Aerohive reports preliminary Q1 adj. EPS (10c)-(9c), consensus (1c)
Reports preliminary Q1 revenue roughly $33M, consensus $37.47M. The company believes approximately half of the revenue shortfall to be primarily due to sales execution issues in the United States, and the other half to be primarily due to two mix shifts in the quarter: An unexpected shift in unit product mix from mid- to lower-priced access points. Revenue on lower-priced access point business is more heavily weighted toward deferred subscription revenue. The company believes this mix shift was an anomaly in the quarter and not an indication of a future trend, and Wi-Fi 6 access point business in the quarter increased sequentially from 15% to 20% of total Wi-Fi business. The other mix shift in the quarter was a faster-than-expected transition from licenses to multi-year subscriptions. While demonstrating increasing acceptance of Aerohive's subscription-based cloud offering, it resulted in a greater portion of revenue being deferred. These mix shifts resulted in the company recognizing a higher portion of shipment value as deferred revenue in the quarter, it said. This generated record deferred revenue balances, but also reduced in-quarter product revenue. "While we are disappointed with sales execution in the US and are implementing measures to improve in this region, we see clear signs that the US education market is returning to growth and believe we are well-positioned to benefit. The 2019 E-rate cycle resulted in a 55% year-over-year increase in funding requests for Aerohive products and over 10% market share of all funding requested for 'wireless data distribution,' as reported by E-rate Profit Works. We expect E-rate orders to begin to flow in the second quarter but primarily to contribute to results in the second half of the year," stated David Flynn, president and chief executive officer, Aerohive Networks. "In the second quarter we expect to see continued progress in our migration to a more SaaS-like business model, as market demand is dictating more cloud-based subscription services and this revenue line continues to grow in the high teens year-over-year."