Good day and welcome to the Aerohive Networks Third Quarter 2014 Financial Results Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Ms. Melanie Solomon. Please go ahead.

Thank you, Operator. I'd like to welcome to Aerohive Networks third quarter 2014 financial results conference call. After the market closed today, Aerohive issued a press release through Business Wire. The release is also available on the company Web site at aerohive.com. This call is being webcast live on the Investor Relations section of the Aerohive Web site and will be available for 30 days. Today's call is being hosted by David Flynn, President and Chief Executive Officer; and Gordon Brooks, Chief Financial Officer. David Greene, Chief Marketing Officer, will also be available for Q&A. During this call, we will make forward-looking statements regarding future events or results of the company and its operations. These forward looking statements include statements regarding our projected financial results, including for our fourth quarter 2014, investments to increase sales and channel capacity and our ability to scale those capabilities, general demand for wireless networking in the industry verticals we target or demand for our products in particular, product differentiation and potential drivers of growth in our business, new customer acquisition, future product offerings, continued 802.11ac transition and adoption of Aerohive cloud management applications and product offerings, changing market conditions, risks associated with the deployment and adoption of new products and services, risks associated with our growth and competitive pressures from existing and new companies. Actual events or results could differ materially from those discussed in the forward-looking statements. Please refer to the risk factors in our perspective filed March 28, 2014 and Form 10-Q filed on August 12, 2014, which contain important factors that could cause actual results to differ materially from the forward-looking statements. Aerohive disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. Today, we'll be discussing both GAAP and non-GAAP financial measures. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. For a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures and a discussion of why we present non-GAAP financial measures, please see today's press release available on our website. And now, let me turn the call over to David Flynn, President and CEO of Aerohive.

Thank you, Melanie and thank you all for joining us today. Our revenue of 35.3 million was within the revised guidance range we provided on October 13 an increase of 22% over Q3 of last year. And while we're disappointed as revenue came in below our regional guidance range provided in August, we are pleased that the development of the rest of the financial model is still on track and Gordy will talk in more detail about that later in the call. I'd like to spend some time talking about what contributed to our revenue performance and the actions we're taking to recover momentum than I’ll go through the highlights of the quarter. Our order linearity and sales forecast were on track through early September, however like many organizations we typically see a significant portion of our orders come in during the last few weeks of the quarter and our sales results for the rest of September were below expectations, resulting in our lower revenue attainment for the quarter. This was primarily a sales execution issue in our less developed sales territories where the progress we saw in our seasonally strong Q2 did not carry through to the end of Q3 and part due to turnover in some of these territories. We do see generally strong results in our developed territories. We've not yet however scaled overall sales and channel capacity enough to cover inconsistent performance in these less developed territories. In response to the quarter's results, we realized we increase our overall sales capacity to enable future growth and to aggressively get back on track by addressing current gaps. We believe our matured territories have established a repeatable sales and channel model that we can use and build upon as a template to grow our business. We are replicating…

Thank you Dave and good afternoon. As Dave noted we are disappointed with our revenue performance in Q3, but we were pleased with progress in our financial model. I will review our GAAP and non-GAAP P&L, balance sheet and cash flow metrics for Q3 and provide related commentary on the business. Lastly, I will close by providing financial guidance for Q4. Net revenue for Q3 was $35.3 million, an increase of 22% compared with the same quarter a year-ago but a decrease of 6% sequentially. Product revenue for Q3 was $30.8 million, increase of 17% compared to with the same quarter year-ago and a 9% decrease sequentially. The vast majority of our product revenue continues to be driven by our access points and related management software licenses. Software subscriptions and service revenue was $4.6 million for Q3 or 13% of revenue, an increase of 73% compared with same quarter year-ago and a 19% sequential increase. As software subscription and service revenue amortizes off the balance sheet we expect to continue to see sequentially -- quarterly increases in this revenue line over the near-term and to not reflect the same seasonality we expect to see with product revenue. On a geographic basis net revenue in the Americas was $23.4 million or 66% of revenue, Americas net revenue increased 36% as compared with same period a year-ago. Net revenue in EMEA was $9.1 million or 26% of total revenue, EMEA net revenue increased 4% compared with same quarter year-ago. And net revenue in Asia-Pac was $2.8 million or 8% of revenue Asia-Pac net revenue decreased 7% compared with same quarter a year-ago. On a non-GAAP basis gross margin was 68% an increase of 150 basis points as compared with same period a year-ago and an increased sequentially from 67.8% in Q2. Product…

Thank you Gordy. While we are disappointed about our third quarter revenue performance I want to reiterate that we are committed to making changes and improvements in our organization in order to reestablish growth and credibility. We are energized and encouraged by the opportunities in front of us. The secular trends driving our market remain strong, enterprise mobility, BYOD and cloud applications are placing incredible demands on the wireless network worldwide and we believe we have a disruptive solution to address these demand through intelligent networking. We remain confident on our long-term strategy and are taking the necessary actions to improve our sales execution and current growth trajectory. And with that we will open up to taking questions.

Thank you. (Operator Instructions). First question will come from Kent Schofield with Goldman Sachs.

First question, on the sales execution side of things, you've talked about less developed areas. Can you give us a little bit more granularity in terms of we saw some weakness year-on-year growth in EMEA and Asia-Pac, so I assume you're referring to those areas. If so, please let us know. But then also on the Americas, are there specific regions that need to see some work, as well? And it would be helpful to know if those areas are looking at adding heads or if it's, you think, just sales execution that you need to work on?

Yeah, so we talked about the less-developed territories, but we are primarily talking about the Western region in the U.S. and Asia Pacific. I think the commentary about the EMEA year-over-year revenue growth is a little bit of a normally because they have an exceptionally strong Q3 in a prior year. And so I think if you -- they grew 40% something sequentially at the prior year if you back that down to a normal number, the EMEA results were actually relatively consistent with expectations. So it is primarily the Western U.S. and the APAC, when we talk about the less-developed regions there are some other less-developed regions scattered around where we need to strengthen the execution in those but those are the primary areas we are talking about. And I think that was the--.

The capacity versus--.

Yeah, and there is a combination of capacity and execution. When we talk about sales capacity we are having the people in place having the ramps to be productive, having the channel be matured as we expecting. And to develop one of these territories they are having the channel and a reasonable install base to drive, when they are recurring repeat business from existing customers is an important part of it. So primarily the combination of adding existing resources and ramping some other resources that we got in place or that we have recently hired.

Okay, so there is some actual head additions that need to be made in those two areas, though, it sounds like, as well?

Yes, we are currently having fewer heads in those regions than we would like to have.

Okay, thank you for that. And then if I jump over to the E-rate side of things, can you remind us again, just to give us some historical context as to how much business you think you've actually seen from E-rate. And then how you're thinking about the cadence of that business going forward, given you did recently have a competitor talk about seeing some push-out of demand given ConnectED that's coming up this next year. Could you talk about what you've seen historically and then how you're thinking of that impacting the next few quarters until we actually see funding from ConnectED?

Historically we have seen relatively small percentage of the business actually get funded by E-Rate. There was -- I think we have commented on this report, we often see many deals start out as E-Rate or a request for funding that ware rarely actually funded. So the businesses not only been driven and funded to other initiatives operating budgets and from the schools or bond initiative, so the actual impact of E-Rate in the past is relatively limited, we expect the incremental funding of next year to be lot more additive to the market opportunity as we come into that funding being available to start in as early as Q2 of next year. I think the question of -- So, they have asserted there's some E-Rate deals that didn't close -- if there had been more E-Rate they might have closed a bit more I think that would have a immaterial impact on our business at this point given how little business we've seen cause on E-Rate traditionally. I think the question of whether E-Rate -- the pending E-Rate funding has delayed deals is one that many people have asked about, I will say we don't believe that has a material impact at this point, I'm aware of one or two customers that have considered holding off, some have come back and funded out of other areas, some have held off but it is I believe immaterial at this point that decision.

Next will be Erik Suppiger with JMP Securities.

First off, can you comment a little bit on the strategy for doing the ConnectEd program with Apple? Does that enhance your ability to win E-Rate business or kind of what is the strategy or the thought process behind that?

One of the key things is we view the alliance with Apple and the Corporation as a great validation of our capabilities in education and we do hope to gain additional exposure in the education market in general from participating in that program with Apple. So I think there is awareness, participation and collaboration with Apple that's a big part of it. Revenue potential from these specific deals was not -- from these deployments was not part of the consideration, this was more of an opportunity to showcase our technology along with Apple's in this marketplace.

And then in some of the developing countries it sounds like you had some turnover, what was going on that caused turnover that you weren't anticipating? And then secondly if I recall I think this was also a difficult quarter for you in the year ago period, is there something some aspect of this quarter from a seasonal perspective that is more challenging maybe this fall off on education reduces visibility or is there any aspect to why both of those quarters would've been bad once?

Yes, there is a big step-up as we re-ramp the company from Q1 to Q2 there is a very large sequential expansion that we've traditionally experienced and kind of continuing that execution and delivery in the subsequent quarters is a challenge. In the mature territories they have enough channel base, customer base et cetera. that they've managed to do that, I think in some of these less mature territories there is less of an installed base. They've to close more net new business each quarter, we have found that it has been a challenge as they come off a robust Q2 into a Q3 that is not as seasonally robust for those territories and I think as we recommend there was some turnover in some of these territories that I think some of them were feeling they weren't executing as well as they would like and that would at times lead to turnover in the sales force.

Was it voluntary turnover or involuntary?

There was some of both.

And then lastly, Aruba introduced their 205 and their 215 products kind of over the summer timeframe, I would assume that would be competitive with some of your ac products, was there any change from a competitive perspective that was part of the issue?

We don't believe the competitive dynamic as what led to this issue believe it was a sales execution issue in some of these less developed territories, Aruba has introduced those other additional products, I think the 215 we believe is larger the response to our AP230 product. Our AP230 continues to do very-very well, I think we grew ac to 45% of the business as you saw from the margins that margins inside the quarter were healthy so I think we feel good about the competitive position on ac at this point.

And next question will come from Matt Lebo with Piper Jaffray.

Thanks for taking my question. First to start with the new sales hires, about how far are we along in that process of the hiring and also how long should we expect to before those sales people really start to ramp and becomes effective?

Yes, so in -- within some of these less developed territories there have been a number of sales people hired over the last quarter or two, some of them have been in place for a while and have ramped more slower than we expected and also some new ones have been put in place. It is as indicated a multi-quarter ramp period that requires for the new Reps to get the productivity and particularly to get their existing -- that territory operating at the efficiency levels we normally see in the additional territories in the more material territories. We are making those investments now, we are training those people we expect to see some ramping over the next couple of quarters, historically we have seen the step-up in business and activity in Q2 is an important catalyst and a trigger that helps to move territories from immaturity towards maturity and we are looking forward to that as being an important milestone on the way of ramping those territories full productivity.

Great, thank you. Just as a quick follow-up, I know prior to the ConnectED announcement with Apple you did have some sort of affiliation with them. And I am curious does the two of you working together on this project create any further revenue generating opportunities?

I think we have always indicated the relationship with Apple is a very collaborative relationship in the field. We have many joint sales engagements, we have a lot of their system engineers using our high product, coming in for training, participating with us. So there is a minimal direct revenue generation. We have the products on Apple Online-Store but that is a material contributor to the business. This doesn’t change that picture of direct revenue contribution, but it does increase the collaboration between the two companies. We will have a 114 new schools where our sales teams and their sales team and SEs will be working together to make successful deployment. And I think those relationships built on activities that provide benefit and other prices.

And our next question comes from Rohit Chopra with Buckingham.

Thanks very much. Gordy and Dave can you just talk to us about ASPs and maybe deal sizes. Did you see any change in the quarter as the quarter progressed and maybe just your outlook on ASPs and deal sizes? And then the other piece I wanted to ask about was the Verizon deal you announced something earlier in October. And wanted to know if that’s expected to be a material contributor to revenue at some point down the line and maybe you can just elaborate on what’s going to be provided over there and how that’s going to benefit you?

So Rohit, this is Gordy I will talk about ASPs and deal sizes. We saw relatively consistent ASPs for the quarter. We talked about the over the development of the new products. How ASPs tend to rise up and go ahead and moderate and therefore over a cycle that things stay relatively consistent. We have seen that pattern develop again here. I think certainly as we look forward to the gross margin for Q4 keeping any eye on product mix during this product transition, is trying to take into consideration any potential movements, but we haven’t seen that as of yet from a quarterly standpoint. Deal sizes were relatively consistent we see a change to the complexion from Q2 and Q3 that seasonality also manifest itself in deal but no material change from what we would expect really to see. The volume of the business in these particular areas causing the issues that we have discussed.

And specifically regarding Verizon I think the announcement that we made there is a in our branch router product family, these are routers with embedded Wi-Fi routing capability. We have a product that has embedded Verizon LTE access for the backhaul which is a product that enables managed services or enables branch office connectivity using the Verizon LTE as a backhaul. And we are part of the Verizon partner program and are working on opportunities to deliver that product to them as a managed service offerings. In terms of material revenue impact, I think it’s early to comment on that. I think -- we are excited about the potential but it certainly wouldn’t factor -- these things take their time to mature and develop.

And our next question is from James Fawcett with Morgan Stanley.

You have Nita Marshall for James, -- joining for James. A couple of questions. Is the 11ac that you are seeing primarily going into education or is it going into other verticals. And then just if you could give kind of quantum of what ConnectED sales and marketing kind of pass through should be -- that we should kind of forecast for the next two years it appears?

You have Nita Marshall for James, -- joining for James. A couple of questions. Is the 11ac that you are seeing primarily going into education or is it going into other verticals. And then just if you could give kind of quantum of what ConnectED sales and marketing kind of pass through should be -- that we should kind of forecast for the next two years it appears?

The ac business, we do see -- we see education being the earlier adaptor of ac they tend to move quickly and have embraced fairly quickly. But we also see significant adaption of ac across enterprise and large enterprise projects. So I don’t know the exact break-up but it is on more skewed towards educations as given the adaption and evaluation cycles with different Companies use environments like retail that tend to use lower end 2x2 end products slower to move to the ac product line.

Yes, in regards to -- Nita this is Gordy the -- in regards to kind of the financial scope of the possible level of donations overall the sales and marketing end, I’d say that for the total sales and marketing expanse spend standpoint far less than potentially 5% of sales and marketing in a given quarter. We haven't financially scoped it, it really depends on the timing of those particular endeavors when those deployments will occur, but again we don't expect that to be material and we will absorb it with like -- absorb it within the model and make tradeoffs in other areas to go ahead and absorb those donations.

And then just one last question about E-Rate funding as we understand kind of the actual revenue from the purchasing will kind of come in the second half of next year, but are you starting to see visibility on the RFP front or when do you expect RFP activity to pick up?

And then just one last question about E-Rate funding as we understand kind of the actual revenue from the purchasing will kind of come in the second half of next year, but are you starting to see visibility on the RFP front or when do you expect RFP activity to pick up?

Yes, E-Rate funding requires an RFP activity is kind of going fast and furious. There’s a lot of those popping up every day and we've sales people that are engaged in responding -- calling the customers and so there is definitely a lot of activity people looking for starting the process to apply for funds and to look for quotes. When the funding will actually play out as the official rules are July 1 is when funding will start to be made available but deployments that happen after April 1 can be retroactively reimbursed, so it expect it to have -- potentially have some impacts starting as always April 1st.

And next will be Catharine Trebnick with Dougherty & Company. Catherine Trebnick - Dougherty & Company: Thanks for taking my question. Can you talk about your partner program? Because one of the things I'm interested in is understanding and the problem with the challenges with the sales execution in these developed areas if you're not only going to add headcount, what are the other processes that you're looking at to help yourself get back on track for execution?

So, Catherine this is David Greene. Commenting on the partner program, I think our focus right now is to ramp up our partner capacity in parallel with the ramp up of our sales capacity. I think as Dave mentioned we find it in our more matured territories one of the attributes we see there is in engaging mature trends to our channel partners. We are working with our partners in the less developed territories with a focus on enablement to make sure they have the tools to jump in and find active role in the sales cycle and really just making sure on the whole that our program is rewarding the partners for their contribution to the sales process. Again we think we have a temper we're seeing from a mature regions that we can replicate in the less developed ones with that focus on enablement and focus on targeted in engagement with resources in this field are going to work with those partners and help them develop and grow their business. Catherine Trebnick - Dougherty & Company: And then other -- it's only 40% of your revenue is now from education which is nice, what other markets in addition to retail, are you doing any specific targeted marketing for?

The other key markets we hit are -- we do address the healthcare market and we've a lot going on in that market and then the -- we call the distributed enterprise the general enterprise market would be the -- which is really a horizontal and ranges from kind of mid-market to up into some fortune 500 accounts. So that's where the business is typically as retail and health together are typically account for about 20% of the business lower education to 40% and the remainder of that is distributed enterprise.

And our next question comes from John Lucia with JMP Securities.

I have two questions. First question, can you go into more detail on why you expanded your gross margin range? You said it was due to potential change in product mix, but understanding what drives that would be helpful. An in addition to product mix, was there any consideration for pricing that caused you to change the range?

Yes, this is Gordy. If you look at our product gross margins there is an embedded seasonality in those margins so we've seen in the seasonal Q2 tend to a lot of our 2x2 product that we talked about being the highest gross margin product, those margins tend to then decrease into Q3 and Q4 slightly, but there is an embedded seasonality that you'll see in our past results, I think the key here is that with ac been 45% now the unit volume in Q3 it's moving extremely rapidly even more rapidly than we anticipated and so we're just trying to be cautious about planning for that transition in a potential changes to our .11 end demand throughout the product portfolio and the mix of those products. So I think it's more cautionary at this point in time just because we've seen mix shifts that have been with the buildup of inventory we saw some of the things that are more than we had planned and so we're just going ahead and trying to manage that.

My second question is on Apple selection process. Can you guys talk about what vendors were willing to donate the gear involved in that selection process? Were all the vendors willing to donate? In which case you would have beat out all the Wi-Fi vendors. Or were there only a few select vendors that were willing to donate? Can you take us through the selection process and what vendors were involved, if you can?

This is David Greene. I think let’s just say that Apple ran that process, we know that they have access all of the leading technology in the marketplace. We know that there are other vendors who are actively looking to do practice with them, we not really in a position to comment on the specific process they went through other than we are the successful person in that process.

Okay, thank you.

That does conclude the question and answer session. I will now turn the conference back over to Mr. David Flynn for any additional or closing remarks.

Thank you all for joining us today. We do have some non-deal road shows and conferences coming up over the next few weeks, so we hope to see you soon at one of those events.

Thank you, that does conclude today’s conference and we thank you for your participation today.