February 21, 2013

Sourcefire Announces Record Revenue for Fourth Quarter & Full Year 2012

Fourth Quarter 2012:
-- Revenue: $67.4 Million, an Increase of 27% Year-Over-Year
-- Adjusted Net Income: $8.9 Million, or $0.29 per Diluted Share
Full Year 2012:
-- Revenue: $223.1 Million, an Increase of 35% Year-Over-Year
-- Adjusted Net Income: $24.9 Million, or $0.81 per Diluted Share

COLUMBIA, MD -- (Marketwire) -- 02/21/13 -- Sourcefire, Inc. (NASDAQ: FIRE), a leader in intelligent cybersecurity solutions, today announced financial results for its fiscal fourth quarter and full year ended December 31, 2012.

"Sourcefire achieved record revenue for the fourth quarter and full year driven by strong global demand for our best in class solutions running on our FirePOWER platform and the successful execution of our expanded go-to-market strategy," said Marty Roesch, interim CEO of Sourcefire. "Our threat-centric approach continues to be the key differentiator for Sourcefire, and our customers are making increasingly larger commitments to us to keep their extended networks safe."

Financial Summary

  • Total Revenue - Revenue for the fourth quarter of 2012 was $67.4 million compared to $53.2 million in the fourth quarter of 2011, an increase of 27%. Revenue for the year ended December 31, 2012 was $223.1 million compared to $165.6 million for 2011, an increase of 35%.

  • GAAP Net Income - Net income was $2.6 million for the fourth quarter of 2012, or $0.08 per diluted share, on the basis of generally accepted accounting principles (GAAP), compared with GAAP net income of $4.1 million, or $0.14 per diluted share, in the fourth quarter of 2011. GAAP net income for the year ended December 31, 2012 was $5.0 million, or $0.16 per diluted share, compared with GAAP net income of $6.2 million, or $0.21 per diluted share, for 2011.

  • Adjusted Net Income - Adjusted net income for the fourth quarter of 2012, which excludes stock-based compensation expense, amortization of acquisition-related intangible assets and includes an assumed tax rate of 35%, was $8.9 million, or $0.29 per diluted share. This compares to adjusted net income of $7.6 million, or $0.25 per diluted share, in the fourth quarter of 2011, which excludes stock-based compensation expense, amortization of acquisition-related intangible assets and other acquisition-related expenses and includes an assumed tax rate of 35%. Adjusted net income for the year ended December 31, 2012, which excludes stock-based compensation expense, amortization of acquisition-related intangible assets and includes an assumed tax rate of 35%, was $24.9 million, or $0.81 per diluted share. This compares to adjusted net income for 2011, which excludes stock-based compensation expense, amortization of acquisition-related intangible assets and other acquisition-related expenses, and includes an assumed tax rate of 35%, of $16.8 million, or $0.57 per diluted share.

  • Cash and Cash Flow - As of December 31, 2012, the Company's cash, cash equivalents and investments totaled $204.0 million. Net cash provided by operating activities was $16.6 million in the fourth quarter of 2012 and $42.7 million for the full year 2012. The Company generated free cash flow of $13.8 million in the fourth quarter of 2012 and $33.8 million for the full year 2012.

Recent Company Highlights
Revenue Growth

  • Increased 2012 U.S. commercial revenue to $104.0 million, up 17% over 2011.
  • Increased 2012 international revenue to $74.4 million, up 77% over 2011.
  • Increased 2012 U.S. federal sector revenue to $44.7 million, up 28% over 2011.

Innovation & Recognition

  • Announced it has expanded its FirePOWER™ appliance family performance range with the addition of the 7000 series. The FirePOWER performance range is now from 50 Mbps to 40+ Gbps, the broadest in the industry.

  • Announced the new Advanced Malware Protection for FirePOWER, providing users with unmatched visibility and control of modern threats on the network -- from point of entry, through propagation, to post-infection remediation.

  • Announced it has expanded its Advanced Malware Protection offerings to include new Incident Response Professional Services that assist customers in addressing advanced malware challenges. The services enable customers to clearly identify an event, evaluate the risk and determine the most effective approach to remediate. Experienced in incident response techniques, methodology and the actions of malicious code, the Sourcefire Incident Response Team helps customers eliminate uncertainty and make educated decisions for better protection -- before, during and after an attack.

First Quarter 2013 Outlook

Based on information as of February 21, 2013, Sourcefire expects revenue for the first quarter of 2013 in the range of $56.0 million to $58.0 million, net income per diluted share in the range of $0.01 to $0.03 and, on an adjusted basis, net income per diluted share in the range of $0.11 to $0.13. Sourcefire's expectation of adjusted net income per diluted share excludes stock-based compensation expense of $6.4 million to $6.6 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 2012 non-GAAP results are 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 Thursday, February 21, 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
Conference ID number: 86561838

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 network security risks. With solutions from a next-generation network security platform to advanced malware protection, Sourcefire provides customers with Agile Security® that is as dynamic as the real world it protects and the attackers against which it defends. Trusted for more than 10 years, Sourcefire has been consistently recognized for its innovation and industry leadership with numerous patents, world-class research, and award-winning technology. Today, the name Sourcefire has grown synonymous with innovation, security intelligence and agile end-to-end security protection. 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 first quarter of 2013.

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 first quarter of 2013 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        Twelve Months Ended

                               December 31,              December 31,

                         ------------------------  ------------------------

                             2012         2011         2012         2011

                         ------------ -----------  ------------ -----------

Revenue:                  (unaudited) (unaudited)   (unaudited)

  Products               $     43,313 $    33,959  $    135,490 $    98,166

  Technical support and

   professional services       24,045      19,245        87,600      67,480

                         ------------ -----------  ------------ -----------

    Total revenue              67,358      53,204       223,090     165,646

                         ------------ -----------  ------------ -----------

Cost of revenue:

  Products                     12,973       9,611        40,695      28,368

  Technical support and

   professional services        3,209       2,680        11,321       8,841

                         ------------ -----------  ------------ -----------

    Total cost of

     revenue                   16,182      12,291        52,016      37,209

                         ------------ -----------  ------------ -----------



Gross profit                   51,176      40,913       171,074     128,437



Operating expenses:

  Research and

   development                 10,713       8,849        41,570      33,145

  Sales and marketing          25,396      19,009        86,759      64,589

  General and

   administrative              10,242       5,258        28,194      19,709

  Depreciation and

   amortization                 1,514       1,059         5,187       3,917

                         ------------ -----------  ------------ -----------

    Total operating

     expenses                  47,865      34,175       161,710     121,360

                         ------------ -----------  ------------ -----------



Income from operations          3,311       6,738         9,364       7,077

Other income (expense),

 net                               22        (252)           20        (351)

                         ------------ -----------  ------------ -----------

Income before income

 taxes                          3,333       6,486         9,384       6,726

Provision for income

 taxes                            701       2,352         4,357         536

                         ------------ -----------  ------------ -----------

Net income               $      2,632 $     4,134  $      5,027 $     6,190

                         ============ ===========  ============ ===========



Net income per share -

 basic                   $       0.09 $      0.14  $       0.17 $      0.22

Net income per share -

 diluted                 $       0.08 $      0.14  $       0.16 $      0.21



Weighted average shares outstanding

 used in computing per share amounts:

  Basic                    30,203,709  28,912,772    29,787,100  28,607,013

  Diluted                  31,246,472  29,907,917    30,929,210  29,529,525



Stock-based compensation expense for the three and twelve

 months ended December 31, 2012 and 2011 is included in the

 Consolidated

Statements of Operations

     as follows (in

       thousands):

                            Three Months Ended        Twelve Months Ended

                               December 31,              December 31,

                         ------------------------  ------------------------

                             2012         2011         2012         2011

                         ------------ -----------  ------------ -----------

                          (unaudited) (unaudited)   (unaudited) (unaudited)

Cost of revenue

 (product)               $        154 $        72  $        480 $       273

Cost of revenue

 (services)                       249         157           863         514

                         ------------ -----------  ------------ -----------

  Stock-based comp

   expense included in

   cost of revenue                403         229         1,343         787



Research and development        1,630         934         5,507       3,408

Sales and marketing             3,007       1,623         9,966       5,990

General and

 administrative                 5,041       1,311         9,348       4,696

                         ------------ -----------  ------------ -----------

  Stock-based comp

   expense included in

   operating expenses           9,678       3,868        24,821      14,094

                         ------------ -----------  ------------ -----------

Total stock-based

 compensation expense    $     10,081 $     4,097  $     26,164 $    14,881

                         ============ ===========  ============ ===========







                              Sourcefire, Inc.

                   Condensed Consolidated Balance Sheets

                               (in thousands)



                                                 December 31,  December 31,

                                                     2012          2011

                                                 ------------  ------------

Assets                                            (unaudited)   (unaudited)

  Cash and cash equivalents                      $     96,178  $     59,407

  Investments                                         107,777        98,407

  Accounts receivable, net                             77,426        54,914

  Inventory                                             6,880         4,285

  Deferred tax assets                                  13,023        11,339

  Prepaid expenses and other current assets             9,043         7,718

  Property and equipment, net                          15,438        12,233

  Goodwill                                             15,000        15,000

  Intangible assets, net                                4,456         5,822

  Other long-term assets                               19,453        14,802

                                                 ------------  ------------

  Total assets                                   $    364,674  $    283,927

                                                 ============  ============



Liabilities

  Accounts payable and accrued expenses          $     27,783  $     23,237

  Deferred revenue                                     90,241        61,570

  Other liabilities                                     1,524         1,263

                                                 ------------  ------------

  Total liabilities                                   119,548        86,070

                                                 ------------  ------------



Stockholders' Equity

  Common stock                                             30            28

  Additional paid-in capital                          255,610       213,402

  Accumulated deficit                                 (10,522)      (15,549)

  Accumulated other comprehensive income (loss)             8           (24)

                                                 ------------  ------------

  Total stockholders' equity                          245,126       197,857

                                                 ------------  ------------



  Total liabilities and stockholders' equity     $    364,674  $    283,927

                                                 ------------  ------------







                              Sourcefire, Inc.

              Condensed Consolidated Statements of Cash Flows

                               (in thousands)



                            Three Months Ended        Twelve Months Ended

                               December 31,              December 31,

                         ------------------------  ------------------------

                             2012         2011         2012         2011

                         -----------  -----------  -----------  -----------

                         (unaudited)  (unaudited)  (unaudited)  (unaudited)



Net income               $     2,632  $     4,134  $     5,027  $     6,190

Adjustments to reconcile

 net income to net cash

 provided by operating

 activities                   14,000       10,889       37,658        8,412

                         -----------  -----------  -----------  -----------

Net cash provided by

 operating activities         16,632       15,023       42,685       14,602



Net cash used in

 investing activities         (5,853)     (10,250)     (22,298)     (16,949)



Net cash provided by

 financing activities          2,111        3,321       16,384        7,344

                         -----------  -----------  -----------  -----------

Net increase in cash and

 cash equivalents             12,890        8,094       36,771        4,997

Cash and cash

 equivalents at

 beginning of period          83,288       51,313       59,407       54,410

                         -----------  -----------  -----------  -----------

Cash and cash

 equivalents at end of

 period                  $    96,178  $    59,407  $    96,178  $    59,407

                         -----------  -----------  -----------  -----------







                              Sourcefire, Inc.

                Reconciliation of Non-GAAP Measures to GAAP

              (in thousands, except share and per share data)



                            Three Months Ended        Twelve Months Ended

                               December 31,              December 31,

                         ------------------------  ------------------------

                             2012         2011         2012         2011

                         -----------  -----------  -----------  -----------

                         (unaudited)  (unaudited)  (unaudited)  (unaudited)

Reconciliation of

 adjusted income from

 operations:

  GAAP income from

   operations            $     3,311  $     6,738  $     9,364  $     7,077

  Amortization of

   acquisition-related

   intangible assets             342          252        1,368        1,008

  Other acquisition-

   related expenses*               -          667        1,436        2,790

  Stock-based

   compensation expense       10,081        4,097       26,164       14,881

                         -----------  -----------  -----------  -----------

  Adjusted income from

   operations            $    13,734  $    11,754  $    38,332  $    25,756

                         ===========  ===========  ===========  ===========

  Adjusted income from

   operations as % of

   total revenue                20.4%        22.1%        17.2%        15.5%



Reconciliation of

 adjusted net income:

  GAAP net income        $     2,632  $     4,134  $     5,027  $     6,190

  Stock-based

   compensation expense       10,081        4,097       26,164       14,881

  Amortization of

   acquisition-related

   intangible assets             342          252        1,368        1,008

  Other acquisition-

   related expenses**              -          781        1,436        3,246

  Tax credit for

   research and

   experimentation                 -            -            -       (2,001)

  Income tax

   adjustment***              (4,113)      (1,714)      (9,066)      (6,514)

                         -----------  -----------  -----------  -----------

  Adjusted net income    $     8,942  $     7,550  $    24,929  $    16,810

                         ===========  ===========  ===========  ===========



  Adjusted net income

   per share - basic     $      0.30  $      0.26  $      0.84  $      0.59

  Adjusted net income

   per share - diluted   $      0.29  $      0.25  $      0.81  $      0.57



  Weighted average

   number of shares -

   basic                  30,203,709   28,912,772   29,787,100   28,607,013

  Weighted average

   number of shares -

   diluted                31,246,472   29,907,917   30,929,210   29,529,525



* Includes the accrual of retention obligations related to the hiring of

former Immunet employees and other acquisition-related costs.

** Includes the accrual of retention obligations related to the hiring of

former Immunet employees, the increase in the fair value of acquisition-

related contingent consideration and other acquisition-related costs.

*** 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        Twelve Months Ended

                               December 31,              December 31,

                         ------------------------  ------------------------

                             2012         2011         2012         2011

                         -----------  -----------  -----------  -----------

                         (unaudited)  (unaudited)  (unaudited)  (unaudited)



Net cash provided by

 operating activities    $    16,632  $    15,023  $    42,685  $    14,602

Purchase of property and

 equipment                    (2,786)      (2,167)      (8,935)      (6,511)

                         -----------  -----------  -----------  -----------

Free cash flow           $    13,846  $    12,856  $    33,750  $     8,091

                         -----------  -----------  -----------  -----------







                              Sourcefire, Inc.

                        Supplemental Operating Data





                            Three Months Ended        Twelve Months Ended

                               December 31,              December 31,

                         ------------------------  ------------------------

                             2012         2011         2012         2011

                         -----------  -----------  -----------  -----------

                         (unaudited)  (unaudited)  (unaudited)  (unaudited)



Number of deals in

 excess of $500,000               25           28           76           68

Number of deals in

 excess of $100,000              127          126          406          333

Number of new customers          162          171          452          452

Percentage of channel-

 influenced deals                 56%          59%          46%          51%

Total channel partners           738          576

Number of full-time

 employees at end of

 period                          599          451



Revenue Composition by

 Geography:

United States                     61%          74%          67%          75%

International                     39%          26%          33%          25%

                         -----------  -----------  -----------  -----------

  Total                          100%         100%         100%         100%

                         ===========  ===========  ===========  ===========



Revenue Composition by Business

 Distribution:

Existing customer

 product revenue                  32%          31%          36%          35%

New customer product

 revenue                          32%          33%          25%          24%

Services revenue                  36%          36%          39%          41%

                         -----------  -----------  -----------  -----------

  Total                          100%         100%         100%         100%

                         ===========  ===========  ===========  ===========

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Media Contact:

Jennifer Leggio

Sourcefire

650-260-4025

jleggio@sourcefire.com



Investor Contact:

Staci Mortenson

ICR

203-682-8273

Staci.Mortenson@icrinc.com



Source: Sourcefire

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