Sourcefire, Inc. : 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™ 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: [phone]
Calling from other countries: [phone]
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® 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
[e-mail]

Investor Contact:
Staci Mortenson
ICR
203-682-8273
[e-mail]

Source: Sourcefire

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