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Gigamon Reports Third Quarter 2017 Financial Results

SANTA CLARA, Calif., Oct. 26, 2017 /PRNewswire/ -- Gigamon Inc. (NYSE:GIMO), the leader in traffic visibility solutions, today released financial results for its third quarter ended September 30, 2017.

Third Quarter 2017 Financial Highlights:

  • Revenue of $79.2 million, compared to $83.5 million in the third quarter of fiscal 2016.
  • GAAP gross margin was 82%, compared to 83% in the third quarter of fiscal 2016.
  • Non-GAAP gross margin was 82%, compared to 83% in the third quarter of fiscal 2016.
  • GAAP net income was $2.2 million, or $0.06 per basic and diluted share, compared to GAAP net income of $6.1 million, or $0.16 per diluted share, in the third quarter of fiscal 2016.
  • Non-GAAP net income was $9.5 million, or $0.23 per diluted share, compared to non-GAAP net income of $14.0 million, or $0.36 per diluted share, in the third quarter of fiscal 2016.
  • Cash and short-term investments were $264.6 million, up $6 million from the second quarter of 2017 and up $20 million from the third quarter of fiscal 2016.

Conference Call Information:

In light of the pending acquisition by Elliott Management, Gigamon will not hold its earnings conference call today to discuss its third quarter 2017 results.  Additionally, Gigamon will not be providing financial guidance.

Additional Information and Where to Find It

Gigamon will file relevant materials with the Securities and Exchange Commission (the "SEC") in connection with the proposed merger, including a preliminary proxy statement on Schedule 14A. Under the proposed terms, promptly after filing its definitive proxy statement with the SEC, Gigamon will mail or otherwise make available the definitive proxy statement and a proxy card to each stockholder entitled to vote at the special meeting relating to the proposed transaction. GIGAMON STOCKHOLDERS AND OTHER INVESTORS ARE ADVISED TO CAREFULLY READ THESE MATERIALS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IN RESPECT OF THE PROPOSED MERGER WHEN THEY BECOME AVAILABLE, AS THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND THE PARTIES TO THE PROPOSED MERGER. Gigamon stockholders and other investors may obtain free copies of the definitive proxy statement, the preliminary proxy statement and other relevant materials in connection with the proposed merger (when they become available), along with other documents filed by Gigamon with the SEC, at the SEC's website (http://www.sec.gov).

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events, including the timing of the proposed transaction and other information related to the proposed transaction. 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 the proposed transaction and our expectations, strategy, plans or intentions regarding it. Forward-looking statements in this press release include, but are not limited to, our pending acquisition by Elliott Management. 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 the risk that the transaction may not be completed in a timely manner or at all, which may adversely affect our business and the trading price of our common stock; the failure to satisfy the conditions to closing of the transaction, including obtaining regulatory and shareholder approval; the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive agreement; the potential for litigation relating to the transaction; the risk that the definitive agreement may be terminated in circumstances that require us to pay a termination fee; the effect of the announcement or pendency of the transaction on our business relationships, results of operations and business generally; risks that the proposed transaction disrupts current plans and operations; risk related to diverting management's attention; 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.

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 restructuring charges and 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.

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


Nine Months Ended


September 30,
2017


October 1, 2016


September 30,
2017


October 1, 2016

Revenue:








Product

$

51,861



$

59,835



$

139,063



$

155,805


Service

27,330



23,677



78,832



70,021


Total revenue

79,191



83,512



217,895



225,826


Cost of revenue:








Product

11,401



12,197



32,429



34,414


Service

3,049



2,141



8,649



6,562


Total cost of revenue

14,450



14,338



41,078



40,976


Gross profit

64,741



69,174



176,817



184,850


Operating expenses:








Research and development

18,783



18,306



59,451



50,914


Sales and marketing

34,914



31,994



105,247



88,494


General and administrative

10,697



8,887



30,033



26,029


Total operating expenses

64,394



59,187



194,731



165,437


Income (loss) from operations

347



9,987



(17,914)



19,413


Other income (expense):








Interest income

541



235



1,374



661


Other expense, net

(241)



(144)



(433)



(386)


Income (loss) before income tax (provision) benefit

647



10,078



(16,973)



19,688


Income tax benefit (provision)

1,531



(3,999)



9,576



23,321


Net income (loss)

$

2,178



$

6,079



$

(7,397)



$

43,009


Net income (loss) per share:








Basic

$

0.06



$

0.17



$

(0.20)



$

1.22


Diluted

$

0.06



$

0.16



$

(0.20)



$

1.15


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








Basic

37,196



35,770



36,885



35,171


Diluted

39,574



38,113



36,885



37,341


 

Gigamon Inc.

Consolidated Balance Sheets

(In thousands)

(unaudited)



September 30, 2017


December 31, 2016

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$

173,182


$

148,926

Short-term investments

91,380


109,238

Accounts receivable, net

71,741


75,522

Inventories, net

15,472


11,347

Prepaid expenses and other current assets

12,048


9,909

Total current assets

363,823


354,942

Property and equipment, net

20,735


11,809

Deferred tax assets, non-current

50,734


33,094

Other assets, non-current

1,103


1,154

TOTAL ASSETS

$

436,395


$

400,999

LIABILITIES AND STOCKHOLDERS' EQUITY




CURRENT LIABILITIES:




Accounts payable

$

5,585


$

5,208

Accrued liabilities

26,897


34,649

Deferred revenue

69,960


68,997

Total current liabilities

102,442


108,854

Deferred revenue, non-current

32,126


28,785

Deferred and other tax liabilities, non-current

553


201

Other liabilities, non-current

933


499

TOTAL LIABILITIES

136,054


138,339

STOCKHOLDERS' EQUITY




Common stock

4


4

Additional paid-in-capital

298,400


256,774

Accumulated other comprehensive loss

(75)


(17)

Retained earnings (Accumulated deficit)

2,012


5,899

TOTAL STOCKHOLDERS' EQUITY

300,341


262,660

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

436,395


$

400,999

 

Gigamon Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)



Three Months Ended


Nine Months Ended


September
30, 2017

October 1,
2016


September
30, 2017

October 1,
2016

CASH FLOWS FROM OPERATING ACTIVITIES:








Net income (loss)

$

2,178



$

6,079



$

(7,397)



$

43,009


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








Depreciation and amortization

2,214



1,642



6,411



4,815


Stock-based compensation expense

10,973



10,104



39,991



28,884


Deferred and other income taxes

(1,790)



(679)



(10,147)



(31,570)


Other

6



54



148



366


Changes in operating assets and liabilities:








Accounts receivable

(8,221)



(14,929)



3,672



(11,567)


Inventories

(1,336)



(862)



(4,761)



(4,316)


Prepaid expenses and other assets

78



(1,753)



(1,944)



(2,991)


Accounts payable

1,757



569



532



54


Accrued liabilities and other liabilities

1,083



9,227



(9,308)



3,470


Deferred revenue

5,413



3,290



4,304



1,015


Net cash provided by (used in) operating activities

12,355



12,742



21,501



31,169


CASH FLOWS FROM INVESTING ACTIVITIES:








Purchase of short-term investments

(8,941)



(20,942)



(78,099)



(84,773)


Proceeds from maturities of short-term investments

25,300



24,500



96,012



85,747


Purchase of property and equipment

(6,977)



(1,523)



(12,179)



(6,001)


Net cash provided by (used in) investing activities

9,382



2,035



5,734



(5,027)


CASH FLOWS FROM FINANCING ACTIVITIES:








Proceeds from employee stock purchase plan

4,487



3,417



9,443



6,785


Proceeds from exercise of stock options

40



5,528



983



9,654


Shares repurchased for tax withholdings on vesting of restricted stock units

(4,188)



(3,411)



(12,592)



(7,240)


Net cash provided by (used in) financing activities

339



5,534



(2,166)



9,199


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

22,076



20,311



25,069



35,341


CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period

151,919



135,242



148,926



120,212


CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period

$

173,995



$

155,553



$

173,995



$

155,553


 

Gigamon Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except percentages)

(unaudited)



Three Months Ended


Nine Months Ended


September 30, 2017


October 1,
2016


September 30, 2017

October 1,
2016

Total Revenue

$

79,191



$

83,512



$

217,895



$

225,826


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








GAAP gross profit

64,741



69,174



176,817



184,850


Stock-based compensation expense

333



519



1,802



1,527


Stock-based compensation related payroll taxes

19



28



79



64


Non-GAAP gross profit

$

65,093



$

69,721



$

178,698



$

186,441


GAAP gross margin

82

%


83

%


81

%


82

%

Non-GAAP gross margin

82

%


83

%


82

%


83

%

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








GAAP operating income (loss)

$

347



$

9,987



$

(17,914)



$

19,413


Stock-based compensation expense

10,973



10,104



39,991



28,884


Stock-based compensation related payroll taxes

199



414



1,036



971


Non-recurring items

2,305





2,891




Non-GAAP operating income

$

13,824



$

20,505



$

26,004



$

49,268


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








GAAP net income (loss)

$

2,178



$

6,079



$

(7,397)



$

43,009


Stock-based compensation expense

10,973



10,104



39,991



28,884


Stock-based compensation related payroll taxes

199



414



1,036



971


Non-recurring items

2,305





2,891




Income tax effect of Non-GAAP adjustments

(6,189)



(2,593)



(18,468)



(39,176)


Non-GAAP net income

$

9,466



$

14,004



$

18,053



$

33,688


 

Gigamon Inc.

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

(In thousands, except per share amounts)

(unaudited)



Three Months Ended


Nine Months Ended


September 30, 2017


October 1, 2016


September 30, 2017


October 1, 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

$

0.06



$

0.16



$

(0.20)



$

1.15


Stock-based compensation expense

0.27



0.27



1.08



0.77


Stock-based compensation related payroll taxes

0.01



0.01



0.03



0.03


Non-recurring items

0.06





0.08




Income tax effect of non-GAAP adjustments

(0.16)



(0.07)



(0.50)



(1.05)


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

(0.01)



(0.01)



(0.05)



(0.01)


Non-GAAP diluted net income per share

$

0.23



$

0.36



$

0.44



$

0.89


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

39,574



38,113



36,885



37,341


Dilutive impact due to stock-based compensation

1,546



544



3,827



673


Non-GAAP diluted weighted-average number of shares

41,120



38,657



40,712



38,014


 

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SOURCE Gigamon

INVESTOR CONTACT: Jennifer Gianola, +1 (408) 831-4452, jennifer.gianola@gigamon.com

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