Guidance Software, Inc. (NASDAQ: GUID) today reported financial results for the fourth quarter and year ended December 31, 2012.

Fourth quarter 2012 financial highlights:

• GAAP revenue of $36.2 million and non-GAAP revenue of $36.7 million, compared to GAAP and non-GAAP revenue of $29.9 million in the fourth quarter of 2011
• GAAP SaaS revenues of $2.5 million and non-GAAP SaaS revenue of $2.8 million
• Product revenue of $16.2 million, compared to $16.8 million in the fourth quarter of 2011
• Services and maintenance revenue of $17.6 million, an increase of $4.5 million, or 34 percent, from $13.1 million in the fourth quarter of 2011
• GAAP net income of $1.9 million, or $0.07 per share, compared to a GAAP net income of $2.3 million, or $0.09 per share, in the fourth 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 $4.5 million, or $0.17 per share, in the fourth quarter of 2012, compared to non-GAAP pre-tax net income of $3.9 million, or $0.16 per diluted share, in the fourth quarter of 2011.

Guidance Software President and Chief Executive Officer Victor Limongelli said, “The fourth quarter was our best quarter ever, with both record revenue and record earnings. We continued to execute on our 'EnCase Everywhere' strategy by adding an all-time high number of 129 new EnCase® Enterprise customers during the fourth quarter and 358 customers for the full year. Our strong performance was further bolstered by the addition of 20 new EnCase® Cybersecurity customers in the fourth quarter.

“Over the coming year, we are planning to launch an entirely new product on the EnCase® Enterprise platform. This new product will be targeted at the IT Security market and will be unveiled at our CEIC conference in May. With this new offering and continued expansion of the capabilities of our existing products, we will make additional investments in sales, marketing and R&D to position Guidance for long-term growth.”

Limongelli concluded, “Guidance Software is poised for a strong 2013. As we continue to invest in our product pipeline and the growth of the Company, we will remain focused on delivering value to both our customers and shareholders.”

Fourth Quarter 2012 Highlights and Noteworthy Events

• The company celebrated its 15^th anniversary this past November. Since its founding, the company has grown to become a market leader and global standard for digital investigations, with over 500 employees, as well as offices around the world. The company will culminate its anniversary celebration at its annual Computer and Enterprise Investigations Conference (CEIC) scheduled to be held May 19-22, 2013 in Orlando, Florida.
• In the fourth quarter, the company added 129 new EnCase® Enterprise customers and 32 new customers of EnCase® eDiscovery or EnCase® Cybersecurity, which are built on the EnCase® Enterprise platform. For the full year 2012, the company added 358 EnCase® Enterprise customers, compared to 285 for full year 2011.
• In December 2012, the company debuted its fastest forensic bridge for forensic imaging in both lab and field environments.
• During the fourth quarter, the company also announced the release of EnCase® Portable Version 4, the simplest to use and most powerful field investigation tool available for digital investigation teams. EnCase® Portable allows for complete forensic triage and data collection in the field for both seasoned forensic professionals and non-technical personnel. It is compatible with EnCase® Forensic Version 7.05.
• In early January 2013, the company announced the appointment of Vincent Schiavo as its Senior Vice President of Worldwide Sales. A veteran of the software industry, Schiavo is responsible for generating revenue growth across all Guidance Software sales channels and markets worldwide.

2013 Financial Outlook:

The company is initiating its guidance for the year ended December 31, 2013, as follows:

• Revenue is expected to be in the range of $144 million to $148 million, representing year-over-year growth of 10% to 13%
• The company will expand sales capacity both internally and in the field, as well as invest in additional marketing initiatives to better address the sales opportunity and customer demand for both our EnCase® eDiscovery and EnCase® Cybersecurity offerings
• Non-GAAP pre-tax earnings are expected to be approximately $0.25 to $0.30 per share

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 83012081, available from 8:00 pm eastern time, February 7, 2013, through midnight eastern time, February 14, 2013.

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 65 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. 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, share-based compensation expense, and a one-time state sales tax charge. 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, share-based compensation expense, and a one-time state sales tax charge.

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.

State Sales Tax One-time Charge. The sales tax one-time charge is expenses accrued for sales taxes that may be due to a taxing authority. Guidance Software excludes the sales tax charge from non-GAAP operating income and non-GAAP net income because it believes the amount of the expense in the specific period it occurred is a one-time charge and does not directly correlate to the underlying performance of Guidance Software’s business operations.

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.

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