Gigamon Reports Fourth Quarter and Fiscal Year 2015 Financial Results

Record annual revenue delivers 41% year-over-year growth

Strong results driven by increasing demand for security solutions

SANTA CLARA, Calif., Jan. 28, 2016 /PRNewswire/ -- Gigamon Inc. GIMO, the leader in traffic visibility solutions, today released financial results for the fourth quarter and fiscal year ended December 26, 2015.

Fourth Quarter 2015 Financial Highlights:

Revenue of $67.0 million, up 31% year-over-year.
GAAP gross margin was 82%, compared to 77% in the fourth quarter of fiscal 2014.
Non-GAAP gross margin was 83%, compared to 77% in the fourth quarter of fiscal 2014.
GAAP net income was $2.6 million, or $0.07 per diluted share, compared to GAAP net income of $2.9 million, or $0.09 per diluted share, in the fourth quarter of fiscal 2014.
Non-GAAP net income was $10.6 million, or $0.29 per diluted share, compared to non-GAAP net income of $6.1 million, or $0.18 per diluted share, in the fourth quarter of fiscal 2014.

Fiscal Year 2015 Financial Highlights:

Revenue of $222.0 million, up 41% from fiscal 2014.
GAAP gross margin was 79%, compared to 76% in fiscal 2014.
Non-GAAP gross margin was 80%, compared to 77% in fiscal 2014.
GAAP net income was $6.2 million, or $0.17 per diluted share, compared to GAAP net loss of $40.8 million, or $1.27 per diluted share, in fiscal 2014.
Non-GAAP net income was $29.0 million, or $0.80 per diluted share, compared to non-GAAP net income of $4.0 million, or $0.12 per diluted share, in fiscal 2014.
Increased cash and investments to $210 million, up $61 million from fiscal 2014.

"2015 was a very strong year for Gigamon. We delivered over 40% year over year revenue growth, we increased our gross margins to over 80% and significantly increased our cash reserve to over $200 million," said Paul Hooper, Chief Executive Officer of Gigamon. "Our momentum in the security market continues to increase, with Q4 seeing almost 50% of our total business directly related to Security deployments. We enter 2016 with increased leadership in our market and continue to execute with conviction and predictability."

Recent Business Highlights:

Expanded functionality of the GigaVUE-OS security capabilities by providing context-aware metadata information in the NetFlow/IPFIX format.
Selected by Telefonica Argentina, a subsidiary of the Telefonica Group, to help optimize its subscriber service offerings utilizing selected Gigamon's subscriber visibility solutions.
Expanded portfolio of virtualized solutions with the announcement of support for VMware NSX and OpenStack/KVM-powered clouds, which provide tenants and administrators extended traffic visibility into private and service provider cloud environments.
Added multiple security vendors to our Ecosystem Partner Program to combat cybersecurity threats.
Ranked as a Fastest Growing Company in North America Based on Deloitte's 2015 Technology Fast 500™ for the third year in a row.
Appointed Chris Deardurff as Vice President, North America Sales and Barbara Spicek as Vice President, Channel Sales.

Conference Call Information:

Gigamon will host a conference call and live webcast for analysts and investors at 5:00 p.m. Eastern time on January 28, 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 (888) 395-3227, using conference code 684468. International parties can access the call by dialing +1 (719) 457-2645, using conference code 684468.

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, February 4, 2016. To access the replay, parties in the United States and Canada should call +1 (888) 203-1112 and enter conference code 684468. International parties should call +1 (719) 457-0820 and enter conference code 684468.

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 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 the evolution of our marketplace, the goals for our Unified Visibility Fabric™ and our Security Delivery Platform and our momentum heading into 2016. 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 27, 2014 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 GIMO provides active visibility into physical and virtual network traffic, enabling stronger security and superior performance. Gigamon's Visibility Fabric™ and GigaSECURE®, the industry's first Security Delivery Platform, deliver advanced intelligence so that security, network and application performance management solutions in enterprise, government and service provider networks operate more efficiently and effectively. See more at www.gigamon.com, the Gigamon Blog, or follow Gigamon on Twitter, LinkedIn or Facebook.

Gigamon Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)

	Three Months Ended				Fiscal Year Ended
	December 26, 2015		December 27, 2014		December 26, 2015		December 27, 2014
Revenue:
Product	$	47,051	$	36,790	$	152,734	$	105,594
Service	19,973		14,461		69,241		51,536
Total revenue	67,024		51,251		221,975		157,130
Cost of revenue:
Product	10,262		10,319		38,878		31,001
Service	1,669		1,722		6,917		6,447
Total cost of revenue	11,931		12,041		45,795		37,448
Gross profit	55,093		39,210		176,180		119,682
Operating expenses:
Research and development	13,171		10,922		49,571		42,806
Sales and marketing	26,150		20,387		87,541		76,063
General and administrative	7,788		5,015		27,459		20,683
Total operating expenses	47,109		36,324		164,571		139,552
Income (loss) from operations	7,984		2,886		11,609		(19,870)
Other income (expense):
Interest income	116		92		446		308
Other expense, net	(119)		(31)		(191)		(94)
Income (loss) before income tax provision	7,981		2,947		11,864		(19,656)
Income tax provision	(5,418)		(41)		(5,678)		(21,134)
Net income (loss)	2,563		2,906		6,186		(40,790)
Net income (loss) per share:
Basic	$	0.07	$	0.09	$	0.18	$	(1.27)
Diluted	$	0.07	$	0.09	$	0.17	$	(1.27)
Weighted average shares used in computing net income (loss) per share:
Basic	34,252		32,746		33,618		32,200
Diluted	36,229		33,606		35,866		32,200

Gigamon Inc.
Consolidated Balance Sheets
(In thousands)
(unaudited)

	December 26, 2015		December 27, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	120,212	$	38,941
Short-term investments	90,001		110,465
Accounts receivable, net	47,947		28,686
Inventories, net	3,813		6,551
Deferred tax assets	—		150
Prepaid expenses and other current assets	7,621		5,316
Total current assets	269,594		190,109
Property and equipment, net	9,416		7,387
Deferred tax assets, non-current	135		64
Other assets, non-current	766		426
TOTAL ASSETS	$	279,911	$	197,986
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,724	$	2,391
Accrued liabilities	37,334		22,838
Deferred revenue	62,248		42,183
Total current liabilities	103,306		67,412
Deferred revenue, non-current	19,883		13,322
Deferred and other tax liabilities, non-current	279		150
Other liabilities, non-current	1,087		1,667
TOTAL LIABILITIES	124,555		82,551
STOCKHOLDERS' EQUITY
Common stock	3		3
Treasury stock	(12,469)		(12,469)
Additional paid-in-capital	211,402		177,714
Accumulated other comprehensive loss	(47)		(94)
Accumulated deficit	(43,533)		(49,719)
TOTAL STOCKHOLDERS' EQUITY	155,356		115,435
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	279,911	$	197,986

Gigamon Inc.
Consolidated Statements of Cash Flows
(In thousands)
(unaudited)

	Three Months Ended				Fiscal Year Ended
	December 26, 2015		December 27, 2014		December 26, 2015		December 27, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	2,563	$	2,906	$	6,186	$	(40,790)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	1,135		1,568		5,577		5,278
Stock-based compensation expense	5,988		6,023		29,768		24,658
Deferred and other income taxes	210		(52)		208		20,825
Excess tax benefit from employee stock-based compensation	(4,706)		—		(4,706)		—
Inventory write-down	292		824		1,859		3,760
Gain on disposal of fixed assets	(29)		—		(17)		—
Provision for doubtful accounts	309		—		309		—
Changes in operating assets and liabilities:
Accounts receivable	(6,518)		(9,117)		(19,570)		(4,158)
Inventories	6		(633)		950		(8,229)
Prepaid expenses and other current assets	(844)		1,234		(2,988)		(950)
Accounts payable	413		(526)		1,265		963
Accrued liabilities and other liabilities	12,450		7,620		17,966		1,709
Deferred revenue	12,892		6,117		26,626		8,029
Net cash provided by operating activities	24,161		15,964		63,433		11,095
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments	(21,557)		(15,607)		(61,725)		(87,698)
Proceeds from sales of short-term investments	—		1,010		2,006		3,010
Proceeds from maturities of short-term investments	21,003		11,100		79,821		32,607
Purchase of property and equipment	(2,304)		(514)		(6,289)		(7,614)
Net cash (used in) provided by investing activities	(2,858)		(4,011)		13,813		(59,695)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from employee stock purchase plan	—		—		5,099		5,878
Proceeds from exercise of stock option	878		449		4,403		5,364
Costs paid for initial public offering, net	—		—		—		(8)
Shares repurchased for tax withholdings on vesting of restricted stock units	(3,219)		(514)		(10,183)		(3,125)
Excess tax benefits from employee stock-based compensation	4,706		—		4,706		—
Distribution of income to Gigamon LLC members	—		—		—		(476)
Net cash provided by (used in) financing activities	2,365		(65)		4,025		7,633
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	23,668		11,888		81,271		(40,967)
CASH AND CASH EQUIVALENTS — Beginning of period	96,544		27,053		38,941		79,908
CASH AND CASH EQUIVALENTS — End of period	$	120,212	$	38,941	$	120,212	$	38,941
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid during the period	$	390	$	243	$	738	$	484

Gigamon Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except percentages)
(unaudited)

	Three Months Ended						Fiscal Year Ended
	December 26, 2015			December 27, 2014			December 26, 2015			December 27, 2014
Total Revenue	67,024			51,251			221,975			157,130
Reconciliation of GAAP Gross Profit and GAAP Gross Margin to Non-GAAP Gross Profit and Non-GAAP Gross Margin:
GAAP gross profit	55,093			39,210			176,180			119,682
Stock-based compensation expense	342			317			1,872			1,679
Stock-based compensation related payroll taxes	8			3			68			64
Non-GAAP gross profit	$	55,443		$	39,530		$	178,120		$	121,425
GAAP gross margin	82		%	77		%	79		%	76		%
Non-GAAP gross margin	83		%	77		%	80		%	77		%
Reconciliation of GAAP Operating Income (loss) and GAAP Operating Margin to Non-GAAP Operating Income and Non-GAAP Operating Margin:
GAAP operating income (loss)	7,984			2,886			11,609			(19,870)
Stock-based compensation expense	5,988			6,024			29,768			24,658
Stock-based compensation related payroll taxes	151			23			942			821
Non-GAAP operating income	$	14,123		$	8,933		$	42,319		$	5,609
Reconciliation of GAAP Net Income (loss) Attributable To Common Stockholders to Non-GAAP Net Income:
GAAP net income (loss) attributable to common stock holders	$	2,563		$	2,906		$	6,186		$	(40,790)
Stock-based compensation expense	5,988			6,024			29,768			24,658
Stock-based compensation related payroll taxes	151			23			942			821
Income tax effect of Non-GAAP adjustments	1,868			(2,811)			(7,913)			19,271
Non-GAAP net income	$	10,570		$	6,142		$	28,983		$	3,960

Gigamon Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures (continued)
(In thousands, except per share amounts)
(unaudited)

	Three Months Ended				Fiscal Year Ended
	December 26, 2015		December 27, 2014		December 26, 2015		December 27, 2014
Reconciliation of GAAP Diluted Net Income (Loss) per Share to Non-GAAP Diluted Net Income per Share:
GAAP diluted net income (loss) per share	$	0.07	$	0.09	$	0.17	$	(1.27)
Stock-based compensation expense	0.17		0.17		0.83		0.79
Stock-based compensation related payroll taxes	—		—		0.03		—
Income tax effect of non-GAAP adjustments	0.05		(0.08)		(0.22)		0.60
Impact of difference in number of GAAP and non-GAAP diluted shares	—		—		(0.01)		—
Non-GAAP diluted net income per share	$	0.29	$	0.18	$	0.80	$	0.12
Reconciliation of GAAP Diluted Weighted-Average Number of Shares to Non-GAAP Diluted Weighted-Average Number of Shares:
GAAP diluted weighted-average number of shares	36,229		33,606		35,866		32,200
Dilutive impact due to stock-based compensation	330		580		491		1,394
Non-GAAP diluted weighted-average number of shares	36,559		34,186		36,357		33,594

Gigamon Inc.
Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations
For the Three months and Fiscal Year Ended December 26, 2015 and December 27, 2014
(In thousands, except per share amounts and percentages)
(unaudited)

	Three Months Ended																Fiscal Year Ended
	December 26, 2015								December 27, 2014								December 26, 2015								December 27, 2014
	As Reported			Adjustments		Non-GAAP			As Reported			Adjustments		Non-GAAP			As Reported			Adjustments		Non-GAAP			As Reported			Adjustments		Non-GAAP
Revenue:
Product	$	47,051		$	—	$	47,051		$	36,790		$	—	$	36,790		$	152,734		$	—	$	152,734		$	105,594		$	—	$	105,594
Service	19,973			—		$	19,973		14,461			—		$	14,461		69,241			—		$	69,241		51,536			—		$	51,536
Total revenue	67,024			—		67,024			51,251			—		51,251			221,975			—		221,975			157,130			—		157,130
Cost of revenue:
Product (1)	10,262			(267)		9,995			10,319			(130)		10,189			38,878			(1,338)		37,540			31,001			(959)		30,042
Service (1)	1,669			(83)		1,586			1,722			(190)		1,532			6,917			(602)		6,315			6,447			(784)		5,663
	11,931			(350)		11,581			12,041			(320)		11,721			45,795			(1,940)		43,855			37,448			(1,743)		35,705
Gross profit	55,093			350		55,443			39,210			320		39,530			176,180			1,940		178,120			119,682			1,743		121,425
Product Gross Margin	78		%			79		%	72		%			72		%	75		%			75		%	71		%			72		%
Service Gross Margin	92		%			92		%	88		%			89		%	90		%			91		%	87		%			89		%
Total Gross Margin	82		%			83		%	77		%			77		%	79		%			80		%	76		%			77		%
Operating expenses:
Research and development (1)	13,171			(2,014)		11,157			10,922			(2,186)		8,736			49,571			(9,533)		40,038			42,806			(8,523)		34,283
Sales and marketing (1)	26,150			(1,769)		24,381			20,387			(1,934)		18,453			87,541			(9,792)		77,749			76,063			(8,433)		67,630
General and administrative (1)	7,788			(2,006)		5,782			5,015			(1,607)		3,408			27,459			(9,445)		18,014			20,683			(6,780)		13,903
Total operating expenses	47,109			(5,789)		41,320			36,324			(5,727)		30,597			164,571			(28,770)		135,801			139,552			(23,736)		115,816
Income (loss) from operations	7,984			6,139		14,123			2,886			6,047		8,933			11,609			30,710		42,319			(19,870)			25,479		5,609
Other income (expense):
Interest income	116			—		116			92			—		92			446			—		446			308			—		308
Other expense, net	(119)			—		(119)			(31)			—		(31)			(191)			—		(191)			(94)			—		(94)
Income (loss) before income taxes	7,981			6,139		14,120			2,947			6,047		8,994			11,864			30,710		42,574			(19,656)			25,479		5,823
Income tax (expense) benefit (2) (3)	(5,418)			1,868		(3,550)			(41)			(2,811)		(2,852)			(5,678)			(7,913)		(13,591)			(21,134)			19,271		(1,863)
Net income (loss)	2,563			8,007		10,570			2,906			3,236		6,142			6,186			22,797		28,983			(40,790)			44,750		3,960
Net income (loss) per share attributable to common stockholders:
Basic	$	0.07		$	0.24	$	0.31		$	0.09		$	0.10	$	0.19		$	0.18		$	0.68	$	0.86		$	(1.27)		$	1.39	$	0.12
Diluted	$	0.07		$	0.22	$	0.29		$	0.09		$	0.09	$	0.18		$	0.17		$	0.63	$	0.80		$	(1.27)		$	1.39	$	0.12
Weighted-average number of shares used in per share amounts:
Basic	34,252			—		34,252			32,746			—		32,746			33,618			—		33,618			32,200			—		32,200
Diluted	36,229			330		36,559			33,606			580		34,186			35,866			491		36,357			32,200			1,394		33,594


Notes:
1.	Includes stock-based compensation expense and related payroll taxes in the three months and fiscal years ended December 26, 2015 and December 27, 2014.
2.	Includes income tax effect of non-GAAP adjustments in the three months and fiscal years ended December 26, 2015 and December 27, 2014.
3.	Amount for the fiscal year ended December 27, 2014 includes establishment of valuation allowance against the deferred tax asset.

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SOURCE Gigamon Inc.

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