VASCO Reports Results for Third Quarter and First Nine Months of 2010
VASCO Data Security International, Inc. (Nasdaq: VDSI) (www.vasco.com), today reported financial results for the third quarter and nine months ended September 30, 2010.
Revenue for the third quarter of 2010 increased 19% to $26.3 million from $22.1 million in the third quarter of 2009, and for the first nine months of 2010, increased 7% to $75.0 million from $69.8 million for the first nine months of 2009.
Net income for the third quarter of 2010 was $2.2 million, or $0.06 per diluted share, an increase of $0.7 million, or 43%, from $1.5 million, or $0.04 per diluted share, for the third quarter of 2009. Net income for the first nine months of 2010 was $4.2 million, or $0.11 per diluted share, a decrease of $2.9 million, or 41%, from $7.0 million, or $0.18 per diluted share, for the comparable period in 2009.
Other Financial Highlights:
Gross profit was $18.5 million and $52.7 million for the third quarter and first nine months of 2010, respectively, and was 71% of revenue for the third quarter and 70% of revenue for the first nine months of 2010. Gross profit was $15.4 million and $48.8 million, both 70% of revenue for the third quarter and the first nine months of 2009, respectively.
Operating expenses for the third quarter and first nine months of 2010 were $16.0 million and $47.9 million, respectively, an increase of 19% from $13.4 million reported for the third quarter of 2009 and an increase of 17% from $40.8 million reported for the first nine months of 2009.
Operating expenses for the third quarter and first nine months of 2010 included $0.8 million and $1.9 million, respectively, of expenses related to stock-based incentives. Operating expenses for the third quarter of 2009 included $0.5 million of expenses related to stock-based incentives. For the first nine months of 2009, operating expenses reflected a benefit of $0.8 million related to stock-based incentives, including the reversal in the first quarter of 2009 of $2.0 million of long-term performance-based incentive award reserves that had been accrued at December 31, 2008.
Operating income for the third quarter and first nine months of 2010 was $2.5 million and $4.8 million, respectively, an increase of $0.5 million, or 28%, from $2.0 million reported for the third quarter of 2009 and a decrease of $3.2 million, or 40%, from $8.0 million reported for the first nine months of 2009. Operating income, as a percentage of revenue, for the third quarter and first nine months of 2010 was 10% and 6%, respectively, compared to 9% and 12% for the comparable periods in 2009.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was $3.6 million and $7.3 million for the third quarter and first nine months of 2010, respectively, an increase of 7% from $3.3 million reported for the third quarter of 2009 and a decrease of 38% from $11.9 million reported for the first nine months of 2009.
Net cash balances at September 30, 2010 totaled $86.4 million compared to $76.0 million and $67.6 million at June 30, 2010 and December 31, 2009, respectively.
Operational and Other Highlights:
VASCO won 387 new customers in Q3 2010 (50 new banks and 337 new enterprise security customers). For the first nine months of 2010, VASCO won 1,305 new customers (158 banks and 1,147 enterprise security customers). Although management considers the number of new customers as an indicator of the momentum of our business and effectiveness of our distribution channel, the number of new customers is not indicative of future revenue.
- VASCO announces the availability of its multi-one time password (OTP) technology. With its multi-OTP devices, existing customers of traditional authentication solutions will be able to secure additional applications without introducing online transaction signing.
- VASCO launches DIGIPASS 831, a new edition of its most popular smart card reader now with replaceable batteries, a larger display (25% bigger) and an improved user-interface.
- VASCO enhances its IDENTIKEY Server to securely access corporate networks using strong authentication through wireless Internet connections.
- PostFinance, a Swiss financial institution, plans to deploy VASCO's new DIGIPASS 831 to its existing and new e-banking customers.
RM, an international education company, secures its remote access and extranet access for employees and partners with VASCO IDENTIKEY, DIGIPASS for Mobile and DIGIPASS GO 6.
Leleux Associated Brokers, an independent Belgian stock broking firm, uses DIGIPASS technology to secure access to its online stock broking application "Leleux On Line."
VASCO partners with Singapore-based distributor Pacific Tech. Pacific Tech is a leading regional Value Added Distributor (VAD) specializing in network unified threat management products and rich media communication systems and solutions.
Guidance for full-year 2010:
VASCO is reaffirming its guidance for the full-year 2010 as follows:
Revenue growth of 5% to 10% for the full-year 2010 over full-year 2009, and Operating margin as a percentage of revenue for full-year 2010 is expected to be in the range of 5% to 10%.
"The results for the third quarter of 2010 reflected the continued strengthening of our business from the depressed economic conditions in 2009," stated T. Kendall Hunt, Chairman & CEO. "Revenues from both the banking and enterprise and application security markets increased substantially over the same periods in 2009. Revenues were also up over the second quarter of 2010 as strength in the banking business offset the declines in third quarter revenues we normally experience due to the seasonality of our business. We have also remained profitable while increasing our aggressive investments in infrastructure that are needed to support future anticipated growth."
"In the third quarter we saw a significant increase in orders from our banking business. The increase in RFP activity from customers in the banking market that we noted in prior quarters has started to result in firm purchase orders that are expected to ship in the fourth quarter of 2010 and throughout 2011," said Jan Valcke, VASCO's President and COO. "We also continue to be encouraged by the progress being made in the enterprise and application security markets. We have increased and plan to continue to increase our investment in sales and marketing and product development to help ensure that we can maintain our leadership position in the global authentication market."
Cliff Bown, Executive Vice President and CFO added, "During the third quarter of 2010, our cash and working capital balances increased 14% and 10%, respectively, from our balances at June 30, 2010. At September 30, 2010 our net cash balance was $86.4 million and we had $92.3 million of working capital. Days sales outstanding in net accounts receivable at September 30, 2010 decreased to 60 days from 71 days at June 30, 2010.
Conference Call Details
In conjunction with this announcement, VASCO Data Security International, Inc. will host a conference call today, October 26, 2010, at 10:00 a.m. EDT - 15:00h CET. During the conference call, Mr. Ken Hunt, CEO, Mr. Jan Valcke, President and COO, and Mr. Cliff Bown, CFO, will discuss VASCO's results for the third quarter and nine months ended September 30, 2010.
To participate in this conference call, please dial one of the following numbers:
USA/Canada: +1 800-747-0367
International: +1 212-231-2937
EBITDA is a non-GAAP financial measure within the meaning of applicable U.S. Securities and Exchange Commission rules and regulations. We use EBITDA as a measure of performance, a simplified tool for use in communicating our performance to investors and analysts and for comparisons to other companies within our industry. As a performance measure, we believe that EBITDA presents a view of our operating results that is most closely related to serving our customers. By excluding interest, taxes, depreciation and amortization we are able to evaluate performance without considering decisions that, in most cases, are not directly related to meeting our customers' requirements and were either made in prior periods (e.g., depreciation and amortization), or deal with the structure or financing of the business (e.g., interest) or reflect the application of regulations that are outside of the control of our management team (e.g., taxes). Similarly, we find that the comparison of our results to those of our competitors is facilitated when we do not need to consider the impact of those items on our competitors' results.
EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States. While we believe that EBITDA, as defined above, is useful within the context described above, it is in fact incomplete and not a measure that should be used to evaluate our full performance or our prospects. Such an evaluation needs to consider all of the complexities associated with our business including, but not limited to, how past actions are affecting current results and how they may affect future results, how we have chosen to finance the business and how regulations and the other aforementioned items affect the final amounts that are or will be available to shareholders as a return on their investment. Net income determined in accordance with U.S. GAAP is the most complete measure available today to evaluate all elements of our performance. Similarly, our Consolidated Statement of Cash Flows, which will be filed as part of our annual report on Form 10-K, provides the full accounting for how we have decided to use resources provided to us from our customers, lenders and shareholders.
Forward Looking Statements:
Statements made in this news release that relate to future plans, events or performances are forward-looking statements. Any statement containing words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “mean,” “potential” and similar words, is forward-looking, and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements.
Reference is made to the VASCO's public filings with the U.S. Securities and Exchange Commission for further information regarding VASCO and its operations.
This document may contain trademarks of VASCO Data Security International, Inc. and its subsidiaries, including VASCO, the VASCO “V” design, DIGIPASS, VACMAN, aXsGUARD and IDENTIKEY.
About VASCO Data Security
VASCO is a leading supplier of strong authentication and e-signature solutions and services specializing in Internet security applications and transactions. VASCO has positioned itself as global software company for Internet security serving a customer base of over 10,000 companies in more than 100 countries, including more than 1,500 international financial institutions. VASCO's prime markets are the financial sector, enterprise security, e-commerce and e-government.