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8-K - 8-K - Guidance Software, Inc.a16-4111_18k.htm

Exhibit 99.1

 

 

 

Guidance Software Reports

2015 Fourth Quarter and Full Year Financial Results

 

 

·                 Fourth quarter 2015 revenue and EPS beat consensus estimates

·                 Fourth quarter revenue of $27.6 million and non-GAAP EPS of ($0.05) per share

·                 Full year 2015 revenue of $107.0 million and non-GAAP EPS of ($0.18) per share

 

PASADENA, Calif. – February 11, 2016Guidance Software, Inc. (NASDAQ: GUID) today reported financial results for the fourth quarter and full year ended December 31, 2015.

 

Fourth quarter 2015 financial highlights, calculated in accordance with generally accepted accounting principles (GAAP) include:

·                 Revenue of $27.6 million, compared to $28.2 million in the fourth quarter of 2014

·                 Net loss of $3.6 million, or ($0.13) per share, compared to a net loss of $3.1 million, or ($0.11) per share, in the fourth quarter of 2014

 

“2015 was a year of transformation at Guidance and I am pleased to report that we finished the year strong,” said Patrick Dennis, Guidance Software’s Chief Executive Officer. “Looking forward, 2016 will be a year of growth for Forensic Security. Our customers have acknowledged that prevention solutions are insufficient for reducing digital risk. They have already started to shift spending to rapid detection and response solutions like ours.”

 

On a non-GAAP basis, which excludes share-based compensation, amortization of intangibles and realignment expenses, the Company reported a pre-tax net loss of $1.3 million, or ($0.05) per share, in the fourth quarter of 2015, compared to non-GAAP pre-tax net income of $0.9 million, or $0.03 per share, in the fourth quarter of 2014.

 

“Throughout 2015 our software mix shifted to end point security” said Barry Plaga, Guidance Software’s Chief Operating Officer. “In Q4 end point security was our largest individual business, representing 24% growth on a year on year basis.”

 

Fourth Quarter 2015 Highlights and Recent Noteworthy Events

 

 

·                 In November, the Company released EnCase® Endpoint Security version 5.10. Version 5.10 included support for IOC’s (YARA), improved surgical remediation, and operating system and integration support updates.

 

·                 In February, the Company unveiled EnForce™ Risk Manager, the first purpose built product to help security professionals reduce the attack surface area associated with sensitive data (PII, PCI, PHI).

 

·                 In February, the Company unveiled its cloud strategy. In a phased approach, the Company will begin supporting hosted versions of its EnCase family of products. This allows customers to bring the robust end point security used inside the four walls of the data center to their preferred public cloud.

 



 

2016 Financial Outlook

 

Comments regarding the Company’s 2016 financial outlook will be discussed on today’s conference call.

 

 

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 4th quarter and full year 2015 results.  Participants should call (877) 407-0784 (North America) or (201) 689-8560 (International) at least five minutes prior to the conference call.

 

A webcast and replay of the call may also be found online 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 (877) 870-5176, passcode 13628074, available from 8:00 pm Eastern Time, February 11, 2016, through midnight Eastern Time, February 18, 2016.

 

 

About Guidance Software:

 

Guidance Software, Inc. (GUID), the maker of the EnCase technology platform, is the gold standard in digital investigations and endpoint data security, helping organizations around the world lower business risk by providing the most complete visibility to data everywhere it’s stored—on the endpoint, across servers, and into the cloud. Guidance Software solutions are built for integration within a rich technology ecosystem, including Dropbox, HP, Cisco, Box, and Blue Coat Systems. Our field-tested and court-proven solutions are used with confidence by more than 70 of the Fortune 100 and hundreds of agencies worldwide. For more information about Guidance Software, please visit guidancesoftware.com, “Like” our Facebook page, follow us on Twitter, or follow our LinkedIn page.

 

Guidance Software®, EnCase®, EnScript®, EnCE™, EnCEP™, EnForce™, Linked Review™, EnPoint™ and Tableau™ are trademarks owned by Guidance Software and may not be used without prior written permission. All other trademarks and copyrights 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 from time to time non-GAAP gross profit, operating expenses, operating income (loss) and net income (loss), as well as non-GAAP net income (loss) per share. Non-GAAP gross profit consists of GAAP gross profit as reported and adds back one-time realignment expenses and share-based compensation expense booked for GAAP purposes. Non-GAAP operating income (loss) consists of GAAP operating income (loss) as reported and excludes one-time realignment expenses, amortization of intangibles and share-based compensation expense. Non-GAAP net income (loss) consists of GAAP operating income (loss) as reported and excludes one-time realignment expenses, amortization of intangibles, share-based compensation expense and the income 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 items 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.

 

Realignment Expenses. Realignment expenses represent one-time severance and related employment costs associated with a reduction in headcount. Guidance Software excludes realignment 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 are uncommon and not expected to recur in future 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.

 

Share-based Compensation Expense. Share-based compensation expense is a non-cash expense arising from the grant of stock awards to employees. Guidance Software excludes share-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 share-based awards, including grants in connection with acquisitions. Investors should note that share-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.

 

Gain on Sale of Domain Name. Gain on sale of domain name is a non-cash gain arising from the sale of a domain name in exchange for certain third party software licenses. Guidance Software excludes the gain on sale of domain name from non-GAAP operating income and non-GAAP net income because it believes (i) the amount of such income in any specific period may not directly correlate to the underlying performance of Guidance Software business operations and (ii) such income is uncommon and not expected to 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 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 e-discovery 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.

 

INVESTOR CONTACT

Rasmus van der Colff

Guidance Software, Inc.

626-768-4607

investorrelations@guidancesoftware.com

 



 

Guidance Software, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

 

 

2015

 

2014

 

2015

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

Product revenue

 

  $

8,804

 

  $

9,205

 

  $

31,897

 

  $

34,412

 

Services revenue

 

8,778

 

8,738

 

35,264

 

34,333

 

Maintenance revenue

 

10,048

 

10,305

 

39,845

 

39,911

 

Total revenues

 

27,630

 

28,248

 

107,006

 

108,656

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

Cost of product revenue

 

2,313

 

2,292

 

8,869

 

8,427

 

Cost of services revenue

 

5,837

 

6,229

 

24,349

 

25,385

 

Cost of maintenance revenue

 

647

 

576

 

2,428

 

2,194

 

Total cost of revenues

 

8,797

 

9,097

 

35,646

 

36,006

 

Gross profit

 

18,833

 

19,151

 

71,360

 

72,650

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling and marketing

 

10,353

 

9,316

 

38,710

 

39,011

 

Research and development

 

5,490

 

5,083

 

21,180

 

22,998

 

General and administrative

 

4,869

 

5,996

 

19,131

 

18,350

 

Depreciation and amortization

 

1,592

 

1,774

 

6,403

 

7,426

 

Total operating expenses

 

22,304

 

22,169

 

85,424

 

87,785

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(3,471)

 

(3,018)

 

(14,064)

 

(15,135

)

 

 

 

 

 

 

 

 

 

 

Interest income and other, net

 

7

 

7

 

29

 

670

 

Loss before income taxes

 

(3,464)

 

(3,011)

 

(14,035)

 

(14,465

)

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

116

 

53

 

360

 

264

 

Net loss

 

  $

(3,580)

 

  $

(3,064)

 

  $

(14,395)

 

  $

(14,729

)

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic

 

  $

(0.13)

 

  $

(0.11)

 

  $

(0.51)

 

  $

(0.55

)

Net loss per share - diluted

 

  $

(0.13)

 

  $

(0.11)

 

  $

(0.51)

 

  $

(0.55

)

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculation - basic

 

28,363

 

27,199

 

27,953

 

26,758

 

Shares used in per share calculation - diluted

 

28,363

 

27,199

 

27,953

 

26,758

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Financial Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP (loss) income before income taxes excluding amortization of intangibles, realignment expense, gain on sale of domain name and share-based compensation expense

 

  $

(1,292)

 

  $

863

 

  $

(5,096)

 

  $

(2,571

)

 

 

 

 

 

 

 

 

 

 

Non-GAAP (loss) income per share before income taxes excluding amortization of intangibles, realignment expense, gain on sale of domain name, and share-based compensation expense

 

 

 

 

 

 

 

 

 

Basic

 

  $

(0.05)

 

  $

0.03

 

  $

(0.18)

 

  $

(0.10

)

Diluted

 

  $

(0.05)

 

  $

0.03

 

  $

(0.18)

 

  $

(0.10

)

 

 

 

 

 

 

 

 

 

 

 



 

Guidance Software, Inc.

Calculation of Pre-Tax Non-GAAP Income

(unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

 

 

2015

 

2014

 

2015

 

2014

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss

 

  $

(3,580)

 

  $

(3,064)

 

  $

(14,395)

 

  $

(14,729

)

Add:

 

 

 

 

 

 

 

 

 

Income tax provision

 

116

 

53

 

360

 

264

 

Amortization of intangibles

 

394

 

520

 

1,654

 

2,187

 

Realignment expense

 

125

 

2,066

 

523

 

3,643

 

Gain on sale of domain name

 

-

 

-

 

-

 

(630

)

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

 

1,653

 

1,288

 

6,762

 

6,694

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP (loss) income before income taxes excluding amortization of intangibles, realignment expense, gain on sale of domain name and share-based compensation expense

 

  $

(1,292)

 

  $

863

 

  $

(5,096)

 

  $

(2,571

)

 

 

 

 

 

 

 

 

 

 

Non-GAAP (loss) income per share before income taxes excluding amortization of intangibles, realignment expense, gain on sale of domain name and share-based compensation expense

 

 

 

 

 

 

 

 

 

Basic

 

  $

(0.05)

 

  $

0.03

 

  $

(0.18)

 

  $

(0.10

)

Diluted

 

  $

(0.05)

 

  $

0.03

 

  $

(0.18)

 

  $

(0.10

)

 

 

 

 

 

 

 

 

 

 

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

Basic

 

28,363

 

27,199

 

27,953

 

26,758

 

Diluted

 

28,363

 

27,335

 

27,953

 

26,758

 

 

 

 

 

 

 

 

 

 

 

Detail of Share-based Compensation Expense:

 

 

 

 

 

 

 

 

 

Cost of product revenue

 

  $

19

 

  $

30

 

  $

106

 

  $

131

 

Cost of services revenue

 

277

 

354

 

1,125

 

1,398

 

Cost of maintenance revenue

 

38

 

39

 

157

 

149

 

Selling and marketing

 

261

 

12

 

1,375

 

1,308

 

Research and development

 

437

 

407

 

1,648

 

1,783

 

General and administrative

 

621

 

446

 

2,351

 

1,925

 

Total share-based compensation expense

 

  $

1,653

 

  $

1,288

 

  $

6,762

 

  $

6,694

 

 

 

 

 

 

 

 

 

 

 

Detail of Realignment Expense:

 

 

 

 

 

 

 

 

 

Cost of services revenue

 

  $

-

 

  $

-

 

  $

77

 

  $

186

 

Selling and marketing

 

16

 

550

 

30

 

1,018

 

Research and development

 

6

 

-

 

6

 

790

 

General and administrative

 

103

 

1,516

 

410

 

1,649

 

Total realignment expense

 

  $

125

 

  $

2,066

 

  $

523

 

  $

3,643

 

 

 

 

 

 

 

 

 

 

 

Detail of Gain on Sale of Domain Name:

 

 

 

 

 

 

 

 

 

Interest income and other, net

 

  $

-

 

  $

-

 

  $

-

 

  $

630

 

Total gain on sale of domain name

 

  $

-

 

  $

-

 

  $

-

 

  $

630

 

 



 

Guidance Software, Inc

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited and in thousands, except per share amounts)

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,

 

December 31,

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

Gross profit, as reported

 

  $

18,833

 

  $

19,151

 

  $

71,360

 

  $

72,650

Realignment expense

 

-

 

-

 

77

 

186

Share-based compensation

 

334

 

423

 

1,388

 

1,678

Gross profit adjustment

 

334

 

423

 

1,465

 

1,864

Total non-GAAP gross profit

 

  $

19,167

 

  $

19,574

 

  $

72,825

 

  $

74,514

 

 

 

 

 

 

 

 

 

Total operating expenses, as reported

 

  $

22,304

 

  $

22,169

 

  $

85,424

 

  $

87,785

Amortization of intangibles

 

(394)

 

(520)

 

(1,654)

 

(2,187)

Realignment expense

 

(125)

 

(2,066)

 

(446)

 

(3,457)

Share-based compensation

 

(1,319)

 

(865)

 

(5,374)

 

(5,016)

Operating expense adjustment

 

(1,838)

 

(3,451)

 

(7,474)

 

(10,660)

Total non-GAAP operating expenses

 

  $

20,466

 

  $

18,718

 

  $

77,950

 

  $

77,125

 

 

 

 

 

 

 

 

 

Operating loss as reported

 

  $

(3,471)

 

  $

(3,018)

 

  $

(14,064)

 

  $

(15,135)

Gross profit adjustment

 

334

 

423

 

1,465

 

1,864

Operating expense adjustment

 

1,838

 

3,451

 

7,474

 

10,660

Total non-GAAP operating (loss) income

 

  $

(1,299)

 

  $

856

 

  $

(5,125)

 

  $

(2,611)

 

 

 

 

 

 

 

 

 

Net loss as reported

 

  $

(3,580)

 

  $

(3,064)

 

  $

(14,395)

 

  $

(14,729)

Gross profit adjustment

 

334

 

423

 

1,465

 

1,864

Operating expense adjustment

 

1,838

 

3,451

 

7,474

 

10,660

Income tax provision

 

116

 

53

 

360

 

264

Gain on sale of domain name

 

-

 

-

 

-

 

(630)

Total non-GAAP net (loss) income

 

  $

(1,292)

 

  $

863

 

  $

(5,096)

 

  $

(2,571)

 

 

 

 

 

 

 

 

 

Net loss per share-diluted, as reported

 

  $

(0.13)

 

  $

(0.11)

 

  $

(0.51)

 

  $

(0.55)

 

 

 

 

 

 

 

 

 

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

 

  $

(0.05)

 

  $

0.03

 

  $

(0.18)

 

  $

(0.10)

 



 

Guidance Software, Inc.

 

Unaudited Condensed Consolidated Balance Sheets

 

(in thousands)

 

 

 

December 31,

 

December 31,

 

 

2015

 

2014

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

  $

18,967

 

  $

18,355

Restricted cash

 

-

 

153

Trade receivables, net

 

21,434

 

20,255

Inventory

 

2,543

 

2,684

Prepaid expenses and other current assets

 

3,335

 

5,054

Total current assets

 

  $

46,279

 

  $

46,501

 

 

 

 

 

Long-term assets:

 

 

 

 

Property and equipment, net

 

  $

13,513

 

  $

14,558

Intangible assets, net

 

6,157

 

7,766

Goodwill

 

14,632

 

14,632

Other assets

 

1,709

 

2,370

Total long-term assets

 

36,011

 

39,326

 

 

 

 

 

Total assets

 

  $

82,290

 

  $

85,827

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

  $

3,335

 

  $

5,919

Accrued liabilities

 

9,815

 

8,407

Capital lease obligations

 

69

 

67

Deferred revenues

 

41,553

 

39,128

Total current liabilities

 

  $

54,772

 

  $

53,521

 

 

 

 

 

Long-term liabilities:

 

 

 

 

Deferred rent

 

  $

6,947

 

  $

7,661

Other long-term liabilities

 

580

 

645

Deferred revenues

 

8,242

 

6,232

Deferred tax liabilities

 

511

 

584

Total long-term liabilities

 

  $

16,280

 

  $

15,122

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock

 

  $

25

 

  $

25

Additional paid-in capital

 

118,714

 

110,265

Treasury stock

 

(11,479)

 

(11,479)

Accumulated deficit

 

(96,022)

 

(81,627)

Total stockholders’ equity

 

  $

11,238

 

  $

17,184

 

 

 

 

 

Total liabilities and stockholders’ equity

 

  $

82,290

 

  $

85,827

 



 

Guidance Software, Inc

 

Unaudited Cash Flow Summary

 

(in thousands)

 

 

 

Twelve Months Ended

 

 

December 31,

 

 

2015

 

2014

Operating Activities:

 

 

 

 

Net loss

 

  $

(14,395)

 

  $

(14,729)

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

 

 

Depreciation & amortization

 

6,403

 

7,426

Benefit for doubtful accounts

 

(150)

 

-

Share-based compensation

 

6,762

 

6,694

Gain on sale of domain name

 

-

 

(630)

Deferred taxes

 

104

 

87

Loss on disposal of assets

 

60

 

249

Changes in operating assets and liabilities:

 

 

 

 

Restricted cash

 

153

 

(153)

Trade receivables

 

(1,029)

 

(1,228)

Inventory

 

141

 

(756)

Prepaid expenses and other assets

 

2,203

 

(1,453)

Accounts payable

 

(2,555)

 

1,296

Accrued liabilities

 

694

 

(1,138)

Deferred revenues

 

4,435

 

3,697

Net cash provided by (used in) operating activities

 

  $

2,826

 

  $

(638)

 

 

 

 

 

Investing Activities:

 

 

 

 

Purchase of property and equipment

 

  $

(3,776)

 

  $

(1,911)

Purchase of intangible asset

 

(45)

 

-

Net cash used in investing activities

 

  $

(3,821)

 

  $

(1,911)

 

 

 

 

 

Financing Activities:

 

 

 

 

Proceeds from the exercise of stock options

 

  $

1,687

 

  $

1,179

Principal payments on capital lease and other obligations

 

(80)

 

(194)

Net cash provided by financing activities

 

  $

1,607

 

  $

985

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

  $

612

 

  $

(1,564)

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

  $

18,355

 

  $

19,919

 

 

 

 

 

Cash and cash equivalents, end of period

 

  $

18,967

 

  $

18,355