Gigamon Reports Third Quarter 2016 Financial Results

Record revenue delivers 47% year-over-year growth

Results driven by strong demand for both Security and Mobility solutions

News provided by

Gigamon Inc.

Oct 27, 2016, 04:32 ET

SANTA CLARA, Calif., Oct. 27, 2016 /PRNewswire/ -- Gigamon Inc. (NYSE:GIMO), the leader in traffic visibility solutions, today released financial results for the third quarter ended October 1, 2016.

Third Quarter 2016 Financial Highlights:

  • Revenue of $83.5 million, up 47% year-over-year.
  • GAAP gross margin was 83%, compared to 80% in the third quarter of fiscal 2015.
  • Non-GAAP gross margin was 83%, compared to 81% in the third quarter of fiscal 2015.
  • GAAP net income was $6.1 million, or $0.16 per diluted share, compared to GAAP net income of $4.3 million, or $0.12 per diluted share, in the third quarter of fiscal 2015.
  • Non-GAAP net income was $14.0 million, or $0.36 per diluted share, compared to non-GAAP net income of $8.0 million, or $0.22 per diluted share, in the third quarter of fiscal 2015.
  • Cash and investments were $245 million, up $17 million from the second quarter of 2016, and up $58 million from the third quarter of fiscal 2015.

"Gigamon posted another strong set of results for our third quarter, delivering record revenue with a growth rate of 47 percent year-over-year," said Paul Hooper, Chief Executive Officer of Gigamon. "Our business continues to accelerate with Q3 representing our third consecutive quarter of an increasing year-over-year revenue growth rate. We continue to invest in our platform and solutions resulting in our new GigaVUE-HC1 product, which extends our GigaSECURE Security Delivery Platform to mid-sized enterprises and out to the edge of large enterprises. With our increasingly strong leadership and momentum in the industry, our security-enabling, network visibility platform has become an essential component of modern IT infrastructure."

Recent Business Highlights:

  • Announced availability of GigaVUE-HC1, expanding the reach of the GigaSECURE Security Delivery Platform from large data centers to small enterprises and remote sites in distributed enterprises.
  • Enhanced our existing channel program by launching the Sell Smart Incentive Program for GigaSECURE Resellers.
  • Introduced a new solution to automate visibility to information-in-motion in Software-Defined Data Centers.
  • Enhanced our GigaSECURE Metadata solution through the inclusion of encryption certificates. 

Conference Call Information:

Gigamon will host a conference call and live webcast for analysts and investors at 5:00 p.m. Eastern time on, October 27, 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 (800)-344-6698, using conference code 6038205.  International parties can access the call by dialing +1 (785) 830-7979, using conference code 6038205.

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, November 3, 2016. To access the replay, parties in the United States and Canada should call +1 (866) 375-1919 and enter conference code 6038205. International parties should call +1 (719) 457-0820 and enter conference code 6038205.

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 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, 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 measures attached to this release.

During the conference call to discuss these financial results, Gigamon expects to give guidance for the fourth quarter of fiscal 2016 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 the stock-based compensation and related payroll taxes, income tax effect of stock-based compensation expense and valuation allowance against deferred tax assets, 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 the Gigamon's common stock, all of which is difficult to predict and subject to constant 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 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 and our most recently available 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 Income

(In thousands, except per share amounts)

(unaudited)



Three Months Ended

Nine Months Ended

October 1, 2016

September 26, 2015

October 1, 2016

September 26, 2015

Revenue:






Product

$

59,835

$

38,717

$

155,805

$

105,683

Service

23,677

17,935

70,021

49,268

Total revenue

83,512

56,652

225,826

154,951

Cost of revenue:






Product

12,197

9,613

34,414

28,616

Service

2,141

1,708

6,562

5,248

Total cost of revenue

14,338

11,321

40,976

33,864

Gross profit

69,174

45,331

184,850

121,087

Operating expenses:






Research and development

18,306

12,677

50,914

36,400

Sales and marketing

31,994

21,388

88,494

61,391

General and administrative

8,887

6,950

26,029

19,671

Total operating expenses

59,187

41,015

165,437

117,462

Income from operations

9,987

4,316

19,413

3,625

Other income (expense):






Interest income

235

106

661

330

Other expense, net

(144)

(69)

(386)

(72)

Income before income tax (provision) benefit

10,078

4,353

19,688

3,883

Income tax (provision) benefit

(3,999)

(73)

23,321

(260)

Net income

$

6,079

$

4,280

$

43,009

$

3,623

Net income per share:






Basic

$

0.17

$

0.13

$

1.22

$

0.11

Diluted

$

0.16

$

0.12

$

1.15

$

0.10

Weighted average shares used in computing net income per share:






Basic

35,770

33,830

35,171

33,412

Diluted

38,113

35,872

37,341

35,497

Gigamon Inc.

Consolidated Balance Sheets

(In thousands)

(unaudited)



October 1, 2016

December 26, 2015

ASSETS


CURRENT ASSETS:


Cash and cash equivalents

$

155,553

$

120,212

Short-term investments

89,183

90,001

Accounts receivable, net

60,184

47,947

Inventories, net

6,953

3,813

Prepaid expenses and other current assets

10,448

7,621

Total current assets

322,321

269,594

Property and equipment, net

11,381

9,416

Deferred tax assets, non-current

31,608

135

Other assets, non-current

1,034

766

TOTAL ASSETS

$

366,344

$

279,911

LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES:


Accounts payable

$

3,910

$

3,724

Accrued liabilities

33,696

37,334

Deferred revenue

59,663

62,248

Total current liabilities

97,269

103,306

Deferred revenue, non-current

23,483

19,883

Deferred and other tax liabilities, non-current

182

279

Other liabilities, non-current

661

1,087

TOTAL LIABILITIES

121,595

124,555

STOCKHOLDERS' EQUITY


Common stock

4

3

Treasury stock

(12,469)

(12,469)

Additional paid-in-capital

257,702

211,402

Accumulated other comprehensive income (loss)

36

(47)

Accumulated deficit

(524)

(43,533)

TOTAL STOCKHOLDERS' EQUITY

244,749

155,356

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

366,344

$

279,911

Gigamon Inc.

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)



Three Months Ended

Nine Months Ended

October 1, 2016

September 26, 2015

October 1, 2016

September 26, 2015

CASH FLOWS FROM OPERATING ACTIVITIES:






Net income

$

6,079

$

4,280

$

43,009

$

3,623

Adjustments to reconcile net income to net cash provided by operating activities:






Depreciation and amortization

1,642

1,804

4,815

5,162

Stock-based compensation expense

10,104

7,869

28,884

23,780

Deferred and other income taxes

(679)

(2)

(31,570)

(2)

Excess tax benefit from employee stock-based compensation

(4,773)

—

(8,258)

—

Inventory write-down

40

504

312

1,374

Write down on fixed assets

4

12

219

12

Provision for doubtful accounts

50

—

147

—

Changes in operating assets and liabilities:






Accounts receivable

(15,519)

(13,028)

(12,384)

(13,052)

Inventories

(1,422)

491

(5,015)

76

Prepaid expenses and other assets

(1,753)

(482)

(2,991)

(1,803)

Accounts payable

569

935

54

852

Accrued liabilities and other liabilities

10,337

5,525

4,674

5,516

Deferred revenue

3,290

517

1,015

13,734

Net cash provided by operating activities

7,969

8,425

22,911

39,272

CASH FLOWS FROM INVESTING ACTIVITIES:






Purchase of short-term investments

(20,942)

(32,169)

(84,773)

(40,168)

Proceeds from sales of short-term investments

—

551

—

2,006

Proceeds from maturities of short-term investments

24,500

24,485

85,747

58,818

Purchase of property and equipment

(1,523)

(1,761)

(6,001)

(3,985)

Net cash provided by (used in) investing activities

2,035

(8,894)

(5,027)

16,671

CASH FLOWS FROM FINANCING ACTIVITIES:






Proceeds from employee stock purchase plan

3,417

2,492

6,785

5,099

Proceeds from exercise of stock options

5,528

757

9,654

3,525

Shares repurchased for tax withholdings on vesting of restricted stock units

(3,411)

(2,995)

(7,240)

(6,964)

Excess tax benefits from employee stock-based compensation

4,773

—

8,258

—

Net cash provided by financing activities

10,307

254

17,457

1,660

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

20,311

(215)

35,341

57,603

CASH AND CASH EQUIVALENTS — Beginning of period

135,242

96,759

120,212

38,941

CASH AND CASH EQUIVALENTS — End of period

$

155,553

$

96,544

$

155,553

$

96,544

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:






Income taxes paid during the period

$

2,032

$

83

$

2,843

$

348

Gigamon Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except percentages)

(unaudited)



Three Months Ended

Nine Months Ended

October 1, 2016

September 26, 2015

October 1, 2016

September 26, 2015

Total Revenue

$

83,512

$

56,652

$

225,826

$

154,951

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






GAAP gross profit

69,174

45,331

184,850

121,087

Stock-based compensation expense

519

471

1,527

1,530

Stock-based compensation related payroll taxes

28

16

64

60

Non-GAAP gross profit

$

69,721

$

45,818

$

186,441

$

122,677

GAAP gross margin

83

%

80

%

82

%

78

%

Non-GAAP gross margin

83

%

81

%

83

%

79

%

Reconciliation of GAAP Operating Income to Non-GAAP Operating Income:






GAAP operating income

$

9,987

$

4,316

$

19,413

$

3,625

Stock-based compensation expense

10,104

7,851

28,884

23,780

Stock-based compensation related payroll taxes

414

162

971

791

Non-GAAP operating income

$

20,505

$

12,329

$

49,268

$

28,196

Reconciliation of GAAP Net Income to Non-GAAP Net Income:






GAAP net income

$

6,079

$

4,280

$

43,009

$

3,623

Stock-based compensation expense

10,104

7,851

28,884

23,780

Stock-based compensation related payroll taxes

414

162

971

791

Income tax effect of Non-GAAP adjustments

(2,593)

(4,310)

(39,176)

(9,781)

Non-GAAP net income

$

14,004

$

7,983

$

33,688

$

18,413

Gigamon Inc.

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

(In thousands, except per share amounts)

(unaudited)



Three Months Ended

Nine Months Ended

October 1,
2016

September 26,
2015

October 1,
2016

September 26,
2015

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






GAAP diluted net income per share

$

0.16

$

0.12

$

1.15

$

0.10

Stock-based compensation expense

0.27

0.22

0.77

0.67

Stock-based compensation related payroll taxes

0.01

—

0.03

0.02

Income tax effect of non-GAAP adjustments

(0.07)

(0.12)

(1.05)

(0.27)

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

(0.01)

—

(0.01)

(0.01)

Non-GAAP diluted net income per share

$

0.36

$

0.22

$

0.89

$

0.51

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

38,113

35,872

37,341

35,497

Dilutive impact due to stock-based compensation

544

498

673

726

Non-GAAP diluted weighted-average number of shares

38,657

36,370

38,014

36,223

Gigamon Inc.

Reconciliation of GAAP to Non-GAAP Consolidated Statements of Income

For the Three and Nine Months Ended October 1, 2016 and September 26, 2015

(In thousands, except per share amounts and percentages)

(unaudited)





Three Months Ended

Nine Months Ended

October 1, 2016

September 26, 2015

October 1, 2016

September 26, 2015

As

Reported

Adjustments

Non-GAAP

As

Reported

Adjustments

Non-GAAP

As

Reported

Adjustments

Non-GAAP

As

Reported

Adjustments

Non-GAAP

Revenue:












Product

$

59,835

$

—

$

59,835

$

38,717

$

—

$

38,717

$

155,805

$

—

$

155,805

$

105,683

$

—

$

105,683

Service

23,677

—

23,677

17,935

—

17,935

70,021

—

70,021

49,268

—

49,268

Total revenue

83,512

—

83,512

56,652

—

56,652

225,826

—

225,826

154,951

—

154,951

Cost of revenue:












Product (1)

12,197

(351)

11,846

9,613

(359)

9,254

34,414

(1,041)

33,373

28,616

(1,071)

27,545

Service (1)

2,141

(196)

1,945

1,708

(128)

1,580

6,562

(550)

6,012

5,248

(519)

4,729

Total Cost of Revenue

14,338

(547)

13,791

11,321

(487)

10,834

40,976

(1,591)

39,385

33,864

(1,590)

32,274

Gross profit

69,174

547

69,721

45,331

487

45,818

184,850

1,591

186,441

121,087

1,590

122,677

Product Gross Margin

80

%

80

%

75

%

76

%

78

%

79

%

73

%

74

%

Service Gross Margin

91

%

92

%

90

%

91

%

91

%

91

%

89

%

90

%

Total Gross Margin

83

%

83

%

80

%

81

%

82

%

83

%

78

%

79

%

Operating expenses:












Research and development (1)

18,306

(3,506)

14,800

12,677

(2,532)

10,145

50,914

(10,175)

40,739

36,400

(7,519)

28,881

Sales and marketing (1)

31,994

(3,204)

28,790

21,388

(2,534)

18,854

88,494

(9,091)

79,403

61,391

(8,023)

53,368

General and administrative (1)

8,887

(3,261)

5,626

6,950

(2,460)

4,490

26,029

(8,998)

17,031

19,671

(7,439)

12,232

Total operating expenses

59,187

(9,971)

49,216

41,015

(7,526)

33,489

165,437

(28,264)

137,173

117,462

(22,981)

94,481

Income from operations

9,987

10,518

20,505

4,316

8,013

12,329

19,413

29,855

49,268

3,625

24,571

28,196

Other income (expense):












Interest income

235

—

235

106

—

106

661

—

661

330

—

330

Other expense, net

(144)

—

(144)

(69)

—

(69)

(386)

—

(386)

(72)

—

(72)

Income before income taxes

10,078

10,518

20,596

4,353

8,013

12,366

19,688

29,855

49,543

3,883

24,571

28,454

Income tax (provision) benefit (2) (3)

(3,999)

(2,593)

(6,592)

(73)

(4,310)

(4,383)

23,321

(39,176)

(15,855)

(260)

(9,781)

(10,041)

Net income

$

6,079

$

7,925

$

14,004

$

4,280

$

3,703

$

7,983

$

43,009

$

(9,321)

$

33,688

$

3,623

$

14,790

$

18,413

Net income per share:












Basic

$

0.17

$

0.22

$

0.39

$

0.13

$

0.11

$

0.24

$

1.22

$

(0.26)

$

0.96

$

0.11

$

0.44

$

0.55

Diluted

$

0.16

$

0.20

$

0.36

$

0.12

$

0.10

$

0.22

$

1.15

$

(0.26)

$

0.89

$

0.10

$

0.41

$

0.51

Weighted-average shares used in computing per share amounts:












Basic

35,770

—

35,770

33,830

—

33,830

35,171

—

35,171

33,412

—

33,412

Diluted

38,113

544

38,657

35,872

498

36,370

37,341

673

38,014

35,497

726

36,223


Notes:

1.

Includes stock-based compensation expense and related payroll taxes in the three and nine months ended October 1, 2016 and September 26, 2015.

2.

Includes income tax effect of non-GAAP adjustments in the three and nine months ended October 1, 2016 and September 26, 2015.

3.

Amount for the nine months ended October 1, 2016 includes a benefit for the release of a significant portion of our valuation allowance against deferred tax assets.

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SOURCE Gigamon Inc.

Related Links

http://www.gigamon.com

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