Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Guidance Software, Inc. (NASDAQ:GUID)

Q4 2013 Earnings Conference Call

February 11, 2014, 05:00 PM ET

Executives

Rasmus van der Colff - VP, Finance and CAO

Victor Limongelli - President and CEO

Barry Plaga - CFO

Analysts

Mark Jordan - Noble Financial

Mark Schappel - Benchmark Company

Michael Kim - Imperial Capital

Kevin Liu - B. Riley & Company

Hendi Susanto - Gabelli

Matthew Kempler - Sidoti & Company

Operator

Good afternoon, and welcome to today's Guidance Software's Q4 2013 earnings results conference call. (Operator Instructions) At this time, for opening remarks and introduction, I would like to turn the call over to Rasmus van der Colff, Vice President, Finance and Chief Accounting Officer. Please go ahead.

Rasmus van der Colff

Thank you. Good afternoon, everyone, and thank you for joining us today to discuss Guidance Software's fourth quarter 2013 results. With me today are Guidance's President and CEO, Victor Limongelli; and Chief Financial Officer, Barry Plaga.

We would like to remind everyone that during today's conference call, management will make certain forward-looking statements regarding the future operations, opportunities or financial performance of Guidance Software within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

These statements involve a high degree of known and unknown risks and uncertainties that could cause actual results to differ materially from those to be discussed. Please refer to the risk factors and other disclosures contained in the company's most recent reports on Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission for a more detailed discussion of the factors which could affect results to differ materially.

The forward-looking statements made in today's conference call are based on information available as of today, February 11, 2014, and Guidance assumes no obligation to update such statements to reflect events or circumstances after today's date.

Additionally, unless otherwise noted, we will discuss non-GAAP results during today's call. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP results, which can be found in today's press release and on our website.

Lastly, before we begin, I would like to remind everyone that today's call is also available via webcast on the Internet through our Investor Relations website and a replay will be available on the site.

With that, I would now like to turn the call over to Victor Limongelli, our President and CEO. Victor?

Victor Limongelli

Thanks, Rasmus. Good afternoon, everyone. For the fourth quarter of 2013, our results were above the range we provided early last month, with revenue of $28 million and $0.07 per share loss. We are focused on improving our execution in 2014, gaining new customers, increasing revenues and returning to profitability.

We believe that our software solves an important problem, and that the world is moving to a recognition of the critical importance of the endpoint when it comes to security. With an estimated footprint of 20 million endpoints and coverage for not only Windows, but Linux, Mac and UNIX operating systems as well, we are in a strong position to benefit from this growing awareness of the importance of forensics and the remediation of problems that occur on the endpoint.

We told you last month that we were taking steps to seize the opportunity in front of us, including increasing our inside sales resources, being more transparent and rational about pricing, and making it easy for EnCase Forensic desktop customers to upgrade to the EnCase Enterprise platform. Four weeks later, we have made progress on each of these, and by the second quarter we expect to be ramping well. In the short-term, this quarter we expect a big improvement in the number of new customers of the EnCase Enterprise platform.

On that topic, it is important to emphasize that we have a platform strategy, not a point solution or a series of point solutions. Each of our Enterprise products leverages the same components, the same endpoint agents for desktops, laptops and servers. So as we add customers of our EnCase Enterprise platform, that doesn't impede our ability to sell EnCase CyberSecurity, EnCase Analytics or EnCase eDiscovery, instead it makes it more likely that we'll be able to turn those customers into users of one of those higher-level products.

Before I turn the call over to Barry, I would like to highlight two opportunities to see us and our products in greater detail. First, we'll be exhibiting at the RSA show in San Francisco in a couple of weeks. And second, next quarter I urge each of you to come to Caesars Palace in Las Vegas for our conference.

CEIC, the biggest and best conference of its kind, with 11 different tracks, including a track in Spanish for the first time and over a 120 sessions focused on Forensics, Cybersecurity and eDiscovery. The dates for CEIC 2014 are May 19 through May 22. I look forward to seeing you there. Barry?

Barry Plaga

Thank you, Victor. As a reminder, the financial information provided on this call will be presented on a non-GAAP basis only. Any information we present on a GAAP basis will be noted as such.

Total revenues in the fourth quarter of 2013 decreased 23% year-over-year to $28 million, down from $36.2 million in the prior year. As we discussed in our January 9 conference call, the decrease was due to many factors, including federal weakness, sales execution and deal slippage into 2014.

Product revenue suffered the biggest decline, with enterprise revenues down 56% year-over-year and Forensic product revenues down 23% year-over-year. Sequentially from Q3, enterprise revenues were relatively flat, while forensic revenues were down 7%. Subscription or SaaS revenue from EnCase eDiscovery Review for the fourth quarter was $2.1 million, down from $2.7 million in Q3.

We have experienced a rather rapid drop-off of our law firm single-case type use of the hosting platform, as these cases have been settling over the past six to nine months. We are expecting this business - type to drop-off, perhaps not so dramatically, and we expect it to offset this growth in our enterprise subscription business, adoption of which has been slower than expected.

Total services and maintenance revenues were down 6% to $16.6 million in the fourth quarter 2013 versus $17.6 million in the prior year. For Q4 2013, we saw a 2% year-over-year increase in maintenance revenue and a 20% year-over-year decrease in professional services revenue.

Geographically in Q4, North America revenues comprised 75%, while EMEA represented 13% and the rest of world 12%. There remains a significant opportunity to expand our revenue base outside North America, especially in the IT security market abroad.

Gross margin for the fourth quarter was 70% versus 75% in the prior year. The gross margin on product revenue was 82%, down from 87% in the prior year, due to a lower mix of software versus hardware revenues year-over-year. Total services margins were up slightly, due to continued strong maintenance renewal rates.

Total operating expenses decreased year-over-year to $21.6 million in Q4 from $22.8 million in the prior year. The decrease was primarily due to lower sales costs associated with lower sales incentive compensation as well as lower R&D cost, due to post-merger cost efficiencies in that group and lower G&A, as we did not incur any significant patent litigation expenses to the extent we did in the prior year.

We are reporting a fourth quarter 2013 net loss of $1.9 million or $0.07 per share as compared to net income of $4.5 million or $0.16 per share in the fourth quarter of 2012. We ended the year with a solid balance sheet with cash and cash equivalents at December 31, 2013, of $19.9 million and no debt. Cash flow from operations in Q4 was $5 million compared to $4.8 million in Q4 of the prior year.

We expect our cash and cash equivalents to be in the range of $15 million to $16 million at the end of Q1, and to remain around that range until the end of Q4, where we expect to end 2014 with $19 million to $21 million in cash. Total deferred revenues were $41.7 million at December 31, up from $40.5 million at September 30, with Q4's enterprise renewals being the largest quarter in dollar terms for the year.

I would now like to discuss forward-looking guidance. The company's guidance for the year ending December 31, 2014, is as follows: revenue for 2014 is expected to be in the range of $116 million to $119 million; non-GAAP pre-tax earnings for 2014 are expected to be $0.00 to $0.03 per share positive; hosting revenues for 2014 are expected to be in the range of $7.5 million to $8 million, reflecting continued weakness in the law firms single-case group of customers on this platform.

In terms of seasonality, we expect the following: Q1 to be down approximately 3% to 8% year-over-year with a Q1 non-GAAP pre-tax loss of $0.08 to negative $0.14 per share. Front-half revenues we expect to be down 5% to flat year-over-year and front-half non-GAAP pre-tax loss in the range of $0.10 to $0.15 per share. Revenues in the back-half are expected to be up approximately 15% year-over-year and back-half non-GAAP earnings of a positive $0.10 to $0.15 per share.

We expect depreciation and amortization of approximately $5.5 million to $6 million for 2014, including the impact of capital expenditures of $1.5 million to $2 million expected during the year. For EPS calculations, we expect basic shares outstanding of approximately 26.5 million shares and fully diluted shares outstanding of approximately 29 million shares.

Additionally, we expect approximately $300,000 in income tax expense for 2014. And finally, in Q1, for GAAP purposes, which is excluded in the aforementioned guidance, we expect a one-time charge for the cost reductions we initiated in January of approximately $1 million. Cost reductions are expected to result in over $6 million in annual savings over the prior year.

With that, let me turn the call back over to Victor to conclude.

Victor Limongelli

Thanks, Barry. We are focused on increasing customer adoption and returning to growth and profitability in 2014. We have the products, the team and the end-markets to do so and we're looking forward to delivering in all three of those items this year.

With that, let me give the call back to Rasmus.

Rasmus van der Colff

Operator, would you please open the floor to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Mark Jordan of Noble Financial.

Mark Jordan - Noble Financial

I'd like to talk a little bit about G&A in the fourth quarter and what's a normalized run rate for that in 2014. The rate of $3.2 million, was that where some of the contingent liabilities that were backed out, did that lower that number? And therefore, what would be sort of a normalized run rate for G&A?

Barry Plaga

On the G&A costs, on a GAAP basis show $3.2 million. That was net of the reversal of the contingent earnout of $600,000. And it was also net of a reversal of over $500,000 on the sales tax issue we've had a couple of years ago. So that was about $1.1 million, $1.2 million. So the normal run rate for G&A is somewhere in the $4.2 million to $4.4 million range per quarter.

Mark Jordan - Noble Financial

Secondly, you talk about the opportunity you have in the international arena. Could you say what percent of revenues in 2013 were international? And how you're incrementally positioning yourself to grow that business in 2014?

Barry Plaga

So in 2013 our international business accounted for roughly 25% of our overall revenues. We expect over the next three to four years that that should grow 35% to 40%. I think North America will always have a dominant share just due to the eDiscovery business we have here, which is primarily North America business as well as just the adoption rates on some of CyberSecurity products.

Mark Jordan - Noble Financial

Strategically, in terms of how you are going to grow that faster than overall corporate revenues in '14, could you talk about your channels and the resources you're putting to work there to have that grow more rapidly than domestic revenue?

Victor Limongelli

Yes, Mark, we've put teams in France and Germany, and started up an operation in Japan as well. So we've put some resources there. That started last summer, so about six, seven months ago. And there is a ramp time for that of course, so we're expecting that to start delivering this year.

Barry Plaga

And we're starting to get some penetration into China and to a bigger extent Korea this year and next year.

Operator

Our next question comes from the line of Mark Schappel from Benchmark Company.

Mark Schappel - Benchmark Company

Victor, I was wondering if you can go into a little bit more detail on some of the changes you've made in the sales organization after the shortfall?

Victor Limongelli

Sure. We have expanded the inside sales team year-over-year. From Q1 last year to Q1 this year, it will be about the commercial inside sales team focused on selling the EnCase Enterprise platform, and as well as our other Enterprise products is moving from six to 12 people. We hired four about three weeks ago and additional pre-sales engineer there as well. So we're expanding in that area.

We'll have fewer field sales people. We do have fewer now field sales people in North America. We've reduced those numbers by about 35% on the field level, took out some management as well there. Federal is not too dissimilar, and as I mentioned, we've added resources internationally, but those are the major changes in terms of the sales organization.

Mark Schappel - Benchmark Company

And Barry on the subscription line, I didn't catch the guidelines that you gave for next year, I was wondering if you could repeat those, please?

Barry Plaga

For 2014, we're expecting the SaaS hosting revenue to be in the range of $7.5 million to $8 million for the year.

Mark Schappel - Benchmark Company

And forensics revenue was about $5.6 million in the quarter?

Barry Plaga

Forensic was roughly totaled about $5million for Q4 in total forensic.

Mark Schappel - Benchmark Company

And then, Victor, to finish up with you, I was wondering if you just sketch out a little bit of what the company is doing in the marketing front to kind of reposition itself from an eDiscovery vendor to more of an IT security vendor?

Victor Limongelli

Part of it is, the focus of the marketing team is not just on eDiscovery, we're focused on security. So if you take as an example, at the RSA show we will have a big presence there. We'll be briefing lots of analysts in the security space. We're starting to see some industry analyst interest in the endpoint from some of the well-known industry analysts, which I think is good.

If you go to our website, you'll see us talking about incident response in security analytics. We'll likely do some awareness building later on in terms of advertising this year. So it's a variety of things, but we are definitely putting wood behind the arrow in the security awareness building.

Operator

Our next question comes from the line of Michael Kim of Imperial Capital.

Michael Kim - Imperial Capital

Can you just talk a little about the progress with the Analytics solution, the pipeline build and are you starting to demo the product with more enterprise customers?

Victor Limongelli

Yes, we are. We're starting with demo, we did get some deals that closed in Q4 and I think we've done a couple or more so far this year. It's early obviously in the quarter with most of it being backend loaded. We're definitely pushing that and really we see the CyberSecurity product and Analytics product as being extremely complementary, so if you see us talking to a customer about Cyber security we’re 98% likely to be talking to them about Analytics as well. And ultimately, I think it's going to be a very important product for us.

I mean strategically when you think about it, if the category is hunting for threats on your endpoints, and it's going to take a little time for that to become mainstream, but we're getting people to adopt it and we will get people to adopt it. And I think it has a potential to be one of our biggest products because it's designed to be used proactively to identify security risks. And then if you think about it in that context, its potential market covers every company with a need for IT security, and not just those companies that want to build the team to do reactive incident response.

Michael Kim - Imperial Capital

And then, can you provide a little feedback on, the feedback you've been getting on the new pricing matrix, has that had or starting to have a positive impact on close rates or your expectations out of the gate?

Victor Limongelli

Absolutely, early indications are good. In terms of net new customers for the EnCase Enterprise platform, we're on track in Q1 to at least double last year's count. I mentioned we expanded the inside sales team. We launched the simplified pricing about three, four weeks ago and some of those changes are still underway.

I mean we hired, as I mentioned, four inside sales reps. It takes a little while for them to get up to speed, new sales engineers to get up to speed, but so far so good. And just a reminder, on that front, on the count of the net new customers for the EnCase Enterprise platform, those customers even if they buy one seed, they buy a base package, so they can freely deploy the EnCase server through their endpoints.

So each new customer expands our footprint, expands the number of endpoints that we cover, and that endpoint coverage is a precursor to future up-sells and also a huge driver in the long-term value of our business. So we think it's important for a lot of reasons.

Michael Kim - Imperial Capital

And just speaking on the expansion of the inside, sales, is the second half revenue expansion driven by expectations that these new folks will achieve sort of full productivity?

Barry Plaga

Yes, definitely by the back half of the year. Typically the inside sales person has a much faster ramp on our products than personal field. So we've seen within 60 days some production out of inside sales people, which is good. So by time we hit June, July, those individuals should be doing a lot of deals per quarter on a quarterly run rate basis.

So that combined with, I think one of things, you asked about was the pricing and acceptance, I mean it was only four weeks ago roughly that we got that new pricing out there and we have a lot of opportunities to go back and discuss with customers and get them going, So that will take 60-90 days to really get out and talk to everyone by the time you get hold at them.

Victor Limongelli

And we have seasonality in our business as well. We typically see stronger customer demand in the back half of the year than during the first half, so that plays a factor as well.

Michael Kim - Imperial Capital

And so your expectations that you'll continue to ramp the inside sales team at the same rate or do you feel like you're front-end loading ahead of these sales to the back half?

Victor Limongelli

More front-end loading, but it's going to be dependent on how we're doing. It's going to be a very efficient distribution method for us, so if we're continuing to see traction, we'll continue to use it.

Barry Plaga

And if you're asking, if we're going to invest a more headcount in area, I think we'll see how the next six months goes and we'll be evaluating that each quarter in terms of how much capacity each of those sales reps has on a monthly and quarterly basis to close deals.

Michael Kim - Imperial Capital

And if I could just speak one last one, and I wouldn't miss it, without asking about the federal sales pipeline, do you have more optimism on capturing some sizeable opportunities this year, especially now that we have a budget deal in place.

Barry Plaga

The budget deal is definitely the thing and it will put some stability into that business. We are optimistic about it, but it is very much for us and maybe for some other vendors as well, very much of the Q3 story in the federal space. A good chunk of our federal business comes in, in that quarter. So we have deals, we're going after this quarter. We have deals, we're forecasting this quarter, but the federal story is told in Q3. And so we're optimistic about it, but we're going to have to execute between now and then to deliver good results in our third quarter.

Operator

Our next question comes from the line of Kevin Liu from B. Riley & Company.

Kevin Liu - B. Riley & Company

I know you've talked a little bit about what drives your second half sales ramp here, but just wanted to get a little bit more detail in terms of to what extent you have deals in the pipeline that you're closing in that period? And what sort of expectations around the federal are kind of built in to that ramp? And whether this is more of kind of a headcount story or whether you already have a pipeline to support where you need to go to?

Barry Plaga

On the federal side, there is an existing pipeline, there are deals, and typically those are longer sales cycles, so newer deals that pop in this year, probably don't close until next year in the federal space. So there is opportunity. The team has been working on there, so its relatively stable groups now.

When we get to March and April, most, if not all of them -- well, all of them have been here a year working on opportunities. So in Q3, the big part of the ramp and revenue growth year-over-year is going to be attributed to federal, and I think also in EMEA, we're going to see some good performance out of them as we hit the back-half.

And then for Q4, it's primarily a commercial year-over-year growth story. We had I think a very poor Q4 in terms of sales execution, in closing deals this past quarter. We're not planning on that occurring again, so we think, the bar, I would say is low there, but we should be able to, on the commercial side, hit that 15% year-over-year growth.

Victor Limongelli

And when we talk, Kevin, we talk about the field sales there, they have quite a few opportunities, specific opportunities identified, as more of as specific pipeline analysis, but when you talk about inside sales that is more of a headcount piece because their sales cycles tend to be 30, 60, 90 days. So their Q4 deals aren't in the pipeline, yet, but we are gaining experience with that group, and we, I think, understand what to expect on a pro individual rep basis.

Kevin Liu - B. Riley & Company

And then, also could you just talk a little bit on the services side, particularly with the training where you've had bigger business with the government in the past. To what extent was that impacted by the shutdown within the fourth quarter and maybe if there is anyway to quantify how much of that you'll get back in terms of newly scheduled training days this year that might be helpful?

Barry Plaga

For Q4, on the professional services side, we lost probably about two weeks of billing time there on some big projects, because of that shutdown, few $100,000 of impact there. Training on the other hand was I think impacted during the whole quarter, because they've booked these training courses months in advance and plan their travel, et cetera. So I think we're seeing a rebound in that. We'll be tracking how many attendees will be coming to see CEIC from the federal sector. That's usually a good indicator for how much training activity follows-on from that during the year.

Victor Limongelli

The other thing about training, Kevin, is a big driver of that independent of travel budgets or federal budgets, big driver is when a new version comes out. A new major version, not a dot release, because people want to run that, what's changed in the latest thing, so that will be a bigger driver for us next year than it will on 2014 on the training basis.

Kevin Liu - B. Riley & Company

And then just lastly during the call last month you guys talked about some early product initiatives especially on the point-of-sale side within retail. Can you speak to whether you've already had your product tested out with some of the higher profile security breaches of late? And then whether you would expect commercialized version of that to be available this year?

Barry Plaga

There is some testing going on right now. The good news is we have a very lightweight server that's been well tested over a long period of time, over a decade of time. And the early indications are that it appears to be able to collect data from POS devices that are running, at least Windows embedded, perhaps Linux ones, as well systems POS terminals embedded on the majority of such terminals in the U.S. So the early indications are good, but we're not at a point, yet, where we can announce a commercial application there.

Operator

Our next question comes from the line of Hendi Susanto of Gabelli.

Hendi Susanto - Gabelli

Victor, the number of your endpoint customer base is pretty high at $20 million. EnCase Cybersecurity provides incident response and data discovery solutions. The market is directing its attention towards active threat identification at endpoints. And we are all aware that EnCase Analytics can incorporate endpoint information. My question is, like, technically how difficult or how easy is it to transform your software platform to have active endpoints threat identification capabilities similar to Bit9 and Mandiant?

Victor Limongelli

Well, we approach it a little bit differently than Bit9, as you know is a whitelist, and Mandiant is essentially detection tool on it's attempt to detect malware on the endpoint by identifying specific indicators of comprise. If you think about security very broadly, you think about prevention, detection, understanding what happened or forensics and remediation, we intended to be focused on those last two pieces.

Certainly, with EnCase Analytics, it is used for threat hunting, for identifying problems that you didn't know were there. And there is some overlap at least conceptually with what somebody like Mandiant does. But I think EnCase Analytics is broader than that. It's not looking for specific indictors that comprise like Mandiant, but instead is identifying anomalies, and it can even help with configuration problems of policy evaluations as well as world processes. But in a sense, both products are looking for threats that are unknown and that are running on endpoints. And in essence, there is some conceptual overlap. Does that answer your question, Hendi?

Hendi Susanto - Gabelli

And if I may ask that question differently, like is Guidance open toward expanding their endpoints or security solutions or is it pretty much like tightly focused on like detection and remediation?

Victor Limongelli

Well, we're definitely open to, and in fact we just did that. It's been about four months since EnCase Analytics came out. And we'll definitely be looking for ways to continue to improve the product. So I don't think you should view it as a closed, what we have now is all we'll ever we have, so definitely depending on customer interest.

Hendi Susanto - Gabelli

Or in other words like, is there any plan to develop competing products to Bit9 and Mandiant.

Victor Limongelli

I mean we certainly integrate with whitelist, with things like Bit9. I don't know that we'll -- we don't have any immediate current plans coming out with our own whitelist, is that's what you mean? But certainly, we will be expanding our capabilities on the security side.

Hendi Susanto - Gabelli

And then, Barry, may I inquire federal revenue in 2013 versus 2012?

Barry Plaga

Roughly it was down from about 25% of enterprise revenues, down to below 8%.

Hendi Susanto - Gabelli

And then as a total percent of revenue, do you have the numbers?

Barry Plaga

As a total percent, I don't have those. I can get them for you later.

Hendi Susanto - Gabelli

And then, Victor, on the infrastructure side of the subscription platform, given that you will be seeing like weakness in that segment of the legal market. What is your current product roadmap and strategy going forward in 2014?

Victor Limongelli

Well, we have some interesting work that's being done in development in that area. But I don't want to prematurely blow over cover, so to speak, and we'll be talking about that at CEIC. And I think it will be too much acclaimed, what we're planning to have there. But I don't want to get ahead of ourselves.

Hendi Susanto - Gabelli

And is it reasonable that you will launch that for second half of 2014 rather than for 2015?

Victor Limongelli

Let's talk about that in detail in next quarter.

Hendi Susanto - Gabelli

Do you have updates on customer feedback and acceptance of EnCase Analytics? And how many customers do you have and how many are in the pipeline?

Barry Plaga

So we signed up five in Q4 and we've already closed a couple of deals here in Q1. In terms of the pipeline, any cyber security opportunity right now? We have hundreds of those in the pipeline are potentially, as Victor said, almost a 100% going to be Analytics opportunities too. So we're not measuring that dollar amount yet and thinking about it that way, but we're looking at how do we get cyber and analytics in front of the customers so they can choose both together.

Hendi Susanto - Gabelli

I have reviewed the pricing on the website, would you go over to distance between the latest pricing versus what the pricing looked like last year?

Victor Limongelli

Sure, Hendi, it really depends on the size of the organization. So for a very large organization with a 100,000 endpoints, the price differential isn't that great, because on a per node basis about 20,000 nodes it really hasn't changed. The big difference is on smaller organizations, particularly below 2,000 nodes.

And even the $2,000 to $10,000 nodes, we're being more, first of all transparent, so you're able to go over the pricing on the website and anybody else's as well, but also more aggressive. So we were closing relatively few, if any deals below 2,000 nodes. And our goal there is to turn somebody who might want to buy EnCase Enterprise into an EnCase eDiscovery or EnCase Cybersecurity or EnCase Analytics customer. So the pricing is much more aggressive, the more you go.

If you think about it on a per node basis, I can give you specifics. Before our per node pricing used to go from high at $40 per node, had a very, very small account, down to $1 to $2 a node for larger accounts. And now it goes from $4 or $5 down to $1 or $2. So we've flattened the pricing quite a bit, but really haven't changed it much for the large organizations.

Operator

And our last question comes from the line of Matthew Kempler of Sidoti & Company.

Matthew Kempler - Sidoti & Company

I just wanted to first check on with the sales restructuring that we've put in place, what are the some of the steps that you're taking to minimize sales execution risk in the first half of the year?

Victor Limongelli

Well, so part of what we've done in addition to the changes we've made, we have clearly delineated the sales team from the inside team. So there is no overlap on their accounts, in terms of who is covering what. I think we've strengthened that delineation quite a bit from last year to this year, because there were some conflicts on those things.

Second of all, we're focused on the yields that pushed or slipped out of Q4 on a nearly daily basis, what's going on with those opportunities to try to make sure that we don't lose them through execution issues, as you indicated. And then, the third piece is the more aggressive pricing. I do think is a help in early part of the year, as we were talking with people in the past and getting some interest, but getting, how shall I say it, not enough interest to have them close the deal with more aggressive and also more transparent pricing. We think that will help as well.

Matthew Kempler - Sidoti & Company

And then you referenced the deals that had slipped out of the fourth quarter. As you're revisiting those in the first quarter, what's the read that the company is getting on, whether these deals have stalled or is there an opportunity to get them across the finish line and kind of what we have to do to drive that?

Victor Limongelli

So, of course, as you may imagine, there was a large number, as we talked about before, so it's not a one-size fits all. So some of them are Q1 opportunities, some of them are Q2 opportunities, there are others that are perhaps stalled. But its not dissimilar to what you might expect, we need to show people what the software does. If we haven't done it already, we do POCs or we'll go on site and do demos for them. Give them a fair price, and then we need to be easy to do business with in terms of our terms our interactions, our support after the fact. So it's not overly complicated in terms of how we're seeking to engage with customers.

Part of what you're seeing as we delineated this field sales and inside sales team is that we want the pre-sales people to be focused on the accounts that are large and more complex, and the inside sales people to be focused on the smaller accounts. So I think that will help us well, putting the right team on the right opportunities.

Matthew Kempler - Sidoti & Company

And then, last question from me, it's in the conversations that we're having these days with prospects for Cybersecurity and Analytics. What's the sense of where these types of products are stacking up, when clients are evaluating investments and security products, in terms on the priority list?

Victor Limongelli

We're on the priority list. I mean it depends, right? You read about breaches all the time or even if they haven't have one of the newspapers maybe somebody in their industry has, which tends to raise the interest level quite a bit. What we're providing in terms of endpoint security with our Cybersecurity product and especially on Analytics product, it bears repeating that those are newer categories, right. It's not like buying a firewall, where somebody has a budget item for firewalls for the last decade-plus. So it's not always a clearly well-established budget item, but I would describe it as quite a bit of interest in what we're providing. And as I said earlier, growing awareness of the need.

Operator

We have a follow-up question from the line of Hendi Susanto of Gabelli.

Hendi Susanto - Gabelli

One follow-up for Barry. Barry, are you still maintaining the non-GAAP gross margin target of 70% to 72% for the year? And how should we think that progressing throughout the year?

Barry Plaga

So overall, gross margin, we're looking at right around finishing the year about 72%. That's going to build from where it is today by quarter, kind of progressively throughout the year. So we ended the year, gross margins at 68%. We're looking down the year at about 72%. So I think the average for the year would be about 70% to 71%.

Operator

And I am showing no further questions at this time. I would like to turn the call back over to Rasmus for closing remarks.

Rasmus van der Colff

Thank you, operator. I think that concludes our call. And we would like to thank everybody for joining us today.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Guidance Software's CEO Discusses Q4 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts