Vasco reports 11% rise in revenue for 2008

Net income for the fourth quarter of 2008 was $2.8 million, or $0.07 per fully diluted share, a decrease of $0.5 million, or 14%, from $3.3 million, or $0.09 per fully diluted share, for the fourth quarter of 2007.  Net income for the full year 2008 was $24.3 million, or $0.64 per fully diluted share, an increase of $3.3 million, or 16%, from $21.0 million, or $0.55 per fully diluted share for the full year 2007.

Financial Highlights:

• Gross profit was $18.7 million or 65% of revenue for the fourth quarter of 2008 and $92.0 million or 69% of revenue for the full year 2008.  Gross profit was $20.9 million or 67% of revenue for the fourth quarter of 2007 and $79.1 million or 66% of revenue for the full year 2007.
• Operating expenses for the fourth quarter and full year 2008 were $16.9 million and $63.8 million, respectively, an increase of 16% from $14.6 million reported for the fourth quarter 2007 and an increase of 32% from $48.2 million reported for the full year 2007.  Operating expenses for the fourth quarter and full year 2007 included $0.7 million and $2.2 million, respectively, related to stock-based incentives.
• Operating income for the fourth quarter and full year 2008 was $1.8 million and $28.1 million, respectively, a decrease of $4.5 million, or 71%, from $6.3 million reported for the fourth quarter of 2007 and a decrease of $2.8 million, or 9%, from the $30.9 million reported for the full year 2007.  Operating income as a percentage of revenue for the fourth quarter and full year 2008 was 6% and 21%, respectively, compared to 20% and 26% for the comparable periods in 2007.
• Earnings before interest, taxes, depreciation and amortization was $2.9 million and $31.3 million for the fourth quarter and for the full year 2008, respectively, a decrease of 58% from $7.0 million reported for the fourth quarter of 2007 and an decrease of 7% from 008, respectively, a decrease of 58% from $7.0 million reported for the fourth quarter of 2007 and an decrease of 7% from $33.5 million reported for the full year 2007. 
• Net cash balances, total cash and cash equivalents less bank borrowings, at December 31, 2008 totaled $57.7 million compared to $50.7 million and $38.8 million at September 30, 2008 and December 31, 2007, respectively.

Operational and Other Highlights:

• Vasco won 355 new customers in Q4 2008 (37 new banks and 318 new enterprise security customers).  For the full year 2008, Vasco won 1,827 new customers (249 banks and 1,578 enterprise security customers).

• HSBC Argentina secures retail & corporate customers with Digipass GO3.

• Vasco expanded its Digipass for Mobile with a dedicated Software Development Kit (SDK) to enable the transparent embedding of Digipass for Mobile functionality in e-banking and m-banking applications.

• Vasco launches Digipass Key1, its first USB-based PKI device for strong authentication, digital signature and data protection.

• Vasco launches Digipass CertiID, a client, PKI-based software suite offering digital signature capabilities.

• Vasco announces Digipass 865, a USB connectable card reader with  "what you see is what you sign'' functionality.

• Vasco announces Digipass 835, a new card reader with an optical interface.

• Vasco provides an answer to SaaS security concerns using its Identikey Server 3.0.

• Vasco launches its aXs GUARD Identifier and upgrade of aXs GUARD Gatekeeper.

• Vasco expands global training capacity with the launch of SEAL e-learning academy.

• Banco de Chile wins Vasco's Market Vision Award.

• DigiNotar wins Vasco's Solution Partner Award 2008.

Guidance for full-year 2009:

Given the uncertainty created by the continued turmoil in the worldwide economy, Vasco has decided to temporarily discontinue its practice of providing annual guidance.

"Even though the fourth quarter of 2008 was difficult due to the worldwide economic conditions, 2008 was a successful year for Vasco ," stated T. Kendall Hunt, Chairman & CEO.  "In 2008, we made substantial investments in new products, new markets and our infrastructure that we believe will help support our growth for years to come.  We are also proud of the fact that Vasco was profitable in each quarter of 2008 in spite of the difficult economies.  While the outlook for 2009 is uncertain, we expect to be profitable in 2009 and we believe that our strong balance sheet and our business model put us in a strong position to continue to move our business forward in 2009."

"The results for the quarter and full year reflect our continued investment in our business and our evolution into a more software-centric company, both of which, we believe, will benefit VASCO in the longer term.  Even though the current economy is forcing many businesses to delay purchases and proceed cautiously, it is clear that identity theft and fraud committed over the internet is continuing to grow and interest in our products and solutions remains strong worldwide," said Jan Valcke, VASCO's President and COO.  "For 2009, we will focus on integrating the staff hired in 2008 more fully to become more efficient.  While we plan to minimize our investment in new staff and new initiatives in 2009 until the economic outlook becomes more certain, we will be opportunistic in considering additional investments that would allow us to expand our products, geographic markets or our market share."

Cliff Bown, Executive Vice President and CFO added, "During the fourth quarter and full year 2008 both our cash and working capital balances increased.  For the fourth quarter our net cash balance increased $7.0 million, or 14%, and our working capital increased $2.9 million, or 4%, from September 30, 2008.  For the full year, our net cash balance increased $18.9 million, or 49%, and our working capital increased $24.2 million, or 46%, from December 31, 2007."