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Gigamon Reports Second Quarter 2014 Financial Results

Companies mentioned in this article: Gigamon

SANTA CLARA, Calif., July 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 second quarter ended June 28, 2014.

Financial Highlights:

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

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

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

Recent Business Highlights:

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

Conference Call Information:

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

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures that exclude stock-based compensation and related payroll taxes and a valuation allowance against deferred tax assets. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies. Gigamon considers these non-GAAP financial measures to be important because they provide useful measures of the operating performance of the company, exclusive of unusual events or factors that do not directly affect what we consider to be our core operating performance, and are used by the company's management for that purpose. In addition, investors often use similar measures to evaluate the operating performance of a company. Non-GAAP financial measures are presented for supplemental informational purposes only for understanding the company's operating results. The non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from non-GAAP financial measures presented by other companies. Please see the reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure attached to this release.

Legal Notice Regarding Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements in this press release include, but are not limited to, our expectations regarding improvements to our business. Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include our ability to continue to deliver and improve our products and successfully develop new products; customer acceptance and purchase of our existing products and new products; our ability to retain existing customers and generate new customers; the market for network traffic visibility solutions not continuing to develop; competition from other products and services; and general market, political, economic and business conditions. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in our filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the period ended March 29, 2014. The forward-looking statements in this press release are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law.

About the Visibility Fabric architecture

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

About Gigamon

Gigamon provides an intelligent Visibility Fabric(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                      Six Months Ended
                                ------------------                      ----------------

                                     June 28,                               June 29,            June 28,            June 29,

                                                  2014                                   2013                  2014                 2013
                                                  ----                                   ----                  ----                 ----

    Revenue:

      Product                                  $22,544                                $23,354               $42,624              $40,873

      Service                                   12,307                                  9,055                23,987               17,349

    Total revenue                               34,851                                 32,409                66,611               58,222
                                                ------                                 ------                ------               ------


    Cost of revenue:

      Product                                    6,281                                  6,944                13,286               11,668

      Service                                    1,544                                  1,911                 3,124                2,564

    Cost of revenue                              7,825                                  8,855                16,410               14,232
                                                 -----                                  -----                ------               ------

    Gross profit                                27,026                                 23,554                50,201               43,990


    Operating expenses:

    Research and development                    10,860                                 17,097                21,798               22,768

    Sales and marketing                         19,558                                 26,114                37,728               38,535

    General and administrative                   4,446                                 12,688                10,451               16,197

       Total operating expenses                 34,864                                 55,899                69,977               77,500
                                                ------                                 ------                ------               ------

    Loss from operations                       (7,838)                              (32,345)             (19,776)            (33,510)

    Other income (expense):

    Interest income                                 73                                      1                   134                    3

    Other income (expense), net                      6                                   (18)                 (35)                (25)
                                                   ---                                    ---                   ---                  ---

    Loss before income taxes                   (7,759)                              (32,362)             (19,677)            (33,532)

    Income tax (expense)
     benefit                                  (24,727)                                22,569              (21,027)              22,540
                                               -------                                 ------               -------               ------

    Net loss                                  (32,486)                               (9,793)             (40,704)            (10,992)

    Accretion of preferred
     stock                                           -                                 (503)                    -             (1,088)

    Loss attributable to
     preferred stock holders                         -                                   538                     -               1,107

    Net loss to common stock
     holders                                 $(32,486)                              $(9,758)            $(40,704)           $(10,973)
                                              ========                                =======              ========             ========


    Net loss per share
     attributable to common
     stock holders:

    Basic and Diluted                          $(1.01)                               $(0.51)              $(1.28)             $(0.60)
                                                ======                                 ======                ======               ======

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

    Basic and Diluted                           32,116                                 19,247                31,895               18,284



                                                Gigamon Inc.

                                         Consolidated Balance Sheets

                                               (In thousands)

                                                 (unaudited)


                                                  June 28,           December 28,

                                                             2014                     2013
                                                             ----                     ----

    Assets

    Current assets:

    Cash and cash
     equivalents                                          $30,923                  $79,908

    Short-term
     investments                                          103,917                   58,242

    Accounts
     receivable,
     net                                                   17,287                   24,528

    Inventories,
     net                                                    7,704                    1,484

    Deferred tax
     assets                                                     -                   3,574

    Prepaid
     expenses and
     other current
     assets                                                 5,849                    5,606
                                                            -----                    -----

       Total current
        assets                                            165,680                  173,342


    Property and
     equipment, net                                         7,654                    4,389

    Deferred tax
     assets, non-
     current                                                   12                   17,315

    Other assets                                              484                      471

    Total assets                                         $173,830                 $195,517
                                                         ========                 ========


    Liabilities and Stockholders' Equity

    Current liabilities:

    Accounts
     payable                                               $5,228                   $1,405

    Accrued
     liabilities                                           17,020                   22,401

    Deferred
     revenue                                               37,750                   37,592

    Gigamon LLC
     members'
     distribution
     payable                                                    -                     476
                                                              ---                     ---

       Total current
        liabilities                                        59,998                   61,874


    Deferred
     revenue, non-
     current                                               10,293                    9,884

    Other
     liabilities                                            1,642                      321


    Stockholders' equity:

    Common stock                                                3                        3

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

    Additional paid
     in capital                                           163,951                  144,810

    Accumulated
     other
     comprehensive
     income                                                    50                       23

    Accumulated
     deficit                                             (49,638)                 (8,929)

        Total
         stockholders'
         equity                                           101,897                  123,438
                                                          -------                  -------

           Total
            liabilities
            and
            stockholders'
            equity                                       $173,830                 $195,517
                                                         ========                 ========



                                                                                     Gigamon Inc.

                                                                         Consolidated Statements of Cash Flows

                                                                                    (In thousands)

                                                                                      (unaudited)


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

                                                       June 28,                             June 29,           June 28,            June 29,

                                                                    2014                                  2013                2014                 2013
                                                                    ----                                  ----                ----                 ----

    Operating activities:

    Net loss                                                   $(32,486)                             $(9,793)          $(40,704)           $(10,992)

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

    Depreciation and
     amortization                                                  1,254                                   649               2,237                1,198

    Stock-based compensation
     expense                                                       6,039                                16,697              13,897               18,290

    Deferred income taxes                                         24,596                              (22,583)             20,877             (22,583)

    Inventory write-offs                                             627                                   138               2,437                  395

    Loss on disposal of fixed
     assets                                                            -                                   14                   -                  14

    Changes in operating assets and liabilities:

    Accounts receivable, net                                       (965)                              (3,977)              7,241                2,769

    Inventories                                                  (7,689)                                (243)            (7,936)                 963

    Prepaid expenses and other
     assets                                                        (314)                                  968             (1,097)                 230

    Accounts payable                                               3,302                                 1,555               3,349                 (85)

    Accrued and other
     liabilities                                                   1,562                                20,293             (4,617)              19,385

    Deferred revenue                                             (1,475)                                1,094                 567                5,481
                                                                  ------                                 -----                 ---                -----

      Net cash provided by (used
       in) operating activities                                  (5,549)                                4,812             (3,749)              15,065


    Investing activities:

    Purchases of short-term
     investments                                                (26,214)                                    -           (60,644)                   -

    Proceeds from sales of
     short-term investments                                        1,000                                     -              2,000                    -

    Proceeds from maturities
     of short-term
     investments                                                   8,337                                     -             13,412                    -

    Purchases of property and
     equipment                                                   (2,463)                              (1,251)            (4,732)             (2,200)
                                                                  ------                                ------              ------               ------

      Net cash used in investing
       activities                                               (19,340)                              (1,251)           (49,964)             (2,200)


    Financing activities:

    Proceeds from employee
     stock purchase plan                                               -                                    -              3,863                    -

    Proceeds from exercise of
     stock options, net                                              690                                    11               3,571                   11

    Proceeds from initial
     public offering and
     follow-on public
     offering, net                                                     -                               97,102                 (8)              97,068

    Shares repurchased for tax
     withholdings on vesting
     of restricted stock units
     and other exercises                                           (590)                                    -            (2,222)                   -

    Distribution of income to
     Gigamon LLC members                                               -                              (2,276)              (476)             (7,097)
                                                                     ---                               ------                ----               ------

      Net cash provided by
       financing activities                                          100                                94,837               4,728               89,982

    Net (decrease) increase in
     cash and cash equivalents                                  (24,789)                               98,398            (48,985)             102,847

    Cash and cash equivalents
     at beginning of period                                       55,712                                23,124              79,908               18,675

    Cash and cash equivalents
     at end of period                                            $30,923                              $121,522             $30,923             $121,522
                                                                 =======                              ========             =======             ========




                                                                                Gigamon Inc.

                                                            Reconciliation of GAAP to Non-GAAP Financial Measures

                                                                     (In thousands, except percentages)

                                                                                 (unaudited)


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

                                             June 28,                                      June 29,               June 28,             June 29,

                                                           2014                                           2013                    2014                  2013
                                                           ----                                           ----                    ----                  ----

    Revenue                                           $34,851                                        $32,409                 $66,611               $58,222


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

    GAAP gross profit                                 $27,026                                        $23,554                 $50,201               $43,990

    Stock-based compensation expense                      471                                          2,691                     919                 2,709

    Stock-based compensation related
     payroll taxes                                          1                                              -                     59                     -

    Performance unit plan
     compensation expense                                   -                                           353                       -                  353

    Non-GAAP gross profit                             $27,498                                        $26,598                 $51,179               $47,052
                                                      =======                                        =======                 =======               =======


        GAAP gross margin                                 78%                                           73%                    75%                  76%

        Non-GAAP gross margin                             79%                                           82%                    77%                  81%


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

    GAAP operating loss                              $(7,838)                                     $(32,345)              $(19,776)            $(33,510)

    Stock-based compensation expense                    6,039                                         16,697                  13,897                18,290

    Stock-based compensation related
     payroll taxes                                       (20)                                             -                    757                     -

    Performance unit plan
     compensation expense                                   -                                        20,371                       -               20,371

    Non-GAAP operating (loss) income                 $(1,819)                                        $4,723                $(5,122)               $5,151
                                                      =======                                         ======                 =======                ======


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

    GAAP net loss attributable to
     common stock holders                           $(32,486)                                      $(9,758)              $(40,704)            $(10,973)

     Stock-based compensation expense                   6,039                                         16,697                  13,897                18,290

     Stock-based compensation related
      payroll taxes                                      (20)                                             -                    757                     -

         Accretion of preferred stock                       -                                           503                       -                1,088

         Loss attributable to preferred
          stock holders                                     -                                         (538)                      -              (1,107)

        Performance unit plan
         compensation expense                               -                                        20,371                       -               20,371

        Tax benefit upon conversion of
         LLC to a C Corporation                             -                                      (14,811)                      -             (14,811)

        Income tax effect of Non-GAAP
         adjustments                                   25,333                                        (8,673)                 22,684               (8,673)

    Non-GAAP net (loss) income                       $(1,134)                                        $3,791                $(3,366)               $4,185
                                                      =======                                         ======                 =======                ======



                                                                    Gigamon Inc.

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

                                                        (In thousands, except per share data)

                                                                     (unaudited)


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

                                           June 28,                              June 29,                   June 28,          June 29,

                                                      2014                                    2013                       2014                2013
                                                      ----                                    ----                       ----                ----

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

    GAAP diluted net loss per share              $(1.01)                                $(0.51)                   $(1.28)            $(0.60)

    Stock-based compensation
     expense                                        0.18                                    0.87                       0.44                1.00

    Stock-based compensation
     related payroll taxes                             -                                      -                      0.02                   -

    Accretion of preferred stock                       -                                   0.03                          -               0.06

    Loss attributable to preferred
     stock holders                                     -                                 (0.03)                         -             (0.06)

    Performance unit plan
     compensation expense                              -                                   1.06                          -               1.11

    Tax benefit upon conversion of
     LLC to a C corporation                            -                                 (0.77)                         -             (0.81)

    Income tax effect on non-GAAP
     adjustments                                    0.79                                  (0.45)                      0.71              (0.47)

    Impact of difference in number
     of GAAP and non-GAAP diluted
     shares                                            -                                 (0.06)                         -             (0.07)

    Non-GAAP diluted net (loss)
     income per share                            $(0.04)                                  $0.14                    $(0.11)              $0.16
                                                  ======                                   =====                     ======               =====


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

    GAAP diluted weighted-average
     number of shares                             32,116                                  19,247                     31,895              18,284

        Dilutive impact due to stock-
         based compensation                            -                                  8,209                          -              8,542

    Non-GAAP diluted weighted-
     average number of shares                     32,116                                  27,456                     31,895              26,826
                                                  ======                                  ======                     ======              ======




                                                                                                                                                                                              Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations

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

                                                                                                                                                                                                      (In thousands, except per share amounts and percentages)

                                                                                                                                                                                                                            (unaudited)


    (In thousands)                             Three Months Ended June 28, 2014                      Three Months Ended June 29, 2013           Six Months Ended June 28, 2014                            Six Months Ended June 29, 2013
                                               --------------------------------                      --------------------------------           ------------------------------                            ------------------------------

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

    Revenue:

      Product                                                      $22,544             $           -                                   $22,544                           $23,354           $             -                                        $23,354                             $42,624              $         -              $42,624                     $40,873                $            -                $40,873

      Service                                                       12,307                         -                                    12,307                             9,055                         -                                          9,055                              23,987                        -               23,987                      17,349                             -                 17,349
                                                                    ------                       ---                                    ------                             -----                       ---                                          -----                              ------                      ---               ------                      ------                           ---                 ------

    Total revenue                                                   34,851                         -                                    34,851                            32,409                         -                                         32,409                              66,611                        -               66,611                      58,222                             -                 58,222


    Cost of revenue:

      Product (1) (3)                                                6,281                     (287)                                     5,994                             6,944                   (1,951)                                          4,993                              13,286                    (541)               12,745                      11,668                       (1,964)                  9,704

      Service (1) (3)                                                1,544                     (185)                                     1,359                             1,911                   (1,092)                                            819                               3,124                    (435)                2,689                       2,564                       (1,098)                  1,466

    Total cost of
     revenue                                                         7,825                     (472)                                     7,353                             8,855                   (3,043)                                          5,812                              16,410                    (976)               15,434                      14,232                       (3,062)                 11,170
                                                                     -----                      ----                                      -----                             -----                    ------                                           -----                              ------                     ----                ------                      ------                        ------                  ------

    Gross profit                                                    27,026                       472                                     27,498                            23,554                     3,043                                          26,597                              50,201                      976                51,177                      43,990                         3,062                  47,052
                                                                    ------                       ---                                     ------                            ------                     -----                                          ------                              ------                      ---                ------                      ------                         -----                  ------


    Product Gross
     Margin                                                            72%                                                                73%                              70%                                                                     79%                                69%                                          70%                        71%                                                 76%

    Service Gross
     Margin                                                            87%                                                                89%                              79%                                                                     91%                                87%                                          89%                        85%                                                 92%

    Total Gross Margin                                                 78%                                                                79%                              73%                                                                     82%                                75%                                          77%                        76%                                                 81%


    Operating expenses:

    Research and
     development (1)
     (3)                                                           10,860                   (2,050)                                     8,810                            17,097                  (11,257)                                          5,840                              21,798                  (5,049)               16,749                      22,768                      (11,566)                 11,202

    Sales and
     marketing (1) (3)                                              19,558                   (2,402)                                    17,156                            26,114                  (13,254)                                         12,860                              37,728                  (5,407)               32,321                      38,535                      (13,683)                 24,852

    General and
     administrative
     (1) (3)                                                         4,446                   (1,095)                                     3,351                            12,688                   (9,513)                                          3,175                              10,451                  (3,223)                7,228                      16,197                      (10,350)                  5,847
                                                                     -----                    ------                                      -----                            ------                    ------                                           -----                              ------                   ------                 -----                      ------                       -------                   -----

       Total operating
        expenses                                                    34,864                   (5,547)                                    29,317                            55,899                  (34,024)                                         21,875                              69,977                 (13,679)               56,298                      77,500                      (35,599)                 41,901
                                                                    ------                    ------                                     ------                            ------                   -------                                          ------                              ------                  -------                ------                      ------                       -------                  ------

    (Loss) income from
     operations                                                    (7,838)                    6,019                                    (1,819)                         (32,345)                   37,067                                           4,722                            (19,776)                  14,655               (5,121)                   (33,510)                       38,661                   5,151
                                                                    ------                     -----                                     ------                           -------                    ------                                           -----                             -------                   ------                ------                     -------                        ------                   -----

    Other income (expense):

    Interest income                                                     73                         -                                        73                                 1                         -                                              1                                 134                        -                  134                           3                             -                      3

    Other expense, net                                                   6                         -                                         6                              (18)                        -                                           (18)                               (35)                       -                 (35)                       (25)                            -                   (25)
                                                                       ---                       ---                                       ---                               ---                       ---                                            ---                                 ---                      ---                  ---                         ---                           ---                    ---

    (Loss) income
     before income
     taxes                                                         (7,759)                    6,019                                    (1,740)                         (32,362)                   37,067                                           4,705                            (19,677)                  14,655               (5,022)                   (33,532)                       38,661                   5,129

    Income tax benefit
     (expense) (2) (4)
     (5)                                                         (24,727)                   25,333                                        606                            22,569                  (23,484)                                          (915)                           (21,027)                  22,684                 1,657                      22,540                      (23,484)                  (944)
                                                                   -------                    ------                                        ---                            ------                   -------                                            ----                             -------                   ------                 -----                      ------                       -------                    ----

    Net (loss) income                                             (32,486)                   31,352                                    (1,134)                          (9,793)                   13,583                                           3,790                            (40,704)                  37,339               (3,365)                   (10,992)                       15,177                   4,185
                                                                   =======                    ======                                     ======                            ======                    ======                                           =====                             =======                   ======                ======                     =======                        ======                   =====

    Accretion of
     preferred stock                                                     -                        -                                         -                            (503)                      503                                               -                                  -                       -                    -                    (1,088)                        1,088                       -

    Loss attributable
     to preferred
     stock holders                                                       -                        -                                         -                              538                     (538)                                              -                                  -                       -                    -                      1,107                       (1,107)                      -

    Net (loss) income
     to common stock
     holders                                                     $(32,486)                  $31,352                                   $(1,134)                         $(9,758)                  $13,548                                          $3,790                           $(40,704)                 $37,339              $(3,365)                  $(10,973)                      $15,158                  $4,185
                                                                  ========                   =======                                    =======                           =======                   =======                                          ======                            ========                  =======               =======                    ========                       =======                  ======


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

    Basic                                                          $(1.01)                    $0.97                                    $(0.04)                          $(0.51)                    $0.71                                           $0.20                             $(1.28)                   $1.17               $(0.11)                    $(0.60)                        $0.83                   $0.23
                                                                    ======                     =====                                     ======                            ======                     =====                                           =====                              ======                    =====                ======                      ======                         =====                   =====

    Diluted                                                        $(1.01)                    $0.97                                    $(0.04)                          $(0.51)                    $0.65                                           $0.14                             $(1.28)                   $1.17               $(0.11)                    $(0.60)                        $0.76                   $0.16
                                                                    ======                     =====                                     ======                            ======                     =====                                           =====                              ======                    =====                ======                      ======                         =====                   =====

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

    Basic                                                           32,116                         -                                    32,116                            19,247                         -                                         19,247                              31,895                        -               31,895                      18,284                             -                 18,284
                                                                    ======                       ===                                    ======                            ======                       ===                                         ======                              ======                      ===               ======                      ======                           ===                 ======

    Diluted                                                         32,116                         -                                    32,116                            19,247                     8,209                                          27,456                              31,895                        -               31,895                      18,284                         8,542                  26,826
                                                                    ======                       ===                                    ======                            ======                     =====                                          ======                              ======                      ===               ======                      ======                         =====                  ======


    Notes:

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

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

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

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

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

SOURCE Gigamon