VASCO Reports Results for Third Quarter and First Nine Months of 2012

    VASCO Reports Results for Third Quarter and First Nine Months of 2012

Revenue from continuing operations for the third quarter of 2012 was $36.3
million, a decrease of 12% compared to the third quarter of 2011; Operating
income from continuing operations for the third quarter of 2012 was $6.3
million, a decrease of 16% compared to the third quarter of 2011. Financial
results for the period ended September 30, 2012 to be discussed on conference
call today at 10:00 a.m. E.D.T.

PR Newswire

OAKBROOK TERRACE, Ill. and ZURICH, Oct. 25, 2012

OAKBROOK TERRACE, Ill. and ZURICH, Oct. 25, 2012 /PRNewswire/ -- VASCO Data
Security International, Inc. (Nasdaq: VDSI) (www.vasco.com), today reported
financial results for the third quarter and nine months ended September 30,
2012.

Revenue from continuing operations for the third quarter of 2012 decreased 12%
to $36.3 million from $41.4 million in the third quarter of 2011, and for the
first nine months of 2012, decreased 4% to $115.2 million from $119.6 million
for the first nine months of 2011.

Net income from continuing operations for the third quarter of 2012 was $4.7
million, or $0.12 per diluted share, a decrease of $1.2 million, or 21%, from
$5.9 million, or $0.15 per diluted share, for the third quarter of 2011. Net
income from continuing operations for the first nine months of 2012 was $14.1
million, or $0.36 per diluted share, an increase of $1.2 million, or 9%, from
$12.9 million, or $0.33 per diluted share, for the comparable period in 2011.

Net income, which includes the impact of our discontinued operations, for the
third quarter of 2012 was $4.5 million, or $0.12 per diluted share, an
increase of $2.3 million, or 102%, from $2.2 million, or $0.06 per diluted
share, for the third quarter of 2011. Net income for the first nine months of
2012 was $13.6 million, or $0.35 per diluted share, an increase of $6.2
million, or 85%, from $7.4 million, or $0.19 per diluted share, for the
comparable period in 2011.

Other Financial Highlights:

  oGross profit from continuing operations was $23.9 million and $75.2
    million for the third quarter and first nine months of 2012, respectively,
    and was 66% of revenue for the third quarter and 65% of revenue for the
    first nine months of 2012. Gross profit was $27.8 million and $76.1
    million for the third quarter and the 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.
  oOperating expenses from continuing operations for the third quarter and
    first nine months of 2012 were $17.6 million and $57.7 million,
    respectively, a decrease of 13% from $20.3 million reported for the third
    quarter of 2011 and a decrease of 4% from $60.4 million reported for the
    first nine months of 2011.
    Operating expenses from continuing operations for the third quarter and
    first nine months of 2012 included $0.5 million and $2.7 million,
    respectively, of expenses related to stock-based incentives. Operating
    expenses 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 from continuing operations for the third quarter and
    first nine months of 2012 also included $0.5 million and $1.4 million,
    respectively, of expenses related to the amortization of purchased
    intangible assets. Operating expenses for the third quarter of and first
    nine months of 2011 included $0.5 million and $1.5 million, respectively,
    of expenses related to the amortization of purchased intangible assets.
  oOperating income from continuing operations for the third quarter and
    first nine months of 2012 was $6.3 million and $17.5 million,
    respectively, a decrease of $1.2 million, or 16%, from $7.4 million
    reported for the third quarter of 2011 and an increase of $1.8 million, or
    12%, from $15.7 million reported for the first nine months of 2011.
    Operating income from continuing operations, as a percentage of revenue,
    for the third quarter and first nine months of 2012 was 17% and 15%,
    respectively, compared to 18% and 13% for the comparable periods in 2011.
  oEarnings before interest, taxes, depreciation and amortization (EBITDA)
    from continuing operations was $7.0 million and $20.6 million for the
    third quarter and first nine months of 2012, respectively, a decrease of
    13% from $8.0 million reported for the third quarter of 2011 and an
    increase of 9% from $18.8 million reported for the first nine months of
    2011.
  oNet cash balances at September30, 2012 totaled $96.1 million compared to
    $85.1 million and $84.5 million at June30, 2012 and December31, 2011,
    respectively.

Operational and Other Highlights:

  oSony Bank implemented VASCO's authentication technology. Sony Bank is an
    affiliate of Sony Financial Holdings, which includes Sony Life Insurance,
    Sony Assurance and other group companies. Sony Bank started business in
    2001 as an internet bank for individuals.
  oVASCO launched DIGIPASS for Mobile 4.0, which offers an enhanced user
    experience through the use of QR (Quick Response) codes and more enhanced
    provisioning and deployment options.
  oDIGIPASS technology allows Intel® Ultrabook™ users convenient and secure
    access to the MYDIGIPASS.COM community.
  oVASCO expanded its MYDIGIPASS.COM platform by adding a launch pad and a
    marketplace. By adding these two features, MYDIGIPASS.COM became even more
    attractive to ASPs allowing them to increase their revenue, improve their
    security and add extra value to their website.
  oWordPress, the largest self-hosted blogging tool worldwide, incorporated
    MYDIGIPASS.COM on its platform. This enables bloggers to benefit from the
    added security the authentication service offers.
  oDrupal has added MYDIGIPASS.COM for DRUPAL v6 to its contributed modules
    enabling web developers to embed secure login access for the websites they
    build through the Drupal community.
  oVASCO launched DIGIPASS 810 e-ID for MYDIGIPASS.COM. The DIGIPASS 810 e-ID
    offers the possibility to authenticate and generate OTPs (one-time
    passwords) through the use of a Belgian e-ID card and the PIN code linked
    to the e-ID. With the launch of DIGIPASS 810 e-ID, VASCO enables
    consumers to safely access websites secured by MYDIGIPASS.COM with their
    e-ID cards.
  oVASCO announced a new Cloud Partner Program for partners in its EMEA
    region. With this program, VASCO supports its channel partners in
    introducing and advising on strong user authentication solutions for
    online web-based applications. VASCO plans to provide the channel
    partners with the latest information on new technologies, products and
    solutions.
  oVASCO extended its e-learning program and enhanced brand awareness among
    its resellers and distributors with an Expert Sales Program.

"Revenues for the third quarter of 2012 were in line with the numbers
discussed in our release on October 9th," stated T. Kendall Hunt, Chairman &
CEO. "As noted at that time, revenues from both the banking and enterprise
and application security markets were lower than revenues in the comparable
periods in 2011. While we were disappointed with the result for the quarter,
we believe that our traditional business remains strong. We are also
continuing to invest in our services platform with the goal of expanding our
target market to consumers and other applications beyond the reach of our
traditional products. We are excited about our business prospects in both our
traditional and services business models for 2013."

"The results of the third quarter reflect the variability of our traditional
business model related to the timing of receipt and shipment of orders,
especially from our banking business," stated Jan Valcke, VASCO's President
and COO. "Our cumulative order intake through the third quarter of 2012 is
approximately 17% stronger than in the same period last year and our pipeline
of potential new orders also continues to be strong. While we recognize that
there is significant economic uncertainty in the markets in which we operate,
we do not believe that there has been a fundamental weakening of either the
global banking market or our competitive position in that market."

Conference Call Details

In conjunction with this announcement, VASCO Data Security International, Inc.
will host a conference call today, October 25, 2012, 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, 2012.

To participate in this conference call, please dial one of the following
numbers:

USA/Canada: +1 800-750-5845
International: +1 212-231-2926

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.



 VASCO Data Security International, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 (unaudited)
                                  Three months ended  Nine months ended
                                  September 30,       September 30,
                                  2012      2011        2012        2011
Net revenue                     $        $  41,385  $115,192    $119,554
                                  36,292
Cost of goods sold              12,437    13,633      40,008      43,468
Gross profit                    23,855    27,752      75,184      76,086
Operating costs:
  Sales and marketing          8,889     9,575       28,152      29,555
  Research and development      4,488     4,787       13,986      13,445
  General and administrative   3,726     5,468       14,131      15,917
  Amortization of purchased      476       486         1,427       1,485
  intangible assets
   Total           17,579    20,316      57,696      60,402
  operating costs
Operating income                6,276     7,436       17,488      15,684
Interest income, net            62        164         207         404
Other income (expense), net     (183)     (359)       349         258
Income from continuing           6,155     7,241       18,044      16,346
operations before income taxes
Provision for income taxes      1,473     1,314       3,970       3,433
Net income - continuing          $       $         $  14,074  $  12,913
operations                       4,682     5,927
Income (loss) from discontinued  (173)     (3,691)     (493)       (5,557)
operations
Net income                      $       $         $  13,581  $  
                                  4,509     2,236                   7,356
Basic income (loss) per share:
  Continuing operations         $      $        $        $   
                                  0.12      0.16        0.37        0.34
  Discontinued operations       -         (0.10)      (0.01)      (0.14)
   Total net income per share  $      $        $        $   
                                  0.12      0.06        0.36        0.20
Diluted income (loss) per
share:
  Continuing operations         $      $        $        $   
                                  0.12      0.15        0.36        0.33
  Discontinued operations       -         (0.09)      (0.01)      (0.14)
   Total net income per share  $      $        $        $   
                                  0.12      0.06        0.35        0.19
Weighted average common shares
outstanding:
  Basic                         38,136    37,539      37,997      37,531
  Diluted                       38,833    38,606      38,676      38,610





VASCO Data Security International, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
                                                September 30,    December 31,
                                                2012             2011
                                                (unaudited)
ASSETS
 Current assets
  Cash and equivalents                          $    96,141   $   84,497
  Accounts receivable, net of allowance for     29,572           31,618
  doubtful accounts
  Inventories                                   17,695           16,033
  Prepaid expenses                              1,819            1,657
  Foreign sales tax receivable                  1,046            683
  Deferred income taxes                         1,196            2,382
  Other current assets                          188              343
  Assets of discontinued operations             2,633            2,545
           Total current assets                 150,290          139,758
 Property and equipment, net                    3,930            4,405
 Goodwill, net of accumulated amortization      12,820           12,910
 Intangible assets, net of accumulated          6,904            8,091
 amortization
 Other assets, net of accumulated amortization  4,208            3,759
           Total assets                         $  178,152     $  168,923
LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
  Accounts payable                              $     5,110  $    
                                                                 7,328
  Deferred revenue                              7,661            8,649
  Accrued wages and payroll taxes               6,576            6,564
  Income taxes payable                          78               1,965
  Other accrued expenses                        5,746            5,070
  Liabilities of discontinued operations        1,365            1,592
           Total current liabilities            26,536           31,168
 Deferred compensation                         -                1,526
 Deferred income taxes                          168              324
 Other long-term liabilities                    94               106
Total liabilities                               26,798           33,124
Stockholders' equity
  Common stock                                  39               38
  Additional paid-in capital                    73,970           71,720
  Accumulated income                            79,239           65,658
  Accumulated other comprehensive income        (1,894)          (1,617)
  (loss)
Total stockholders' equity                      151,354          135,799
Total liabilities and stockholders' equity      $  178,152     $  168,923





Reconciliation of Earnings from continuing operations Before Interest, Taxes,
Depreciation and
Amortization (EBITDA) to net income from continuing operations (in
thousands):
                               Three months            Nine months
                               ended September 30,     ended September 30,
                               2012          2011        2012        2011
                               (in thousands,           (in thousands,
                               unaudited)               unaudited)
EBITDA - continuing            $  6,981     $  8,033   $         $ 18,805
operations                                               20,573
Interest income, net         62            164         207         404
Provision for income taxes   (1,473)       (1,314)     (3,970)     (3,433)
Depreciation and              (888)         (956)       (2,736)     (2,863)
amortization
Net income - continuing       $  4,682     $  5,927   $         $ 12,913
operations                                              14,074

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.

About VASCO:

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 approximately 10,000 companies in
more than 100 countries, including approximately 1,700 international financial
institutions. VASCO's prime markets are the financial sector, enterprise
security, e-commerce and e-government.

Forward-Looking Statements:
This press release contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 and Section 27A of the
Securities Act of 1933. These forward-looking statements (1) are identified
by use of terms and phrases such as "expect," "believe", "will," "anticipate,"
"emerging," "intend," "plan," "could," "may," "estimate," "should,"
"objective," "goal," "possible," "potential," "projected" and similar words
and expressions, but such words and phrases are not the exclusive means of
identifying them, and (2) are subject to risks and uncertainties and represent
our present expectations or beliefs concerning future events. VASCO cautions
that the forward-looking statements are qualified by important factors that
could cause actual results to differ materially from those in the
forward-looking statements. Factors that could cause actual results to differ
materially from those contemplated above include risks, uncertainties and
other factors described in our Annual Report on Form 10-K for the year ended
December 31, 2011 and include, but are not limited to, (a) risks of general
market conditions, including currency fluctuations and the uncertainties
resulting from turmoil in world economic and financial markets, (b) risks
inherent to the computer and network security industry, including rapidly
changing technology, evolving industry standards, increasingly sophisticated
hacking attempts, increasing numbers of patent infringement claims, changes in
customer requirements, price competitive bidding, and changing government
regulations, and (c) risks specific to VASCO, including demand for our
products and services, competition from more established firms and others,
pressures on price levels and our historical dependence on relatively few
products, certain suppliers and certain key customers. Thus, the results that
we actually achieve may differ materially from any anticipated results
included in, or implied by these statements. Except for our ongoing
obligations to disclose material information as required by the U.S. federal
securities laws, we do not have any obligations or intention to release
publicly any revisions to any forward-looking statements to reflect events or
circumstances in the future or to reflect the occurrence of unanticipated
events.

Thisdocumentmay contain trademarks of VASCO Data Security International,
Inc. and its subsidiaries, including VASCO, CertiID, DIGIPASS, VACMAN,
aXsGUARD, IDENTIKEY, the VASCO "V" design, and the dP+ design.

For more information contact:
Jochem Binst, +32 2 609 97 00, jbinst@vasco.com

SOURCE VASCO Data Security International, Inc.

Website: http://www.vasco.com
 
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