VASCO Reports Results for Third Quarter and First Nine Months of 2013

    VASCO Reports Results for Third Quarter and First Nine Months of 2013

Revenue from continuing operations for the third quarter of 2013 was $39.2
million, an increase of 8% compared to the third quarter of 2012; Operating
income from continuing operations for the third quarter of 2013 was $5.0
million, a decrease of 20% compared to the third quarter of 2012. Financial
results for the period ended September 30, 2013 to be discussed on conference
call today at 10:00 a.m. E.D.T.

PR Newswire

OAKBROOK TERRACE, Ill., and ZURICH, Oct. 24, 2013

OAKBROOK TERRACE, Ill., and ZURICH, Oct. 24, 2013 /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,
2013.

Revenue from continuing operations for the third quarter of 2013 increased 8%
to $39.2 million from $36.3 million in the third quarter of 2012, and for the
first nine months of 2013, decreased 3% to $111.8 million from $115.2 million
for the first nine months of 2012.

Net income from continuing operations for the third quarter of 2013 was $3.4
million, or $0.08 per diluted share, a decrease of $1.3 million, or 28%, from
$4.7 million, or $0.12 per diluted share, for the third quarter of 2012. Net
income from continuing operations for the first nine months of 2013 was $7.6
million, or $0.19 per diluted share, a decrease of $6.4 million, or 46%, from
$14.1 million, or $0.36 per diluted share, for the comparable period in 2012.

Net income, which includes the impact of our discontinued operations, for the
third quarter of 2013 was $3.3 million, or $0.08 per diluted share, a decrease
of $1.2 million, or 26%, from $4.5 million, or $0.12 per diluted share, for
the third quarter of 2012. Net income for the first nine months of 2013 was
$7.9 million, or $0.20 per diluted share, a decrease of $5.7 million, or 42%,
from $13.6 million, or $0.35 per diluted share, for the comparable period in
2012.

Other Financial Highlights:

  oGross profit from continuing operations was $25.1 million and $72.0
    million for the third quarter and first nine months of 2013, respectively,
    and was 64% of revenue for both the third quarter and first nine months of
    2013. Gross profit was $23.9 million and $75.2 million for the third
    quarter and the 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.
  oOperating expenses from continuing operations for the third quarter and
    first nine months of 2013 were $20.0 million and $62.4 million,
    respectively, an increase of 14% from $17.6 million reported for the third
    quarter of 2012 and an increase of 8% from $57.7 million reported for the
    first nine months of 2012. 
  oOperating income from continuing operations for the third quarter and
    first nine months of 2013 was $5.0 million and $9.7 million, respectively,
    a decrease of $1.2 million, or 20%, from $6.3 million reported for the
    third quarter of 2012 and a decrease of $7.8 million, or 45%, from $17.5
    million reported for the first nine months of 2012. Operating income from
    continuing operations, as a percentage of revenue, for the third quarter
    and first nine months of 2013 was 13% and 9%, respectively, compared to
    17% and 15% for the comparable periods in 2012.
  oEarnings before interest, taxes, depreciation and amortization (EBITDA)
    from continuing operations was $6.3 million and $13.3 million for the
    third quarter and first nine months of 2013, respectively, a decrease of
    10% from $7.0 million reported for the third quarter of 2012 and a
    decrease of 35% from $20.6 million reported for the first nine months of
    2012.
  oNet cash balances at September30, 2013 totaled $92.1 million compared to
    $85.6 million and $106.5 million at June30, 2013 and December31, 2012,
    respectively.

Operational and Other Highlights:

  oSumitomo Mitsui Banking Corporation implements DIGIPASS 275 to secure its
    retail banking services.
  oSociete Generale in India chooses DIGIPASS 270 to secure its corporate
    banking customers.
  oTelenet implements IDENTIKEY Authentication Server and VASCO's DIGIPASS
    for Mobile to secure its SSL VPN solution.
  oInfotouch Technologies, a leading Systems Integrator and e-Solutions
    company, partners with VASCO to bring the authentication services to the
    United Arab Emirates market.

"Clearly, we are disappointed with our year-to-date results and the outlook
for the full year as reported last week," stated T. Kendall Hunt, Chairman &
CEO. "We do, however, have a strong base of business to build upon in both
the Banking and in the Enterprise and Application Security markets. As we go
forward, we will be assessing every operation, with a focus on our investments
in the Enterprise and Application Security market and our cloud-based services
products. Our goal will be to make our company more efficient in 2014 and
beyond."

"We began our detailed review of our investments earlier this year," stated
Jan Valcke, VASCO's President and COO. "As a result of that review, we
decided to close our R&D facility in Brisbane Australia, which was announced
earlier this week, and to transfer the responsibility for the development of
those products to our engineers in Vienna. While the review will be ongoing,
we will not lose focus on continuing to invest in our growth areas. We are
pleased with our recent acquisition of Cronto and the integration of their
technology into ours is going well. Both existing customers and potential new
customers are showing a high level of interest in the Cronto technology."

Conference Call Details

In conjunction with this announcement, VASCO Data Security International, Inc.
will host a conference call today, October 24, 2013, 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, 2013.

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

USA/Canada: 1 800 728 2056
International: +1 212 231 2900

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     Nine months ended
                                        ended
                                        September 30,   September 30,
                                        2013     2012     2013      2012
Net revenue                           $       $       $111,782  $115,192
                                        39,156   36,292
Cost of goods sold                    14,102   12,437   39,757    40,008
Gross profit                          25,054   23,855   72,025    75,184
Operating costs:
    Sales and marketing              9,375    8,889    29,476    28,152
    Research and development          5,065    4,488    15,257    13,986
    General and administrative       4,469    3,726    15,414    14,131
    Amortization of purchased          1,114    476      2,207     1,427
    intangible assets
                Total operating        20,023   17,579   62,354    57,696
                costs
Operating income                      5,031    6,276    9,671     17,488
Interest income, net                  48       62       130       207
Other income (expense), net           (304)    (183)    109       349
Income from continuing operations      4,775    6,155    9,910     18,044
before income taxes
Provision for income taxes            1,406    1,473    2,279     3,970
Net income - continuing operations    $      $      $       $  14,074
                                        3,369    4,682    7,631
Income (loss) from discontinued        (47)     (173)    286       (493)
operations
Net income                            $      $      $       $  13,581
                                        3,322    4,509    7,917
Basic income (loss) per share:
    Continuing operations             $     $     $      $   
                                        0.09     0.12     0.19      0.37
    Discontinued operations           (0.00)   -        0.01      (0.01)
     Total net income per share      $     $     $      $   
                                        0.09     0.12     0.20      0.36
Diluted income (loss) per share:
    Continuing operations             $     $     $      $   
                                        0.08     0.12     0.19      0.36
    Discontinued operations           (0.00)   -        0.01      (0.01)
     Total net income per share      $     $     $      $   
                                        0.08     0.12     0.20      0.35
Weighted average common shares
outstanding:
    Basic                             38,910   38,136   38,836    37,997
    Diluted                           39,226   38,833   39,172    38,676





VASCO Data Security International, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
                                                September 30,   December 31,
                                                2013             2012
                                                (unaudited)
ASSETS
 Current assets
  Cash and equivalents                          $    92,121   $  106,469
  Accounts receivable, net of allowance for     27,590           27,574
  doubtful accounts
  Inventories                                   26,312           18,675
  Prepaid expenses                              2,883            1,896
  Foreign sales tax receivable                  696              415
  Deferred income taxes                         1,161            1,714
  Other current assets                          1,140            41
  Assets of discontinued operations             2,244            2,651
           Total current assets                 154,147          159,435
 Property and equipment, net                    3,309            4,052
 Goodwill, net of accumulated amortization      23,082           13,176
 Intangible assets, net of accumulated          17,777           6,507
 amortization
 Other assets, net of accumulated amortization  2,681            3,336
           Total assets                         $  200,996     $  186,506
LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
  Accounts payable                              $     6,077  $    
                                                                 7,765
  Deferred revenue                              12,533           8,146
  Accrued wages and payroll taxes               7,647            6,212
  Income taxes payable                          3,902            378
  Other accrued expenses                        3,841            6,112
  Liabilities of discontinued operations        30               1,335
           Total current liabilities            34,030           29,948
 Deferred income taxes                          161              141
 Other long-term liabilities                    171              97
Total liabilities                               34,362           30,186
Stockholders' equity
  Common stock                                  39               39
  Additional paid-in capital                    76,133           74,965
  Accumulated income                            89,171           81,256
  Accumulated other comprehensive income        1,291            60
  (loss)
Total stockholders' equity                      166,634          156,320
Total liabilities and stockholders' equity      $  200,996     $  186,506



Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP, but Company
management also evaluates its performance using EBITDA, Adjusted Net Income
and Adjusted Diluted EPS. The Company's management believes that these
measures provide useful supplemental information regarding the performance of
our business and facilitates comparisons to our historical operating results.

These non-GAAP measures are not measures of performance under GAAP and should
not be considered as alternatives or substitutes for the most directly
comparable financial measures calculated in accordance with GAAP. While we
believe that these non-GAAP measures are useful within the context described
below, they are in fact incomplete and are 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
taxes affect the final amounts that are or will be available to shareholders
as a return on their investment.

EBITDA

We define EBITDA as net income from continuing operations before interest,
taxes, depreciation and amortization. We use EBITDA as a simplified measure of
performance 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.

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,
                               2013          2012        2013        2012
                               (in thousands,           (in thousands,
                               unaudited)               unaudited)
EBITDA - continuing            $  6,263     $  6,981   $         $ 20,573
operations                                               13,267
Interest income, net         48            62          130         207
Provision for income taxes   (1,406)       (1,473)     (2,279)     (3,970)
Depreciation and              (1,536)       (888)       (3,487)     (2,736)
amortization
Net income - continuing       $  3,369     $  4,682   $        $ 14,074
operations                                              7,631



Adjusted Net Income & Adjusted Diluted EPS

We define Adjusted Net Income and Adjusted Diluted EPS, as net income or EPS
from continuing operations before the consideration of long-term incentive
compensation expenses and the amortization of purchased intangible assets. We
use these measures to assess the impact of our performance excluding items
that though they are recurring, can significantly impact the comparison of our
results between periods and the comparison to competitors.

Long-term incentive compensation for management and others is directly tied to
performance and this measure allows management to see the relationship of the
cost of incentives to the performance of the business operations directly if
such incentives are based on that period's performance. To the extent that
such incentives are based on performance over a period of several years, there
may be periods which have significant adjustments to the accruals in the
period but which relate to a longer period of time, and which can make it
difficult to assess the results of the business operations in the current
period. In addition, the Company's long-term incentives generally reflect the
use of restricted stock grants or cash awards while other Companies may use
different forms of incentives the cost of which is determined on a different
basis, which makes a comparison difficult.

The Company also excludes amortization of purchased intangible assets because
it believes that the amount of such expenses in any given period may not be
correlated directly to the performance of the business operations and that
such expenses can vary significantly between periods as a result of new
acquisitions, the full amortization of previously acquired intangible assets
or the write down of such assets due to an impairment event.



Reconciliation of Adjusted Net Income from Continuing Operations to
 Net Income from Continuing Operations
                              Three months           Nine months
                              ended September 30,    ended September 30,
                              2013           2012      2013          2012
                              (in thousands,          (in thousands,
                              unaudited)              unaudited)
Adjusted Net Income -         $  4,743      $        $           $ 17,414
continuing operations                        5,463     10,966
Long-term Incentive          (604)          (500)     (1,962)       (2,748)
Compensation Expense
Amortization of Purchased    (1,114)        (476)     (2,207)       (1,427)
Intangible Assets
Tax impact of                344            195       834           835
Adjustments*
Net income - continuing      $  3,369      $        $          $ 14,074
operations                                  4,682     7,631



Reconciliation of Adjusted Diluted EPS from Continuing Operations to
 Diluted EPS from Continuing
Operations
                                  Three months         Nine months
                                  ended September 30,  ended September 30,
                                  2013          2012     2013          2012
                                  (in thousands,        (in thousands,
                                  unaudited)            unaudited)
Adjusted Diluted EPS - continuing $   0.12    $      $         $  
operations                                      0.14     0.28          0.45
Long-term Incentive Compensation (0.02)        (0.01)   (0.05)        (0.07)
Expense
Amortization of Purchased        (0.03)        (0.01)   (0.06)        (0.04)
Intangible Assets
Tax impact of Adjustments*      0.01          0.00     0.02          0.02
Diluted EPS - continuing         $   0.08    $      $         $  
operations                                     0.12     0.19          0.36

* = The tax impact of adjustments is calculated at 20% of the adjustments in
all periods

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, among others, our ability to
integrate and effectively sell Cronto's technology, our ability to recover
amounts held in escrow related to our acquisition of DigiNotar and
unanticipated costs associated with DigiNotar's bankruptcy or potential claims
that may arise in connection with the hacking incidents at DigiNotar.
Additional risks, uncertainties and other factors have been described in our
Annual Report on Form 10-K for the year ended December 31, 2012 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, the VASCO "V" design, DIGIPASS,
VACMAN, aXsGUARD and IDENTIKEY.

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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