EXHIBIT 99.1
VASCO Reports Results for Third Quarter and First Nine Months of 2004
Revenues increase 32% over third quarter of prior year; Operating income best in
the Company's history; Cash increases $2,598,000 from June 30, 2004 to
$8,948,000. Financial results and guidance for full-year 2004 to be discussed on
conference call today at 10:00 a.m. E.S.T.
OAKBROOK TERRACE, Ill., and BRUSSELS, Belgium, October 21, 2004 - VASCO Data
Security International, Inc. (Nasdaq: VDSI) ( www.vasco.com), today reported its
financial results for the third quarter and nine-months ended September 30,
2004.
Revenues for the third quarter of 2004 increased 32% to $7,400,000 from
$5,599,000 in 2003 and, for the first nine months of 2004, increased 24% to
$20,595,000 from $16,670,000 in 2003.
Net income available to common shareholders for the third quarter of 2004 was
$1,150,000, or $0.03 per diluted share and compares to a loss of $2,500,000, or
$0.08 per diluted share in 2003. Net income available to common shareholders for
the first nine months of 2004, was $2,540,000, or $0.08 per diluted share
compared to a loss of $1,879,000, or $0.06 per diluted share in 2003. Net income
available to common shareholders in 2003 included a charge of $3,720,000 for the
beneficial conversion option associated with the Series D 5% Cumulative
Preferred Stock issued in the third quarter of 2003.
Financial Highlights:
o Results reflect the seventh consecutive quarter of operating profit and
positive earnings before interest, taxes, depreciation and amortization
("EBITDA").
o Results reflect the third consecutive quarter-over-quarter increase in
revenue.
o 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. Gross
profit was $3,453,000 or 62% of revenue for the third quarter and
$9,943,000 or 60% of revenue for the first nine months of 2003.
o Operating expenses for the third quarter and first nine months of 2004
were $3,475,000 and $10,618,000, respectively, an increase of 2% from
$3,395,000 reported for the third quarter 2003 and an increase of 16% from
$9,185,000 reported for the first nine months of 2003.
o Operating income for the third quarter and first nine months of 2004 was
$1,681,000 and $4,059,000, respectively, an increase of $1,623,000 from
$58,000 reported for the third quarter of 2003 and an increase of
$3,301,000 from the $758,000 reported for the first nine months of 2003.
Operating income as a percentage of revenue for the third quarter and
first nine months of 2004 was 22.7% and 19.7%, respectively, compared to
1.0% and 4.5% for the comparable periods in 2003.
o Net income from continuing operations for the third quarter and first nine
months of 2004 was $1,201,000 and $2,737,000, respectively, and compares
to a net loss of $194,000 reported for the third quarter of 2003 and a net
income of $525,000 reported for the first nine months of 2003.
o Net income from total operations for the third quarter and first nine
months of 2004 was $1,201,000 and $2,737,000, respectively, a decrease of
7% from $1,287,000 reported for the third quarter of 2003 and an increase
of 10% from $2,490,000 reported for the first nine months of 2003,
respectively. Net income from total operations in 2003 included the
results of its VACMAN Enterprise business, which was sold in the third
quarter of 2003.
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o Earnings before interest, taxes, depreciation and amortization from
continuing operations was $1,806,000 and $4,562,000 for the third quarter
and first nine months of 2004, respectively, an increase of 464% from
$320,000 reported for the third quarter of 2003 and an increase of 134%
from $1,951,000 reported for the first nine months of 2003.
o Cash balances at September 30, 2004 totaled $8,948,000 compared to
$6,350,000 and $4,817,000 at June 30, 2004 and December 31, 2003,
respectively.
Operational and Other Highlights:
o VASCO wins 103 new customers in Q3 2004 (15 banks and 88 corporate
customers) and 347 for the first nine months of 2004. Year-to-date new
customers include 48 new banks and 299 corporate customers.
o Bendigo Bank (Australia) and ABN Amro (Singapore) to use Digipass for
Retail Banking;
o VASCO Launched Digipass Host Authentication to Tackle Phishing;
o Network Engines and VASCO Announce Extended Distribution Agreement (USA);
o VASCO Strengthens Indirect Sales Network in Europe by Signing Leading
Distributors in UK, Denmark, Switzerland, Belgium, The Netherlands, France
and Italy;
o VASCO & Protocom Development Systems Launch Digipass Pack for Microsoft
Windows.
"Our strategies to expand the market's awareness of our products are working as
evidenced by our year-over-year and quarter-over-quarter growth in revenue and
the continued expansion of our customer base," said Ken Hunt, VASCO's CEO, and
Chairman. "The improvement in operating margins as a percent of revenue also
demonstrate the leverage we have with our operations. With the strong results of
the third quarter and first nine months of 2004, we have begun to increase our
investment in sales and marketing programs, including expanding our sales staff.
With the added investment, we are confident that our strong growth will
continue."
"The results of the third quarter reflect the strong growth of the business in
markets outside of Europe and the stable revenue in Europe during the quarter,"
said Jan Valcke, VASCO's President and COO. "Traditionally, Q3 is our weakest
quarter, due to the seasonality that slows down the Corporate Network Access
market. Nevertheless, in total, the third quarter of 2004 is stronger than Q1
and Q2 of this year. This clearly proves the growing demand for our products,
which is also demonstrated by the growth in our backlog. As we start the fourth
quarter, we have a backlog of firm orders to be shipped in the fourth quarter of
$6.8 million, which is 54% higher than the $4.4 million backlog we had, entering
the fourth quarter of 2003. VASCO is quickly growing its business, and is ready
for the next episode in its growth cycle."
Cliff Bown, Executive Vice President and CFO added, "Our balance sheet continues
to strengthen as a result of the strong operating performance. Cash balances
have increased $2,598,000 or 41% from June 30, 2004 and $4,131,000 or 86% from
December 31, 2003. Our working capital increased by 22% in the third quarter,
from $7,133,000 at June 30, 2004 to $8,700,000 at September 30, 2004. Days Sales
Outstanding (DSO) in net accounts receivable decreased to approximately 43 days
at September 30, 2004 from 58 days at June 30, 2004."
Conference Call Details
In conjunction with this announcement, VASCO Data Security International, Inc.
will host a conference call today, October 21, 2004, at 10:00 a.m. EST - 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 2004.
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To participate in this Conference Call, please dial one of the following
numbers:
USA/Canada: +1 888 424-5801
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
------------------------------ ------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net revenues $ 7,400 $ 5,599 $ 20,595 $ 16,670
Cost of goods sold 2,244 2,146 5,918 6,727
------------ ------------ ------------ ------------
Gross profit 5,156 3,453 14,677 9,943
Operating costs:
Sales and marketing 1,975 1,713 6,218 4,921
Research and development 677 613 2,048 1,732
General and administrative 855 1,037 2,384 2,492
Restructuring costs (32) -- (32) --
Non-cash compensation 0 32 0 40
------------ ------------ ------------ ------------
Total operating costs 3,475 3,395 10,618 9,185
------------ ------------ ------------ ------------
Operating income 1,681 58 4,059 758
Interest income (expense), net 34 (22) 88 (120)
Other income (expense), net (45) (5) (0) 376
------------ ------------ ------------ ------------
Income before income taxes 1,670 31 4,147 1,014
Provision for income taxes 469 225 1,410 489
------------ ------------ ------------ ------------
Net income (loss) from continuing operations $ 1,201 $ (194) $ 2,737 $ 525
Income from discontinued operations -- 1,481 -- 1,965
------------ ------------ ------------ ------------
Net income 1,201 1,287 2,737 2,490
Preferred stock accretion and dividends (51) (3,787) (197) (4,369)
------------ ------------ ------------ ------------
Net income (loss) available to common shareholders $ 1,150 $ (2,500) $ 2,540 $ (1,879)
============ ============ ============ ============
Basic net income (loss) per common share:
Income (loss) from continuing operations $ 0.04 $ (0.13) $ 0.08 $ (0.13)
Income from discontinued operations -- 0.05 -- 0.07
------------ ------------ ------------ ------------
Net income (loss) $ 0.04 $ (0.08) $ 0.08 $ (0.06)
============ ============ ============ ============
Diluted net income (loss) per common share:
Income (loss) from continuing operations $ 0.03 $ (0.13) $ 0.08 $ (0.13)
Income from discontinued operations -- 0.05 -- 0.07
------------ ------------ ------------ ------------
Net income (loss) $ 0.03 $ (0.08) $ 0.08 $ (0.06)
============ ============ ============ ============
Weighted average common shares outstanding:
Basic 32,578,124 30,391,827 31,897,037 29,211,293
============ ============ ============ ============
Diluted 35,171,801 31,222,297 35,216,524 29,210,033
============ ============ ============ ============
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VASCO Data Security International, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 30, December 31,
2004 2003
-------- --------
ASSETS
Current assets:
Cash $ 8,948 $ 4,817
Accounts receivable, net of allowance for doubtful accounts 3,534 2,523
Inventories, net 1,180 1,075
Prepaid expenses 668 476
Deferred income taxes 70 70
Foreign sales tax receivable 403 362
Other current assets 368 335
-------- --------
Total current assets 15,171 9,658
Property and equipment, net 743 882
Intangible assets, net 1,134 1,378
Goodwill 250 250
Note receivable and investment in SSI 879 1,132
Other assets 77 83
-------- --------
Total assets $ 18,254 $ 13,383
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,124 $ 1,698
Deferred revenue 549 386
Accrued wages and payroll taxes 1,428 1,515
Income taxes payable 1,246 (197)
Other accrued expenses 1,139 1,038
-------- --------
Total current liabilities 6,486 4,440
-------- --------
Long-term deferred warranty 103 --
Stockholders' equity:
Series D Convertible Preferred Stock 2,806 5,786
Common stock 33 30
Additional paid-in capital 50,360 47,167
Accumulated deficit (41,153) (43,693)
Accumulated other comprehensive loss -
cumulative translation adjustment (381) (347)
-------- --------
Total stockholders' equity 11,665 8,943
-------- --------
Total liabilities and stockholders' equity $ 18,254 $ 13,383
======== ========
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Reconciliation of EBITDA from continuing operations to net income from
continuing operations (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
2004 2003 2004 2003
------- ------- ------- -------
(Unaudited) (Unaudited)
EBITDA from continuing operations $ 1,806 $ 320 $ 4,562 $ 1,951
Interest expense (income), net (34) 22 (88) 120
Provision for income taxes 469 225 1,410 489
Depreciaton and amortization 170 267 503 817
------- ------- ------- -------
Net income (loss) from continuing operations $ 1,201 $ (194) $ 2,737 $ 525
======= ======= ======= =======
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 over 12 million Digipass
products sold and delivered, VASCO has established itself as a world-leader for
strong Identity Authentication with over 300 international financial
institutions and over 1,400 blue-chip corporations and governments located in
more than 80 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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