Gigamon Reports Second Quarter 2013 Financial Results

Second Quarter Revenue Growth of 44% year-over-year

News provided by

Gigamon

Jul 29, 2013, 04:05 ET

SILICON VALLEY, Calif., July 29, 2013 /PRNewswire/ -- Gigamon® (NYSE:GIMO), a leader in traffic visibility solutions with the innovative Visibility Fabric™ architecture, today released financial results for the second quarter ended June 29, 2013. 

Financial Highlights:

  • Revenues for the second quarter of fiscal 2013 were $32.4 million, compared to $22.5 million in the second quarter of fiscal 2012.
  • GAAP gross margins of 72% in the second fiscal quarter, compared to 80% in the second quarter of fiscal 2012.
  • Non-GAAP gross margins of 82% in the second fiscal quarter, compared to 80% in the second quarter of fiscal 2012.
  • GAAP net loss for the second quarter of fiscal 2013 was $7.9 million, or $0.41 per diluted share, compared to GAAP net income of $1.3 million, or $0.08 per diluted share, in the second quarter of fiscal 2012.
  • Non-GAAP net income for the second quarter of fiscal 2013 was $3.6 million, or $0.13 per diluted share, compared to non-GAAP net income of $3.1 million, or $0.18 per diluted share, in the second quarter of fiscal 2012.

"In our first quarter as a public company, we delivered solid revenue growth of 44% year-over-year," said Paul Hooper, CEO of Gigamon. "Our Visibility Fabric enables our customers to gain higher levels of visibility into their IT infrastructure by delivering the right network traffic to the right management system, at the right time.  We believe our market is significantly underpenetrated, and through our broad, intelligent and scalable solution, we believe we are well-positioned to capitalize on this exciting growth opportunity."

Business Highlights:

  • Pricing of our initial public offering, raising $93.4 million, net of expenses, on June 11, 2013.
  • Acquired 72 new customers in the second quarter, bringing the total to 1142 customers that have deployed our visibility solutions.
  • Recognition for the GigaVUE-HD4 which won the 'Best of Show Grand Prix' award in its category at Interop Tokyo 2013.
  • Recognition as the 'Hottest New Networking Company' at NetEvents Innovation Awards 2013.
  • First shipment of the GigaVUE-HB1 fully integrated "Visibility Fabric in a box" system targeted at managed service providers and midsized enterprises.
  • Announcement of the company's enhanced strategy to deliver a unified Visibility Fabric™ architecture - designed to provide pervasive visibility across physical, virtual and Software-Defined networks (SDN).
  • Appointment of Shehzad Merchant as Chief Strategy Officer and Peter Finter as Chief Marketing Officer.

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 29, 2013. To access the conference call, dial 877-941-1427, using conference code 4627689. Callers outside the U.S. and Canada should dial 480-629-9664, using conference code 4627689. A replay of the conference call will be available through Monday, August 5, 2013. To access the replay, please dial 800-406-7325 and enter pass code 4627689. Callers outside the U.S. and Canada should dial 303-590-3030 and enter pass code 4627689. 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 Measurements

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. 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 that the market for our products will continue to grow and develop; and our expectations regarding product developments and enhancements and adoption of those products by our customers.  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 Prospectus related to our initial public offering of common stock filed pursuant to Rule 424(b) under the Securities Act of 1933 (Registration No. 333-182662). 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.

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.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)









Three Months Ended

Six Months Ended

June 29,

June 30,

June 29,

June 30,

2013

2012

2013

2012

Net Revenue:






  Product

$ 23,354

$ 16,213

$ 40,873

$ 27,106

  Service

9,055

6,254

17,349

12,063

Total net revenue

32,409

22,467

58,222

39,169








Cost of revenue:






  Product

7,098

4,086

11,822

7,451

  Service

1,911

453

2,564

945

Cost of revenue (1), (2)

9,009

4,539

14,386

8,396

Gross profit

23,400

17,928

43,836

30,773








Operating expenses:






Research and development (1), (2)

17,097

3,570

22,768

7,515

Sales and marketing (1), (2)

26,114

9,112

38,535

17,335

General and administrative (1), (2)

12,688

2,735

16,197

4,041

    Total operating expenses

55,899

15,417

77,500

28,891

(Loss) income from operations

(32,499)

2,511

(33,664)

1,882

Other income (expense):






Interest income

1

3

3

6

Other expense, net

(18)

(7)

(25)

(33)

(Loss) income before income taxes

(32,516)

2,507

(33,686)

1,855

Income tax benefit (expense) (3)

24,571

(28)

24,542

(91)

Net (loss) income 

(7,945)

2,479

(9,144)

1,764

Accretion of preferred stock

(503)

(553)

(1,088)

(1,097)

Loss (earnings) attributable to preferred stock holders

538

(615)

1,107

(213)

Net (loss) income to common stock holders

$ (7,910)

$   1,311

$ (9,125)

$      454








Net (loss) income per share attributable to common stock holders:






Basic

$   (0.41)

$     0.08

$   (0.50)

$     0.03

Diluted

$   (0.41)

$     0.08

$   (0.50)

$     0.03

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






Basic

19,247

17,300

18,284

17,300

Diluted

19,247

17,300

18,284

17,300
















(1) Includes stock-based compensation expenses, as follows:






Cost of revenue

$   2,691

$          2

$   2,709

$          2

Research and development

6,069

32

6,378

32

Sales and marketing

5,263

86

5,692

86

General and administrative

2,674

516

3,511

516

    Total stock-based compensation expenses

$ 16,697

$      636

$ 18,290

$      636








(2) Includes performance unit plan compensation expenses, as follows:






Cost of revenue

$      353

$         -

$      353

$         -

Research and development

5,188

-

5,188

-

Sales and marketing

7,991

-

7,991

-

General and administrative

6,839

-

6,839

-

    Total performance unit plan compensation expenses

$ 20,371

$         -

$ 20,371

$         -








(3) Includes tax benefit upon conversion of LLC to a C Corporation on May 31, 2013

$ 14,811

$         -

$ 14,811

$         -









Gigamon Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)





June 29,

December 31,

2013

2012

Assets


Current assets:


Cash and cash equivalents

$ 121,522

$         18,675

Accounts receivable, net

17,908

20,677

Inventories

3,241

3,736

Deferred income tax asset

4,679

-

Prepaid expenses and other current assets

3,269

3,407

    Total current assets

150,619

46,495




Property and equipment, net

3,558

2,686

Deferred income tax asset, non-current

19,906

-

Other assets

17

2,316

    Total assets

$ 174,100

$         51,497




Liabilities and Stockholders' Equity (Deficit)


Current liabilities:


Accounts payable

$     2,986

$           3,221

Accrued and other current liabilities

36,443

18,710

Deferred revenue

27,662

23,917

    Total current liabilities

67,091

45,848




Deferred revenue, non-current

8,639

6,903

Other liabilities

219

447




Commitments and contingencies


Series A preferred stock

-

28,344




Stockholders' equity (deficit):


Common stock

3

1,625

Treasury stock

(12,469)

(12,469)

Additional paid in capital

143,160

1,522

Accumulated deficit

(32,543)

(20,723)

    Total stockholders' equity (deficit)

98,151

(30,045)

        Total liabilities, preferred stock and stockholders' equity (deficit)

$ 174,100

$         51,497


Gigamon Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)









Three Months Ended

Six Months Ended

June 29,

June 30,

June 29,

June 30,

2013

2012

2013

2012

Operating activities:






Net (loss) income

$   (7,945)

$   2,479

$   (9,144)

$   1,764

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






  Depreciation and amortization

649

282

1,198

538

  Stock-based compensation

16,697

636

18,290

636

  Deferred income taxes

(24,585)

-

(24,585)

-

  Inventory (recovery) write-offs

(140)

404

(140)

1,382

  Loss on disposal of fixed assets

14

-

14

-

  Changes in operating assets and liabilities:






    Accounts receivable, net

(3,977)

(1,796)

2,769

4,760

    Inventories

189

1,810

1,652

352

    Prepaid expenses and other assets

968

461

230

684

    Accounts payable

1,555

(1,469)

(85)

(1,288)

    Accrued and other liabilities

20,293

1,816

19,385

3,944

    Deferred revenue

1,094

1,783

5,481

2,110

        Net cash provided by operating activities

4,812

6,406

15,065

14,882

Investing activities:






  Purchases of property and equipment

(1,251)

(678)

(2,200)

(1,240)

        Net cash used in investing activities

(1,251)

(678)

(2,200)

(1,240)

Financing activities:






  Proceeds from initial public offering, net

97,102

-

97,068

-

  Proceeds from exercise of stock options

11

-

11

-

  Distribution of income to LLC members

(2,276)

(2,790)

(7,097)

(7,440)

        Net cash provided by (used in) financing activities

94,837

(2,790)

89,982

(7,440)

  Net increase in cash and cash equivalents

98,398

2,938

102,847

6,202

  Cash and cash equivalents at beginning of period

23,124

16,366

18,675

13,102

  Cash and cash equivalents at end of period

$ 121,522

$ 19,304

$ 121,522

$ 19,304
 


Gigamon Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except per share data)

(unaudited)











Three Months Ended

Six Months Ended


June 29,

June 30,

June 29,

June 30,


2013

2012

2013

2012

Reconciliation of Gross Profit and Gross Margin on a GAAP Basis to Gross Profit and Gross Margin on a Non-GAAP Basis:






Gross profit on a GAAP basis

$    23,400

$     17,928

$    43,836

$    30,773

Stock-based compensation

2,691

2

2,709

2

Performance unit plan compensation expense

353

-

353

-

Gross profit on a Non-GAAP basis

$    26,444

$     17,930

$    46,898

$    30,775









Revenue

$    32,409

$    22,467

$    58,222

$     39,169

    Gross margin on a GAAP basis

72%

80%

75%

79%

    Gross margin on a Non-GAAP basis

82%

80%

81%

79%









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






Operating (loss) income on a GAAP basis

$  (32,499)

$         2,511

$  (33,664)

$        1,882

Stock-based compensation 

16,697

636

18,290

636

Performance unit plan compensation expense

20,371

-

20,371

-

Operating income on a Non-GAAP basis

$       4,569

$        3,147

$       4,997

$        2,518









    Operating margin on a GAAP basis

-100%

11%

-58%

5%

    Operating margin on a Non-GAAP basis

14%

14%

9%

6%









Reconciliation of Net (Loss) income attributable to common stockholders on a GAAP Basis to Net Income attributable to common stockholders on a Non-GAAP Basis:






Net (loss) income attributable to common stock holders on a GAAP basis

$      (7,910)

$          1,311

$      (9,125)

$          454

     Accretion of preferred stock

503

553

1,088

1,097

    (Loss) earnings attributable to preferred stock holders

(538)

615

(1,107)

213

    Stock-based compensation

16,697

636

18,290

636

    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

(10,675)

-

(10,675)

Net income on a Non-GAAP basis

$       3,637

$         3,115

$        4,031

$       2,400










Gigamon Inc.

Reconciliation of Non-GAAP Financial Measures (continued)

(in thousands, except per share data)

(unaudited)











Three Months Ended

Six Months Ended


June 29,

June 30,

June 29,

June 30,


2013

2012

2013

2012

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






Diluted net (loss) income per share on a GAAP basis

$  (0.41)

$    0.08

$  (0.50)

$    0.03









    Accretion of preferred stock

0.03

0.03

0.06

0.06

    (Loss) earnings attributable to preferred stock holders 

(0.03)

0.04

(0.06)

0.01

  Stock-based compensation

0.87

0.04

1.00

0.04

  Performance unit plan compensation

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

(0.55)

-

(0.58)

-

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

(0.07)

(0.01)

(0.07)

-

Diluted net income per share on a Non-GAAP basis

$    0.13

$    0.18

$    0.15

$    0.14









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

19,247

17,300

18,284

17,300

Dilutive impact due to stock options, a common stock warrant, restricted stock awards, and restricted stock units

 

8,209

 

113

 

8,542

 

44

Non-GAAP diluted weighted-average number of shares

27,456

17,413

26,826

17,344


Condensed Non-GAAP Consolidated Income Statements

Impact of Non-GAAP Adjustments on Reported Net (Loss) Income

For the Three and Six Months Ended June 29, 2013 and June 30, 2012

(In thousands, except per share amounts)

(unaudited)

























Three Months Ended June 29, 2013

Three Months Ended June 30, 2012

Six Months Ended June 29, 2013

Six Months Ended June 30, 2012

As Reported

Adjustments

Non-GAAP

As Reported

Adjustments

Non-GAAP

As Reported

Adjustments

Non-GAAP

As Reported

Adjustments

Non-GAAP

Net Revenue:






















  Product

$      23,354

$               -

$    23,354

$      16,213

$               -

$    16,213

$      40,873

$               -

$    40,873

$      27,106

$               -

$    27,106

  Service

9,055

-

9,055

6,254

-

6,254

17,349

-

17,349

12,063

-

12,063

Total net revenue

32,409

-

32,409

22,467

-

22,467

58,222

-

58,222

39,169

-

39,169
























Cost of revenue:






















  Product (1), (2)

7,098

(1,952)

5,146

4,086

(2)

4,084

11,822

(1,964)

9,858

7,451

(2)

7,449

  Service (1), (2)

1,911

(1,092)

819

453

-

453

2,564

(1,098)

1,466

945

-

945

Cost of revenue

9,009

(3,044)

5,965

4,539

(2)

4,537

14,386

(3,062)

11,324

8,396

(2)

8,394

Gross profit

23,400

3,044

26,444

17,928

2

17,930

43,836

3,062

46,898

30,773

2

30,775
























Operating expenses:






















Research and development (1), (2)

17,097

(11,257)

5,840

3,570

(32)

3,538

22,768

(11,566)

11,202

7,515

(32)

7,483

Sales and marketing (1), (2)

26,114

(13,254)

12,860

9,112

(86)

9,026

38,535

(13,683)

24,852

17,335

(86)

17,249

General and administrative (1), (2)

12,688

(9,513)

3,175

2,735

(516)

2,219

16,197

(10,350)

5,847

4,041

(516)

3,525

    Total operating expenses

55,899

(34,024)

21,875

15,417

(634)

14,783

77,500

(35,599)

41,901

28,891

(634)

28,257

(Loss) income from operations

(32,499)

37,068

4,569

2,511

636

3,147

(33,664)

38,661

4,997

1,882

636

2,518

Other income (expense):






















Interest income

1

-

1

3

-

3

3

-

3

6

-

6

Other expense, net

(18)

-

(18)

(7)

-

(7)

(25)

-

(25)

(33)

-

(33)

(Loss) income before income taxes

(32,516)

37,068

4,552

2,507

636

3,143

(33,686)

38,661

4,975

1,855

636

2,491

Income tax benefit (expense) (3), (4)

24,571

(25,486)

(915)

(28)

-

(28)

24,542

(25,486)

(944)

(91)

-

(91)

Net (loss) income

(7,945)

11,582

3,637

2,479

636

3,115

(9,144)

13,175

4,031

1,764

636

2,400

Accretion of preferred stock

(503)

503

-

(553)

553

-

(1,088)

1,088

-

(1,097)

1,097

-

Loss (earnings) attributable to preferred stock holders

538

(538)

-

(615)

615

-

1,107

(1,107)

-

(213)

213

-

Net (loss) income to common stock holders

$       (7,910)

$       11,547

$      3,637

$        1,311

$         1,804

$      3,115

$       (9,125)

$       13,156

$      4,031

$           454

$         1,946

$      2,400
























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






















Basic

$         (0.41)

$           0.60

$        0.19

$          0.08

$           0.10

$        0.18

$         (0.50)

$           0.72

$        0.22

$          0.03

$           0.11

$        0.14

Diluted

$         (0.41)

$           0.54

$        0.13

$          0.08

$           0.10

$        0.18

$         (0.50)

$           0.65

$        0.15

$          0.03

$           0.11

$        0.14

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






















Basic

19,247

-

19,247

17,300

-

17,300

18,284

-

18,284

17,300

-

17,300

Diluted

19,247

8,209

27,456

17,300

113

17,413

18,284

8,542

26,826

17,300

44

17,344
























Notes:






















(1) Stock-based compensation









(2) Performance unit plan compensation









(3) Tax benefit upon conversion from an LLC to a C Corporation on May 31, 2013









(4) Income tax effect on non-GAAP adjustments









 

SOURCE Gigamon

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