Sourcefire Announces Third Quarter 2011 Financial Results

PRESS RELEASE

COLUMBIA, Md.--Sourcefire, Inc. (Nasdaq:FIRE):

Third Quarter 2011:

Revenue: $45.2 million, an increase of 25% year-over-year Adjusted Net Income: $5.7 million, or $0.19 per diluted share

Sourcefire, Inc. (Nasdaq:FIRE), a leader in intelligent cybersecurity solutions, today announced financial results for its fiscal third quarter ended September 30, 2011.

"Our record quarterly revenue and adjusted net income were the result of broad based strength across our business. Our Commercial and International businesses continued their strong performance while our Federal business benefited from increased spending as the Federal Government closed out its fiscal year and made our solutions a funding priority,” said John Burris, CEO of Sourcefire. “With our Agile SecurityTM vision, which emphasizes the need for more informed, adaptive, and automated security, and the upcoming availability of our expanded solutions, we have the opportunity to take on an even larger role in our clients’ security infrastructure.”

Financial Summary

Total Revenue - Revenue for the third quarter of 2011 was $45.2 million compared to $36.2 million in the third quarter of 2010, an increase of 25%.

GAAP Net Income - Net income was $2.0 million for the third quarter of 2011, or $0.07 per diluted share, on the basis of generally accepted accounting principles (GAAP), compared with GAAP net income of $4.2 million, or $0.15 per diluted share, in the third quarter of 2010.

Adjusted Net Income - Adjusted net income for the third quarter of 2011, which excludes stock-based compensation expense, amortization of acquired intangible assets and other acquisition-related expenses, and includes an assumed tax rate of 35%, was $5.7 million, or $0.19 per diluted share. This compares to adjusted net income of $5.2 million, or $0.18 per diluted share, in the third quarter of 2010, which excludes stock-based compensation expense and assumes a tax rate of 35%.

Third Quarter Company Highlights

Global Expansion & Channel Development

Increased channel-influenced sales worldwide to 39%, up from 33% in 3Q10.

Increased U.S. commercial revenue to $18.8 million, up 25% over 3Q10.

Increased international revenue to $10.5 million, up 41% over 3Q10.

Increased U.S. federal sector revenue to $15.9 million, up 16% over 3Q10.

Innovation & Recognition

Unveiled the Agile SecurityTM vision emphasizing the need for more informed, adaptive, and automated security solutions to protect today's dynamic IT environments from constantly changing threats.

Announced the availability of Industry’s first IPS for 40 Gigabit Ethernet Networks. Brings new models and enhancements to the 3D8000 series for high-end performance networks and delivers a new SSL Appliance with lightning fast SSL decryption. These new appliances increase customer agility by supporting a wide range of performance requirements while continuing to deliver on the Agile Security vision and expanding the portfolio of intelligent, adaptive security solutions.

Frost & Sullivan honored Sourcefire with its 2011 Global Customer Value Enhancement Award, recognizing it above all others in the network intrusion prevention system market.

Fourth Quarter and Full Year 2011 Outlook

Based on information as of November 1, 2011, Sourcefire expects revenue for the fourth quarter of 2011 in the range of $45.5 million to $47.5 million, net income per diluted share in the range of $0.06 to $0.08 and, on an adjusted basis, net income per diluted share in the range of $0.18 to $0.20. Sourcefire's expectation of adjusted net income per diluted share excludes stock-based compensation expense of $3.8 million to $4.0 million and amortization of acquired intangible assets and other acquisition-related expenses of approximately $1.0 million and includes an assumed 35% tax rate.

For fiscal year 2011 Sourcefire expects revenue in the range of $157.9 million to $159.9 million, net income per diluted share in the range of $0.13 to $0.15 and adjusted net income per diluted share in the range of $0.49 to $0.51. Sourcefire’s expectation of full year 2011 adjusted net income per share excludes stock-based compensation expense in the expected range of $14.6 million to $14.8 million and amortization of acquired intangible assets and other acquisition-related expenses of approximately $4.3 million and includes an assumed tax rate of 35%.

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 the Company’s 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 Tuesday, November 1, 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: 866-543-6405

Calling from other countries: 617-213-8897

Pass code: 11982750

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 2000 organizations and government agencies manage and minimize network security risks. With solutions from the network to the endpoint, Sourcefire provides customers with Agile SecurityTM 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 dozens of 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 infrastructure. For more information about Sourcefire, please visit http://www.sourcefire.com.