Sourcefire Announces Second Quarter 2011 Financial Result

Second Quarter 2011:

Revenue: $36.5 million, an increase of 19% year-over-year Adjusted Net Income: $2.4 million, or $0.08 per diluted share

Sourcefire, Inc. (Nasdaq:FIRE), the creator of Snort(R) and a leader in intelligent cybersecurity solutions, today announced financial results for its fiscal second quarter ended June 30, 2011.

"The investments we are making to grow both our sales force and partner channel are showing results, as evidenced by the strength in our U.S. Commercial and International businesses which grew 36% and 32%, respectively, over the second quarter of last year. I’m equally excited about the opportunity we see to expand our market and extend the value we provide our customers with our Next Generation Firewall and End Point Protection solutions to be released later this year,” said John Burris, CEO of Sourcefire.

Financial Summary

Total Revenue - Revenue for the second quarter of 2011 was $36.5 million compared to $30.6 million in the second quarter of 2010, an increase of 19%. GAAP Net Income/Loss - Net loss was $399,000 for the second quarter of 2011, or a loss of $0.01 per diluted share, on the basis of generally accepted accounting principles (GAAP), compared with GAAP net income of $10.5 million, or $0.37 per diluted share, in the second quarter of 2010. Adjusted Net Income - Adjusted net income for the second quarter of 2011, which excludes stock-based compensation expense, amortization of acquired intangible assets and acquisition-related expenses, and includes an assumed tax rate of 35%, was $2.4 million, or $0.08 per diluted share. This compares to adjusted net income of $3.3 million, or $0.11 per diluted share, in the second quarter of 2010, which excludes both stock-based compensation expense and the benefit from the release of the valuation allowance on the Company’s deferred tax asset and assumes a tax rate of 35%. Cash and Cash Flow – Cash, cash equivalents and investments were $145.3 million as of June 30, 2011. For the second quarter of 2011 net cash used in operating activities was $7.3 million. Free cash flow, which Sourcefire defines as net cash provided by operating activities less capital expenditures, was a negative $8.8 million for the second quarter of 2011. The second quarter figures include a one-time cash pre-payment of $11.0 million for third-party platform support. The majority of this pre-payment is included in the Company’s other long-term assets as of June 30, 2011 and will be expensed to cost of revenue through 2015.

Second Quarter Company Highlights

Global Expansion & Channel Development

Increased channel-influenced sales worldwide to 51%, up from 39% in 2Q10. Increased U.S. commercial revenue to $21.1 million, up 36% over 2Q10. Increased international revenue to $9.5 million, up 32% over 2Q10. U.S. federal sector revenue of $5.8 million was down 26% over 2Q10.

Innovation & Recognition

Sourcefire's Global Security Alliance Partner Program received a five-star rating in Everything Channel's annual Partner Program Guide. Introduced Sourcefire IPSx™, a streamlined, easy-to-manage IPS ideal for channel distribution and emerging international markets. Released Version 4.10 of the Sourcefire software, adding enhanced application awareness and third-party interoperability to its IPS solutions The Sourcefire Defense Center(R) successfully satisfied U.S. federal government IPv6 test requirements (USGv6) and the Company's IPS sensors are currently being tested.

Third Quarter 2011 Outlook

Based on information as of August 3, 2011, Sourcefire expects revenue for the third quarter of 2011 in the range of $40.5 million to $42.5 million, net income per diluted share in the range of $0.02 to $0.04 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 $4.2 million to $4.4 million and amortization of acquired intangible assets and acquisition-related expenses of approximately $1.1 million and includes an assumed 35% tax rate.

Non-GAAP Measures

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 our business, Sourcefire excludes certain charges and credits that are required by GAAP. Sourcefire believes these non-GAAP results provide useful information to both management and investors by excluding (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 our business in the ordinary course. For all of 2011 Sourcefire expects that non-GAAP results will continue to be adjusted to reflect the effect of an assumed tax rate of 35%. Sourcefire believes this adjustment provides useful information to both management and investors.

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 Wednesday, August 3, 2011 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: 866-383-8119

Calling from other countries: 617-597-5344

Pass code: 16634375

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), is a world leader in intelligent cybersecurity solutions. Sourcefire is transforming the way Global 2000 organizations and government agencies manage and minimize network security risks. Sourcefire's IPS, RNA(R) (Real-time Network Awareness) and Real-time Adaptive Security solutions equip customers with an efficient and effective layered security defense - protecting network assets before, during and after an attack. Through the years, Sourcefire has been consistently recognized for its innovation and industry leadership by customers, media and industry analysts alike - with more than 50 awards and accolades. Today, the name Sourcefire has grown synonymous with innovation and network security intelligence. For more information about Sourcefire, please visit http://www.sourcefire.com.