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July 13, 2017

U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549

Attention:     Kathleen Collins
Rebekah Lindsey
Mitchell Austin
Jan Woo

Re:    Aerohive Networks, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2016
Filed February 24, 2017
Form 8-K furnished May 3, 2017
File No. 001-36355


Ladies and Gentlemen:

Aerohive Networks, Inc. (“Aerohive,” “we,” “our,” or the “Company”) submits this letter in response to the comments from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in its letter dated July 5, 2017 (the “Comment Letter”), relating to the above-referenced Annual Report on Form 10-K for fiscal year ended December 31, 2016 and Current Report on Form 8-K furnished on May 3, 2017. For your convenience, we have recited below the Staff’s comments in italicized, bold type and have followed each comment with the Company’s response.

Form 10-K for Fiscal Year Ended December 31, 2016

Business

Customers


U.S. Securities and Exchange Commission
July 13, 2017
Page 2


1.
Please disclose the names of any value-added distributor that accounts for 10% or more of your revenues and discuss the material terms of your agreements with such distributors. On page 74, you disclose that two value-added distributors accounted for 14.9% and 12.2% of your revenues for fiscal 2016. Additionally, on page 8 of your Form 10-Q for the quarterly period ended March 31, 2017, you disclose that a value-added distributor accounted for 19.6% of your revenues for that period. See Item 101(c)(1)(vii) of Regulation S-K.

The Company respectfully advises the Staff that the Company sells its products primarily to channel partners, which include value-added distributors (VADs) and value-added resellers (VARs). The Company ordinarily enters into channel partner agreements in the normal course of business. The VADs and the VARs are the Company’s direct customers and not end-user customers that purchase the Company’s products and services directly or indirectly from such VADs and VARs. With respect to disclosing the names of any channel partner that accounted for 10% or more of the Company’s total revenue in a reported period, the Company respectfully advises the Staff that the Company does not believe that such information is material or helpful to an investor. The percentages the Company provided related to two VADs who stock Company’s products and further sell them to other resellers or end-users. No single reseller or end-user customer accounted for more than 10% of the Company’s total revenue for any reported period.

The Company’s channel partners do not determine the ultimate demand for a particular product; rather, demand is determined by the reseller or the end-user customer through its purchases of the Company’s products. Should any of the channel partners terminate its relationship with the Company, or otherwise experience disruption, voluntary or involuntary, in its ability to sell the Company’s products to resellers, the resellers could purchase the Company’s products directly from the Company or another channel partner that services the respective markets where the Company’s products are being sold. As such, the loss of any individual channel partner, even one accounting for 10% or more of our consolidated revenue in a particular reporting period, would not be expected to have a material adverse effect on the financial condition or operations of the Company or its subsidiaries taken as a whole.

The Company enters into distribution agreements in the normal course of business and has consistent contractual terms with its channel partners in all material respects. The Company believes that the termination of any particular distribution agreement would not be expected to have a material adverse effect on its financial results and that alternative distributors and other distribution channels exist to deliver the Company’s products to its end-customers. Therefore, the Company believes that additional disclosure regarding the identity of its channel partners or the terms of its agreements with the referenced channel partners is neither material to investors nor required to be included in the Company’s periodic reports under Item 101(c)(1)(vii).
  
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources, page 57


U.S. Securities and Exchange Commission
July 13, 2017
Page 3


2.
Please revise your future filings to disclose the factors contributing to significant fluctuations in your measure of Days Sales Outstanding.

The Company advises the Staff that in the event of significant future fluctuations in the Company’s measure of Days Sales Outstanding the Company will disclose in future filings the factors contributing to such fluctuations.


Form 8-K furnished May 3, 2017

3.
You disclose a number of non-GAAP measures in your earnings call which are also identified in your Item 2.02 Form 8-K filings. Please revise to separately reconcile each non-GAAP measure disclosed in your filing or discussed in your earnings call pursuant to Item 100 of Regulation G.

In response to the Staff’s comment, the Company supplementally provides as Exhibit A additional reconciliation of the GAAP to Non-GAAP Financial Measures furnished on Form 8-K filed May 3, 2017 or discussed in our earnings call on May 3, 2017, which illustrates our intended additions in future Form 8-K filings to the Reconciliation of GAAP to Non-GAAP Financial Measures table included as an exhibit to Item 2.02 to comply with Item 100 of Regulation G.

    
Please direct any questions regarding the Company’s responses to me at (408) 585-6209 or jritchie@aerohive.com.


Sincerely,

/s/ John Ritchie    

John Ritchie
Senior Vice President, Chief Financial and Chief Operating Officer
Aerohive Networks, Inc.

 

cc:
David K. Flynn, Aerohive Networks, Inc.
Steve Debenham, Aerohive Networks, Inc.
Mark Baulder, Esq., Wilson Sonsini Goodrich & Rosati
Deloitte and Touche LLP.

U.S. Securities and Exchange Commission
July 13, 2017
Page 4


Exhibit A
AEROHIVE NETWORKS, INC.
Reconciliation of GAAP to Non-GAAP Financial Measures
(unaudited; in thousands, except share and per share amounts)
 
Three Months Ended March 31,
 
2017
 
2016
 
Amount
 
Margin
 
Amount
 
Margin
Gross Profit and Gross Margin Reconciliations:
 
 
 
 
 
 
 
GAAP gross profit
$
24,439

 
67.2
 %
 
$
26,786

 
66.8
 %
Stock-based compensation
271

 
0.8
 %
 
272

 
0.6
 %
Amortization of internal use software
35

 
0.1
 %
 
35

 
0.1
 %
Restructuring charges
51

 
0.1
 %
 
—

 
—

Non-GAAP gross profit
$
24,796

 
68.2
 %
 
$
27,093

 
67.5
 %
 
 
 
 
 
 
 
 
Product Gross Profit and Product Gross Margin Reconciliations:
 
 
 
 
 
 
 
GAAP product gross margin
$
18,134

 
67.5
 %
 
$
22,017

 
67.8
 %
Stock-based compensation
51

 
0.2
 %
 
17

 
0.1
 %
Restructuring charges
51

 
0.2
 %
 
—

 
—

Non-GAAP product gross margin
$
18,236

 
67.9
 %
 
$
22,034

 
67.9
 %
 
 
 
 
 
 
 
 
Software Subscription and Services Gross Profit and Software Subscription and Services Margin Reconciliations:
 
 
 
 
 
 
 
GAAP software subscription and services gross margin
$
6,305

 
66.5
 %
 
$
4,769

 
62.2
 %
Stock-based compensation
220

 
2.3
 %
 
255

 
3.3
 %
Amortization of internal use software
35

 
0.4
 %
 
35

 
0.4
 %
Non-GAAP software subscription and services gross margin
$
6,560

 
69.2
 %
 
$
5,059

 
65.9
 %
 
 
 
 
 
 
 
 
Operating Loss and Operating Margin Reconciliations:
 
 
 
 
 
 
 
GAAP operating loss
$
(8,847
)
 
(24.3
)%
 
$
(12,387
)
 
(30.9
)%
Stock-based compensation
3,553

 
9.8
 %
 
4,896

 
12.2
 %
Amortization of internal use software
35

 
0.1
 %
 
35

 
0.1
 %
Restructuring charges
1,327

 
3.6
 %
 
—

 
—

Charges related to securities litigation
—

 
—

 
1,376

 
3.4
 %
Non-GAAP operating loss
$
(3,932
)
 
(10.8
)%
 
$
(6,080
)
 
(15.2
)%
 
 
 
 
 
 
 
 
 
Amount
 
Per share
 
Amount
 
Per share
Net Loss and Net Loss per Share Reconciliations:
 
 
 
 
 
 
 
GAAP net loss
$
(9,019
)
 
$
(0.17
)
 
$
(12,523
)
 
$
(0.25
)
Stock-based compensation
3,553

 
0.07

 
4,896

 
0.09

Amortization of internal use software
35

 
—

 
35

 
—

Restructuring charges
1,327

 
0.02

 
—

 
—

Charges related to securities litigation
—

 
—

 
1,376

 
0.03

Non-GAAP net loss
$
(4,104
)
 
$
(0.08
)
 
$
(6,216
)
 
$
(0.13
)
 
 
 
 
 
 
 
 
Shares Used in Computing non-GAAP Basic and Diluted Net Loss per Share
 
 
 
 
 
 
Weighted average shares used in computing net loss per share
52,439,039

 
 
 
49,140,340

 
 
 
 
 
 
 
 
 
 

U.S. Securities and Exchange Commission
July 13, 2017
Page 5


 
Amount
 
% of Revenue
 
Amount
 
% of Revenue
Operating Expenses Reconciliations:
 
 
 
 
 
 
 
GAAP research and development
$
9,550

 
26.3
 %
 
$
10,210

 
25.4
 %
Stock-based compensation
(688)

 
(1.9
)%
 
(1,345)

 
(3.3
)%
Restructuring charges
(838)

 
(2.3
)%
 
—

 
—

Non-GAAP research and development
$
8,024

 
22.1
 %
 
$
8,865

 
22.1
 %
 
 
 
 
 
 
 
 
GAAP sales and marketing
$
17,439

 
48.0
 %
 
$
21,068

 
52.5
 %
Stock-based compensation
(1,294)

 
(3.6
)%
 
(1,768)

 
(4.4
)%
Restructuring charges
(243)

 
(0.7
)%
 
—

 
—

Non-GAAP sales and marketing
$
15,902

 
43.7
 %
 
$
19,300

 
48.1
 %
 
 
 
 
 
 
 
 
GAAP general and administrative
$
6,297

 
17.3
 %
 
$
7,895

 
19.7
 %
Stock-based compensation
(1,300)

 
(3.6
)%
 
(1,511)

 
(3.8
)%
Restructuring charges
(195)

 
(0.5
)%
 
—

 
—

Charges related to securities litigation
—

 
—

 
(1,376)

 
(3.4
)%
Non-GAAP general and administrative
$
4,802

 
13.2
 %
 
$
5,008

 
12.5
 %
 
 
 
 
 
 
 
 
GAAP operating expenses
$
33,286

 
91.6
 %
 
$
39,173

 
97.6
 %
Stock-based compensation
(3,282)

 
(9.1
)%
 
(4,624)

 
(11.5
)%
Restructuring charges
(1,276)

 
(3.5
)%
 
—

 
0.0
 %
Charges related to securities litigation
—

 
—

 
(1,376)

 
(3.4
)%
Non-GAAP operating expenses
$
28,728

 
79.0
 %
 
$
33,173

 
82.7
 %