Gigamon Reports Second Quarter 2014 Financial Results

SANTA CLARA, Calif., July 24, 2014 /PRNewswire/ -- Gigamon® Inc. (NYSE: GIMO), a leader in traffic visibility solutions with the innovative Visibility Fabric™ architecture, today released financial results for the second quarter ended June 28, 2014. 

Financial Highlights:

  • Revenues for the second quarter of fiscal 2014 were $34.9 million, compared to $32.4 million in the second quarter of fiscal 2013, representing growth of 8% year-over-year.
  • GAAP gross margins were 78% in the second quarter of fiscal 2014, compared to 73% in the second quarter of fiscal 2013.
  • Non-GAAP gross margins were 79% in the second quarter of fiscal 2014, compared to 82% in the second quarter of fiscal 2013.
  • GAAP net loss for the second quarter of fiscal 2014 was $32.5 million, or $1.01 per diluted share, impacted by a one-time charge of $24.6 million to the Company's GAAP income tax provision to establish a valuation allowance against deferred tax assets. This compares to GAAP net loss of $9.8 million, or $0.51 per diluted share, in the second quarter of fiscal 2013.
  • Non-GAAP net loss for the second quarter of fiscal 2014 was $1.1 million, or $0.04 per diluted share, compared to non-GAAP net income of $3.8 million, or $0.14 per diluted share, in the second quarter of fiscal 2013.

"Our disappointing second quarter results were due primarily to lower than expected performance in our Enterprise business where we continued to see longer sales cycles and larger deals requiring more steps in the customer approval process. In addition, our Service Provider and international segments did not accelerate at the pace we anticipated," said Paul Hooper, chief executive officer of Gigamon. "We are taking actions to address these dynamics and improve our go-to-market execution, including initiating a search for a new head of worldwide sales." 

"We continue to believe in the strength and health of the Network Visibility market and the demand for our industry leading solutions as evidenced by our 84 customer additions, and we were pleased with the performance of our Federal business during the second quarter," Hooper said.

Recent Business Highlights:

  • Appointed Mike Burns as the Company's chief financial officer and Sachi Sambandan as the company's senior vice president of engineering.
  • Announced forthcoming solutions to address the growing security needs of organizations including modules to address inline traffic security.
  • Delivered enhanced centralized management and configuration for network visibility in private clouds and virtualized data centers (GigaVUE-VM and GigaVUE-FM).
  • Recognized as the winner of Network World Asia's 2014 Information Management Awards in the "Network Traffic Monitoring & Management" category.
  • Became a member of the Network Intelligence Alliance (NI Alliance), an industry organization created to promote collaborative solutions for Intelligent Network solutions.
  • Selected as 'Best New Product' 2014 finalist in the Leading Lights Awards, recognizing Gigamon's NetFlow Generation application.

Conference Call Information:

Gigamon will host an investor conference call and live webcast today at 5:00 p.m. ET (2:00 p.m. PT) to discuss its financial results for the second quarter ended June 28, 2014. To access the conference call, dial 888-438-5525, using conference code 8532663. Callers outside the U.S. and Canada should dial 719-325-2432, using conference code 8532663. A replay of the conference call will be available through Thursday, July 31, 2014. To access the replay, please dial 888-203-1112 and enter pass code 8532663. Callers outside the U.S. and Canada should dial 719-457-0820 and enter pass code 8532663. The live webcast will be accessible on Gigamon's investor relations website at http://investor.gigamon.com and will be archived and available on this site for twelve months.

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 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 improvements to our business.  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 Quarterly Report on Form 10-Q for the period ended March 29, 2014. The forward-looking statements in this press release are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law.

About the Visibility Fabric architecture

At Gigamon we realized that delivering the visibility essential to manage, analyze and secure the complex system that is the IT infrastructure requires a new approach. With millions of traffic flows across thousands of endpoints, visibility needs to be pervasive, intelligent and dynamic. Using our patented, unique technology, we created an innovative new approach for delivering this visibility called the Visibility Fabric architecture. This new approach is intelligent and versatile in its ability to enable visibility into the network. For more information visit http://www.gigamon.com/traffic-visibility-fabric.

About Gigamon

Gigamon provides an intelligent Visibility Fabric™ architecture for enterprises, data centers and service providers around the globe. Our technology empowers infrastructure architects, managers and operators with pervasive and dynamic intelligent visibility of traffic across both physical and virtual environments without affecting the performance or stability of the production network. Through patented technologies and centralized management, the Gigamon GigaVUE portfolio of high availability and high density products intelligently delivers the appropriate network traffic to management, analysis, compliance and security tools. With over eight years' experience designing and building traffic visibility products in the US, Gigamon solutions are deployed globally across vertical markets including over half of the Fortune 100 and many government and federal agencies. www.gigamon.com

 



Gigamon Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)

(unaudited)












Three Months Ended


Six Months Ended



June 28,


June 29,


June 28,


June 29,



2014


2013


2014


2013

Revenue:








  Product


$  22,544


$ 23,354


$  42,624


$  40,873

  Service


12,307


9,055


23,987


17,349

Total revenue


34,851


32,409


66,611


58,222










Cost of revenue:









  Product


6,281


6,944


13,286


11,668

  Service


1,544


1,911


3,124


2,564

Cost of revenue


7,825


8,855


16,410


14,232

Gross profit


27,026


23,554


50,201


43,990










Operating expenses:









Research and development


10,860


17,097


21,798


22,768

Sales and marketing


19,558


26,114


37,728


38,535

General and administrative


4,446


12,688


10,451


16,197

   Total operating expenses


34,864


55,899


69,977


77,500

Loss from operations


(7,838)


(32,345)


(19,776)


(33,510)

Other income (expense):









Interest income


73


1


134


3

Other income (expense), net


6


(18)


(35)


(25)

Loss before income taxes


(7,759)


(32,362)


(19,677)


(33,532)

Income tax (expense) benefit 


(24,727)


22,569


(21,027)


22,540

Net loss


(32,486)


(9,793)


(40,704)


(10,992)

Accretion of preferred stock


-


(503)


-


(1,088)

Loss attributable to preferred stock holders


-


538


-


1,107

Net loss to common stock holders


$ (32,486)


$ (9,758)


$ (40,704)


$ (10,973)










Net loss per share attributable to common stock holders:









Basic and Diluted


$     (1.01)


$   (0.51)


$     (1.28)


$     (0.60)

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









Basic and Diluted


32,116


19,247


31,895


18,284



















 


Gigamon Inc.

Consolidated Balance Sheets

(In thousands)

(unaudited)






June 28,


December 28,


2014


2013

Assets




Current assets:




Cash and cash equivalents

$   30,923


$         79,908

Short-term investments

103,917


58,242

Accounts receivable, net

17,287


24,528

Inventories, net

7,704


1,484

Deferred tax assets

-


3,574

Prepaid expenses and other current assets

5,849


5,606

   Total current assets

165,680


173,342





Property and equipment, net

7,654


4,389

Deferred tax assets, non-current

12


17,315

Other assets

484


471

Total assets

$ 173,830


$       195,517





Liabilities and Stockholders' Equity




Current liabilities:




Accounts payable

$     5,228


$           1,405

Accrued liabilities

17,020


22,401

Deferred revenue

37,750


37,592

Gigamon LLC members' distribution payable

-


476

   Total current liabilities

59,998


61,874





Deferred revenue, non-current

10,293


9,884

Other liabilities

1,642


321





Stockholders' equity:




Common stock

3


3

Treasury stock

(12,469)


(12,469)

Additional paid in capital

163,951


144,810

Accumulated other comprehensive income

50


23

Accumulated deficit

(49,638)


(8,929)

    Total stockholders' equity

101,897


123,438

       Total liabilities and stockholders' equity

$ 173,830


$       195,517





 

 


Gigamon Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)










Three Months Ended


Six Months Ended


June 28,


June 29,


June 28,


June 29,


2014


2013


2014


2013

Operating activities:








Net loss 

$ (32,486)


$   (9,793)


$ (40,704)


$ (10,992)

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








Depreciation and amortization

1,254


649


2,237


1,198

Stock-based compensation expense

6,039


16,697


13,897


18,290

Deferred income taxes

24,596


(22,583)


20,877


(22,583)

Inventory write-offs

627


138


2,437


395

Loss on disposal of fixed assets

-


14


-


14

Changes in operating assets and liabilities:








Accounts receivable, net

(965)


(3,977)


7,241


2,769

Inventories

(7,689)


(243)


(7,936)


963

Prepaid expenses and other assets

(314)


968


(1,097)


230

Accounts payable

3,302


1,555


3,349


(85)

Accrued and other liabilities

1,562


20,293


(4,617)


19,385

Deferred revenue

(1,475)


1,094


567


5,481

  Net cash provided by (used in) operating activities

(5,549)


4,812


(3,749)


15,065









Investing activities:








Purchases of short-term investments

(26,214)


-


(60,644)


-

Proceeds from sales of short-term investments

1,000


-


2,000


-

Proceeds from maturities of short-term investments

8,337


-


13,412


-

Purchases of property and equipment

(2,463)


(1,251)


(4,732)


(2,200)

  Net cash used in investing activities

(19,340)


(1,251)


(49,964)


(2,200)









Financing activities:








Proceeds from employee stock purchase plan

-


-


3,863


-

Proceeds from exercise of stock options, net

690


11


3,571


11

Proceeds from initial public offering and follow-on public offering, net

-


97,102


(8)


97,068

Shares repurchased for tax withholdings on vesting of restricted stock units and other exercises

(590)


-


(2,222)


-

Distribution of income to Gigamon LLC members

-


(2,276)


(476)


(7,097)

  Net cash provided by financing activities

100


94,837


4,728


89,982

Net (decrease) increase in cash and cash equivalents

(24,789)


98,398


(48,985)


102,847

Cash and cash equivalents at beginning of period

55,712


23,124


79,908


18,675

Cash and cash equivalents at end of period

$  30,923


$ 121,522


$  30,923


$ 121,522









 

 


 


Gigamon Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except percentages)

(unaudited)














Three Months Ended


Six Months Ended




June 28,


June 29,


June 28,


June 29,




2014


2013


2014


2013

Revenue


$  34,851


$  32,409


$  66,611


$  58,222











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









GAAP gross profit


$  27,026


$  23,554


$  50,201


$  43,990

Stock-based compensation expense


471


2,691


919


2,709

Stock-based compensation related payroll taxes


1


-


59


-

Performance unit plan compensation expense


-


353


-


353

Non-GAAP gross profit


$  27,498


$  26,598


$  51,179


$  47,052











    GAAP gross margin


78%


73%


75%


76%

    Non-GAAP gross margin


79%


82%


77%


81%











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









GAAP operating loss


$   (7,838)


$ (32,345)


$ (19,776)


$ (33,510)

Stock-based compensation expense


6,039


16,697


13,897


18,290

Stock-based compensation related payroll taxes


(20)


-


757


-

Performance unit plan compensation expense


-


20,371


-


20,371

Non-GAAP operating (loss) income


$   (1,819)


$    4,723


$   (5,122)


$    5,151











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









GAAP net loss attributable to common stock holders


$ (32,486)


$   (9,758)


$ (40,704)


$ (10,973)

 Stock-based compensation expense


6,039


16,697


13,897


18,290

 Stock-based compensation related payroll taxes


(20)


-


757


-

     Accretion of preferred stock


-


503


-


1,088

     Loss attributable to preferred stock holders


-


(538)


-


(1,107)

    Performance unit plan compensation expense


-


20,371


-


20,371

    Tax benefit upon conversion of LLC to a C Corporation


-


(14,811)


-


(14,811)

    Income tax effect of Non-GAAP adjustments


25,333


(8,673)


22,684


(8,673)

Non-GAAP net (loss) income


$   (1,134)


$    3,791


$   (3,366)


$    4,185





















 

 


Gigamon Inc.

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

(In thousands, except per share data)

(unaudited)














Three Months Ended


 Six Months Ended 




June 28,


June 29,


June 28,


June 29,




2014


2013


2014


2013

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









GAAP diluted net loss per share


$  (1.01)


$  (0.51)


$  (1.28)


$  (0.60)

Stock-based compensation expense


0.18


0.87


0.44


1.00

Stock-based compensation related payroll taxes


-


-


0.02


-

Accretion of preferred stock


-


0.03


-


0.06

Loss attributable to preferred stock holders 


-


(0.03)


-


(0.06)

Performance unit plan compensation expense


-


1.06


-


1.11

Tax benefit upon conversion of LLC to a C corporation


-


(0.77)


-


(0.81)

Income tax effect on non-GAAP adjustments


0.79


(0.45)


0.71


(0.47)

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


-


(0.06)


-


(0.07)

Non-GAAP diluted net (loss) income per share


$  (0.04)


$    0.14


$  (0.11)


$    0.16











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









GAAP diluted weighted-average number of shares


32,116


19,247


31,895


18,284

    Dilutive impact due to stock-based compensation


-


8,209


-


8,542

Non-GAAP diluted weighted-average number of shares


32,116


27,456


31,895


26,826











 

 



Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations

For the Three and Six Months Ended June 28, 2014 and June 29, 2013

(In thousands, except per share amounts and percentages)

(unaudited)

























(In thousands)

Three Months Ended June 28, 2014


Three Months Ended June 29, 2013


Six Months Ended June 28, 2014


Six Months Ended June 29, 2013


As Reported


Adjustments


Non-GAAP


As Reported


Adjustments


Non-GAAP


As Reported


Adjustments


Non-GAAP


As Reported


Adjustments


Non-GAAP

Revenue:
























  Product

$      22,544


$               -


$    22,544


$      23,354


$               -


$    23,354


$      42,624


$               -


$    42,624


$      40,873


$               -


$    40,873

  Service

12,307


-


12,307


9,055


-


9,055


23,987


-


23,987


17,349


-


17,349

Total revenue

34,851


-


34,851


32,409


-


32,409


66,611


-


66,611


58,222


-


58,222

























Cost of revenue:
























  Product (1) (3)

6,281


(287)


5,994


6,944


(1,951)


4,993


13,286


(541)


12,745


11,668


(1,964)


9,704

  Service (1) (3)

1,544


(185)


1,359


1,911


(1,092)


819


3,124


(435)


2,689


2,564


(1,098)


1,466

Total cost of revenue

7,825


(472)


7,353


8,855


(3,043)


5,812


16,410


(976)


15,434


14,232


(3,062)


11,170

Gross profit

27,026


472


27,498


23,554


3,043


26,597


50,201


976


51,177


43,990


3,062


47,052

























Product Gross Margin

72%




73%


70%




79%


69%




70%


71%




76%

Service Gross Margin

87%




89%


79%




91%


87%




89%


85%




92%

Total Gross Margin

78%




79%


73%




82%


75%




77%


76%




81%

























Operating expenses:
























Research and development (1) (3)

10,860


(2,050)


8,810


17,097


(11,257)


5,840


21,798


(5,049)


16,749


22,768


(11,566)


11,202

Sales and marketing (1) (3)

19,558


(2,402)


17,156


26,114


(13,254)


12,860


37,728


(5,407)


32,321


38,535


(13,683)


24,852

General and administrative (1) (3)

4,446


(1,095)


3,351


12,688


(9,513)


3,175


10,451


(3,223)


7,228


16,197


(10,350)


5,847

   Total operating expenses

34,864


(5,547)


29,317


55,899


(34,024)


21,875


69,977


(13,679)


56,298


77,500


(35,599)


41,901

(Loss) income from operations

(7,838)


6,019


(1,819)


(32,345)


37,067


4,722


(19,776)


14,655


(5,121)


(33,510)


38,661


5,151

Other income (expense):
























Interest income

73


-


73


1


-


1


134


-


134


3


-


3

Other expense, net

6


-


6


(18)


-


(18)


(35)


-


(35)


(25)


-


(25)

(Loss) income before income taxes

(7,759)


6,019


(1,740)


(32,362)


37,067


4,705


(19,677)


14,655


(5,022)


(33,532)


38,661


5,129

Income tax benefit (expense) (2) (4) (5)

(24,727)


25,333


606


22,569


(23,484)


(915)


(21,027)


22,684


1,657


22,540


(23,484)


(944)

Net (loss) income

(32,486)


31,352


(1,134)


(9,793)


13,583


3,790


(40,704)


37,339


(3,365)


(10,992)


15,177


4,185

Accretion of preferred stock

-


-


-


(503)


503


-


-


-


-


(1,088)


1,088


-

Loss attributable to preferred stock holders

-


-


-


538


(538)


-


-


-


-


1,107


(1,107)


-

Net (loss) income to common stock holders

$     (32,486)


$       31,352


$     (1,134)


$       (9,758)


$       13,548


$      3,790


$     (40,704)


$       37,339


$     (3,365)


$     (10,973)


$       15,158


$      4,185

























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
























Basic

$         (1.01)


$           0.97


$       (0.04)


$         (0.51)


$           0.71


$        0.20


$         (1.28)


$           1.17


$       (0.11)


$         (0.60)


$           0.83


$        0.23

Diluted

$         (1.01)


$           0.97


$       (0.04)


$         (0.51)


$           0.65


$        0.14


$         (1.28)


$           1.17


$       (0.11)


$         (0.60)


$           0.76


$        0.16

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
























Basic

32,116


-


32,116


19,247


-


19,247


31,895


-


31,895


18,284


-


18,284

Diluted

32,116


-


32,116


19,247


8,209


27,456


31,895


-


31,895


18,284


8,542


26,826

























Notes:
























(1) Includes stock-based compensation expense and related payroll taxes in the three and six months ended June 28, 2014 and stock-based compensation expense in the three and six months ended June 29, 2013.

(2) Includes income tax effect on non-GAAP adjustments in the three and six months ended June 28, 2014 and June 29, 2013.

(3) Includes performance unit plan compensation related expenses in the three and six months ended June 29, 2013.

(4) Amount for the three and six months ended June 29, 2013 includes tax benefit recorded upon the conversion from an LLC to a C Corporation on May 31, 2013.

(5) Amount for the three and six months ended June 28, 2014 includes establishment of valuation allowance against the deferred tax asset .

























 

 

 

SOURCE Gigamon



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