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Press release from Business Wire

Guidance Software Reports Q2 2011 Financial Results

<ul> <li class='bwlistitemmargb'> <b>Revenue of $23.9 million marks record Q2 revenue performance</b> </li> <li class='bwlistitemmargb'> <b>Non-GAAP earnings per share of $0.02 marks fifth consecutive profitable quarter</b> </li> <li class='bwlistitemmargb'> <b>Added 65 customers on the EnCase® Enterprise platform compared to 17 in Q2 2010</b> </li> </ul>

Monday, August 01, 2011

Guidance Software Reports Q2 2011 Financial Results16:01 EDT Monday, August 01, 2011 PASADENA, Calif. (Business Wire) -- Guidance Software, Inc. (NASDAQ: GUID) today reported financial results for the quarter ended June 30, 2011. Second quarter 2011 financial highlights, calculated in accordance with generally accepted accounting principles (GAAP) include: revenue of $23.9 million, an increase of $1.2 million, or 5 percent, from $22.7 million in the second quarter of 2010 product revenue of $11.2 million, flat with $11.2 million in the second quarter of 2010 services and maintenance revenue of $12.7 million, an increase of $1.2 million, or 11 percent, from $11.5 million in the second quarter of 2010 GAAP net loss of $1.4 million, or ($0.06) per share, compared to a GAAP net loss of $1.3 million, or ($0.05) per share, in the second quarter of 2010. On a non-GAAP basis, which excludes share-based compensation, acquisition-related expense, and amortization of intangibles, the company reported pre-tax net income of $0.4 million, or $0.02 per share, in the second quarter of 2011, compared to non-GAAP pre-tax net income of $0.6 million, or $0.03 per share, in the second quarter of 2010. Guidance Software President and Chief Executive Officer Victor Limongelli said, “In addition to delivering our highest second quarter revenue ever, the quarter marked the achievement of several significant strategic and financial milestones. We delivered the much-anticipated version 7 of EnCase® Forensic, our flagship digital forensics solution. Guidance Software was also positioned in the ‘Leaders Quadrant' in the industry's first Gartner Magic Quadrant for E-Discovery Software, which we believe recognizes our leadership, vision, continued innovation and the success of our EnCase® software.” Limongelli added, “We also added 65 new customers on the EnCase® Enterprise platform, bringing the total to more than 1,000 since the introduction of that product.” Second Quarter 2011 Highlights and Noteworthy Events The company added 65 new EnCase® Enterprise customers in the second quarter of 2011, compared to 17 in the second quarter of 2010. EnCase® Enterprise customers gained over the life of the product include more than sixty percent of the Fortune 100 and more than one-third of the Fortune 500. The company also added 27 customers of EnCase®eDiscovery or EnCase® Cybersecurity which are built on the EnCase® Enterprise platform. In May, Gartner, Inc. named Guidance Software a leader in its first Magic Quadrant for E-Discovery Software (1). The Magic Quadrant for E-Discovery Software report assesses 24 vendors on their ability to execute and completeness of vision in the e-discovery market. In May, Guidance Software hosted the eleventh annual Computer and Enterprise Investigations Conference (CEIC). With record attendance of more than 1,300 people from 49 different countries, CEIC underscored the continued growth of the digital forensics industry. In late June, the newest version of Guidance Software's flagship digital forensic solution - EnCase® Forensic version 7 – became available to customers. The company's biggest EnCase® Forensic product release since 2006 transforms the way digital investigations are conducted — delivering new smartphone and tablet data acquisition for iPhones, iPads, BlackBerrys, Android, and the like – not available with any other computer forensics application. Also included are new, intuitive email results and a unified search functionality; expanded capabilities for the included EnScript programming language for customization; and all with a streamlined interface and built-in workflow. 2011 Financial Outlook: The company is reiterating its guidance for the year ended December 31, 2011, as follows: Revenue is expected to be in the range of $99 million to $103 million, representing year-over-year growth of 8 percent to 12 percent. Non-GAAP pre-tax earnings are expected to be approximately $0.12 - $0.18 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. 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 82392031, available from 8:00 pm eastern time, August 1, 2011, through midnight eastern time, August 9, 2011. 1) Source: Gartner, Inc. "Magic Quadrant for E-Discovery Software" by Debra Logan, John Bace, May 13, 2011 About Guidance Software, Inc. 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 e-discovery 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 40,000 licensed users of the EnCase® technology worldwide, the EnCase® Enterprise platform is used by more than sixty percent of the Fortune 100, and thousands attend Guidance Software's renowned training programs annually. For more information about Guidance Software, visit www.guidancesoftware.com/. Follow Guidance Software on Twitter at www.twitter.com/encase and on Facebook at www.facebook.com/guidancesoftware. EnCase®, EnCE®, EnCEP®, EnScript®, FastBloc®, 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 marks and brands may be claimed as the property of their respective owners. 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 the 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 the Guidance Software's pursuit of providing network security and eDiscovery technology might not be successful, or that if successful, it will not materially enhance the 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 the 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. 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,   2011       2010     2011       2010   Revenues: Product revenue $ 11,186 $ 11,235 $ 20,740 $ 19,677 Services and maintenance revenue   12,705     11,471     26,728     22,424   Total revenues   23,891     22,706     47,468     42,101     Cost of revenues: Cost of product revenue 1,625 1,072 2,910 1,760 Cost of services and maintenance revenue   5,586     4,928     11,884     9,169   Total cost of revenues   7,211     6,000     14,794     10,929     Gross profit   16,680     16,706     32,674     31,172     Operating expenses: Selling and marketing 8,686 9,060 16,815 17,285 Research and development 4,797 4,096 9,569 8,182 General and administrative 3,238 3,590 6,709 6,847 State sales tax charges - - 1,336 - Depreciation and amortization   1,287     1,204     2,528     2,218   Total operating expenses   18,008     17,950     36,957     34,532     Operating income (loss) (1,328 ) (1,244 ) (4,283 ) (3,360 )   Interest income and other, net   13     18     19     53     Income (loss) before income taxes (1,315 ) (1,226 ) (4,264 ) (3,307 )   Income tax provision   58     37     154     86     Net Income (loss) $ (1,373 ) $ (1,263 ) $ (4,418 ) $ (3,393 )     Net income (loss) per share $ (0.06 ) $ (0.05 ) $ (0.19 ) $ (0.15 )   Shares used in per share calculation - basic   23,248     23,094     23,145     23,055   Shares used in per share calculation - diluted   23,248     23,094     23,145     23,055                       Supplemental Financial Data Non-GAAP income (loss) before income taxes excluding share-based compensation, acquisition-related expense, amortization of intangibles and certain state sales tax charges $ 434   $ 621   $ 647   $ (360 ) Non-GAAP income (loss) per share before income taxes excluding share-based compensation, acquisition-related expense, amortization of intangibles and certain sales tax charges $ 0.02   $ 0.03   $ 0.03   $ (0.02 )   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,   2011       2010     2011       2010   Calculation of pre-tax non-GAAP income (loss):   GAAP net loss $ (1,373 ) $ (1,263 ) $ (4,418 ) $ (3,393 )   Add: Income tax provision 58 37 154 86   Certain state sales tax charges - - 1,336 -   Acquisition-related expense - 223 - 223   Amortization of intangibles 268 182 540 182   Share-based compensation expense (including related payroll taxes paid by the Company)   1,481     1,442     3,035     2,542     Non-GAAP income (loss) before income taxes excluding share-based compensation expense, acquisition-related expense, amortization of intangibles and certain sales tax charges $ 434   $ 621   $ 647   $ (360 )   Non-GAAP income (loss) per share before income taxes excluding share-based compensation expense, acquisition-related expense, amortization of intangibles and certain sales tax charges Basic $ 0.02   $ 0.03   $ 0.03   $ (0.02 ) Diluted $ 0.02   $ 0.03   $ 0.03   $ (0.02 )   Shares used in per share calculations: Basic   23,248     23,094     23,145     23,055   Diluted   24,581     23,549     24,479     23,055     Detail of Share-based Compensation Expense: Cost of product revenue 17 13 39 18 Cost of service and maintenance revenue 217 230 470 435 Selling and marketing 472 454 909 814 Research and development 364 337 785 526 General and administrative   411     408     832     749   Total share-based compensation expense   1,481     1,442     3,035     2,542     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, acquisition-related expense, amortization of intangibles and certain state sales tax charges and non-GAAP income (loss) before income taxes per share excluding share-based compensation expense, acquisition-related expense, amortization of intangibles and certain state sales tax charges, 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, acquisition-related expense, amortization of intangibles and certain state sales tax charges. 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, acquisition-related expense, amortization of intangibles and certain state sales tax charges in evaluating the Company, its management team and business unit performance during a particular time period. Share-based compensation expense, acquisition-related expense, amortization of intangibles, certain state sales tax charges 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, acquisition-related expense, amortization of intangibles and certain state sales tax charges 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.Condensed Consolidated Balance Sheets(in thousands)           June 30, March 31, December 31,   2011     2011     2010   ASSETS (unaudited) (unaudited) Current assets: Cash and cash equivalents $ 27,704 $ 25,180 $ 27,621 Trade receivables, net 15,576 16,862 16,344 Inventory 905 922 987 Prepaid expenses and other current assets   2,338     2,089     1,934   Total current assets   46,523     45,053     46,886     Long-term assets: Property and equipment, net 10,613 11,326 11,351 Intangible assets, net 4,518 4,786 5,058 Goodwill 3,711 3,711 3,711 Other assets   434     434     434   Total long-term assets   19,276     20,257     20,554     Total assets $ 65,799   $ 65,310   $ 67,440     LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 2,868 $ 2,466 $ 2,568 Accrued liabilities 7,040 6,662 7,255 Capital lease obligations 74 74 76 Deferred revenues   30,009     30,038     30,279   Total current liabilities   39,991     39,240     40,178     Long-term liabilities: Rent incentives 825 1,019 1,221 Capital lease obligations 78 97 116 Deferred revenues 4,026 4,033 3,335 Deferred tax liabilities   162     131     61   Total long-term liabilities   5,091     5,280     4,733     Stockholders' equity: Common stock 23 23 23 Additional paid-in capital 71,712 69,966 68,311 Treasury stock (4,834 ) (4,388 ) (4,039 ) Accumulated deficit   (46,184 )   (44,811 )   (41,766 ) Total stockholders' equity   20,717     20,790     22,529     Total liabilities and stockholders' equity $ 65,799   $ 65,310   $ 67,440     Guidance Software, Inc.Unaudited Cash Flow Summary(in thousands)     Six Months Ended June 30,       2011     2010     Operating Activities: Net loss $ (4,418 ) $ (3,393 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation & amortization 2,528 2,218 Benefit for doubtful accounts - (48 ) Share-based compensation 3,035 2,542 Deferred taxes 101 - Changes in operating assets and liabilities: Trade receivable 768 4,949 Inventory 82 (17 ) Prepaid expenses and other assets (404 ) (498 ) Accounts payable 175 (422 ) Accrued liabilities (611 ) 1,682 Deferred revenues   421     (4,426 ) Net cash provided by operating activities   1,677     2,587     Investing Activities: Purchase of property and equipment (1,126 ) (1,345 ) Acquisition, net of cash acquired   -     (10,686 ) Net cash used in investing activities   (1,126 )   (12,031 )   Financing Activities: Proceeds from the exercise of stock options 366 197 Common stock repurchased or withheld (794 ) (214 ) Principal payments on capital leases   (40 )   (42 ) Net cash used in financing activities   (468 )   (59 )   Net increase (decrease) in cash and cash equivalents 83 (9,503 )   Cash and cash equivalents, beginning of period   27,621     36,585     Cash and cash equivalents, end of period $ 27,704   $ 27,082   Guidance Software, Inc.INVESTOR CONTACTRasmus van der Colff, 626-768-4607investorrelations@guidancesoftware.comMEDIA CONTACTCas Purdy, 626-768-4666cas.purdy@guidancesoftware.com