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VASCO Data Security International, Inc. (NASDAQ:VDSI)

Q1 2010 Earnings Call Transcript

April 27, 2010 10:00 am ET

Executives

T. Kendall Hunt – Chairman and CEO

Jan Valcke – President and COO

Cliff Bown – EVP and CFO

Analysts

Andrew Abrams – Avian Securities

Joe Maxa – Dougherty & Company

Brian Freed – Morgan Keegan

Scott Zeller – Needham & Company

Operator

Ladies and gentlemen, thank you for standing by and welcome to the VASCO Data Security International Incorporated First Quarter Earnings 2010 Conference Call. During the presentation, all participants will be in a listen-only mode, after which we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded, Tuesday, April 27, 2010.

It is now my pleasure to introduce T. Kendall Hunt, Founder, Chairman, and Chief Executive Officer. You may go ahead, sir.

T. Kendall Hunt

Thank you, operator. Good morning, everyone. For those listening in from Europe, good afternoon and from Asia, good evening. My name Ken Hunt and I’m the Chairman, Founder, and CEO of VASCO Data Security International, Inc. On the call with me today are Jan Valcke, our President and Chief Operating Officer; and Cliff Bown, our EVP and Chief Financial Officer.

Before we begin the conference call, I need to brief all of you on forward-looking statements. Statements made in this conference call 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. 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 first quarter of 2010. As always, we will host a question-and-answer session after the conclusion of management’s prepared remarks. If possible, I’d like you 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 Q1 were $23.9 million, an increase of approximately 3% compared to the first quarter of 2009. Q1 2010 was our 29th consecutive positive quarter in terms of operating income. Our business mix between banking, which provides higher volume/lower margin and non-banking, which provides lower volume/higher margin resulted in continuing healthy gross margin of 70% for Q1 2010. Our operating income was approximately 3% of revenue.

During the quarter, we sold an additional 438 new accounts, including 52 new banks and 386 new enterprise and application security customers. This compares to the first quarter a year ago in which we sold 357 new accounts including 51 banks and 306 enterprise security customers. We now have over 9,500 customers including approximately 1,450 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 first quarter of 2010, our cash increased by 13%, while our working capital balance decreased 1%. At March 31, 2010, our net cash balance was $76 million; we had approximately $86 million of working capital. This strong cash balance gives us the flexibility to invest in our growth now that the economic storm seems to have abated.

The first quarter of 2010 was challenging due to prospects in the banking market delaying expenditures for new projects and current customers slowing down existing projects. Also contributing to the results was the very strong fourth quarter of 2009, which we believe impacted the number of transactions that normally would have occurred in the first quarter of 2010.

Despite the results of the first quarter, we are encouraged by the number of new transactions that are in various stages of discussions or negotiation. We continue to believe that we will return to a trend of solid growth in 2010 over the comparable periods of 2009. We are also continuing to invest in the infrastructure and people needed to support growth in all of our markets, as well as the launch of our authentication services business.

Our banking revenue for the first quarter of 2010 increased 2% over the first quarter of 2009. Our enterprise and application security markets, also referred to as non-banking, is growing steadily. Year-over-year, we had a growth of approximately 6% compared with Q1 2009. We believe this is an encouraging sign for the future growth of this market. We do not believe the results of Q1 are indicative of our performance for the remainder of the year. We expect to deliver stronger results as the year progresses.

Looking forward in the banking market, we are very active in the shift of electronic banking to include transaction signing. VASCO has long – has a long history of providing strong authentication to the world’s leading banks, but fraud does not stop once an order is placed. More advanced attacks like man-in-the-browser and man-in-the-middle have become common and banks are migrating to secure their transactions with our proven electronic signature functionality.

We have been working closely with some of the world’s most respected banks to make our products more intuitive, cost effective, and user-friendly. We think this effort will ensure a successful transaction – transition to transaction signing. As far as enterprise security is concerned, we have strengthened our position in the North American market by signing a distribution agreement with leading distributor Tech Data.

We've also recently announced new products targeting the banking and SME markets such as DIGIPASS for Windows Mobile and we have added IDENTIKEY to our DIGIPASS Pack product line. We’ve also increase support for the channel by introducing expanded SEAL training and IDENTIKEY 3.1 e-learning.

In the applications security market, VASCO continues to extend its leadership position within the growing online gaming market. During the past quarter, we kept strengthening our customer portfolio in this field. We are securing over 1 million online gamers in a market that is continuing to grow. We are pleased not only to be adding new gaming customers, but also competing on our new projects throughout Asia, Europe, and the U.S. Our customers vary from MMOs – massive multiplayer online, online lotteries, and everything in between.

The increase in fraud within online gaming is creating additional opportunities for VASCO beyond our traditional markets. Most importantly, it has validated our strategy to extend our position into other growing markets and expand our portfolio products to include online services requiring authentication.

We continue to invest in our authentication services. We expect to launch the first phase of the service towards the end of the second quarter of 2010. Our investments today have primarily been in engineering but as the technical development of our service nears completion, we plan to invest in additional sales and marketing programs to introduce this service to our corporate customers in the first phase and to consumers in the second phase. As always, we want to offer our customers the best possible products and services today, next quarter, and in the future.

At this time, I would like to introduce Jan Valcke, VASCO’s President and Chief Operating Officer. Jan?

Jan Valcke

Thank you, Ken. Ladies and gentlemen, the first quarter of 2010 confirms the trend that became visible in the third quarter 2009. The crisis has reached its bottom. However, recovery is slow, especially in the banking and financial markets, which has been and continues to be very important for VASCO’s revenue. Despite the slow return of the banking market, we are proud that the first quarter of 2010 is profitable, with a limited year-over-year growth in the revenue of 3%.

In the product field, VASCO continues to strengthen its offering by making DIGIPASS for mobile available to Windows Mobile users, and by adding IDENTIKEY to DIGIPASS Pack, we expanded the reach of our software and server offerings. IDENTIKEY server keeps gaining traction in the enterprise security market, enabling us to compete effectively in the larger enterprise niche.

In addition to our existing product offerings, VASCO announced DIGIPASS as a Service in first quarter of 2010. We expect the first phase of DIGIPASS as a Service to be available to our enterprise customers towards the end of the second quarter. Like most new products, we do not expect that DIGIPASS as a Service would have a significant impact on the revenues in 2010.

As you may know, DIGIPASS as a Service was announced during our February 18th Investor Submit in New York City. DIGIPASS as a Service represents VASCO's "in the Cloud" authentication business model and offers on-demand identity and transaction security. With DIGIPASS as a Service, we will first target companies, organizations, and in the later phase, consumers that want to secure the applications of their choice with best-of-breed DIGIPASS authentication.

In our markets, we see that our success in the non-banking market is growing worldwide. Our enterprise business benefits from our investments in products and the quality of our channel partners. Our channel network now includes some of the world’s largest distributors. Our application security business experiences a lot of traction too. As Ken told you, we are growing quickly in the gaming sector.

As I stated before, we believe that the financial crisis in the banking market has bottomed out, but we expect growth to be slow and somewhat lumpy in the short term. Our belief that the financial crisis has bottomed out is based on a significant increase in RFPs coming from both existing and new customers. We believe that the bulk of these projects will materialize in the beginning of 2011.

In order to leverage our expertise in several vertical markets and increase the growth rate in the application security market, we are consolidating our know-how in several competence centers. Currently, our competence centers are operational for the financial sector including insurance, brokerage, mortgage, and lending, e-gaming and e-gambling, Software as a Service, and e-governance. In the future, we will add more competence centers as needed to leverage our expertise in additional vertical application markets that we believe to be high-growth markets.

VASCO is making progress in the retail sector too. In Belgium, our DIGIPASS 905 electronic ID-reader is now available in many of the largest retail stores of the country, both physically and online. The expertise that we build in the consumer markets will be a great asset when we export this model to all the geographic and vertical markets and when we bring DIGIPASS as a Service to the end-user.

In order to support VASCO’s future growth, we need more people. We expect to hire approximately 60 additional employees in 2010, predominantly in sales and R&D. We need those people to have more feet on the street for sales purposes and to support our new DIGIPASS as a Service business model. We are well on track with these hiring programs.

As a conclusion, ladies and gentlemen, I want to tell you that it's time to look at the future again. Growth may be limited in the short time, but the future of VASCO is bright, thanks to its products, markets, and people. Thank you.

T. Kendall Hunt

Thank you, Jan. At this time, I would like to introduce Cliff Bown, VASCO’s EVP and Chief Financial Officer.

Cliff Bown

Thank you, Ken, and welcome to everyone on the call. As noted earlier by Ken, revenues for the first quarter of 2010 were $23.9 million, an increase of $740,000 or 3% from the first quarter of 2009. The increase in revenue for the first quarter reflected a 2% increase from the banking market and a 6% increase from the enterprise and application security market.

The comparison of revenues in Q1 2010 to Q1 2009 benefited from the weaker U.S. dollar in 2010. We estimate the revenues were $824,000 or 4% higher than they would have been had the exchange rates in the first quarter of 2010 been the same as in the first quarter of 2009.

The distribution of our revenues in the first quarter of 2010 between our two primary markets was approximately 74% from banking and 26% from the enterprise and application security market. In the first quarter of 2009, approximately 75% came from the banking market and 25% came from the enterprise and application security market.

The geographic distribution of our revenue in the first quarter of 2010 was approximately 68% from Europe, 9% from the United States, 5% from Asia, and the remaining 18% from other countries. For the first quarter of 2009, 71% of the revenues was from Europe, 5% was from the United States, 12% from Asia, and 12% was from other countries.

Gross profit as a percentage of revenue for the first quarter 2010 was approximately 70% and compares to 72% for the first quarter of 2009. The decrease in gross profit as a percentage of revenue is primarily related to higher non-product costs and the increase in card readers sold as a percentage of total revenue, partially offset by an increase in non-hardware related revenues, an increase in the percentage of our revenues that came from the enterprise and application security market, and the benefit from the impact of currency.

Our non-hardware revenues were approximately 24% of revenue in the first quarter of 2010 compared with 20% of revenue in the first quarter of 2009. As mentioned earlier, revenue from our enterprise security market, which generally has margins that are 20 to 30 percentage points higher than the banking market, was 26% of our total revenue in Q1 2010 and compares to 25% in Q1 2009.

Operating expenses for the first quarter of 2010 were $16 million, an increase of $4 million or 33% from the first quarter of 2009. The comparison of operating expenses for the two periods is significantly impacted by an adjustment made in the first quarter of 2009.

In the first quarter of 2009, we reversed approximately $2 million of accruals that had been established in prior years for long-term, incentive-based compensation plans where it was no longer likely that the performance targets will be met. Including the adjustment, we reported a net benefit of $1.7 million related to equity incentive plans in the first quarter of 2009. And in the first quarter of 2010, we recorded $533,000 of expenses related to our awards under the equity incentive plans.

The comparison of operating earnings in the first quarter of 2010 to 2009 was also negatively impacted by the weaker U.S. dollar in 2010. We estimate that expenses were $820,000 or 5% higher than they would have been at the exchange rates in the first quarter of 2010 than the same as in the first quarter of 2009.

Operating expenses increased $1,127,000 or 17% in sales and marketing, $828,000 or 34% in research and development, and $2,025,000 or 77% in general and administrative when compared to the first quarter of 2009. The majority of the increases in the sales and marketing and research and development areas were related to the 2009 benefit from the adjustment of the long-term incentive plan accruals and the negative impact of currency.

The increase in the general and administrative expenses not only reflected the 2009 benefit from the adjustment of the long-term incentive plan accruals and the negative impact of currency, but also the negative impact of increased bad debt related expenses. In 2010, we recorded approximately $340,000 of incremental reserves for bad debts which compares to a net recovery of previously reserved amounts of approximately $340,000 in 2009.

Operating income for the first quarter of 2010 was $724,000, a decrease of $4 million or 85% from the first quarter of 2009. And as Ken stated earlier, operating income as a percent of revenue or operating margin was 3% for first quarter of 2010 compared to 20% for the first quarter of 2009.

The company reported income tax expense of $282,000 for the first quarter of 2010 compared to $1.2 million for the first quarter of 2009. The effective tax rate was 33% for the first quarter of 2010 and compares to 25% as reported for the first quarter of 2009. The effective rates for both periods reflect our estimate of our full-year tax rate at the end of each respective period. The increase in the tax rate is primarily attributable to a reduction in pretax profits.

Under our current structure, our effective rate will be very sensitive to the level of pretax income. As pretax income increases, we expect the effective rate to decline and as pretax income decreases, the effective rate will increase.

Earnings before interest, taxes, depreciation, and amortization, EBITDA or operating cash flow, if you will, was $1.5 million for the quarter – for the first quarter of 2010 and is 71% lower than the $5.3 million reported for the first quarter of 2009.

The makeup of our workforce as of March 31st, 2010 was 309 people worldwide with approximately 160 in sales, marketing, and customer support, 96 in research and development, and 53 in general and administrative. The average headcount for the first quarter of 2010 was 8 persons or 3% lower than the average headcount for the first quarter of 2009.

And turning for a moment to the balance sheet, our net cash balance increased and our working capital decreased from December 31st of 2009. During the first quarter of 2010, our cash balance increased by $8.5 million or 13% to $76.1 million from $67.6 million at December 31st, 2009. Our working capital decreased $1.3 million or 1% from $87.6 million at December 31st, 2009 to $86.3 million at March 31st of 2010. We had no debt outstanding at either March 31st, 2010 or December 31st of 2009.

Finally, our day sales outstanding in net accounts receivable decreased from 88 days at December 31st, 2009 to 83 days at March 31st, 2010. The decrease in DSO primarily reflects the timing of when sales were made in the quarter.

Thank you for your attention. I would now like to turn the meeting back to Ken.

T. Kendall Hunt

Thank you, Cliff. As I mentioned before, VASCO’s management team does not believe first quarter’s results are indicative of what to expect for the rest of the year. We expect that our backlog will be improving based on more volume purchase agreements being closed.

At this time, I would like to reaffirm guidance from last quarter’s earnings conference call. First, we are reaffirming guidance that full year 2010 revenue will grow from 15% to 20% over full year 2009. Second, we are reaffirming guidance that full year 2010 operating income will be in a range between 5% to 10% of revenue.

This guidance reflects the Company’s strategy to continue its aggressive growth by investing in its people, our newly announced DIGIPASS as a Service or DaaS, and the infrastructure necessary for long-term profitability. It also reflects our continued evolution to a more software-centric company with a focus on recurring revenues.

This concludes our presentations today and we will now open the call for questions. As I mentioned earlier, as a courtesy to others on the call, I would appreciate it if you would limit your questions to an initial question, plus a follow-up. If you have additional questions, please get back into the queue. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question is from the line of Andrew Abrams from Avian Securities. Please go ahead.

Andrew Abrams – Avian Securities

Ken, I wonder if you could just kind of walk us through to your continued optimism on the year that the 15% to 20%, given the fact that March looked a little on the light side at least to the community. Is it that you have in hand a lot of unsigned deals that you are comfortable closing this year or is it some basic fundamental difference in us – our view of the industry generally as opposed to yours?

T. Kendall Hunt

Well Andrew, the way we gauge our business or try to gauge our business is to take a look at what we have in terms of firm backlogs, those are firm orders, purchase orders that have multiple-month or multiple-quarter deliveries, where we could look out over the course of the year and say that’s firm business.

We are also – and we’ve been reporting on this now, this is the third quarter where we’re seeing a building number of request for proposals or RFPs. And I can say that that list and the volume, the revenue associated with that list is the biggest that we’ve seen. And so it’s those items that give us encouragement. Added to that is our weighted forecast for mainly existing customers that we look at. So, it's numbers that we’ve been following for quite some time that gives us comfort that there is business out there and that we will return to strong growth.

Andrew Abrams – Avian Securities

Okay. I appreciate that. And could you talk a little bit about pricing? I think Jan mentioned something in the press release about pricing and maybe we could just get a little more color on that.

T. Kendall Hunt

Sure. Jan, would you like to address that, please?

Jan Valcke

What do you mean, Andrew, with pricing?

Andrew Abrams – Avian Securities

It said, if I remember correctly, that there will be pressure on pricing as new banking deals develop and maybe you could just flush that out a little bit for us? Is that different than what you’ve been seeing? Is it a more competitive environment because there are less deals out there? Maybe you could just kind of walk us through that.

Jan Valcke

Yes. As you probably understand and 2009 was a very difficult year, very challenging year for us due to the fact that we didn’t see anymore or not so much RFPs anymore. So, it all started in 2009 with a lot of RFIs – request for information, today followed by real RFPs. But at the same time, we see that there is a very challenging environment due to the fact that was banks are organized today or the purchase department, the legal department also are better organized than ever before and it is possible that we are – we will get some pricing pressure in that banking field.

On the other hand, we see also a much more increase in the enterprise security, in the application security, in also business-to-consumer non-banking and we believe that at these both businesses will offset and that we will remain still having a very strong margin like we have in the past.

Andrew Abrams – Avian Securities

So, the –

Jan Valcke

I’m sorry.

Andrew Abrams – Avian Securities

I was just going to say so the pressure that you might see in the banking side should be offset by the increase in the enterprise business, which obviously guarantee your margins?

Jan Valcke

Yes.

Andrew Abrams – Avian Securities

Okay, got it. Thank you very much.

Operator

Our next question is from the line of Joe Maxa from Dougherty & Company. You may proceed.

Joe Maxa – Dougherty & Company

Yes, thank you. I wanted to follow up on the revenue guidance. The expectations, Ken you mentioned, seeing stronger result as the year progresses, how should we think about that in terms of your normal seasonality?

T. Kendall Hunt

Well, historically our seasonality has been strong second quarter to down third quarter because mainly of holidays in Europe, and then a strong fourth quarter, and then a seasonally down first quarter. And so I think you can anticipate that we will continue that pattern.

Now, we have had some exceptions, as you know, to that pattern in 2008 in the third quarter, which is normally seasonally down, we had the largest, strongest quarter of all time. So in Jan’s terms that used before, we still suffer under some kind of a lumpy production and that’s mainly at the womb of the larger banks when they decide to roll out their projects. But I think an answer to your question, I think, that we are expecting a seasonally normal delivery of revenue results.

Joe Maxa – Dougherty & Company

Okay. And then the follow-up to that I would suggest this delayed budget spend on new projects and currently, customers slowing down on existing projects has come back to, I guess, maybe not be quite as delayed in Q2, though we are seeing the pickup?

T. Kendall Hunt

Jan, would you like to answer that question, please?

Jan Valcke

Yes. So basically, you need to see that in the good days, let's say 2008 – 2007, 2008, and the previous years, the way it works is that banks are deciding to work with a company, they go for a commercial (inaudible) purchase agreement and that is executed over several quarters. We've seen that stopping in 2009. We are still suffering a little bit that decision of the banks in 2009.

But on the other hand, we see, like Ken has mentioned, a serious – a never-seen-before increase in RFPs that will be executed in the several next quarters. But all – but we can be – say that all will be certainly executed as from the beginning of 2011. So it’s difficult to say what will be the second quarter, third quarter. But let’s take it like that that it’s roughly as from the beginning of 2011 will become in the normal way of working as in the years 2007, 2008 with CPAs [ph] and a normal way of delivery.

Today, we work with short-term deliveries, we have changed our production programs that way that we can do that, we can take large orders and deliver them at short term. But that's – makes us also a little bit vulnerable, that gives us less flexibility in those quarterly [ph] deliveries that we need to do to convince the market.

Joe Maxa – Dougherty & Company

Okay. Sorry (Technical Difficulty) point, but – so are we looking for more of a Q4 being kind of the – obviously it’s historically strong, Q4, but more so this year than in prior years compared to the previous seasonality?

Jan Valcke

Well, I don't want to give guidance on that. But let’s say that as from the third quarter and certainly the beginning of 2011, we will come back to our previous system in the banks – you may not forget that I'm only talking here about banks and that we are increasing, I love this non-banking business. But in the banks, we will come back to that comfort way of doing business.

Joe Maxa – Dougherty & Company

Okay. That’s helpful. Thank you.

Operator

(Operator Instructions). Our next question is from the line of Brian Freed from Morgan Keegan. You may proceed.

Brian Freed – Morgan Keegan

Good morning. Thanks taking my call. First up, just a quick housekeeping item. Looking to last year, when you filed your 10-K, it looked like your G&A expenses were (inaudible) to $16.2 million versus the 8-K where you had (Technical Difficulty) $15.4 million. Could you talk about what the shift was there that drove that change?

T. Kendall Hunt

Cliff, would you handle that, please?

Cliff Bown

Sure. Between the time that we released our numbers with the normal press release and 8-K filings and the time that we filed the 10-K, we obtained information that one of our distributors had reached or within significant financial difficulty. So we took an additional reserve of $770,000 in the bad debt reserve area in Q4. So that’s the difference between what you saw that was originally filed in final [ph] 10-K.

Brian Freed – Morgan Keegan

Okay, fine. And then – trying to look forward, did you say you had 8% lower headcount in the March quarter this year than last year?

Cliff Bown

That’s correct, Brian.

Brian Freed – Morgan Keegan

Okay. So looking back, can you give as a little more clarity on the operating expense increase? It doesn't appear to be headcount-driven. Was that all currency or there is some other investments that you guys are seeing in the quarter that drove the expense increase?

Cliff Bown

There are a number of things going in opposite directions here, Brian. If you were to look at the Q1 2010 versus Q1 2009, you’d see our total increase is just under $4 million. That $4 million could be summarized as Z$2.2 million from the long-term incentive plan adjustments that we talked about, about $800,000 of it is currency, $820,000 is the specific number that we have, there is about $680,000 that’s the bad debt expense. Again, we had a recovery in the first quarter of 2009 and we increased our reserve over $300,000 in this quarter. And then there is other miscellaneous difference for around $300,000 making up the difference.

Now, when you look at Q1 2009 versus Q1 2010, in Q1 2009, headcount-wise, we were actually in a cost containment mode and we were reducing the staff or people that were not particularly productive or effective. In the first quarter of 2010, we are headed in the other direction and compared to Q4 of 2010, we are actually up 15 people, about 20% from our ending balance at the end of December. Actually, it's – it doesn’t compute to 20%, it computes to 5%; I’m sorry for that misstatement. So we were at 294 at the end of December, 309 now; that’s 15 plus people or 5%. And that’s the hiring program that Ken and Jan were speaking of.

Also when you compare currency rates, Q4 versus Q1, the currency rates are headed in the direction where it’s in favor of the U.S. dollar, which is just the opposite of Q1 2009 versus Q1 2010. So again, we would need to focus on which period we are comparing the operating expenses to. Compared to the first quarter of 2010, the differences are, as I stated, the long-term incentive plan adjustment $2.2 million, currency $800,000, bad debt $680,000, and other.

If you are comparing to the fourth quarter of 2009, then currency is actually a benefit. $hen you also have the $770,000 that we took as a bad debt reserve that we just mentioned in answering your first question. And then finally, we had other year-end adjustments that were in year-end 2009 that were not in the first quarter of 2010.

Brian Freed – Morgan Keegan

Okay, great.

Cliff Bown

That’s a lot of information and data, Brian. If you'd like to have a follow-up call after this call, we’d be happy to explain it in slower time frame in more detail.

Brian Freed – Morgan Keegan

Okay. And then one final kind of clarification. As I think about operating expenses going forward, you made 60 headcount additions over the course of the year. Do those 15 people you hired in the quarter count against that 60 or is it 64?

T. Kendall Hunt

No, that’s – counts against the 60.

Brian Freed – Morgan Keegan

Okay.

Operator

Our next question is from the line of Scott Zeller, Needham & Company. You may proceed.

Scott Zeller – Needham & Company

Thanks. I may have just missed on the previous question, I’m not sure. But the commentary earlier about 60 new heads in sales for the on-demand offering, is that factored in when you look at your operating margin guidance of 5% to 10% for the year, is that baked in?

Cliff Bown

It absolutely is, yes, Scott.

Scott Zeller – Needham & Company

Okay. And then the other question on concentration of revenue, were there any 10% customers in the quarter?

Cliff Bown

No, there were none.

Scott Zeller – Needham & Company

No 10% customers? Okay, thank you.

Operator

Speakers, there are no further questions at this time. You may proceed with your closing remarks.

T. Kendall Hunt

All right. Well, thanks, everybody for your attendance today, I appreciate it. And as always, I want to thank the VASCO personnel around the world for their hard work, diligence, and enthusiasm. Good day, everybody.

Operator

Ladies and gentlemen, this does conclude the conference call for today. We thank you all for your participation and kindly ask that you please disconnect your lines. Have a great day, everyone.

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