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 email@example.com or Media Contact Alex Andrianopoulos, 626-229-9191 firstname.lastname@example.org
Guidance Software Reports 2013 First Quarter Financial Results
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