EX-99.1 2 d623086dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

INVESTOR CONTACT    MEDIA CONTACT
Rasmus van der Colff    Alex Andrianopoulos
Guidance Software, Inc.    Guidance Software, Inc.
626-768-4607    626-229-9191
investorrelations@guidancesoftware.com    newsroom@guidancesoftware.com

Guidance Software Reports 2013 Third Quarter Financial Results

 

    Revenue of $28.3 million; Non-GAAP net loss of ($0.09) per share

 

    51 new EnCase® Enterprise platform customers

 

    Releases industry’s first proactive endpoint security analytics solution, EnCase® Analytics

PASADENA, Calif. – November 5, 2013 – Guidance Software, Inc. (NASDAQ: GUID) today reported financial results for the third quarter ended September 30, 2013.

Third quarter 2013 financial highlights, calculated in accordance with generally accepted accounting principles (GAAP) include:

 

    Revenue of $28.3 million, compared to $36.1 million in the third quarter of 2012

 

    SaaS revenues of $2.7 million, compared to $2.6 million in the third quarter of 2012

 

    Product revenue of $9.7 million, compared to $17.4 million in the third quarter of 2012

 

    Services and maintenance revenue of $15.9 million, compared to $16.1 million in the third quarter of 2012

 

    Net loss of $5.0 million, or ($0.19) per share, compared to net income of $1.3 million, or $0.05 per share, in the third 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 $2.3 million, or ($0.09) per share, in the third quarter of 2013, compared to non-GAAP pre-tax net income of $4.1 million, or $0.15 per diluted share, in the third quarter of 2012.

Guidance Software President and Chief Executive Officer Victor Limongelli said, “Our third quarter results met our expectations, as our business began to improve from the first half of the year. Product revenues for the third quarter increased 26% sequentially and we added 51 new EnCase® Enterprise customers. Most importantly, during the third quarter we introduced our newest product, EnCase® Analytics, the industry’s first proactive endpoint security analytics solution. The introduction of EnCase® Analytics builds upon Guidance Software’s overall strategy of ‘EnCase® Everywhere’ and is a testament to our Company’s ability to create innovative products that meet and exceed the needs of our customers.”

Third Quarter 2013 Highlights and Noteworthy Events

 

    In September, the Company announced that its newest product, EnCase® Analytics, is now generally available to the market through Guidance Software as well as channel partners. EnCase® Analytics exposes unknown and difficult-to-detect threats by applying “big data” analytical techniques to the reams of data generated by endpoint activity, producing a clear picture of organization-wide security risk through an interactive visual interface. For the first time, IT security teams can take a proactive approach to threat surveillance by collecting and analyzing activity across all endpoints—including servers—on their network to reveal both external and internal threats.


    In the third quarter of 2013, the Company added 51 new EnCase® Enterprise customers. The Company also added 17 customers of EnCase® eDiscovery or EnCase® Cybersecurity, which are built on the EnCase® Enterprise platform.

 

    The Company released the results of a survey conducted during the Guidance’s 13th Annual Computer and Enterprise Investigations Conference (CEIC) held this past May. The respondents, which include more than 150 organizations, indicated shifting priorities in enterprise and government security teams with the “length of time to resolve attacks” coming in as the primary cybersecurity concern. EnCase® Cybersecurity and EnCase® Analytics help organizations reduce the gap between detecting an incident and mobilizing a rapid response.

 

    EnCase® App Central downloads have exceeded 15,000 since the online store opened in spring 2013. EnCase® App Central has become a trusted source for developers and investigation professionals to share and discover the latest apps that complement the Company’s EnCase® solutions. In addition, Belkasoft®, a developer of forensic analysis tools, published its entire Evidence Center product line on the EnCase® App Central.

 

    The Company introduced the Tableau T3iu Forensic SATA Imaging Bay, which adds SATA imaging capacity to forensic workstations via USB 3.0 bandwidth and provides fast and efficient SATA hard-drive acquisitions.

2013 Financial Outlook:

The Company is maintaining its guidance for the year ending December 31, 2013:

 

    Revenue for 2013 is expected to be in the range of $112 million to $115 million.

 

    Non-GAAP pre-tax earnings for 2013 are expected to be in the range of a $0.50 per share loss to a $0.42 per share loss.

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 70989535, available from 8:00 pm eastern time, November 5, 2013, through midnight eastern time, November 12, 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, 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 about Guidance Software, visit www.encase.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 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.

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.


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,  
     2013     2012     2013     2012  

Revenues:

        

Product revenue

   $ 9,728      $ 17,394      $ 24,953      $ 39,945   

Subscription revenue

     2,711        2,648        8,202        6,716   

Services and maintenance revenue

     15,875        16,099        49,409        46,567   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     28,314        36,141        82,564        93,228   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenues:

        

Cost of product revenue

     2,164        2,208        5,665        5,795   

Cost of subscription revenue

     1,109        981        3,289        2,850   

Cost of services and maintenance revenue

     6,432        6,539        19,961        18,086   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     9,705        9,728        28,915        26,731   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     18,609        26,413        53,649        66,497   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Selling and marketing

     10,494        11,790        30,359        30,341   

Research and development

     6,771        6,224        21,438        17,807   

General and administrative

     4,271        5,351        14,155        16,664   

Depreciation and amortization

     1,983        1,745        5,673        5,335   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     23,519        25,110        71,625        70,147   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (4,910     1,303        (17,976     (3,650

Interest income and other, net

     9        (9     18        (10
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (4,901     1,294        (17,958     (3,660

Income tax provision

     67        22        183        231   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (4,968   $ 1,272      $ (18,141   $ (3,891
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share—basic

   $ (0.19   $ 0.05      $ (0.71   $ (0.16
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share—diluted

   $ (0.19   $ 0.05      $ (0.71   $ (0.16
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation—basic

     25,914        24,988        25,713        24,450   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation—diluted

     25,914        26,543        25,713        24,450   
  

 

 

   

 

 

   

 

 

   

 

 

 

Supplemental Financial Data

        

Non-GAAP income (loss) before income taxes excluding acquisition-related deferred revenue adjustment, acquisition-related expense, share-based compensation and amortization of intangibles

   $ (2,305   $ 4,065      $ (10,152   $ 6,047   

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

   $ (0.09   $ 0.16      $ (0.39   $ 0.25   

Diluted

   $ (0.09   $ 0.15      $ (0.39   $ 0.23   


Guidance Software, Inc.

Calculation of Pre-Tax Non-GAAP Income

(unaudited)

(in thousands, except per share amounts)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2013     2012      2013     2012  

Calculation of pre-tax non-GAAP (loss) income:

         

GAAP net income (loss)

   $ (4,968   $ 1,272       $ (18,141   $ (3,891

Add:

         

Income tax provision

     67        22         183        231   

Acquisition-related expense

     —          214         —          2,420   

Acquisition-related deferred revenue adjustment

     —          420         253        1,048   

Amortization of intangibles

     577        668         1,899        2,014   

Share-based compensation expense (including related payroll taxes paid by the Company)

     2,019        1,469         5,654        4,225   
  

 

 

   

 

 

    

 

 

   

 

 

 

Non-GAAP income (loss) before income taxes excluding acquisition-related deferred revenue adjustment, acquisition-related expense, share-based compensation and amortization of intangibles

   $ (2,305   $ 4,065       $ (10,152   $ 6,047   
  

 

 

   

 

 

    

 

 

   

 

 

 

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

   $ (0.09   $ 0.16       $ (0.39   $ 0.25   
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

   $ (0.09   $ 0.15       $ (0.39   $ 0.23   
  

 

 

   

 

 

    

 

 

   

 

 

 

Shares used in per share calculations:

         

Basic

     25,914        24,988         25,713        24,450   
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

     25,914        26,543         25,713        26,020   
  

 

 

   

 

 

    

 

 

   

 

 

 

Detail of Share-based Compensation Expense:

         

Cost of product revenue

   $ 35      $ 25       $ 100      $ 72   

Cost of subscription revenue

     51        38         141        108   

Cost of service and maintenance revenue

     368        256         1,039        735   

Selling and marketing

     539        408         1,518        1,217   

Research and development

     544        365         1,479        990   

General and administrative

     482        377         1,377        1,103   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total share-based compensation expense

   $ 2,019      $ 1,469       $ 5,654      $ 4,225   
  

 

 

   

 

 

    

 

 

   

 

 

 

Detail of Acquisition-related Expense:

         

General and administrative

   $ —        $ 214       $ —        $ 2,420   
  

 

 

   

 

 

    

 

 

   

 

 

 

Detail of Acquisition-related Deferred Revenue Adjustment:

         

Subscription revenue

   $ —        $ 318       $ 193      $ 803   

Services and maintenance revenue

     —          102         60        245   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total acquisition-related deferred revenue adjustment

   $ —        $ 420       $ 253      $ 1,048   
  

 

 

   

 

 

    

 

 

   

 

 

 


Guidance Software, Inc

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited and in thousands, except per share amounts)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  

Total revenues, as reported

   $ 28,314      $ 36,141      $ 82,564      $ 93,228   

Acquisition-related deferred revenue adjustment

     —          420        253        1,048   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-GAAP revenues

   $ 28,314      $ 36,561      $ 82,817      $ 94,276   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit, as reported

   $ 18,609      $ 26,413      $ 53,649      $ 66,497   

Acquisition-related deferred revenue adjustment

     —          420        253        1,048   

Share-based compensation

     454        319        1,280        915   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit adjustment

     454        739        1,533        1,963   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-GAAP gross profit

   $ 19,063      $ 27,152      $ 55,182      $ 68,460   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses, as reported

   $ 23,519      $ 25,110      $ 71,625      $ 70,147   

Amortization of intangibles

     (577     (668     (1,899     (2,014

Acquisition-related expenses

     —          (214     —          (2,420

Share-based compensation

     (1,565     (1,150     (4,374     (3,310
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expense adjustment

     (2,142     (2,032     (6,273     (7,744
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-GAAP operating expenses

   $ 21,377      $ 23,078      $ 65,352      $ 62,403   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income, (loss) as reported

   $ (4,910   $ 1,303      $ (17,976   $ (3,650

Gross profit adjustment

     454        739        1,533        1,963   

Operating expense adjustment

     2,142        2,032        6,273        7,744   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-GAAP operating income (loss)

   $ (2,314   $ 4,074      $ (10,170   $ 6,057   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income, (loss) as reported

   $ (4,968   $ 1,272      $ (18,141   $ (3,891

Gross profit adjustment

     454        739        1,533        1,963   

Operating expense adjustment

     2,142        2,032        6,273        7,744   

Income tax provision

     67        22        183        231   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-GAAP net income (loss)

   $ (2,305   $ 4,065      $ (10,152   $ 6,047   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share-diluted, as reported

   $ (0.19   $ 0.05      $ (0.71   $ (0.16
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income (loss) per share-diluted

   $ (0.09   $ 0.15      $ (0.39   $ 0.23   
  

 

 

   

 

 

   

 

 

   

 

 

 


Guidance Software, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

 

     September 30,     December 31,  
     2013     2012  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 16,803      $ 32,606   

Trade receivables, net

     21,806        23,558   

Inventory

     1,800        2,008   

Prepaid expenses and other current assets

     5,579        3,753   
  

 

 

   

 

 

 

Total current assets

     45,988        61,925   
  

 

 

   

 

 

 

Long-term assets:

    

Property and equipment, net

     19,078        10,227   

Intangible assets, net

     10,512        12,411   

Goodwill

     14,632        14,632   

Other assets

     1,355        2,026   
  

 

 

   

 

 

 

Total long-term assets

     45,577        39,296   
  

 

 

   

 

 

 

Total assets

   $ 91,565      $ 101,221   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 6,494      $ 3,058   

Accrued liabilities

     10,853        12,929   

Capital lease obligations

     209        393   

Deferred revenues

     36,095        37,337   
  

 

 

   

 

 

 

Total current liabilities

     53,651        53,717   
  

 

 

   

 

 

 

Long-term liabilities:

    

Rent incentives

     6,283        730   

Deferred revenues

     4,367        6,115   

Contingent earn-out

     397        569   

Deferred tax liabilities

     958        889   

Other long-term liabilities

     81        181   
  

 

 

   

 

 

 

Total long-term liabilities

     12,086        8,484   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Common stock

     25        25   

Additional paid-in capital

     100,147        93,037   

Treasury stock

     (10,805     (8,644

Accumulated deficit

     (63,539     (45,398
  

 

 

   

 

 

 

Total stockholders’ equity

     25,828        39,020   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 91,565      $ 101,221   
  

 

 

   

 

 

 


Guidance Software, Inc

Unaudited Cash Flow Summary

(in thousands)

 

     Nine Months Ended
September 30,
 
     2013     2012  

Operating Activities:

    

Net loss

   $ (18,141   $ (3,891

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

    

Depreciation & amortization

     5,673        5,335   

Provision for doubtful accounts

     350        100   

Share-based compensation

     5,654        4,225   

Deferred taxes

     69        96   

Loss on disposal of assets

     107        82   

Changes in operating assets and liabilities:

    

Trade receivables

     1,401        3,080   

Inventory

     208        (494

Prepaid expenses and other assets

     217        (696

Accounts payable

     2,680        170   

Accrued liabilities

     2,620        (1,255

Deferred revenues

     (2,990     (2,109
  

 

 

   

 

 

 

Net cash (used in) provided by operating activities

     (2,152     4,643   
  

 

 

   

 

 

 

Investing Activities:

    

Purchase of property and equipment

     (11,921     (2,485

Acquisition, net of cash acquired

     —          (9,642
  

 

 

   

 

 

 

Net cash used in investing activities

     (11,921     (12,127
  

 

 

   

 

 

 

Financing Activities:

    

Proceeds from the exercise of stock options

     1,456        2,655   

Common stock repurchased or withheld

     (2,161     (1,294

Principal payments on capital lease and other obligations

     (1,025     (937
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (1,730     424   
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (15,803     (7,060

Cash and cash equivalents, beginning of period

     32,606        37,048   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 16,803      $ 29,988