Vasco acquires Able; reports strong Q3

Source: Vasco

VASCO Data Security International, Inc. (Nasdaq: VDSI), the global number one vendor of strong user authentication products, today announced its acquisition of Unified Threat Management (UTM) specialist Able N.V. of Mechelen, Belgium.

VASCO acquired all of the stock of Able N.V., in exchange for cash consideration of Euro 5 million ($6.3 million U.S. dollars using the exchange rate at the date of close). The acquisition was financed completely from VASCO's cash and is not expected to have a significant impact on earnings in fiscal 2007.

Able is a profitable, privately-owned Unified Threat Management software company with a customer base existing of large corporations and Small and Medium Sized Enterprises (SME's). Able generated revenues of approximately Euro 1.5 million in 2005.

With the acquisition of Able, VASCO expands and strengthens its product line and position in the unified threat management market for large, medium and small sized companies. A key asset of Able is its ability to manage, maintain and upgrade all of the deployed systems centrally, without local physical intervention. This enhances the scalability of the appliance solution. Able's product line already supports VASCO's VACMAN Controller and is a good fit with VASCO's strong authentication strategy. With the addition of Able's products and technical expertise, VASCO takes an important step forward in the Enterprise Security market.

Able's key product is the award winning aXs GUARD appliance. aXs GUARD is an all-in-1 solution (21 different applications in one) for Internet communications and security. aXs GUARD consists of different modules, including Digipass strong user authentication, VPN, firewall, anti-virus, hacker detection, statistics & reporting, content scanning and more. Situated between a company's LAN and the Internet, aXs GUARD comprises a mix of hardware, software and support. The product is completely customizable, making it an affordable solution to SME's and large organizations alike. aXs GUARD centrally manages and secures surfing, e-mail, VPN connections between subsidiaries and for home workers, website hosting, etc., while protecting against viruses and other risks from the Internet.

"We believe that the UTM market will grow significantly in the coming years and we believe that Able's product line will enable VASCO to win a substantial part of the SME market," said Ken Hunt, VASCO's Founder, Chairman and CEO. "During our January Press and Investor Meeting in New York, we announced our new product strategy, turning VASCO into the Full Option, All- Terrain Authentication Company. The acquisition of Able fits perfectly in this strategy. The addition of Able will also strengthen VASCO's position in the Enterprise Security market substantially by adding 1,000 Able customers to its installed base of almost 3,000 companies."

"Able is a valuable addition to VASCO's quickly growing product offering for the Enterprise Security market," said Jan Valcke, VASCO's President and COO. "We acquired Able because of its complementary product suite and the fit of its business culture. With Able, we are putting our authentication products in a broader perspective. Able's existing products will be marketed by VASCO's worldwide indirect sales network, thus creating added revenue and profitability. In a later phase, the cross fertilization between VASCO and Able will result in new products for the Enterprise Security market. We expect that the integration of Able's products and people will go smoothly."

"The Enterprise Security market is growing rapidly worldwide," said Alex Ongena, Founder and CEO of Able. "In order to be able to take advantage of new opportunities in the market, Able has looked for a strong, global partner. VASCO, as worldwide leader in authentication, was an ideal candidate. I am convinced that the combination of the experience, market vision, R&D capacity and extended product range of both companies will allow them to be successful all over the world."

Separately, VASCO Data Security International, Inc. (NASDAQ:VDSI) today reported financial results for the third quarter and nine months ended September 30, 2006.

Revenues for the third quarter of 2006 increased 41% to $18.7 million from $13.3 million in 2005 and, for the first nine months of 2006, increased 37% to $50.9 million from $37.1 million in 2005.

Net income available to common shareholders for the third quarter of 2006 was $3.3 million, or $0.09 per diluted share, an increase of $1.5 million or 88% from $1.8 million, or $0.05 per diluted share in 2005. Net income available to common shareholders for the first nine months of 2006 was $7.5 million, or $0.20 per diluted share, an increase of $2.8 million or 59% from $4.7 million, or $0.13 per diluted share, in 2005.

Financial Highlights:

  • Gross profit was $12.8 million or 68% of revenue for the third quarter and $34.1 million or 67% of revenue for the first nine months of 2006. Gross profit was $8.1 million or 61% of revenue for the third quarter and $23.4 million or 63% of revenue for the first nine months of 2005.
  • Operating expenses for the third quarter and first nine months of 2006 were $7.8 million and $22.1 million, respectively, an increase of 40% from $5.6 million reported for the third quarter 2005 and an increase of 33% from $16.7 million reported for the first nine months of 2005. Operating expenses for the third quarter and first nine months of 2006 included $0.5 million and $1.2 million, respectively, related to stock-based incentives.
  • Operating income for the third quarter and first nine months of 2006 was $5.0 million and $12.0 million, respectively, an increase of $2.5 million or 96% from $2.5 million reported for the third quarter of 2005 and an increase of $5.3 million or 77% from the $6.7 million reported for the first nine months of 2005. Operating income, as a percentage of revenue, for the third quarter and first nine months of 2006 was 26.6% and 23.5%, respectively, compared to 19.1% and 18.2% for the comparable periods in 2005.
  • Net income for the third18.2% for the comparable perioods in 2005. < for the third18.2% forarable perioods in 2005. < for the third18.2% for the comparable perioods in 2005.
  • Net income for the third18.2% for the comparable periods in 2005.
  • Net income for the third quarter and first nine months of 2006 was $3.3 million and $7.5 million, respectively, and compares to net income of $1.8 million reported for the third quarter of 2005 and net income of $4.7 million reported for the first nine months of 2005.
  • Earnings before interest, taxes, depreciation and amortization was $5.3 million and $12.2 million for the third quarter and first nine months of 2006, respectively, an increase of 80% from $3.0 million reported for the third quarter of 2005 and an increase of 51% from $8.1 million reported for the first nine months of 2005.
  • Net cash balances, cash balances less borrowing under its line of credit, at September 30, 2006 totaled $20.4 million compared to $13.0 million and $14.0 million at June 30, 2006 and December 31, 2005, respectively.


Operational and Other Highlights:
  • Approximately 2.9 million Digipasses shipped in the third quarter 2006, an increase of 60% from the third quarter of 2005. For the nine months ended September 30, 2006, approximately 7.4 million Digipasses were shipped, an increase of 50% over the same period in 2005.
  • VASCO won 381 new customers in Q3 2006 (58 banks and 323 enterprise security) and 1,083 for the first nine months of 2006. Year-to-date new customers include 138 banks and 945 enterprise security.
  • VASCO won 29 U.S. Banks during Q3 2006.
  • Postfinance (Switzerland) uses Digipass 810 for corporate and retail banking.
  • Garanti Bank (Turkey) secures retail customers with Digipass for Java Phone.
  • Old National Bank (U.S.A.) uses Digipass 260 for corporate banking.
  • Banca Antonveneta uses VASCO's Digipass GO3 for retail banking.
  • Promedico (The Netherlands) secures medical data with Digipass 300 and VACMAN Controller.
  • VASCO launches fraud detection & analysis services.
  • VASCO launches Digipass Smart Pack.
  • VASCO is the first company to receive full Belgian EPCI Certification for Digipass 810.
  • Jean K. Holley elected to VASCO's Board of Directors.


Guidance for full-year 2006:
VASCO is updating its guidance for the full-year 2006 as follows:
  • Revenue growth of 35% to 45% for the full-year 2006 over full-year 2005 is reaffirmed and remains unchanged from prior guidance,
  • Gross margins as a percentage of revenue for full-year 2006 are projected to be in the range of 60% to 65% and remain unchanged from prior guidance, and
  • Operating margins as a percentage of revenue for full-year 2006 are projected to be 20% to 25% as reported in accordance with Generally Accepted Accounting Principles, up from the previous guidance of 15% to 20%.


"Our Full-Option, All-Terrain Strategy is being very well received in the market," said Ken Hunt, VASCO's CEO and Chairman. "As evidenced by the record revenue and Digipass units shipped in the third quarter, we are seeing continuing strong interest in our product in all of our markets. The leverage in our business model is also contributing to the strong results as our operating margins as a percentage of revenue have been and are expected to continue to be, as evidenced by our increase in guidance for operating margins, above 20%."

"The results of the third quarter continue the trend of strong growth," said Jan Valcke, VASCO's President and COO. "Our product platform, which allows our customers to use any of our forms of authentication simultaneously, continues to be very well received. It enables our customers to deploy an appropriate, cost-effective method of authentication for each user of their application by selecting the appropriate Digipass product, including Digipass for Web. As a market leader, we also are continuing to see increased interest from distributors, solution partners and companies with complementary technologies. As we start the fourth quarter, we have a backlog of firm orders scheduled to be shipped in the fourth quarter of $21.5 million, which is 69% higher than the $12.7 million backlog we had entering the fourth quarter of 2005 and 23% higher than the $17.5 million actual revenue reported for the fourth quarter of 2005."

Cliff Bown, Executive Vice President and CFO added, "Our balance sheet continues to be strong as a result of the strong operating performance. Our net cash balances increased $7.4 million or 57% from June 30, 2006 while our working capital increased approximately 21% to $24.0 million at September 30, 2006 from $19.9 million at June 30, 2006. Days Sales Outstanding (DSO) in net accounts receivable decreased to approximately 66 days at September 30, 2006 from 81 days at June 30, 2006."» Download the document now 69.1 kb (Adobe Acrobat Document)

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