Sourcefire Announces Second Quarter 2013 Results

Second Quarter 2013: -- Revenue: $65.1 million, an increase of 29% year-over-year -- Adjusted Net Income: $6.6 million, or $0.20 per diluted share

Marketwired

COLUMBIA, MD--(Marketwired - Jul 29, 2013) - Sourcefire, Inc. (NASDAQ: FIRE), a leader in intelligent cybersecurity solutions, today announced financial results for its fiscal second quarter ended June 30, 2013.

Financial Summary

  • Total Revenue - Revenue for the second quarter of 2013 was $65.1 million compared to $50.6 million in the second quarter of 2012, an increase of 29%.

  • GAAP Net Income - Net income was $2.2 million for the second quarter of 2013, or $0.07 per diluted share, on the basis of generally accepted accounting principles (GAAP), compared with GAAP net income of $1.1 million, or $0.04 per diluted share, in the second quarter of 2012.

  • Adjusted Net Income - Adjusted net income for the second quarter of 2013, which excludes stock-based compensation expense and amortization of acquired intangible assets and includes an assumed tax rate of 35%, was $6.6 million, or $0.20 per diluted share. This compares to adjusted net income of $4.9 million, or $0.16 per diluted share, for the second 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 June 30, 2013, the Company's cash, cash equivalents and investments totaled $237.4 million. For the second quarter of 2013, net cash provided by operating activities was $5.9 million and the Company generated free cash flow of $2.5 million.

Recent Company Highlights

Revenue

  • Increased U.S. commercial revenue to $32.1 million, up 16% over 2Q12. 
  • Increased international revenue to $19.9 million, up 35% over 2Q12.
  • Increased U.S. federal sector revenue to $13.1 million, up 57% over 2Q12.

Innovation & Recognition

  • Introduced innovative malware trajectory capabilities across the Advanced Malware Protection portfolio, giving customers detailed visibility into malware attack activity and enabling them to detect, remediate and control malware outbreaks. With these additions, Sourcefire Advanced Malware Protection solutions are the only offerings that add a continuous capability to its malware blocking, going beyond point-in-time detection to confirm an infection, trace its path, analyze its behavior, remediate its targets and report on its impact regardless of when a file is determined to be malware.

  • Announced enhancements to the FirePOWER™ security platform, including the 7000 and 8000 series appliances, as well as updates to the Next-Generation Intrusion Prevention Systems (NGIPS) and Next-Generation Firewall (NGFW) solutions. With these new features, Sourcefire offers customers increased flexibility and scalability to help ensure leading protection for any environment.

  • Based on its recent analysis of the intrusion prevention systems (IPS) market, Frost & Sullivan recognized Sourcefire with the 2013 Global Frost & Sullivan Award for Product Leadership. Sourcefire's dedication to understanding, detecting, and blocking the most advanced enterprise network threats has enabled its Next-Generation IPS (NGIPS) solution to stand out from the competition. In addition, Sourcefire was recognized for providing exceptional customer value in terms of deployment flexibility, adaptability, and performance.

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.

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, 'Before, During, and After,' 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, 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 June 30,   Six Months Ended June 30,
    2013     2012   2013     2012
Revenue:   (unaudited)     (unaudited)   (unaudited)     (unaudited)
  Products   $ 38,088     $ 29,794   $ 68,880     $ 55,487
  Technical support and professional services     26,964       20,804     52,336       41,413
    Total revenue     65,052       50,598     121,216       96,900
Cost of revenue:                            
  Products     10,891       8,682     20,917       17,171
  Technical support and professional services     3,578       2,837     6,776       5,270
    Total cost of revenue     14,469       11,519     27,693       22,441
                             
Gross profit     50,583       39,079     93,523       74,459
                             
Operating expenses:                            
  Research and development     12,255       10,661     23,450       20,089
  Sales and marketing     25,792       19,764     50,902       38,968
  General and administrative     8,138       5,911     14,542       11,355
  Depreciation and amortization     1,660       1,133     3,263       2,317
    Total operating expenses     47,845       37,469     92,157       72,729
                             
Income from operations     2,738       1,610     1,366       1,730
Other income (expense), net     (149 )     11     (190 )     8
Income before income taxes     2,589       1,621     1,176       1,738
Provision (benefit) for income taxes     372       508     (1,015 )     558
Net income   $ 2,217     $ 1,113   $ 2,191     $ 1,180
                             
Net income per share - basic   $ 0.07     $ 0.04   $ 0.07     $ 0.04
Net income per share - diluted   $ 0.07     $ 0.04   $ 0.07     $ 0.04
                             
Weighted average shares outstanding used in computing per share amounts:                      
  Basic     31,314,224       29,714,500     30,983,817       29,470,671
  Diluted     32,129,720       30,961,421     31,892,619       30,669,716
                             
Stock-based compensation expense for the three and six months ended June 30, 2013 and 2012 is included in the Consolidated Statements of Operations as follows (in thousands):              
               
    Three Months Ended June 30,   Six Months Ended June 30,
    2013     2012   2013     2012
    (unaudited)     (unaudited)   (unaudited)     (unaudited)
  Cost of revenue (product)   $ 152     $ 93   $ 309     $ 171
  Cost of revenue (services)     305       211     564       377
    Stock-based comp expense included in cost of revenue     457       304     873       548
                               
  Research and development     1,758       1,184     3,328       2,156
  Sales and marketing     3,176       2,137     6,144       3,883
  General and administrative     1,803       1,244     3,156       2,389
    Stock-based comp expense included in operating expenses     6,737       4,565     12,628       8,428
  Total stock-based compensation expense   $ 7,194     $ 4,869   $ 13,501     $ 8,976
                             
                             
   
   
Sourcefire, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands)  
             
    June 30,     December 31,  
    2013     2012  
Assets   (unaudited)     (unaudited)  
  Cash and cash equivalents   $ 128,720     $ 96,178  
  Investments     108,729       107,777  
  Accounts receivable, net     71,092       77,426  
  Inventory     7,107       6,880  
  Deferred tax assets     24,027       13,023  
  Prepaid expenses and other current assets     10,438       9,043  
  Property and equipment, net     16,666       15,438  
  Goodwill     15,000       15,000  
  Intangible assets, net     3,773       4,456  
  Other long-term assets     18,570       19,453  
  Total assets   $ 404,122     $ 364,674  
                 
Liabilities                
  Accounts payable and accrued expenses   $ 28,872     $ 27,783  
  Deferred revenue     94,073       90,241  
  Other liabilities     2,252       1,524  
  Total liabilities     125,197       119,548  
                 
Stockholders' Equity                
  Common stock     31       30  
  Additional paid-in capital     287,775       255,610  
  Accumulated deficit     (8,331 )     (10,522 )
  Accumulated other comprehensive income (loss)     (550 )     8  
  Total stockholders' equity     278,925       245,126  
                   
  Total liabilities and stockholders' equity   $ 404,122     $ 364,674  
                 
                 
   
   
Sourcefire, Inc.  
Condensed Consolidated Statements of Cash Flows  
(in thousands)  
                         
    Three Months Ended June 30,     Six Months Ended June 30,  
    2013     2012     2013     2012  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Net income   $ 2,217     $ 1,113     $ 2,191     $ 1,180  
Adjustments to reconcile net income to net cash provided by operating activities     3,643       1,521       19,548       21,131  
Net cash provided by operating activities     5,860       2,634       21,739       22,311  
                                 
Net cash used in investing activities     (4,768 )     (7,573 )     (7,862 )     (13,109 )
                                 
Net cash provided by financing activities     2,853       5,087       18,665       8,928  
Net increase in cash and cash equivalents     3,945       148       32,542       18,130  
Cash and cash equivalents at beginning of period     124,775       77,389       96,178       59,407  
Cash and cash equivalents at end of period   $ 128,720     $ 77,537     $ 128,720     $ 77,537  
                                 
                                 
   
   
Sourcefire, Inc.  
Reconciliation of Non-GAAP Measures to GAAP  
(in thousands, except share and per share data)  
                         
                         
    Three Months Ended June 30,     Six Months Ended June 30,  
    2013     2012     2013     2012  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
Reconciliation of adjusted income from operations:                                
  GAAP income from operations   $ 2,738     $ 1,610     $ 1,366     $ 1,730  
  Amortization of acquisition-related intangible assets     342       342       684       684  
  Other acquisition-related expenses*     -       769       -       1,436  
  Stock-based compensation expense     7,194       4,869       13,501       8,976  
  Adjusted income from operations   $ 10,274     $ 7,590     $ 15,551     $ 12,826  
  Adjusted income from operations as % of total revenue     15.8 %     15.0 %     12.8 %     13.2 %
                                 
Reconciliation of adjusted net income:                                
  GAAP net income   $ 2,217     $ 1,113     $ 2,191     $ 1,180  
  Stock-based compensation expense     7,194       4,869       13,501       8,976  
  Amortization of acquisition-related intangible assets     342       342       684       684  
  Other acquisition-related expenses*     -       769       -       1,436  
  Tax credit for research and experimentation     (601 )     -       (2,064 )     -  
  Income tax adjustment**     (2,571 )     (2,152 )     (4,327 )     (3,934 )
  Adjusted net income   $ 6,581     $ 4,941     $ 9,985     $ 8,342  
                                 
  Adjusted net income per share - basic   $ 0.21     $ 0.17     $ 0.32     $ 0.28  
  Adjusted net income per share - diluted   $ 0.20     $ 0.16     $ 0.31     $ 0.27  
                                 
  Weighted average number of shares - basic     31,314,224       29,714,500       30,983,817       29,470,671  
  Weighted average number of shares - diluted     32,129,720       30,961,421       31,892,619       30,669,716  
                                 
* 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 estimated tax rate of 35%.  
                                 
                                 
Reconciliation of net cash provided by operating activities to free cash flow:  
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2013     2012     2013     2012  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
                                 
Net cash provided by operating activities   $ 5,860     $ 2,634     $ 21,739     $ 22,311  
Purchase of property and equipment     (3,371 )     (1,534 )     (4,606 )     (4,076 )
Free cash flow   $ 2,489     $ 1,100     $ 17,133     $ 18,235  
                                 
                                 
   
   
Sourcefire, Inc.  
Supplemental Operating Data  
                         
                         
    Three Months Ended June 30,     Six Months Ended June 30,  
    2013     2012     2013     2012  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)  
                         
Number of deals in excess of $500,000   28     13     41     25  
Number of deals in excess of $100,000   120     83     206     162  
Number of new customers   126     98     225     182  
Percentage of channel-influenced deals   39 %   43 %   45 %   47 %
Percentage of install base on FirePOWER   38 %   15 %            
Total channel partners   814     691              
Number of full-time employees at end of period   674     519              
                         
Revenue Composition by Geography:                        
United States   69 %   71 %   67 %   69 %
International   31 %   29 %   33 %   31 %
  Total   100 %   100 %   100 %   100 %
                         
Revenue Composition by Business Distribution:                        
Existing customer product revenue   42 %   41 %   41 %   38 %
New customer product revenue   16 %   18 %   16 %   20 %
Services revenue   42 %   41 %   43 %   42 %
  Total   100 %   100 %   100 %   100 %
                         
                         
Contact:
Media
Jennifer Leggio
Sourcefire
650-260-4025
jleggio@sourcefire.com

Investor
Staci Mortenson
ICR
203-682-8273
Staci.Mortenson@icrinc.com

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