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VASCO Data Security Int., CEO Discusses Q3 2010 Results – Earnings Call Transcript

Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements. I direct your attention to the company's filings with the U.S. Securities and Exchange Commission for a discussion of such risks and uncertainties in this regard.

Today, we are going to review the results for the third 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 Q3 were $26.3 million, an increase of 19% compared to the third quarter 2009. Revenues reflected strong growth in both banking and enterprise and applications security. Our revenues from our banking market increased 20% over Q3 2009. Revenues from our enterprise and application security markets increased 17% over Q3 2009. Q3 2010 was our 31st consecutive positive quarter in terms of operating income. Our gross profit for the quarter was 71% of revenue and our operating income was 10% of revenue.

Our business mix between banking which provide higher volume, lower margin and non-banking which provides lower volume, higher margin resulted in continuing healthy gross margin of 70% for the first nine months of 2010. Non-banking revenue was 24% in Q3 and 28% for the first nine months in 2010. This compares to 25% in Q3 a year ago and 27% for the first nine months of 2009. Also contributing to the healthy gross margin was the gross of our non-hardware revenue which was 26% versus 24% in Q3 and 25% versus 23% year-to-date compared to this same period a year ago.

During the quarter, we sold an additional 387 new accounts including 50 new banks and 337 new Enterprise and Application Security customers. This compares to the third quarter a year ago in which we sold 350 new accounts including 56 banks and 294 enterprise and applications security customers. We now have over 10,000 customers including more than 1,500 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.

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