Rating Action: Moody's upgrades Gigamon's CFR to B2 from B3; outlook stableGlobal Credit Research - 05 Feb 2021New York, February 05, 2021 -- Moody's Investors Service, ("Moody's") upgraded Gigamon, Inc.'s Corporate Family Rating ("CFR") to B2 from B3 and upgraded the company's Probability of Default Rating ("PDR") to B2-PD from B3-PD. Concurrently, Moody's upgrade the first lien senior secured bank credit facilities to B2 from B3. The outlook is stable.The upgrade of Gigamon's CFR to B2 reflects the company's stable operating performance through the COVID-19 recession, resumption of healthy free cash flow generation and expectations for mid-single digit revenue and EBITDA growth over the next 12-18 months.Upgrades:..Issuer: Gigamon Inc..... Corporate Family Rating, Upgraded to B2 from B3.... Probability of Default Rating, Upgraded to B2-PD from B3-PD ....Senior Secured Bank Credit Facility, Upgraded to B2 (LGD4) from B3 (LGD4) Outlook Actions: ..Issuer: Gigamon Inc. ....Outlook, Remains Stable RATINGS RATIONALE Gigamon's B2 CFR reflects the company's high leverage, and narrow product focus. The rating also reflects Gigamon's very strong market position within the network packet broker (NPB) market with a strong suite of network visibility products for large enterprises. The NPB market is a growing market but evolving rapidly to address changing network architectures and growth in cloud-based applications, tools and infrastructure. Leverage as of the LTM period ended September 30, 2020 is estimated at about 7x, or about 5.5x on a cash adjusted basis (when adding change in deferred revenue). The ratings also consider the company's reliance on a narrow product line and short history at its current scale. While Gigamon generates approximately half of its revenue from predictable maintenance & support, term license and subscription revenues, most rated software peers generate a greater proportion of their revenue from maintenance, subscription or other recurring revenue.The stable outlook incorporates Moody's expectation that Gigamon will reduce leverage toward 6x and will generate annualized free cash flow to debt in excess of 6% over the next 12-18 months.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe ratings could be downgraded if free cash flow to debt was maintained below 5% on other than a temporary basis or if leverage was expected to be maintained above 6.5x. The ratings could be upgraded if Gigamon were to maintain healthy organic revenue growth with leverage sustained below 5x and free cash flow to debt in excess of 10%.Gigamon's liquidity is considered good and is supported by cash balances of approximately $80 million, expectations for free cash flow generation in excess of $40 million and a $50 million revolving credit facility.As a software company, Gigamon's exposure to environmental risk is considered low. Social risks are considered low to moderate, in line with the software sector. Broadly, the main credit risks stemming from social issues are linked to data security, diversity in the workplace and access to highly skilled workers. Gigamon is owned by funds affiliated with Evergreen Coast Capital and is expected to maintain a relatively aggressive financial strategy as evidenced by the high debt levels used to acquire the company.Gigamon, Inc. is a provider of network visibility and analytics products for physical, virtual and cloud infrastructure that helps with critical performance and security needs. The company, headquartered in Santa Clara, CA generated pro forma revenues of approximately $392 million in the LTM period ended September 30, 2020. Gigamon is owned by funds affiliated with Evergreen Coast Capital.The principal methodology used in these ratings was Software Industry published in August 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1130740. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Stephen Morrison Asst Vice President - Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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