VASCO Reports Results for Third Quarter and First Nine Months of 2011
Revenue from continuing operations for the third quarter of 2011 was $41.4 million, an increase of 57% compared to the third quarter of 2010; Operating income from continuing operations for the third quarter of 2011 was $7.4 million, an increase of 196% compared to the third quarter of 2010. Guidance for full-year 2011 revenue and operating margins increased. Financial results for the period ended September 30, 2011 to be discussed on conference call today at 10:00 a.m. E.D.T.
OAKBROOK TERRACE, IL, and ZURICH, Switzerland, October 27, 2011 - VASCO Data Security International, Inc. (Nasdaq: VDSI) (www.vasco.com), today reported financial results for the third quarter and nine months ended September 30, 2011.
Revenue from continuing operations for the third quarter of 2011 increased 57% to $41.4 million from $26.3 million in the third quarter of 2010, and for the first nine months of 2011, increased 59% to $119.6 million from $75.0 million for the first nine months of 2010.
Net income from continuing operations for the third quarter of 2011 was $5.9 million, or $0.15 per diluted share, an increase of $3.7 million, or 172%, from $2.2 million, or $0.06 per diluted share, for the third quarter of 2010. Net income from continuing operations for the first nine months of 2011 was $12.9 million, or $0.33 per diluted share, an increase of $8.8 million, or 211%, from $4.2 million, or $0.11 per diluted share, for the comparable period in 2010.
Net income, which includes the impact of our discontinued operations, for the third quarter of 2011 was $2.2 million, or $0.06 per diluted share. Net income for the first nine months of 2011 was $7.4 million, or $0.19 per diluted share. Net income in 2011 included a net loss of $3.7 million and $5.6 million for the three and nine months ended September 30, 2011, respectively, related to DigiNotar B.V., which ceased operations during the third quarter of 2011. DigiNotar B.V. had been acquired in January 2011 and was declared bankrupt on September 20, 2011 by the Haarlem District Court, The Netherlands.
Other Financial Highlights:
- Gross profit from continuing operations was $27.8 million and $76.1 million for the third quarter and first nine months of 2011, respectively, and was 67% of revenue for the third quarter and 64% of revenue for the first nine months of 2011. Gross profit was $18.5 million, or 71% of revenue, and $52.7 million, or 70% of revenue, for the third quarter and the first nine months of 2010, respectively.
- Operating expenses from continuing operations for the third quarter and first nine months of 2011 were $20.3 million and $60.4 million, respectively, an increase of 27% from $16.0 million reported for the third quarter of 2010 and an increase of 26% from $47.9 million reported for the first nine months of 2010.
Operating expenses from continuing operations for the third quarter and first nine months of 2011 included $0.9 million and $2.2 million, respectively, of expenses related to stock-based incentives. 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 from continuing operations for the third quarter and first nine months of 2011 also included $0.5 million and $1.5 million, respectively, of expenses related to the amortization of purchased intangible assets. Operating expenses for the third quarter of and first nine months of 2010 included $0.1 million and $0.3 million, respectively, of expenses related to the amortization of purchased intangible assets.
- Operating income from continuing operations for the third quarter and first nine months of 2011 was $7.4 million and $15.7 million, respectively, an increase of $4.9 million, or 196%, from $2.5 million reported for the third quarter of 2010 and an increase of $10.9 million, or 227%, from $4.8 million reported for the first nine months of 2010. Operating income from continuing operations, as a percentage of revenue, for the third quarter and first nine months of 2011 was 18% and 13%, respectively, compared to 10% and 6% for the comparable periods in 2010.
- Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations was $8.0 million and $18.8 million for the third quarter and first nine months of 2011, respectively, an increase of 122% from $3.6 million reported for the third quarter of 2010 and an increase of 156% from $7.3 million reported for the first nine months of 2010.
- Net cash balances at September 30, 2011 totaled $77.5 million compared to $84.6 million and $85.5 million at June 30, 2011 and December 31, 2010, respectively.
Operational and Other Highlights:
- VASCO and Option, a wireless technology company, announce a partnership to co-develop and bring to market Cloudkey®, a mobile security solution that provides simple and secure access to cloud applications and data.
- VASCO launches IDENTIKEY Server 3.3 with PCI DSS compliancy.
- VASCO strengthens presence on US West Coast with San Mateo office.
- VASCO launched DIGIPASS as a Service on Salesforce.com’s AppExchange.
Guidance for full-year 2011:
VASCO is revising its guidance for the full-year 2011 as follows:
- Revenue growth from continuing operations is projected to be in the range of 45% to 55% for the full-year 2011 over full-year 2010, as compared to expected full-year revenue growth of more than 40% announced at the end of the second quarter of 2011; and
- Operating margins from continuing operations, excluding expenses related to the amortization of acquisition-related intangible assets, for full-year 2011 are projected to be in the range of 13% to 16% of revenue, compared to 8% to 12% of revenue announced at the end of the second quarter of 2011.
“Revenues for the third quarter of 2011 were the second highest in our company’s history and were second only to the previous quarter of 2011,” stated T. Kendall Hunt, Chairman & CEO. “Revenues from both the banking and enterprise and application security markets increased substantially over the same periods in 2010. While we were disappointed with the closure of the DigiNotar business, we believe that VASCO’s customers understand that the certificate authority business of DigiNotar was separate and distinct from our core authentication business. We continue to experience strong order intake for our authentication products and expect to show strong growth in the fourth quarter of 2011 over 2010.”
"The results of the third quarter indicate that we are making progress in a number of important areas," said Jan Valcke, VASCO's President and COO. "Revenue from the banking market grew in most all of our geographic markets, including the European market where the concerns related to sovereign debt have been highly publicized. In addition, we saw strong orders from and shipments to customers in the enterprise and application security market. Our gross margins as a percentage of revenue also showed substantial improvement over earlier quarters of 2011. The improvement in the margin rate can be attributed to shipping orders to a broader base of banking customers, an improved mix of our business associated with the growth in revenues from the enterprise and application security market and improvements we have made in our production scheduling that allows us to reduce our overall freight costs."
Cliff Bown, Executive Vice President and CFO added, “During the third quarter of 2011 our balance sheet remained strong. Our cash balances decreased $7.1 million, or approximately 8%, from June 30, 2011 as we invested in higher levels of inventory to meet the expected demand in the fourth quarter and carried increased receivables related to the strong sales in the third quarter. Our total working capital increased $5.3 million, or 6%, from June 30, 2011 to $99.2 million. The decline in cash also reflected the strengthening of the U.S. dollar compared to other key currencies. The U.S. dollar strengthened approximately 6% to 7% during the third quarter when compared to the Euro and Swiss Franc.”
Conference Call Details
In conjunction with this announcement, VASCO Data Security International, Inc. will host a conference call today, October 27, 2011, 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, 2011.
To participate in this conference call, please dial one of the following numbers:
USA/Canada: +1 800-772-4206
International: +1 212-231-2915
And mention VASCO to be connected to the conference call.
The conference call is also available in listen-only mode on www.vasco.com. Please log on 15 minutes before the start of the conference call in order to download and install any necessary software. The recorded version of the conference call will be available on the VASCO website 24 hours a day for approximately 60 days after the call.
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.