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VASCO Data Security International, Inc. Q2 2010 Earnings Call Transcript

Today, we are going to review the results for the second quarter of 2010. As always, we will host a question-and-answer session after the conclusion of management's prepared remarks. If possible, I would like to budget one hour total for this conference call. If you can limit your questions to one or two, it would be appreciated.

Revenues for Q2 were $24.7 million, an increase of approximately 1% compared to the second quarter of 2009. Q2 2010 was our 30th consecutive positive quarter in terms of operating income. Our gross profit for the quarter was 70% of revenue, and our operating income was 6% of revenue.

Our business mix between banking which provides higher volume, more margin and non-banking which provides lower volume higher margin resulted in continuing healthy gross margin of 70% for the first six months of 2010. during the quarter, we sold an additional 480 new accounts including 56 new banks, and 424 new enterprise and application security customers.

This compares to the second quarter a year ago, in which we sold 350 new accounts including 44 banks and 306 enterprise security customers. We now have almost 10,000 customers including approximately 1500 banks in more than 100 countries. Although management considers the number of new customers as an indicator of the momentum of our business, and effectiveness of our distribution channel, the number of new customers is not indicative of future revenue.

During the second quarter of 2010, our cash and our working capital remain relatively constant as compared with our balances at the end of the first quarter. At June 30, 2010 our net cash balance was approximately $76 million and we had approximately $84 million of working capital. The strong cash balance gives us the flexibility to invest in our growth now that the economy seems to be improving. Over the past several quarters, we've seen a number of positive trends in our business.

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