Vasco Data Security International (NASDAQ: VDSI) today reported financial results for the first quarter ended March 31, 2011.
Revenue for the first quarter of 2011 increased 52% to $36.4 million from $23.9 million in the first quarter of 2010. Net income for the first quarter of 2011 was $2.5 million, or $0.06 per fully diluted share, an increase of $1.9 million, or 336%, from $0.6 million, or $0.01 per fully diluted share, for the first quarter of 2010.
• Gross profit was $22.7 million, or 62%, of revenue for the first quarter of 2011. Gross profit was $16.7 million, or 70%, of revenue for the first quarter of 2010.
• Operating expenses for the first quarter 2011 were $19.6 million, an increase of 23% from $16.0 million reported for the first quarter 2010. Operating expenses for the first quarter of 2011 included $0.6 million of non-cash compensation expenses and $0.7 million of amortization expense related to purchased intangible assets. Operating expenses for the first quarter of 2010 included $0.5 million of non-cash compensation expenses and $0.1 million of amortization expense related to purchased intangible assets.
• Operating income for the first quarter 2011 was $3.1 million, an increase of $2.3 million, or 324%, from $0.7 million reported for the first quarter of 2010. Operating income as a percentage of revenue in the first quarter 2011 was 8.4% compared to 3% in the first quarter of 2010.
• Earnings before interest, taxes, depreciation and amortization were $4.5 million for the first quarter 2011, an increase of 196% from $1.5 million reported for the first quarter of 2010.
• Net cash balances, total cash and cash equivalents less bank borrowings, at March 31, 2011 totaled $86.0 million compared to $85.5 million at December 31, 2010. There were no bank borrowings at either March 31, 2011 or December 31, 2010.
Operational and Other Highlights:
• VASCO won 574 new customers in Q1 2011 (126 new banks and 448 new enterprise security customers).
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• VASCO acquired DigiNotar in January 2011.
• VASCO's DIGIPASS technology to be embedded into Intel® Identity Protection Technology (Intel® IPT). This will allow customers to easily deploy two-factor authentication without the need to roll-out software or hardware devices to end-users. This collaboration will make market-leading authentication available on select 2nd Generation Intel® CoreTM processor-based PCs.
• Volunteer Corporate Credit Union deployed DIGIPASS GO 6 to secure access to its online application.
• Belgian cloud computing specialist, Adapti, secures online applications with DIGIPASS as a Service. Adapti's core activity is the implementation of its clients' 'in the cloud' CRM-programs.
• VASCO announced a build out of the company's multi-tier channel strategy in the EMEA region. The strategy is an extension of its existing partner program, tailored to the specific needs of its distributors and resellers throughout the region.
• VASCO enhances its North-American channel partner program by introducing VASCO Partner, VASCO Select Partner, and VASCO Ready Premium Partner programs to provide channel partners with tailored benefits depending on their level of commitment.
Guidance for full-year 2011:
VASCO is reaffirming its guidance for the full-year 2011 as follows:
• Revenue growth of 20% or more for the full-year 2011 over full-year 2010,; and
• Operating margins, excluding expenses related to the amortization of acquisition-related intangible assets, for full-year 2011 are projected to be in the range of 8% to 12% of revenue.
"Consistent with the second half of 2010, the first quarter of 2011 continued to show strong revenue growth from our traditional businesses," stated T. Kendall Hunt, Chairman & CEO. "Revenues in the first quarter of 2011 were the second highest in the company's history, reflecting strong growth from the banking market partially offset by a small decline in revenues from the enterprise and application security market. In addition to the strong revenue growth, we continued to invest in new technology and people as evidenced by the acquisition of DigiNotar in January of 2011 and the acquisition of Alfa & Ariss, which closed on April 1, 2011. While revenues from DigiNotar and Alfa & Ariss are not expected to be significant in 2011, we believe that both acquisitions will provide technology that will enhance our current product line as well as provide us with technical expertise that will be important to the continued development and rollout of our authentication services product lines."
"In addition to the growth in revenue, we saw a significant increase in order intake during the first quarter of 2011 compared to the first quarter of 2010," said Jan Valcke, VASCO's President and COO. "We are also encouraged to see that the pipeline for future deals continues to be strong. While we expect that there will continue to be pressure on price and terms of new large banking deals, as evidenced by the decline in our gross margins in the first quarter of 2011, we expect that we will be able to improve our gross margins as the growth rate in the enterprise and application security revenue increases and our authentication service business model gains momentum in the quarters ahead."
Cliff Bown, Executive Vice President and CFO added, "During the first quarter of 2011 our cash and working capital balances were impacted by our cash purchase of DigiNotar for 10 million Euros or approximately 12.9 million USD. At March 31, 2011 our working capital balance was $90.8 million, a decrease of $6.1 million, or 6%, from December 31, 2010 and our net cash balance was $86.0 million, an increase of $0.5 million or less than 1% from December 31, 2010."