Revenue from continuing operations for the first quarter of 2012 decreased 11% to $32.3 million from $36.1 million in the first quarter of 2011. Net income from continuing operations for the first quarter of 2012 was $2.0 million, or $0.05 per fully diluted share, a decrease of $1.7 million, or 45%, from $3.6 million, or $0.10 per fully diluted share, for the first quarter of 2011.

Net income, which includes the impact of our discontinued operations, for the first quarter of 2012 was $1.9 million, or $0.05 per diluted share. Net income for the first quarter of 2011 was $2.5 million, or $0.06 per diluted share.

Financial Highlights:
• Gross profit from continuing operations was $21.9 million, or 68%, of revenue for the first quarter of 2012. Gross profit was $22.6 million, or 63%, of revenue for the first quarter of 2011.
• Operating expenses from continuing operations for the first quarter 2012 were $19.7 million, an increase of 7% from $18.4 million reported for the first quarter 2011. Operating expenses for the first quarter of 2012 included $1.1 million of non-cash compensation expenses and $0.5 million of amortization expense related to purchased intangible assets. Operating expenses for the first quarter of 2011 included $0.6 million of non-cash compensation expenses and $0.5 million of amortization expense related to purchased intangible assets.
• Operating income from continuing operations for the first quarter 2012 was $2.2 million, a decrease of $2.0 million, or 47%, from $4.2 million reported for the first quarter of 2011. Operating income as a percentage of revenue in the first quarter 2012 was 7% compared to 12% in the first quarter of 2011.
• Earnings before interest, taxes, depreciation and amortization from continuing operations were $3.4 million for the first quarter 2012, a decrease of 37% from $5.4 million reported for the first quarter of 2011.
• Net cash balances, total cash and and cash equivalents less bank borrowings, at March 31, 2012 totaled $93.4 million compared to $84.5 million at December 31, 2011. There were no bank borrowings at either March 31, 2012 or December 31, 2011.
Operational and Other Highlights:
• VASCO launched the next step in its DIGIPASS as a Service strategy with a new free services program for web application providers/web site owners.
• CDS (Condomínio de Soluções Corporation), a vendor and business solutions integrator, chose DIGIPASS GO3 with IDENTIKEY to enhance the security of the business intelligence retail program it developed for General Motors Brazil.
• TechMag, a distributor of VASCO's solutions in Brazil, chose DIGIPASS GO 3 and DIGIPASS for Mobile 3.0 to protect its infrastructure.
• VASCO launched a new optical e-signature device, DIGIPASS 736, with adaptive signing functionality.
• VASCO showcased its first acoustic smart card reader, DIGIPASS 837, at CeBIT.
Guidance for full-year 2012:
VASCO is reaffirming its guidance for the full-year 2012 as follows:
• Revenue for 2012 is expected to be $175 million or more, and
• Operating income as a percentage of revenue, excluding the amortization of purchased intangible assets, for full-year 2012 is projected to be in the range of 13% to 16%.

"While total revenues were below our expectations in the first quarter of 2012, our intake of new orders and our pipeline of potential orders remained strong throughout the period," stated T. Kendall Hunt, Chairman & CEO. "Revenues were generally lower than we expected due to the timing of receipt of new orders and production delays associated with the Chinese New Year. The outlook for the full-year 2012, however, continues to be strong and on track with our previous expectations. We continue to believe that 2012 will be a year in which we fortify and enhance our strong position in our core business while we develop the market for our DIGIPASS as a Service business line."

"The results for the first quarter reflected an 18% decline in revenues from the Banking market partially offset by a 29% increase in revenues from the Enterprise and Application Security market," said Jan Valcke, VASCO's President and COO. "The decline in revenue from the Banking market primarily reflects the fact that we had unusually large orders in our backlog entering into 2011 that were not replaced by orders of a similar size in our backlog entering 2012. Order intake through the first quarter of 2012, however, has been the best in our history and we are narrowing the gap in the order backlog at the beginning of the year. We were also pleased with the improvement in our gross margin rate, which increased from 63% in 2011 to 68% in 2012."

Cliff Bown, Executive Vice President and CFO added, "During the first quarter of 2012 our cash and working capital balances continued to increase. At March 31, 2012 we had working capital $112.7 million, an increase of $4.1 million, or 4%, from December 31, 2011 and our net cash balance was $93.4 million, an increase of $8.9 million or 11% from December 31, 2011."