vasco investor presentation 11 2009

T.Kendall HuntFounder, Chairman and CEO

VASCO, the Full-Option, All-Terrain Authentication Company

November 2009

2VASCO Investor Presentation

Forward Looking Statements

Statements made in this presentation that relate to future plans, events or performances are forward-looking statements within the meaning of Section 21e of the Securities and Exchange Act of 1934 and section 27a of the Securities Act of 1933. These forward-looking statements (1) are identified by use of terms and phrases such as “expect”, “believe”, “will”, “anticipate”, “emerging”, “intend”, “plan” , “could”, “may”, “estimate”, “should”, “objective” and “goal” and similar words and expressions, but such words and phrases are not the exclusive means of identifying them, and (2) are subject to risks and uncertainties and represent our present expectations or beliefs concerning future events.

VASCO cautions that the forward-looking statements are qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. I direct your attention to the company’s filings with the securities and exchange commission for a discussion of such risks and uncertainties in this regard.


Corporate Information


Corporate Profile

Global company with worldwide HQ in the United States and international HQ in Switzerland

Listed on Nasdaq: VDSI

Leading supplier of strong authentication and e-signature solutions and services specializing in Internet security applications

Over 9,000 customers in 100+ countries, including almost 1,350 financial institutions

Revenue compound annual growth rate of 42% over 5-year period through 2008

27 consecutive profitable quarters through Q3 2009 allowing VASCO to finance its organic growth and acquisitions


VASCO, the Full Option, All-Terrain Authentication Company

VASCO’s Mission is to authenticate the world

VASCO’s Vision:

The Full Option, All Terrain authentication company VASCO combines all authentication technologies on one and

unique platform

VASCO’s products can be used in unlimited vertical applications

VASCO secures people all over the world

VASCO sees authentication as a crucial application surrounded by other services and applications


Full Option: Products

Authentication appliances

Combines Identikey with a wide variety of Internet communication solutions

Digipass

A suite of over 50 multi-application client e-signature software products

Digipass Plus: Authentication Services

Combines all VASCO products and solutions in an outsourced service offering. VASCO also offers related services under the DigipassPlus label, such as Fraud Detection and Analysis and the brand new VASCO Video Training.

Authentication server

Combines the VACMAN core authentication platform with full server functionalities

Core authentication platform

Combines all authentication technologies on one unique platform


All terrain

All terrain = all applications/ technologies

VASCO’s products are used in over 50 applications

E-bankingE-brokerage

Online gaming

Automotive

E-government

Healthcare B-to-B

E-commerce

Social Security

EducationPublishing Industry


VASCO’s Success Story: Full Years 2003 – 2008

572 543821

1,553

2,509

1,827

0

500

1,000

1,500

2,000

2,500

3,000

2003 2004 2005 2006 2007 2008

New Customers

$1.1

$5.6

$11.0

$18.9

$30.9$28.1

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

2003 2004 2005 2006 2007 2008

Operating Income (in millions)

$22.9 $29.9

$54.6

$76.1

$120.0$133.0

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

2003 2004 2005 2006 2007 2008

Sales (in millions)

69 7089

233

379

249

0

50

100

150

200

250

300

350

400

2003 2004 2005 2006 2007 2008

New banking customers


2003-2008: Revenue from Banking and Enterprise & Application Security Markets

Revenue from Banking Market

$17.7$24.0

$46.8

$65.0

$108.9

$100.3

0

20

40

60

80

100

120

2003 2004 2005 2006 2007 2008

Do

llars

in M

illio

ns

Revenue from Enterprise & Application Security Market

$5.1 $5.9

$11.1

$19.7

$24.0

$7.8

0

10

20

30

40

2003 2004 2005 2006 2007 2008

Dol

lars

in M

illio

ns

CAGR: 44% CAGR: 36%CAGR VASCO

2003 -2008:42%


Net Cash and Working Capital

Net Cash

$71.2

$8.1$4.8

$12.6

$57.7

$13.8

$38.8

0

10

20

30

40

50

60

70

80

90

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Q3 09

Dolla

rs in

Millio

ns

Working Capital

$52.4

$16.3

$75.9

$10.0

$83.3

$22.1

$5.2

0

10

20

30

40

50

60

70

80

90

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Q3 09

Dolla

rs in

Mill

ions


Revenue: $69.8 million - 33%*

Gross Margin as a % of Revenue: 70.0% - 0.4 pts*

Operating Income: $8.0 million - 70%*

Operating Income as a % of Revenue: 11.5% -13.8 pts*

Net Income: $7.0 million - 67%*

Fully-Diluted Earnings Per Share: $0.18 - 67%*

1,057 new customers in YTD Q3 2009

151 banks

906 Enterprise Security Customers

* Compared to YTD Q3 2008

Summary Results YTD Q3 2009


The current business climate in banking

Dust is settling after financial crisis

Banks are cautious with regards to new projects

VASCO has a large installed base that provides a source of sustainable, repeatable revenues

Rise in number of Requests for Proposals

Internet banking is the most cost effective business for financial institutions


Sustainable, Repeatable Revenue Model

Typical Bank Customer Purchase TimelineIn a Stable Environment

→ E.g. bank has 100 K electronic banking customers at start (year 1) Roll-out for 100,000 units:

Pilot 3-4

Months Year 1 Year 2 Year 3 Year 4 Year 5

40K 55K60K 20K 15K

Year 6

65K

Initial Roll-Out Organic Growth of Application Second Roll-Out

NOTE: Individual roll-outs might differ materially from this example


VASCO’s Strategies


General Strategy

Banking: To offer banks and other financial institutions a full array of authentication products and services (Full Option)

Enterprise: To take our existing authentication products to the enterprise (i.e., companies) for employee remote or network security (directly and through our channel)

Application: To take our existing authentication products to other applications where security is required

Services: Develop and provide an authentication services platform and product offering.


1. Until 2005: VASCO = “token company”.

2. Since 2005: VASCO = a software company, specializing in authentication, with hardware as an add-on to the software.

Results of a successful business mix:

large quantities to the banking market with low margins

increased penetration of the enterprise security market and expansion into the application security market (i.e., vertical markets of applications outside of banking) -- small and medium quantities sold with high margins

increase in non-hardware revenues at high margins

3. Next step is to expand product offering to include a service offering. This will allow our business mix to grow even stronger and grant VASCO the opportunity to add even more applications.

VASCO’s Evolution


Authentication Market in Users

Source: VASCO

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2008 2009 2010 2011 2012 2013

Software StrongAuthenticationHardware StrongAuthenticationM

illio

n U

sers

One user can access multiple applications

CAGR Software Authentication Market: 18%

CAGR Hardware Authentication Market: 48%


Re-defining Our Approach Moving forward

With Authentication Services, VASCO expects that it will be able to

tackle markets for which the current software offering is seen as too

expensive for their needs and create additional sources of recurring

revenue.

We plan to position this strategy as follows:

Authentication end-to-end

Banking

Enterprise Security

Application Security

Authentication Services


COMPETENCE CENTERS

BankingOnline

Application Security

Enterprise Security

CUSTOMER security EMPLOYEE security

SELLING Managers

DISTRIBUTOR Managers

Local Sales Managers Reseller Managers

Authentication End-to-End


VASCO Application Security Customers


Application Security Verticals in VASCO’s scope

E-gaming (market leader)

Insurance

Healthcare

Education

…

Competence center per vertical in order to enhance leadership


When we move to Authentication Services, VASCO’s technologies

(engineering) will be threefold:

Redefining Our Approach Moving forward

+ Maintenance+ Support

+ Maintenance+ Support+ Revenue per year

HARDWARE SOFTWAREAaaS:

AUTHENTICATION as a Service


VASCO’s Outlook for the Future


Key Growth and Profitability Factors

Overall growth will be strongly correlated to the growth in the use of the Internet for risk-based transactions.

VASCO has a growing base of customers that provide a sustainable, repeatable source of revenues.

Gross margins are expected to be stable as the benefits of the more non-hardware revenues will offset the margin pressure on hardware devices.

Operating margins will continue to be strong as a result of VASCO’s operating model.


NASDAQ: VDSI

vasco investor presentation 11 2009

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