* Record Total Revenue of $20.3 Million; Up $5.5 Million and 37 percent year-over-year * Sixth Consecutive Quarter of Record Revenue * Operating Expenses Continue to Moderate
PASADENA, Calif., Nov. 13, 2007 (PRIME NEWSWIRE) -- Guidance Software, Inc. (Nasdaq:GUID), The World Leader in Digital Investigations(tm), today announced record revenues for the third quarter period ending September 30, 2007.
"It gives me pleasure to announce we have realized yet another important goal for the company and its shareholders in achieving pre-tax GAAP and non-GAAP profitability," said John Colbert, Chief Executive Officer of Guidance Software. "Continued demand for our EnCase(r) Enterprise and EnCase Forensic product lines demonstrates the strength and diversity in our earnings model despite the expected challenges to federal sales presented by continuing resolution funding issues."
Total revenue in the third quarter of fiscal 2007 was a record $20.3 million, an increase of $5.5 million, or 37 percent, from the third quarter of 2006. Product revenue in the third quarter of fiscal 2007 was $11.6 million, up $2.4 million, or 26 percent year-over-year. Services and Maintenance revenue in the third quarter of fiscal 2007 was $8.7 million, an increase of $3.1 million, or 55 percent year-over-year. Deferred revenue on September 30, 2007 was $26.6 million, rising 45 percent, or $8.2 million, from the third quarter of 2006.
The company became profitable on a pre-tax GAAP basis in the quarter. Pre-tax income rose to $0.6 million for the quarter compared to a pre-tax loss of $0.5 million for the same quarter of the prior year. Share-based compensation was $1.0 million and $0.4 million for the quarters ended September 30, 2007 and 2006, respectively. Thus, non-GAAP pre-tax income was $1.6 million or $0.07 per share for the third quarter compared to a loss of $0.2 million or ($0.01) per share for the same quarter of the prior year.
During the third quarter the Company recorded a tax provision that resulted from the amount of stock compensation the Company reported for financial reporting purposes (which differs from the amount of the compensation deduction the Company will take on its income tax returns). As a result, the Company is expected to report taxable income on its tax return for 2007. In accordance with GAAP, the Company has recorded a tax provision in the quarter ended September 30, 2007 in the amount of $1.0 million; however, the Company expects application of GAAP to result in the Company receiving an offsetting tax benefit of approximately $0.5 million in the quarter ending December 31, 2007.
For the third quarter of fiscal 2007, GAAP net loss for the quarter was $0.4 million, or ($0.02) per share, compared to a net loss of $0.5 million, or ($0.03) per share for the same period of the prior year. Excluding share-based compensation, non-GAAP net income rose to $0.6 million, or $0.03 per diluted share, compared to a loss of $0.2 million, or ($0.01) per diluted share in the third quarter of 2006.
"With seven consecutive quarters of increasing revenue, our investments in sales and product development are paying off," said Frank Sansone, Chief Financial Officer of Guidance Software. "Our third quarter results demonstrate the leverage of the EnCase platform that will continue to support our growth strategy."
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 (888) 523-1194 (North America) or (719) 325-2214 (International) and should dial in at least 10 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 5084292, available from 8:00 p.m. eastern time, November 13, through midnight November 19.
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 and effective computer investigations of any kind, such as intellectual property theft, incident response, compliance auditing and responding to eDiscovery requests -- all while maintaining the forensic integrity of the data. There are more than 20,000 licensed users of the technology, and thousands of investigators and corporate security personnel attend Guidance Software's forensic methodology training annually. Validated by numerous courts worldwide, EnCase software is also frequently honored with top security awards and recognition from eWEEK, SC Magazine and Network Computing, as well as the Socha-Gelbmann survey.
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,
------------------- -------------------
2006 2007 2006 2007
-------- -------- -------- --------
Revenues:
Product revenue $ 9,207 $ 11,616 $ 22,363 $ 31,997
Services and maintenance
revenue 5,588 8,661 16,476 24,410
-------- -------- -------- --------
Total revenues 14,795 20,277 38,839 56,407
-------- -------- -------- --------
Cost of revenues:
Cost of product revenue 599 653 1,623 2,054
Cost of services and
maintenance revenue 3,462 4,584 9,209 13,800
-------- -------- -------- --------
Total cost of revenues 4,061 5,237 10,832 15,854
-------- -------- -------- --------
Gross profit 10,734 15,040 28,007 40,553
-------- -------- -------- --------
Operating expenses:
Selling and marketing 6,683 7,863 18,225 24,591
Research and development 2,062 2,294 5,248 6,537
General and administrative 2,062 3,681 5,535 10,249
Depreciation 489 909 1,281 2,424
-------- -------- -------- --------
Total operating expenses 11,296 14,747 30,289 43,801
-------- -------- -------- --------
Operating (loss) income (562) 293 (2,282) (3,248)
Other income, net 26 328 112 1,097
-------- -------- -------- --------
(Loss) income before
income taxes (536) 621 (2,170) (2,151)
Income tax provision -- 983 22 1,033
-------- -------- -------- --------
Net loss $ (536) $ (362) $ (2,192) $ (3,184)
======== ======== ======== ========
Net loss per share $ (0.03) $ (0.02) $ (0.11) $ (0.14)
======== ======== ======== ========
Shares used in per share
calculation - diluted 18,789 22,745 19,525 22,485
======== ======== ======== ========
Share based compensation
expense (including taxes
paid by the company) was
allocated as follows:
Cost of product revenue $ 1 $ 13 $ 2 $ 59
Cost of service and
maintenance revenue 79 205 116 549
Selling and marketing 98 272 174 951
Research and development 53 137 67 413
General and administrative 129 373 223 1,008
-------- -------- -------- --------
Total share-based
compensation expense $ 360 $ 1,000 $ 582 $ 2,980
======== ======== ======== ========
---------------------------------------------------------------------
Supplemental Financial Data (See Note)
Non-GAAP (loss) income
before income taxes
excluding share-based
compensation expense $ (176) $ 1,621 $ (1,588) $ 829
======== ======== ======== ========
Non-GAAP net (loss) income
before income taxes per
share excluding share-based
compensation expense $ (0.01) $ 0.07 $ (0.08) $ 0.04
======== ======== ======== ========
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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 SFAS 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 com Additionally, we believe it is useful in measuring
the Company's performance to exclude expenses related to income taxes
and SFAS 123 R equity expense because it facilitates comparability
with prior period information.
Non-GAAP net (loss) income is defined as net (loss) income excluding
compensation expenses required to be recorded by SFAS 123R. 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 expenses related to share-based
compensation because SFAS 123R compensation costs are generally fixed
at the time an aware is granted, are then expensed over several years
and generally cannot be changed or influenced by management once
granted. Management and the Board of Directors do not consider
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 per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------- ----------------
2006 2007 2006 2007
------- ------- ------- -------
GAAP (loss) income before
income taxes $ (536) $ 621 $(2,170) $(2,151)
------- ------- ------- -------
Share-based compensation
expense as measured using
the fair value method
under SFAS 123R $ 360 $ 990 $ 582 $ 2,890
Payroll taxes on employee
stock options and
restricted stock grants 10 -- -- 90
------- ------- ------- -------
Total share-based
compensation expense 360 1,000 582 2,980
------- ------- ------- -------
Non-GAAP (loss) income
before income taxes
excluding share-base
compensation expense $ (176) $ 1,621 $(1,588) $ 829
------- ------- ------- -------
Income tax provision -- 983 22 1,033
Non-GAAP (loss) income
excluding share-based
compensation expense $ (176) $ 638 $(1,610) $ (204)
======= ======= ======= =======
GAAP net loss per share -
diluted $ (0.03) $ (0.02) $ (0.11) $ (0.14)
======= ======= ======= =======
Non-GAAP net (loss) income
before income taxes per
share excluding share-based
compensation expense -
diluted $ (0.01) $ 0.07 $ (0.08) $ 0.04
======= ======= ======= =======
Non-GAAP net loss excluding
share-based compensation
expense - diluted $ (0.01) $ 0.03 $ (0.08) $ (0.01)
======= ======= ======= =======
Shares used in per
share calculations -
diluted 18,789 22,745 19,525 22,485
======= ======= ======= =======
Guidance Software, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31, September 30,
2006 2007
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,041 $ 35,128
Investments in marketable debt
securities 24,694 --
Trade receivables, net 17,513 20,052
Prepaid expenses, inventory and
other current assets 2,064 3,165
------------ ------------
Total current assets 52,312 58,345
Property and equipment, net 6,526 11,607
Other assets 507 616
------------ ------------
Total assets $ 59,345 $ 70,568
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,494 $ 4,361
Accrued expenses 3,974 5,587
Capital lease obligations 942 657
Deferred revenues 18,123 24,185
------------ ------------
Total current liabilities 28,533 34,790
------------ ------------
Long-term liabilities:
Rent incentives 1,537 2,891
Capital lease obligations 488 285
Deferred revenues 2,098 2,445
------------ ------------
Total long-term liabilities 4,123 5,621
------------ ------------
Stockholders' equity:
Common stock 22 23
Additional paid-in capital 36,393 43,094
Accumulated other comprehensive
loss (17) --
Accumulated deficit (9,709) (12,960)
------------ ------------
Total stockholders' equity 26,689 30,157
------------ ------------
Total liabilities and
stockholders' equity $ 59,345 $ 70,568
============ ============
GUID-F