Juan Costello: Good day for Wall Street this is Juan Costello senior analyst of the Wall Street reporters and joining us today is Barry Plaga, the chief financial officer for Guidance Software. The company trades on NASDAQ and the ticker symbol is GUID. Thanks for joining us today Barry.
Barry Plaga: Hey thanks Juan, it’s good to here.
Juan Costello: Great, now starting up, give us a brief history and overview of Guidance for some of our listeners that are new to your story.
Barry Plaga: Okay, well the company was founded in 1997, really focused on forensic toolsets for law enforcement. That is you know police forces around the world and government agencies to investigate computers. And in early 2000, 2001, 2002, many of our customers came to us and said, “This is great, I love to use this over my network and be able to pull information from endpoints or computers and servers and centralize that so I don’t have to spend somewhere around all over the globe to connect to somebody’s computers.” So that really launched the fast growth of the company and we go public in 2006 and a year before that we come out with our E-Discovery product. Really focus on the legal process behind E-Discovery and data collection for lawsuits and investigations.
And from there with that capability when visibility to all endpoints on a customer’s network we’re able to also provide some cyber security and security solutions around that. And that you can determine what on your endpoints or computers and what shouldn’t be there and if it shouldn’t be there, what do you want to do with it? So that’s really the quick you know 15,000 foot view of what Guidance does. We have over 1200 enterprise customers and we have over 40,000 in case forensic customers, the in case are our major brand name behind our products. It’s pretty well known in some respect people will say, “Hey, did you in case that hard drive?” Meaning did you take a picture of it and were you able to analyze it.
Juan Costello: Well great, yeah it’s like you know saying that you Googled that information right? It’s kind of sort of become synonymous with that sort of encryption and so yes, what are some of the drivers behind the company the key one that you posted a couple of weeks ago?
Barry Plaga: Well we came off on a fantastic 2011 or we have record revenue, record arrange for sharing and a record number of new customers. We’ve really focused last year on getting incase everywhere strategy with our enterprise product and that came off very well with the year with planning almost all over 250 new customers last year. About 290 and that was up quite a bit and we continued that strength into key one. We had roughly a 50% increase in the number of new customers in key one. It did pretty well in the top line and we exceeded expectation on the bottom line in terms of earnings per share. One of the biggest I think milestones in key one was our acquisition of case central which is fast based, Cloud based document review platform that expands our E-Discovery capabilities and processes deep into the customers’ needs.
Juan Costello: Well good and so what are some of the trends right now as far as forensic software and — what are some of the way that the company is positioned to capitalize on them?
Barry Plaga: Well you know we got a myriad of things going on and just in the world of the marketplace in terms of you know first of all the explosion of data, you know and people use the term big data but there is data. The problem is that it’s everywhere and so we’re able to reach it almost on any laptop, server, device they has an operating system associated with it. So if you think about it companies now are giving employees laptops, they give them tablets, they give them smart phones and all those things are collecting data on them. They’re using the Cloud in terms of — you know Dropbox and using all these Cloud based applications where there’s data residing everywhere now, so this huge, huge problem for corporations and government entities because they need to find it and they need to protect their data.
They need to protect their intellectual property and so the explosion of data, the explosion of devices is really having a huge impact on to kind of accelerate the option of our products. You know we’ve seen a dramatic increase, a number of new customers. I think that’s coming from the fact that it’s a well established technology now in the marketplace. It’s not something new, we don’t have to improve our concepts anymore, we’re selling product over the phone in a lot of instances in very large companies and some small companies. The technology is well known now and it’s starting to get the attention it deserves in terms of being able to do that investigation or that search you know or to find those sensitive documents that are out there or personal information that are out on your network that shouldn’t be. So I think that problem is just going to continue to accelerate you know with the proliferation of devices out there.
Juan Costello: What else would we say makes the company and your product unique (it’s obviously a niche market) from some of the players in the sector?
Barry Plaga: Well the key differentiator for us is our collection capability, number one we’re able to reach every end point no matter what the operating system or device looks like. That’s one thing and number two is really the grant of our offering, you know we go from — we cover the entire E-Discovery process from collection. The first past review filtering it down to them, providing a data up in the Cloud for an entities lost — you know outside legal help or the legal terms to review those documents and they could be anywhere in the world and it provide a lot of flexibility. And we’re the only vendor out there that’s providing a complete end to end E-Discovery solution and we were a leader on the magic quadrant of Garner last year and I think with this acquisition that really should solidify our position as being considered one of the leaders and the go to vendors in this area.
Juan Costello: Great and so perhaps you could walk us through your background experience Barry and talk a little bit about the senior management team, the guys behind the scene there?
Barry Plaga: Sure, I’ve been you know public companies CFO and Perry’s companies now for almost 25-years. My background with the CPA at Arthur Young, I spent almost a decade at Activision entertainment Software Company. I took the company public in 2000 CB and we ended up selling to Microsoft.
Juan Costello: Oh yeah.
Barry Plaga: And back in 2005, so that was — I got my large company experience with Sun which was great and you know I kind of brought that back to smaller organization such as Guidance and things have gone really well here over the past four years. We have a pretty seasoned management team in terms of software industry experience and especially when it relates to the E-Discovery and legal expertise that we have here on the management or you know a big chunk of our efforts are focused.
Juan Costello: Certainly and so what are some of the goals that you and the team are hoping to accomplish for the next year?
Barry Plaga: Well number one, we want to you know complete the acquisition with a very successful integration. It’s gone really well now; we’re just wrapping up really the first 90-days since they closed the transaction. We have all the systems integrated for the most part, we’ve got our sales forces integrated and our compounds which is a key thing to do in order to drive good sales behavior on the sales force in terms of getting out there and selling our new product offerings. So that’s you know one of our top priorities this year and then we have our user conference next week in Las Vegas.
We’ll have, you know well over 1500 attendees one of our largest site, I guess our largest conference ever, so it should be very successful to launch it back after a year and we’re seeing a really strong activity level in pipeline level and [inaudible] [00:09:37] not only in the in the corporate space in terms of potential deals during the year. And we’re still focused on bringing down cost, bringing down our cost of sale. Focusing our efforts on you know — the more we can sell over the phone the better, and continuing our land and expand strategy with encase enterprise.
Juan Costello: Well great and so in terms of investors, I mean the financial community there, do you believe that the company story and your upside and the message are completely understood by them and if not what do you wish that — or individual investors better understood about the company?
Barry Plaga: Well I’d like to say we’re getting there, we’re getting — we’ve built up a lot of awareness over the last six months especially during key one. After we’ve announced key four and acquisition, but then you know I think when you look at our evaluation, it’s still you know, I think behind what the comparables are in our space in terms of if you look at just the enterprise value, the maintenance multiples out there. You can buy our maintenance with our new subscription revenue streams, we’re — I would say we’re severely undervalued at this point and there’s a huge opportunity if we execute well this year.
Juan Costello: Well good and so once again joining us today is Barry Plaga, the chief financial officer for Guidance Software. The company trade on [inaudible] [00:11:23] which is a symbol in GUID, currently trading at 8.51 a share, the market count is north of 204 million and before we conclude here Barry to recap some key points, why do you believe investors should consider the company as a good investment opportunity today?
Barry Plaga: Yes, I think number one we’re growing faster in the market. We’re estimating growth this year at 20 to 25% of the top line and almost 50% on APS. So I think we’ve got some really good operational metrics behind us, we got a very strong balance sheet, great cash position. And we’re going to you know, continue to generate a significant amount of cash relative on our side over the next couple of years. I think there’s a great growth opportunity, we’re at the beginning of the market. It’s you know we’re probably alone in the US well over ten thousand companies that we’re focusing our efforts on. We only penetrated on a very small percentage of those and the thing is a green field, there’s no other vendor to displace, it’s really our land to grab and we’re really focused on that.
Juan Costello: Well we certainly look forward to continuing to track your company’s growth and report on your upcoming progress and I’d like to thank you for taking the time to join us today Barry and to update our investors on GUID.
Barry Plaga: All right, thank you sir.