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Press release from Business Wire

Guidance Software Reports 2012 Third Quarter Financial Results

<ul> <li class='bwlistitemmargb'> <b>Non-GAAP Revenue: $36.6 million, up $9.3 million, or 34 percent year-over-year</b> </li> <li class='bwlistitemmargb'> <b>Non-GAAP EPS: $0.15 per share, up $0.06 year-over-year</b> </li> <li class='bwlistitemmargb'> <b>Addition of 65 New EnCase® Enterprise platform customers during the third quarter of 2012</b> </li> <li class='bwlistitemmargb'> <b>50,000</b><sup><b>th</b></sup> <b>EnCase® student trained</b> </li> </ul>

Thursday, November 01, 2012

Guidance Software Reports 2012 Third Quarter Financial Results16:01 EDT Thursday, November 01, 2012 PASADENA, Calif. (Business Wire) -- Guidance Software, Inc. (NASDAQ: GUID) today reported financial results for the quarter ended September 30, 2012. Third quarter 2012 financial highlights, determined in accordance with GAAP include: GAAP Revenue of $36.1 million and non-GAAP revenue of $36.6 million, compared to GAAP and non-GAAP revenue of $27.3 million in the third quarter of 2011 GAAP SaaS revenues of $2.6 million and non-GAAP SaaS revenue of $3.0 million. Product revenue of $17.4 million, an increase of $2.6 million, or 17 percent, from $14.8 million in the third quarter of 2011 Services and maintenance revenue of $16.1 million, an increase of $3.7 million, or 29 percent, from $12.4 million in the third quarter of 2011 GAAP net income of $1.3 million, or $0.05 per share, compared to a GAAP net income of $0.5 million, or $0.02 per share, in the third quarter of 2011 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 $4.1 million, or $0.15 per share, in the third quarter of 2012, compared to non-GAAP pre-tax net income of $2.1 million, or $0.09 per share, in the third quarter of 2011. “The third quarter marked another period of strong growth for Guidance Software, with revenues increasing by more than 30% year-over-year,” said Victor Limongelli, President and Chief Executive Officer of Guidance Software. “The federal sector performed well in the third quarter across the board in e-discovery, cybersecurity and forensics. We are also excited about the recent announcement of EnCase eDiscovery Version 5, which delivers seamless integration with our CaseCentral cloud review platform and provides in-house counsel with control and oversight of every phase of the electronic discovery process. Looking ahead, we will continue to innovate in the forensics, e-discovery and cybersecurity spaces and remain focused on delivering additional value to our customers and shareholders.” Third Quarter 2012 Highlights and Noteworthy Events The company added 65 new EnCase® Enterprise customers and 20 new customers of EnCase® eDiscovery or EnCase® Cybersecurity, which are built on the EnCase® Enterprise platform, in the third quarter of 2012. In October, the company showcased EnCase® eDiscovery v5, the newest version of its industry-leading e-discovery software, at the Association of Corporate Counsel annual meeting. Version 5, which was released at the end of October, delivers a seamless integration with Guidance's CaseCentral cloud review platform and provides in-house counsel control and oversight of every phase of the electronic discovery process. Also in October, the company announced the release of EnCase® Forensic v7.05, the fastest, most comprehensive digital forensic product available on the market. Using this new enhanced software version, investigators can uncover evidence up to nine times faster than previous versions, all with unparalleled precision. In September, the company celebrated its 50,000th EnCase® student to complete EnCase training courses in its classroom, online training, or certified partner training programs. In the first year of Guidance's training program the company trained 32 students. This year Guidance expects to train nearly 6,500 students. Also in September, the company debuted the industry's first touch screen, modular forensic imager the Tableau® TD3 Forensic Imager. The color touch screen on the TD3 makes it easier and faster to start collections or to view data. The TD3 includes a pop-up software touch screen keypad for convenient alphanumeric data entry, log review or network connection setup, and also supports a USB-connected physical keyboard. The company announced a partnership with RSA®, the security division of EMC, to interconnect EnCase® Cybersecurity and the RSA® enVision security information and event management (SIEM) platform enabling automated incident response and management. The interoperability of these two solutions will enable organizations to reduce the time it takes to remediate threats, ultimately decreasing the high cost of response as well as the risk of exposing sensitive data to loss or theft. In July, the company's EnCase® eDiscovery software was ranked #1 out of more than 20 vendors in the inaugural DCIG E-Discovery Early Case Assessment (ECA) Buyer's Guide. For the Buyer's Guide, DCIG looked at more than 60 key features of more than 25 ECA software products from more than 20 leading companies. EnCase eDiscovery was ranked the #1 product in each one of the three evaluation categories (Overall, Operating Environment, and User Experience) outscoring each one of the other reviewed products and earning the "Recommended" ranking from DCIG. 2012 Financial Outlook: As it enters the final quarter of the year, the company's guidance for the year ended December 31, 2012 is as follows: Non-GAAP revenue in the range of $129 million - $131 million, representing year-over-year growth of 23 percent to 25 percent. Non-GAAP pre-tax earnings in the range of $0.37 - $0.41 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 (855) 859-2056, passcode 34410521, available from 8:00 pm eastern time, November 1, 2012, through midnight eastern time, November 8, 2012. About Guidance Software: Guidance Software is recognized worldwide as the industry leader in digital investigative solutions. Its EnCase® platform, with more than 40,000 licenses distributed worldwide, 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. The EnCase Enterprise platform is used by numerous Federal Civilian and Defense agencies, more than 60 of the Fortune 100, and thousands attend Guidance Software's renowned training programs annually. For more information about Guidance Software, visit www.guidancesoftware.com. EnCase®, EnScript®, FastBloc®, EnCE®, EnCEP®, CaseCentral®, CaseCentral eDiscovery Cloud®, 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 as reported and adds back the acquisition-related deferred revenue adjustment booked for GAAP purposes and excludes amortization of intangibles, transaction-related expenses, stock-based compensation expense, and a one-time sales tax charge. Non-GAAP net income (loss) consists of GAAP operating income as reported and adds back the acquisition-related deferred revenue adjustment booked for GAAP purposes and excludes amortization of intangibles, transaction-related expenses, stock-based compensation expense, and a one-time sales tax charge. 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 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 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. Sales Tax One-time Charge. The sales tax one-time charge is expenses accrued for sales taxes that may be due to a taxing authority. Guidance Software excludes the sales tax charge from non-GAAP operating income and non-GAAP net income because it believes the amount of the expense in the specific period it occurred is a one-time charge and does not directly correlate to the underlying performance of Guidance Software's business operations. 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   Nine Months Ended September 30, September 30, 2012   2011 2012   2011 Revenues: Product revenue $ 17,394 $ 14,818 $ 39,945 $ 35,558 Subscription revenue 2,648 - 6,716 - Services and maintenance revenue   16,099     12,440   46,567     39,168   Total revenues   36,141     27,258   93,228     74,726     Cost of revenues: Cost of product revenue 2,208 1,439 5,795 4,349 Cost of subscription revenue 981 - 2,850 - Cost of services and maintenance revenue   6,539     5,373   18,086     17,257   Total cost of revenues   9,728     6,812   26,731     21,606     Gross profit   26,413     20,446   66,497     53,120     Operating expenses: Selling and marketing 11,790 9,791 30,341 26,606 Research and development 6,224 4,642 17,807 14,211 General and administrative 5,351 4,143 16,664 10,852 State sales tax charges - - - 1,336 Depreciation and amortization   1,745     1,353   5,335     3,881   Total operating expenses   25,110     19,929   70,147     56,886     Operating income (loss) 1,303 517 (3,650 ) (3,766 )   Interest income and other, net   (9 )   20   (10 )   39     Income (loss) before income taxes 1,294 537 (3,660 ) (3,727 )   Income tax provision   22     25   231     179     Net Income (loss) $ 1,272   $ 512 $ (3,891 ) $ (3,906 )   Net income (loss) per share - basic $ 0.05   $ 0.02 $ (0.16 ) $ (0.17 ) Net income (loss) per share - diluted $ 0.05   $ 0.02 $ (0.16 ) $ (0.17 )   Shares used in per share calculation - basic   24,988     23,355   24,450     23,219   Shares used in per share calculation - diluted   26,543     24,501   24,450     23,219     Supplemental Financial Data Non-GAAP income before income taxes excludingacquisition-related deferred revenue adjustment,acquisition-related expense, share-basedcompensation, amortization of intangibles and certainstate sales tax charges $ 4,065   $ 2,131 $ 6,047   $ 2,778     Non-GAAP income per share before income taxesexcluding acquisition-related deferred revenueadjustment, acquisition-related expense, share-basedcompensation, amortization of intangibles and certainstate sales tax charges Basic $ 0.16   $ 0.09 $ 0.25   $ 0.12   Diluted $ 0.15   $ 0.09 $ 0.23   $ 0.11       Guidance Software, Inc.Calculation of Pre-Tax Non-GAAP Income(unaudited)(in thousands, except per share amounts)         Three Months Ended     Nine Months Ended September 30, September 30, 2012   2011 2012   2011 Calculation of pre-tax non-GAAP income:   GAAP net loss $ 1,272 $ 512 $ (3,891 ) $ (3,906 ) Add: Income tax provision 22 25 231 179 Certain state sales tax charges - - - 1,336 Acquisition-related expense 214 - 2,420 - Acquisition-related deferred revenue adjustment 420 - 1,048 - Amortization of intangibles 668 264 2,014 804 Share-based compensation expense (includingrelated payroll taxes paid by the Company)   1,469   1,330   4,225     4,365     Non-GAAP income before income taxes excludingacquisition-related deferred revenue adjustment,acquisition-related expense, share-basedcompensation, amortization of intangibles and certainstate sales tax charges $ 4,065 $ 2,131 $ 6,047   $ 2,778     Non-GAAP income per share before income taxesexcluding acquisition-related deferred revenueadjustment, acquisition-related expense, share-basedcompensation, amortization of intangibles and certainstate sales tax charges Basic $ 0.16 $ 0.09 $ 0.25   $ 0.12   Diluted $ 0.15 $ 0.09 $ 0.23   $ 0.11     Shares used in per share calculations: Basic   24,988   23,355   24,450     23,219   Diluted   26,543   24,501   26,020     24,490     Detail of Share-based Compensation Expense: Cost of product revenue 25 22 72 61 Cost of subscription revenue 38 - 108 - Cost of service and maintenance revenue 256 228 735 698 Selling and marketing 408 396 1,217 1,305 Research and development 365 322 990 1,107 General and administrative   377   362   1,103     1,194   Total share-based compensation expense   1,469   1,330   4,225     4,365   Detail of Acquisition-related Expense: General and administrative   214   -   2,420     -   Detail of Acquisition-related Deferred Revenue Adjustment: Subscription revenue 318 - 803 - Services and maintenance revenue   102   -   245     -   Total acquisition-related deferred revenue adjustment   420   -   1,048     -       Guidance Software, IncReconciliation of GAAP to Non-GAAP Financial Measures(Unaudited and in thousands, except per share amounts)         Three Months Ended     Nine Months Ended September 30, September 30, 2012   2011 2012   2011   Total revenues, as reported $ 36,141 $ 27,258 $ 93,228 $ 74,726 Acquisition-related deferred revenue adjustment   420     -     1,048     -   Total non-GAAP revenues $ 36,561   $ 27,258   $ 94,276   $ 74,726     Gross profit, as reported $ 26,413 $ 20,446 $ 66,497 $ 53,120 Acquisition-related deferred revenue adjustment 420 - 1,048 - Share-based compensation   319     250     915     759   Gross profit adjustment   739     250     1,963     759   Total non-GAAP gross profit   27,152   $ 20,696   $ 68,460   $ 53,879     Total operating expenses, as reported $ 25,110 $ 19,929 $ 70,147 $ 56,886 Amortization of intangibles (668 ) (264 ) (2,014 ) (804 ) Acquisition-related expenses (214 ) - (2,420 ) - Share-based compensation (1,150 ) (1,080 ) (3,310 ) (3,606 ) State sales tax one-time charge   -     -     -     (1,336 ) Operating expense adjustment   (2,032 )   (1,344 )   (7,744 )   (5,746 ) Total non-GAAP operating expenses $ 23,078   $ 18,585   $ 62,403   $ 51,140     Operating income (loss), as reported $ 1,303 $ 517 $ (3,650 ) $ (3,766 ) Gross profit adjustment 739 250 1,963 759 Operating expense adjustment   2,032     1,344     7,744     5,746   Total non-GAAP operating income (loss) $ 4,074   $ 2,111   $ 6,057   $ 2,739     Net income (loss), as reported $ 1,272 $ 512 $ (3,891 ) $ (3,906 ) Gross profit adjustment 739 250 1,963 759 Operating expense adjustment 2,032 1,344 7,744 5,746 Income tax provision   22     25     231     179   Total non-GAAP net income (loss) $ 4,065   $ 2,131   $ 6,047   $ 2,778     Net income (loss) per share-diluted, as reported $ 0.05   $ 0.02   $ (0.16 ) $ (0.17 )   Non-GAAP net income (loss) per share-diluted $ 0.15   $ 0.09   $ 0.23   $ 0.11       Guidance Software, Inc.Unaudited Condensed Consolidated Balance Sheets(in thousands)         September 30,   December 31, 2012 2011 ASSETSCurrent assets: Cash and cash equivalents $ 29,988 $ 37,048 Trade receivables, net 19,397 19,505 Inventory 1,888 1,394 Prepaid expenses and other current assets   4,405     2,209   Total current assets   55,678     60,156     Long-term assets: Property and equipment, net 10,115 9,273 Intangible assets, net 15,041 3,754 Goodwill, net 16,732 3,711 Other assets   1,754     434   Total long-term assets   43,642     17,172     Total assets $ 99,320   $ 77,328     LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 3,840 $ 2,895 Accrued liabilities 12,624 9,774 Capital lease obligations 437 58 Deferred revenues   34,869     33,630   Total current liabilities   51,770     46,357     Long-term liabilities: Rent incentives 316 498 Capital lease obligations 257 55 Deferred revenues 5,904 5,952 Contingent earn-out, net of current portion 4,859 - Deferred tax liabilities 251 155 Other long-term liabilities   458     -   Total long-term liabilities   12,045     6,660     Stockholders' equity: Common stock 25 23 Additional paid-in capital 90,673 74,297 Treasury stock (7,887 ) (6,594 ) Accumulated deficit   (47,306 )   (43,415 ) Total stockholders' equity   35,505     24,311     Total liabilities and stockholders' equity $ 99,320   $ 77,328     Guidance Software, IncUnaudited Cash Flow Summary(in thousands)         Nine Months Ended September 30, 2012   2011 Operating Activities: Net loss $ (3,891) $ (3,906) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation & amortization 5,335 3,881 Provision for bad debt 100 - Share-based compensation 4,225 4,365 Deferred taxes 96 96 Loss on disposal of assets 82 - Changes in operating assets and liabilities: Trade receivables 3,080 (5,842) Inventory (494) (377) Prepaid expenses and other assets (696) (370) Accounts payable 170 20 Accrued liabilities (1,255) 1,216 Deferred revenues (2,109) 2,481 Net cash provided by operating activities 4,643 1,564   Investing Activities: Purchase of property and equipment (2,485) (1,880) Acquisition, net of cash acquired (9,642) - Net cash used in investing activities (12,127) (1,880)   Financing Activities: Proceeds from the exercise of stock options 2,655 449 Common stock repurchased or withheld (1,294) (1,146) Principal payments on capital lease and other obligations (937) (60) Net cash provided by (used in) financing activities 424 (757)   Net decrease in cash and cash equivalents (7,060) (1,073)   Cash and cash equivalents, beginning of period 37,048 27,621   Cash and cash equivalents, end of period $ 29,988 $ 26,548 Guidance Software, Inc.INVESTOR CONTACTRasmus van der Colff, 626-768-4607investorrelations@guidancesoftware.comorMEDIA CONTACTAlex Andrianopoulos, 626-229-9191newsroom@guidancesoftware.com