneys’ fees and/or costs and expenses incurred in the arbitration (whether such party is the prevailing party). Executive will be required in conjunction with this Agreement to sign the Company’s current form Agreement to Arbitrate Disputes and Claims, which will govern such arbitration of any disputes, claims, causes or controversies as provided therein, including whether arising from this Agreement, your employment or the termination of your employment.

19.    Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect.

20.    Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income, employment and other taxes.

21.    Waiver of Jury; Attorney’s Fees. The Company and Executive agree, to the fullest extent permitted by law, to waive any right or claim to adjudication by jury of any claim or cause asserted against the other and arising hereunder. In any judicial proceeding arising out of this Agreement neither party is entitled to recover its attorneys’ fees or costs incurred pertaining to such proceeding (whether such party is the prevailing party).

22.    Effective Date. This Agreement is effective eight (8) days after it has been signed by both Parties.

23.    Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

24.    Voluntary Execution of Agreement. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties hereto, with the full intent of releasing all claims. The Parties acknowledge that:

(a)    They have read this Agreement;

(b)    They have been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

(c)    They understand the terms and consequences of this Agreement and of the releases it contains;

(d)    They are fully aware of the legal and binding effect of this Agreement.

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

AEROHIVE NETWORKS, INC.

Dated: _______________, 20__        By

_______________, an individual

Dated: _______________, 20__        

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EX-10.3

Date:    April 19, 2018

To:    Alan Amrod

From:    David Flynn

Subject:    Documentation of Agreement to Support Your Temporary Relocation to CA

This Memorandum confirms the company’s agreement to pay to or reimburse you for certain expenses you may incur relating to your relocation of residence to California in conjunction with your assumption of the role of VP of products leading the Aerohive product team.

1. Other items –

a. Housing rental or lease costs –

i. The company will pay on your behalf, or directly reimburse you, for monthly lease or rental costs related to housing in California for the period of January 1, 2017 through March 31, 2018. These payments or reimbursement will be included in your taxable income for this period.

b. Additional temporary cost of living adjustments –

i. The company will pay you $2,325 per month for the period of January 1, 2017 through March 31, 2018, for additional incidental costs associated with you assuming the role of VP Products to compensate for the difference in regional cost-of-living expenses. These payments will be included in your taxable income for this period.

c. Automobile costs –

i. The company will pay you $300 per month for the period of January 1, 2017 through March 31, 2018, for the lease or rental cost of an automobile. These payments will be included in your taxable income for this period.

d. Personal travel –

i. The company will reimburse you commercial airfare, round trip, coach travel, for up to 4 personal trips for you individually to your home in Florida during calendar year 2017. These reimbursements will be included in your taxable income for this period.

e. The company will reimburse you $5,000 for professional tax services for the tax year 2017. This reimbursement will be included in your taxable income for this period.

2. Tax adjustments -

a. For of each of tax years 2017 and 2018, the company will pay you an amount equivalent to the individual tax assessed on you for the respective “Other items”

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payments or reimbursements identified above (such payment(s) by the company to you to be further “grossed up” to reflect the imputed income to you of such payments). Such grossed-up payment amounts will be reflected on you W-2s.

Any changes to this Memorandum can only be made through a mutually agreed upon written addendum, signed for Aerohive by our C.E.O or C.F.O.

Subject only to the Tax adjustments payment provided, above, you understand you are otherwise obligated and responsible for the timely payment of any tax obligations, liabilities or assessments relating to the payments and/or reimbursements provided in this Memorandum.

Aerohive Networks	Alan Amrod
Dave Flynn	Alan Amrod
Date:	Date:

CHANGES

• Addendum 1 – Effective 2/27/2017

Item 2.b.i Automobile costs – Effective 2/27/17 the monthly value shall increase from $300 to $450. Retroactive to 1/1/2017 and terminate effective 3/31/18

Dave Flynn	Alan Amrod
Date:	Date:

• Addendum 2 – Effective 7/1/2017

Item 2. a. i, 2. b. i, 2. c. i, 2. d. i .and 3.a. terminate on effective 3/31/2018.

Dave Flynn	Alan Amrod
Date:	Date:

• Addendum 3 – Effective 2/21/2018

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Schedule of payments made in 2017 per item specified in agreement

Item 2.a.i -     $31,657.17

    Item 2.b.i -     $27,900.00

Item 2.c.i -     $5,400.00

Item 2.d.i -     $1,965.26

Item 3 -     $5,000.00

Item 4 – 85,285.07, gross up to compensate for the tax liability created by payments outlined above.

Dave Flynn	Alan Amrod
Date:	Date:

3

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David K. Flynn, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Aerohive Networks, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2018

/s/ David K. Flynn

David K. Flynn

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John Ritchie, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Aerohive Networks, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2018

/s/ John Ritchie

John Ritchie

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), I, David K. Flynn, President and Chief Executive Officer of Aerohive Networks, Inc. (the “Company”), hereby certify that, to the best of my knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 2, 2018

By:	/s/ David K. Flynn
Name:	David K. Flynn
Title:	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), I, John Ritchie, Chief Financial Officer of Aerohive Networks, Inc. (the “Company”), hereby certify that, to the best of my knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2018, to which this Certification is attached as Exhibit 32.2 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 2, 2018

By:	/s/ John Ritchie
Name:	John Ritchie
Title:	Chief Financial Officer

XML

Document and Entity Information Document - shares	3 Months Ended
	Mar. 31, 2018	Apr. 27, 2018
Entity [Abstract]
Entity Registrant Name	Aerohive Networks, Inc.
Entity Central Index Key	0001372414
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		54,629,170

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	[1]
CURRENT ASSETS:
Cash and cash equivalents	$ 21,484	$ 27,249
Short-term investments	56,388	57,675
Accounts receivable, net of allowance for doubtful accounts of $120 and $127 as of March 31, 2018 and December 31, 2017, respectively	19,474	17,662
Inventories	13,558	13,495
Prepaid expenses and other current assets	6,205	6,396
Total current assets	117,109	122,477
Property and equipment, net	6,988	6,381
Goodwill	513	513
Other assets	5,009	4,900
Total assets	129,619	134,271
CURRENT LIABILITIES:
Accounts payable	12,020	11,946
Accrued liabilities	7,811	8,602
Debt, current	20,000	0
Deferred revenue, current	33,885	33,279
Total current liabilities	73,716	53,827
Debt, non-current	0	20,000
Deferred revenue, non-current	33,993	33,761
Other liabilities	1,734	1,769
Total liabilities	109,443	109,357
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, par value of $0.001 per share - 25,000,000 shares authorized as of March 31, 2018 and December 31, 2017; no shares issued and outstanding as of March 31, 2018 and December 31, 2017	0	0
Common stock, par value of $0.001 per share - 500,000,000 shares authorized as of March 31, 2018 and December 31, 2017; 54,625,924 and 54,171,498 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively	55	55
Additional paid–in capital	281,146	278,528
Treasury stock - 1,361,243 shares as of March 31, 2018 and December 31, 2017, respectively	(6,216)	(6,216)
Accumulated other comprehensive loss	(69)	(30)
Accumulated deficit	(254,740)	(247,423)
Total stockholders’ equity	20,176	24,914
Total liabilities and stockholders’ equity	$ 129,619	$ 134,271

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 120	$ 127
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	54,625,924	54,171,498
Common stock, shares outstanding	54,625,924	54,171,498
Treasury stock, shares outstanding	1,361,243	1,361,243

XML

Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Revenue:
Product		$ 25,066	$ 26,967	[1]
Subscription and support		10,701	9,362	[1]
Total revenue		35,767	36,329	[1]
Cost of revenue
Product		8,671	8,815	[1]
Subscription and support		3,404	3,176	[1]
Total cost of revenue		12,075	11,991	[1]
Gross profit		23,692	24,338	[1]
Operating expenses:
Research and development		9,279	9,550	[1]
Sales and marketing		15,670	17,437	[1]
General and administrative		5,954	6,297	[1]
Total operating expenses		30,903	33,284	[1]
Operating loss		(7,211)	(8,946)	[1]
Interest income		289	140	[1]
Interest expense		(164)	(130)	[1]
Other expense, net		(173)	(85)	[1]
Loss before income taxes		(7,259)	(9,021)	[1]
Provision for income taxes	[1]	58	97
Net loss		$ (7,317)	$ (9,118)	[1]
Net loss per share, basic and diluted (USD per share)		$ (0.13)	$ (0.17)	[1]
Weighted-average shares used in computing net loss per share, basic and diluted		54,332,767	52,439,039	[1]
Stock-based compensation		$ 3,671	$ 3,553	[1]
Cost of Sales
Operating expenses:
Stock-based compensation		246	271	[1]
Research and development
Operating expenses:
Stock-based compensation		1,046	688	[1]
Sales and marketing
Operating expenses:
Stock-based compensation		997	1,294	[1]
General and administrative
Operating expenses:
Stock-based compensation		$ 1,382	$ 1,300	[1]

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Statement of Comprehensive Income [Abstract]
Net loss	$ (7,317)	$ (9,118)	[1]
Unrealized loss on available-for-sale investments, net of tax	(39)	(6)	[2]
Comprehensive loss	$ (7,356)	$ (9,124)	[2]

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

[2] The Company has adjusted certain amounts have been adjusted for the retrospective change in accounting policy for revenue recognition (See Note 1).

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018		Mar. 31, 2017
Cash flows from operating activities
Net loss	$ (7,317)		$ (9,118)	[1]
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	708		842	[2]
Stock-based compensation	3,671		3,553	[2]
Other	(116)		(15)	[2]
Changes in operating assets and liabilities:
Accounts receivable, net	(1,812)		4,562	[2]
Inventories	(63)		961	[2]
Prepaid expenses and other current assets	191		(562)	[2]
Other assets	(109)		(57)	[2]
Accounts payable	(56)		(885)	[2]
Accrued liabilities	(792)		144	[2]
Other liabilities	12		(6)	[2]
Deferred revenue	838		(975)	[2]
Net cash used in operating activities	(4,845)		(1,556)	[2]
Cash flows from investing activities
Purchases of property and equipment	(1,185)		(223)	[2]
Maturities of short-term investments	22,950		4,200	[2]
Purchases of short-term investments	(21,587)		(7,709)	[2]
Net cash provided by (used in) investing activities	178		(3,732)	[2]
Cash flows from financing activities
Proceeds from employee stock option exercises and employee stock purchase plan	28		218	[2]
Payment for shares withheld for tax withholdings on vesting of restricted stock units	(1,080)		(326)	[2]
Payment on capital lease obligations	(46)		(43)	[2]
Net cash used in financing activities	(1,098)		(151)	[2]
Net decrease in cash and cash equivalents	(5,765)		(5,439)	[2]
Cash and cash equivalents at beginning of period	27,249	[3]	34,346
Cash and cash equivalents at end of period	21,484		28,907	[2]
Supplemental disclosure of cash flow information
Income taxes paid	36		99	[2]
Interest paid	168		126	[2]
Supplemental disclosure of noncash investing and financing activities
Unpaid property and equipment purchases	$ 196		$ 22	[2]

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

[2] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1).

[3] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)

XML

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Aerohive Networks, Inc. was incorporated in Delaware on March 15, 2006, and, together with its subsidiaries (the "Company"), has designed and developed a leading cloud and enterprise Wi-Fi solution that enables the Company's customers to use the power of the Wi-Fi, cloud, analytics and applications to transform how they serve their customers. The Company's products include Wi-Fi access points, access switches and SD-WAN capable routers required to build an edge-access network; a cloud-based services platform for centralized management; data collection and analytics; and applications that leverage the network to provide additional capabilities to the business and IT organizations. Together, these products, service platforms and applications create a simple, scalable, and secure solution to deliver a better-connected experience.

The Company has offices in North America, Europe and Asia Pacific and employs staff around the world.

Basis of Presentation and Consolidation

The Company prepared the accompanying consolidated financial statements in accordance with generally accepted accounting principles in the United States (GAAP), which includes the accounts of Aerohive Networks, Inc. and its wholly owned subsidiaries. The Company has eliminated all intercompany accounts and transactions in consolidation.

Use of Estimates

When preparing the accompanying consolidated financial statements in conformity with GAAP, management makes estimates and assumptions that affect the amounts the Company reports in the consolidated financial statements and accompanying notes. Those estimates and assumptions include, among others, the determination of standalone selling price (SSP) of product, software and related support and subscriptions, determination of fair value of stock-based awards, inventory valuation, accounting for income taxes, including the valuation reserve on deferred tax assets and uncertain tax positions, allowance for sales reserves, allowance for rebate reserves, allowance for doubtful accounts, and warranty costs. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. As the Company cannot determine future events and their effects with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the consolidated financial statements.

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. The Company remeasures the transactions denominated in currencies other than the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, the Company remeasures its subsidiaries’ monetary assets and liabilities to the U.S. dollar using exchange rates in effect at the end of the reporting period. The Company remeasures its non-monetary assets and liabilities at historical exchange rates. The Company records gains and losses related to remeasurement in other income (expense), net in the consolidated statements of operations. Foreign currency exchange losses have not been significant in any period presented and the Company has not undertaken any hedging transactions related to foreign currency exposure.

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from contracts with customers (Topic 606), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605) and most industry-specific guidance. This standard requires entities to recognize revenue when they transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 deferring the effective date of this standard by one year to December 15, 2017. In the first quarter of 2018, the Company adopted ASC 606, using the full retrospective method, which required the Company to restate its historical financial information to be consistent with the standard. The most significant impact of the standard related to the way the Company accounts for arrangements with its stocking distributors. The Company previously deferred the recognition of revenue and the cost of revenue from sales to these stocking distributors until the stocking distributors had sold the products to their customers (known as “sell-through” revenue recognition). Under the new standard, the Company recognizes all revenue and related cost of revenue on sales to stocking distributors upon shipment and transfer of control (known as “sell-in” revenue recognition), rather than deferring recognition until the stocking distributors report that they have sold the products to their customers, provided that all other revenue recognition criteria have been met. The Company also attributes the impact to its revenue and deferred revenue balance to the removal of the limitation on contingent revenue, which accelerates revenue recognition for certain contracts. Further, the adoption of this standard also resulted in differences in the timing of recognition of contract costs, such as sales commissions.    

The Company has finalized the adoption of the standard and product revenue was $113.1 million and $134.6 million for fiscal years ended December 31, 2017 and 2016, respectively, and subscription and support revenue was $40.4 million and $33.3 million for fiscal years ended December 31, 2017 and 2016, respectively. The adoption of the standard resulted in a decrease in total deferred revenue of $3.3 million as of December 31, 2017, driven by the Company's recognition in the period of revenue related to stocking distributors upon shipment and also the removal of the limitation on contingent revenue accelerating revenue recognition for certain contracts. The adoption of the standard resulted in a decrease of $0.3 million in capitalized contract costs as of December 31, 2017. The adoption of this standard did not have a significant impact on the revenue or the related costs and sales commission for the three months ended March 31, 2017. In addition, the adoption of the standard had no significant impact on the provision for income taxes and the net cash provided by (used in) operating, investing, or financing on the Company's consolidated statements of cash flows.

ASC 606 Adoption Impact to Previously Reported Results

The following tables present the impacts to reported results from the Company's adoption of the standard on the Company's condensed consolidated balance sheets and condensed consolidated statements of operations.

Consolidated Balance Sheet (in thousands)
	As of December 31, 2017
	As Reported			Impact of Adoption			As Adjusted
Prepaid expenses and other current assets	$	6,513		$	(117	)	$	6,396
Total current assets	122,594			(117		)	122,477
Other assets	5,124			(224		)	4,900
Total assets	134,612			(341		)	134,271
Deferred revenue, current	34,281			(1,002		)	33,279
Total current liabilities	54,829			(1,002		)	53,827
Deferred revenue, non-current	36,083			(2,322		)	33,761
Total liabilities	112,681			(3,324		)	109,357
Accumulated deficit	(250,406		)	2,983			(247,423		)
Total stockholders' equity	21,931			2,983			24,914
Total liabilities and stockholders' equity	$	134,612		$	(341	)	$	134,271

Consolidated Statements of Operations (in thousands, except per share amounts)
	Three Months Ended March 31, 2017
	As Reported			Impact of  Adoption			As Adjusted
Product revenue	$	26,870		$	97		$	26,967
Subscription and support	9,481			(119		)	9,362
Total Revenue	36,351			(22		)	36,329
Cost of revenue - Product	8,736			79			8,815
Total cost of revenue	11,912			79			11,991
Gross profit	24,439			(101		)	24,338
Sales and marketing	17,439			(2		)	17,437
Total operating expenses	33,286			(2		)	33,284
Operating loss	(8,847		)	(99		)	(8,946		)
Net loss	$	(9,019	)	$	(99	)	$	(9,118	)
Net loss per share, basic and diluted	$	(0.17	)	$	—		$	(0.17	)

Effect on certain items in the Statement of Cash Flows (operating activities, in thousands)
	Three Months Ended March 31, 2017
	As Reported			Impact of Adoption			As Adjusted
Cash flows from operating activities:
Net loss:	$	(9,019	)	$	(99	)	$	(9,118	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Prepaid expenses and other current assets	(638		)	76			(562		)
Other assets	(58		)	1			(57		)
Deferred revenue	(997		)	22			(975		)

Revenues by geographic location, based on the billing address of the respective channel partner’s bill-to location, which reflect the adoption of ASC 606, are as follows: (in thousands)
	Three Months Ended March 31, 2017
	As Reported		Impact of Adoption			As Adjusted
Americas	$	23,918	$	(22	)	$	23,896
Europe, Middle East and Africa	9,832		—			9,832
Asia Pacific	2,601		—			2,601
Total revenues	$	36,351	$	(22	)	$	36,329

Under ASC 606, the Company recognizes revenue as of the time of transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to from those goods or services. As shown on the condensed consolidated statement of operations, the Company derives revenue from two sources: (i) product, which includes hardware and software revenue, and (ii) subscription and support, which includes post-contract customer support (PCS) and software delivered as a service (SaaS).

Beginning with its first quarter, fiscal year 2018, the Company follows the following five-step approach in recognizing revenue:

• Identification of the contract, or contracts, with a customer - A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which the Company bases on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

• Identification of the performance obligations in the contract - The Company identifies performance obligations promised in a contract based on the goods or services that the Company will transfer to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or services either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, the Company applies judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract.

• Determination of the transaction price - The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer.

• Allocation of the transaction price to the performance obligations in the contract - If the contract contains a single performance obligation, the Company allocates the entire transaction price to the single performance obligation. The Company allocates the transaction price of contracts that contain multiple performance obligations to each performance obligation based on a relative SSP. The Company determines SSP based on the price at which the performance obligation is sold separately. If the Company cannot observe SSP through past transactions, the Company estimates the SSP by taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

• Recognition of revenue when, or as, we satisfy a performance obligation- The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. The Company recognizes revenue at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.

Revenue Recognition

The Company’s product revenue consists of sales to distributors, and value-added resellers, or VARs and an OEM partner. The Company considers purchase orders such distributors, VARs and OEM partner issue to the Company, which are in some cases governed by master sales agreements, to be the Company's contracts with such customers, as such documents provide enforceable rights and obligations between the Company and distributor, VAR or OEM partner. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer goods or services to be the identified performance obligation. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company allocates the transaction price to each distinct performance obligation based on its respective and relative standalone selling price. The Company recognizes revenue when control of the product or service is transferred to the customer (i.e., when the Company has met its performance obligation is satisfied). Further, in determining whether control has transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer.

The Company makes sales of products to most distributors under terms allowing certain price adjustments and limited rights of return (known as “stock rotation”) of the Company’s products held in their inventory. The Company recognizes revenue from sales to distributors upon the transfer of control of the product to the distributor. Frequently, distributors need to sell product at a discounted price lower than the standard distribution price in order to win business. After the Company verifies that the distributor had obtained the Company's pre-approval for the discount claim, the Company may issue a credit memo to the distributor representing a rebate of the amount of the discount. In determining the transaction price, the Company considers these price adjustments to be variable consideration. The Company estimates such price adjustments using the expected-value method based on an analysis of actual credit claims and at the distributor level, over a period of time the Company considers adequate to account for current pricing and business trends. Historically, actual price adjustments relative to those the Company estimates and includes when determining the transaction price have not materially differed. Stock rotation rights provide distributor with the ability to return certain specified amounts of inventory. Stock rotation adjustments are an additional form of variable consideration which the Company also estimates using the expected-value method based on historical return rates. Historically, distributor stock rotation adjustments have not been material.

The Company makes sales to certain distributors, VARs and its OEM partner under terms that do not include rights of return or price concessions after the product is shipped. Accordingly, upon application of steps one through five above, the Company recognizes product revenue is recognized upon shipment and transfer of control.

The Company generally provides a limited lifetime warranty that its products will substantially conform to the published specifications. The Company limits its liability to either a credit equal to the purchase price or replacement of the defective part. The Company does not consider activities related to such warranty a separate performance obligation.

Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 90 days. In instances where the timing of the Company's revenue recognition differs from the timing of its invoicing, the Company has determined that its contracts generally do not include a significant financing component.

The Company records accounts receivable at the invoiced amount, net of an allowance for doubtful accounts. The Company recognizes a receivable in the period the Company deliver goods or provide services or when its right to consideration is unconditional.

Significant Judgments

The Company's contracts with customers often include promises to transfer multiple products and services to a customer. The Company may exercise significant judgment when determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together. The Company may also exercise judgment to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the hardware and recognized upon transfer of control.

The Company may further require judgment to determine the SSP for each distinct performance obligation. The Company determines SSP for the purposes of allocating the arrangement, primarily based on historical transaction pricing. The Company segregates historical transactions based on its pricing model and go-to-market strategy, which includes factors such as type of sales channel (VAR, OEM or distributor), the geographies in which the Company sells its products and services (domestic or international) and offering type (product series, software subscriptions and level of support for PCS).

Disaggregation of Revenue

Product Revenue - The Company’s product revenue consists of revenue from the sale of the Company’s hardware products, which each contain embedded software related to the Company's proprietary operating system that is not considered to be distinct in the context of the contract, HiveOS. Therefore, the Company considers its hardware appliances together with related embedded HiveOS software (collectively, “the hardware”) as a single performance obligation. The Company transfers these items to the customer concurrently. The Company recognizes hardware revenue upon transfer of control to its customers, which occurs upon shipment. The Company’s product revenue includes the sales of software licenses of HiveManager, a license-based unified networking management system, which consists of the purchase of a perpetual license of the HiveManager software. The Company generally recognizes revenue from its software licenses upon transfer of control to its customers.

Subscription and Support Revenue - The Company’s subscription and support revenue consists of revenue from SaaS and PCS arrangements. SaaS arrangements with customers do not provide the right to take possession of the software at any time during the hosting period and have a defined contract term. PCS arrangements include software updates, access to technical support personnel, and expedited replacement of defective hardware products. Each of the promised services is distinct in the context of the contract as the services are not inputs to a combined output for which the Company provides any significant integration service, the provision of each service does not significantly modify or customize the other, and the Company could provide each service independently of the other. Though the Company has identified that each of the performance obligations are distinct, as each of the performance obligations represents a series of distinct services that have the same pattern of transfer (stand ready obligations) and the same measure of progress of transfer (days of service) the Company will account for the all series as a single performance obligation. The Company recognizes revenue from SaaS and PCS arrangements on a straight-line basis over the service contract term, which is typically one, three or five years. The contract term typically commences upon transfer of control of the corresponding products to our customer.

See the condensed consolidated statement of operations for the Company's product revenue and subscription and support revenue amounts for the three months ended March 31, 2018 and 2017, respectively.

Costs to Obtain and Fulfill a Contract

The Company capitalizes certain contract acquisition costs consisting primarily of commissions paid and the related payroll taxes when customer contracts are signed. The Company capitalizes commission expenses earned by sales personnel and the related payroll taxes that are incremental to obtaining customer contracts. The Company amortizes deferred sales commission amounts based on the expected future revenue streams under the customer contracts. The Company includes amortization of deferred sales commissions in sales and marketing expense in the accompanying consolidated statements of operations. The Company classifies deferred commissions as current or non-current based on the timing of when the Company expects to recognize the expense. The Company periodically reviews these costs for impairment.

The Company records deferred revenue when it invoices the customer, collection is probable, and the associated revenue has not yet been earned. The current portion of deferred revenue represents the amounts the Company expects to be recognized as revenue within one year of the condensed consolidated balance sheet date. See Note 3, Consolidated Balance Sheet Components, for the changes in the deferred revenue and deferred commissions during the three months ended March 31, 2018 and 2017, respectively.

Contracted-but-not-recognized revenue

The Company's contracted but not invoiced performance obligations do not include the option for its customers to cancel. The Company's revenue allocated to remaining performance obligations represents contractedrevenue that the Company has not yet recognized (“contracted not recognized”), which includes deferred revenue and non-cancelable amounts that the Company will invoice and recognize as revenue in future periods. Contracted-but-not-recognized revenue was $72.3 million as of March 31, 2018, of which the Company expects to recognize approximately 53% of the revenue over the next 12 months and the remainder thereafter.

Other Recently Adopted Accounting Pronouncements

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments, to clarify certain aspects of ASU No. 2016-01. We adopted these standards effective January 1, 2018. The Company's adoption of these standards did not have a material impact on the Company's financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which provides guidance to decrease the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company adopted ASU 2016-15 in the first quarter of 2018. The Company's adoption of this standard did not have a material impact on the Company's financial statements.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the lease accounting requirements in Topic 840. This standard requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The standard also requires qualitative and quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including the Company's significant judgments and changes in judgments. This standard is effective beginning in fiscal year 2019. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. An impairment charge will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The standard is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company plans to adopt this standard in 2021 when it becomes effective.

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. The Company maintains cash equivalents in money market funds. The Company maintains short-term investments in U.S. treasuries, corporate securities, and commercial paper.

The Company sells its products primarily to channel partners, which include value-added resellers, or VARs, distributors, Managed Service Providers, or MSPs, and Original Equipment Manufacturers, or OEMs. The Company’s accounts receivable are typically unsecured and are derived from revenue earned from customers located in the Americas, Europe, the Middle East and Africa, and Asia Pacific. The Company performs ongoing credit evaluations to determine customer credit, but generally does not require collateral from its customers. The Company maintains reserves for estimated credit losses and these losses have historically been within management’s expectations. 

The Company has entered into separate agreements with certain individual distributors that are part of a consolidated group of entities which collectively constitutes greater than 10% of the Company’s total revenue or gross accounts receivable balance for certain periods, as presented in the tables below.

The percentages of revenue from a consolidated group of entities (Distributor A and Distributor B) greater than 10% of total consolidated revenue were as follows:

	Three Months Ended March 31,
	2018		2017
			(As Adjusted)
Distributor A	17.2	%	15.1	%
Distributor B	35.1	%	19.6	%

The percentages of receivables from Distributor A and Distributor B greater than 10% of total consolidated accounts receivable were as follows:

	March 31,		December 31,
	2018		2017
Distributor A	22.9	%	27.9	%
Distributor B	32.0	%	29.4	%

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FAIR VALUE DISCLOSURE

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE DISCLOSURE

FAIR VALUE MEASUREMENTS

The Company records its financial assets and liabilities at fair value. The Company categorizes these assets and liabilities based upon the level of judgment associated with inputs the Company uses to measure the fair value. The categories are as follows:

Level 1	Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2	Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3	Unobservable inputs are used when little or no market data is available.

The Company classified its cash equivalents and short-term marketable investments within Level 1 and Level 2 in the fair value hierarchy as of March 31, 2018 and December 31, 2017, respectively. Level 1 assets include highly liquid money market funds that the Company includes in cash equivalents. The Company classifies these instruments within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. Level 2 assets include U.S. treasuries, corporate securities, agency securities and commercial paper. The Company classifies these instruments within Level 2 of the fair value hierarchy because they are valued based on pricing obtained from an independent pricing service, which may use quoted market prices for identical or comparable instruments or model driven valuations using observable market date or inputs corroborated by observable market data. The Company classifies these instruments as short-term investments unless their maturities are three months or less when purchased, in which case the Company includes them in cash and cash equivalents. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency, which the Company obtains from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets.

The components of the Company’s Level 1 and Level 2 assets are as follows:

	March 31, 2018
	Amortized Cost		Gross Unrealized Gain (Loss)			Estimated Fair Value		Cash equivalents		Short-term investments
	(in thousands)
Level 1:
Money market funds	6,937		—			6,937		6,937		—
	$	6,937	$	—		$	6,937	$	6,937	$	—
Level 2:
U.S. treasuries	9,411		(13		)	9,398		—		9,398
Corporate securities	19,911		(56		)	19,855		—		19,855
Commercial paper	29,133		—			29,133		1,998		27,135
	$	58,455	$	(69	)	$	58,386	$	1,998	$	56,388
Total	$	65,392	$	(69	)	$	65,323	$	8,935	$	56,388

	December 31, 2017
	Amortized Cost		Gross Unrealized Gain (Loss)			Estimated Fair Value		Cash equivalents		Short-term investments
	(in thousands)
Level 1:
Money market funds	7,538		—			7,538		7,538		—
	$	7,538	$	—		$	7,538	$	7,538	$	—
Level 2:
U.S. treasuries	9,480		(3		)	9,477		—		9,477
Corporate securities	15,293		(27		)	15,266		—		15,266
Commercial paper	32,932		—			32,932		—		32,932
	$	57,705	$	(30	)	$	57,675	$	—	$	57,675
Total	$	65,243	$	(30	)	$	65,213	$	7,538	$	57,675

All short-term investments the Company held as of March 31, 2018 and December 31, 2017 contractually mature within one year from these respective dates.

Unrealized gains and losses related to these investments are due to interest rate fluctuations as opposed to credit quality. In addition, the Company does not intend to sell, and it is not more likely than not that the Company would be required to sell, these investments before recovery of their cost basis. As a result, there was no other-than-temporary impairment for these investments as of March 31, 2018 and December 31, 2017.

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CONSOLIDATED BALANCE SHEET COMPONENTS

3 Months Ended

Mar. 31, 2018

Balance Sheet Related Disclosures [Abstract]

CONSOLIDATED BALANCE SHEET COMPONENTS

CONSOLIDATED BALANCE SHEET COMPONENTS

Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following:

	March 31,		December 31,
	2018		2017
			(As Adjusted)
	(in thousands)
Deferred sales commissions, current portion	$	3,100	$	3,072
Prepaid expenses	2,543		2,543
Other	562		781
Total prepaid expenses and other current assets	$	6,205	$	6,396

Property and Equipment, net

Property and equipment, net consists of the following:

		March 31,			December 31,
	Estimated Useful Lives	2018			2017
		(in thousands)
Computer and other equipment	3 years	$	1,714		$	1,713
Manufacturing, research and development laboratory equipment	3 years	4,888			4,630
Software	2 to 5 years	9,230			8,182
Office furniture and equipment	3 to 7 years	2,061			2,061
Leasehold improvements	shorter of useful life or lease term	1,025			1,017
Property and equipment, gross		18,918			17,603
Less: Accumulated depreciation and amortization		(11,930		)	(11,222		)
Property and equipment, net		$	6,988		$	6,381

The software category includes the capitalized software for the Company's cloud service platform. The Company amortizes these capitalized costs to cost of subscription and support revenue on a straight-line basis over an estimated useful life of the software of five years.

Depreciation and amortization expense was $0.7 million and $0.8 million for the three months ended March 31, 2018 and 2017, respectively.

Office furniture and equipment classified under capital lease was $1.2 million at March 31, 2018 and December 31, 2017 respectively, and the related accumulated depreciation was $0.5 million and $0.4 million at March 31, 2018 and December 31, 2017, respectively.

Other assets

Other assets consist of the following:

	March 31,		December 31,
	2018		2017
			(As Adjusted)
	(in thousands)
Deferred sales commissions, non-current portion	$	2,985	$	2,947
Investment in privately held company	1,500		1,500
Other	524		453
Total other assets	$	5,009	$	4,900

Deferred Commission

The current portion of deferred commission represents the amounts that the Company expects to be recognized as commission expense within one year of the consolidated balance sheet date. Significant changes in the balance of total deferred commission (contract asset) during the three months ended March 31, 2018 and March 31, 2017 are as follows:

	Three Months Ended March 31,
	2018			2017
				(As Adjusted)
	(in thousands)
Beginning balance	$	6,019		$	5,766
Recognized	(3,018		)	(3,224		)
Additions	3,084			3,416
Ending balance	$	6,085		$	5,958
Current portion	$	3,100		$	2,928
Non-current portion	$	2,985		$	3,030

Of the $6.1 million total deferred commission balance as of March 31, 2018, the Company expects to recognize approximately 51% as commission expense over the next 12 months and the remainder thereafter.

In January 2016, the Company paid $1.5 million in cash to purchase a convertible note issued by a privately held company, which provides Wi-Fi application and analytics. In June 2017, the convertible note and accrued interest on the note converted into shares of preferred stock of the privately held company and the note was canceled. The accrued interest on the note was immaterial. The Company currently has no significant voting rights, investor rights or influence over the privately held company. Since the investment has no readily determinable market value, the Company elected the measurement alternative. As of March 31, 2018, the Company carried the investment at the value of original principal and the Company reviews such carried value quarterly for indicators of fair value changes when there are observable prices less any potential impairment. The Company did not recognize a change in value or impairment for the three months ended March 31, 2018 and 2017, as there were no identified events or changes in circumstances that might have a significant impact on the carrying value. The Company has classified the investment as other assets on the condensed consolidated balance sheet.

Accrued Liabilities

Accrued liabilities consist of the following:

	March 31,		December 31,
	2018		2017
	(in thousands)
Accrued compensation	$	6,691	$	6,971
Accrued expenses and other liabilities	903		1,385
Warranty liability, current portion	217		246
Total accrued liabilities	$	7,811	$	8,602

Deferred Revenue

The current portion of deferred revenue represents the amounts that the Company expects to recognize as revenue within one year of the consolidated balance sheet date. Significant changes in the balance of total deferred revenue (contract liability) during the three months ended March 31, 2018 and March 31, 2017 are as follows:

	Three Months Ended March 31,
	2018			2017
				(As Adjusted)
	(in thousands)
Beginning balance	$	67,040		$	63,239
Recognized	(10,701		)	(9,362		)
Additions	11,539			8,387
Ending balance	$	67,878		$	62,264
Current portion	$	33,885		$	30,326
Non-current portion	$	33,993		$	31,938

Of the $67.9 million total deferred revenue balance as of March 31, 2018, the Company expects to recognize approximately 50% as revenue over the next 12 months and the remainder thereafter.

Warranty Liability

The following table summarizes the activity related to the Company’s accrued liability for estimated future warranty:

	Three Months Ended March 31,
	2018			2017
	(in thousands)
Beginning balance	$	577		$	975
Charges to operations	126			121
Obligations fulfilled	(153		)	(197		)
Changes in existing warranty	(4		)	(42		)
Total product warranties	$	546		$	857
Current portion	$	217		$	516
Non-current portion	$	329		$	341

Changes in existing warranty reflect a combination of changes in expected warranty claims and changes in the related costs to service such claims.

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DEBT

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

DEBT

DEBT

Financing Agreements

In June 2012, the Company entered into a revolving credit facility with Silicon Valley Bank (the "Revolving Credit Facility"). The Revolving Credit Facility is collateralized by substantially all of the Company’s property, other than intellectual property. Since January 1, 2016, the Revolving Credit Facility bears interest rate at the lesser of (i) LIBOR rate plus 1.75% or (ii) prime rate minus 1.0%. In March 2017, the Company further amended the Revolving Credit Facility to extend the maturity date by two years and reduce the minimum cash requirements. The weighted-average interest rate of the Revolving Credit Facility was 3.28% and 2.57% for the three months ended March 31, 2018 and 2017, respectively.

The Revolving Credit Facility contains customary negative covenants which, unless waived by the bank, limit the Company’s ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets or engage in merger and acquisition activity, including merge or consolidate with a third party. The Revolving Credit Facility also requires the Company to maintain a minimum adjusted quick ratio of 1.25 to 1.00 and a minimum cash balance with the bank as of the last day of each month of $35.0 million and to demonstrate the absence of defined events of default in order to assure full access to the available borrowing. The Revolving Credit Facility also contains customary events of default, subject to customary cure periods for certain defaults, that include, among other things, non-payment defaults, covenant defaults, material judgment defaults, bankruptcy and insolvency defaults, cross-defaults to certain other material indebtedness, and defaults due to inaccuracy of representation and warranties. Upon an event of default, the lender may declare all or a portion of the outstanding obligations payable by the Company to be immediately due and payable and exercise other rights and remedies provided for under the Revolving Credit Facility. During the existence of an event of default, interest on the obligations under the Revolving Credit Facility could be increased by 5.0%. As of March 31, 2018, the Company was in compliance with these covenants.

The Revolving Credit facility currently provides, among other things (i) a maturity date of March 31, 2019; and (ii) a revolving line up to $20.0 million, subject to certain conditions.

As of March 31, 2018, $20.0 million remains outstanding under the Revolving Credit Facility, and the Company classifies this amount as a current liability in the condensed consolidated balance sheet.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company currently leases its main office facility in Milpitas, California, which lease is set to expire in June 2023. In addition, the Company leases office space for its subsidiaries in the United Kingdom, the Netherlands, Korea and China under non-cancelable operating leases that expire at various times through September 2022. The Company has also entered into various lease agreements in other locations in the United States and globally to support its sales and research and development functions.

The Company recognizes rent expense on a straight-line basis over the respective lease period. Future minimum lease payments by year under operating leases as of March 31, 2018 are as follows:

	Amount
Year Ending December 31,	(in thousands)
2018 (remaining nine months)	$	1,185
2019	1,471
2020	1,103
2021	1,090
2022	999
Thereafter	445
Total	$	6,293

Rent expense was $0.5 million for the three months ended March 31, 2018 and 2017.

Capital Lease Obligations

The Company has certain office furniture and equipment that it classifies under capital leases. The terms of the capital leases range from three years to seven years. The interest expense is immaterial in any particular period. Future minimum lease payments by year under capital lease obligations as of March 31, 2018 are as follows:

	Amount
Year Ending December 31,	(in thousands)
2018 (remaining nine months)	$	141
2019	178
2020	172
2021	170
2022	162
Thereafter	83
Total	$	906

Manufacturing Commitments

The Company subcontracts with manufacturing companies to manufacture its hardware products. The contract manufacturers procure components based on non-cancelable orders the Company places with them. If the Company cancels all or part of an order, the Company is liable to the contract manufacturers for the cost of the related components they purchased under such orders.

As of March 31, 2018 and December 31, 2017, the Company had manufacturing commitments with contract manufacturers for inventory totaling approximately $3.9 million and $6.0 million, respectively.

Contingencies

The Company may be subject to legal proceedings and litigation arising from time to time. The Company will record a liability when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. The Company expects periodically to evaluate developments in its legal matters that could affect the amount of liability that it has previously accrued, if any, and make adjustments as appropriate. The Company exercises significant judgment to determine both likelihood of there being, and the estimated amount of, a loss related to such matters, and the Company’s judgment may be incorrect. The Company cannot reasonably determine in advance the outcome of any litigation proceeding. Until the final resolution of any such matter for which the Company may be required to accrue, the Company may have an exposure to loss in excess of the amount the Company has accrued, and such excess amount could be significant.

The Company is currently engaged in the following separate security litigations:

In January 2018, three purported class actions were filed in the United States District Court for the Northern District of California against the Company and two of its officers.  The actions are McGovney v. Aerohive Networks, Inc., et al., Case No. 5:18-cv-00435, Beyerbach v. Aerohive Networks, Inc., et al., Case No. 5:18-cv-0544 and Panjabi v. Aerohive Networks, Inc., et al., Case No. 5:18-cv-00656.  The complaints allege that the defendants made false and misleading statements, in particular regarding the Company’s financial outlook for the fourth quarter of 2017. The complaints assert claims for violations of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 on behalf of those who purchased the Company’s common stock between November 1, 2017 and January 16, 2018, inclusive. The complaints seek monetary damages in an unspecified amount.  On March 20, 2018, three shareholders filed respective motions to consolidate the three cases and to be appointed lead plaintiff for a class.  The Company anticipates that these cases will be consolidated and that a court-appointed lead plaintiff will file a consolidated complaint later this year.

On March 26, 2018, a purported shareholder derivative complaint was filed in the California Superior Court for the County of Santa Clara against the Company’s board of directors and two of its officers.  The action is titled Flores v. Flynn, et.al, Case No. 18CV325517.  The complaint alleges that the same general conduct alleged in the securities class actions also constituted a breach of fiduciary duty, waste of corporate assets, abuse of control, mismanagement, and unjust enrichment.  The complaint seeks monetary damages in an unspecified amount, restitution, and certain changes to the Company’s corporate governance and internal procedures.

The outcomes of the legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to the Company's operating results and cash flows for any particular period.

The Company intends to defend these lawsuits vigorously, and is not able to predict or estimate any range of reasonably possible loss related to these lawsuits. If these matters have an adverse outcome, they may have a material impact on the Company’s financial position, results of operations or cash flows.       

Guarantees

The Company typically enters into agreements with its customers that contain indemnification provisions in the event of claims alleging that the Company’s products infringe the intellectual property rights of a third party. The Company has at its option and expense, the ability to resolve any infringement, replace product with a non-infringing product that is equivalent-in-function, or refund to the customers the total product price. These agreements also typically include guarantees of product and service performance. The Company has not recorded a liability related to these indemnification and guarantee provisions and the Company’s indemnification and guarantee provisions have not had any impact on the consolidated financial statements to date.

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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

Common Stock reserved for Future Issuance

As of March 31, 2018, the Company had the following reserved shares of common stock for future issuance:

	March 31,
	2018
Common stock reserved for future grant under the 2014 Equity Incentive Plan	11,033,424
Common stock reserved for future purchase under the 2014 Employee Stock Purchase Plan	2,169,988
Options and Restricted Stock Units issued and outstanding	7,559,655
Total reserved shares of common stock for future issuance	20,763,067

Stock Repurchase Program

In February 2016, the Company's board of directors authorized a stock repurchase program of up to $10.0 million, with stock purchases made from time to time in compliance with applicable securities laws in the open market or in privately negotiated transactions. The timing and amounts of any purchases will be based on market conditions and other factors including price, regulatory requirements and capital availability. The authorization does not require the purchase of any minimum number of shares, and the Company may suspend, modify or discontinue the program at any time without prior notice. In August 2017, the Company's board of directors extended this program to June 30, 2018. In November 2017, the Company's board of directors increased the authorized amount under this program to $20.0 million.

During the three months ended March 31, 2018 and the three months ended March 31, 2017, the Company did not repurchase any shares. As of March 31, 2018, the Company had repurchased under this program 1,361,243 shares of its common stock at a total price $6.2 million with an average purchase price $4.57 per share of our common stock. Approximately $13.8 million remains available to the Company as of March 31, 2018 for repurchases under this program.

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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

2014 Equity Incentive Plan

On March 26, 2014, the Company's 2014 Equity Incentive Plan ("2014 Plan") became effective. On March 27, 2014, the Company terminated its earlier 2006 Global Share Plan ("2006 Plan"), added all reserved-but-unissued shares under the 2006 Plan to the 2014 Plan and rolled into the 2014 Plan all shares underlying stock awards granted under the 2006 Plan that otherwise would return to the 2006 Plan. The Company may not grant additional awards under the 2006 Plan, but the 2006 Plan will continue to govern outstanding awards previously granted under the 2006 Plan.

The 2014 Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code, only to employees of the Company or any parent or subsidiary of the Company, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to employees, directors and consultants of the Company, and the employees and consultants of any parent or subsidiary of the Company.

In January 2018, the Company effected an increase of 2,708,575 shares reserved under the 2014 Plan. As of March 31, 2018, the Company had 11,033,424 total shares of common stock reserved and available for grant under the 2014 Plan.

The following table summarizes the total number of shares available for grant under the 2014 Plan as of March 31, 2018:

	Shares Available for Grant
Balance, December 31, 2017	7,997,691
Authorized	2,708,575
Options granted	—
Options canceled	94,449
Awards granted	(304,188	)
Awards canceled	536,897
Balance, March 31, 2018	11,033,424

Stock Options

The following table summarizes the information about outstanding stock option activity:

	Options Outstanding
	Number of Shares Underlying Outstanding Options		Weighted Average Exercise  Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
						(in thousands)
Balance, December 31, 2017	4,247,911		$	6.03	5.80	$	4,472
Options granted	—		—
Options exercised	(7,125	)	1.22
Options canceled	(94,449	)	6.43
Balance, March 31, 2018	4,146,337		$	6.03	5.54	$	2,602
Options exercisable, March 31, 2018	3,607,547		$	5.94	5.24	$	2,602

There were no options granted during the three months ended March 31, 2018 and 2017.

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2018 and 2017 was $0.03 million and $0.4 million, respectively. The intrinsic value for each share underlying an option represents the difference between the option exercise price per share and the closing stock price of a share of the Company’s common stock. The total grant-date fair value of the options vested was $0.7 million and $4.8 million, respectively, during the three months ended March 31, 2018 and 2017, respectively.

Restricted Stock Units

The Company currently grants Restricted Stock Units (RSUs) to certain employees and directors. The RSUs typically vest over a period of time, generally one to three years, and are subject to the participant’s continuing service to the Company over that period. Until vested, RSUs do not have the voting and dividend participation rights of common stock and the shares underlying the awards are not considered issued and outstanding.

The following is a summary of the Company’s RSU grant activity and related information for the three months ended March 31, 2018:

	Restricted Stock Units Outstanding
	Shares		Weighted-Average Grant-Date Fair Value Per Share
Balance, December 31, 2017	4,089,067		$	6.47
Awards granted	304,188		4.30
Awards vested	(699,069	)	5.29
Awards canceled	(280,868	)	5.45
Balance, March 31, 2018	3,413,318		$	5.32

The weighted-average grant-date fair value of RSUs the Company granted during the three months ended March 31, 2018 and 2017 was $4.30 and $5.00 per share, respectively. The aggregate grant-date fair value of RSUs the Company granted during the three months ended March 31, 2018 and 2017 was $3.7 and $4.0 million, respectively. The aggregate fair value of shares vested as of the respective vesting dates during the three months ended March 31, 2018 and 2017 was $1.3 and $2.2 million, respectively.

The number of RSUs vested during a particular period includes shares that the Company withheld during the period on behalf of certain employees to satisfy the minimum statutory tax withholding requirements, as determined by the Company. During the three months ended March 31, 2018 and 2017, the Company withheld 256,029 and 70,368 shares of stock, respectively, for an aggregate value of $1.1 million and $0.3 million, respectively. The Company returned such withheld shares to the 2014 Plan, which were then available under the plan terms for future issuance.

In the three months ended March 31, 2017, Company granted 378,644 shares of RSUs as performance-based restricted stock units (PBRSUs) to certain executives pursuant to the 2014 Plan. Each PBRSU represents the right to receive one share of the Company's common stock upon vesting, subject to the Company's achievement of certain performance conditions. 251,037 of these PBRSU awards vested in the three months ended March 2018. The Company did not grant any PBRSUs during the three months ended March 31, 2018.

The Company granted 358,000 market-based restricted stock units (MBRSUs) to certain executives in June 2017 pursuant to the 2014 Plan. Each MBRSU represents the right to receive one share of the Company's common stock upon vesting subject to the Company's achievement of certain stock price targets. The Company estimated the fair value of the MBRSUs using the Monte Carlo option-pricing model as of the date of grant as the MBRSUs contain both market and service conditions. The weighted-average grant-date fair value of these MBRSUs was $4.18 per share. The Company will record the total expense related to all of the MBRSUs on a graded-vesting method over the estimated term.  36,625 of these MBRSU awards vested in the three months ended March 31, 2018. The Company did not grant any MBRSUs during the three months ended March 31, 2018 and March 31, 2017.     

2014 Employee Stock Purchase Plan

The 2014 Employee Stock Purchase Plan ("ESPP") is a ten-year plan, effective in March 2014. The ESPP authorizes the Company to issue shares of common stock pursuant to purchase rights it grants to its employees and those of its designated subsidiaries. In January 2018, the Company effected an increase of 541,715 shares reserved under the ESPP. As of March 31, 2018, the Company had 2,169,988 total shares of common stock reserved and available for issuance under the ESPP.

Under the ESPP, the Company grants stock purchase rights to all eligible employees, currently covering a one-year offering period ending December 1, 2018, with purchase dates at the end of each interim six-month purchase period. Employees purchase shares using employee payroll deductions at purchase prices equal to 85% of the lesser of the fair market value of the Company’s common stock at either the first day of each offering period or the date of purchase. The ESPP currently has a reset provision: If the closing price of the Company’s common stock on the last day of any purchase period during an offering period is lower than the closing sales price on the first day of the related offering period, that offering period will terminate upon the purchase of shares for such purchase period and participants will be automatically re-enrolled in the immediately following offering period. As a result, the reference price for purposes of determining the purchase price of shares for subsequent purchase periods for all participants of the new offering period resets to such lower price. No participant may purchase more than $25,000 worth of common stock in any calendar year, or 5,000 shares of common stock in any six-month purchase period. The Company did not issue any shares under the ESPP during the three months ended March 31, 2018 and March 31, 2017.

Determination of Fair Values

Weighted-average assumptions to value employee stock purchase rights under the Black-Scholes model were as follows:

	Three Months Ended March 31,
	2018	2017
ESPP purchase rights:
Expected term (in years)	0.50 - 1.00	0.50 - 1.00
Expected volatility	46% - 48%	34% - 39%
Risk free interest rate	1.45% - 1.62%	0.60% - 0.82%

Stock-based Compensation Expense

The Company recognized total stock-based compensation for stock-based awards in the condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
	2018		2017
	(in thousands)
Cost of revenue	$	246	$	271
Research and development	1,046		688
Sales and marketing	997		1,294
General and administrative	1,382		1,300
Total stock-based compensation	$	3,671	$	3,553

The following table presents stock-based compensation expense by award-type:

	Three Months Ended March 31,
	2018		2017
	(in thousands)
Stock Options	$	541	$	883
Restricted Stock Units	2,792		2,270
Employee Stock Purchase Plan	338		400
Total stock-based compensation	$	3,671	$	3,553

The stock-based compensation expense the Company recorded for restricted stock units for the three months ended March 31, 2018 and 2017 includes the amount of stock-based compensation recorded for PBRSUs of approximately $0.2 million and $0.1 million, respectively and MBRSUs of approximately $0.2 million and $0.01 million, respectively.

As of March 31, 2018, unrecognized stock-based compensation related to outstanding stock options, RSUs, including performance-based and market-based RSUs and ESPP purchase rights, was $1.7 million, $14.3 million and $0.9 million, respectively, which the Company expects to recognize over weighted-average periods of 1.24 years, 1.72 years and 0.67 years, respectively.

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NET LOSS PER SHARE

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

NET LOSS PER SHARE

NET LOSS PER SHARE

The Company calculates basic and diluted net loss per share by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive.

The following table presents the computation of basic and diluted net loss per share:

	Three Months Ended March 31,
	2018			2017
				(As Adjusted)
	(in thousands, except for share and per share data)
Numerator:
Net loss	$	(7,317	)	$	(9,118	)
Denominator:
Weighted-average shares used to compute net loss per share, basic and diluted	54,332,767			52,439,039
Net loss per share:
Basic and diluted	$	(0.13	)	$	(0.17	)

The Company excluded the following period-end outstanding common stock equivalents from its computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	As of March 31,
	2018	2017
Shares of common stock issuable under the Equity Incentive Plan	7,559,655	9,465,157
Employee Stock Purchase Plan	456,426	470,217
Total	8,016,081	9,935,374

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INCOME TAXES

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company's provision for income taxes was approximately $0.1 million, for the three months ended March 31, 2018 and 2017. The Company's provision for income taxes consisted primarily of state taxes and foreign income taxes.

For the three months ended March 31, 2018 and 2017, the Company's provision for income taxes differed from the statutory amount primarily due to the Company's maintaining a full valuation allowance against the U.S. net deferred tax assets, partially offset by foreign and state taxes.

The Company has intercompany services agreements with its subsidiaries located in the United Kingdom, the Netherlands, New Zealand, Australia, Canada and China, which require payment for services rendered by these subsidiaries at an arm’s-length transaction price. The foreign tax expense represents foreign income tax payable by these subsidiaries on profit generated on intercompany services agreements.

The Company's realization of deferred tax assets depends on future taxable income, the existence and timing of which is uncertain. Based on the Company’s history of losses, management has determined it cannot conclude that it is more likely than not that the deferred tax assets will be realized and, accordingly, management has placed a full valuation allowance against its domestic deferred tax assets, including net operating loss carryforwards and research and development and other tax credits, as of March 31, 2018 and December 31, 2017, respectively.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one‑time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; (6) creating the base erosion anti‑abuse tax (“BEAT”), a new minimum tax; (7) creating a new limitation on deductible interest expense; and (8) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

The Company has not completed its accounting assessment for the effects of the Tax Act; however, based on its initial assessment, the Company has determined that the Tax Act did not have a material effect on its consolidated financial statements for the three months ended March 31, 2018.

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SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

The Company’s chief operating decision maker (CODM) is its Chief Executive Officer. The Company derives its revenue primarily from sales of products and subscription and support services. The Company’s CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. Accordingly, the Company determined that it operates as one reportable and operating segment.

The following table represents the Company's revenue based on the billing address of the respective channel partners:

	Three Months Ended March 31,
	2018		2017
			(As Adjusted)
	(in thousands)
Americas	$	20,830	$	23,896
Europe, Middle East and Africa	11,900		9,832
Asia Pacific	3,037		2,601
Total revenues	$	35,767	$	36,329

     The Company has included within Americas in the above table revenue from sales in the United States of $19.0 million and $22.0 million, respectively, for the three months ended March 31, 2018 and 2017. Aside from the United States, no country comprised 10% or more of the Company's total revenue for each of the three months ended March 31, 2018 and 2017, respectively.

Property and equipment, net by location is summarized as follows:  

	March 31,		December 31,
	2018		2017
	(in thousands)
United States	$	6,366	$	5,323
People's Republic of China	512		875
United Kingdom	110		183
Total property and equipment, net	$	6,988	$	6,381

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

Nature of Operations

Aerohive Networks, Inc. was incorporated in Delaware on March 15, 2006, and, together with its subsidiaries (the "Company"), has designed and developed a leading cloud and enterprise Wi-Fi solution that enables the Company's customers to use the power of the Wi-Fi, cloud, analytics and applications to transform how they serve their customers. The Company's products include Wi-Fi access points, access switches and SD-WAN capable routers required to build an edge-access network; a cloud-based services platform for centralized management; data collection and analytics; and applications that leverage the network to provide additional capabilities to the business and IT organizations. Together, these products, service platforms and applications create a simple, scalable, and secure solution to deliver a better-connected experience.

The Company has offices in North America, Europe and Asia Pacific and employs staff around the world.

Basis of Presentation

The Company prepared the accompanying consolidated financial statements in accordance with generally accepted accounting principles in the United States (GAAP), which includes the accounts of Aerohive Networks, Inc. and its wholly owned subsidiaries.

Consolidation

The Company has eliminated all intercompany accounts and transactions in consolidation.

Use of Estimates

Use of Estimates

When preparing the accompanying consolidated financial statements in conformity with GAAP, management makes estimates and assumptions that affect the amounts the Company reports in the consolidated financial statements and accompanying notes. Those estimates and assumptions include, among others, the determination of standalone selling price (SSP) of product, software and related support and subscriptions, determination of fair value of stock-based awards, inventory valuation, accounting for income taxes, including the valuation reserve on deferred tax assets and uncertain tax positions, allowance for sales reserves, allowance for rebate reserves, allowance for doubtful accounts, and warranty costs. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. As the Company cannot determine future events and their effects with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the consolidated financial statements

Foreign Currency

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. The Company remeasures the transactions denominated in currencies other than the functional currency at the average exchange rate in effect during the period. At the end of each reporting period, the Company remeasures its subsidiaries’ monetary assets and liabilities to the U.S. dollar using exchange rates in effect at the end of the reporting period. The Company remeasures its non-monetary assets and liabilities at historical exchange rates. The Company records gains and losses related to remeasurement in other income (expense), net in the consolidated statements of operations. Foreign currency exchange losses have not been significant in any period presented and the Company has not undertaken any hedging transactions related to foreign currency exposure.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from contracts with customers (Topic 606), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605) and most industry-specific guidance. This standard requires entities to recognize revenue when they transfer promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 deferring the effective date of this standard by one year to December 15, 2017. In the first quarter of 2018, the Company adopted ASC 606, using the full retrospective method, which required the Company to restate its historical financial information to be consistent with the standard. The most significant impact of the standard related to the way the Company accounts for arrangements with its stocking distributors. The Company previously deferred the recognition of revenue and the cost of revenue from sales to these stocking distributors until the stocking distributors had sold the products to their customers (known as “sell-through” revenue recognition). Under the new standard, the Company recognizes all revenue and related cost of revenue on sales to stocking distributors upon shipment and transfer of control (known as “sell-in” revenue recognition), rather than deferring recognition until the stocking distributors report that they have sold the products to their customers, provided that all other revenue recognition criteria have been met. The Company also attributes the impact to its revenue and deferred revenue balance to the removal of the limitation on contingent revenue, which accelerates revenue recognition for certain contracts. Further, the adoption of this standard also resulted in differences in the timing of recognition of contract costs, such as sales commissions.    

The Company has finalized the adoption of the standard and product revenue was $113.1 million and $134.6 million for fiscal years ended December 31, 2017 and 2016, respectively, and subscription and support revenue was $40.4 million and $33.3 million for fiscal years ended December 31, 2017 and 2016, respectively. The adoption of the standard resulted in a decrease in total deferred revenue of $3.3 million as of December 31, 2017, driven by the Company's recognition in the period of revenue related to stocking distributors upon shipment and also the removal of the limitation on contingent revenue accelerating revenue recognition for certain contracts. The adoption of the standard resulted in a decrease of $0.3 million in capitalized contract costs as of December 31, 2017. The adoption of this standard did not have a significant impact on the revenue or the related costs and sales commission for the three months ended March 31, 2017. In addition, the adoption of the standard had no significant impact on the provision for income taxes and the net cash provided by (used in) operating, investing, or financing on the Company's consolidated statements of cash flows.

ASC 606 Adoption Impact to Previously Reported Results

The following tables present the impacts to reported results from the Company's adoption of the standard on the Company's condensed consolidated balance sheets and condensed consolidated statements of operations.

Consolidated Balance Sheet (in thousands)
	As of December 31, 2017
	As Reported			Impact of Adoption			As Adjusted
Prepaid expenses and other current assets	$	6,513		$	(117	)	$	6,396
Total current assets	122,594			(117		)	122,477
Other assets	5,124			(224		)	4,900
Total assets	134,612			(341		)	134,271
Deferred revenue, current	34,281			(1,002		)	33,279
Total current liabilities	54,829			(1,002		)	53,827
Deferred revenue, non-current	36,083			(2,322		)	33,761
Total liabilities	112,681			(3,324		)	109,357
Accumulated deficit	(250,406		)	2,983			(247,423		)
Total stockholders' equity	21,931			2,983			24,914
Total liabilities and stockholders' equity	$	134,612		$	(341	)	$	134,271

Consolidated Statements of Operations (in thousands, except per share amounts)
	Three Months Ended March 31, 2017
	As Reported			Impact of  Adoption			As Adjusted
Product revenue	$	26,870		$	97		$	26,967
Subscription and support	9,481			(119		)	9,362
Total Revenue	36,351			(22		)	36,329
Cost of revenue - Product	8,736			79			8,815
Total cost of revenue	11,912			79			11,991
Gross profit	24,439			(101		)	24,338
Sales and marketing	17,439			(2		)	17,437
Total operating expenses	33,286			(2		)	33,284
Operating loss	(8,847		)	(99		)	(8,946		)
Net loss	$	(9,019	)	$	(99	)	$	(9,118	)
Net loss per share, basic and diluted	$	(0.17	)	$	—		$	(0.17	)

Effect on certain items in the Statement of Cash Flows (operating activities, in thousands)
	Three Months Ended March 31, 2017
	As Reported			Impact of Adoption			As Adjusted
Cash flows from operating activities:
Net loss:	$	(9,019	)	$	(99	)	$	(9,118	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Prepaid expenses and other current assets	(638		)	76			(562		)
Other assets	(58		)	1			(57		)
Deferred revenue	(997		)	22			(975		)

Revenues by geographic location, based on the billing address of the respective channel partner’s bill-to location, which reflect the adoption of ASC 606, are as follows: (in thousands)
	Three Months Ended March 31, 2017
	As Reported		Impact of Adoption			As Adjusted
Americas	$	23,918	$	(22	)	$	23,896
Europe, Middle East and Africa	9,832		—			9,832
Asia Pacific	2,601		—			2,601
Total revenues	$	36,351	$	(22	)	$	36,329

Under ASC 606, the Company recognizes revenue as of the time of transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to from those goods or services. As shown on the condensed consolidated statement of operations, the Company derives revenue from two sources: (i) product, which includes hardware and software revenue, and (ii) subscription and support, which includes post-contract customer support (PCS) and software delivered as a service (SaaS).

Beginning with its first quarter, fiscal year 2018, the Company follows the following five-step approach in recognizing revenue:

• Identification of the contract, or contracts, with a customer - A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which the Company bases on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

• Identification of the performance obligations in the contract - The Company identifies performance obligations promised in a contract based on the goods or services that the Company will transfer to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or services either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, the Company applies judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract.

• Determination of the transaction price - The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer.

• Allocation of the transaction price to the performance obligations in the contract - If the contract contains a single performance obligation, the Company allocates the entire transaction price to the single performance obligation. The Company allocates the transaction price of contracts that contain multiple performance obligations to each performance obligation based on a relative SSP. The Company determines SSP based on the price at which the performance obligation is sold separately. If the Company cannot observe SSP through past transactions, the Company estimates the SSP by taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

• Recognition of revenue when, or as, we satisfy a performance obligation- The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. The Company recognizes revenue at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.

Revenue Recognition

The Company’s product revenue consists of sales to distributors, and value-added resellers, or VARs and an OEM partner. The Company considers purchase orders such distributors, VARs and OEM partner issue to the Company, which are in some cases governed by master sales agreements, to be the Company's contracts with such customers, as such documents provide enforceable rights and obligations between the Company and distributor, VAR or OEM partner. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer goods or services to be the identified performance obligation. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company allocates the transaction price to each distinct performance obligation based on its respective and relative standalone selling price. The Company recognizes revenue when control of the product or service is transferred to the customer (i.e., when the Company has met its performance obligation is satisfied). Further, in determining whether control has transferred, the Company considers if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer.

The Company makes sales of products to most distributors under terms allowing certain price adjustments and limited rights of return (known as “stock rotation”) of the Company’s products held in their inventory. The Company recognizes revenue from sales to distributors upon the transfer of control of the product to the distributor. Frequently, distributors need to sell product at a discounted price lower than the standard distribution price in order to win business. After the Company verifies that the distributor had obtained the Company's pre-approval for the discount claim, the Company may issue a credit memo to the distributor representing a rebate of the amount of the discount. In determining the transaction price, the Company considers these price adjustments to be variable consideration. The Company estimates such price adjustments using the expected-value method based on an analysis of actual credit claims and at the distributor level, over a period of time the Company considers adequate to account for current pricing and business trends. Historically, actual price adjustments relative to those the Company estimates and includes when determining the transaction price have not materially differed. Stock rotation rights provide distributor with the ability to return certain specified amounts of inventory. Stock rotation adjustments are an additional form of variable consideration which the Company also estimates using the expected-value method based on historical return rates. Historically, distributor stock rotation adjustments have not been material.

The Company makes sales to certain distributors, VARs and its OEM partner under terms that do not include rights of return or price concessions after the product is shipped. Accordingly, upon application of steps one through five above, the Company recognizes product revenue is recognized upon shipment and transfer of control.

The Company generally provides a limited lifetime warranty that its products will substantially conform to the published specifications. The Company limits its liability to either a credit equal to the purchase price or replacement of the defective part. The Company does not consider activities related to such warranty a separate performance obligation.

Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 30 to 90 days. In instances where the timing of the Company's revenue recognition differs from the timing of its invoicing, the Company has determined that its contracts generally do not include a significant financing component.

The Company records accounts receivable at the invoiced amount, net of an allowance for doubtful accounts. The Company recognizes a receivable in the period the Company deliver goods or provide services or when its right to consideration is unconditional.

Significant Judgments

The Company's contracts with customers often include promises to transfer multiple products and services to a customer. The Company may exercise significant judgment when determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together. The Company may also exercise judgment to determine whether the software license is considered distinct and accounted for separately, or not distinct and accounted for together with the hardware and recognized upon transfer of control.

The Company may further require judgment to determine the SSP for each distinct performance obligation. The Company determines SSP for the purposes of allocating the arrangement, primarily based on historical transaction pricing. The Company segregates historical transactions based on its pricing model and go-to-market strategy, which includes factors such as type of sales channel (VAR, OEM or distributor), the geographies in which the Company sells its products and services (domestic or international) and offering type (product series, software subscriptions and level of support for PCS).

Disaggregation of Revenue

Product Revenue - The Company’s product revenue consists of revenue from the sale of the Company’s hardware products, which each contain embedded software related to the Company's proprietary operating system that is not considered to be distinct in the context of the contract, HiveOS. Therefore, the Company considers its hardware appliances together with related embedded HiveOS software (collectively, “the hardware”) as a single performance obligation. The Company transfers these items to the customer concurrently. The Company recognizes hardware revenue upon transfer of control to its customers, which occurs upon shipment. The Company’s product revenue includes the sales of software licenses of HiveManager, a license-based unified networking management system, which consists of the purchase of a perpetual license of the HiveManager software. The Company generally recognizes revenue from its software licenses upon transfer of control to its customers.

Subscription and Support Revenue - The Company’s subscription and support revenue consists of revenue from SaaS and PCS arrangements. SaaS arrangements with customers do not provide the right to take possession of the software at any time during the hosting period and have a defined contract term. PCS arrangements include software updates, access to technical support personnel, and expedited replacement of defective hardware products. Each of the promised services is distinct in the context of the contract as the services are not inputs to a combined output for which the Company provides any significant integration service, the provision of each service does not significantly modify or customize the other, and the Company could provide each service independently of the other. Though the Company has identified that each of the performance obligations are distinct, as each of the performance obligations represents a series of distinct services that have the same pattern of transfer (stand ready obligations) and the same measure of progress of transfer (days of service) the Company will account for the all series as a single performance obligation. The Company recognizes revenue from SaaS and PCS arrangements on a straight-line basis over the service contract term, which is typically one, three or five years. The contract term typically commences upon transfer of control of the corresponding products to our customer.

See the condensed consolidated statement of operations for the Company's product revenue and subscription and support revenue amounts for the three months ended March 31, 2018 and 2017, respectively.

Costs to Obtain and Fulfill a Contract

The Company capitalizes certain contract acquisition costs consisting primarily of commissions paid and the related payroll taxes when customer contracts are signed. The Company capitalizes commission expenses earned by sales personnel and the related payroll taxes that are incremental to obtaining customer contracts. The Company amortizes deferred sales commission amounts based on the expected future revenue streams under the customer contracts. The Company includes amortization of deferred sales commissions in sales and marketing expense in the accompanying consolidated statements of operations. The Company classifies deferred commissions as current or non-current based on the timing of when the Company expects to recognize the expense. The Company periodically reviews these costs for impairment.

The Company records deferred revenue when it invoices the customer, collection is probable, and the associated revenue has not yet been earned. The current portion of deferred revenue represents the amounts the Company expects to be recognized as revenue within one year of the condensed consolidated balance sheet date. See Note 3, Consolidated Balance Sheet Components, for the changes in the deferred revenue and deferred commissions during the three months ended March 31, 2018 and 2017, respectively.

Contracted-but-not-recognized revenue

The Company's contracted but not invoiced performance obligations do not include the option for its customers to cancel. The Company's revenue allocated to remaining performance obligations represents contractedrevenue that the Company has not yet recognized (“contracted not recognized”), which includes deferred revenue and non-cancelable amounts that the Company will invoice and recognize as revenue in future periods. Contracted-but-not-recognized revenue was $72.3 million as of March 31, 2018, of which the Company expects to recognize approximately 53% of the revenue over the next 12 months and the remainder thereafter.

Other Recently Adopted Accounting Pronouncements

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments, to clarify certain aspects of ASU No. 2016-01. We adopted these standards effective January 1, 2018. The Company's adoption of these standards did not have a material impact on the Company's financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which provides guidance to decrease the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company adopted ASU 2016-15 in the first quarter of 2018. The Company's adoption of this standard did not have a material impact on the Company's financial statements.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the lease accounting requirements in Topic 840. This standard requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The standard also requires qualitative and quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities, including the Company's significant judgments and changes in judgments. This standard is effective beginning in fiscal year 2019. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. An impairment charge will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The standard is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company plans to adopt this standard in 2021 when it becomes effective.

Concentrations of Credit Risk and Significant Customers

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. The Company maintains cash equivalents in money market funds. The Company maintains short-term investments in U.S. treasuries, corporate securities, and commercial paper.

The Company sells its products primarily to channel partners, which include value-added resellers, or VARs, distributors, Managed Service Providers, or MSPs, and Original Equipment Manufacturers, or OEMs. The Company’s accounts receivable are typically unsecured and are derived from revenue earned from customers located in the Americas, Europe, the Middle East and Africa, and Asia Pacific. The Company performs ongoing credit evaluations to determine customer credit, but generally does not require collateral from its customers. The Company maintains reserves for estimated credit losses and these losses have historically been within management’s expectations. 

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Adoption of ASC 606

The following tables present the impacts to reported results from the Company's adoption of the standard on the Company's condensed consolidated balance sheets and condensed consolidated statements of operations.

Consolidated Balance Sheet (in thousands)
	As of December 31, 2017
	As Reported			Impact of Adoption			As Adjusted
Prepaid expenses and other current assets	$	6,513		$	(117	)	$	6,396
Total current assets	122,594			(117		)	122,477
Other assets	5,124			(224		)	4,900
Total assets	134,612			(341		)	134,271
Deferred revenue, current	34,281			(1,002		)	33,279
Total current liabilities	54,829			(1,002		)	53,827
Deferred revenue, non-current	36,083			(2,322		)	33,761
Total liabilities	112,681			(3,324		)	109,357
Accumulated deficit	(250,406		)	2,983			(247,423		)
Total stockholders' equity	21,931			2,983			24,914
Total liabilities and stockholders' equity	$	134,612		$	(341	)	$	134,271

Consolidated Statements of Operations (in thousands, except per share amounts)
	Three Months Ended March 31, 2017
	As Reported			Impact of  Adoption			As Adjusted
Product revenue	$	26,870		$	97		$	26,967
Subscription and support	9,481			(119		)	9,362
Total Revenue	36,351			(22		)	36,329
Cost of revenue - Product	8,736			79			8,815
Total cost of revenue	11,912			79			11,991
Gross profit	24,439			(101		)	24,338
Sales and marketing	17,439			(2		)	17,437
Total operating expenses	33,286			(2		)	33,284
Operating loss	(8,847		)	(99		)	(8,946		)
Net loss	$	(9,019	)	$	(99	)	$	(9,118	)
Net loss per share, basic and diluted	$	(0.17	)	$	—		$	(0.17	)

Effect on certain items in the Statement of Cash Flows (operating activities, in thousands)
	Three Months Ended March 31, 2017
	As Reported			Impact of Adoption			As Adjusted
Cash flows from operating activities:
Net loss:	$	(9,019	)	$	(99	)	$	(9,118	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Prepaid expenses and other current assets	(638		)	76			(562		)
Other assets	(58		)	1			(57		)
Deferred revenue	(997		)	22			(975		)

Percentage of Revenue from Individual Customers

The percentages of revenue from a consolidated group of entities (Distributor A and Distributor B) greater than 10% of total consolidated revenue were as follows:

	Three Months Ended March 31,
	2018		2017
			(As Adjusted)
Distributor A	17.2	%	15.1	%
Distributor B	35.1	%	19.6	%

The percentages of receivables from Distributor A and Distributor B greater than 10% of total consolidated accounts receivable were as follows:

	March 31,		December 31,
	2018		2017
Distributor A	22.9	%	27.9	%
Distributor B	32.0	%	29.4	%

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FAIR VALUE DISCLOSURE (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of financial assets and liabilities measured at fair value on a recurring basis

The components of the Company’s Level 1 and Level 2 assets are as follows:

	March 31, 2018
	Amortized Cost		Gross Unrealized Gain (Loss)			Estimated Fair Value		Cash equivalents		Short-term investments
	(in thousands)
Level 1:
Money market funds	6,937		—			6,937		6,937		—
	$	6,937	$	—		$	6,937	$	6,937	$	—
Level 2:
U.S. treasuries	9,411		(13		)	9,398		—		9,398
Corporate securities	19,911		(56		)	19,855		—		19,855
Commercial paper	29,133		—			29,133		1,998		27,135
	$	58,455	$	(69	)	$	58,386	$	1,998	$	56,388
Total	$	65,392	$	(69	)	$	65,323	$	8,935	$	56,388

	December 31, 2017
	Amortized Cost		Gross Unrealized Gain (Loss)			Estimated Fair Value		Cash equivalents		Short-term investments
	(in thousands)
Level 1:
Money market funds	7,538		—			7,538		7,538		—
	$	7,538	$	—		$	7,538	$	7,538	$	—
Level 2:
U.S. treasuries	9,480		(3		)	9,477		—		9,477
Corporate securities	15,293		(27		)	15,266		—		15,266
Commercial paper	32,932		—			32,932		—		32,932
	$	57,705	$	(30	)	$	57,675	$	—	$	57,675
Total	$	65,243	$	(30	)	$	65,213	$	7,538	$	57,675

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CONSOLIDATED BALANCE SHEET COMPONENTS (Tables)

3 Months Ended

Mar. 31, 2018

Balance Sheet Related Disclosures [Abstract]

Schedule of Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

	March 31,		December 31,
	2018		2017
			(As Adjusted)
	(in thousands)
Deferred sales commissions, current portion	$	3,100	$	3,072
Prepaid expenses	2,543		2,543
Other	562		781
Total prepaid expenses and other current assets	$	6,205	$	6,396

Schedule of Property and Equipment

Property and equipment, net consists of the following:

		March 31,			December 31,
	Estimated Useful Lives	2018			2017
		(in thousands)
Computer and other equipment	3 years	$	1,714		$	1,713
Manufacturing, research and development laboratory equipment	3 years	4,888			4,630
Software	2 to 5 years	9,230			8,182
Office furniture and equipment	3 to 7 years	2,061			2,061
Leasehold improvements	shorter of useful life or lease term	1,025			1,017
Property and equipment, gross		18,918			17,603
Less: Accumulated depreciation and amortization		(11,930		)	(11,222		)
Property and equipment, net		$	6,988		$	6,381

Schedule of Other Assets

Other assets consist of the following:

	March 31,		December 31,
	2018		2017
			(As Adjusted)
	(in thousands)
Deferred sales commissions, non-current portion	$	2,985	$	2,947
Investment in privately held company	1,500		1,500
Other	524		453
Total other assets	$	5,009	$	4,900

Schedule of Deferred Commission Expense

Significant changes in the balance of total deferred commission (contract asset) during the three months ended March 31, 2018 and March 31, 2017 are as follows:

	Three Months Ended March 31,
	2018			2017
				(As Adjusted)
	(in thousands)
Beginning balance	$	6,019		$	5,766
Recognized	(3,018		)	(3,224		)
Additions	3,084			3,416
Ending balance	$	6,085		$	5,958
Current portion	$	3,100		$	2,928
Non-current portion	$	2,985		$	3,030

Schedule of Accrued Liabilities

Accrued liabilities consist of the following:

	March 31,		December 31,
	2018		2017
	(in thousands)
Accrued compensation	$	6,691	$	6,971
Accrued expenses and other liabilities	903		1,385
Warranty liability, current portion	217		246
Total accrued liabilities	$	7,811	$	8,602

Summary of Deferred Revenue

Significant changes in the balance of total deferred revenue (contract liability) during the three months ended March 31, 2018 and March 31, 2017 are as follows:

	Three Months Ended March 31,
	2018			2017
				(As Adjusted)
	(in thousands)
Beginning balance	$	67,040		$	63,239
Recognized	(10,701		)	(9,362		)
Additions	11,539			8,387
Ending balance	$	67,878		$	62,264
Current portion	$	33,885		$	30,326
Non-current portion	$	33,993		$	31,938

Schedule of Product Warranty Liability

The following table summarizes the activity related to the Company’s accrued liability for estimated future warranty:

	Three Months Ended March 31,
	2018			2017
	(in thousands)
Beginning balance	$	577		$	975
Charges to operations	126			121
Obligations fulfilled	(153		)	(197		)
Changes in existing warranty	(4		)	(42		)
Total product warranties	$	546		$	857
Current portion	$	217		$	516
Non-current portion	$	329		$	341

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COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Lease Payment by Year Under Operating Leases

Future minimum lease payments by year under operating leases as of March 31, 2018 are as follows:

	Amount
Year Ending December 31,	(in thousands)
2018 (remaining nine months)	$	1,185
2019	1,471
2020	1,103
2021	1,090
2022	999
Thereafter	445
Total	$	6,293

Schedule of Future Minimum Lease Payments for Capital Leases

Future minimum lease payments by year under capital lease obligations as of March 31, 2018 are as follows:

	Amount
Year Ending December 31,	(in thousands)
2018 (remaining nine months)	$	141
2019	178
2020	172
2021	170
2022	162
Thereafter	83
Total	$	906

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STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Schedule of shares reserved for future issuance

As of March 31, 2018, the Company had the following reserved shares of common stock for future issuance:

	March 31,
	2018
Common stock reserved for future grant under the 2014 Equity Incentive Plan	11,033,424
Common stock reserved for future purchase under the 2014 Employee Stock Purchase Plan	2,169,988
Options and Restricted Stock Units issued and outstanding	7,559,655
Total reserved shares of common stock for future issuance	20,763,067

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STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of total shares available for grant

The following table summarizes the total number of shares available for grant under the 2014 Plan as of March 31, 2018:

	Shares Available for Grant
Balance, December 31, 2017	7,997,691
Authorized	2,708,575
Options granted	—
Options canceled	94,449
Awards granted	(304,188	)
Awards canceled	536,897
Balance, March 31, 2018	11,033,424

Summary of shares available for grant and outstanding stock option activity

The following table summarizes the information about outstanding stock option activity:

	Options Outstanding
	Number of Shares Underlying Outstanding Options		Weighted Average Exercise  Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
						(in thousands)
Balance, December 31, 2017	4,247,911		$	6.03	5.80	$	4,472
Options granted	—		—
Options exercised	(7,125	)	1.22
Options canceled	(94,449	)	6.43
Balance, March 31, 2018	4,146,337		$	6.03	5.54	$	2,602
Options exercisable, March 31, 2018	3,607,547		$	5.94	5.24	$	2,602

Summary of RSU activity and related information

The following is a summary of the Company’s RSU grant activity and related information for the three months ended March 31, 2018:

	Restricted Stock Units Outstanding
	Shares		Weighted-Average Grant-Date Fair Value Per Share
Balance, December 31, 2017	4,089,067		$	6.47
Awards granted	304,188		4.30
Awards vested	(699,069	)	5.29
Awards canceled	(280,868	)	5.45
Balance, March 31, 2018	3,413,318		$	5.32

Weighted average assumptions used to value employee stock purchase rights

Weighted-average assumptions to value employee stock purchase rights under the Black-Scholes model were as follows:

	Three Months Ended March 31,
	2018	2017
ESPP purchase rights:
Expected term (in years)	0.50 - 1.00	0.50 - 1.00
Expected volatility	46% - 48%	34% - 39%
Risk free interest rate	1.45% - 1.62%	0.60% - 0.82%

Schedule of stock-based awards granted in the consolidated statements of operations

The Company recognized total stock-based compensation for stock-based awards in the condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
	2018		2017
	(in thousands)
Cost of revenue	$	246	$	271
Research and development	1,046		688
Sales and marketing	997		1,294
General and administrative	1,382		1,300
Total stock-based compensation	$	3,671	$	3,553

The following table presents stock-based compensation expense by award-type:

	Three Months Ended March 31,
	2018		2017
	(in thousands)
Stock Options	$	541	$	883
Restricted Stock Units	2,792		2,270
Employee Stock Purchase Plan	338		400
Total stock-based compensation	$	3,671	$	3,553

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NET LOSS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2018

Earnings Per Share [Abstract]

Schedule of Calculation of Basic and Diluted Net Income (Loss) per Share

The following table presents the computation of basic and diluted net loss per share:

	Three Months Ended March 31,
	2018			2017
				(As Adjusted)
	(in thousands, except for share and per share data)
Numerator:
Net loss	$	(7,317	)	$	(9,118	)
Denominator:
Weighted-average shares used to compute net loss per share, basic and diluted	54,332,767			52,439,039
Net loss per share:
Basic and diluted	$	(0.13	)	$	(0.17	)

Schedule of Antidilutive Securities Excluded from the Computation of Diluted Net Loss Per Share

The Company excluded the following period-end outstanding common stock equivalents from its computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

	As of March 31,
	2018	2017
Shares of common stock issuable under the Equity Incentive Plan	7,559,655	9,465,157
Employee Stock Purchase Plan	456,426	470,217
Total	8,016,081	9,935,374

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SEGMENT INFORMATION (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Schedule of total revenue by geographic region

The following table represents the Company's revenue based on the billing address of the respective channel partners:

	Three Months Ended March 31,
	2018		2017
			(As Adjusted)
	(in thousands)
Americas	$	20,830	$	23,896
Europe, Middle East and Africa	11,900		9,832
Asia Pacific	3,037		2,601
Total revenues	$	35,767	$	36,329

Schedule of property and equipment, net, by location

Property and equipment, net by location is summarized as follows:  

	March 31,		December 31,
	2018		2017
	(in thousands)
United States	$	6,366	$	5,323
People's Republic of China	512		875
United Kingdom	110		183
Total property and equipment, net	$	6,988	$	6,381

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Adoption of New Accounting Pronouncements (Details) - USD ($) $ in Thousands	3 Months Ended			12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017		Dec. 31, 2017	Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Product revenue	$ 25,066	$ 26,967	[1]	$ 113,100	$ 134,600
Subscription and support revenue	10,701	9,362	[1]	40,400	33,300
Deferred revenue	67,878	62,264		67,040	63,239
Capitalized contract costs	6,085	5,958		6,019	$ 5,766
Contracted-but-not-yet-recognized Revenue	$ 72,300
Contracted-but-not-recognized revenue expected to be recognized over next 12 months	53.00%
Restatement Adjustment | Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Product revenue		97
Subscription and support revenue		$ (119)
Deferred revenue				(3,300)
Capitalized contract costs				$ (300)

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017		Mar. 31, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Prepaid expenses and other current assets	$ 6,205	$ 6,396	[1]
Total current assets	117,109	122,477	[1]
Other assets	5,009	4,900	[1]
Total assets	129,619	134,271	[1]
Deferred revenue, current	33,885	33,279	[1]	$ 30,326
Total current liabilities	73,716	53,827	[1]
Deferred revenue, non-current	33,993	33,761	[1]	$ 31,938
Total liabilities	109,443	109,357	[1]
Accumulated deficit	(254,740)	(247,423)	[1]
Total stockholders’ equity	20,176	24,914	[1]
Total liabilities and stockholders’ equity	$ 129,619	134,271	[1]
As Reported
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Prepaid expenses and other current assets		6,513
Total current assets		122,594
Other assets		5,124
Total assets		134,612
Deferred revenue, current		34,281
Total current liabilities		54,829
Deferred revenue, non-current		36,083
Total liabilities		112,681
Accumulated deficit		(250,406)
Total stockholders’ equity		21,931
Total liabilities and stockholders’ equity		134,612
Restatement Adjustment | Accounting Standards Update 2014-09
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Prepaid expenses and other current assets		(117)
Total current assets		(117)
Other assets		(224)
Total assets		(341)
Deferred revenue, current		(1,002)
Total current liabilities		(1,002)
Deferred revenue, non-current		(2,322)
Total liabilities		(3,324)
Accumulated deficit		2,983
Total stockholders’ equity		2,983
Total liabilities and stockholders’ equity		$ (341)

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Consolidated Statements of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended			12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017		Dec. 31, 2017	Dec. 31, 2016
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Product revenue	$ 25,066	$ 26,967	[1]	$ 113,100	$ 134,600
Subscription and support	10,701	9,362	[1]	$ 40,400	$ 33,300
Total revenue	35,767	36,329	[1]
Cost of revenue - Product	8,671	8,815	[1]
Total cost of revenue	12,075	11,991	[1]
Gross profit	23,692	24,338	[1]
Sales and marketing	15,670	17,437	[1]
Total operating expenses	30,903	33,284	[1]
Operating loss	(7,211)	(8,946)	[1]
Net loss	$ (7,317)	$ (9,118)	[1]
Net loss per share, basic and diluted (USD per share)	$ (0.13)	$ (0.17)	[1]
As Reported
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Product revenue		$ 26,870
Subscription and support		9,481
Total revenue		36,351
Cost of revenue - Product		8,736
Total cost of revenue		11,912
Gross profit		24,439
Sales and marketing		17,439
Total operating expenses		33,286
Operating loss		(8,847)
Net loss		$ (9,019)
Net loss per share, basic and diluted (USD per share)		$ (0.17)
Restatement Adjustment | Accounting Standards Update 2014-09
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Product revenue		$ 97
Subscription and support		(119)
Total revenue		(22)
Cost of revenue - Product		79
Total cost of revenue		79
Gross profit		(101)
Sales and marketing		(2)
Total operating expenses		(2)
Operating loss		(99)
Net loss		$ (99)
Net loss per share, basic and diluted (USD per share)		$ 0.00

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Statements of Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net loss	$ (7,317)	$ (9,118)	[1]
Prepaid expenses and other current assets	191	(562)	[2]
Other assets	(109)	(57)	[2]
Deferred revenue	$ 838	(975)	[2]
As Reported
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net loss		(9,019)
Prepaid expenses and other current assets		(638)
Other assets		(58)
Deferred revenue		(997)
Restatement Adjustment | Accounting Standards Update 2014-09
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net loss		(99)
Prepaid expenses and other current assets		76
Other assets		1
Deferred revenue		$ 22

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

[2] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1).

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenues by Geographic Location (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Disaggregation of Revenue [Line Items]
Total revenues	$ 35,767	$ 36,329	[1]
Americas
Disaggregation of Revenue [Line Items]
Total revenues	20,830	23,896
Europe, Middle East and Africa
Disaggregation of Revenue [Line Items]
Total revenues	11,900	9,832
Asia Pacific
Disaggregation of Revenue [Line Items]
Total revenues	$ 3,037	2,601
As Reported
Disaggregation of Revenue [Line Items]
Total revenues		36,351
As Reported | Americas
Disaggregation of Revenue [Line Items]
Total revenues		23,918
As Reported | Europe, Middle East and Africa
Disaggregation of Revenue [Line Items]
Total revenues		9,832
As Reported | Asia Pacific
Disaggregation of Revenue [Line Items]
Total revenues		2,601
Accounting Standards Update 2014-09 | Restatement Adjustment
Disaggregation of Revenue [Line Items]
Total revenues		(22)
Accounting Standards Update 2014-09 | Restatement Adjustment | Americas
Disaggregation of Revenue [Line Items]
Total revenues		(22)
Accounting Standards Update 2014-09 | Restatement Adjustment | Europe, Middle East and Africa
Disaggregation of Revenue [Line Items]
Total revenues		0
Accounting Standards Update 2014-09 | Restatement Adjustment | Asia Pacific
Disaggregation of Revenue [Line Items]
Total revenues		$ 0

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration of Credit Risk and Significant Customers (Details) - Customer Concentration Risk	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2016
VAD A | Sales
Revenue, Major Customer [Line Items]
Significant customer, as a percentage	17.20%	15.10%
VAD A | Accounts Receivable
Revenue, Major Customer [Line Items]
Significant customer, as a percentage	22.90%		27.90%
VAD B | Sales
Revenue, Major Customer [Line Items]
Significant customer, as a percentage	35.10%	19.60%
VAD B | Accounts Receivable
Revenue, Major Customer [Line Items]
Significant customer, as a percentage	32.00%		29.40%

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FAIR VALUE DISCLOSURE (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	$ 8,935	$ 7,538
Total cash equivalents and short-term investments, Amortized Cost	65,392	65,243
Total cash equivalents and short-term investments, Gross Unrealized Gain (Loss)	(69)	(30)
Total cash equivalents and short-term investments, Fair Value	65,323	65,213
Short-term Investments	56,388	57,675	[1]
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Amortized Cost	6,937	7,538
Cash equivalents	6,937	7,538
Level 1 | Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, Amortized Cost	6,937	7,538
Cash equivalents	6,937	7,538
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	1,998	0
Short-term investments	58,386	57,675
Securities, Amortized cost	58,455	57,705
Securities, Gross Unrealized Gain (Loss)	(69)	(30)
Short-term Investments	56,388	57,675
Level 2 | U.S. treasuries
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	0
Level 2 | Commercial Paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	1,998
Level 2 | U.S. treasuries
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	9,398	9,477
Securities, Amortized cost	9,411	9,480
Securities, Gross Unrealized Gain (Loss)	(13)	(3)
Short-term Investments	9,398	9,477
Level 2 | Corporate securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	19,855	15,266
Securities, Amortized cost	19,911	15,293
Securities, Gross Unrealized Gain (Loss)	(56)	(27)
Short-term Investments	19,855	15,266
Level 2 | Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	29,133	32,932
Securities, Amortized cost	29,133	32,932
Securities, Gross Unrealized Gain (Loss)	0	0
Short-term Investments	$ 27,135	$ 32,932

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)

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CONSOLIDATED BALANCE SHEET COMPONENTS - Prepaid expenses and other current assets (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Prepaid expenses and other current assets [Abstract]
Deferred Sales Commission	$ 3,100	$ 3,072
Prepaid expenses	2,543	2,543
Other	562	781
Prepaid expenses and other current assets	$ 6,205	$ 6,396	[1]

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)

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CONSOLIDATED BALANCE SHEET COMPONENTS - Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Property and Equipment [Line Items]
Property and equipment, gross	$ 18,918		$ 17,603
Less: Accumulated depreciation and amortization	(11,930)		(11,222)
Property and equipment, net	6,988		6,381	[1]
Depreciation and amortization expense	700	$ 800
Assets under capital lease	1,200		1,200
Related accumulated depreciation	500		400
Computer and other equipment
Property and Equipment [Line Items]
Property and equipment, gross	$ 1,714		1,713
Estimated useful lives	3 years
Manufacturing, research and development laboratory equipment
Property and Equipment [Line Items]
Property and equipment, gross	$ 4,888		4,630
Estimated useful lives	3 years
Software
Property and Equipment [Line Items]
Property and equipment, gross	$ 9,230		8,182
Estimated useful lives	5 years
Software | Minimum
Property and Equipment [Line Items]
Estimated useful lives	2 years
Software | Maximum
Property and Equipment [Line Items]
Estimated useful lives	5 years
Office furniture and equipment
Property and Equipment [Line Items]
Property and equipment, gross	$ 2,061		2,061
Office furniture and equipment | Minimum
Property and Equipment [Line Items]
Estimated useful lives	3 years
Office furniture and equipment | Maximum
Property and Equipment [Line Items]
Estimated useful lives	7 years
Leasehold improvements
Property and Equipment [Line Items]
Property and equipment, gross	$ 1,025		$ 1,017

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)

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CONSOLIDATED BALANCE SHEET COMPONENTS Other assets (Details) - USD ($) $ in Thousands	1 Months Ended
	Jan. 31, 2016	Mar. 31, 2018	Dec. 31, 2017
Investment [Line Items]
Deferred sales commissions, non-current portion		$ 2,985	$ 2,947
Investment in privately held company		1,500	1,500
Other		524	453
Total other assets		$ 5,009	$ 4,900	[1]
Convertible Note [Member]
Investment [Line Items]
Convertible note	$ 1,500

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)

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CONSOLIDATED BALANCE SHEET COMPONENTS - Deferred Commission Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Capitalized Contract Cost [Roll Forward]
Beginning balance	$ 6,019	$ 5,766
Recognized	(3,018)	(3,224)
Additions	3,084	3,416
Ending balance	6,085	5,958
Current portion	3,100	2,928
Non-current portion	$ 2,985	$ 3,030
Deferred commission expense expected to be recognized over next twelve months (percent)	51.00%

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CONSOLIDATED BALANCE SHEET COMPONENTS - Accrued Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017		Mar. 31, 2017
Accrued Liabilities, Current [Abstract]
Accrued compensation	$ 6,691	$ 6,971
Accrued expenses and other liabilities	903	1,385
Warranty liability, current portion	217	246		$ 516
Total accrued liabilities	$ 7,811	$ 8,602	[1]

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)

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CONSOLIDATED BALANCE SHEET COMPONENTS - Deferred Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	[1]
Movement in Deferred Revenue [Roll Forward]
Beginning balance	$ 67,040	$ 63,239
Recognized	(10,701)	(9,362)
Additions	11,539	8,387
Ending balance	67,878	62,264
Current portion	33,885	30,326	$ 33,279
Non-current portion	$ 33,993	$ 31,938	$ 33,761
Deferred revenue expected to be recognized over next 12 months (percent)	50.00%

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)

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CONSOLIDATED BALANCE SHEET COMPONENTS - Warranty Liability (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Movement in Standard and Extended Product Warranty Accrual, Increase (Decrease) [Roll Forward]
Beginning balance	$ 577	$ 975
Charges to operations	126	121
Obligations fulfilled	(153)	(197)
Changes in existing warranty	(4)	(42)
Total product warranties	546	857
Current portion	217	516	$ 246
Non-current portion	$ 329	$ 341

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DEBT (Details)	1 Months Ended	3 Months Ended
	Jan. 31, 2016	Mar. 31, 2018 USD ($)	Mar. 31, 2017	Dec. 31, 2017 USD ($)	[1]
Debt Instrument [Line Items]
Line of Credit Facility, Expiration Period		2 years
Debt, non-current		$ 0		$ 20,000,000
Revolving Credit Facility
Debt Instrument [Line Items]
Required liquidity ratio		1.25
Requitred minimum cash balance as of the last day of each month		$ 35,000,000
Potential increase in interest rate		5.00%
Maximum borrowing capacity		$ 20,000,000.0
Debt, non-current		$ 20,000,000
Revolving Credit Facility | Weighted Average
Debt Instrument [Line Items]
Interest rate during the period		3.28%	2.57%
Revolving Credit Facility | Prime Rate
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%
Revolving Credit Facility | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate	1.75%

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)

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COMMITMENTS AND CONTINGENCIES - Operating Leases and Purchase Commitments (Details) $ in Thousands	Mar. 31, 2018 USD ($)
Operating Leases, Future Minimum Payments [Abstract]
2018 (remaining nine months)	$ 1,185
2019	1,471
2020	1,103
2021	1,090
2022	999
Thereafter	445
Total future minimum lease payments	$ 6,293

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COMMITMENTS AND CONTINGENCIES Capital Lease Obligations (Details) $ in Thousands	Mar. 31, 2018 USD ($)
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2018 (remaining nine months)	$ 141
2019	178
2020	172
2021	170
2022	162
Thereafter	83
Total	$ 906

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COMMITMENTS AND CONTINGENCIES - Narrative (Details) $ in Millions	1 Months Ended	3 Months Ended
	Jan. 31, 2018 lawsuit officer	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Rent expense		$ 0.5	$ 0.5
Number of class action lawsuits filed | lawsuit	3
Inventories
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Amount of manufacturing commitment		$ 3.9	$ 6.0
Shareholder Class Action
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Number of Company officers named in lawsuits | officer	2

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STOCKHOLDERS' EQUITY - Common Stock Reserved for Future Issuance (Details) - shares	Mar. 31, 2018	Dec. 31, 2017
Class of Stock [Line Items]
Total reserved shares of common stock for future issuance	20,763,067
Employee Stock Options and Restricted Stock Units
Class of Stock [Line Items]
Options and Restricted Stock Units issued and outstanding	7,559,655
2014 Equity Incentive Plan
Class of Stock [Line Items]
Shares reserved for issuance under share-based compensation plan	11,033,424	7,997,691
Employee Stock Purchase Plan
Class of Stock [Line Items]
Shares reserved for issuance under share-based compensation plan	2,169,988

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STOCKHOLDERS' EQUITY - Stock Repurchase Program (Details) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended		3 Months Ended		26 Months Ended
	Nov. 30, 2017	Aug. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Feb. 29, 2016
Equity [Abstract]
Amount authorized under stock repurchase program						$ 10.0
Stock repurchase program expiration date		Jun. 30, 2018
Additional shares authorized for repurchase	20,000,000
Number of shares repurchased in period			0	0	1,361,243
Value of shares repurchased in period					$ 6.2
Average cost of repurchased shares (in usd per share)					$ 4.57
Remaining amount available for repurchases under the program			$ 13.8		$ 13.8

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STOCK-BASED COMPENSATION - Equity Incentive Plan (Details) - 2014 Equity Incentive Plan - shares	1 Months Ended	3 Months Ended
	Jan. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Increase to shares of common stock reserved for issuance	2,708,575	2,708,575
Shares reserved for issuance under share-based compensation plan		11,033,424	7,997,691

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STOCK-BASED COMPENSATION - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended		12 Months Ended
	Jan. 31, 2018	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2016
Shares Available for Grant
Options granted (shares)		0
Options canceled (shares)		94,449
Number of Shares
Beginning balance (shares)	4,247,911	4,247,911
Options granted (shares)		0
Options exercised (shares)		(7,125)
Options forfeited (shares)		(94,449)
Ending balance (shares)		4,146,337
Options Exercisable (shares)		3,607,547
Weighted Average Exercise Price
Beginning balance (in dollars per share)	$ 6.03	$ 6.03
Options granted (in dollars per share)		0.00
Options exercised (in dollars per share)		1.22
Options forfeited (in dollars per share)		6.43
Ending balance (in dollars per share)		6.03
Options exercisable (in dollars per share)		$ 5.94
Weighted Average Remaining Contractual Life
Weighted average remaining contractual life, period start		5 years 6 months 15 days		5 years 9 months 18 days
Weighted average remaining contractual life, period end		5 years 6 months 15 days		5 years 9 months 18 days
Weighted average life, options exercisable		5 years 2 months 27 days
Aggregate Intrinsic Value
Aggregate intrinsic value, period start	$ 4,472	$ 4,472
Aggregate intrinsic value, period end		2,602
Aggregate intrinsic value, options exercisable		2,602
Total intrinsic value of options exercised		0	$ 400
Total grant-date fair value of options		$ 700	$ 4,800
2014 Equity Incentive Plan
Shares Available for Grant
Beginning balance (shares)	7,997,691	7,997,691
Authorized (shares)	2,708,575	2,708,575
Options granted (shares)		0
Options canceled (shares)		94,449
Awards granted (shares)		(304,188)
Awards canceled (shares)		536,897
Ending balance (shares)		11,033,424
Number of Shares
Options granted (shares)		0
Options forfeited (shares)		(94,449)

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STOCK-BASED COMPENSATION - Restricted Stock Units (Details) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended
	Jun. 30, 2017 $ / shares shares	Mar. 31, 2018 USD ($) $ / shares shares	Mar. 31, 2017 USD ($) $ / shares shares
Restricted Stock Units, Weighted Average Grant Date Fair Value [Abstract]
Payment for shares withheld for tax withholdings on vesting of restricted stock units | $		$ (1,080)	$ (326)	[1]
2014 Equity Incentive Plan
Restricted Stock Units, Number of Shares [Roll Forward]
Awards granted		304,188
Awards canceled		(536,897)
Restricted Stock Units (RSUs)
Restricted Stock Units, Number of Shares [Roll Forward]
Beginning balance		4,089,067
Awards granted		304,188
Awards vested		(699,069)
Awards canceled		(280,868)
Ending balance		3,413,318
Restricted Stock Units (RSUs) | 2014 Equity Incentive Plan
Restricted Stock Units, Weighted Average Grant Date Fair Value [Abstract]
Beginning balance (in dollars per share) | $ / shares		$ 6.47
Awards granted (in dollars per share) | $ / shares		4.30	$ 5.00
Awards vested (in dollars per share) | $ / shares		5.29
Awards canceled (in dollars per share) | $ / shares		5.45
Ending balance (in dollars per share) | $ / shares		$ 5.32
Aggregate grant date fair value | $		$ 3,700	$ 4,000
Fair value of shares vested | $		$ 1,300	$ 2,200
Shares repurchased for tax withholdings on vesting of RSUs		256,029	70,368
Payment for shares withheld for tax withholdings on vesting of restricted stock units | $		$ (1,100)	$ (300)
Restricted Stock Units (RSUs) | Vesting period, one year
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		1 year
Restricted Stock Units (RSUs) | Vesting period, three years
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		3 years
PBRSUs | 2014 Equity Incentive Plan
Restricted Stock Units, Number of Shares [Roll Forward]
Awards granted		0
PBRSUs | 2014 Equity Incentive Plan | Common Stock
Restricted Stock Units, Weighted Average Grant Date Fair Value [Abstract]
PBRSU to common stock, conversion ratio		1
Market-Based Restricted Stock Unit | 2014 Equity Incentive Plan
Restricted Stock Units, Number of Shares [Roll Forward]
Awards granted	358,000	0	0
Restricted Stock Units, Weighted Average Grant Date Fair Value [Abstract]
Awards granted (in dollars per share) | $ / shares	$ 4.18
Market-Based Restricted Stock Unit | 2014 Equity Incentive Plan | Common Stock
Restricted Stock Units, Weighted Average Grant Date Fair Value [Abstract]
Market-Based Restricted Stock Unit, Conversion Ratio		1

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1).

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STOCK-BASED COMPENSATION - Employee Stock Purchase Plan (Details) - USD ($)	1 Months Ended	3 Months Ended
	Jan. 31, 2018	Mar. 31, 2018	Mar. 31, 2017
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility, minimum		46.00%	34.00%
Expected volatility, maximum		48.00%	39.00%
Risk free interest rate, minimum		1.45%	0.60%
Risk free interest rate, maximum		1.62%	0.82%
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for issuance under share-based compensation plan		2,169,988
Employee Stock Purchase Plan | ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Increase to shares of common stock reserved for issuance	541,715
Shares reserved for issuance under share-based compensation plan		2,169,988
Offering period, term		1 year
Percent of fair market value of common stock the price at which common stock is purchased		85.00%
Maximum amount any participant may purchase per calendar year		$ 25,000
Maximum number of shares to be purchased per employee in any six-month period		5,000
Stock issued in period			0
Minimum | ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)		6 months	6 months
Maximum | ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)		1 year	1 year

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STOCK-BASED COMPENSATION - Valuation Assumptions (Details) - ESPP	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility, minimum	46.00%	34.00%
Expected volatility, maximum	48.00%	39.00%
Risk free interest rate, minimum	1.45%	0.60%
Risk free interest rate, maximum	1.62%	0.82%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	6 months	6 months
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years)	1 year	1 year

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STOCK-BASED COMPENSATION - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 3,671	$ 3,553	[1]
Employee Stock Option
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	541	883
Unrecognized stock-based compensation expense	$ 1,700
Period of recognition of unrecognized stock-based compensation expense	1 year 2 months 27 days
Restricted Stock Units (RSUs)
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 2,792	2,270
Unrecognized stock-based compensation expense	$ 14,300
Period of recognition of unrecognized stock-based compensation expense	1 year 8 months 19 days
ESPP
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 338	400
Unrecognized stock-based compensation expense	$ 900
Period of recognition of unrecognized stock-based compensation expense	8 months 1 day
Performance-Based Restricted Stock Unit [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 200
Cost of revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	246	271	[1]
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	1,046	688	[1]
Sales and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	997	1,294	[1]
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 1,382	$ 1,300	[1]

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

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NET LOSS PER SHARE - Calculation of Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator:
Net loss	$ (7,317)	$ (9,118)	[1]
Denominator:
Weighted-average shares used to compute net loss per share, basic and diluted	54,332,767	52,439,039	[1]
Basic (in dollars per share)	$ (0.13)	$ (0.17)

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

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NET LOSS PER SHARE - Antidilutive Securities (Details) - shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded from the diluted per share calculation	8,016,081	9,935,374
Shares of common stock issuable under the Equity Incentive Plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded from the diluted per share calculation	7,559,655	9,465,157
Employee Stock Purchase Plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded from the diluted per share calculation	456,426	470,217

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INCOME TAXES (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Income Tax Disclosure [Abstract]
Income tax provision	[1]	$ (58)	$ (97)

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

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SEGMENT INFORMATION (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($) segment	Mar. 31, 2017 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment	1
Number of reportable segments | segment	1
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net revenues	$ 35,767	$ 36,329	[1]
Americas
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net revenues	20,830	23,896
Europe, Middle East and Africa
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net revenues	11,900	9,832
Asia Pacific
Revenues from External Customers and Long-Lived Assets [Line Items]
Total net revenues	3,037	2,601
Geographic Concentration Risk | United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues from sales	$ 19,000	$ 22,000

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition (See Note 1).

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SEGMENT INFORMATION - Property, Plant, and Equipment by Geographic Region (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Segment Reporting Information [Line Items]
Property and equipment, net	$ 6,988	$ 6,381	[1]
United States
Segment Reporting Information [Line Items]
Property and equipment, net	6,366	5,323
People's Republic of China
Segment Reporting Information [Line Items]
Property and equipment, net	512	875
United Kingdom
Segment Reporting Information [Line Items]
Property and equipment, net	$ 110	$ 183

[1] The Company has adjusted certain amounts for the retrospective change in accounting policy for revenue recognition. (See Note 1)