Gigamon Reports First Quarter 2016 Financial Results

Record revenue delivers 43% year-over-year growth

Results driven by strong demand for both Security and Mobility solutions

News provided by

Gigamon Inc.

Apr 28, 2016, 04:15 ET

SANTA CLARA, Calif., April 28, 2016 /PRNewswire/ -- Gigamon Inc. (NYSE: GIMO), the leader in traffic visibility solutions, today released financial results for the first quarter ended April 2, 2016.

First Quarter 2016 Financial Highlights:

  • Revenue of $67.2 million, up 43% year-over-year.
  • GAAP gross margin was 81%, compared to 76% in the first quarter of fiscal 2015.
  • Non-GAAP gross margin was 82%, compared to 77% in the first quarter of fiscal 2015.
  • GAAP net income was $3.0 million, or $0.08 per diluted share, compared to GAAP net loss of $0.7 million, or $0.02 per basic and diluted share, in the first quarter of fiscal 2015.
  • Non-GAAP net income was $8.2 million, or $0.22 per diluted share, compared to non-GAAP net income of $4.6 million, or $0.13 per diluted share, in the first quarter of fiscal 2015.
  • Cash and investments were $208 million, up $42 million from the first quarter of fiscal 2015.

"Security continues to be a significant growth driver for us representing over 60% of our transactions this quarter," said Paul Hooper, Chief Executive Officer of Gigamon. "Our Security Delivery Platform is proving to be the most efficient and effective way for organizations to scale their security deployments. The strength in this vertical in combination with accelerating growth in our Mobility market addressing the needs of Service Providers around the globe, delivered an all-time high revenue result."

Recent Business Highlights:

  • Introduced a metadata engine for GigaSECURE® Security Delivery Platform.
  • Announced new 100 Gb product offerings and software updates to our portfolio.
  • Launched Professional Service Partner Program allowing certified channel partners to design, implement, and service Gigamon solutions.
  • Included in CRN's inaugural 2016 Security 100 List of leading vendors.
  • Achieved National Information Assurance Partnership (NIAP) Common Criteria certification for GigaVUE®.

Conference Call Information:

Gigamon will host a conference call and live webcast for analysts and investors at 5:00 p.m. Eastern time on, April 28, 2016. The news release with the financial results will be accessible from the company's website prior to the conference call.  Parties in the United States and Canada can access the call by dialing +1 (888)-461-2024, using conference code 6511476.  International parties can access the call by dialing +1 (719)-325-2452, using conference code 6511476.

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, May 5, 2016. To access the replay, parties in the United States and Canada should call +1 (888)-203-1112 and enter conference code 6511476. International parties should call +1 (719)-457-0820 and enter conference code 6511476

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 the accompanying tables contain certain non-GAAP financial measures that exclude stock-based compensation and related payroll taxes, income tax effect of stock-based compensation expense, and a valuation allowance against deferred tax assets. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies.  Gigamon considers these non-GAAP financial measures to be 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 to be our core 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. Non-GAAP financial measures are presented for supplemental informational purposes only for 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, and may be different from non-GAAP financial measures presented by other companies.  Please see the reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure attached to this release.

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 evolution of our marketplace and the goals for our Unified Visibility Fabric™ and our Security Delivery Platform. 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 26, 2015. 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

April 2, 2016

March 28, 2015

Revenue:


Product

$

44,662

$

32,152

Service

22,549

14,701

Total revenue

67,211

46,853

Cost of revenue:


Product

10,707

9,445

Service

2,082

1,777

Total cost of revenue

12,789

11,222

Gross profit

54,422

35,631

Operating expenses:


Research and development

15,358

11,496

Sales and marketing

27,657

18,832

General and administrative

7,995

6,019

Total operating expenses

51,010

36,347

Income (loss) from operations

3,412

(716)

Other income (expense):


Interest income

207

119

Other expense, net

(69)

(10)

Income (loss) before income tax provision

3,550

(607)

Income tax provision

(579)

(88)

Net income (loss)

$

2,971

$

(695)

Net income (loss) per share:


Basic

$

0.09

$

(0.02)

Diluted

$

0.08

$

(0.02)

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


Basic

34,633

32,994

Diluted

36,546

32,994


Gigamon Inc.

Consolidated Balance Sheets

(In thousands)

(unaudited)



April 2, 2016

December 26, 2015

ASSETS


CURRENT ASSETS:


Cash and cash equivalents

$

115,877

$

120,212

Short-term investments

92,240

90,001

Accounts receivable, net

45,659

47,947

Inventories, net

5,769

3,813

Prepaid expenses and other current assets

6,967

7,621

Total current assets

266,512

269,594

Property and equipment, net

9,975

9,416

Deferred tax assets, non-current

141

135

Other assets, non-current

766

766

TOTAL ASSETS

$

277,394

$

279,911

LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES:


Accounts payable

$

3,546

$

3,724

Accrued liabilities

23,287

37,334

Deferred revenue

56,952

62,248

Total current liabilities

83,785

103,306

Deferred revenue, non-current

21,897

19,883

Deferred and other tax liabilities, non-current

168

279

Other liabilities, non-current

1,026

1,087

TOTAL LIABILITIES

106,876

124,555

STOCKHOLDERS' EQUITY


Common stock

3

3

Treasury stock

(12,469)

(12,469)

Additional paid-in-capital

223,509

211,402

Accumulated other comprehensive income (loss)

37

(47)

Accumulated deficit

(40,562)

(43,533)

TOTAL STOCKHOLDERS' EQUITY

170,518

155,356

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

277,394

$

279,911


Gigamon Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)



Three Months Ended

April 2, 2016

March 28, 2015

CASH FLOWS FROM OPERATING ACTIVITIES:


Net income (loss)

$

2,971

$

(695)

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


Depreciation and amortization

1,271

1,515

Stock-based compensation expense

8,176

7,343

Deferred and other income taxes

(117)

13

Excess tax benefit from employee stock-based compensation

(559)

—

Inventory write-down

175

493

Provision for doubtful accounts

25

—

Changes in operating assets and liabilities:


Accounts receivable

2,263

3,282

Inventories

(2,073)

1,155

Prepaid expenses and other current assets

654

(1,463)

Accounts payable

(254)

(1,147)

Accrued liabilities and other liabilities

(13,076)

(5,247)

Deferred revenue

(3,282)

10,523

Net cash (used in) provided by operating activities

(3,826)

15,772

CASH FLOWS FROM INVESTING ACTIVITIES:


Purchase of short-term investments

(29,107)

—

Proceeds from maturities of short-term investments

26,786

21,653

Purchase of property and equipment

(2,107)

(1,037)

Net cash (used in) provided by investing activities

(4,428)

20,616

CASH FLOWS FROM FINANCING ACTIVITIES:


Proceeds from employee stock purchase plan

3,368

2,607

Proceeds from exercise of stock option

1,377

1,245

Shares repurchased for tax withholdings on vesting of restricted stock units

(1,385)

(1,262)

Excess tax benefits from employee stock-based compensation

559

—

Net cash provided by financing activities

3,919

2,590

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(4,335)

38,978

CASH AND CASH EQUIVALENTS — Beginning of period

120,212

38,941

CASH AND CASH EQUIVALENTS — End of period

$

115,877

$

77,919

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:


Income taxes paid during the period

$

283

$

129


Gigamon Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except percentages)

(unaudited)



Three Months Ended

April 2, 2016

March 28, 2015

Total Revenue

$

67,211

$

46,853

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


GAAP gross profit

$

54,422

$

35,631

Stock-based compensation expense

470

549

Stock-based compensation related payroll taxes

16

23

Non-GAAP gross profit

$

54,908

$

36,203

GAAP gross margin

81

%

76

%

Non-GAAP gross margin

82

%

77

%

Reconciliation of GAAP Operating Income (loss) and GAAP Operating Margin to Non-GAAP Operating Income and Non-GAAP Operating Margin:


GAAP operating income (loss)

$

3,412

$

(716)

Stock-based compensation expense

8,176

7,343

Stock-based compensation related payroll taxes

282

312

Non-GAAP operating income

$

11,870

$

6,939

Reconciliation of GAAP Net Income (loss) Attributable To Common Stockholders to Non-GAAP Net Income:


GAAP net income (loss) attributable to common stock holders

$

2,971

$

(695)

Stock-based compensation expense

8,176

7,343

Stock-based compensation related payroll taxes

282

312

Income tax effect of Non-GAAP adjustments

(3,253)

(2,396)

Non-GAAP net income

$

8,176

$

4,564

Gigamon Inc.

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

(In thousands, except per share amounts)

(unaudited)



Three Months Ended

April 2, 2016

March 28, 2015

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


GAAP diluted net income (loss) per share

$

0.08

$

(0.02)

Stock-based compensation expense

0.22

0.22

Stock-based compensation related payroll taxes

0.01

0.01

Income tax effect of non-GAAP adjustments

(0.09)

(0.07)

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

—

(0.01)

Non-GAAP diluted net income per share

$

0.22

$

0.13

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

36,546

32,994

Dilutive impact due to stock-based compensation

578

1,670

Non-GAAP diluted weighted-average number of shares

37,124

34,664


Gigamon Inc.

Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations

For the Three months Ended April 2, 2016 and March 28, 2015

(In thousands, except per share amounts and percentages)

(unaudited)



Three Months Ended

April 2, 2016

March 28, 2015

As

Reported

Adjustments

Non-GAAP

As

Reported

Adjustments

Non-GAAP

Revenue:





Product

$

44,662

$

—

$

44,662

$

32,152

$

—

$

32,152

Service

22,549

—

22,549

14,701

—

14,701

Total revenue

67,211

—

67,211

46,853

—

46,853

Cost of revenue:





Product (1)

10,707

(315)

10,392

9,445

(380)

9,065

Service (1)

2,082

(171)

1,911

1,777

(192)

1,585

Total Cost of Revenue

12,789

(486)

12,303

11,222

(572)

10,650

Gross profit

54,422

486

54,908

35,631

572

36,203

Product Gross Margin

76

%

77

%

71

%

72

%

Service Gross Margin

91

%

92

%

88

%

89

%

Total Gross Margin

81

%

82

%

76

%

77

%

Operating expenses:





Research and development (1)

15,358

(3,082)

12,276

11,496

(2,247)

9,249

Sales and marketing (1)

27,657

(2,367)

25,290

18,832

(2,540)

16,292

General and administrative (1)

7,995

(2,523)

5,472

6,019

(2,296)

3,723

Total operating expenses

51,010

(7,972)

43,038

36,347

(7,083)

29,264

Income (loss) from operations

3,412

8,458

11,870

(716)

7,655

6,939

Other income (expense):





Interest income

207

—

207

119

—

119

Other expense, net

(69)

—

(69)

(10)

—

(10)

Income (loss) before income taxes

3,550

8,458

12,008

(607)

7,655

7,048

Income tax (2)

(579)

(3,253)

(3,832)

(88)

(2,396)

(2,484)

Net income (loss)

$

2,971

$

5,205

$

8,176

$

(695)

$

5,259

$

4,564

Net income (loss) per share attributable to common stockholders:





Basic

$

0.09

$

0.15

$

0.24

$

(0.02)

$

0.16

$

0.14

Diluted

$

0.08

$

0.14

$

0.22

$

(0.02)

$

0.15

$

0.13

Weighted-average number of shares used in per share amounts:





Basic

34,633

—

34,633

32,994

—

32,994

Diluted

36,546

578

37,124

32,994

1,670

34,664



Notes:



1.

Includes stock-based compensation expense and related payroll taxes in the three months April 2, 2016 and March 28, 2015.

2.

Includes income tax effect of non-GAAP adjustments in the three months April 2, 2016 and March 28, 2015.

SOURCE Gigamon Inc.