NW_20030724_VASCO Reports Second Quarter and First Six Months 2003 Results

OAKBROOK TERRACE, Ill., and BRUSSELS, Belgium, July 24, 2003 - VASCO Data Security International, Inc. (Nasdaq: VDSI) ( www.vasco.com), a global provider of security products that enable e-business and e-commerce, today announced financial results for the second quarter and six months ended June 30, 2003. Revenues for the second quarter and first six months were $6,449,000 and $12,060,000, respectively, and were 55% and 18% higher than the second quarter and first six months of 2002, respectively. Revenues were also 15% higher than first quarter 2003.

Operating income for the second quarter of 2003 was $853,000 compared with an operating loss of $1,283,000 for the second quarter of 2002. Operating income for the six months ended June 30, 2003 was $1,183,000 compared to an operating loss of $1,452,000 for the comparable period of 2002. Operating expenses for the second quarter and first six months of 2003 were $3,096,000 and $6,214,000, respectively, a decrease of 18% from $3,787,000 in the second quarter 2002 and a decrease of 20% from $7,760,000 in the first six months of 2002.

The Company reported net income for the second quarter of 2003 of $721,000 compared with a net loss of $1,670,000 for the comparable period of 2002. Net income for the first six months of 2003 was $1,202,000 compared with a net loss of $1,830,000 for the first six months of 2002. Income per basic and diluted common share was $0.01 and $0.02 for the second quarter and first six months of 2003, respectively. The Company reported a net loss per basic and diluted common share of $0.07 and $0.09 for the second quarter and first six months of 2002, respectively.

Earnings before interest, taxes, depreciation and amortization (EBITDA) was $1,343,000 and $2,181,000 for the second quarter and first six months of 2003, respectively compared with losses before these items of $1,006,000 in the second quarter and $781,000 for the first six months of 2002. The company had a cash balance at June 30, 2003 of $3,983,000 compared to $3,892,000 and $2,616,000 at March 31, 2003 and December 31, 2002, respectively.

“The results of the second quarter of 2003, along with our recently announced sale of the VACMAN Enterprise business and the purchase of VASCO’s Preferred Stock from Ubizen, demonstrate VASCO’s continued execution of our business plan,” said Ken Hunt, VASCO’s CEO, and Chairman. “VASCO’s management team was able to both deliver substantial improvement in operating results compared to prior periods and devote substantial time and effort to completing transactions that are expected to improve shareholder value over the long run. Through the first six months of 2003, we have achieved or exceeded our plan in revenue, margin, cost control and cash management. In addition, with the current status of our order backlog, which currently includes firm orders for delivery in the third quarter of $5.4 million, we are well positioned to achieve our plan for the third quarter.”

“We are very pleased with the results of the second quarter,” stated Jan Valcke, VASCO’s President, and COO. “While the market continues to still be very cautious relative to spending on investment technology, we were able to add 160 new customers in the second quarter. For the first six months, we have now added a total of 330 new customers. Even though new customers often start with small orders, they will be 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. Overall, our order activity also remained strong throughout the second quarter. The backlog of firm orders to be shipped in third quarter, which is traditionally the weakest quarter of the year due to the holidays in Europe, is stronger for our core products than it was at the beginning of the second quarter, for orders to be delivered in the second quarter. While the absolute value of the backlog between the two quarters is comparable, the backlog entering the second quarter included revenues for the VACMAN Enterprise.”

Cliff Bown, Executive Vice President and CFO added, “Our balance sheet continued to strengthen during the second quarter as our working capital increased by approximately $885,000 from the first quarter of 2003. Within the components of working capital, our cash balances continued to benefit from our reduction of Days Sales Outstanding (DSO) in net accounts receivable. During the second quarter, we were able to reduce our DSO to 60 days from 68 days at the end of the first quarter. While the cash balances did not change significantly from the end of the first quarter, we were able to increase our inventory position without a commensurate increase in our payables. Further, our deferred revenue related to monies received in prior quarters under the just-in-time delivery program decreased significantly.”

[ See Financial Tables at the end of this Release ]

Highlights of the Quarter:

· VASCO wins 160 new customers in Q2 2003
- 18 banks
- 142 corporates

· VASCO sells its 10 millionth Digipass;
· John R. Walter joins VASCO’s Board of Directors;

· VASCO launches 4 new products:
- Digipass 260
- Digipass 560
- Digipass for Windows 4.0
- VACMAN Server for Radius 6.0.4


Please join us during our upcoming conference call on July 24, 2003, at 10:00 a.m. EST - 16:00h CET.
During the Conference Call, Mr. Ken Hunt, CEO, Mr. Jan Valcke, President and COO, and Mr. Cliff Bown, CFO, will discuss VASCO’s Results for the Second Quarter and First Six Months of 2003.
To participate in this Conference Call, please dial one of the following numbers:
USA/Canada: +1 800 475 2151
International: +1 973 582 2710
And mention access code: VASCO to be connected to the Conference Call.

The Conference Call is also available in listen-only mode on www.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.



About VASCO: VASCO designs, develops, markets and supports patented “Identity Authentication” products for e-business and e-commerce. VASCO’s Identity Authentication software is delivered via its Digipass security products, small “calculator” hardware devices carried by an end user, or in a software format on mobile phones, other portable devices, and PCs. For user access control, VASCO’s VACMAN products guarantee that only designated Digipass users get access to the application. VASCO’s target markets are the applications and their several hundred million users that utilize fixed passwords as security. VASCO’s time-based system generates a “one-time” password that changes with every use, and is virtually impossible to hack, or break. With 10 million Digipass products sold and ordered, VASCO has established itself as a world-leader for strong Identity Authentication with 200 international financial institutions, approximately 1000 blue-chip corporations, and governments representing more than 50 countries.
 

Forward Looking Statements
Statements made in this news release that relate to future plans, events or performances are forward-looking statements. Any statement containing words such as “believes,” “anticipates,” “plans,” “expects,” and similar words, is forward-looking, and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements.

Reference is made to the Company's public filings with the US Securities and Exchange Commission for further information regarding the Company and its operations.

More information is available at www.vasco.com.

For more information contact:
Media: Jochem Binst: +32 2 456 9810, [email protected]
Investor Relations: Tony Schor, President, Investor Awareness, Inc.: 847-945-2222, [email protected]