Guidance Software Reports 2012 Second Quarter Financial Results

Guidance Software, Inc. (NASDAQ:GUID) today reported financial results for the quarter ended June 30, 2012.

Second quarter 2012 financial highlights include:
  • GAAP revenue of $31.1 million and non-GAAP revenue of $31.5 million. This compares to GAAP and non-GAAP revenue of $23.9 million in the second quarter of 2011.
  • Product revenue of $12.0 million, an increase of $0.8 million, or 8 percent, from $11.2 million in the second quarter of 2011.
  • GAAP SaaS revenue of $2.8 million and non-GAAP SaaS revenue of $3.2 million.
  • Services and maintenance revenue of $16.2 million, an increase of $3.5 million, or 27 percent, from $12.7 million in the second quarter of 2011.
  • GAAP net loss of $1.6 million, or ($0.06) per share, compared to a GAAP net loss of ($1.4) million, or ($0.06) per share, in the second 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 $1.4 million, or $0.05 per share, in the second quarter of 2012, compared to non-GAAP pre-tax net income of $0.4 million, or $0.02 per share, in the second quarter of 2011.

Victor Limongelli, Guidance Software’s President and Chief Executive Officer, said, “We had a fantastic second quarter, with strong overall growth, including robust organic growth, and improved non-GAAP earnings. In addition to revenues increasing more than 30% on a year-over-year basis, we also signed a record number of new EnCase Enterprise customers, bringing 100 new customers into our install base during the quarter.”

Limongelli continued, “The value of our software was once again recognized by Gartner Inc., who positioned us in its ‘Leaders’ Quadrant for E-Discovery Software. This represents an important third-party endorsement of our offering. Looking ahead, we will continue to focus on enhancing our product offerings and acquiring new customers in the second half of fiscal 2012 and beyond.”

Second Quarter 2012 Highlights and Noteworthy Events

  • The company added a record 100 new Encase Enterprise customers in the second quarter of 2012, up 54% year-over-year from 65 new customers in the second quarter of 2011. The company also added 27 customers of EnCase eDiscovery or EnCase Cybersecurity, which are built on the EnCase Enterprise platform.
  • Gartner Inc. positioned Guidance Software in the “Leaders” quadrant of its 2012 Magic Quadrant for E-Discovery Software (1). This recognition of our product and company as a leader validates the quality and strength of our software products and is a testament to Guidance’s commitment to providing the most functional end-to-end e-discovery solution that the market is now demanding.
  • In May, the Company hosted the 12th Annual Computer and Enterprise Investigations Conference (CEIC). More than 1,500 people attended the conference, making this the largest CEIC conference to date and the premier event for the exchange of best practices in digital investigations. The conference addressed topics ranging from advanced digital forensic labs to concepts in malware response and cloud/mobile investigations.
  • In April, Guidance Software announced the availability of Tableau TD2 Forensic Duplicator, which includes twinning capabilities and faster imaging for standalone forensics acquisitions in both the field and lab settings.
  • In May, the company announced the planned launch of EnCase App Central, a new marketplace for digital investigation apps. EnCase App Central will include both free and paid EnScript® modules, the applications that customize and automate functions in the EnCase Software platform. For the first time, EnCase users will be able to shop for the apps they need in a single location, while EnCase software partners will be able to market and monetize their work.
  • In June, the company announced a new Legal Hold and Early Case Assessment Optimization Service that enables corporations and government agencies to solve legal hold issues through the use of EnCase eDiscovery. The service is designed as a three-day on-site program followed by the development and implementation of best practices that fit each organization’s needs. Customers can eliminate the guess work and stress involved in legal hold and early case assessment processes.

2012 Financial Outlook:

The company is raising its revenue and EPS guidance for the year ended December 31, 2012. The company now expects:
  • Non-GAAP revenue to be in the range of $128 million to $133 million, representing year-over-year growth of 22 percent to 27 percent.
  • Non-GAAP pre-tax earnings to be approximately $0.37 - $0.44 per share.

Conference Call Information:

The company will host a conference call today at 2:00 p.m. PT, 5:00 p.m. ET 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 (404) 537-3406, passcode 95437872, available from 8:00 pm eastern time, July 31, 2012, through midnight eastern time, August 6, 2012.

1) Source: Gartner, Inc. "Magic Quadrant for E-Discovery Software" by Debra Logan, Sheila Childs, May 24, 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.

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 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 Guidance Software's pursuit of providing network security and eDiscovery technology might not be successful, or that if successful, it will not materially enhance 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 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,
2012       2011 2012       2011
Revenues:
Product revenue $ 12,042 $ 11,186 $ 22,551 $ 20,740
Subscription revenue 2,843 - 4,068 -
Services and maintenance revenue   16,183     12,705     30,468     26,728  
Total revenues   31,068     23,891     57,087     47,468  
 
Cost of revenues:
Cost of product revenue 1,904 1,625 3,587 2,910
Cost of subscription revenue 1,283 - 1,869 -
Cost of services and maintenance revenue   6,097     5,586     11,547     11,884  
Total cost of revenues   9,284     7,211     17,003     14,794  
 
Gross profit   21,784     16,680     40,084     32,674  
 
Operating expenses:
Selling and marketing 9,914 8,686 18,551 16,815
Research and development 6,294 4,797 11,584 9,569
General and administrative 5,092 3,238 11,312 6,709
State sales tax charges - - - 1,336
Depreciation and amortization   1,964     1,287     3,590     2,528  
Total operating expenses   23,264     18,008     45,037     36,957  
 
Operating income (loss) (1,480 ) (1,328 ) (4,953 ) (4,283 )
 
Interest income and other, net   (8 )   13     (1 )   19  
 
Income (loss) before income taxes (1,488 ) (1,315 ) (4,954 ) (4,264 )
 
Income tax provision   75     58     209     154  
 
Net Income (loss) $ (1,563 ) $ (1,373 ) $ (5,163 ) $ (4,418 )
 
Net income (loss) per share - basic $ (0.06 ) $ (0.06 ) $ (0.21 ) $ (0.19 )
Net income (loss) per share - diluted $ (0.06 ) $ (0.06 ) $ (0.21 ) $ (0.19 )
 
Shares used in per share calculation - basic   24,767     23,248     24,274     23,145  
Shares used in per share calculation - diluted   24,767     23,248     24,274     23,145  
                                 

Supplemental Financial Data
Non-GAAP income before income taxes excluding acquisition-related deferred revenue adjustment, acquisition-related expense, share-based compensation, amortization of intangibles and certain state sales tax charges $ 1,421   $ 434   $ 1,982   $ 647  
 
Non-GAAP income per share before income taxes excluding acquisition-related deferred revenue adjustment, acquisition-related expense, share-based compensation, amortization of intangibles and certain state sales tax charges
Basic $ 0.06   $ 0.02   $ 0.08   $ 0.03  
Diluted $ 0.05   $ 0.02   $ 0.08   $ 0.03  
                                                 
 
 
Guidance Software, Inc.
Calculation of Pre-Tax Non-GAAP Income
(unaudited)
(in thousands, except per share amounts)
 
      Three Months Ended       Six Months Ended
June 30, June 30,
2012       2011 2012       2011
Calculation of pre-tax non-GAAP income:
 
GAAP net loss $ (1,563 ) $ (1,373 ) $ (5,163 ) $ (4,418 )
Add:
Income tax provision 75 58 209 154
Certain state sales tax charges - - - 1,336
Acquisition-related expense 232 - 2,206 -
Acquisition-related deferred revenue adjustment 421 - 628 -
Amortization of intangibles 797 268 1,346 540
Share-based compensation expense (including related payroll taxes paid by the Company)   1,459     1,481     2,756     3,035  
 
Non-GAAP income before income taxes excluding acquisition-related deferred revenue adjustment, acquisition-related expense, share-based compensation, amortization of intangibles and certain state sales tax charges $ 1,421   $ 434   $ 1,982   $ 647  
 
Non-GAAP income per share before income taxes excluding acquisition-related deferred revenue adjustment, acquisition-related expense, share-based compensation, amortization of intangibles and certain state sales tax charges
Basic $ 0.06   $ 0.02   $ 0.08   $ 0.03  
Diluted $ 0.05   $ 0.02   $ 0.08   $ 0.03  
 
Shares used in per share calculations:
Basic   24,767     23,248     24,274     23,145  
Diluted   26,139     24,581     25,800     24,479  
 

Detail of Share-based Compensation Expense:
Cost of product revenue 24 17 47 39
Cost of subscription revenue 50 - 70 -
Cost of service and maintenance revenue 261 217 479 470
Selling and marketing 432 472 809 909
Research and development 335 364 625 785
General and administrative   357     411     726     832  
Total share-based compensation expense   1,459     1,481     2,756     3,035  
 

Detail of Acquisition-related Expense:
General and administrative   232     -     2,206     -  
 

Detail of Acquisition-related Deferred Revenue Adjustment:
Subscription revenue 318 - 485 -
Services and maintenance revenue   103     -     143     -  
Total acquisition-related deferred revenue adjustment   421     -     628     -  
 
 
Guidance Software, Inc
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited and in thousands, except per share amounts)
 
      Three Months Ended       Six Months Ended
June 30, June 30,
           
2012 2011 2012 2011
 
Total revenues, as reported $ 31,068 $ 23,891 $ 57,087 $ 47,468
Acquisition-related deferred revenue adjustment   421     -     628     -  
Total non-GAAP revenues $ 31,489   $ 23,891   $ 57,715   $ 47,468  
 
Gross profit, as reported $ 21,784 $ 16,680 $ 40,084 $ 32,674
Acquisition-related deferred revenue adjustment 421 - 628 -
Share-based compensation   335     234     596     509  
Gross profit adjustment   756     234     1,224     509  
Total non-GAAP gross profit   22,540   $ 16,914   $ 41,308   $ 33,183  
 
Total operating expenses, as reported $ 23,264 $ 18,008 $ 45,037 $ 36,957
Amortization of intangibles (797 ) (268 ) (1,346 ) (540 )
Acquisition-related expenses (232 ) - (2,206 ) -
Share-based compensation (1,124 ) (1,247 ) (2,160 ) (2,526 )
State sales tax one-time charge   -     -     -     (1,336 )
Operating expense adjustment   (2,153 )   (1,515 )   (5,712 )   (4,402 )
Total non-GAAP operating expenses $ 21,111   $ 16,493   $ 39,325   $ 32,555  
 
Operating income (loss), as reported $ (1,480 ) $ (1,328 ) $ (4,953 ) $ (4,283 )
Gross profit adjustment 756 234 1,224 509
Operating expense adjustment   2,153     1,515     5,712     4,402  
Total non-GAAP operating income (loss) $ 1,429   $ 421   $ 1,983   $ 628  
 
Net income (loss), as reported $ (1,563 ) $ (1,373 ) $ (5,163 ) $ (4,418 )
Gross profit adjustment 756 234 1,224 509
Operating expense adjustment 2,153 1,515 5,712 4,402
Income tax provision   75     58     209     154  
Total non-GAAP net income (loss) $ 1,421   $ 434   $ 1,982   $ 647  
 
Net income (loss) per share-diluted, as reported $ (0.06 ) $ (0.06 ) $ (0.21 ) $ (0.19 )
 
Non-GAAP Net income (loss) per share-diluted $ 0.05   $ 0.02   $ 0.08   $ 0.03  
 
 
Guidance Software, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
 
      June 30,       December 31,
2012 2011
ASSETS
Current assets:
Cash and cash equivalents $ 23,917 $ 37,048
Trade receivables, net 19,689 19,505
Inventory 1,961 1,394
Prepaid expenses and other current assets   4,260     2,209  
Total current assets   49,827     60,156  
 
Long-term assets:
Property and equipment, net 9,921 9,273
Intangible assets, net 16,308 3,754
Goodwill, net 16,132 3,711
Other assets   1,231     434  
Total long-term assets   43,592     17,172  
 
Total assets $ 93,419   $ 77,328  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,490 $ 2,895
Accrued liabilities 14,305 9,774
Capital lease obligations 506 58
Deferred revenues   32,209     33,630  
Total current liabilities   50,510     46,357  
 
Long-term liabilities:
Rent incentives 396 498
Capital lease obligations 310 55
Deferred revenues 6,181 5,952
Contingent earn-out, net of current portion 3,189 -
Deferred tax liabilities 251 155
Other long-term liabilites   458     -  
Total long-term liabilities   10,785     6,660  
 
Stockholders' equity:
Common stock 25 23
Additional paid-in capital 88,469 74,297
Treasury stock (7,792 ) (6,594 )
Accumulated deficit   (48,578 )   (43,415 )
Total stockholders' equity   32,124     24,311  
 
Total liabilities and stockholders' equity $ 93,419   $ 77,328  
 
 
Guidance Software, Inc
Unaudited Cash Flow Summary
(in thousands)
 
      Six Months Ended
June 30,
     
2012 2011
 
Operating Activities:
Net loss $ (5,163 ) $ (4,418 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation & amortization 3,590 2,528
Provision for bad debt 100 -
Share-based compensation 2,756 3,035
Deferred taxes 96 101
Loss on disposal of assets 18 -
Changes in operating assets and liabilities:
Trade receivables 2,788 768
Inventory (567 ) 82
Prepaid expenses and other assets (29 ) (404 )
Accounts payable (35 ) 175
Accrued liabilities (1,164 ) (611 )
Deferred revenues   (4,492 )   421  
Net cash (used in) provided by operating activities   (2,102 )   1,677  
 
Investing Activities:
Purchase of property and equipment (1,424 ) (1,126 )
Acquisition, net of cash acquired   (9,642 )   -  
Net cash used in investing activities   (11,066 )   (1,126 )
 
Financing Activities:
Proceeds from the exercise of stock options 1,919 366
Common stock repurchased or withheld (1,198 ) (794 )
Principal payments on capital lease and other obligations   (684 )   (40 )
Net cash provided by (used in) financing activities   37     (468 )
 
Net (decrease) increase in cash and cash equivalents (13,131 ) 83
 
Cash and cash equivalents, beginning of period   37,048     27,621  
 
Cash and cash equivalents, end of period $ 23,917   $ 27,704  

Copyright Business Wire 2010

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