Vasco Data Security International (Nasdaq: VDSI) today reported financial results for the third quarter and nine months ended September 30, 2007.
Revenues for the third quarter of 2007 increased 60% to $30.0 million from $18.7 million in 2006 and, for the first nine months of 2007, increased 74% to $88.8 million from $50.9 million in 2006.
Net income for the third quarter of 2007 was $5.9 million or $0.15 per diluted share, an increase of $2.6 million or 79% from $3.3 million, or $0.09 per diluted share in 2006. Net income for the first nine months of 2007 was $17.7 million, or $0.46 per diluted share, an increase of $10.2 million or 136% from $7.5 million, or $0.20 per diluted share, in 2006.
- Gross profit was $20.0 million or 67% of revenue for the third quarter and $58.2 million or 66% of revenue for the first nine months of 2007. 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.
- Operating expenses for the third quarter and first nine months of 2007 were $11.7 million and $33.6 million, respectively, an increase of 50% from $7.8 million reported for the third quarter 2006 and an increase of 52% from $22.1 million reported for the first nine months of 2006. Operating expenses for the third quarter and first nine months of 2007 included $0.6 million and $1.5 million, respectively, related to stock-based incentives. 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 2007 was $8.3 million and $24.6 million, respectively, an increase of $3.3 million or 66% from $5.0 million reported for the third quarter of 2006 and an increase of $12.6 million or 105% from the $12.0 million reported for the first nine months of 2006. Operating income, as a percentage of revenue, for the third quarter and first nine months of 2007 was 27.5% and 27.7%, respectively, compared to 26.6% and 23.5% for the comparable periods in 2006.<
- Earnings before interest, taxes, depreciation and amortization (EBITDA) was $8.7 million and $26.5 million for the third quarter and first nine months of 2007, respectively, an increase of 64% from $5.3 million reported for the third quarter of 2006 and an increase of 117% from $12.2 million reported for the first nine months of 2006.
- Net cash balances, cash balances less borrowing under VASCO's line of credit, at September 30, 2007 totaled $36.7 million compared to $26.0 million and $12.6 million at June 30, 2007 and December 31, 2006, respectively.
Operational and Other Highlights:
- VASCO won 608 new customers in the third quarter of 2007 (106 banks and 502 enterprise security) and 1,858 in the first nine months of 2007 (313 banks and 1,545 enterprise security).
- People's United Bank to use VASCO's strong authentication.
- Azlan-Tech Data to distribute Digipass Pack in EMEA.
- VASCO turns Belgian eID into Digipass Strong Authentication.
- VASCO launches next generation of Digipass Packs for small and medium-sized enterprises; Digipass Pack for Remote Authentication and Digipass Pack for Network Authentication.
- VASCO expands international management team in Zurich - hires Victor Hoogland as Chief Information Officer and Alexandra Spirig as Director of Contracts and Compliance.
- VASCO opens subsidiary in Sao Paulo, Brazil.
- VASCO opens sales office in Tokyo, Japan.
Guidance for full-year 2007:
VASCO reaffirmed its guidance for the full-year 2007 as follows:
- Revenue growth is projected to be 55% to 65% for the full-year 2007 over full-year 2006;
- Gross profit (margin) as a percentage of revenue for full-year 2007 is projected to be in the range of 60% to 68%; and
- Operating profit (margin) as a percentage of revenue for full-year 2007 is projected to be in the range of 23% to 30%.
"The results for the quarter, and year-to-date, continue to demonstrate that our core strategies are working," said Ken Hunt, VASCO's CEO and Chairman. "Our Full-Option, All-Terrain product strategy is generating large numbers of new customers. Our existing customers, which are the source of our sustainable, repeatable revenues, are contributing strongly to our growth in revenues. In addition, our strategy of increased focus on software is generating higher levels of deferred revenue that will be recognized over the life of the contracts. We expect that the recurring revenue that comes from these new contracts will become a more significant part of our revenues in future periods. And, finally, our operating margin of approximately 28% of revenue for both the third quarter and the first nine months of 2007 demonstrates the efficiency of our operating model."
"The results of the third quarter continue the trend of strong growth," said Jan Valcke, VASCO's President and COO. "During the last few months, there has been a significant increase in criminal activity directed at online banking. This fact has been covered by media all over the world. We believe that our growth continues to reflect an increase in the size of the market and recognition by the market that it needs stronger forms of authentication to combat the increasing sophistication of the criminals in their attempts to steal persons' identities. We are also seeing important growth in the size of our distribution channel as evidenced by the recent agreement we signed with Azlan-Tech Data. We believe that Azlan-Tech Data and other new distributors will be important contributors to our future growth. As we start the fourth quarter, we have a backlog of firm orders to be shipped in the fourth quarter of $33.4 million, which is 55% higher than the $21.5 million backlog we had when entering the fourth quarter of 2006 and 33% higher than the $25.2 million in actual sales reported for Q4 2006."
Cliff Bown, Executive Vice President and CFO added, "Our balance sheet continues to strengthen as a result of the strong operating performance. Our net cash balance has increased by approximately $19.9 million over the last two quarters. At September 30, 2007, our net cash balance was $36.7 million, an increase of $10.7 million or 41% from $26.0 million at June 30, 2007. The increase in cash in the third quarter was also due in part to a reduction in days sales outstanding (DSO) in our net accounts receivable. DSO decreased to approximately 55 days at September 30, 2007, from 67 days at June 30, 2007."
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