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Guidance Software Announces Preliminary 2013 Results and Updates 2014 Outlook

  Guidance Software Announces Preliminary 2013 Results and Updates 2014
  Outlook

Business Wire

PASADENA, Calif. -- January 9, 2014

Guidance Software, Inc. (NASDAQ:GUID), the World Leader in Digital
Investigations™, today announced that it has revised its financial outlook for
the fourth quarter and year ended December 31, 2013.

The Company now projects 2013 non-GAAP revenue in the range of approximately
$110.0 million to $110.5 million, compared with the previous guidance issued
on November 5, 2013 of $112.0 million to $115.0 million. The change in
projected revenue is primarily a result of delays in closing of numerous deals
greater than $100,000 at the end of the quarter. Non-GAAP revenue for the
quarter ended December 31, 2013 is expected to be in the range of $27.2
million to $27.7 million.

As a result of the revised revenue projections, 2013 non-GAAP pre-tax
earnings, which exclude share-based compensation, amortization of intangibles
and adjustments to the fair value of contingent consideration and goodwill,
are now expected to be in the range of a $0.52 per share loss to a $0.50 per
share loss, compared with the previous guidance of a $0.50 per share loss to a
$0.42 per share loss. Pre-tax non-GAAP earnings for the quarter ended December
31, 2013 are now expected to be in the range of an $0.11 per share loss to a
$0.09 per share loss, compared with the previous guidance of an $0.11 per
share loss to $0.03 per share loss.

In the fourth quarter of 2013, the Company added 84 new EnCase® Enterprise
customers. The Company also added 32 customers ofEnCase®eDiscovery or
EnCase® Cybersecurity and the first 5 customers of EnCase® Analytics, all
which are built on the EnCase® Enterprise platform.

Guidance Software President and Chief Executive Officer Victor Limongelli
said, “2013 proved to be a very difficult year for us. We have identified and
are fixing the causes of our poor performance, which I will detail in today’s
webcast. We have taken immediate action to adjust our cost structure and are
committed to being profitable in 2014.”

2014 Financial Outlook:

Barry Plaga, Chief Financial Officer, commented, “Now that we have adjusted
our cost structure, our focus will be on profitability, deal velocity and cash
generation. In terms of guidance for 2014, we expect revenue for the full year
to be in the range of $116 to $119 million. On the expense side, we have
aggressively reduced our total non-GAAP cost structure to approximately $115
million for 2014, down 7 percent from our 2013 cost structure of $124 million.
Accordingly, we expect to be profitable on a non-GAAP basis for the full year
2014. We will provide more detailed guidance, including quarterly expectations
for growth rates, on our regularly scheduled conference call on February 11,
2014.”

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 the information in today’s press release.
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 accompanying slides will also be broadcast live over the
Internet 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,
conference ID 31110167, available from 8:00 p.m. eastern time, January 9,
2014, through midnight eastern time, January 16, 2014.

About Guidance Software:

Guidance Softwareis 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, EnCase® Cybersecurity, and EnCase® Analytics. They empower
organizations to respond to litigation discovery requests, perform sensitive
data discovery for compliance purposes, conduct speedy and thorough security
incident response, and reveal previously hidden advanced persistent threats or
malicious insider activity. For more information aboutGuidance Software,
visitwww.encase.com.

EnCase®, EnScript®, FastBloc®, EnCE®, EnCEP®, Guidance Software™ and Tableau™
are registered trademarks or trademarks owned byGuidance Softwareinthe
United Statesand 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:

Guidance Software reports its financial results in accordance with generally
accepted accounting principles, or GAAP. To supplement this information, we
present from time to time 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, share-based
compensation expense and adjustments to fair value of contingent consideration
and any potential adjustments to goodwill. 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.

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 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.

Adjustment to Fair Value of Contingent Consideration. Adjustment to fair value
of contingent consideration reflects any adjustment to the fair value of the
contingent consideration from the final purchase price allocation established
as of February 21, 2012, which was the date the Company acquired CaseCentral.
Guidance Software excludes adjustments to the fair value of contingent
consideration from non-GAAP operating income and non-GAAP net income because
it believes (i) the amount of such adjustments in any specific period may not
directly correlate to the underlying performance of Guidance Software business
operations and (ii) such adjustments can vary significantly between periods as
a result of an increase or decrease in the probability of the achievement of
various earn-out scenarios used to determine the fair value of the contingent
consideration.

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 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 any of
the financial projections or expectations expressed herein will be realized,
that demand for the Company's products will continue at current or greater
levels, or that the Company will grow revenues, or be profitable. There are
also risks that the Company's pursuit of providing network security and
e-discovery technology might not be successful, or that if successful, it will
not materially enhance the Company'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 the Company'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 the Company'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.

GUID-F

Contact:

Investor Contact
Guidance Software, Inc.
Rasmus van der Colff, 626-768-4607
investorrelations@guidancesoftware.com
 
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