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Gigamon Reports First Quarter 2014 Financial Results

Companies mentioned in this article: Gigamon Inc.

SANTA CLARA, Calif., April 24, 2014 /PRNewswire/ -- Gigamon(® )Inc. (NYSE: GIMO), a leader in traffic visibility solutions with the innovative Visibility Fabric(TM) architecture, today released financial results for the first quarter ended March 29, 2014.

Financial Highlights:

    --  Revenues for the first quarter of fiscal 2014 were $31.8 million,
        compared to $25.8 million in the first quarter of fiscal 2013,
        representing growth of 23% year-over-year.
    --  GAAP gross margins were 73% in the first quarter of fiscal 2014,
        compared to 79% in the first quarter of fiscal 2013.
    --  Non-GAAP gross margins were 75% in the first quarter of fiscal 2014,
        compared to 79% in the first quarter of fiscal 2013.
    --  GAAP net loss for the first quarter of fiscal 2014 was $8.2 million, or
        $0.26 per diluted share, compared to GAAP net loss of $1.2 million, or
        $0.07 per diluted share, in the first quarter of fiscal 2013.
    --  Non-GAAP net loss for the first quarter of fiscal 2014 was $2.2 million,
        or $0.07 per diluted share, compared to non-GAAP net income of $0.4
        million, or $0.02 per diluted share, in the first quarter of fiscal
        2013.

"Our revenue shortfall in the first quarter was impacted by one expected large transaction from an existing customer in EMEA that did not materialize and certain other transactions that were expected to close late in the quarter that slipped into the second quarter," said Paul Hooper, CEO of Gigamon. "We remain confident in our business strategy and in our continued market leadership driven by the versatility and intelligence of our GigaVUE technology and GigaSMART applications platform."

Recent Business Highlights:

    --  Announced the release of the GigaVUE-HC2 fabric node.
    --  Demonstrated flow-level visibility using our NetFlow Generation
        application and packet-based monitoring solutions at RSA conference in
        San Francisco, in conjunction with our partners FireEye, Riverbed,
        Sourcefire, and ForeScout.
    --  Selected as 'Best of Interop' 2014 finalist for the management award
        category, recognizing Gigamon's NetFlow Generation application.
    --  Introduced a vision of Network Functions Virtualization for Tools
        (NFVfT), in partnership with Vistapointe, Inc., to standardize APIs and
        the demarcation point for network traffic and Big Data in highly
        virtualized service provider environments.
    --  Appointed Ananda Rajagopal as Vice President of Product Management.
        Ananda joins Gigamon from Brocade, where he was most recently VP
        Routing, Product Management & Strategy for their Data Center Routing
        business.

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 first quarter ended March 29, 2014. To access the conference call, dial 888-846-5003, using conference code 4678046. Callers outside the U.S. and Canada should dial 480-629-9856, using conference code 4678046. A replay of the conference call will be available through Thursday, May 1, 2014. To access the replay, please dial 800-406-7325 and enter pass code 4678046. Callers outside the U.S. and Canada should dial 303-590-3030 and enter pass code 4678046. 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. 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. 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 our continued market leadership. 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 year ended December 28, 2013. 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(TM) 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
                                     -------------

                                       March 29,             March 30,

                                                2014                 2013
                                                ----                 ----

    Revenue:

      Product                                $20,080              $17,519

      Service                                 11,680                8,294
                                              ------                -----

    Total revenue                             31,760               25,813


    Cost of revenue:

      Product                                  7,005                4,724

      Service                                  1,580                  653
                                               -----                  ---

    Cost of revenue                            8,585                5,377
                                               -----                -----

    Gross profit                              23,175               20,436


    Operating expenses:

      Research and development                10,938                5,671

      Sales and marketing                     18,170               12,421

      General and administrative               6,005                3,509

     Total operating expenses                 35,113               21,601
                                              ------               ------

    Loss from operations                     (11,938)              (1,165)

    Other income (expense):

       Interest income                            61                    2

       Other expense, net                        (41)                  (7)
                                                 ---                  ---

    Loss before income taxes                 (11,918)              (1,170)

    Income tax benefit
     (expense)                                 3,700                  (29)
                                               -----                  ---

    Net loss                                  (8,218)              (1,199)
                                              ======               ======

    Accretion of preferred
     stock                                         -                 (585)

    Loss attributable to
     preferred stock holders                       -                  569

    Net loss to common stock
     holders                                 $(8,218)             $(1,215)
                                             =======              =======


    Net loss per share
     attributable to common
     stock holders:

    Basic                                     $(0.26)              $(0.07)
                                              ======               ======

    Diluted                                   $(0.26)              $(0.07)
                                              ======               ======

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

    Basic                                     31,734               17,300
                                              ======               ======

    Diluted                                   31,734               17,300
                                              ======               ======


                                      Gigamon Inc.

                              Consolidated Balance Sheets

                                     (In thousands)

                                      (unaudited)


                                          March 29,       December 28,

                                                   2014                2013
                                                   ----                ----

    Assets

    Current assets:

      Cash and cash equivalents                 $55,712             $79,908

      Short-term investments                     86,960              58,242

      Accounts receivable, net                   16,322              24,528

      Inventories, net                            1,557               1,484

      Deferred tax assets                         6,895               3,574

      Prepaid expenses and other
       current assets                             5,787               5,606
                                                  -----               -----

     Total current assets                       173,233             173,342


      Property and equipment, net                 6,004               4,389

      Deferred tax assets, non-
       current                                   17,713              17,315

      Other assets                                  517                 471
                                                    ---                 ---

    Total assets                               $197,467            $195,517
                                               ========            ========


    Liabilities and Stockholders' Equity

    Current liabilities:

      Accounts payable                           $1,659              $1,405

      Accrued liabilities                        17,146              22,401

      Deferred revenue                           39,436              37,592

      Gigamon LLC members'
       distribution payable                           -                 476

     Total current liabilities                   58,241              61,874


    Deferred revenue, non-current                10,082               9,884

    Other liabilities                               949                 321


    Stockholders' equity:

    Common stock                                      3                   3

    Treasury stock                              (12,469)            (12,469)

    Additional paid in capital                  157,793             144,810

    Accumulated other comprehensive
     income                                          15                  23

    Accumulated deficit                         (17,147)             (8,929)

        Total stockholders' equity              128,195             123,438
                                                -------             -------

        Total liabilities and
         stockholders' equity                  $197,467            $195,517
                                               ========            ========


                                       Gigamon Inc.

                           Consolidated Statements of Cash Flows

                                      (In thousands)

                                        (unaudited)


                                     Three Months Ended
                                     ------------------

                                         March 29,               March 30,

                                                     2014                    2013
                                                     ----                    ----

    Operating activities:

    Net loss                                      $(8,218)                $(1,199)

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

    Depreciation and
     amortization                                     983                     549

    Stock-based
     compensation
     expense                                        7,858                   1,593

    Deferred income
     taxes                                         (3,719)                      -

    Inventory write-
     down                                           1,810                       -

    Changes in operating assets and
     liabilities:

    Accounts
     receivable, net                                8,206                   6,746

    Inventories                                      (247)                  1,463

    Prepaid expenses
     and other assets                                (783)                   (738)

    Accounts payable                                   47                  (1,640)

    Accrued and other
     liabilities                                   (6,179)                   (908)

    Deferred revenue                                2,042                   4,387
                                                    -----                   -----

      Net cash provided
       by operating
       activities                                   1,800                  10,253


    Investing activities:

    Purchases of short-
     term investments                             (34,430)                      -

    Proceeds from sales
     of short-term
     investments                                    1,000                       -

    Proceeds from
     maturities of
     short-term
     investments                                    5,075                       -

    Purchases of
     property and
     equipment                                     (2,269)                   (949)
                                                   ------                    ----

      Net cash used in
       investing
       activities                                 (30,624)                   (949)


    Financing activities:

    Proceeds from
     employee stock
     purchase plan                                  3,863                       -

    Proceeds from
     exercise of stock
     options, net                                   2,881                       -

    Costs paid for
     initial public
     offering and
     follow-on public
     offering                                          (8)                    (34)

    Shares repurchased
     for tax
     withholdings on
     vesting of
     restricted stock
     units and other
     exercises                                     (1,632)                      -

    Distribution of
     income to Gigamon
     LLC members                                     (476)                 (4,821)
                                                     ----                  ------

      Net cash provided
       by (used in)
       financing
       activities                                   4,628                  (4,855)

    Net (decrease)
     increase in cash
     and cash
     equivalents                                  (24,196)                  4,449

    Cash and cash
     equivalents at
     beginning of
     period                                        79,908                  18,675
                                                   ------                  ------

    Cash and cash
     equivalents at end
     of period                                    $55,712                 $23,124
                                                  =======                 =======


                                       Gigamon Inc.

                       Reconciliation of GAAP to Non-GAAP Financial
                                          Measures

                            (In thousands, except percentages)

                                        (unaudited)


                                                    Three Months
                                                       Ended
                                                   -------------

                                                     March 29,             March 30,

                                                              2014                 2013
                                                              ----                 ----

    Revenue                                                $31,760              $25,813


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

    GAAP gross
     profit                                                $23,175              $20,436

        Stock-based
         compensation
         expense                           448                         18

        Stock-based
         compensation
         related
         payroll taxes                      58                                       -

    Non-GAAP
     gross profit                                          $23,681              $20,454
                                                           =======              =======


        GAAP gross
         margin                             73%                        79%

        Non-GAAP
         gross margin                       75%                        79%


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

    GAAP operating
     loss                             $(11,938)                                 $(1,165)

       Stock-based
        compensation
        expense                          7,858                      1,593

       Stock-based
        compensation
        related
        payroll taxes                      777                                       -

    Non-GAAP
     operating
     (loss) income                                         $(3,303)                $428
                                                           =======                 ====


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

    GAAP net loss
     attributable
     to common
     stock holders                                         $(8,218)             $(1,215)

        Stock-based
         compensation
         expense                         7,858                      1,593

        Stock-based
         compensation
         related
         payroll taxes                     777                                       -

        Accretion of
         preferred
         stock                                                  -                  585

        Loss
         attributable
         to preferred
         stock holders                                          -                 (569)

        Income tax
         effect of
         Non-GAAP
         adjustments                    (2,649)                                      -

    Non-GAAP net
     (loss) income                                         $(2,232)                $394
                                                           =======                 ====


                                      Gigamon Inc.

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

                         (In thousands, except per share data)

                                      (unaudited)


                                                 Three Months
                                                    Ended
                                                ------------

                                                  March 29,            March 30,

                                                          2014                 2013
                                                          ----                 ----

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

    GAAP diluted net
     loss per share                                     $(0.26)              $(0.07)

       Stock-based
        compensation
        expense                         0.25                      0.09

       Stock-based
        compensation
        related payroll
        taxes                           0.02                                     -

       Accretion of
        preferred stock                                     -                 0.03

       Loss attributable to
        preferred stock
        holders                                             -                (0.03)

       Income tax effect on
        non-GAAP
        adjustments                   (0.08)                                     -

    Non-GAAP diluted
     net (loss) income
     per share                                          $(0.07)               $0.02
                                                        ======                =====


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

    GAAP diluted
     weighted-average
     number of shares                 31,734                    17,300

       Dilutive impact                                      -                  583

    Non-GAAP diluted
     weighted-average
     number of shares                 31,734                    17,883
                                      ======                    ======



                                                                   Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations

                                                                         For the Three Months Ended March 29, 2014 and March 30, 2013

                                                                           (In thousands, except per share amounts and percentages)

                                                                                                  (unaudited)


                                 Three Months Ended March 29, 2014                       Three Months Ended March 30, 2013
                                 ---------------------------------                       ---------------------------------

                                           As Reported             Adjustments                       Non-GAAP                       As Reported          Adjustments         Non-GAAP
                                           -----------             -----------                       --------                       -----------          -----------         --------

    Revenue:

      Product                                           $20,080       $               -                        $20,080                          $17,519     $             -           $17,519

      Service                                            11,680                       -                         11,680                            8,294                   -             8,294
                                                         ------                     ---                         ------                            -----                 ---             -----

    Total
     revenue                                             31,760                       -                         31,760                           25,813                   -            25,813


    Cost of revenue:

      Product (1)                                         7,005                    (254)                         6,751                            4,724                 (12)            4,712

      Service (1)                                         1,580                    (252)                         1,328                              653                  (4)              649
                                                          -----                    ----                          -----                              ---                 ---               ---

                                                          8,585                    (506)                         8,079                            5,377                 (16)            5,361
                                                          -----                    ----                          -----                            -----                 ---             -----

    Gross profit                                         23,175                     506                         23,681                           20,436                  16            20,452
                                                         ------                     ---                         ------                           ------                 ---            ------


    Product
     Gross
     Margin                                                  65%                                                    66%                              73%                                   73%

    Service
     Gross
     Margin                                                  86%                                                    89%                              92%                                   92%

    Total Gross
     Margin                                                  73%                                                    75%                              79%                                   79%


    Operating expenses:

     Research and
      development
      (1)                                                10,938                  (2,997)                         7,941                            5,671                (310)            5,361

     Sales and
      marketing
      (1)                                                18,170                  (3,004)                        15,166                           12,421                (430)           11,991

     General and
      administrative
      (1)                                                 6,005                  (2,128)                         3,877                            3,509                (837)            2,672

     Total
      operating
      expenses                                           35,113                  (8,129)                        26,984                           21,601              (1,577)           20,024
                                                         ------                  ------                         ------                           ------              ------            ------

    (Loss)
     income from
     operations                                         (11,938)                  8,635                         (3,303)                          (1,165)              1,593               428
                                                        -------                   -----                         ------                           ------               -----               ---

    Other income (expense):

      Interest
       income                                                61                       -                             61                                2                   -                 2

      Other
       expense,
       net                                                  (41)                      -                            (41)                              (7)                  -                (7)
                                                            ---                     ---                            ---                              ---                 ---               ---

    (Loss)
     income
     before
     income
     taxes                                              (11,918)                  8,635                         (3,283)                          (1,170)              1,593               423

    Income tax
     benefit
     (expense)
     (2)                                                  3,700                  (2,649)                         1,051                              (29)                  -               (29)
                                                          -----                  ------                          -----                              ---                 ---               ---

    Net (loss)
     income                                              (8,218)                  5,986                         (2,232)                          (1,199)              1,593               394
                                                         ======                   =====                         ======                           ======               =====               ===

    Accretion of
     preferred
     stock                                                    -                       -                              -                             (585)                585                 -

    Loss
     attributable
     to
     preferred
     stock
     holders                                                  -                       -                              -                              569                (569)                -

    Net (loss)
     income to
     common
     stock
     holders                                            $(8,218)                 $5,986                        $(2,232)                         $(1,215)             $1,609              $394
                                                        =======                  ======                        =======                          =======              ======              ====


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

    Basic                                                $(0.26)                  $0.19                         $(0.07)                          $(0.07)              $0.09             $0.02
                                                         ======                   =====                         ======                           ======               =====             =====

    Diluted                                              $(0.26)                  $0.19                         $(0.07)                          $(0.07)              $0.09             $0.02
                                                         ======                   =====                         ======                           ======               =====             =====

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

    Basic                                                31,734                       -                         31,734                           17,300                   -            17,300
                                                         ======                     ===                         ======                           ======                 ===            ======

    Diluted                                              31,734                       -                         31,734                           17,300                 583            17,883
                                                         ======                     ===                         ======                           ======                 ===            ======



    Notes:

    (1) Includes stock-based
     compensation expense and
     related payroll taxes in
     the three months ended
     March 29, 2014 and stock-
     based compensation expense
     in the three months ended
     March 30, 2013.

    (2) Includes income tax
     effect on non-GAAP
     adjustments in the three
     months ended March 29,
     2014.

SOURCE Gigamon Inc.