EX-99.1 2 exhibit991-earningsrelease.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

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