SOURCE: Sourcefire

Sourcefire

February 21, 2013 16:05 ET

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 - Feb 21, 2013) -  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 December 31,     Twelve Months Ended 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 December 31,     Twelve Months Ended 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 December 31,     Twelve Months Ended 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 December 31,     Twelve Months Ended 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 December 31,     Twelve Months Ended 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 December 31,     Twelve Months Ended 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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