Exhibit 99.3
Investor Analysts' Presentation
[VASCO LOGO] THE AUTHENTICATION COMPANY
T. Kendall Hunt
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Founder, Chairman and CEO
April 2005
Analyst Presentation T. Kendall Hunt April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Today's VASCO Speakers
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T. Kendall Hunt, Chairman and CEO
Mr. Hunt has been a director since July 1997. He served since 1984 as Chairman,
President and CEO as the founder of our predecessor company, VASCO Corp. Mr.
Hunt received a B.B.A. from the University of Miami, Miami, Florida and an
M.B.A. from Pepperdine University, Malibu, California.
Jan Valcke, President and COO
Mr. Valcke has been managing worldwide sales, marketing, business development,
and product management for both the Digipass and VACMAN product lines since
2000. From 1992 until joining VASCO in 1996, he served as Vice President of
Sales and Marketing of Digipass NV/SA, a member of the Digiline International
group. He was co-founder and a member of the Board of Directors of Digiline.
Clifford K. Bown, Executive Vice President and CFO
Cliff has his MBA from the University of Chicago, a B.S. in Accountancy from the
University of Illinois, and his CPA certificate. Prior to VASCO, he held the
position of CFO with several companies, including a $300 million computer
company, and was an audit manager at KPMG.
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Analyst Presentation T. Kendall Hunt April 2005 2
[VASCO LOGO] THE AUTHENTICATION COMPANY
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VASCO's First Analysts/Investors Day
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AGENDA
> 12:00 Noon Introduction & Welcome Ken Hunt
> 12:15 PM Review of Q1 2005 Financials Cliff Bown
Q&A
> 12:45 PM VASCO Markets, Current & Future Jan Valcke
Q&A
> 1:45 PM Customer Testimonials
> 2:00 PM Phishing & Man-in-the-middle Attacks
> 2:30 PM Final Comments & Q & A Ken Hunt
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Analyst Presentation T. Kendall Hunt April 2005 3
[VASCO LOGO] THE AUTHENTICATION COMPANY
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ABOUT VASCO
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> VASCO, is the High Volume, High Quality, Low Cost Producer of Strong
Authentication products for the financial world, remote access, e-commerce
and e-government
> We've developed a Sustainable, repeatable revenue model
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Analyst Presentation T. Kendall Hunt April 2005 4
[VASCO LOGO] THE AUTHENTICATION COMPANY
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High volume, High Quality, Low Cost Producer
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Leading provider of strong authentication products to the financial world, with
over 370 banks as customers
Over 15 million of Digipass products sold and delivered
Nine consecutive profitable quarters
Growing strongly, with a year-to-year growth of 90% in Q1 2005
42 distributors and over 1,500 resellers worldwide
Sold and Delivered over 1,000,000 Digipass in Q4 2004
Sold and Delivered over 1,500,000 Digipass in Q1 2005
Product lifespan of 5-7 years, allowing customers to amortize the cost over
several years
Easy to install middleware software (VACMAN)
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Analyst Presentation T. Kendall Hunt April 2005 5
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Sustainable, Repeatable Revenue Model
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- -------------------------------------------------------------------------------------------------------->
| | | |
Pilot phase Enrollment of first More orders
Initial order application + while bank
(100-1000 (3 months- 1 additional orders broadens use of
units) year) Digipass
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Analyst Presentation T. Kendall Hunt April 2005 6
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Sustainable, Repeatable Revenue Model
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> Case Study: Rabobank (The Netherlands)
> 1992: Initial order - 10,000 units of Digipass 500 Phone banking.
> 1994: start of www.rabobank.be for retail banking
> 1997: online transactions possible - with Digipass
> 2000: 700,000 units of Digipass 500 in the field
> 2001: introduction of Random Reader (Digipass 800 - secure smart card
reader)
> 2004-2005: 2,000,000 units of Random Reader in the field
> Largest Internet Bank in Europe, according to Nielsen Webratings
Comparable cases: Swedbank (Sweden), Fortis (Belgium), ZaBa (Croatia),
Wachovia (U.S. - corporate banking), ABN-Amro (U.S. - corporate banking)
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Analyst Presentation T. Kendall Hunt April 2005 7
[VASCO LOGO] THE AUTHENTICATION COMPANY
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VASCO - TGhe Leader in Large Deployments
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> 80 % of the largest deployments of strong user authentication products in
the financial sector, including.
> Fortis (Belgium & Netherlands)
> Swedbank (Sweden)
> Den Norske Bank (Norway)
> Zagrebacka Banka (Croatia)
> BN L (Italy)
> Rabobank (The Netherlands)
> ABN-Amro (The Netherlands)
> Mandiri Bank (Indonesia)
> SEB (Sweden)
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Analyst Presentation T. Kendall Hunt April 2005 8
DIGIPASS FACTORY
A concept for Strong User Authentication & Digital Signatures
[GRAPHIC]
DIGIPASS
FACTORY
[VASCO LOGO]
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Nasdaq: VDSI
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Analyst Presentation T. Kendall Hunt April 2005
[VASCO LOGO]THE AUTHENTICATION COMPANY
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VASCO Analyst Day Presentation
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Jan Valcke, President & COO
April 2005
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO]THE AUTHENTICATION COMPANY
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Agenda: Actual Situation
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> 1. General
> 2. Elements of a company
> Markets
> Regions
> Products
> People
> 3. Questions and Answers
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Analyst Presentation Jan Valcke April 2005 2
[VASCO LOGO]THE AUTHENTICATION COMPANY
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General
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> Overview of last two years' work
4 Elements in a Company:
> Markets
> Products
> People
> Cash
Growth can only be successful if the 4 elements
grow at the same time.
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Analyst Presentation Jan Valcke April 2005 3
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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MARKETS
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> Mature Markets
> Retail Banking
> Corporate Banking
> Enterprise Security
> Remote Access
> Potential Markets
> B-to-C e-Commerce (Including EMV)
> B-to-B e-Commerce
> E-government
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Analyst Presentation Jan Valcke April 2005 5
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: Mature
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> Markets ready to deploy strong authentication:
Remote Access: 70 Mio users
Enterprise Security: 300 Mio users
Corporate Banking: 10 Mio users
Retail Banking: 130 Mio users
All those markets are fast growing
Source: Jan Valcke - June 2004
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Analyst Presentation Jan Valcke April 2005 6
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: Mature
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> Market penetration strong authentication:
Remote Access: 13%
Enterprise Security: 3%
Corporate Banking: 20%
Retail Banking: 8%
Source: Jan Valcke - June 2004
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Analyst Presentation Jan Valcke April 2005 7
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: Strategy
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> Large deployments in banks, but lower margins
> Customers of banks are also working in companies (banks are promoting
our brand name)
More actions towards the enterprises:
> more products, more sales and marketing in the enterprise
security market
> Business plan to define priorities by segment & by country
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Analyst Presentation Jan Valcke April 2005 8
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Potential Markets
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> B-to-B e-Commerce
> B-to-C e-Commerce (including EMV)
> E-Government
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Analyst Presentation Jan Valcke April 2005 9
[VASCO LOGO] THE AUTHENTICATION COMPANY
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B-to-B e-Commerce
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> Vendors offering products/services to a closed user group of companies
> Customers have a loyalty (smart) card or a Digipass
> Authentication with Digipass 800/820 & smart card or stand-alone
Digipass
> Strategy: we go to C.N.A. customers - proposal to use Digipass in
e-commerce application
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Analyst Presentation Jan Valcke April 2005 10
[VASCO LOGO] THE AUTHENTICATION COMPANY
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B-to-C e-Commerce
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> Companies selling products & services to end consumer
> EMV and beyond
> Strategy: to get as many banks as possible as customers - let them use
DP as secure Internet banking application - multi-application
capabilities of DP allows banks to enter e-commerce business + credit
card companies
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Analyst Presentation Jan Valcke April 2005 11
[VASCO LOGO] THE AUTHENTICATION COMPANY
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EMV B-to-C e-Commerce
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> EMV = Europay, Mastercard, VISA: new generation of credit cards
> EMV-CAP: EMV Chip Authentication Protocol: authentication software needed
for online transactions + reader (Digipass 800, 820,...): << card not
present >> transactions
> Roll-out of EMV-cards speeds up in several important markets
> First pilots including EMV-CAP & Digipass started in 2004
> First big EMV-CAP deals + Digipass expected in 2005
> Easy migration for existing Digipass customers to Digipass for EMV
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Analyst Presentation Jan Valcke April 2005 12
[VASCO LOGO] THE AUTHENTICATION COMPANY
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E- Government
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> First big deployments projected for 2006/2007
> Belgium, Estonia, Malaysia, Hong Kong trendsetters with regards to national
ID-cards
> VASCO ready with Digipass 800/820/850 secure card readers
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Analyst Presentation Jan Valcke April 2005 13
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Regions
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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VASCO Worldwide
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[MAP]
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Analyst Presentation Jan Valcke April 2005 15
[VASCO LOGO] THE AUTHENTICATION COMPANY
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The worldwide, Local approach
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> Boston, Sydney, Singapore:
> First focus was to create a "cushion"
> Strategy is global, tactics are locally defined
- Using VASCO's European experience with a localized approach/local flavor
- To Export Knowledge:
Local banking summits to/with prospects & customers Vasco-on-Tour:
Roadshows for banks and resellers/customers of the CNA market
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Analyst Presentation Jan Valcke April 2005 16
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Facts in Markets: Year 2004
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> Revenues By Region
U.S. is the fastest growing region for VASCO
2003 2004
Europe: 84% 81%
US: 7% 10%
Others: 9% 9%
> Revenues by Markets
Banking: 82%
Corporate network Access: 18%
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Analyst Presentation Jan Valcke April 2005 17
[VASCO LOGO] THE AUTHENTICATION COMPANY
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The worldwide, Local approach
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> Corporate Headquarters in Chicago
> North American Operational HQ in Boston
> Growing presence & revenue
> Corporate Banking and Corporate Network Access (Novell, F5, Citrix,...)
> VeriSign OEM agreement
> Investing strongly
> U.S. E-Commerce market more advanced than European
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Analyst Presentation Jan Valcke April 2005 18
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Products
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Analyst Presentation Jan Valcke April 2005
DIGIPASS FACTORY
A concept for Strong User Authentication & Digital Signatures
FROM:
- - Transactions with high value
- - High frequence of use
[GRAPHIC]
TO:
- Transactions with low value
- Low frequence of use
[DIGIPASS FACTORY LOGO]
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Products
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> Manufacturing with just-in-time delivery program
> Japanese quality is the standard
> Focus and vision:
The authentication company
Largest suit of products
Leader in that field: here to stay
> Environmental conscious production
Lead free
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Analyst Presentation Jan Valcke April 2005 21
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Products
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> Business mix: same products in different market segments for different
applications (banking, CNA) etc.
> Largest manufacturer of strong authentication products
- 1.5 million units deployed in Q1
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Analyst Presentation Jan Valcke April 2005 22
[VASCO LOGO] THE AUTHENTICATION COMPANY
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The VeriSign OEM Agreement
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> Digipass G03 is the One-Time Password component of VeriSign's OATH
infrastructure
> Digipass G03 to Support OATH algorithm - entirely new product
> First G03 for OATH will be delivered during Q2
> VeriSign's sales force to sell Digipass G03
> Important asset for VASCO towards U.S.A. financial, e-commerce and
Enterprise sector.
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Analyst Presentation Jan Valcke April 2005 23
[VASCO LOGO] THE AUTHENTICATION COMPANY
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People
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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People
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> 75 employees end Q3 2004
> Over 110 employees end Q1 2005
> Extremely skilled and experienced team
> Same goal
> People grow together with company
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Analyst Presentation Jan Valcke April 2005 25
[VASCO LOGO] THE AUTHENTICATION COMPANY
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The Acquisition of AOS
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> Debt free and profitable
> Smart Card Reader Specialist
> EMV Ready
> Seasoned high level R&D team
> Headquartered at short distance from VASCO's Belgian office
> Creating revenue from Day 1
> Integration finalized at the end of April 2005
> Target: to make VASCO's readers ready for every commercially interesting
smart card type and application in the world
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Analyst Presentation Jan Valcke April 2005 26
[VASCO LOGO] THE AUTHENTICATION COMPANY
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VASCO's Future Vision
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Products
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> Hardware Products
> Middleware Software
> Services
> Security Software
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Analyst Presentation Jan Valcke April 2005 28
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Hardware Products
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> Definition
Having the best TCO pricing in the market for all kind of authentication
products. OEM strategy towards strong solution partners and large end-user
customers.
> Local assembly will be possible (avoid high import taxes)
> Highest quality standards (lowest TCO in the market - low fall-out)
> Transport with a Just-in-Time delivery Programm
> Programming-initialization can be done remotely
> OEM Factory Concept
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Analyst Presentation Jan Valcke April 2005 29
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Hardware Products
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> Local Design
> Multi-application and Products
> Standard Platforms for different products
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Analyst Presentation Jan Valcke April 2005 30
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Software Middleware Products
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> Definition:
- Works with the Partners' Solution
- Software that can be distributed through the channel.
- Software that allows Vasco to sell more Digipass.
- Goal: to have a better margin rate
> PKI - Federated Identity
> Authentication
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Analyst Presentation Jan Valcke April 2005 31
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Services
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> Definition:
is selling a customer (by month/year/transaction) several times towards
different companies (applications).
Authentication is not anymore a security add-on, but becomes more and
more business.
> Digipass PKI Solution:
Private Key is stored on a Secure Server and retrieved with a classic
Digipass.
> Already over one million Digipass in deployment.
> Extremely low cost (TCO) solution for high level security applications.
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Analyst Presentation Jan Valcke April 2005 32
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Services
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> Digipass enables Federated Identity Management.
> Activation code principle.
> Digipass concept is multimedia and multi-application
> Banks/Credit Card Companies becomes a trusted center and are willing to
commercialize their DB.
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Analyst Presentation Jan Valcke April 2005 33
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Security Software
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> Definition:
Software that is important to our Core Business and that will not
compete with our Largest Solution Partner Software.
> Authentication Server Software
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Analyst Presentation Jan Valcke April 2005 34
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets and Regions
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets
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> Mature Markets
> Potential Markets
> Markets under investigation
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Analyst Presentation Jan Valcke April 2005 36
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: Mature
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> Markets ready to deploy strong authentication
Banking:
We are the No. 1 vendor.
Digipass Factory fits for all banking applications
Have enough people to serve the market worldwide
Institutional Banking is in the most countries a mature market
Most Countries are moving foreward to use strong authentication for
retail banking
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Analyst Presentation Jan Valcke April 2005 37
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: Mature
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> USA: Banking
Institutional Banking is mature
> Retail Banking:
more and more influence of international banks
FDIC advices strong authentication for retail banking.
Most advanced banks are anticipating to future laws.
Some banks are investigating the use of strong authentication for
retail banking
Start: probably some tests end this year, beginning next year.
Deployments: 2006/2007
Marketing: Road Shows
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Analyst Presentation Jan Valcke April 2005 38
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: Mature
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> CNA
Middleware strategy for own Vasco Products.
Enterprise security through partnerships like Verisign, Novell,
Tivoli, . . .
We have a good growth but to boost that growth, we need more people and
products.
Will be prority No. 1 as from now.
We do not compete with our solution partners
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Analyst Presentation Jan Valcke April 2005 39
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: Mature
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> CNA:
2004: priority was to find new distributors/resellers
Also to partner with the market leaders.
Now: Lead Generation is the priority.
Marketing is road show principle.
> USA:
Whole US is covered by resellers.
Resellers are specialized by solution partner.
Reseller network is extremely fast growing.
Lead Generation is the priority for Marketing.
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Analyst Presentation Jan Valcke April 2005 40
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: Potential
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> e-Commerce B2B: Market is ready.
Strategy is to go in the first place to existing CNA customer. Lead
generation by market segment.
Healthcare, Car Industry, Distribution, Government, Social Security,
Real Estate,...... We have several references by markets segment.
> e-Commerce B2C: The consumer market by Excellence
EMV: will start this year with more pilots. Large deployments as from
2006.
VASCO is ready to deploy the Digipass through large consumer
distribution channels.
Digipass Factory concept applies.
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Analyst Presentation Jan Valcke April 2005 41
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: Potential
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> e-Government: National ID-Cards
2004: Prototypes
2005: testing and probably as from 2006/2007 deployments. It is
possible that the Norway bankId PKI solution will be deployed in other
countries
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Analyst Presentation Jan Valcke April 2005 42
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: under investigation
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> On-line Gaming
> Healthcare - Social Security
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Analyst Presentation Jan Valcke April 2005 43
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Markets: Strategy - Priority
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> Our Focus and Vision is working
- - We will continue to work agressively in the banking market.
- - We are hiring more people for the CNA market.
- - We will continue to develop, OEM, buy new products for the existing
customers
- - Business plan to define priorities by segment & by country
- - Business development for the new opportunities
- - "Cushion" strategy is over: we have trained talent in all regions.
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Analyst Presentation Jan Valcke April 2005 44
[VASCO LOGO] THE AUTHENTICATION COMPANY
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People
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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People
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> Definition:
To have a strong organization and professional people management.
International Headquarters and local funtions. Integration of new
personnel (new hires and or acquisitions) must happen fast and in a
professional way.
> Assestments has been done
> Develoment Centers has been set up
> Next one and a half year: a strategy by department and implementation
of a balanced scoring system.
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Analyst Presentation Jan Valcke April 2005 46
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Answers and Questions
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Customer Testimonials
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-Evert Fekkes, Rabobank Netherlands
-Qasif Shahid, ABN-Amro Singapore
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Digipass:
an effective weapon against Phishing
and Man-in-the-Middle Attacks
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Analyst Presentation Jan Valcke April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Clifford K. Bown
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Executive Vice President, Chief Financial Officer
April 2005
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Analyst Presentation C. K. Bown April 2005
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Actual Results 2002-2004 (Continuing Operations)
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(Dollars in Thousands)
Better (Worse)
Actual Results --------------------------
----------------------------------------- 2004 vs 2003 vs
2004 2003 2002 2003 2002
--------- --------- --------- -------- ---------
Sales $ 29,893 $ 22,866 $ 17,370 30.7 % 31.6
Gross profit $ 20,709 $ 13,856 $ 10,210 49.5 % 35.7
Gross margin % of revenue 69.3% 60.6% 58.8% 8.7 pts 1.8 pts
Operating expenses $ 15,157 $ 12,733 $ 15,109 (19.0) % 15.7%
Oper. exp. % of revenue 50.7% 55.7% 87.0% 5.0 pts 31.3 pts
Operating income (loss) $ 5,552 $ 1,123 $ (4,898) 394.4 % N/M
Oper. margin % of revenue 18.6% 4.9% -28.2% 13.7 pts 33.1 pts
N/M = Not Meaningful
17
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Analyst Presentation C. K. Bown April 2005 2
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Turn Around - Quarterly Results (Continuing Operations)
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SALES ($000s)
Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05
- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
5,478 3,761 4,740 3,391 5,118 5,953 5,599 6,196 6,021 7,174 7,400 9,298 11,444
EXECUTIVE MANAGEMENT CHANGE
OPERATING MARGIN
Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05
- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(9)% (39)% (19)% (59)% 0% 11% 1% 6% 15% 21% 23% 16% 17%
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Analyst Presentation C. K. Bown April 2005 3
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Consolitated Statement of Operations - Q1 05 vs. Q1 04 (unaudited)
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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
EXCLUDING AOS
Q1 2005 ACTUAL Q1 2005 ACTUAL
B/(W) THAN 2004 B/(W) THAN 2004
2005 2004 ---------------------- ---------------------
Q1 ACTUAL Q1 ACTUAL AMOUNT PERCENT AMOUNT PERCENT
--------- --------- -------- ------- --------- -------
TOTAL REVENUE $ 11,444 $ 6,021 $ 5,422 90% $ 4,546 75%
-------- -------- -------- --------
GROSS PROFIT 7,221 4,446 2,775 62% $ 2,407 54%
Gross Profit % 63.1% 73.8% (10.7) pts
OPERATING EXPENSES:
Sales and Marketing Expenses 3,311 2,093 (1,218) (58)% (1,048) (50)%
R&D Expense 885 708 (178) (25)% (37) (5)%
General and Administrative Expense 976 746 (230) (31)% (170) (23)%
Non-cash expense (AOS Amort. & Equity Plan) 125 -- (125) (36)
-------- -------- -------- -------- --------
Total operating expenses: $ 5,297 $ 3,547 $ (1,750) (49)% $ (1,291) (36)%
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS) $ 1,924 $ 899 $ 1,025 114% $ 1,116 124
-------- -------- -------- --------
As a percentage of total revenue 16.8% 14.9% 1.9 pts
Income before income taxes $ 2,165 $ 1,005 $ 1,160 115
Income taxes 758 422 (336) (80)%
-------- -------- --------
NET INCOME $ 1,407 $ 583 $ 825 142%
Preferred stock accretion/Dividend (14) (81) 66 82%
-------- -------- --------
Net income available to common shareholders $ 1,393 $ 502 891 178%
======== ======== ========
FULLY-DILUTED EARNINGS PER SHARE $ 0.04 $ 0.02 $ 0.02 146%
======== ======== ========
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Analyst Presentation C. K. Bown April 2005 4
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Consolidated Statement of Operations - Q1 05 vs. Q4 04 (unaudited)
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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
EXCLUDING AOS
Q1 2005 ACTUAL Q1 2005 ACTUAL
B/(W) THAN 2004 B/(W) THAN 2004
2005 2004 -------------------- ------------------
Q1 ACTUAL Q4 ACTUAL AMOUNT PERCENT AMOUNT PERCENT
--------- --------- ------ ------- ----- -------
TOTAL REVENUE $11,444 $9,298 $2,146 23% $1,269 14%
------- ------ ------ --- ------
GROSS PROFIT 7,221 6,032 1,189 20% $ 821 14%
Gross Profit % 63.1% 64.9% (1.8) pts
OPERATING EXPENSES:
Sales and Marketing Expenses 3,311 2,942 (369) (13)% (192) (7)%
R&D Expense 885 787 (98) (12)% 50 6
General and Administrative Expense 976 810 (166) (20)% (121) (15)%
Non-cash expense (AOS Amort. & Equity Plan) 125 - (125) (36)
------- ------ ------ --- ------
Total operating expenses: $ 5,297 $4,539 $ (758) (17)% $ (299) (7)%
------- ------ ------ --- ------
OPERATING INCOME (LOSS) $ 1,924 $1,493 $ 431 29% $ 522 35%
------- ------ ------ --- ======
As a percentage of total revenue 16.8% 16.1% 0.8 pts
Income before income taxes $ 2,165 $ 986 $1,179 120%
Income taxes 758 471 (287) (61)%
NET INCOME $ 1,407 $ 515 $ 892 173%
------- ------ ------ ---
Preferred stock accretion/Dividend (14) (35) 21 59%
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Net income available to common shareholders $ 1,393 $ 480 913 190%
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FULLY-DILUTED EARNINGS PER SHARE $ 0.04 $ 0.02 $ 0.02 150%
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Analyst Presentation C. K. Bown April 2005 5
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Revenue and Token Volume
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(Dollars and units in thousands)
Revenue Units
------- -----
(Dollars)
Q1 04 6,021 480
Q2 04 7,174 625
Q3 04 7,400 660
Q4 04 9,298 1,070
Q1 05 11,444 1,505
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Analyst Presentation C. K. Bown April 2005 6
[LOGO} THE AUTHENTICATION COMPANY
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Average Selling Price (ASP) and Token Volume
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ASP Units
--- -----
(Dollars) (Units in thousands)
Q1 04 12.54 480
Q2 04 11.48 625
Q3 04 11.21 660
Q4 04 8.69 1,070
Q1 05 7.60 1,505
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Analyst Presentation C. K. Bown April 2005 7
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Operating Components as a Percentage of Revenue
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Q1 04 Q2 04 Q3 04 Q4 05 Q1 05
----- ----- ----- ----- -----
Gr. Mgn. 73.8% 70.7% 69.7% 64.9% 63.1%
Oper. Exp. 58.9% 50.1% 47.0% 48.8% 46.3%
Oper. Mgn. 14.9% 20.6% 22.7% 16.1% 16.8%
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Analyst Presentation C. K. Bown April 2005 8
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Operating Percentages and Operating Income
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Q1 04 Q2 04 Q3 04 Q4 05 Q1 05
----- ----- ----- ----- -----
Gr. Mgn. 73.8% 70.7% 69.7% 64.9% 63.1%
Oper. Exp. 58.9% 50.1% 47.0% 48.8% 46.3%
Oper. Mgn 14.9% 20.6% 22.7% 16.1% 16.8%
Oper. Earnings $899 $1,479 $1,681 $1,493 $1,924
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Analyst Presentation C. K. Bown April 2005 9
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Target Market - VASCO vs. Competitors
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Total Addressable Market Size - By Market Segment*
--------------------------------------------------
Competitors
Enterprise Market
High-Cost Producers
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Natural Barrier
Retail Market
VASCO
Low-Cost Producer
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*Based on total number of potential end users.
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Analyst Presentation C. K. Bown April 2005 10
[VASCO LOGO] THE AUTHENTICATION COMPANY
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Nasdaq: VDSI
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Analyst Presentation C. K. Bown April 2005