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VASCO Reports Results for First Quarter 2018

First Quarter Financial Results

- Q1 Total revenue of $45.4 million

- Q1 Adjusted EBITDA of $6.1 million1

- Q1 GAAP earnings per share of $0.04

- Q1 Non-GAAP earnings per share of $0.121

CHICAGO and ZURICH, May 8, 2018 - VASCO Data Security International, Inc. (NASDAQ: VDSI), a global leader in digital identity security, transaction security and business productivity, today reported financial results for the first quarter ended March 31, 2018.

“We reported record non-hardware revenue in the first quarter with strong contributions from software licenses and subscriptions. Our success was underscored by the doubling of our mobile security software and an increase of nearly 50% in our e-signature solutions,” stated VASCO CEO, Scott Clements. “Strong software and services revenue combined with expected Q1 declines in hardware revenue contributed to a higher gross profit margin. Our strategy of developing software and services solutions that address the secure identity and business enablement challenges of our customers is being well received by the market and we anticipate future gains as we prepare to launch our Trusted Identity Platform later this quarter.”

Revenue for the first quarter of 2018 increased 8% to $45.4 million from $42.0 million in the first quarter of 2017.

Adjusted earnings before interest, taxes, depreciation, amortization and long-term incentive compensation (Adjusted EBITDA)1 for the first quarter of 2018 was $6.1 million, an increase of $1.9 million, or 44% from $4.2 million reported for the first quarter of 2017. Adjusted EBITDA as a percentage of revenue was 13.5% for the first quarter of 2018, and increase of 3.4 percentage points from 10.1% in the first quarter of 2017.

Net income for the first quarter of 2018 was $1.8 million or $0.04 per fully diluted share, an increase of $1.2 million from net income of $0.6 million or $0.01 per fully diluted share for the first quarter of 2017.

Non-GAAP net income1, which excludes long-term incentive compensation and the amortization of intangible assets, for the first quarter of 2018, was $4.6 million or $0.12 per fully diluted share, an increase of $1.4 million from $3.2 million or $0.08 per fully diluted share, for the first quarter of 2017.

Other Financial Metrics

·  Gross profit was $34.7 million or 76% of revenue for the first quarter of 2018. Gross profit was $29.9 million or 71% of revenue for the first quarter of 2017.

·  Operating expenses for the first quarter were $33.0 million, an increase of 11.6% from $29.6 million reported for the first quarter of 2017.

·  Cash, cash equivalents and short-term investments at March 31, 2018 totaled $166.4 million compared to $158.4 million at December 31, 2017.


1  An explanation of the use of non-GAAP measures is included below under the heading “Non-GAAP Financial Measures.” A reconciliation of GAAP to non-GAAP financial measures has also been provided in tables below.

First Quarter Operational and Other Highlights

·  On January 1, 2018 VASCO adopted Accounting Standards Codification 606 – Revenue from Contracts with Customers (“ASC 606”).

·  Software revenue included a seven-figure eSignLiveTM term license with a major U.S. financial services company.

·  Software revenue included several six-figure DIGIPASS for Apps perpetual licenses.

·  We launched an orchestration SDK for DIGIPASS for Apps that enables our customers to more simply and rapidly integrate biometrics and other security features into their mobile applications.

Guidance for Full Year 2018

VASCO is reaffirming guidance for the full-year 2018 as follows:

·  Revenue is expected to be in the range of $197 million to $207 million; and

·  Adjusted EBITDA is expected to be in the range of $21 million to $25 million.

Conference Call Details

In conjunction with this announcement, VASCO Data Security International, Inc. will host a conference call today, May 8, 2018, at 4:30 p.m. EDT/22:30 CEST. During the conference call, Mr. Scott Clements, CEO, and Mr. Mark Hoyt, CFO, will discuss VASCO’s results for the first quarter of 2018.

To participate in this conference call, please dial one of the following numbers:

USA/Canada: 800‑659‑3371

International: +1-312-281-1206

The conference call is also available in listen-only mode on ir.vasco.com. The recorded version of the conference call will be available on the VASCO website as soon as possible following the call and will be available for replay for at least 60 days.

About VASCO

VASCO® is a global leader in delivering trust and business productivity solutions to the digital market. VASCO develops next generation technologies that enable more than 10,000 customers in 100 countries in financial, enterprise, government, health care and other segments to achieve their digital agenda, deliver an enhanced customer experience and meet regulatory requirements. More than half of the top 100 global banks rely on VASCO solutions to protect their online, mobile, and ATM channels. VASCO’s solutions combine to form a powerful trust platform that empowers businesses by incorporating identity, fraud prevention, electronic and transaction signing, mobile application protection and risk analysis. Learn more about VASCO at VASCO.com and on TwitterLinkedIn and Facebook.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, including, without limitation the guidance for full year 2018. These forward-looking statements (1) are identified by use of terms and phrases such as “expect”, “believe”, “will”, “anticipate”, “emerging”, “intend”, “plan”, “could”, “may”, “estimate”, “should”, “objective”, “goal”, “possible”, “potential”, “project” and similar words and expressions, but such words and phrases are not the exclusive means of identifying them, and (2) are subject to risks and uncertainties and represent our present expectations or beliefs concerning future events. VASCO cautions that the forward-looking statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. These risks, uncertainties and other factors have been described in our Annual Report on Form 10‑K for the year ended December 31, 2017 and include, but are not limited to, (a) risks of general market conditions, including currency fluctuations and the uncertainties resulting from turmoil in world economic and financial markets, (b) risks inherent to the computer and network security industry, including rapidly changing technology, evolving industry standards, increasingly sophisticated hacking attempts, increasing numbers of patent infringement claims, changes in customer requirements, price competitive bidding, and changing government regulations, and (c) risks specific to VASCO, including demand for our products and services, competition from more established firms and others, pressures on price levels and our historical dependence on relatively few products, certain suppliers and certain key customers. Thus, the results that we actually achieve may differ materially from any anticipated results included in, or implied by these statements. Except for our ongoing obligations to disclose material information as required by the U.S. federal securities laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events.



VASCO Data Security International, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

 

 

 

 

 

 

 

 

 

Three months ended

 

 

March 31,

 

 

2018

 

2017

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

Product and license

 

$

 33,494

 

$

 31,561

Services and other

 

 

 11,938

 

 

 10,404

Total revenue

 

 

 45,432

 

 

 41,965

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

Product and license

 

 

 8,185

 

 

 9,540

Services and other

 

 

 2,550

 

 

 2,513

Total cost of goods sold

 

 

 10,735

 

 

 12,053

 

 

 

 

 

 

 

Gross profit

 

 

 34,697

 

 

 29,912

 

 

 

 

 

 

 

Operating costs

 

 

 

 

 

 

Sales and marketing

 

 

 14,277

 

 

 13,702

Research and development

 

 

 5,797

 

 

 5,856

General and administrative

 

 

 10,774

 

 

 7,853

Amortization of purchased intangible assets

 

 

 2,201

 

 

 2,199

Total operating costs

 

 

 33,049

 

 

 29,610

 

 

 

 

 

 

 

Operating income

 

 

 1,648

 

 

 302

 

 

 

 

 

 

 

Interest income, net

 

 

 393

 

 

 290

Other income, net

 

 

 380

 

 

 214

 

 

 

 

 

 

 

Income before income taxes

 

 

 2,421

 

 

 806

Provision for income taxes

 

 

 629

 

 

 233

 

 

 

 

 

 

 

Net income

 

$

 1,792

 

$

 573

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

Basic

 

$

 0.04

 

$

 0.01

Diluted

 

$

 0.04

 

$

 0.01

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

Basic

 

 

 39,910

 

 

 39,760

Diluted

 

 

 40,059

 

 

 39,770




VASCO Data Security International, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

2018

 

2017

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and equivalents

 

$

 126,484

 

$

 78,661

Short term investments

 

 

 39,953

 

 

 79,733

Accounts receivable, net of allowances of $809 in 2018 and $520 in 2017

 

 

 34,445

 

 

 48,126

Inventories, net

 

 

 11,504

 

 

 12,040

Prepaid expenses

 

 

 6,478

 

 

 3,876

Contract assets

 

 

 4,874

 

 

 —

Other current assets

 

 

 4,547

 

 

 5,501

Total current assets

 

 

 228,285

 

 

 227,937

Property and equipment:

 

 

 

 

 

 

Furniture and fixtures

 

 

 7,451

 

 

 5,655

Office equipment

 

 

 10,012

 

 

 13,084

Total Property and equipment:

 

 

 17,463

 

 

 18,739

Accumulated depreciation

 

 

 (11,163)

 

 

 (13,963)

Property and equipment, net

 

 

 6,300

 

 

 4,776

Goodwill

 

 

 57,025

 

 

 56,332

Intangible assets, net of accumulated amortization

 

 

 35,733

 

 

 37,888

Deferred income taxes

 

 

 4,975

 

 

 5,460

Contract assets - non-current

 

 

 7,488

 

 

 —

Other assets

 

 

 7,062

 

 

 5,229

Total assets

 

$

 346,868

 

$

 337,622

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

 4,822

 

$

 8,144

Deferred revenue

 

 

 30,433

 

 

 33,295

Accrued wages and payroll taxes

 

 

 10,669

 

 

 11,643

Short-term income taxes payable

 

 

 1,435

 

 

 3,673

Other accrued expenses

 

 

 9,598

 

 

 7,746

Deferred compensation

 

 

 395

 

 

 1,652

Total current liabilities

 

 

 57,352

 

 

 66,153

Long-term deferred revenue

 

 

 6,773

 

 

 7,019

Other long-term liabilities

 

 

 7,500

 

 

 5,919

Long-term income taxes payable

 

 

 12,848

 

 

 12,848

Deferred income taxes

 

 

 8,169

 

 

 7,753

Total liabilities

 

 

 92,642

 

 

 99,692

Stockholders' equity

 

 

 

 

 

 

Common stock: $.001 par value per share, 75,000 shares authorized; 40,312 and 40,086 issued and outstanding at March 31, 2018 and December 31, 2017, respectively

 

 

 40

 

 

 40

Additional paid-in capital

 

 

 91,106

 

 

 90,307

Accumulated income

 

 

 170,319

 

 

 156,151

Accumulated other comprehensive loss

 

 

 (7,239)

 

 

 (8,568)

Total stockholders' equity

 

 

 254,226

 

 

 237,930

Total liabilities and stockholders' equity

 

$

 346,868

 

$

 337,622



VASCO Data Security International, Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

 

 

2018

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

 1,792

 

$

 573

 

Adjustments to reconcile net income to net cash provided:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 2,747

 

 

 2,633

 

Deferred tax benefit

 

 

 (9)

 

 

 (395)

 

Stock-based compensation

 

 

 800

 

 

 544

 

Changes in assets and liabilities

 

 

 

 

 

 

 

Accounts receivable, net

 

 

 14,185

 

 

 1,715

 

Inventories, net

 

 

 535

 

 

 (1,403)

 

Contract assets

 

 

 (4,195)

 

 

 —

 

Accounts payable

 

 

 (3,360)

 

 

 (1,507)

 

Income taxes payable

 

 

 (3,012)

 

 

 (2,914)

 

Accrued expenses

 

 

 (821)

 

 

 1,265

 

Deferred compensation

 

 

 (1,258)

 

 

 243

 

Deferred revenue

 

 

 3,424

 

 

 1,691

 

Other

 

 

 (1,102)

 

 

 (738)

 

Net cash provided by operating activities

 

 

 9,726

 

 

 1,707

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchase of short term investments

 

 

 —

 

 

 (69,626)

 

Maturities of short term investments

 

 

 40,000

 

 

 75,000

 

Additions to property and equipment

 

 

 (2,296)

 

 

 (247)

 

Net cash provided by investing activities

 

 

 37,704

 

 

 5,127

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Tax payments for restricted stock issuances

 

 

 (179)

 

 

 (154)

 

Net cash used in financing activities

 

 

 (179)

 

 

 (154)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

 572

 

 

 253

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

 47,823

 

 

 6,933

 

Cash and equivalents, beginning of period

 

 

 78,661

 

 

 49,345

 

Cash and equivalents, end of period

 

$

 126,484

 

$

 56,278

 


Revenue by major products and services:

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 

 

 

2018

 

2017*

 

 

 

 

 

 

 

Hardware products

 

$

 17,491

 

$

 21,744

Software licenses

 

 

 16,003

 

 

 9,816

Subscription

 

 

 2,970

 

 

 2,115

Professional services

 

 

 964

 

 

 961

Maintenance, support and other

 

 

 8,004

 

 

 7,329

 

 

 

 

 

 

 

Total Revenue

 

$

 45,432

 

$

 41,965

* Prior period amounts are presented under ASC 605 and 985-605


Impact of ASC 606 Adoption:

 

 

 

 

 

 

 

 

 

 

 

 

For the three-months ended March 31, 2018

 

 

As Reported

 

Adjustments

 

Balances without the adoption of Topic 606

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Product and license

 

$

 33,494

 

$

 (2,447)

 

$

 31,047

Services and other

 

 

 11,938

 

 

 (698)

 

 

 11,240

Total revenue

 

 

 45,432

 

 

 (3,145)

 

 

 42,287

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

 

 

 

Product and license

 

 

 8,185

 

 

 393

 

 

 8,578

Services and other

 

 

 2,550

 

 

 —

 

 

 2,550

Total Cost of goods sold

 

 

 10,735

 

 

 393

 

 

 11,128

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 34,697

 

 

 (3,538)

 

 

 31,159

 

 

 

 

 

 

 

 

 

 

Operating Costs

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

 14,277

 

 

 382

 

 

 14,659

Total operating costs

 

 

 33,049

 

 

 382

 

 

 33,431

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 1,648

 

 

 (3,920)

 

 

 (2,272)

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

 

 2,421

 

 

 (3,920)

 

 

 (1,499)

 

 

 

 

 

 

 

 

 

 

Provision for income tax

 

 

 629

 

 

 (1,019)

 

 

 (390)

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

 1,792

 

$

 (2,901)

 

$

 (1,109)

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

$

 0.04

 

 

 

 

$

 (0.03)

Diluted EPS

 

$

 0.04

 

 

 

 

$

 (0.03)

Non-GAAP Financial Measures

We report financial results in accordance with GAAP. We also evaluate our performance using certain non-GAAP operating metrics, namely Adjusted EBITDA, non-GAAP Net Income and non-GAAP diluted EPS. Our management believes that these measures provide useful supplemental information regarding the performance of our business and facilitates comparisons to our historical operating results. We believe these non-GAAP operating metrics provide additional tools for investors to use to compare our business with other companies in the industry.

These non-GAAP measures are not measures of performance under GAAP and should not be considered in isolation, as alternatives or substitutes for the most directly comparable financial measures calculated in accordance with GAAP. While we believe that these non-GAAP measures are useful within the context described below, they are in fact incomplete and are not a measure that should be used to evaluate our full performance or our prospects. Such an evaluation needs to consider all of the complexities associated with our business including, but not limited to, how past actions are affecting current results and how they may affect future results, how we have chosen to finance the business, and how taxes affect the final amounts that are or will be available to shareholders as a return on their investment. Reconciliations of the non-GAAP measures to the most directly comparable GAAP financial measures are found below.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation, amortization and long-term incentive compensation. We use Adjusted EBITDA as a simplified measure of performance for use in communicating our performance to investors and analysts and for comparisons to other companies within our industry. As a performance measure, we believe that Adjusted EBITDA presents a view of our operating results that is most closely related to serving our customers. By excluding interest, taxes, depreciation, amortization and long-term incentive compensation we are able to evaluate performance without considering decisions that, in most cases, are not directly related to meeting our customers’ requirements and were either made in prior periods (e.g., depreciation, amortization and long-term incentive compensation), or deal with the structure or financing of the business (e.g., interest) or reflect the application of regulations that are outside of the control of our management team (e.g., taxes). Similarly, we find the comparison of our results to those of our competitors is facilitated when we do not consider the impact of these items.



Reconciliation of Net Income to Adjusted EBITDA
(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

Three months ended

 

 

March 31, 

 

 

2018

 

2017

Net income

 

$

 1,792

 

$

 573

Interest income, net

 

 

 (393)

 

 

 (290)

Provision for income taxes

 

 

 629

 

 

 233

Depreciation and amortization

 

 

 2,747

 

 

 2,633

Long-term incentive compensation

 

 

 1,352

 

 

 1,100

Adjusted EBITDA

 

$

 6,127

 

$

 4,249

Non-GAAP Net Income & Non-GAAP Diluted EPS

We define non-GAAP net income and non-GAAP diluted EPS, as net income or EPS before the consideration of long-term incentive compensation expenses and the amortization of purchased intangible assets. We use these measures to assess the impact of our performance excluding items that can significantly impact the comparison of our results between periods and the comparison to competitors.

Long-term incentive compensation for management and others is directly tied to performance and this measure allows management to see the relationship of the cost of incentives to the performance of the business operations directly if such incentives are based on that period’s performance. To the extent that such incentives are based on performance over a period of several years, there may be periods which have significant adjustments to the accruals in the period but which relate to a longer period of time, and which can make it difficult to assess the results of the business operations in the current period. In addition, the Company’s long-term incentives generally reflect the use of restricted stock grants or cash awards while other companies may use different forms of incentives the cost of which is determined on a different basis, which makes a comparison difficult.

We exclude amortization of purchased intangible assets as we believe the amount of such expenses in any given period may not be correlated directly to the performance of the business operations and that such expenses can vary significantly between periods as a result of new acquisitions, the full amortization of previously acquired intangible assets or the write down of such assets due to an impairment event. However, purchased intangible assets contribute to current and future revenue and related amortization expense will recur in future periods until expired or written down. We make a tax adjustment based on the above adjustments resulting in an effective tax rate on a non-GAAP basis, which may differ from the GAAP tax rate. We believe the effective tax rates we use in the adjustment are reasonable estimates of the overall tax rates for the Company under its global operating structure.



Reconciliation of Net Income to Non-GAAP Net Income
(in thousands except per share data, unaudited)

 

 

 

 

 

 

 

 

 

Three months ended

 

 

March 31, 

 

 

2018

 

2017

Net income

 

$

 1,792

 

$

 573

Long-term incentive compensation

 

 

 1,352

 

 

 1,110

Amortization of purchased intangible assets

 

 

 2,201

 

 

 2,199

Tax impact of adjustments*

 

 

 (711)

 

 

 (662)

Non-GAAP net income

 

$

 4,634

 

$

 3,220

 

 

 

 

 

 

 

Non-GAAP diluted EPS

 

$

 0.12

 

$

 0.08

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

 40,059

 

 

 39,770

* The tax impact of adjustments is calculated at 20% of the adjustments in all periods

Copyright© 2018 VASCO Data Security, Inc., VASCO Data Security International GmbH. All rights reserved. VASCO®, DIGIPASS®, CRONTO®, and eSignLive™ are registered or unregistered trademarks of VASCO Data Security, Inc. and/or VASCO Data Security International GmbH, or Silanis Technology Inc. in the U.S. and other countries.

For more information contact:

Joe Maxa
+1-612‑247‑8592 
joe.maxa@vasco.com

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