EXHIBIT 99.1
VASCO Reports Third Quarter and Nine Months 2003 Results - Third Quarter Revenue
from Continuing Operations Reflects Best Third Quarter in Company's History.
Q3 2003 revenues increase 18% compared to Q3 2002; Q3 2003 net income of $1.3
million compared to net losses of $0.8 million in Q3 2002. Cash balances of $5.5
million increase $1.5 million from June 30, 2003. All bank debt is paid off.
Backlog for firm orders to be shipped in Q4 2003 at $4.4 million.
OAKBROOK TERRACE, Ill., and BRUSSELS, Belgium, October 23, 2003 - VASCO Data
Security International, Inc. (Nasdaq: VDSI) ( www.vasco.com), a global provider
of security products that enable e-business and e-commerce, today announced
financial results for the third quarter and nine months ended September 30,
2003. Revenues for the third quarter and first nine months were $5,599,000 and
$16,670,000, respectively, and were 18% and 19% higher than the third quarter
and first nine months of 2002, respectively.
Operating income for the third quarter of 2003 was $58,000 compared with an
operating loss of $905,000 for the third quarter of 2002. Operating income for
the nine months ended September 30, 2003 was $758,000 compared to an operating
loss of $2,891,000 for the comparable period of 2002. Operating expenses for the
third quarter and first nine months of 2003 were $3,395,000 and $9,185,000,
respectively, a decrease of 5% from $3,584,000 in the third quarter 2002 and a
decrease of 16% from $10,934,000 in the first nine months of 2002.
The Company reported net income for the third quarter of 2003 of $1,287,000
compared with a net loss of $809,000 for the comparable period of 2002. Net
income for the first nine months of 2003 was $2,490,000 compared with a net loss
of $2,639,000 for the first nine months of 2002. Net income in 2003 included a
gain from the sale, in the third quarter, of its VACMAN Enterprise business unit
of $1,517,000, a loss from discontinued operations of $36,000 for the three
months ended September 30, 2003 and income from discontinued operations of
$448,000 for the nine months ended September 30, 2003. Excluding the results of
its VACMAN Enterprise unit, the Company reported a net loss from continuing
operations of $194,000 and net income from continuing operations of $525,000 for
the three and nine months ended September 30, 2003, respectively. For 2002, the
Company reported net losses from continuing operations for the three and nine
month periods of $1,021,000 and $3,385,000, respectively.
Income per basic and diluted common share from total operations was $0.04 and
$0.06 for the third quarter and first nine months of 2003, respectively, and
compares to a loss per basic and diluted common share of $0.04 and $0.12 for the
third quarter and first nine months of 2002, respectively. For the third quarter
of 2003, the Company reported a loss per basic and diluted common share of $0.01
from continuing operations and income per basic and diluted common share of
$0.05 from discontinued operations. For the nine months ended September 30,
2003, the Company reported no income or loss per basic and diluted common share
from continuing operations and income per basic and diluted common share of
$0.06 from discontinued operations.
Earnings before interest, taxes, depreciation and amortization (EBITDA) from
continuing operations was $320,000 and $1,951,000 for the third quarter and
first nine months of 2003, respectively, compared with losses before these items
of $698,000 in the third quarter and $2,094,000 for the first nine months of
2002. The Company had a cash balance at September 30, 2003 of $5,524,000
compared to $3,983,000 and $2,616,000 at June 30, 2003 and December 31, 2002,
respectively.
"The management team completed several major transactions in the third quarter
while achieving record third-quarter revenue," said Ken Hunt, VASCO's CEO, and
Chairman. "During the quarter, we completed the sale of the VACMAN Enterprise
business unit, a non-core business, repurchased all of the outstanding shares of
our Series C Convertible Preferred Stock from Ubizen N.V., raised $8 million of
new capital and repaid our $3.4 million term loan from Dexia Bank. Each of these
transactions was identified as a key objective for the team at the beginning of
the year and we are very pleased to have completed each of them in the third
quarter. With these transactions behind us, the management team can focus more
clearly on increasing revenues and continuing to improve operating efficiency."
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"The third quarter of 2003 was one of the best third quarters in the Company's
history," stated Jan Valcke, VASCO's President, and COO. "Traditionally the
third quarter is one of our weakest quarters due to the holidays. Revenue in the
third quarter of 2003 was higher than any previous third quarter and it was only
the second time in the Company's history that it generated an operating profit
in the third quarter. As I have noted in previous quarters, the market continues
to be very cautious relative to spending on investment technology. Even with the
cautious market, we were able to add 112 new customers in the third quarter. For
the first nine months, we have now added a total of 442 new customers. New
customers often start with small orders, but are an important source of revenue
in the future as they learn more about the benefits of strong user
authentication and the ease with which our product can be deployed and used.
With the holidays, our order activity in the third quarter was predictably
slower than prior quarters. As we start the fourth quarter, we are seeing a high
level of interest in our authentication products, but have noticed that some
orders are being delayed as customers are uncertain about the economy. We are
confident, however, that the order volume will increase as our customers
finalize their plans for 2003 and 2004"
Cliff Bown, Executive Vice President and CFO added, "I believe that the
transactions that were completed in the third quarter have strengthened our
balance sheet significantly. As a result of the sale of VACMAN Enterprise, we
should be able to convert a non-core asset to cash over time. The repurchase of
the Series C Convertible Preferred Stock eliminated the risk of substantial
dilution to existing shareholders if the Series C had reached its mandatory
conversion date. Finally, the recent financing allowed the Company to pay off
all of its outstanding bank debt and replenish its working capital. Those
transactions, combined with the positive operating cash flow, as measured by
EBITDA, and continued improvement in reducing our Days Sales Outstanding (DSO)
in net accounts receivable, have increased our working capital to $4.6 million
from $1.0 million at June 30, 2003 and from a deficit of $0.6 million at
December 31, 2002. During the third quarter, we were able to reduce our DSO to
45 days, a reduction of 14 days and 28 days from June 30, 2003 and December 31,
2002, respectively."
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VASCO DATA SECURITY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------------- -----------------------------
2002 2003 2002 2003
------------ ------------ ------------ ------------
Net revenues $ 4,740,000 $ 5,599,000 $ 13,979,000 $ 16,670,000
Cost of goods sold 2,061,000 2,146,000 5,936,000 6,727,000
------------ ------------ ------------ ------------
Gross profit 2,679,000 3,453,000 8,043,000 9,943,000
Operating costs:
Sales and marketing 1,825,000 1,579,000 5,741,000 4,589,000
Research and development 651,000 747,000 2,043,000 2,064,000
General and administrative 1,177,000 1,037,000 3,183,000 2,492,000
Non-cash compensation (recovery) (69,000) 32,000 (33,000) 40,000
------------ ------------ ------------ ------------
Total operating costs 3,584,000 3,395,000 10,934,000 9,185,000
------------ ------------ ------------ ------------
Operating income (loss) from continuing operations (905,000) 58,000 (2,891,000) 758,000
Interest expense, net (45,000) (22,000) (238,000) (120,000)
Other income (expense), net (71,000) (5,000) (116,000) 376,000
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before income taxes (1,021,000) 31,000 (3,245,000) 1,014,000
Provision for income taxes -- 225,000 140,000 489,000
------------ ------------ ------------ ------------
Net income (loss) from continuing operations (1,021,000) (194,000) (3,385,000) 525,000
Discontinued operations:
Income (loss) from discontinued operations 212,000 (36,000) 746,000 448,000
Gain on sale of discontinued operations -- 1,517,000 -- 1,517,000
------------ ------------ ------------ ------------
Net income (loss) (809,000) 1,287,000 (2,639,000) 2,490,000
Preferred stock accretion and dividends (291,000) (67,000) (873,000) (649,000)
------------ ------------ ------------ ------------
Net income (loss) available to common shareholders $ (1,100,000) $ 1,220,000 $ (3,512,000) $ 1,841,000
============ ============ ============ ============
Basic and diluted net income (loss) per common share:
Income (loss) from continuing operations $ (0.05) $ (0.01) $ (0.15) $ --
Income (loss) from discontinued operations $ 0.01 $ 0.05 $ 0.03 $ 0.06
------------ ------------ ------------ ------------
Net income (loss) $ (0.04) $ 0.04 $ (0.12) $ 0.06
============ ============ ============ ============
Weighted average common shares outstanding:
Basic 28,346,000 28,437,000 28,305,000 28,420,000
============ ============ ============ ============
Diluted 28,389,000 31,222,000 28,333,000 29,510,000
============ ============ ============ ============
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VASCO DATA SECURITY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2002 2003
------------ -------------
(Audited) (Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 2,616,000 $ 5,524,000
Accounts receivable, net of allowance for doubtful accounts 2,870,000 2,725,000
Inventories, net 1,579,000 1,654,000
Prepaid expenses 395,000 246,000
Assets of discontinued operations 156,000 --
Other current assets 119,000 693,000
------------ ------------
Total current assets 7,735,000 10,842,000
Property and equipment
Furniture and fixtures 1,485,000 1,870,000
Office equipment 1,927,000 1,972,000
------------ ------------
Total property and equipment 3,412,000 3,842,000
Accumulated depreciation (2,256,000) (2,994,000)
------------ ------------
Net property and equipment 1,156,000 848,000
Intangible assets, net 1,911,000 1,504,000
Goodwill, net 250,000 250,000
Note receivable and investment in SSI -- 1,212,000
Other assets 81,000 87,000
------------ ------------
Total assets $ 11,133,000 $ 14,743,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,590,000 $ --
Accounts payable 1,850,000 1,819,000
Liabilities related to assets of discontinued operations 108,000 43,000
Deferred revenue 644,000 679,000
Amount payable to Ubizen -- 1,000,000
Other accrued expenses 2,131,000 2,666,000
------------ ------------
Total current liabilities 8,323,000 6,207,000
STOCKHOLDERS' EQUITY:
Series C Convertible Preferred Stock 9,108,000 --
Series D Convertible Preferred Stock -- 5,831,000
Common stock 28,000 30,000
Additional paid-in capital 36,763,000 47,145,000
Accumulated deficit (42,608,000) (43,858,000)
Accumulated other comprehensive income (loss) -
cumulative translation adjustment (481,000) (612,000)
------------ ------------
Total stockholders' equity 2,810,000 8,536,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,133,000 $ 14,743,000
============ ============
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Reconciliation of EBITDA from continuing operations to net income from
continuing operations:
Three Months Ended (unaudited), Nine Months Ended (unaudited),
--------------------------------- ----------------------------------
Sept. 30, 2002 Sept. 30, 2003 Sept. 30, 2002 Sept. 30, 2003
-------------- -------------- -------------- --------------
EBITDA $ (698,000) $ 320,000 $(2,094,000) $ 1,951,000
Interest expense, net 45,000 22,000 238,000 120,000
Tax provision -- 225,000 140,000 489,000
Depreciaton and amortization 278,000 267,000 913,000 817,000
----------- ----------- ----------- -----------
Net income (loss) $(1,021,000) $ (194,000) $(3,385,000) $ 525,000
=========== =========== =========== ===========
Highlights of the Quarter - VASCO:
- - Sells VACMAN Enterprise to SecureD Services,
- - Reaches agreement with Ubizen to settle Ubizen's $15 million investment in
the Company for $4 million in cash and 2 million shares of common stock,
- - Completes $8 million capital raise,
- - Repays term note to Dexia Bank, eliminating all bank debt,
- - Launches Digipass Pack of Microsoft Outlook Web Access,
- - Launches Digipass Go3,
- - Signs a solution partnership agreement with Network Engines, and
- - Adds 8 new distributors, bringing the total number of VASCO distributors to 29
Please join us during our upcoming conference call on October 23, 2003, at 10:00
a.m. EDT - 16:00h 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 First Nine Months of 2003.
To participate in this Conference Call, please dial one of the following
numbers:
USA/Canada: +1 800-475-2151
International: +1 973-582-2710
And mention access code: 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.
ABOUT VASCO: VASCO designs, develops, markets and supports patented "Identity
Authentication" products for e-business and e-commerce. VASCO's Identity
Authentication software is delivered via its Digipass security products, small
"calculator" hardware devices carried by an end user, or in a software format on
mobile phones, other portable devices, and PCs. For user access control, VASCO's
VACMAN products guarantee that only designated Digipass users get access to the
application. VASCO's target markets are the applications and their several
hundred million users that utilize fixed passwords as security. VASCO's
time-based system generates a "one-time" password that changes with every use,
and is virtually impossible to hack, or break. With 10 million Digipass products
sold and ordered, VASCO has established itself as a world-leader for strong
Identity Authentication with 200 international financial institutions,
approximately 1000 blue-chip corporations, and governments representing more
than 50 countries.
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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 "believes," "anticipates," "plans," "expects," 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 Company's public filings with the US Securities and
Exchange Commission for further information regarding the Company and its
operations.
More information is available at www.vasco.com.
-------------
For more information contact:
Media: Jochem Binst: +32 2 456 9810, JBINST@VASCO.COM
----------------
Investor Relations: Tony Schor, President, Investor Awareness, Inc.:
847-945-2222, TONYSCHOR@INVESTORAWARENESS.COM
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