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Sourcefire Inc. (FIRE)

Q2 2009 Earnings Call

July 30, 2009 9:00 am ET


Tania Almond – Investor Relations Officer

John Burris – Chief Executive Officer

Todd Headley – Chief Financial Officer

Tom McDonough – President and Chief Operating Officer


Adam Holt – Morgan Stanley

Rob Owens – Pacific Crest Securities

Todd Weller – Stifel Nicolaus

Katherine Egbert – Jefferies & Company

Aaron Husock – Lanexa Global



Welcome to the second quarter 2009 Sourcefire earnings conference call. (Operator Instructions) I would now like to turn the presentation over to our host for today's call the Investor Relations Officer with Sourcefire, Tania Almond.

Tania Almond

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 in our public filings, releases and website which are not historical facts maybe considered 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 belief 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 10-Q filed with the Securities and Exchange Commission in May 2009.

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

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 investor section of the website for at least 90 days.

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

John Burris

This is the first time we're having a morning call in response to feedback we received, so hopefully this is a more convenient time for everyone.

Let's start today's call with a brief review of the quarterly results, we'll highlight some of our accomplishments in the second quarter, and provide an update on trends in the business. I will then conclude with our financial guidance for the third quarter of 2009.

As we announced in our press release earlier today, total revenues for the second quarter of 2009 were $22.2 million that's 38% above second quarter of 2008 revenues. GAAP net income was $0.6 million in the second quarter of 2009 that's a positive $0.02 per share compared with a loss of $3.1 million or a loss of $0.12 per share in a year ago period. Adjusted net income was $2 million in the second quarter of 2009 or a positive $0.07 per share.

Earlier this month I marked my one year anniversary as CEO of the company. Upon joining Sourcefire, I publicly stated four central areas of focus for the company, growing revenue in the low double-digit range, controlling operating expenses, leveraging our channel relationships, and attaining full year profitability on an adjusted basis.

We had very strong results on all key financial metrics in the second quarter exceeding the top end of our previously announced expectations for revenue, net loss which actually became income, and adjusted net income. Given the challenging global economic environment and mixed results from other public companies this earning season, I am delighted with continued improvement in Sourcefire's bottom line and the fact that on a GAAP basis we were profitable in the second quarter.

Besides the revenue growth, we achieved this profitability by improving our operating expense margin versus the same quarter last year. I believe we are working all the right levers and can now make a few opportunistic investments in the business without compromising profitability.

Our international business is up 23% year-to-date versus the same period of 2008. Overall look at our second quarter '09 shows revenues of $4.2 million down slightly from $4.5 million in a year ago quarter. Included in international revenue is the vast majority of our OEM business.

A year ago we had active revenue producing arrangements with both Nokia and Nortel. Today, both of those arrangements are no longer active. Nokia's security group was acquired by Check Point in April of 2009 and Nortel has ceased activities around their security product line and incorporated Sourcefire technology.

We're disappointed with the turn of events we have deployed those resources to other areas of our business with very positive results. Our EMEA business has grown nicely over the past year, while our Asia Pacific business has been softer than expected due higher discounting practices from aggressive competition and a pronounced economic downturn. We'er committed to expanding our presence in Asia Pacific and in other international geographies and believe overtime that our international channel initiatives have the potential to grow to a much larger percentage of our total revenue.

We have recently appointed a managing director of Asia pacific operations in order to help us take advantage of the opportunities we see in the region. A sampling of additional investments and accomplishments in this area during the second quarter include the closed two transactions in EMEA greater than $500,000. We achieved EMEA channel end business of 58% of total revenue in the second quarter.

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