VASCO Reports Third Quarter and Nine Months 2003 Results - Third Quarter Revenue from Continuing Operations Reflects Best Third Quarter in Company's History
Thursday October 23, 3:00 am ET
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Q3 2003 Revenues Increase 18% Compared to Q3 2002; Q3 2003 Net Income Of $1.3 Million Compared to Net Losses of $0.8 Million in Q3 2002. Cash Balances Of $5.5 Million Increase $1.5 Million From June 30, 2003. All Bank Debt Is Paid Off. Backlog for Firm Orders to Be Shipped in Q4 2003 at $4.4 Million.
OAKBROOK TERRACE, Ill. and BRUSSELS, Belgium, Oct. 23
/PRNewswire-FirstCall/ -- VASCO Data Security International, Inc.
(Nasdaq: VDSI; vasco.com ), a global provider of security products that
enable e-business and e-commerce, today announced financial results for the
third quarter and nine months ended September 30, 2003. Revenues for the third
quarter and first nine months were $5,599,000 and $16,670,000, respectively,
and were 18% and 19% higher than the third quarter and first nine months of
2002, respectively.
Operating income for the third quarter of 2003 was $58,000 compared with an operating loss of $905,000 for the third quarter of 2002. Operating income for the nine months ended September 30, 2003 was $758,000 compared to an operating loss of $2,891,000 for the comparable period of 2002. Operating expenses for the third quarter and first nine months of 2003 were $3,395,000 and $9,185,000, respectively, a decrease of 5% from $3,584,000 in the third quarter 2002 and a decrease of 16% from $10,934,000 in the first nine months of 2002.
The Company reported net income for the third quarter of 2003 of $1,287,000 compared with a net loss of $809,000 for the comparable period of 2002. Net income for the first nine months of 2003 was $2,490,000 compared with a net loss of $2,639,000 for the first nine months of 2002. Net income in 2003 included a gain from the sale, in the third quarter, of its VACMAN Enterprise business unit of $1,517,000, a loss from discontinued operations of $36,000 for the three months ended September 30, 2003 and income from discontinued operations of $448,000 for the nine months ended September 30, 2003. Excluding the results of its VACMAN Enterprise unit, the Company reported a net loss from continuing operations of $194,000 and net income from continuing operations of $525,000 for the three and nine months ended September 30, 2003, respectively. For 2002, the Company reported net losses from continuing operations for the three and nine month periods of $1,021,000 and $3,385,000, respectively.
Income per basic and diluted common share from total operations was $0.04 and $0.06 for the third quarter and first nine months of 2003, respectively, and compares to a loss per basic and diluted common share of $0.04 and $0.12 for the third quarter and first nine months of 2002, respectively. For the third quarter of 2003, the Company reported a loss per basic and diluted common share of $0.01 from continuing operations and income per basic and diluted common share of $0.05 from discontinued operations. For the nine months ended September 30, 2003, the Company reported no income or loss per basic and diluted common share from continuing operations and income per basic and diluted common share of $0.06 from discontinued operations.
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations was $320,000 and $1,951,000 for the third quarter and first nine months of 2003, respectively, compared with losses before these items of $698,000 in the third quarter and $2,094,000 for the first nine months of 2002. The Company had a cash balance at September 30, 2003 of $5,524,000 compared to $3,983,000 and $2,616,000 at June 30, 2003 and December 31, 2002, respectively.
"The management team completed several major transactions in the third quarter while achieving record third-quarter revenue," said Ken Hunt, VASCO's CEO, and Chairman. "During the quarter, we completed the sale of the VACMAN Enterprise business unit, a non-core business, repurchased all of the outstanding shares of our Series C Convertible Preferred Stock from Ubizen N.V., raised $8 million of new capital and repaid our $3.4 million term loan from Dexia Bank. Each of these transactions was identified as a key objective for the team at the beginning of the year and we are very pleased to have completed each of them in the third quarter. With these transactions behind us, the management team can focus more clearly on increasing revenues and continuing to improve operating efficiency."
"The third quarter of 2003 was one of the best third quarters in the Company's history," stated Jan Valcke, VASCO's President and COO. "Traditionally the third quarter is one of our weakest quarters due to the holidays. Revenue in the third quarter of 2003 was higher than any previous third quarter and it was only the second time in the Company's history that it generated an operating profit in the third quarter. As I have noted in previous quarters, the market continues to be very cautious relative to spending on investment technology. Even with the cautious market, we were able to add 112 new customers in the third quarter. For the first nine months, we have now added a total of 442 new customers. New customers often start with small orders, but are an important source of revenue in the future as they learn more about the benefits of strong user authentication and the ease with which our product can be deployed and used. With the holidays, our order activity in the third quarter was predictably slower than prior quarters. As we start the fourth quarter, we are seeing a high level of interest in our authentication products, but have noticed that some orders are being delayed as customers are uncertain about the economy. We are confident, however, that the order volume will increase as our customers finalize their plans for 2003 and 2004."
Cliff Bown, Executive Vice President and CFO added, "I believe that the transactions that were completed in the third quarter have strengthened our balance sheet significantly. As a result of the sale of VACMAN Enterprise, we should be able to convert a non-core asset to cash over time. The repurchase of the Series C Convertible Preferred Stock eliminated the risk of substantial dilution to existing shareholders if the Series C had reached its mandatory conversion date. Finally, the recent financing allowed the Company to pay off all of its outstanding bank debt and replenish its working capital. Those transactions, combined with the positive operating cash flow, as measured by EBITDA, and continued improvement in reducing our Days Sales Outstanding (DSO) in net accounts receivable, have increased our working capital to $4.6 million from $1.0 million at June 30, 2003 and from a deficit of $0.6 million at December 31, 2002. During the third quarter, we were able to reduce our DSO to 45 days, a reduction of 14 days and 28 days from June 30, 2003 and December 31, 2002, respectively."
VASCO Data Security International, Inc.
Consolidated Statements of Operations
(Unaudited)
Three months ended Nine months ended
September 30 September 30
2002 2003 2002 2003
Net revenues $4,740,000 $5,599,000 $13,979,000 $16,670,000
Cost of goods sold 2,061,000 2,146,000 5,936,000 6,727,000
Gross profit 2,679,000 3,453,000 8,043,000 9,943,000
Operating costs:
Sales and
marketing 1,825,000 1,579,000 5,741,000 4,589,000
Research and
development 651,000 747,000 2,043,000 2,064,000
General and
administrative 1,177,000 1,037,000 3,183,000 2,492,000
Non-cash
compensation
(recovery) (69,000) 32,000 (33,000) 40,000
Total operating
costs 3,584,000 3,395,000 10,934,000 9,185,000
Operating income
(loss) from
continuing
operations (905,000) 58,000 (2,891,000) 758,000
Interest expense, net (45,000) (22,000) (238,000) (120,000)
Other income
(expense), net (71,000) (5,000) (116,000) 376,000
Income (loss) from
continuing operations
before income
taxes (1,021,000) 31,000 (3,245,000) 1,014,000
Provision for
income taxes - 225,000 140,000 489,000
Net income (loss)
from continuing
operations (1,021,000) (194,000) (3,385,000) 525,000
Discontinued
operations:
Income (loss)
from discontinued
operations 212,000 (36,000) 746,000 448,000
Gain on sale of
discontinued
operations - 1,517,000 - 1,517,000
Net income (loss) (809,000) 1,287,000 (2,639,000) 2,490,000
Preferred stock
accretion and
dividends (291,000) (67,000) (873,000) (649,000)
Net income (loss)
available to
common
shareholders $(1,100,000) $1,220,000 $(3,512,000) $1,841,000
Basic and diluted
net income (loss)
per common share:
Income (loss)
from continuing
operations $(0.05) $(0.01) $(0.15) $-
Income (loss)
from discontinued
operations $0.01 $0.05 $0.03 $0.06
Net income
(loss) $(0.04) $0.04 $(0.12) $0.06
Weighted average
common shares
outstanding:
Basic 28,346,000 28,437,000 28,305,000 28,420,000
Diluted 28,389,000 31,222,000 28,333,000 29,510,000
VASCO Data Security International, Inc.
Consolidated Balance Sheets
December 31, September 30,
2002 2003
(Audited) (Unaudited)
ASSETS
Current assets:
Cash $2,616,000 $5,524,000
Accounts receivable, net of
allowance for doubtful accounts 2,870,000 2,725,000
Inventories, net 1,579,000 1,654,000
Prepaid expenses 395,000 246,000
Assets of discontinued operations 156,000 -
Other current assets 119,000 693,000
Total current assets 7,735,000 10,842,000
Property and equipment
Furniture and fixtures 1,485,000 1,870,000
Office equipment 1,927,000 1,972,000
Total property and equipment 3,412,000 3,842,000
Accumulated depreciation (2,256,000) (2,994,000)
Net property and equipment 1,156,000 848,000
Intangible assets, net 1,911,000 1,504,000
Goodwill, net 250,000 250,000
Note receivable and investment in SSI - 1,212,000
Other assets 81,000 87,000
Total assets $11,133,000 $14,743,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $3,590,000 $-
Accounts payable 1,850,000 1,819,000
Liabilities related to assets of
discontinued operations 108,000 43,000
Deferred revenue 644,000 679,000
Amount payable to Ubizen - 1,000,000
Other accrued expenses 2,131,000 2,666,000
Total current liabilities 8,323,000 6,207,000
Stockholders' equity :
Series C Convertible Preferred Stock 9,108,000 -
Series D Convertible Preferred Stock - 5,831,000
Common stock 28,000 30,000
Additional paid-in capital 36,763,000 47,145,000
Accumulated deficit (42,608,000) (43,858,000)
Accumulated other comprehensive
income (loss) - cumulative translation
adjustment (481,000) (612,000)
Total stockholders' equity 2,810,000 8,536,000
Total liabilities and stockholders'
equity $11,133,000 $14,743,000
Reconciliation of EBITDA from continuing operations to net income from
continuing operations:
Three Months Ended Nine Months Ended
(unaudited), (unaudited),
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2002 2003 2002 2003
EBITDA $(698,000) $320,000 $(2,094,000) $1,951,000
Interest expense, net 45,000 22,000 238,000 120,000
Tax provision - 225,000 140,000 489,000
Depreciation and
amortization 278,000 267,000 913,000 817,000
Net income (loss) $(1,021,000) $(194,000) $(3,385,000) $525,000
Highlights of the Quarter - VASCO:
- Sells VACMAN Enterprise to SecureD Services,
- Reaches agreement with Ubizen to settle Ubizen's $15 million investment
in the Company for $4 million in cash and 2 million shares of common
stock,
- Completes $8 million capital raise,
- Repays term note to Dexia Bank, eliminating all bank debt,
- Launches Digipass Pack of Microsoft Outlook Web Access,
- Launches Digipass Go3,
- Signs a solution partnership agreement with Network Engines, and
- Adds 8 new distributors, bringing the total number of VASCO distributors
to 29 |
