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Press release from Business Wire

Guidance Software Reports Record Q2 2010 Results

<ul class='bwtextalignleft'> <li class=' bwlistitemmarginbottom'> <i><b>Q2 2010 revenue increased 38 percent over Q2 2009</b></i> </li> <li class=' bwlistitemmarginbottom'> <i><b>Q2 2010 product revenue increased 61 percent over Q2 2009</b></i> </li> <li class=' bwlistitemmarginbottom'> <i><b>Q2 2010 Non-GAAP earnings per share of $0.03</b></i> </li> <li class=' bwlistitemmarginbottom'> <i><b>Raises 2010 financial outlook for the second time this year</b></i> </li> </ul>

Monday, August 02, 2010

Guidance Software Reports Record Q2 2010 Results16:01 EDT Monday, August 02, 2010 PASADENA, Calif. (Business Wire) -- Guidance Software, Inc. (NASDAQ:GUID) today reported financial results for the second quarter ended June 30, 2010. Second quarter 2010 highlights, calculated in accordance with generally accepted accounting principles (GAAP) include: Revenue of $22.7 million, an increase of $6.3 million, or 38 percent from $16.4 million in the second quarter of 2009 Product revenue of $11.2 million, an increase of $4.2 million, or 61 percent, from $7.0 million in the second quarter of 2009 Services and maintenance revenue of $11.5 million, an increase of $2.1 million, or 22 percent, from $9.4 million in the second quarter of 2009 Gross margin of 73.6 percent, a 4.2 percentage point increase from 69.4 percent in the second quarter of 2009, reflecting the Company's reduced overall cost structure, the increase in product revenue and increased margins in its professional services business GAAP net loss of $1.3 million, or ($0.05) per share, compared to a net loss of $5.8 million, or ($0.25) per share, in the second quarter of fiscal 2009 On a non-GAAP basis, which excludes share-based compensation, restructuring costs, amortization of intangibles and certain expenses related to the acquisition of Tableau, LLC, the Company reported pre-tax net income of $621,000, or $0.03 per share, in the second quarter of 2010. For the second quarter of 2009, the non-GAAP pre-tax net loss was $4.1 million, or ($0.18) per share. Guidance Software President and Chief Executive Officer Victor Limongelli said, “With record second quarter revenues and a lower cost structure reflecting changes we made in 2009, we increased productivity while growing our business. We are looking forward to continued progress in the third quarter, particularly with the pending release of EnCase eDiscovery Version 4, the industry's first unified product for in-house electronic discovery.” 2010 Financial Outlook: Upon completing the acquisition of the assets of Tableau LLC in May 2010, the Company raised its fiscal 2010 revenue guidance to a range of $83 - $87 million and its non-GAAP earnings guidance to $0.03 per share. Today, the Company announces another increase in 2010 guidance to a revenue range of $84 - $88 million for 2010 and non-GAAP earnings of approximately $0.03 - $0.04 per share. Second Quarter 2010 Highlights and Recent Events In May 2010, the Company acquired Tableau, LLC, the leader in the computer forensic hardware industry, for a net cash purchase price of $10.7 million. The Company successfully hosted the 2010 Computer and Enterprise Investigations Conference (CEIC) in Summerlin, Nevada, drawing a record number of attendees and sponsors to four days of networking, training, best practice exchanges and previews from the latest technology and services vendors. In July 2010, the Company announced that Integreon, the largest global provider of integrated research, legal and business solutions to professionals, will use Guidance Software EnCase® eDiscovery in conjunction with Integreon's core service offerings to provide corporations and law firms world-class, e-discovery services for collection and expert analysis of electronically stored information (ESI). The Company added 17 new EnCase® Enterprise customers in the second quarter of 2010. EnCase® Enterprise customers gained over the life of the product include over half of the Fortune 100 and nearly thirty percent of the Fortune 500. The Company also added 12 new customers for its products built on the EnCase® Enterprise platform, including four new EnCase®eDiscovery customers and seven new EnCase® Cybersecurity customers. 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. If you 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 (706) 645-9291, passcode 86686988, available from 8:00 pm Eastern Time, August 2, through midnight August 10, 2010. Forward Looking Statements: This 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 the Company'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 the Company's pursuit of providing network security and eDiscovery 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 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. About Guidance Software: Guidance Software is recognized worldwide as the industry leader in digital investigative solutions. Its EnCase® platform provides the foundation for government, corporate and law enforcement organizations to conduct thorough, network-enabled, and court-validated computer investigations of any kind, such as responding to eDiscovery requests, conducting internal investigations, responding to regulatory inquiries or performing data and compliance auditing - all while maintaining the integrity of the data. There are more than 30,000 licensed users of the EnCase® technology worldwide, the EnCase® Enterprise platform is used by over half of the Fortune 100, and thousands attend Guidance Software's renowned training programs annually. Validated by numerous courts, corporate legal departments, government agencies and law enforcement organizations worldwide, EnCase® has been honored with industry awards and recognition from Law Technology News, SC Magazine, Government Security News, Law Enforcement Technology and KMWorld. For more information about Guidance Software, visit www.guidancesoftware.com. GUID-F Guidance Software, Inc.Unaudited Condensed Consolidated Statements of Operations(in thousands, except per share amounts)             Three Months Ended Six Months Ended June 30, June 30, 2010 2009 2010 2009 Revenues: Product revenue $ 11,235 $ 6,990 $ 19,677 $ 15,345 Services and maintenance revenue   11,471     9,429     22,424     19,743   Total revenues   22,706     16,419     42,101     35,088     Cost of revenues: Cost of product revenue 1,072 595 1,760 1,333 Cost of services and maintenance revenue   4,928     4,436     9,169     9,266   Total cost of revenues   6,000     5,031     10,929     10,599     Gross profit   16,706     11,388     31,172     24,489     Operating expenses: Selling and marketing 9,060 9,316 17,285 18,881 Research and development 4,096 3,662 8,182 7,234 General and administrative 3,590 3,094 6,847 7,249 Depreciation   1,204     1,132     2,218     2,261   Total operating expenses   17,950     17,204     34,532     35,625     Operating loss (1,244 ) (5,816 ) (3,360 ) (11,136 )   Interest income and other, net   18     9     53     33     Loss before income taxes (1,226 ) (5,807 ) (3,307 ) (11,103 )   Income tax provision   37     12     86     86     Net loss $ (1,263 ) $ (5,819 ) $ (3,393 ) $ (11,189 )     Net loss per share $ (0.05 ) $ (0.25 ) $ (0.15 ) $ (0.48 )   Shares used in per share calculation - basic   23,094     23,212     23,055     23,247   Shares used in per share calculation - diluted   23,094     23,212     23,055     23,247                         Supplemental Financial Data Non-GAAP income (loss) before income taxesexcluding share-based compensation expense,restructuring costs, acquisition-related expense andamortization of intangibles $ 621   $ (4,143 ) $ (360 ) $ (7,374 )   Non-GAAP income (loss) before income taxes per basicand diluted shares outstanding excluding share-basedcompensation expense, restructuring costs, acquisition-relatedexpense and amortization of intangibles $ 0.03   $ (0.18 ) $ (0.02 ) $ (0.32 )                                       Guidance Software, Inc.Calculation of Pre-Tax Non-GAAP Income (Loss)(unaudited)(in thousands, except per share amounts)           Three Months Ended Six Months Ended June 30, June 30, 2010 2009 2010 2009 Calculation of pre-tax non-GAAP income (loss):   GAAP net loss $ (1,263 ) $ (5,819 ) $ (3,393 ) $ (11,189 )   Add: Income tax provision 37 12 86 86   Acquisition- related expense 223 - 223 -   Amortization of intangibles 182 - 182 -   Restructuring costs - 302 - 302   Share-based compensation expense(including related payroll taxes paid by the Company)   1,442     1,362     2,542     3,427     Non-GAAP income (loss) before income taxesexcluding share-based compensation expense,restructuring costs, acquisition-related expenseand amortization of intangibles $ 621   $ (4,143 ) $ (360 ) $ (7,374 )   Non-GAAP income (loss) per share beforeincome taxes excluding share-basedcompensation expense, restructuring costs,acquisition-related expense and amortizationof intangibles Basic $ 0.03   $ (0.18 ) $ (0.02 ) $ (0.32 ) Diluted $ 0.03   $ (0.18 ) $ (0.02 ) $ (0.32 )   Shares used in per share calculations: Basic   23,094     23,212     23,055     23,247   Diluted   23,549     23,212     23,055     23,247     Detail of Share-based Compensation Expense: Cost of product revenue 13 7 18 13 Cost of service and maintenance revenue 230 249 435 644 Selling and marketing 454 418 814 1,174 Research and development 337 391 526 724 General and administrative   408     297     749     872   Total share-based compensation expense   1,442     1,362     2,542     3,427     Detail of Restructuring Costs: Cost of product revenue - 13 - 13 Cost of service and maintenance revenue - 89 - 89 Selling and marketing - 98 - 98 Research and development - - - - General and administrative   -     102     -     102   Total Restructuring Costs   -     302     -     302     Detail of Acquisition-related Expense: General and administrative   223     -     223     -   Notes to Unaudited Condensed Consolidated Statements of Operations: This press release and its attachments include the non-GAAP financial measures of income (loss) before income taxes excluding share-based compensation expense, restructuring costs, acquisition-related expenses and amortization of intangibles and non-GAAP income (loss) before income taxes per share excluding share-based compensation expense, restructuring costs, acquisition-related expenses and amortization of intangibles, which are reconciled to net loss and net loss per share, respectively, which we believe are the most comparable GAAP measures. 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 loss and net loss per share calculated in accordance with GAAP. Non-GAAP income (loss) is defined as follows: GAAP net income (loss) before income taxes excluding share-based compensation expense, restructuring costs, acquisition-related expenses and amortization of intangibles. Share-based compensation expense is recorded in accordance with the FASB Accounting Standards Codification (ASC 718) Compensation – Stock Compensation Topic (formerly Statement of Financial Accounting Standard No. 123R, “Share-Based Payment”) for equity awards to employees and directors. Management and the Board of Directors believe it is useful to review the supplemental non-GAAP financial measures, which excludes income taxes and expenses related to share-based compensation, restructuring, acquisition-related expenses and amortization of intangibles in evaluating the Company, its management team and business unit performance during a particular time period. Share-based compensation expense, restructuring costs, acquisition-related expenses, amortization of intangibles and income taxes are not the responsibility of operating managers and generally cannot be changed or influenced by management. Additionally, we believe it is useful in measuring the Company's performance to exclude expenses related to income taxes, share-based compensation expense, restructuring costs, acquisition-related expenses and amortization of intangibles because it facilitates comparability with prior period information. 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. Guidance Software, Inc.Unaudited Condensed Consolidated Balance Sheets(in thousands)           June 30, March 31, December 31, 2010 2010 2009 ASSETSCurrent assets: Cash and cash equivalents $ 27,082 $ 38,734 $ 36,585 Trade receivables, net 12,554 12,128 16,932 Prepaid expenses, inventory and other current assets   3,478     2,505     2,233   Total current assets   43,114     53,367     55,750     Long-term assets: Property and equipment, net 12,208 12,637 12,835 Intangible assets, net 5,393 - - Goodwill 3,911 - - Other assets   434     434     434   Total long-term assets   21,946     13,071     13,269     Total assets $ 65,060   $ 66,438   $ 69,019     LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 2,868 $ 2,973 $ 3,226 Accrued liabilities 6,224 5,348 4,143 Capital lease obligations 60 66 75 Deferred revenues   27,937     30,204     32,336   Total current liabilities   37,089     38,591     39,780     Long-term liabilities: Rent incentives 1,582 1,760 1,929 Capital lease obligations 69 84 96 Deferred revenues   3,725     3,590     3,752   Total long-term liabilities   5,376     5,434     5,777     Stockholders' equity: Common stock 23 23 23 Additional paid-in capital 65,423 63,895 62,683 Treasury stock (2,294 ) (2,211 ) (2,080 ) Accumulated deficit   (40,557 )   (39,294 )   (37,164 ) Total stockholders' equity   22,595     22,413     23,462     Total liabilities and stockholders' equity $ 65,060   $ 66,438   $ 69,019     GUIDANCE SOFTWARE, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)     Six Months Ended June 30 2010 2009   Operating Activities: Net loss $ (3,393 ) $ (11,189 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation & amortization 2,218 2,261 Benefit for doubtful accounts (48 ) (202 ) Share-based compensation 2,542 3,427 Changes in operating assets and liabilities: Trade receivable 4,949 10,267 Prepaid expenses, inventory and other assets (515 ) 264 Accounts payable (225 ) (439 ) Accrued liabilities 1,682 (851 ) Deferred revenues   (4,426 )   (3,215 ) Net cash provided by operating activities   2,784     323     Investing Activities: Purchase of property and equipment (1,542 ) (1,537 ) Acquisition, net of cash acquired   (10,686 )   -   Net cash used in investing activities   (12,228 )   (1,537 )   Financing Activities: Proceeds from the exercise of stock options 197 - Common stock repurchased or withheld (214 ) (1,011 ) Principal payments on capital leases   (42 )   (121 ) Net cash used in financing activities   (59 )   (1,132 )   Net decrease in cash and cash equivalents (9,503 ) (2,346 )   Cash and cash equivalents, beginning of period   36,585     36,006     Cash and cash equivalents, end of period $ 27,082   $ 33,660