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Sourcefire, Inc. (FIRE)

Q4 2008 Earnings Call

February 26, 2009 5:00 pm ET


Tania Almond – IR Officer

John Burris – CEO

Todd Headley – CFO and Treasurer

Tom McDonough – President and COO


Analyst for Adam Holt – Morgan Stanley

Aaron Husock – Lanexa Global Management

Nick Selby - The 451 Group

Analyst for Katherine Egbert – Jefferies & Company

Jeff Meyers – Wachovia Capital

Michael Schechter – Mentor Partners

Jeff Silver – [Meridian]



Welcome to the fourth 2008 Sourcefire, Inc. earnings conference call. (Operator instructions) I would now like to turn the call over to Ms. Tania Almond, Investor Relations Officer with Sourcefire. Please proceed.

Tania Almond

This is Tania Almond, Sourcefire’s Investor Relations Officer. I want to thank you for joining our fourth quarter and full year 2008 earnings conference call. Joining me today on the call is John Burris, Sourcefire’s Chief Executive Officer; Tom McDonough, Sourcefire’s Chief Operating Officer and Todd Headley, our Chief Financial Officer.

Before we begin, I must remind you that statements made in this conference call and our public filings, releases and website which are not historical facts may be considered to be forward-looking statements that involve risks and uncertainties and are subject to change at any time.

We caution investors that any forward-looking statements made by us are management’s beliefs based on currently available information and should not be taken as a guarantee of future results or performance which may differ materially as a result of a variety of factors discussed in our earnings release that was issued today and in our latest Form 10Q, filed with the Securities and Exchange Commission in November 2008.

We disclaim any obligations to update any of these forward-looking statements or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments. There is more complete information regarding forward-looking statements, risks and uncertainties in the company’s filings with the SEC available on our website at

In addition, we may discuss non-GAAP financial information on the call. This information is reconciled to comparable GAAP financial information in the earnings release. The full earnings release can be found on our website. An online replay of this call will be available on the Investors section of our website for at least 90 days.

With that, I’ll turn the call over to John Burris, Sourcefire’s CEO.

John Burris

Thanks Tania. Happy very belated New Year everyone and thank you for joining us for our fourth quarter and full year 2008 earnings call. Let’s start today’s call with a brief review of the quarterly and full year results, highlight some of our accomplishments in the quarter and full year and provide an update on the trends in the business. I will then provide some insight into our strategic priorities and I will conclude with our financial guidance for the first quarter 2009.

As we announced in our press release earlier today, total revenues for the fourth quarter 2008 were $25.7 million, 33% above fourth quarter 2007 revenues. Gross profit for the quarter increased 38% to $20 million or 78% of revenues compared to $14.5 million or 75% of revenues in the fourth quarter of 2007. Net income attributable to common stockholders increased to $2.3 million in the fourth quarter 2008 compared with around $800,000 in the year-ago period.

We had a very strong quarter beating the top end of our revenue, net income and adjusted net income guidance ranges across the board. I am very pleased with the marked improvement in our bottom line. In spite of the strong Q3 that we had Q4 continued to be our seasonally strongest quarter with 34% of our revenue for the full year. This makes six years in a row now that this seasonal trend has occurred.

We also continued to see improvement in our operating expense margins in Q4 versus the fourth quarter of 2007 and we will continue to focus on the absolute dollars we are spending in all areas especially in light of the macro economic environment. We are keenly focused on leveraging our business model to reach and sustain profitability. Let me say that again, we are keenly focused on leveraging our business model to reap and sustain reach and sustain profitability. This is a top priority for the company to make progress on in 2009 and you will hear me refer to this throughout the year.

During the quarter our sales force and channel closed 46 six-figure transactions, 15 of which represent new Sourcefire 3D customers. We had eight transactions in the quarter in excess of $500,000. We expanded our international sales delivering revenues of $5.6 million this quarter from $5.4 million in the year-ago quarter or an increase of 3% but for the full year 2008 international revenues were up 30% over 2007 to $18.1 million.

Our international channel initiatives continue to make progress. During the fourth quarter we added ten new premier partners in our EMEA region three of which were in the middle east reflecting growth in that region and three in Germany. In fact, we won our first customer from the Middle East as well this quarter. In Asia Pacific we signed up seven new value added resellers and added a distribution partner. EMEA and Asia Pacific are focused growth areas for us in 2009.

Federal sector performance continued to show strength in the fourth quarter 2008 with revenues of $5.1 million or 20% of total revenues versus the year-ago period revenues of $1.7 million or 9% of total revenues. That is 195% year-over-year. The CNCI, Comprehensive National Cyber Security Initiative, has been a positive driving force for our business that did not exist in 2007. We continue to expect CNCI to positively influence our federal business throughout 2009.

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