Sourcefire Announces First Quarter 2013 Results

Sourcefire Announces First Quarter 2013 Results 
First Quarter 2013: 
-- Revenue: $56.2 million, an increase of 21% year-over-year 
-- Adjusted Net Income: $3.4 million, or $0.11 per diluted share 
COLUMBIA, MD -- (Marketwired) -- 04/30/13 --  Sourcefire, Inc.
(NASDAQ: FIRE), a leader in intelligent cybersecurity solutions,
today announced financial results for its fiscal first quarter ended
March 31, 2013. 
"Our threat-centric approach to cybersecurity that allows defenders
to address the full attack continuum is in high demand, and we
believe we are extremely well positioned to capitalize on the growth
opportunity in front of us. Despite weakness in federal government
spending, our total revenue increased 21% driven by ongoing strong
performance from our International and U.S. Commercial businesses,"
said John Becker, CEO of Sourcefire. 
Financial Summary 


 
--  Total Revenue - Revenue for the first quarter of 2013 was $56.2
    million compared to $46.3 million in the first quarter of 2012, an
    increase of 21%.
    
    
--  GAAP Net Income/Loss - Net loss was $26,000 for the first quarter of
    2013, or $0.00 per diluted share, on the basis of generally accepted
    accounting principles (GAAP), compared with GAAP net income of
    $67,000, or $0.00 per diluted share, in the first quarter of 2012.
    
    
--  Adjusted Net Income - Adjusted net income for the first quarter of
    2013, which excludes stock-based compensation expense and amortization
    of acquired intangible assets and includes an assumed tax rate of 35%,
    was $3.4 million, or $0.11 per diluted share. This compares to
    adjusted net income of $3.4 million, or $0.11 per diluted share, for
    the first quarter of 2012, which excludes stock-based compensation
    expense, amortization of acquired intangible assets and other
    acquisition-related expenses, and includes an assumed tax rate of
    35%.
    
    
--  Cash and Cash Flow - As of March 31, 2013, the Company's cash, cash
    equivalents and investments totaled $232.9 million. For the first
    quarter of 2013, net cash provided by operating activities was $15.9
    million and the Company generated free cash flow of $14.6 million.

  
Recent Company Highlights 
Revenue  


 
--  Increased U.S. commercial revenue to $29.2 million, up 40% over 1Q12.
    
    
--  Increased international revenue to $20.7 million, up 32% over 1Q12.
    
    
--  U.S. federal sector revenue of $6.2 million, compared to $9.8 million
    in 1Q12.

  
Innovation & Recognition 


 
--  Introduced its dedicated Advanced Malware Protection (AMP) appliance,
    based on its FirePOWER(TM) network security platform. Expanding
    Sourcefire's AMP solution, the dedicated AMP appliances detect, track
    and defend against sophisticated malware as it travels in, out and
    across the network.
    
    
--  Expanded its FirePOWER appliance family at the mid-range with the new
    7115 and 7125 models, providing greater port density.
    
    
--  Announced that Sourcefire's Next-Generation Firewall (NGFW) was
    recognized as leader in the NSS Labs NGFW Security Value Map,
    achieving a 98% effectiveness rate and the lowest
    total-cost-of-ownership of all appliances tested.
    
    
--  Featured as a market leader in Gartner's "Next-Generation IPS (NGIPS)
    Technology Disrupts the IPS Market" report, which highlighted
    Sourcefire's innovation in NGIPS, and the company's ability to
    influence the market with its entry into the Next-Generation Firewall
    market.

  
Second Quarter 2013 Outlook  
Based on information as of April 30, 2013, Sourcefire expects revenue
for the second quarter of 2013 in the range of $60.5 million to $63.5
million, net income per diluted share in the range of a loss of $0.02
to a profit of $0.01 and, on an adjusted basis, net income per
diluted share in the range of $0.13 to $0.16. Sourcefire's
expectation of adjusted net income per diluted share excludes
stock-based compensation expense of $6.9 million to $7.1 million and
amortization of acquired intangible assets of approximately $0.3
million, and includes an assumed 35% tax rate.  
Non-GAAP Measures 
To supplement its consolidated financial statements presented in
accordance with GAAP, Sourcefire considers certain financial measures
that are not prepared in accordance with GAAP, including non-GAAP
adjusted net income, adjusted net income per share, adjusted income
from operations, adjusted income from operations as a percentage of
revenue and free cash flow. 
Sourcefire uses these non-GAAP financial measures, in addition to
GAAP financial measures, to evaluate its operating and financial
performance and to compare such performance to that of prior periods
and to the performance of its competitors. The Company also uses
these non-GAAP financial measures in making operational and financial
decisions and in establishing operational goals. Sourcefire believes
that providing these non-GAAP financial measures to investors, as a
supplement to GAAP financial measures, helps investors to evaluate
the Company's operating and financial performance and trends in its
business, consistent with how management evaluates such performance
and trends. The Company also believes these non-GAAP financial
measures may be useful to investors in comparing its performance to
the performance of other companies, although Sourcefire's non-GAAP
financial measures are specific to it and the non-GAAP financial
measures of other companies may not be calculated in the same manner. 
Adjusted Net Income, Adjusted Net Income per Share, Adjusted Income
from Operations and Adjusted Income from Operations as a Percentage
of Revenue: In evaluating the operating performance of its business,
Sourcefire excludes certain charges and credits that are required by
GAAP. These non-GAAP measures exclude (i) stock-based compensation,
which does not involve the expenditure of cash, (ii) amortization of
acquisition-related intangible assets, which does not involve the
expenditure of cash, and (iii) other acquisition-related expenses,
which are unrelated to the ongoing operation of the Company's
business in the ordinary course. For 2013, we expect non-GAAP results
to be adjusted to reflect the effect of an assumed tax rate of 35%.
This adjustment is intended to normalize the tax rate and provide a
tax rate that approximates the Company's expected long-term GAAP tax
rate.  
Free Cash Flow: Sourcefire defines free cash flow as net cash
provided by operating activities minus capital expenditures. The
Company considers free cash flow to be a liquidity measure that
provides useful information to management and investors about the
amount of cash generated by the business that, after the purchase of
property and equipment, can be used for strategic opportunities,
including investing in the business, making strategic acquisitions
and strengthening the balance sheet. 
These measures should be considered in addition to results prepared
in accordance with GAAP, but should not be considered a substitute
for, or superior to, GAAP results. The non-GAAP measures included in
this press release have been reconciled to the nearest GAAP measure
in the table following the financial statements attached to this
press release.  
Conference Call and Webcast 
On Tuesday, April 30, 2013 at 5:00 p.m. Eastern Time, Sourcefire will
host a conference call to review these results. A listen-only web
cast of the session will be available at
http://investor.sourcefire.com.  
Those wishing to participate in the live session should use the
following numbers to dial in:  
Calling from the United States or Canada: (877) 712-7037
 Calling
from other countries: (253) 237-1122
 Pass code: 33989448 
An online replay will be available at http://investor.sourcefire.com
following the completion of the live call and will remain available
for at least 90 days.  
About Sourcefire
 Sourcefire, Inc. (NASDAQ: FIRE), a world leader in
intelligent cybersecurity solutions, is transforming the way global
large- to mid-size organizations and government agencies manage and
minimize security risks to their dynamic networks, endpoints, mobile
devices and virtual environments. With solutions from a
next-generation network security platform to advanced malware
protection, Sourcefire's threat-centric approach provides customers
with Agile Security(R) that delivers protection before, during and
after an attack. Trusted for more than 10 years, Sourcefire has
earned a reputation for innovation, consistent security effectiveness
and world-class research all focused on detecting, understanding and
stopping threats. For more information about Sourcefire, please visit
www.sourcefire.com. 
Sourcefire, the Sourcefire logo, Snort, the Snort and Pig logo, Agile
Security and the Agile Security logo, ClamAV, FireAMP, FirePOWER,
FireSIGHT and certain other trademarks and logos are trademarks or
registered trademarks of Sourcefire, Inc. in the United States and
other countries. Other company, product and service names may be
trademarks or service marks of others.  
Cautionary Language Concerning Forward-Looking Statements 
The statements contained in this release that are not historical
facts are "forward-looking statements" (as such term is defined in
the Private Securities Litigation Reform Act of 1995) that involve
risks and uncertainties. These statements include expectations
regarding financial results for the second quarter of 2013 and
expectations of future growth.  
Management cautions the reader that these forward-looking statements
are only predictions and are subject to a number of both known and
unknown risks and uncertainties, and actual results, performance,
and/or achievements of Sourcefire, Inc. may differ materially from
the future results, performance, and/or achievements expressed or
implied by these forward-looking statements as a result of a number
of factors. These factors include, without limitation, the fact that
the outlook for the second quarter of 2013 and expectations of future
growth could change,, and also include, without limitation, those
risks and uncertainties described from time to time in the reports
filed by Sourcefire, Inc. with the U.S. Securities and Exchange
Commission. Sourcefire, Inc. undertakes no obligation to update any
forward-looking statements.  


 
                                                                            
                              Sourcefire, Inc.                              
                   Consolidated Statements of Operations                    
              (in thousands, except share and per share data)               
                                                                            
                                                                            
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2013           2012     
                                               -------------  ------------- 
Revenue:                                        (unaudited)    (unaudited)  
  Products                                     $      30,792  $      25,693 
  Technical support and professional services         25,372         20,609 
                                               -------------  ------------- 
    Total revenue                                     56,164         46,302 
                                               -------------  ------------- 
Cost of revenue:                                                            
  Products                                            10,026          8,489 
  Technical support and professional services          3,198          2,433 
                                               -------------  ------------- 
    Total cost of revenue                             13,224         10,922 
                                               -------------  ------------- 
                                                                            
Gross profit                                          42,940         35,380 
                                                                            
Operating expenses:                                                         
  Research and development                            11,195          9,428 
  Sales and marketing                                 25,110         19,204 
  General and administrative                           6,404          5,444 
  Depreciation and amortization                        1,603          1,184 
                                               -------------  ------------- 
    Total operating expenses                          44,312         35,260 
                                               -------------  ------------- 
                                                                            
Income (loss) from operations                         (1,372)           120 
Other income (expense), net                              (41)            (3)
                                               -------------  ------------- 
Income (loss) before income taxes                     (1,413)           117 
Provision for (benefit from) income taxes             (1,387)            50 
                                               -------------  ------------- 
Net income (loss)                              $         (26) $          67 
                                               =============  ============= 
                                                                            
Net income (loss) per share - basic            $        0.00  $        0.00 
Net income (loss) per share - diluted          $        0.00  $        0.00 
                                                                            
Weighted average shares outstanding used in computing per                   
 share amounts:                                                             
  Basic                                           30,649,739     29,226,842 
  Diluted                                         30,649,739     30,378,011 
                                                                            
Stock-based compensation expense for the three months ended March 31, 2013  
 and 2012 is included in the Consolidated Statements of Operations as       
 follows (in thousands):                                                    
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2013           2012     
                                               -------------  ------------- 
                                                (unaudited)    (unaudited)  
  Cost of revenue (product)                    $         157  $          78 
  Cost of revenue (services)                             259            166 
                                               -------------  ------------- 
    Stock-based comp expense included in cost                               
     of revenue                                          416            244 
                                                                            
  Research and development                             1,570            972 
  Sales and marketing                                  2,968          1,746 
  General and administrative                           1,353          1,145 
                                               -------------  ------------- 
    Stock-based comp expense included in                                    
     operating expenses                                5,891          3,863 
                                               -------------  ------------- 
  Total stock-based compensation expense       $       6,307  $       4,107 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                              Sourcefire, Inc.                              
                   Condensed Consolidated Balance Sheets                    
                               (in thousands)                               
                                                                            
                                                 March 31,     December 31, 
                                                    2013           2012     
                                               -------------  ------------- 
Assets                                          (unaudited)    (unaudited)  
  Cash and cash equivalents                    $     124,775  $      96,178 
  Investments                                        108,143        107,777 
  Accounts receivable, net                            58,446         77,426 
  Inventory                                            7,247          6,880 
  Deferred tax assets                                 24,547         13,023 
  Prepaid expenses and other current assets           10,956          9,043 
  Property and equipment, net                         14,935         15,438 
  Goodwill                                            15,000         15,000 
  Intangible assets, net                               4,115          4,456 
  Other long-term assets                              19,109         19,453 
                                               -------------  ------------- 
  Total assets                                 $     387,273  $     364,674 
                                               =============  ============= 
                                                                            
Liabilities                                                                 
  Accounts payable and accrued expenses        $      26,813  $      27,783 
  Deferred revenue                                    90,536         90,241 
  Other liabilities                                    2,834          1,524 
                                               -------------  ------------- 
  Total liabilities                                  120,183        119,548 
                                               -------------  ------------- 
                                                                            
Stockholders' Equity                                                        
  Common stock                                            30             30 
  Additional paid-in capital                         277,729        255,610 
  Accumulated deficit                                (10,548)       (10,522)
  Accumulated other comprehensive income                                    
   (loss)                                               (121)             8 
                                               -------------  ------------- 
  Total stockholders' equity                         267,090        245,126 
                                               -------------  ------------- 
                                                                            
  Total liabilities and stockholders' equity   $     387,273  $     364,674 
                                               -------------  ------------- 
                                                                            
                                                                            
                                                                            
                              Sourcefire, Inc.                              
              Condensed Consolidated Statements of Cash Flows               
                               (in thousands)                               
                                                                            
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2013           2012     
                                               -------------  ------------- 
                                                (unaudited)    (unaudited)  
                                                                            
Net income (loss)                              $         (26) $          67 
                                                                            
Adjustments to reconcile net income (loss) to                               
 net cash provided by operating activities            15,905         19,610 
                                               -------------  ------------- 
Net cash provided by operating activities             15,879         19,677 
                                                                            
Net cash used in investing activities                 (3,094)        (5,536)
                                                                            
Net cash provided by financing activities             15,812          3,841 
                                               -------------  ------------- 
Net increase in cash and cash equivalents             28,597         17,982 
Cash and cash equivalents at beginning of                                   
 period                                               96,178         59,407 
                                               -------------  ------------- 
Cash and cash equivalents at end of period     $     124,775  $      77,389 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                              Sourcefire, Inc.                              
                Reconciliation of Non-GAAP Measures to GAAP                 
              (in thousands, except share and per share data)               
                                                                            
                                                                            
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2013           2012     
                                               -------------  ------------- 
                                                (unaudited)    (unaudited)  
Reconciliation of adjusted income from                                      
 operations:                                             
                   
  GAAP income (loss) from operations           $      (1,372) $         120 
  Amortization of acquisition-related                                       
   intangible assets                                     342            342 
  Other acquisition-related expenses*                      -            667 
  Stock-based compensation expense                     6,307          4,107 
                                               -------------  ------------- 
  Adjusted income from operations              $       5,277  $       5,236 
                                               =============  ============= 
  Adjusted income from operations as % of                                   
   total revenue                                         9.4%          11.3%
                                                                            
Reconciliation of adjusted net income:                                      
  GAAP net income (loss)                       $         (26) $          67 
  Stock-based compensation expense                     6,307          4,107 
  Amortization of acquisition-related                                       
   intangible assets                                     342            342 
  Other acquisition-related expenses*                      -            667 
  Tax credit for research and experimentation         (1,463)             - 
  Income tax adjustment**                             (1,757)        (1,782)
                                               -------------  ------------- 
  Adjusted net income                          $       3,403  $       3,401 
                                               =============  ============= 
                                                                            
  Adjusted net income per share - basic        $        0.11  $        0.12 
  Adjusted net income per share - diluted      $        0.11  $        0.11 
                                                                            
  Weighted average number of shares - basic       30,649,739     29,226,842 
  Weighted average number of shares - diluted     31,651,847     30,378,011 
                                                                            
* Includes the accrual of retention obligations related to the hiring of    
 former Immunet employees                                                   
** Income tax adjustment is used to adjust the GAAP provision for income    
 taxes to a Non-GAAP provision for income taxes utilizing an assumed tax    
 rate of 35%.                                                               
                                                                            
                                                                            
                                                                            
Reconciliation of net cash provided by operating activities                 
 to free cash flow:                                                         
                                                                            
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2013           2012     
                                               -------------  ------------- 
                                                (unaudited)    (unaudited)  
                                                                            
Net cash provided by operating activities      $      15,879  $      19,677 
Purchase of property and equipment                    (1,235)        (2,542)
                                               -------------  ------------- 
Free cash flow                                 $      14,644  $      17,135 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                              Sourcefire, Inc.                              
                        Supplemental Operating Data                         
                                                                            
                                                                            
                                               Three Months Ended March 31, 
                                               ---------------------------- 
                                                    2013           2012     
                                               -------------- ------------- 
                                                 (unaudited)   (unaudited)  
                                                                            
Number of deals in excess of $500,000                      13            12 
Number of deals in excess of $100,000                      86            79 
Number of new customers                                    99            84 
Percentage of channel-influenced deals                    53%            51%
Total channel partners                                    778           637 
Number of full-time employees at end of period            644           489 
                                                                            
Revenue Composition by Geography:                                           
United States                                             63%            66%
International                                             37%            34%
                                               -------------- ------------- 
  Total                                                  100%           100%
                                               ============== ============= 
                                                                            
Revenue Composition by Business Distribution:                               
Existing customer product revenue                         39%            34%
New customer product revenue                              16%            22%
Services revenue                                          45%            44%
                                               -------------- ------------- 
  Total                                                  100%           100%
                                               ============== ============= 

  
Media Contact:
Jennifer Leggio
Sourcefire
650-260-4025
jleggio@sourcefire.com 
Investor Contact:
Staci Mortenson
ICR
203-682-8273
Staci.Mortenson@icrinc.com 
 
 
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