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Guidance Software, Inc. Reports Record Quarterly and Full Year 2007 RevenuePASADENA, Calif. --(Business Wire)-- Guidance Software, Inc. (NASDAQ: GUID), The World Leader in Digital Investigations(TM), today reported its financial results for the fourth quarter and fiscal year ended December 31, 2007. "In both the fourth quarter and for 2007, Guidance Software produced the best results in its history," said Victor Limongelli, president and chief executive officer of Guidance Software. "Top-line growth continues to be driven by sales of EnCase(R) Enterprise, which now has over 500 customers, and by sales of our high-value add-on products, most notably sales of EnCase(R) eDiscovery. In addition, unit sales of EnCase(R) Forensic reached their highest level ever, confirming its status as the leading forensic software. "As we enter 2008, we are better positioned than ever before to build upon our foundation and expand our leadership," he concluded. Total revenue in the fourth quarter of fiscal 2007 was a record $22.5 million, an increase of $5.5 million, or 32 percent, from the fourth quarter of 2006. Total revenue for fiscal 2007 was a record $78.9 million, up $23.0 million, or 41 percent from fiscal 2006. In the fourth quarter of fiscal 2007, product revenue was $12.3 million, rising $2.1 million, or 21 percent, year-over-year. Services and Maintenance revenue for the same period grew to $10.2 million, up $3.3 million, or 49 percent, year-over-year. For fiscal 2007, product revenue was $44.3 million, rising $11.7 million, or 36 percent, compared to fiscal 2006. Services and Maintenance revenue for fiscal 2007 grew to $34.6 million, up $11.3 million, or 48 percent, compared to fiscal 2006. Deferred revenue continued to grow in the fourth quarter, reaching $27.2 million as of December 31, 2007, an increase of $7.0 million, or 34.5 percent, over fiscal 2006. On a non-GAAP basis, fourth quarter 2007 income before income taxes, excluding share-based compensation, was $1.8 million, or $0.08 per share, as compared to a non-GAAP loss before income taxes, excluding share-based compensation, of $0.3 million, or ($0.02) per share, in the fourth quarter of 2006. For fiscal 2007, non-GAAP income before income taxes, excluding share-based compensation, was $2.7 million, or $0.11 per share, as compared to a non-GAAP loss before income taxes, excluding share-based compensation, of $1.9 million, or ($0.10) per share, for fiscal 2006. On a GAAP basis, the company reported fourth quarter 2007 net income of $0.3 million, or $0.01 per share, versus a net loss of $0.9 million, or ($0.05) per share in the same quarter of the previous year. For fiscal 2007, the company narrowed its GAAP net loss to $2.9 million, or ($0.13) per share, versus a net loss of $3.1 million, or ($0.16) per share, in fiscal 2006. Gross margins for the fourth quarters and for the fiscal years were:
Non-GAAP (excluding Share Based Compensation)
Q406 Q407 FY06 FY07
Overall Gross Margin 69.9% 73.9% 71.7% 73.2%
Product Gross Margin 92.1% 94.5% 92.5% 94.0%
Services Gross Margin 36.8% 48.8% 42.5% 46.6%
GAAP
Q406 Q407 FY06 FY07
Overall Gross Margin 69.2% 72.5% 71.3% 72.1%
Product Gross Margin 92.1% 94.3% 92.5% 93.8%
Services Gross Margin 35.1% 46.0% 41.5% 44.2%
Financial Outlook: Notwithstanding the challenging economic environment, the Company is maintaining and reiterating its previously issued revenue guidance of $94 million to $99 million for 2008, as well as its previously issued EPS guidance (before income taxes, excluding share based compensation) of $0.11 to $0.24 per share, on a fully diluted basis (assuming a weighted average of approximately 24 million shares outstanding). For 2008, we expect share-based compensation expense of $7 million to $10 million, resulting in an estimated GAAP EPS, before income taxes, of ($0.32) to ($0.05) per share. "We are seeing steady improvement in our margins, as evidenced by our fourth quarter and fiscal 2007 results," said Frank J. Sansone, chief financial officer of Guidance Software. "By controlling expenses and leveraging investments we've made in our business, we are on a path to achieve continued margin expansion." 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) 397-0291 (North America) or (719) 325-4856 (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 web site at http://investors.guidancesoftware.com. A replay of the call will be available by calling (719) 457-0820, passcode 8464694, available from 8:00 p.m. eastern time, February 28, through midnight March 6, 2008. 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(R) 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 20,000 licensed users of the EnCase technology worldwide, 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 eWEEK, SC Magazine, Network Computing, and the Socha-Gelbmann survey. 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 Year Ended
December 31, December 31,
----------------- -----------------
2006 2007 2006 2007
-------- -------- -------- --------
Revenues:
Product revenue $10,202 $12,317 $32,565 $44,314
Services and maintenance revenue 6,824 10,156 23,300 34,566
-------- -------- -------- --------
Total revenues 17,026 22,473 55,865 78,880
-------- -------- -------- --------
Cost of revenues:
Cost of product revenue 806 700 2,429 2,754
Cost of services and maintenance
revenue 4,430 5,480 13,639 19,280
-------- -------- -------- --------
Total cost of revenues 5,236 6,180 16,068 22,034
-------- -------- -------- --------
Gross profit 11,790 16,293 39,797 56,846
-------- -------- -------- --------
Operating expenses:
Selling and marketing 8,013 8,373 26,238 32,964
Research and development 1,865 2,530 7,113 9,067
General and administrative 2,305 4,388 7,840 14,637
Depreciation 542 1,029 1,823 3,453
-------- -------- -------- --------
Total operating expenses 12,725 16,320 43,014 60,121
-------- -------- -------- --------
Operating (loss) (935) (27) (3,217) (3,275)
Other income, net 75 389 187 1,486
-------- -------- -------- --------
(Loss) income before income taxes (860) 362 (3,030) (1,789)
Income tax provision 17 45 39 1,078
-------- -------- -------- --------
Net (loss) income $ (877) $ 317 $(3,069) $(2,867)
======== ======== ======== ========
Net (loss) income per share $ (0.05) $ 0.01 $ (0.16) $ (0.13)
======== ======== ======== ========
Shares used in per share
calculation - basic 19,487 22,942 19,530 22,600
======== ======== ======== ========
Shares used in per share
calculation - diluted 19,487 23,509 19,530 23,264
======== ======== ======== ========
Share based compensation expense
(including taxes paid by the
company) was allocated as
follows:
Cost of product revenue $ - $ 27 $ 2 $ 86
Cost of service and maintenance
revenue 115 282 232 831
Selling and marketing 149 411 328 1,362
Research and development 80 205 148 618
General and administrative 176 545 392 1,553
-------- -------- -------- --------
Total share-based compensation
expense $ 520 $ 1,470 $ 1,102 $ 4,450
======== ======== ======== ========
Supplemental Financial Data (See
Note)
---------------------------------
Non-GAAP (loss) income before
income taxes excluding share-
based compensation expense $ (340) $ 1,832 $(1,928) $ 2,661
======== ======== ======== ========
Non-GAAP net (loss) income before
income taxes per share excluding
share-based compensation expense $ (0.02) $ 0.08 $ (0.10) $ 0.11
======== ======== ======== ========
Guidance Software, Inc.
Note to Unaudited Condensed Consolidated Statements of Operations
This press release and its attachments include the non-GAAP financial
measures of net (loss) income before income taxes excluding share-
based compensation expense and non-GAAP net (loss) income before
income taxes per share excluding share-based compensation expense,
which are reconciled to net (loss) income and net (loss) income 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) income and net (loss) income per share calculated in
accordance with GAAP.
Non-GAAP net (loss) income before income taxes is defined as net
(loss) income before income taxes excluding compensation expenses
required to be recorded by Statement of Financial Accounting Standard
No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R") for
equity awards to employees and directors. Management and the Board of
Directors believe it is useful in evaluating the Company's and its
management teams' and business units' performance during a particular
time period to review the supplemental non-GAAP financial measures,
which excludes income taxes and expenses related to share-based
compensation, because income taxes are not the responsibility of
operating managers and because FAS 123R compensation costs are
generally fixed at the time an award is granted, are then expensed
over several years and generally cannot be changed or influenced by
management once granted. Accordingly, our operational managers are
evaluated based on the operating expenses exclusive of income taxes
and share-based compensation expenses and including such charges
would hamper investors' ability to evaluate the performance of our
management in the manner in which the Company's management evaluates
performance.
Additionally, we believe it is useful in measuring the Company's
performance to exclude expenses related to income taxes and FAS 123R
equity expense because it facilitates comparability with prior period
information.
Accordingly, management and the Board of Directors do not consider
income taxes or share-based compensation 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.
Reconciliation of GAAP (Loss) Income Before Income Taxes and Net
(Loss) Income Before Taxes Per Share to Non-GAAP (Loss) Income Before
Income Taxes and Net (Loss) Income Before Income Taxes Per Share
(in thousands, except share amounts)
Three Months
Ended Year Ended
December 31, December 31,
---------------- -----------------
2006 2007 2006 2007
-------- ------- -------- --------
GAAP (loss) income before income
taxes $ (860) $ 362 $(3,030) $(1,789)
-------- ------- -------- --------
Share-based compensation expense
as measured using the fair value
method under SFAS 123R $ 520 $ 1,455 $ 1,102 $ 4,345
Payroll taxes on employee stock
options and restricted stock
grants - 15 - 105
-------- ------- -------- --------
Total share-based compensation
expense 520 1,470 1,102 4,450
-------- ------- -------- --------
Non-GAAP (loss) income before
income taxes excluding share-
based compensation expense $ (340) $ 1,832 $(1,928) $ 2,661
Income tax provision 17 45 39 1,078
-------- ------- -------- --------
Non-GAAP (loss) income excluding
share-based compensation expense $ (357) $ 1,787 $(1,967) $ 1,583
======== ======= ======== ========
GAAP net loss (income) per share -
diluted $ (0.05) $ 0.01 $ (0.16) $ (0.13)
======== ======= ======== ========
Non-GAAP net (loss) income before
income taxes per share excluding
share-based compensation expense
- diluted $ (0.02) $ 0.08 $ (0.10) $ 0.11
======== ======= ======== ========
Non-GAAP net (loss) income
excluding share-based
compensation expense - diluted $ (0.02) $ 0.08 $ (0.10) $ 0.07
======== ======= ======== ========
Shares used in per share
calculations:
Basic 19,487 22,942 19,530 22,600
======== ======= ======== ========
Diluted 19,487 23,509 19,530 23,264
======== ======= ======== ========
Guidance Software, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2006 2007
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,041 $ 37,591
Investments in marketable debt securities 24,694 -
Trade receivables, net 17,513 21,093
Prepaid expenses, inventory and other
current assets 2,064 2,863
Deferred tax asset - 1,386
------------ ------------
Total current assets 52,312 62,933
Property and equipment, net 6,526 12,515
Other assets 507 489
------------ ------------
Total assets $ 59,345 $ 75,937
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,494 $ 4,595
Accrued expenses 3,974 6,421
Capital lease obligations 942 586
Deferred revenues 18,123 24,895
------------ ------------
Total current liabilities 28,533 36,497
------------ ------------
Long-term liabilities:
Rent incentives 1,537 3,053
Capital lease obligations 488 185
Deferred revenues 2,098 2,306
------------ ------------
Total long-term liabilities 4,123 5,544
------------ ------------
Stockholders' equity:
Common stock 22 23
Additional paid-in capital 36,330 46,516
Accumulated other comprehensive loss (17) -
Accumulated deficit (9,646) (12,643)
------------ ------------
Total stockholders' equity 26,689 33,896
------------ ------------
Total liabilities and stockholders'
equity $ 59,345 $ 75,937
============ ============
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