OAKBROOK TERRACE, IL and ZURICH, October 26, 2017 – 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, 2017.

“VASCO^® returned to growth in the quarter with positive contributions across hardware, software, and services,” stated Scott Clements, VASCO CEO. “Record revenue in non-hardware offerings contributed to higher operating profit. We are executing on our strategy to sustain our hardware business while driving growth in software and services that secure the operations of our banking and enterprise customers.”

Revenue for the third quarter of 2017 increased 17% to $51.1 million from $43.6 million in the third quarter of 2016, and for the first nine months of 2017 decreased 4% to $138.8 million from $144.7 million for the first nine months of 2016.

Net income for the third quarter of 2017 was $2.8 million or $0.07 per fully diluted share, an increase of $2.3 million from $0.5 million or $0.01 per fully diluted share, for the third quarter of 2016. Net income for the first nine months of 2017 was $3.4 million or $0.09 per diluted share, a decrease of $2.1 million from $5.5 million or $0.14 per diluted share, for the comparable period in 2016.

Operating income for the third quarter of 2017 was $5.1 million, an increase of $4.2 million from $0.9 million reported for the third quarter of 2016. Operating income for the first nine months of 2017 was $5.0 million, a decrease of $2.4 million from $7.4 million reported for the first nine months of 2016. Operating income as a percentage of revenue for the third quarter and first nine months of 2017 was 10% and 4% respectively compared to 2% and 5% for the comparable periods in 2016.

Non-GAAP net income¹, which excludes both long-term incentive compensation and amortization of intangible assets, for the third quarter of 2017 was $5.5 million or $0.14 per fully diluted share, an increase of $2.0 million from $3.5 million or $0.09 per fully diluted share, for the third quarter of 2016. Non-GAAP net income, which excludes both long-term incentive compensation and amortization of intangible assets, for the first nine months of 2017 was $11.3 million or $0.28 per fully diluted share, a decrease of $3.9 million from $15.2 million or $0.38 per fully diluted share, for the first nine months of 2016.

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 was $36.6 million or 72% of revenue for the third quarter of 2017 and $98.6 million or 71% of revenue for the first nine months of 2017. Gross profit was $30.1 million or 69% of revenue for the third quarter of 2016 and $98.7 million or 68% of revenue the first nine months of 2016.
• Operating expenses for the third quarter and first nine months of 2017 were $31.5 million and $93.6 million, respectively, an increase of 8% and 3% from $29.1 million and $91.3 million reported for the third quarter and first nine months of 2016, respectively.
• Earnings before interest, taxes, depreciation and amortization (EBITDA)¹ was $7.6 million and $13.3 million for the third quarter and first nine months of 2017, respectively, an increase of 105% from $3.7 million reported for the third quarter of 2016 and a decrease of 17% from $16.1 million reported for the first nine months of 2016.
• Cash, cash equivalents and short-term investments at September 30, 2017 totaled $158.7 million compared to $156.2 million and $144.2 million at June 30, 2017 and December 31, 2016, respectively.

Operational and Other Highlights

• We recorded a seven-figure perpetual eSignLive^TM deal from a major North American bank. The bank is using our e-signature solution on premises to automate all signing in their 2,000 branches.
• We also won a seven-figure eSignLive SaaS deal from a major North American bank. This bank will be using our solution in the cloud across all their business lines.
• Our maintenance revenue posted a strong quarter of growth due to the implementation of a dedicated team focused on increasing renewal rates.
• The VASCO Adaptive Authentication Service Sandbox was launched which allows developers to integrate and test VASCO login and transaction signing capabilities with their mobile applications.

Guidance for Full-Year 2017

VASCO is increasing its guidance for the full-year 2017 as follows:

• We expect revenue to be in the range of $185 million to $190 million versus our previous guidance of $180 million to $190 million.
• Operating income as a percentage of revenue, excluding amortization of purchased intangible assets is projected to be in the range of 6% to 9%, up from our prior guidance of 1% to 5%.

Conference Call Details

In conjunction with this announcement, VASCO Data Security International, Inc. will host a conference call today, October 26, 2017, at 4:30 p.m. EDT/22:30 CEST. During the conference call, Mr. Scott Clements, CEO and President, and Mr. Mark Hoyt, CFO, will discuss VASCO’s results for the third quarter and first nine months of 2017.

To participate in this conference call, please dial one of the following numbers:

USA/Canada: 800-952-4629
International: + 1 212-231-2920

The Conference Call is also available in listen-only mode on ir.vasco.com. The recorded version of the Conference Call will be available on the VASCO website as soon as possible following the call and will be available for replay for at least 60 days.