Vasco Data Security International (Nasdaq: VDSI) today reported financial results for the second quarter and six months ended June 30, 2009.
Revenue for the second quarter of 2009 decreased 31% to $24.5 million from $35.4 million in the second quarter of 2008, and for the first six months of 2009, decreased 26% to $47.6 from $64.3 million for the first six months of 2008.
Net income for the second quarter of 2009 was $2.0 million, or $0.05 per diluted share, a decrease of $5.5 million, or 73%, from $7.5 million, or $0.20 per diluted share, for the second quarter of 2008. Net income for the first six months of 2009 was $5.5 million, or $0.14 per diluted share, a decrease of $6.9 million, or 55%, from $12.4 million, or $0.32 per diluted share, for the comparable period in 2008.
Other Financial Highlights:
- Gross profit was $16.7 million, or 68% of revenue, for the second quarter of 2009 and $33.4 million, or 70% of revenue, for the first six months of 2009. Gross profit was $25.4 million or 72% of revenue for the second quarter of 2008 and $45.4 million, or 71% of revenue, for the first six months of 2008.
- Operating expenses for the second quarter and first six months of 2009 were $15.4 million and $27.3 million, respectively, a decrease of 6% from $16.4 million reported for the second quarter of 2008 and a decrease of 11% from $30.6 million reported for the first six months of 2008.
- Operating expenses for the second quarter of 2009 included $0.4 million of expenses related to stock-based incentives. For the first six months of 2009, operating expenses reflected a benefit of $1.3 million related to stock-based incentives, including the reversal in the first quarter of 2009 of $2.0 million of long-term performance-based incentive award reserves that had been accrued at 12/31/08. Operating expenses for the second quarter and first six months of 2008 included $0.8 million and $1.5 million, respectively, of expense related to stock-based incentives.
- Operating income for the second quarter and first six months of 2009 was $1.4 million and $6.1 mil $1.4 million and $6.1 million, respectively, a decrease of $7.6 million, or 85%, from $9.0 million reported for the second quarter of 2008 and a decrease of $8.8 million, or 59%, from $14.9 million reported for the first six months of 2008. Operating income, as a percentage of revenue, for the second quarter and first six months of 2009 was 6% and 13%, respectively, compared to 26% and 23% for the comparable periods in 2008.
- Earnings before interest, taxes, depreciation and amortization (EBITDA) was $3.2 million and $8.5 million for the second quarter and first six months of 2009, respectively, a decrease of 67% from $9.9 million reported for the second quarter of 2008 and a decrease of 50% from $16.9 million reported for the first six months of 2008.
- Net cash balances, cash balances less borrowing under VASCO's line of credit, at June 30, 2008 totaled $67.6 million compared to $57.3 million and $57.7 million at March 31, 2009 and December 31, 2008, respectively.
Operational and Other Highlights:
- VASCO won 350 new customers in Q2 2009 (44 new banks and 306 new enterprise security customers). For the first six months of 2009, VASCO won 707 new customers (95 banks and 612 enterprise security customers). Although management considers the number of new customers as an indicator of the momentum of our business and effectiveness of our distribution channel, the number of new customers is not indicative of future revenue.
- VASCO DIGIPASS for Mobile available for DOCOMO i-mode. NTT DOCOMO is Japan's leading provider of mobile voice, data and multimedia services. With the development of DIGIPASS for Mobile for i-mode, VASCO's mobile solutions now cover all of the major mobile carriers of Japan.
- KBC Securities, the largest brokerage company in Belgium, secures Bolero customers with DIGIPASS 270, a lightweight ultra-portable authentication device that fits into the customer's wallet. Bolero is KBC Securities online platform where individual investors can manage their investment portfolio.
- HSBC Brazil protects internet banking, phone banking and ATM banking with DIGIPASS for Mobile. HSBC Brazil is the first bank in Brazil to offer integrated m-banking services to its retail customers based on VASCO's DIGIPASS for Mobile.
- VASCO launches DIGIPASS Ready Solution Partner Program. The Program was developed to facilitate the compatibility of solutions from other technology vendors with VASCO's DIGIPASS. Solution partners will be able to either bundle their solutions with VASCO solutions or develop new solutions based on the combined product offering.
- VASCO & OpenTrust offer end-to-end PKI-based solutions. VASCO's VACMAN and DIGIPASS CertiID will be integrated into OpenTrust Smart Card Manager (SCM), a web-based solution for the management of security devices.
- VASCO launches IDENTIKEY Server 3.1 a full blown authentication server for network and application security offering one-time passwords and e-signature capability to several markets, including Software as a Service (SaaS), e-gaming, online gambling, healthcare, automotive, e-banking and VPN access to corporate networks.
- VASCO launches new DIGIPASS packs in North America, Europe, India & Japan. The DIGIPASS Pack for Remote Authentication offers a complete solution in a box and is simple to install, easy to manage, and provides a level of security necessary to protect mission-critical applications.
- VASCO launches DIGIPASS License Protection. With DIGIPASS License Protection, online application vendors can protect themselves against the sharing of passwords, known as license fraud. By linking one user to one license, the vendor is ensured that only licensed users gain access to accounts that they have licenses for and that the vendor's revenue stream is protected.
- VASCO & Moadbus partner to deliver digital signature for mobile banking and mobile cash solutions.
- VASCO launches DIGIPASS for Mobile Enterprise Security edition.
- VASCO expands training capacity with new Authorized Training Centers.
- VASCO integrates strong host authentication into DIGIPASS 250, 260, 270. Strong host authentication assures the user that the bank or organization they are connecting to is actively involved in the communication process - an effective solution against identity theft and man-in-the-middle attacks. VASCO's patent pending technology offers one of the strongest one time password solutions on the market.
"The second quarter of 2009 continued to be challenging," stated T. Kendall Hunt, Chairman & CEO. "Revenues from the banking market continued to be very soft, but the decline in banking was partially offset by increases in revenues from the enterprise security market. As noted in Q1, we continue to focus on our most productive markets and the growth in the enterprise security market reflects our success in increasing our penetration in new applications, such as gaming. Also, as expected, we were able to remain profitable while continuing to invest in new products and marketing events, which continue to provide a significant number of new customers. We will continue to focus on our most productive markets, be selective in making new investments and maintain our focus on containing our costs and, as a result, expect to be profitable throughout 2009. "
"Orders from the banking market continue to be for smaller quantities than in prior periods and appear to be based primarily on meeting their short-term needs. While we have seen an increase in activity from the banks in our pipeline, we do not expect the current situation to change significantly until the fourth quarter of this year," said Jan Valcke, VASCO's President and COO. "We are very encouraged however by the progress being made in the enterprise security markets. Our product and marketing strategies are producing strong growth over prior periods."
Cliff Bown, Executive Vice President and CFO added, "During the second quarter 2009 both our cash and working capital balances increased substantially. In the second quarter our net cash balance increased $10.3 million, or 18%, and our working capital increased $4.7 million, or 6%, from March 31, 2009. Days sales outstanding in net accounts receivable at June 30, 2009 decreased to 65 days from 84 days at March 31, 2009 and 79 days at December 31, 2008.