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Gigamon Reports Second Quarter 2017 Financial Results
Accelerating Customer Demand for GigaVUE-HC2
Strong Pipeline from Innovative Technologies Launched in the Second Quarter

SANTA CLARA, Calif., July 27, 2017 /PRNewswire/ -- Gigamon Inc. (NYSE:GIMO), the leader in traffic visibility solutions, today released financial results for its second quarter ended July 1, 2017.

Second Quarter 2017 Financial Highlights:

  • Revenue of $69.1 million, compared to $75.1 million in the second quarter of fiscal 2016.
  • GAAP gross margin was 81%, compared to 82% in the second quarter of fiscal 2016.
  • Non-GAAP gross margin was 82%, consistent with the second quarter of fiscal 2016.
  • GAAP net loss was $7.3 million, or $0.20 per basic and diluted share, compared to GAAP net income of $34.0 million, or $0.91 per diluted share, in the second quarter of fiscal 2016 that included a one-time tax benefit of $30.5 million.
  • Non-GAAP net income was $4.0 million or $0.10 per diluted share, compared to non-GAAP net income of $11.5 million, or $0.30 per diluted share, in the second quarter of fiscal 2016.
  • Cash and short-term investments were $258.8 million, down $6 million from the first quarter of 2017 and up $31 million from the second quarter of fiscal 2016.

"We delivered revenue within our guidance range with continued strong gross margin, and achieved lower than planned operating expenses, generating EPS ahead of our guidance range," said Paul Hooper, Chief Executive Officer of Gigamon. "We also saw a number of positive trends in the quarter, supporting our confidence in a return to growth in the second half of 2017. We had 16 customers with bookings over one-million-dollars in the quarter, our second highest total ever. Further, our flagship GigaVUE-HC2 product revenue rebounded strongly, Asia Pacific posted a record quarter, and we saw record attach rates for our GigaSMART® software modules and our recently released inline SSL solution and our new high-performance and high-density chassis, the GigaVUE-HC3, performed well in the quarter while also building significant pipeline for the second half. We continue to believe our rapid pace of innovation, leadership in the visibility market and seed-and-grow strategy will deliver long-term value to our shareholders."

Recent Business Highlights:

  • Introduced a new Defender Lifecycle Model to address the increasing speed, volume and polymorphic nature of network cyber threats. This new approach is based on the GigaSECURE® Security Delivery Platform to better integrate security technologies that detect, predict and contain threats throughout networks.
  • Named the market leader in the Network Monitoring Equipment (NME), Annual Report 2017, by IHS Markit. Gigamon extended to 36 percent market share, nearly twice the share of its nearest competitor.
  • Announced general availability of the GigaVUE-HC3 high performance appliance addressing the requirements of compute-intensive traffic applications in large enterprise data centers.
  • Released a new SSL inline capability to address the requirements of customers looking to manage encrypted traffic at scale as increased data volumes are surpassing the capacity and performance of security tools.
  • Extended cloud visibility into Amazon Web Services (AWS) GovCloud region, enabling compliance with stringent, federal operational requirements.
  • Appointed Burney Barker, as Senior Vice President of Worldwide Sales to drive direct and indirect Sales execution.

Conference Call Information:

Gigamon will host a conference call and live webcast for analysts and investors at 5:00 p.m. Eastern time on July 27, 2017. This news release and a supplemental financial presentation will be available on the company's website prior to the conference call. Parties in the United States and Canada can access the call by dialing +1 (888) 417-2254, using conference code 3532506. International parties can access the call by dialing +1 (719) 325-2463, using conference code 3532506.

The webcast will be accessible on Gigamon's investor relations website at http://investor.gigamon.com for a period of one year. A telephonic replay of the conference call will be available through Thursday, August 3, 2017. To access the replay, parties in the United States and Canada should call +1 (866) 375-1919 and enter conference code 3532506. International parties should call +1 (719) 457-0820 and enter conference code 3532506.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release and accompanying tables contain certain non-GAAP financial measures that exclude stock-based compensation and related payroll taxes, income tax effects of stock-based compensation expense, non-recurring items such as advisory services and other costs related to non-routine stockholder matters, and periodic tax items. Non-GAAP financial measures do not have any standardized meaning and our non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies. Gigamon considers these non-GAAP financial measures important because they provide useful measures of the operating performance of the company, exclusive of unusual events or factors that do not directly affect what we consider core to our operating performance, and are used by the company's management for that purpose. In addition, investors often use similar measures to evaluate the operating performance of a company. We present non-GAAP financial measures for supplemental informational purposes only to provide additional information in understanding the company's operating results. The non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP. Please see the reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures attached to this release.

During the conference call to discuss these financial results, Gigamon expects to give guidance for the third quarter of fiscal 2017 on a non-GAAP basis. Gigamon does not provide reconciliations of its forward-looking non-GAAP financial measures to the corresponding GAAP measures due to the high variability and difficulty in making accurate forecasts and projections with respect to stock-based compensation and related payroll taxes, and income tax effect of stock-based compensation expense, which are excluded from these non-GAAP measures. In particular, stock-based compensation and related taxes are impacted by future hiring and retention needs, as well as the future fair market value of Gigamon's common stock, all of which are difficult to predict and subject to change. The actual amounts of these excluded items will have a significant impact on Gigamon's GAAP net income (loss) per diluted share and GAAP tax provision. Accordingly, reconciliations of Gigamon's forward-looking non-GAAP financial measures to the corresponding GAAP measures are not available without unreasonable effort.

Legal Notice Regarding Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements in this press release include, but are not limited to, our expectations regarding the future growth of our business and our efforts to deliver long-term value to our shareholders. Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include our ability to continue to deliver and improve our products and successfully develop new products; customer acceptance and purchase of our existing products and new products; our ability to retain existing customers and generate new customers; the market for network traffic visibility solutions not continuing to develop; competition from other products and services; and general market, political, economic and business conditions. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the period ended December 31, 2016 and our most recently filed quarterly report on Form 10-Q. The forward-looking statements in this press release are based on information available to Gigamon as of the date hereof, and Gigamon disclaims any obligation to update any forward-looking statements, except as required by law.

Gigamon

Gigamon (NYSE: GIMO) provides active visibility into physical and virtual network traffic, enabling stronger security and superior performance. Gigamon's Visibility Fabric and GigaSECURE®, the industry's first Security Delivery Platform, deliver advanced intelligence so that security, network and application performance management solutions in enterprise, government and service provider networks operate more efficiently and effectively. See more at www.gigamon.com, the Gigamon Blog, or follow Gigamon on Twitter, LinkedIn or Facebook.

 


Gigamon Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(unaudited)



Three Months Ended


Six Months Ended


July 1, 2017


July 2, 2016


July 1, 2017


July 2, 2016

Revenue:








Product

$

43,192



$

51,308



$

87,202



$

95,970


Service

25,945



23,795



51,502



46,344


Total revenue

69,137



75,103



138,704



142,314


Cost of revenue:








Product

10,424



11,510



21,028



22,217


Service

2,894



2,339



5,600



4,421


Total cost of revenue

13,318



13,849



26,628



26,638


Gross profit

55,819



61,254



112,076



115,676


Operating expenses:








Research and development

20,519



17,250



40,668



32,608


Sales and marketing

36,892



28,843



70,333



56,500


General and administrative

10,281



9,147



19,336



17,142


Total operating expenses

67,692



55,240



130,337



106,250


Income (loss) from operations

(11,873)



6,014



(18,261)



9,426


Other income (expense):








Interest income

477



219



833



426


Other expense, net

(75)



(173)



(192)



(242)


Income (loss) before income tax (provision) benefit

(11,471)



6,060



(17,620)



9,610


Income tax benefit (provision)

4,133



27,899



8,045



27,320


Net income (loss)

$

(7,338)



$

33,959



$

(9,575)



$

36,930


Net income (loss) per share:








Basic

$

(0.20)



$

0.97



$

(0.26)



$

1.06


Diluted

$

(0.20)



$

0.91



$

(0.26)



$

1.00


Weighted average shares used in computing net income (loss) per share:








Basic

36,890



35,146



36,728



34,878


Diluted

36,890



37,262



36,728



36,792


 

Gigamon Inc.

Consolidated Balance Sheets

(In thousands)

(unaudited)



July 1, 2017


December 31, 2016

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$

151,106



$

148,926


Short-term investments

107,722



109,238


Accounts receivable, net

63,519



75,522


Inventories, net

14,301



11,347


Prepaid expenses and other current assets

12,176



9,909


Total current assets

348,824



354,942


Property and equipment, net

14,299



11,809


Deferred tax assets, non-current

48,866



33,094


Other assets, non-current

1,379



1,154


TOTAL ASSETS

$

413,368



$

400,999


LIABILITIES AND STOCKHOLDERS' EQUITY




CURRENT LIABILITIES:




Accounts payable

$

4,063



$

5,208


Accrued liabilities

24,768



34,649


Deferred revenue

65,652



68,997


Total current liabilities

94,483



108,854


Deferred revenue, non-current

31,021



28,785


Deferred and other tax liabilities, non-current

475



201


Other liabilities, non-current

510



499


TOTAL LIABILITIES

126,489



138,339


STOCKHOLDERS' EQUITY




Common stock

4



4


Additional paid-in-capital

287,145



256,774


Accumulated other comprehensive loss

(104)



(17)


Retained earnings (Accumulated deficit)

(166)



5,899


TOTAL STOCKHOLDERS' EQUITY

286,879



262,660


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

413,368



$

400,999


 

Gigamon Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)



Three Months Ended


Six Months Ended


July 1, 2017

July 2, 2016


July 1, 2017

July 2, 2016

CASH FLOWS FROM OPERATING ACTIVITIES:








Net income (loss)

$

(7,338)



$

33,959



$

(9,575)



$

36,930


Adjustments to reconcile net income (loss) to net cash provided by operating activities:








Depreciation and amortization

2,176



1,749



4,197



3,173


Stock-based compensation expense

16,464



10,604



29,018



18,780


Deferred and other income taxes

(4,220)



(30,774)



(8,357)



(30,891)


Inventory write-down

725



183



931



272


Other

113



287



142



312


Changes in operating assets and liabilities:








Accounts receivable

(7,103)



910



11,893



3,362


Inventories

(3,403)



(1,235)



(4,173)



(3,593)


Prepaid expenses and other assets

770



(2,110)



(2,022)



(1,238)


Accounts payable

(2,943)



(261)



(1,225)



(515)


Accrued liabilities and other liabilities

3,797



7,375



(10,574)



(5,890)


Deferred revenue

838



1,007



(1,109)



(2,275)


Net cash provided by (used in) operating activities

(124)



21,694



9,146



18,427


CASH FLOWS FROM INVESTING ACTIVITIES:








Purchase of short-term investments

(35,448)



(34,724)



(69,158)



(63,831)


Proceeds from maturities of short-term investments

33,212



34,461



70,712



61,247


Purchase of property and equipment

(2,507)



(2,371)



(5,202)



(4,478)


Net cash provided by (used in) investing activities

(4,743)



(2,634)



(3,648)



(7,062)


CASH FLOWS FROM FINANCING ACTIVITIES:








Proceeds from employee stock purchase plan





4,956



3,368


Proceeds from exercise of stock options

362



2,749



943



4,126


Shares repurchased for tax withholdings on vesting of restricted stock units

(4,065)



(2,444)



(8,404)



(3,829)


Net cash provided by (used in) financing activities

(3,703)



305



(2,505)



3,665


NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

(8,570)



19,365



2,993



15,030


CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period

160,489



115,877



148,926



120,212


CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period

$

151,919



$

135,242



$

151,919



$

135,242


 

Gigamon Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except percentages)

(unaudited)



Three Months Ended


Six Months Ended


July 1, 2017


July 2, 2016


July 1, 2017

July 2, 2016

Total Revenue

$

69,137



$

75,103



$

138,704



$

142,314


Reconciliation of GAAP Gross Profit and GAAP Gross Margin to Non-GAAP Gross Profit and Non-GAAP Gross Margin:








GAAP gross profit

55,819



61,254



112,076



115,676


Stock-based compensation expense

792



538



1,469



1,008


Stock-based compensation related payroll taxes

29



20



60



36


Non-GAAP gross profit

$

56,640



$

61,812



$

113,605



$

116,720


GAAP gross margin

81

%


82

%


81

%


81

%

Non-GAAP gross margin

82

%


82

%


82

%


82

%

Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Operating Income:








GAAP operating income (loss)

$

(11,873)



$

6,014



$

(18,261)



$

9,426


Stock-based compensation expense

16,464



10,605



29,018



18,780


Stock-based compensation related payroll taxes

330



274



837



557


Non-recurring items

586





586




Non-GAAP operating income

$

5,507



$

16,893



$

12,180



$

28,763


Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income:








GAAP net income (loss)

$

(7,338)



$

33,959



$

(9,575)



$

36,930


Stock-based compensation expense

16,464



10,605



29,018



18,780


Stock-based compensation related payroll taxes

330



274



837



557


Non-recurring items

586





586




Income tax effect of Non-GAAP adjustments

(6,086)



(33,330)



(12,279)



(36,583)


Non-GAAP net income

$

3,956



$

11,508



$

8,587



$

19,684


 

Gigamon Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures (continued)

(In thousands, except per share amounts)

(unaudited)



Three Months Ended


Six Months Ended


July 1,
2017


July 2,
2016


July 1,
2017


July 2,
2016

Reconciliation of GAAP Diluted Net Income (Loss) per Share to Non-GAAP Diluted Net Income per Share:








GAAP diluted net income (loss) per share

$

(0.20)



$

0.91



$

(0.26)



$

1.00


Stock-based compensation expense

0.45



0.28



0.79



0.51


Stock-based compensation related payroll taxes

0.01



0.01



0.02



0.02


 Non-recurring items

0.01





0.01




Income tax effect of non-GAAP adjustments

(0.16)



(0.89)



(0.33)



(1.00)


Impact of difference in number of GAAP and non-GAAP diluted shares

(0.01)



(0.01)



(0.02)



(0.01)


Non-GAAP diluted net income per share

$

0.10



$

0.30



$

0.21



$

0.52


Reconciliation of GAAP Diluted Weighted-Average Number of Shares to Non-GAAP Diluted Weighted-Average Number of Shares:








GAAP diluted weighted-average number of shares

36,890



37,262



36,728



36,792


Dilutive impact due to stock-based compensation

3,987



793



3,776



786


Non-GAAP diluted weighted-average number of shares

40,877



38,055



40,504



37,578


 

View original content with multimedia:http://www.prnewswire.com/news-releases/gigamon-reports-second-quarter-2017-financial-results-300495599.html

SOURCE Gigamon

INVESTOR CONTACT: Jennifer Gianola, +1 (408) 831-4452, jennifer.gianola@gigamon.com or MEDIA CONTACT: Judy Kaneko, +1 (408) 831-4238, judy.kaneko@gigamon.com

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