EXHIBIT 99.1
VASCO REPORTS RESULTS FOR THIRD QUARTER AND FIRST NINE MONTHS OF 2005
REVENUES FOR THE THIRD QUARTER 2005 INCREASE 79% OVER Q3 2004; OPERATING INCOME
INCREASES 51% OVER Q3 2004. BOTH REVENUE AND OPERATING INCOME FOR THE THIRD
QUARTER 2005 ARE BEST IN THE COMPANY'S HISTORY. FINANCIAL RESULTS FOR THE
PERIODS ENDED SEPTEMBER 30, 2005 AND GUIDANCE FOR FULL-YEAR 2005 TO BE DISCUSSED
ON CONFERENCE CALL TODAY AT 10:00 A.M. E.D.T.
OAKBROOK TERRACE, Ill., and BRUSSELS, Belgium, October 27, 2005 - VASCO Data
Security International, Inc. (Nasdaq: VDSI) ( www.vasco.com), today reported
financial results for the third quarter and nine-months ended September 30,
2005.
Revenues for the third quarter of 2005 increased 79% to $13,272,000 from
$7,400,000 in 2004 and, for the first nine months of 2005, increased 80% to
$37,060,000 from $20,595,000 in 2004. Revenues for the quarter and nine months
ended September 30, 2005 included $1,156,000 and $3,386,000, respectively, from
AOS-Hagenuk B.V. ("AOS"), which was acquired on February 4, 2005.
Net income available to common shareholders for the third quarter of 2005 was
$1,751,000, or $0.05 per diluted share, an increase of $601,000 or 52% from
$1,150,000, or $0.03 per diluted share in 2004. Net income available to common
shareholders for the first nine months of 2005 was $4,724,000, or $0.13 per
diluted share, an increase of $2,184,000 or 86% from $2,540,000, or $0.08 per
diluted share in 2004.
Financial Highlights:
o Results reflect the eleventh consecutive quarter of operating profit
and positive earnings before interest, taxes, depreciation and
amortization ("EBITDA").
o Results reflect the sixth consecutive quarter-over-quarter increase in
revenue.
o Gross profit was $8,134,000 or 61% of revenue for the third quarter
and $23,403,000 or 63% of revenue for the first nine months of 2005.
Gross profit was $5,156,000 or 70% of revenue for the third quarter
and $14,677,000 or 71% of revenue for the first nine months of 2004.
o Operating expenses for the third quarter and first nine months of 2005
were $5,596,000 and $16,657,000, respectively, an increase of 61% from
$3,475,000 reported for the third quarter 2004 and an increase of 57%
from $10,618,000 reported for the first nine months of 2004. Operating
expenses from AOS for the third quarter were $586,000, including
$91,000 of expense related to amortization of intangible assets
resulting from the acquisition. Operating expenses included in the
results for the first nine months from AOS were $1,740,000, including
$313,000 of amortization expense.
o Operating income for the third quarter and first nine months of 2005
was $2,538,000 and $6,746,000, respectively, an increase of $857,000
or 51% from $1,681,000 reported for the third quarter of 2004 and an
increase of $2,687,000 or 66% from the $4,059,000 reported for the
first nine months of 2004. Operating income, as a percentage of
revenue, for the third quarter and first nine months of 2005 was 19.1%
and 18.2%, respectively, compared to 22.7% and 19.7% for the
comparable periods in 2004.
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o Net income for the third quarter and first nine months of 2005 was
$1,751,000 and $4,738,000, respectively, and compares to income of
$1,201,000 reported for the third quarter of 2004 and net income of
$2,737,000 reported for the first nine months of 2004.
o Earnings before interest, taxes, depreciation and amortization was
$2,970,000 and $8,080,000 for the third quarter and first nine months
of 2005, respectively, an increase of 64% from $1,806,000 reported for
the third quarter of 2004 and an increase of 77% from $4,562,000
reported for the first nine months of 2004.
o Net cash balances, cash balances less borrowing under its line of
credit, at September 30, 2005 totaled $9,272,000 compared to
$8,009,000 and $8,220,000 at June 30, 2005 and December 31, 2004,
respectively.
Operational and Other Highlights:
o Approximately 1.8 million Digipasses shipped in the third quarter
2005, an increase of more than 175% from the third quarter of 2004.
For the nine months ended September 30, 2005, approximately 4.9
million Digipasses were shipped, also an increase of more than 175%
over the same period in 2004.
o VASCO won 194 new customers in Q3 2005 (27 banks and 167 corporate
customers) and 570 for the first nine months of 2005. Year-to-date new
customers include 68 banks and 502 corporate customers.
o VASCO is the first company to receive Mastercard's EMV-CAP 2004
approval and the Belgian EPCI certification.
o VASCO and I-Flex sign solution partnership.
o VASCO signs Online Distribution to tackle CNA market in the
Middle-East.
"The results of the third quarter confirm that our strategies are working
worldwide" said Ken Hunt, VASCO's CEO and Chairman. "Even though the third
quarter is seasonally weak in Europe due to the holidays, the growth in revenues
in other countries more than offset the seasonality in Europe, resulting in our
sixth consecutive quarterly increase in revenues. Those increases in revenues
have been combined with increases in operating productivity and margins.
Operating income, as a percentage of revenue, increased for the third
consecutive quarter to 19% of revenue."
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"As a leader in the banking and financial markets, our products are being
deployed in large quantities in many countries around the world" said Jan
Valcke, VASCO's President and COO. "Two-factor authentication is being accepted
in more and more countries and our products are setting the standard as the
high-volume, high-quality, low-cost solution. The success that we have enjoyed
with many of the world's largest banks give many other banks the confidence that
our solutions are right for them as well. We now have over 400 banks as
customers in over 100 countries. That success can also be seen in our increasing
backlog of orders. As we start the fourth quarter, we have a backlog of firm
orders to be shipped in the fourth quarter of $12.7 million, which is 87% higher
than the $6.8 million backlog we had entering the fourth quarter of 2004."
Cliff Bown, Executive Vice President and CFO added, "Our balance sheet continues
to strengthen as a result of our strong operating performance. Our net cash
balances at September 30, 2005 were $9,272,000, an increase of $1,263,000 or 16%
from June 30, 2005 and our working capital increased approximately 24% to
$12,851,000 at September 30, 2005 from $10,325,000 at June 30, 2005. Days Sales
Outstanding (DSO) in net accounts receivable increased to approximately 59 days
at September 30, 2005 from 54 days at June 30, 2005."
Conference Call Details
In conjunction with this announcement, VASCO Data Security International, Inc.
will host a conference call today, October 27, 2005, 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 actual results for the
periods ended September 30, 2005 and full-year 2005 guidance.
To participate in this Conference Call, please dial one of the following
numbers:
USA/Canada: +1 800-322-0079
International: +1 973 409-9258
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.
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VASCO DATA SECURITY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------------- -----------------------------------
2005 2004 2005 2004
---------------- ---------------- ---------------- ----------------
Net revenues $ 13,272 $ 7,400 $ 37,060 $ 20,595
Cost of goods sold 5,138 2,244 13,657 5,918
---------------- ---------------- ---------------- ----------------
Gross profit 8,134 5,156 23,403 14,677
Operating costs:
Sales and marketing 3,387 1,975 10,259 6,218
Research and development 902 595 2,615 1,803
General and administrative 1,128 855 3,205 2,384
Restructuring costs (recovery) - (32) - (32)
Amortization of purchased intangible assets 179 82 578 245
---------------- ---------------- ---------------- ----------------
Total operating costs 5,596 3,475 16,657 10,618
---------------- ---------------- ---------------- ----------------
Operating income 2,538 1,681 6,746 4,059
Interest income (expense), net (10) 34 32 88
Other income (expense), net 166 (45) 512 -
---------------- ---------------- ---------------- ----------------
Income before income taxes 2,694 1,670 7,290 4,147
Provision for income taxes 943 469 2,552 1,410
---------------- ---------------- ---------------- ----------------
Net income $ 1,751 $ 1,201 $ 4,738 $ 2,737
Preferred stock dividends - (51) (14) (197)
---------------- ---------------- ---------------- ----------------
Net income available to common shareholders $ 1,751 $ 1,150 $ 4,724 $ 2,540
================ ================ ================ ================
Net income per common share:
Basic $ 0.05 $ 0.04 $ 0.13 $ 0.08
================ ================ ================ ================
Diluted $ 0.05 $ 0.03 $ 0.13 $ 0.08
================ ================ ================ ================
Weighted average common shares outstanding:
Basic 35,848 32,578 35,235 31,897
================ ================ ================ ================
Diluted 37,703 35,172 37,088 35,217
================ ================ ================ ================
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VASCO DATA SECURITY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
2005 2004
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,754 $ 8,220
Accounts receivable, net 8,552 5,965
Inventories, net 2,517 1,346
Prepaid expenses 485 791
Deferred income taxes 23 23
Foreign sales tax receivable 316 313
Other current assets 422 464
------------ ------------
Total current assets 24,069 17,122
Property and equipment, net 950 838
Intangible assets, net 1,036 1,134
Goodwill 6,637 250
Investment in SSI 570 760
Other assets 25 146
------------ ------------
TOTAL ASSETS $ 33,287 $ 20,250
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,951 $ 3,065
Bank borrowings 2,482 --
Deferred revenue 1,145 620
Accrued wages and payroll taxes 1,712 1,602
Income taxes payable 849 435
Other accrued expenses 2,079 1,345
------------ ------------
Total current liabilities 11,218 7,067
------------ ------------
Long-term deferred warranty 238 152
STOCKHOLDERS' EQUITY:
Series D convertible preferred stock -- 1,504
Common stock 36 34
Additional paid-in capital 58,934 51,825
Deferred compensation (451) --
Accumulated deficit (35,948) (40,672)
Accumulated other comprehensive income (loss) -
cumulative translation adjustment (740) 340
------------ ------------
Total stockholders' equity 21,831 13,031
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 33,287 $ 20,250
============ ============
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Reconciliation of EBITDA to net income (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------ ------------------------------------
2005 2004 2005 2004
----------------- ----------------- ----------------- -----------------
UNAUDITED UNAUDITED
EBITDA $ 2,970 $ 1,806 $ 8,080 $ 4,562
Interest (income) expense, net 10 (34) (32) (88)
Provision for income taxes 943 469 2,552 1,410
Depreciation and amortization 266 170 822 503
----------------- ----------------- ----------------- -----------------
Net income $ 1,751 $ 1,201 $ 4,738 $ 2,737
================= ================= ================= =================
ABOUT VASCO: VASCO designs, develops, markets and supports patented user
authentication products for the financial world, remote access, e-business and
e-commerce. VASCO's user authentication software is delivered via its Digipass
hardware and software security products. With approximately 19 million Digipass
products sold and delivered, VASCO has established itself as a world-leader for
strong user authentication with more than 400 international financial
institutions and 2,000 blue-chip corporations and governments located in more
than 100 countries.
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.
For more information contact:
Jochem Binst, +32 2 456 9810, jbinst@vasco.com
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