Guidance Software Reports 2013 First Quarter Financial Results

  Guidance Software Reports 2013 First Quarter Financial Results

  *Non-GAAP revenue: $27.2 million, up $1.0 million, or 4% year-over-year
  *65 new EnCase® Enterprise platform customers during the first quarter of
    2013

Business Wire

PASADENA, Calif. -- May 02, 2013

Guidance Software, Inc. (NASDAQ: GUID) today reported financial results for
the first quarter ended March 31, 2013.

First quarter 2013 financial highlights include:

  *GAAP revenue of $26.9 million and non-GAAP revenue of $27.2 million,
    compared to GAAP revenue of $26.0 million and non-GAAP revenue of $26.2
    million in the first quarter of 2012
  *GAAP SaaS revenues of $2.6 million and non-GAAP SaaS revenue of $2.8
    million
  *Product revenue of $7.5 million, compared to $10.5 million in the first
    quarter of 2012
  *Services and maintenance revenue of $16.8 million, an increase of $2.5
    million, or 18 percent, from $14.3 million in the first quarter of 2012
  *GAAP net loss of $6.5 million, or ($0.26) per share, compared to a GAAP
    net loss of $3.6 million, or ($0.15) per share, in the first quarter of
    2012

On a non-GAAP basis, which excludes share-based compensation and amortization
of intangibles, the Company reported a pre-tax net loss of $3.9 million, or
($0.15) per share, in the first quarter of 2013, compared to non-GAAP pre-tax
net income of $0.6 million, or $0.02 per diluted share, in the first quarter
of 2012.

Guidance Software President and Chief Executive Officer Victor Limongelli
said, “While the macroeconomic environment has created some headwinds in the
first half of 2013, we are continuing to execute on our long-term EnCase
Everywhere strategy, with the addition of 65 new EnCase Enterprise customers
during the quarter. We believe we are well positioned competitively, and well
positioned to capitalize on the growth opportunity in the security space, as
we get set to launch our third product built on the EnCase Enterprise
platform. We are investing now in research and development, as well as
expanded sales and marketing, to take advantage of the growth opportunity in
front of us.”

First Quarter 2013 Highlights and Noteworthy Events

  *The Company celebrated its 15^th anniversary this past November and will
    culminate its celebration at the annual Computer and Enterprise
    Investigations Conference (CEIC), hosted by Guidance Software and
    scheduled to be held May 19-22, 2013 in Orlando, Florida. The event will
    feature a keynote by GeneralMichael Hayden, a retired, four-starUnited
    States Air ForceGeneral, former Director of theCentral Intelligence
    Agency, and former Director of theNational Security Agency.
  *In the first quarter 2013, the Company added 65 new EnCase Enterprise
    customers and 7 new customers of the products built on top of the EnCase
    Enterprise platform.
  *During the first quarter, EnCase was selected as the Reader Trust Award
    winner in the computer forensic tool category of the 2013 SC Magazine
    Awards announced at the RSA Conference®. TheSC MagazineAwards, now in
    its 16^th year, is the premier recognition for information security
    products.
  *In the first quarter, the Company announced out-of-the-box integrations
    between EnCase Cybersecurity and a number of high-profile security tools,
    including HP’s ArcSight, IBM’s QRadar, SourceFire, and FireEye. These
    integrations are designed to more effectively detect, validate, and
    remediate today’s new breed of cyber attacks. Combining the detection and
    correlation capabilities of one of these other products with EnCase
    Cybersecurity automates incident response workflow so that companies can
    triage an advanced cyber attack immediately.
  *In March, the Company launched EnCase App Central, a new online
    marketplace for digital investigators that makes available add-on
    applications – some free, some paid – to run on EnCase, and extend its
    functionality and increase its value. With 50 apps currently available,
    and more to come, EnCase App Central underscores the open nature of the
    EnCase platform. More than 50,000 investigators trained and licensed in
    the use of EnCase solutions can now leverage these apps to automate and
    add to the functionality of their EnCase software for more effective and
    streamlined digital investigations.

2013 Financial Outlook:

Given the constraints of the federal spending environment and what is expected
to be a very back-end loaded year in the corporate sector, the Company is
revising its guidance for the year endingDecember 31, 2013, as follows:

  *Revenue for 2013 is expected to be in the range of$133 million to $138
    million.
  *Non-GAAP pre-tax earnings for 2013 are expected to be in the range of
    $0.20per share loss to breakeven or $0.00 per share.

Conference Call Information:

The Company will host a conference call today at 2:00 p.m. pacific time, 5:00
p.m. eastern time to discuss its quarterly results. Participants should call
877-303-9850 (North America) or 408-427-3732 (International) and should dial
in at least 5 minutes prior to the conference call.

A webcast and replay of the call may also be found on the Internet through
Guidance Software's Investor Relations website at
http://investors.guidancesoftware.com/events.cfm. Registered users may access
this content over the Internet, and there is no cost to register. Ifyou have
not already registered, please do so at least 15 minutes prior to the start of
the conference call.

An audio-only replay of the call will be available by calling 855-859-2056,
passcode 30942149, available from 8:00 p.m. eastern time, May 2, 2013, through
midnight eastern time, May 9, 2013.

About Guidance Software:

Guidance Software is recognized worldwide as the industry leader in digital
investigative solutions. Its EnCase Enterprise platform is used by numerous
government agencies, more than 65 percent of the Fortune 100, and more than 40
percent of the Fortune 500 to conduct digital investigations of servers,
laptops, desktops, and mobile devices. Built on the EnCase Enterprise platform
are market-leading electronic discovery and cyber security solutions, EnCase
eDiscovery and EnCase Cybersecurity, which enable organizations to respond to
litigation discovery requests, proactively perform data discovery for
compliance purposes, and conduct speedy and thorough security incident
response. For more information about Guidance Software, visit
www.guidancesoftware.com.

EnCase®, EnScript®, FastBloc®, EnCE®, EnCEP®, Guidance Software™, and Tableau™
are registered trademarks or trademarks owned by Guidance Software in the
United States and other jurisdictions and may not be used without prior
written permission. All other trademarks and copyrights referenced in this
press release are the property of their respective owners.

Notes to Unaudited Condensed Consolidated Statements of Operations:

Guidance Software reports its financial results in accordance with generally
accepted accounting principles, or GAAP. To supplement this information, we
present in this release total non-GAAP revenue, gross profit, operating
expenses, operating income (loss) and net income (loss), as well as non-GAAP
net income (loss) per share. Total non-GAAP revenue consists of GAAP revenue
as reported and adds back the acquisition-related deferred revenue adjustment
booked for GAAP purposes. Non-GAAP gross profit consists of GAAP gross profit
as reported and adds back the acquisition-related deferred revenue adjustment
and stock-based compensation expense booked for GAAP purposes. Non-GAAP
operating income (loss) consists of GAAP operating income (loss) as reported
and adds back the acquisition-related deferred revenue adjustment booked for
GAAP purposes and excludes amortization of intangibles, acquisition-related
expenses, and share-based compensation expense. Non-GAAP net income (loss)
consists of GAAP operating income (loss) as reported and adds back the
acquisition-related deferred revenue adjustment booked for GAAP purposes and
excludes amortization of intangibles, acquisition-related expenses, and
share-based compensation expense.

Non-GAAP net income (loss) also excludes the tax provision.

We use these non-GAAP financial measures for internal managerial purposes,
when publicly providing our business outlook, and to facilitate
period-to-period comparisons. We describe limitations specific to each
non-GAAP financial measure below. Management generally compensates for
limitations in the use of non-GAAP financial measures by relying on comparable
GAAP financial measures and providing investors with a reconciliation of the
non-GAAP financial measures only in addition to and in conjunction with
results presented in accordance with GAAP. We believe that these non-GAAP
financial measures reflect an additional way of viewing aspects of our
operations that, when viewed with our GAAP results, provide a more complete
understanding of factors and trends affecting our business. These non-GAAP
measures should be considered as a supplement to, and not as a substitute for,
or superior to, net income (loss) and net income (loss) per share calculated
in accordance with GAAP.

Accordingly, management and the Board of Directors do not consider these
excluded costs for purposes of evaluating the performance of the business, and
they exclude such costs when evaluating the performance of the Company, its
business units and its management teams, and when making decisions to allocate
resources among the Company's business units.

Acquisition-related Deferred Revenue. Acquisition-related deferred revenue
adjustment reflects the fair value adjustment to deferred revenues acquired in
business combinations. The fair value of deferred revenue represents an amount
equivalent to the estimated cost plus an appropriate profit margin, to perform
services related to the acquiree's software and product support, which assumes
a legal obligation to do so, based on the deferred revenue balances as of the
acquisition date. Guidance Software adds back this deferred revenue for its
non-GAAP financial measures because it believes the inclusion of this amount
directly correlates to the underlying performance of Guidance Software
operations and facilitates comparisons of pre-merger results of legacy
Guidance Software and CaseCentral to that of the Company's post-merger
results.

Acquisition-related Expenses. Acquisition-related expenses are fees and
expenses, including legal, investment banking and accounting fees, and other
integration-related expenses, incurred in connection with announced
transactions. Guidance Software excludes acquisition-related expenses from
non-GAAP operating income and non-GAAP net income because it believes (i) the
amount of such expenses in any specific period may not directly correlate to
the underlying performance of Guidance Software business operations and (ii)
such expenses can vary significantly between periods.

Amortization of Intangibles. Amortization of intangibles is a non-cash expense
arising from the acquisition of intangible assets in connection with
acquisitions. Guidance Software excludes acquisition-related amortization
expense from non-GAAP operating income and non-GAAP net income because it
believes (i) the amount of such expenses in any specific period may not
directly correlate to the underlying performance of Guidance Software’s
business operations and (ii) such expenses can vary significantly between
periods as a result of new acquisitions and full amortization of previously
acquired intangible assets. Investors should note that the use of these
intangible assets contributed to revenue in the periods presented and will
contribute to future revenue generation and the related amortization expense
will recur in future periods.

Stock-based Compensation Expense. Stock-based compensation expense is a
non-cash expense arising from the grant of stock awards to employees. Guidance
Software excludes stock-based compensation expense from non-GAAP operating
income and non-GAAP net income because it believes (i) the amount of such
expenses in any specific period may not directly correlate to the underlying
performance of Guidance Software’s business operations and (ii) such expenses
can vary significantly between periods as a result of the timing of grants of
new stock-based awards, including grants in connection with acquisitions.
Investors should note that stock-based compensation is a key incentive offered
to employees whose efforts contributed to the operating results in the periods
presented and are expected to contribute to operating results in future
periods and such expense will recur in future periods.

Forward-Looking Statements:

This news release contains forward-looking statements within the meaning of
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that forward-looking statements in this release
involve risks and uncertainties that could cause actual results to differ
materially from current expectations. There can be no assurance that demand
for Guidance Software's products will continue at current or greater levels,
or that the Company will continue to grow revenues, or be profitable. There
are also risks that Guidance Software's pursuit of providing network security
and eDiscovery technology might not be successful, or that if successful, it
will not materially enhance Guidance Software's financial performance; that
the Company could fail to retain key employees; that changes in customer
requirements and other general economic and political uncertainties could
impact Guidance Software's relationship with its customers; and that delays in
product development, competitive pressures, or technical difficulties could
impact timely delivery of next-generation products; and other risks and
uncertainties that are described from time to time in Guidance Software's
periodic reports and registration statements filed with the Securities and
Exchange Commission. The Company specifically disclaims any responsibility for
updating these forward-looking statements.

                                                      
Guidance Software, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)

                                     Three Months Ended
                                     March 31,
                                     2013                           2012
Revenues:
       Product revenue               $ 7,530                        $ 10,509
       Subscription revenue            2,582                          1,225
       Services and                   16,832                       14,285 
       maintenance revenue
Total revenues                        26,944                       26,019 
                                                                    
Cost of revenues:
       Cost of product revenue         1,768                          1,683
       Cost of subscription            1,126                          586
       revenue
       Cost of services and           6,561                        5,450  
       maintenance revenue
Total cost of revenues                9,455                        7,719  
                                                                    
Gross profit                          17,489                       18,300 
                                                                    
Operating expenses:
       Selling and marketing           9,453                          8,637
       Research and                    7,544                          5,290
       development
       General and                     5,269                          6,220
       administrative
       Depreciation and               1,697                        1,626  
       amortization
Total operating expenses              23,963                       21,773 
                                                                    
Operating income (loss)                (6,474 )                       (3,473 )
                                                                    
Interest income and other, net        6                            7      
                                                
Income (loss) before income            (6,468 )                       (3,466 )
taxes
                                                                    
Income tax provision                  65                           134    
                                                                    
Net income (loss)                    $ (6,533 )                     $ (3,600 )
                                                                    
Net income (loss) per share -        $ (0.26  )                     $ (0.15  )
basic
Net income (loss) per share -        $ (0.26  )                     $ (0.15  )
diluted
                                                                    
Shares used in per share              25,508                      23,854 
calculation - basic
Shares used in per share              25,508                      23,854 
calculation - diluted
                                                                    
                                                                    
Supplemental Financial Data
Non-GAAP income (loss) before
income taxes excluding
acquisition-related deferred
revenue adjustment,                  $ (3,914 )                     $ 561    
acquisition-related expense,
share-based compensation and
amortization of intangibles
                                                                    
Non-GAAP income (loss) per
share before income taxes
excluding acquisition-related
deferred revenue adjustment,
acquisition-related expense,
share-based compensation and
amortization of intangibles
       Basic                         $ (0.15  )                     $ 0.02   
       Diluted                       $ (0.15  )                     $ 0.02   
                                                                    
                                                                    

                                                      
Guidance Software, Inc.
Calculation of Pre-Tax Non-GAAP Income
(unaudited)
(in thousands, except per share amounts)

                                     Three Months Ended
                                     March 31,
                                     2013                           2012
Calculation of pre-tax
non-GAAP income (loss):
                                                                    
GAAP net income (loss)               $ (6,533 )                     $ (3,600 )
Add:
    Income tax provision               65                             134
    Acquisition-related                -                              1,974
    expense
    Acquisition-related
    deferred revenue                   253                            207
    adjustment
    Amortization of                    562                            549
    intangibles
    Share-based compensation
    expense (including related        1,739                        1,297  
    payroll taxes paid by the
    Company)
                                                                    
Non-GAAP income (loss) before
income taxes excluding
acquisition-related deferred
revenue adjustment,                  $ (3,914 )                     $ 561    
acquisition-related expense,
share-based compensation and
amortization of intangibles
                                                                    
Non-GAAP income (loss) per
share before income taxes
excluding acquisition-related
deferred revenue adjustment,
acquisition-related expense,
share-based compensation and
amortization of intangibles
    Basic                            $ (0.15  )                     $ 0.02   
    Diluted                          $ (0.15  )                     $ 0.02   
                                                                    
Shares used in per share
calculations:
    Basic                             25,508                       23,854 
    Diluted                           25,508                       25,491 
                                                                    
Detail of Share-based
Compensation Expense:
    Cost of product revenue          $ 32                           $ 22
    Cost of subscription               44                             23
    revenue
    Cost of service and                322                            216
    maintenance revenue
    Selling and marketing              442                            377
    Research and development           461                            290
    General and administrative        438                          369    
    Total share-based                $ 1,739                       $ 1,297  
    compensation expense
Detail of Acquisition-related
Expense:
    General and administrative       $ -                           $ 1,974  
Detail of Acquisition-related
Deferred Revenue Adjustment:
    Subscription revenue             $ 193                          $ 167
    Services and maintenance          60                           40     
    revenue
    Total acquisition-related
    deferred revenue                 $ 253                         $ 207    
    adjustment
                                                                    
                                                                    

                                                      
Guidance Software, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited and in thousands, except per share amounts)
                                                                    
                                     Three Months Ended
                                     March 31,
                                     2013                           2012
                                                                    
Total revenues, as reported          $ 26,944                       $ 26,019
Acquisition-related deferred          253                          207    
revenue adjustment
Total non-GAAP revenues              $ 27,197                      $ 26,226 
                                                                    
Gross profit, as reported            $ 17,489                       $ 18,300
Acquisition-related deferred           253                            207
revenue adjustment
Share-based compensation              398                          261    
Gross profit adjustment               651                          468    
Total non-GAAP gross profit           18,140                      $ 18,768 
                                                                    
Total operating expenses, as         $ 23,963                       $ 21,773
reported
Amortization of intangibles            (562   )                       (549   )
Acquisition-related expenses           -                              (1,974 )
Share-based compensation              (1,341 )                      (1,036 )
Operating expense adjustment          (1,903 )                      (3,559 )
Total non-GAAP operating             $ 22,060                      $ 18,214 
expenses
                                                                    
Operating income (loss), as          $ (6,474 )                     $ (3,473 )
reported
Gross profit adjustment                651                            468
Operating expense adjustment          1,903                        3,559  
Total non-GAAP operating             $ (3,920 )                     $ 554    
income (loss)
                                                                    
Net income (loss), as reported       $ (6,533 )                     $ (3,600 )
Gross profit adjustment                651                            468
Operating expense adjustment           1,903                          3,559
Income tax provision                  65                           134    
Total non-GAAP net income            $ (3,914 )                     $ 561    
(loss)
                                                                    
Net income (loss) per                $ (0.26  )                     $ (0.15  )
share-diluted, as reported
                                                                    
Non-GAAP net income (loss) per       $ (0.15  )                     $ 0.02   
share-diluted
                                                                    
                                                                    

                                                    
Guidance Software, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
                                                                  
                                  March 31,                       December 31,
                                  2013                            2012
ASSETS
Current assets:
Cash and cash equivalents         $ 26,072                        $  32,606
Trade receivables, net              19,894                           23,558
Inventory                           2,004                            2,008
Prepaid expenses and other         5,076                          3,753   
current assets
Total current assets               53,046                         61,925  
                                                                  
Long-term assets:
Property and equipment, net         13,612                           10,227
Intangible assets, net              11,848                           12,411
Goodwill                            14,632                           14,632
Other assets                       1,615                          2,026   
Total long-term assets             41,707                         39,296  
                                                                  
Total assets                      $ 94,753                       $  101,221 
                                                                  
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                  $ 4,588                         $  3,058
Accrued liabilities                 10,141                           12,929
Capital lease obligations           345                              393
Deferred revenues                  37,219                         37,337  
Total current liabilities          52,293                         53,717  
                                                                  
Long-term liabilities:
Rent incentives                     1,206                            730
Capital lease obligations           104                              181
Deferred revenues                   5,670                            6,115
Contingent earn-out                 600                              569
Deferred tax liabilities           912                            889     
Total long-term liabilities        8,492                          8,484   
                                                                  
Stockholders' equity:
Common stock                        25                               25
Additional paid-in capital          95,846                           93,037
Treasury stock                      (9,972  )                        (8,644  )
Accumulated deficit                (51,931 )                       (45,398 )
Total stockholders' equity         33,968                         39,020  
                                                                  
Total liabilities and             $ 94,753                       $  101,221 
stockholders' equity
                                                                  
                                                                  

                                                     
Guidance Software, Inc.
Unaudited Cash Flow Summary
(in thousands)
     
                                    Three Months Ended
                                    March 31,
                                    2013                           2012
Operating Activities:
  Net loss                          $ (6,533 )                     $ (3,600  )
  Adjustments to reconcile
  net loss to net cash used
  in operating activities:
       Depreciation &                 1,697                          1,626
       amortization
       Provision for doubtful         100                            -
       accounts
       Share-based                    1,739                          1,297
       compensation
       Deferred taxes                 23                             77
       Loss on disposal of            42                             18
       assets
       Changes in operating
       assets and
       liabilities:
           Trade receivables          3,564                          2,570
           Inventory                  4                              (126    )
           Prepaid expenses           (455   )                       (632    )
           and other assets
           Accounts payable           908                            377
           Accrued                    (2,510 )                       (3,147  )
           liabilities
           Deferred revenues         (563   )                      (129    )
       Net cash used in              (1,984 )                      (1,669  )
       operating activities
                                                                   
Investing Activities:
  Purchase of property and            (3,939 )                       (571    )
  equipment
  Acquisition, net of cash           -                            (9,528  )
  acquired
       Net cash used in              (3,939 )                      (10,099 )
       investing activities
                                                                   
Financing Activities:
  Proceeds from the exercise          1,070                          1,507
  of stock options
  Common stock repurchased or         (1,327 )                       (628    )
  withheld
  Principal payments on
  capital lease and other            (354   )                      (88     )
  obligations
       Net cash (used in)
       provided by financing         (611   )                      791     
       activities
                                                                   
Net decrease in cash and cash         (6,534 )                       (10,977 )
equivalents
                                                                   
Cash and cash equivalents,           32,606                       37,048  
beginning of period
                                                                   
Cash and cash equivalents,          $ 26,072                      $ 26,071  
end of period

GUID-F

Contact:

Guidance Software, Inc.
Investor Contact
Rasmus van der Colff, 626-768-4607
investorrelations@guidancesoftware.com
or
Media Contact
Alex Andrianopoulos, 626-229-9191
newsroom@guidancesoftware.com