VASCO Reports Results for Third Quarter and First Nine Months of 2016

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– Q3 Total revenue of $43.6 million
– Q3 GAAP operating income of $0.9 million
– Q3 GAAP earnings per share of $0.01
– Q3 Non-GAAP earnings per share of $0.091
OAKBROOK TERRACE, IL, and ZURICH: VASCO Data Security International, Inc. (NASDAQ: VDSI), a global leader in digital solutions including identity, security and business productivity, today reported financial results for the third quarter and nine months ended September 30, 2016.
“Our third quarter results were primarily impacted by the extension of sales cycles as some of our large, European banking customers made adjustments in their ordering patterns in response to economic pressures and the need for digital transformation.” said T. Kendall Hunt, VASCO Chairman & CEO. “We are pleased to make additional gains in our gross margins as we continue to derive more of our revenue from software. We remain optimistic about market demand for our solutions, including our hardware products, DIGIPASS® for Apps mobile security suite, and eSignLive™ electronic signature solutions. We remain confident in our long term strategy and in the strength of our future growth opportunities as all types of businesses in every region expand their use of online and mobile channels to conduct business.”
Revenue from continuing operations for the third quarter of 2016 decreased 27% to $43.6 million from $60.0 million in the third quarter of 2015, and for the first nine months of 2016, decreased 24% to $144.7 million from $190.6 million for the first nine months of 2015.
Net income from continuing operations for the third quarter of 2016 was $0.5 million, or $0.01 per fully diluted share, a decrease of $10.7 million, or 96% from $11.2 million, or $0.28 per fully diluted share, for the third quarter of 2015. Net income from continuing operations for the first nine months of 2016 was $5.5 million, or $0.14 per diluted share, a decrease of $33.2 million, or 86%, from $38.7 million, or $0.97 per diluted share, for the comparable period in 2015.
Operating income from continuing operations for the third quarter of 2016 was $0.9 million, a decrease of $12.5 million, or 93%, from $13.5 million reported for the third quarter of 2015. Operating income from continuing operations for the first nine months of 2016 was $7.4 million, a decrease of $37.9 million, or 84%, from $45.3 million reported for the first nine months of 2015.
Operating income as a percentage of revenue for the third quarter and first nine months of 2016 was 2% and 5%, respectively compared to 22% and 24% for the comparable periods in 2015.
Net income, which includes the impact of our discontinued operations, for the third quarter of 2016 was $0.5 million, or $0.01 per diluted share, a decrease of $10.7 million, or 96%, from $11.2 million, or $0.28 per diluted share, for the third quarter of 2015. Net income for the first nine months of 2016 was $5.5 million, or $0.14 per diluted share, a decrease of $33.2 million, or 86%, from $38.7 million, or $0.97 per diluted share, for the comparable period in 2015.
Non-GAAP net income from continuing operations, which excludes both long-term incentive compensation and amortization of intangible assets, for the third quarter of 2016 was $3.5 million, or $0.09 per fully diluted share, a decrease of $9.8 million, or 74% from $13.3 million, or $0.34 per fully diluted share, for the third quarter of 2015. Non-GAAP net income from continuing operations for the first nine months of 2016 was $15.2 million, or $0.38 per fully diluted share, a decrease of $29.5 million, or 66% from $44.7 million, or $1.11 per fully diluted share, for the comparable period in 2015.
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.
Other Financial Highlights:
Gross profit from continuing operations was $32.1 million, or 74% of revenue, for the third quarter of 2016 and $104.6 million, or 72% of revenue, for the first nine months of 2016. Gross profit was $36.3 million, or 60% of revenue, for the third quarter of 2015 and $112.4 million, or 59% of revenue the first nine months of 2015.
Operating expenses from continuing operations for the third quarter and first nine months of 2016 were $31.2 million and $97.1 million, respectively, an increase of 37% and 45% from $22.8 million and $67.2 million reported for the third quarter of 2015 and first nine months of 2015, respectively.
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations was $3.7 million and $16.1 million for the third quarter and first nine months of 2016, respectively, a decrease of 75% from $14.9 million reported for the third quarter of 2015 and a decrease of 68% from $49.6 million reported for the first nine months of 2015.
Cash, cash equivalents and short-term investments at September 30, 2016 totaled $141.5 million compared to $135.7 million and $123.5 million at June 30, 2016 and December 31, 2015, respectively.
Operational and Other Highlights:
VASCO announced support for European eIDAS e-signature regulations with eSignLive interoperability with all qualified EU Trust Service Providers.
VASCO launched MYDIGIPASS™ for Healthcare bringing trusted digital identities to healthcare through identity proofing, credentialing, and authentication.
VASCO expanded its relationship with Promon AS, a developer of Runtime Application Self-Protection (RASP) technology with a strategic investment in the firm.
MYDIGIPASS was awarded SAFE-BioPharma full-service credential service provider certification at NIST Level of Authentication (LOA) 3.
Guidance for full-year 2016:
VASCO is reducing guidance for the full-year 2016 as follows:
Revenue is expected to be in the range of $185 million to $195 million, compared to $205 million to $215 million communicated at the start of the year; and
Operating income as a percentage of revenue, excluding the amortization of purchased intangible assets, is projected to be in the range of 7% to 9%, compared to 10% to 12% communicated at the start of the year.
Conference Call Details
In conjunction with this announcement, VASCO Data Security International, Inc. will host a conference call today, October 27, 2016, at 4:30 p.m. EDT/22:30h CEST. During the conference call, Mr. Ken Hunt, CEO, Mr. Jan Valcke, President and COO, and Mr. Mark Hoyt, CFO, will discuss VASCO’s results for the third quarter 2016.
To participate in this conference call, please dial one of the following numbers:
USA/Canada: 800-698-1231
International: +1-303-223-4389
Please mention VASCO to be connected to the Conference Call.
The Conference Call is also available in listen-only mode on ir.vasco.com. Please log on 15 minutes before the start of the Conference Call in order to download and install any necessary software. The recorded version of the Conference Call will be available on the VASCO website 24 hours a day for at least 60 days.

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