Vasco Q3 net income tumbles

Revenue from continuing operations for the third quarter of 2012 decreased 12% to $36.3 million from $41.4 million in the third quarter of 2011, and for the first nine months of 2012, decreased 4% to $115.2 million from $119.6 million for the first nine months of 2011.

Net income from continuing operations for the third quarter of 2012 was $4.7 million, or $0.12 per diluted share, a decrease of $1.2 million, or 21%, from $5.9 million, or $0.15 per diluted share, for the third quarter of 2011. Net income from continuing operations for the first nine months of 2012 was $14.1 million, or $0.36 per diluted share, an increase of $1.2 million, or 9%, from $12.9 million, or $0.33 per diluted share, for the comparable period in 2011.

Net income, which includes the impact of our discontinued operations, for the third quarter of 2012 was $4.5 million, or $0.12 per diluted share, an increase of $2.3 million, or 102%, from $2.2 million, or $0.06 per diluted share, for the third quarter of 2011. Net income for the first nine months of 2012 was $13.6 million, or $0.35 per diluted share, an increase of $6.2 million, or 85%, from $7.4 million, or $0.19 per diluted share, for the comparable period in 2011.

Other Financial Highlights:
• Gross profit from continuing operations was $23.9 million and $75.2 million for the third quarter and first nine months of 2012, respectively, and was 66% of revenue for the third quarter and 65% of revenue for the first nine months of 2012. Gross profit was $27.8 million and $76.1 million for the third quarter and the first nine months of 2011, respectively, and was 67% of revenue for the third quarter and 64% of revenue for the first nine months of 2011.
• Operating expenses from continuing operations for the third quarter and first nine months of 2012 were $17.6 million and $57.7 million, respectively, a decrease of 13% from $20.3 million reported for the third quarter of 2011 and a decrease of 4% froease of 4% from $60.4 million reported for the first nine months of 2011.
Operating expenses from continuing operations for the third quarter and first nine months of 2012 included $0.5 million and $2.7 million, respectively, of expenses related to stock-based incentives. Operating expenses for the third quarter and first nine months of 2011 included $0.9 million and $2.2 million, respectively, of expenses related to stock-based incentives.
Operating expenses from continuing operations for the third quarter and first nine months of 2012 also included $0.5 million and $1.4 million, respectively, of expenses related to the amortization of purchased intangible assets. Operating expenses for the third quarter of and first nine months of 2011 included $0.5 million and $1.5 million, respectively, of expenses related to the amortization of purchased intangible assets.
• Operating income from continuing operations for the third quarter and first nine months of 2012 was $6.3 million and $17.5 million, respectively, a decrease of $1.2 million, or 16%, from $7.4 million reported for the third quarter of 2011 and an increase of $1.8 million, or 12%, from $15.7 million reported for the first nine months of 2011. Operating income from continuing operations, as a percentage of revenue, for the third quarter and first nine months of 2012 was 17% and 15%, respectively, compared to 18% and 13% for the comparable periods in 2011.
• Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations was $7.0 million and $20.6 million for the third quarter and first nine months of 2012, respectively, a decrease of 13% from $8.0 million reported for the third quarter of 2011 and an increase of 9% from $18.8 million reported for the first nine months of 2011.
• Net cash balances at September 30, 2012 totaled $96.1 million compared to $85.1 million and $84.5 million at June 30, 2012 and December 31, 2011, respectively.
Operational and Other Highlights:
• Sony Bank implemented VASCO's authentication technology. Sony Bank is an affiliate of Sony Financial Holdings, which includes Sony Life Insurance, Sony Assurance and other group companies. Sony Bank started business in 2001 as an internet bank for individuals.
• VASCO launched DIGIPASS for Mobile 4.0, which offers an enhanced user experience through the use of QR (Quick Response) codes and more enhanced provisioning and deployment options.
• DIGIPASS technology allows Intel® Ultrabook™ users convenient and secure access to the MYDIGIPASS.COM community.
• VASCO expanded its MYDIGIPASS.COM platform by adding a launch pad and a marketplace. By adding these two features, MYDIGIPASS.COM became even more attractive to ASPs allowing them to increase their revenue, improve their security and add extra value to their website.
• WordPress, the largest self-hosted blogging tool worldwide, incorporated MYDIGIPASS.COM on its platform. This enables bloggers to benefit from the added security the authentication service offers.
• Drupal has added MYDIGIPASS.COM for DRUPAL v6 to its contributed modules enabling web developers to embed secure login access for the websites they build through the Drupal community.
• VASCO launched DIGIPASS 810 e-ID for MYDIGIPASS.COM. The DIGIPASS 810 e-ID offers the possibility to authenticate and generate OTPs (one-time passwords) through the use of a Belgian e-ID card and the PIN code linked to the e-ID. With the launch of DIGIPASS 810 e-ID, VASCO enables consumers to safely access websites secured by MYDIGIPASS.COM with their e-ID cards.
• VASCO announced a new Cloud Partner Program for partners in its EMEA region. With this program, VASCO supports its channel partners in introducing and advising on strong user authentication solutions for online web-based applications. VASCO plans to provide the channel partners with the latest information on new technologies, products and solutions.
• VASCO extended its e-learning program and enhanced brand awareness among its resellers and distributors with an Expert Sales Program.

"Revenues for the third quarter of 2012 were in line with the numbers discussed in our release on October 9th," stated T. Kendall Hunt, Chairman & CEO. "As noted at that time, revenues from both the banking and enterprise and application security markets were lower than revenues in the comparable periods in 2011. While we were disappointed with the result for the quarter, we believe that our traditional business remains strong. We are also continuing to invest in our services platform with the goal of expanding our target market to consumers and other applications beyond the reach of our traditional products. We are excited about our business prospects in both our traditional and services business models for 2013."

"The results of the third quarter reflect the variability of our traditional business model related to the timing of receipt and shipment of orders, especially from our banking business," stated Jan Valcke, VASCO's President and COO. "Our cumulative order intake through the third quarter of 2012 is approximately 17% stronger than in the same period last year and our pipeline of potential new orders also continues to be strong. While we recognize that there is significant economic uncertainty in the markets in which we operate, we do not believe that there has been a fundamental weakening of either the global banking market or our competitive position in that market."