<SEC-DOCUMENT>0001193125-14-167103.txt : 20140429
<SEC-HEADER>0001193125-14-167103.hdr.sgml : 20140429
<ACCEPTANCE-DATETIME>20140429160653
ACCESSION NUMBER:		0001193125-14-167103
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20140424
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20140429
DATE AS OF CHANGE:		20140429

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			VASCO DATA SECURITY INTERNATIONAL INC
		CENTRAL INDEX KEY:			0001044777
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373]
		IRS NUMBER:				364169320
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24389
		FILM NUMBER:		14793909

	BUSINESS ADDRESS:	
		STREET 1:		1901 SOUTH MYERS ROAD
		STREET 2:		SUITE 210
		CITY:			OAKBROOK TERRACE
		STATE:			IL
		ZIP:			60181
		BUSINESS PHONE:		6309328844

	MAIL ADDRESS:	
		STREET 1:		1919 S HIGHLAND AVE
		STREET 2:		STE 118 C
		CITY:			LOMBARD
		STATE:			IL
		ZIP:			60148
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>d716940d8k.htm
<DESCRIPTION>8-K
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<HTML><HEAD>
<TITLE>8-K</TITLE>
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 <P STYLE="line-height:1.0pt;margin-top:0pt;margin-bottom:0pt;border-bottom:1px solid #000000">&nbsp;</P>
<P STYLE="line-height:3.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000">&nbsp;</P> <P STYLE="margin-top:4pt; margin-bottom:0pt; font-size:18pt; font-family:Times New Roman" ALIGN="center"><B>SECURITIES AND EXCHANGE COMMISSION
</B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>WASHINGTON, D.C. 20549 </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center>
<P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:18pt; font-family:Times New Roman" ALIGN="center"><B>FORM 8-K
</B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center> <P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>CURRENT REPORT </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>PURSUANT
TO SECTION 13 OR 15(d) </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>OF THE SECURITIES EXCHANGE ACT OF 1934 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:12pt; font-family:Times New Roman" ALIGN="center"><B>Date of Report (Date of earliest event reported): April&nbsp;24, 2014 </B></P>
<P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center> <P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:24pt; font-family:Times New Roman" ALIGN="center"><B>VASCO Data Security International, Inc. </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(Exact name of registrant as specified in charter) </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center>
<P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:8pt" ALIGN="center">


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<TD VALIGN="top" ALIGN="center"><B>Delaware</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"><B>000-24389</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"><B>36-4169320</B></TD></TR>
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<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(State or other jurisdiction</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>of incorporation)</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(Commission</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>File Number)</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(IRS Employer</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Identification No.)</B></P></TD></TR>
</TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>1901 South Meyers Road, Suite 210</B></P>
<P STYLE="margin-top:0pt; margin-bottom:1pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Oakbrook Terrace, Illinois</B></P></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="center"><B>60181</B></TD></TR>
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<TD VALIGN="top" ALIGN="center"><B>(Address of principal executive offices)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="top" ALIGN="center"><B>(Zip Code)</B></TD></TR>
</TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>Registrant&#146;s telephone number, including area code: (630)&nbsp;932-8844 </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>N/A </B></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>(Former name or
former address, if changed since last report) </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><center>
<P STYLE="line-height:6.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1.00pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD ALIGN="left" VALIGN="top">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD ALIGN="left" VALIGN="top">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="FONT-FAMILY:WINGDINGS">&#168;</FONT></TD>
<TD ALIGN="left" VALIGN="top">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </TD></TR></TABLE> <P STYLE="font-size:10pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<P STYLE="line-height:1.0pt;margin-top:0pt;margin-bottom:0pt;border-bottom:1px solid #000000">&nbsp;</P> <P STYLE="line-height:3.0pt;margin-top:0pt;margin-bottom:2pt;border-bottom:1px solid #000000">&nbsp;</P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>ITEM&nbsp;2.02 Results of Operations and Financial Condition </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The information contained in this Form 8-K shall not be deemed &#147;filed&#148; for purposes of Section&nbsp;18 of the Securities Exchange Act of 1934, as
amended (the &#147;Exchange Act&#148;), or otherwise subject to the liabilities of that section, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by
specific reference in such a filing. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">On April&nbsp;24, 2014, VASCO Data Security International, Inc. (&#147;VASCO&#148;) issued a press release providing
a financial update for the first quarter ended March&nbsp;31, 2014. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">On April&nbsp;24, 2014, VASCO held a conference call with investors to discuss VASCO&#146;s earnings and results of operations for the first quarter ended
March&nbsp;31, 2014. A prepared script of the conference call is furnished as Exhibit 99.2 to this Current Report on Form 8-K. A transcript of the conference call is furnished as Exhibit 99.3 to this Current Report on Form 8-K. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The press release and the comments by VASCO during the conference call contained a non-GAAP financial measure within the meaning of the Securities and
Exchange Commission&#146;s Regulation G.&nbsp;For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant&#146;s historical or future financial performance, financial position or cash flows that excludes
amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of
cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The press release contained a reference to EBITDA and provided a reconciliation of EBITDA to net income. EBITDA, which is earnings before interest, taxes,
depreciation and amortization, is computed by adding back net interest expense, income tax expense, depreciation expense, and amortization expense to net income from continuing operations as reported. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The press release contained a reference to Adjusted Net Income from Continuing Operations and provided a reconciliation of Adjusted Net Income from Continuing
Operations to net income from continuing operations. Adjusted Net Income from Continuing Operations is computed by adding back long term compensation expense, amortization of purchased intangible assets, and the corresponding tax impact of the two
adjustments to net income from continuing operations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The press release also contained a reference to Adjusted Diluted Earnings Per Share from Continuing
Operations and provided a reconciliation to diluted earnings per share from continuing operations. Adjusted Diluted Earnings Per Share from Continuing Operations is the same as Adjusted Net Income from Continuing Operations described above on a
fully diluted per share basis. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>ITEM&nbsp;9.01 Financial Statements and Exhibits </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">(d) Exhibits. The following Exhibits are furnished herewith: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1.00pt solid #000000; width:26.20pt; font-size:8pt; font-family:Times New Roman" ALIGN="center">Exhibit<BR>Number</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1.00pt solid #000000; width:37.25pt; font-size:8pt; font-family:Times New Roman">Description</P></TD></TR>


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<TD VALIGN="top" NOWRAP>99.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Press release, dated April 24, 2014.</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>99.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Prepared script of April 24, 2014 Earnings Conference Call.</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>99.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Transcript of April 24, 2014 Earnings Conference Call.</TD></TR>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>SIGNATURE </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="top">Date: April&nbsp;29, 2014</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top" COLSPAN="5">VASCO Data Security International, Inc.</TD></TR>
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<TD HEIGHT="16" COLSPAN="2"></TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
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<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000">/s/ Clifford K. Bown</TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">Clifford K. Bown</TD></TR>
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<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">Chief Financial Officer</TD></TR>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>EXHIBIT INDEX </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The following Exhibits are furnished herewith: </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1.00pt solid #000000; width:39.10pt; font-size:8pt; font-family:Times New Roman" ALIGN="center"><B>Exhibit&nbsp;No.</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1.00pt solid #000000; width:39.50pt; font-size:8pt; font-family:Times New Roman"><B>Description</B></P></TD></TR>


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<TD VALIGN="top" NOWRAP>99.1</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Press release, dated April 24, 2014.</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>99.2</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Prepared script of April 24, 2014 Earnings Conference Call.</TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top" NOWRAP>99.3</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="top">Transcript of April 24, 2014 Earnings Conference Call.</TD></TR>
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<TYPE>EX-99.1
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right">Exhibit 99.1 </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">VASCO Reports Results for First Quarter 2014 </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Revenue from
continuing operations for the first quarter of 2014 was $38.8 million, an increase of 10% compared to the first quarter 2013; Operating income from continuing operations for the first quarter of 2014 was $3.9 million, an increase of 43% compared to
the first quarter 2013. Financial results for the period ended March&nbsp;31, 2014 and guidance for full-year 2014 to be discussed on conference call today at 10:00 a.m. E.D.T. </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">OAKBROOK TERRACE, IL, and ZURICH, Switzerland, April&nbsp;24, 2014&#151;VASCO Data Security International, Inc. (NASDAQ: VDSI), today reported financial
results for the first quarter ended March&nbsp;31, 2014. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Revenue from continuing operations for the first quarter of 2014 increased 10% to $38.8 million
from $35.4 million in the first quarter of 2013. Net income from continuing operations for the first quarter of 2014 was $3.5 million, or $0.09 per fully diluted share, an increase of $1.1 million, or 46%, from $2.4 million, or $0.06 per fully
diluted share, for the first quarter of 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Net income, which includes the impact of our discontinued operations, for the first quarter of 2014 was
$3.5 million, or $0.09 per diluted share. Net income for the first quarter of 2013 was $2.8 million, or $0.07 per diluted share. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Financial Highlights:
</B></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Gross profit from continuing operations was $25.8 million, or 66%, of revenue for the first quarter of 2014. Gross profit was $23.1 million, or 65%, of revenue for the first quarter of 2013. </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Operating expenses from continuing operations for the first quarter 2014 were $21.9 million, an increase of 8% from $20.4 million reported for the first quarter 2013. Operating expenses for the first quarter of 2014
included $0.6 million of long-term incentive compensation expenses and $1.1 million of amortization expense related to purchased intangible assets. Operating expenses for the first quarter of 2013 included $0.8 million of long-term incentive
compensation expenses and $0.4 of amortization expense related to purchased intangible assets. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Operating income from continuing operations for the first quarter 2014 was $3.9 million, an increase of $1.2 million, or 43%, from $2.7 million reported for the first quarter of 2013. Operating income as a percentage of
revenue in the first quarter 2014 was 10% compared to 8% in the first quarter of 2013. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Earnings before interest, taxes, depreciation and amortization from continuing operations were $5.9 million for the first quarter 2014, an increase of 58% from $3.7 million reported for the first quarter of 2013.
</TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Net cash balances, total cash and cash equivalents less bank borrowings, at March&nbsp;31, 2014 totaled $109.5 million compared to $98.6 million at December&nbsp;31, 2013. There were no bank borrowings at either
March&nbsp;31, 2014 or December&nbsp;31, 2013. </TD></TR></TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operational and Other Highlights: </B></P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">VASCO launched a native authentication integration solution for MYDIGIPASS.COM that allows application developers to protect their end users&#146; online identity. This solution allows users to securely log on from a
mobile app by clicking the &#145;MYDIGIPASS.COM Secure Connect&#146; button. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">VASCO announced it has been positioned by Gartner, Inc. as a Leader in the Gartner Magic Quadrant for User Authentication. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">VASCO introduced a customer-centric distribution strategy, aimed at delivering solutions along with high-level pre and post-sales services. The company selected a limited group of high-end security distributors that
offer value-added services and can act as an extension of the technical and commercial VASCO team. </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">VASCO announced that system integrator Think Software Services (TSS) is VASCO&#146;s new system integrator. TSS is an information technology consulting company and system integrator with a strong foothold in the United
Arab Emirates. </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Guidance for full-year 2014: </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">VASCO is increasing its guidance for revenue for the full-year 2014 as follows: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Revenue from our traditional business, which excludes our new service product offerings (DIGIPASS as a Service and MYDIGIPASS.COM), is expected to be in the range of $168 million to $172 million, an increase from the
range communicated previously of $160 million to $165 million, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Operating income as a percentage of revenue, excluding the amortization of purchased intangible assets, is projected to be in the range of 11% to 13%, which is consistent with the range communicated previously.
</TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">&#147;We are very pleased with the results of the first quarter,&#148; stated T. Kendall Hunt, Chairman&nbsp;&amp; CEO. &#147;Not only was
the revenue reported for the first quarter of 2014 the best first quarter in our history, we also had the strongest intake of new orders of any quarter in our history. The increasing demand for our products is coming from both our traditional
products as well as our new products using the Cronto technology. We are also making progress with our cloud-based product offerings. As noted previously, we do not expect to see any significant revenue from the cloud-based products in 2014, but we
continue to believe that it is an important part of our product mix for the future. &#147; </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">&#147;The results for the first quarter reflected a 6%
increase in revenues from the Banking market and a 27% increase in revenues from the Enterprise and Application Security market,&#148; said Jan Valcke, VASCO&#146;s President and COO. &#147;We believe that the increase in the Enterprise and
Application Security market was due primarily to our growing base of maintenance revenues, our increased focus on sales and marketing and a pickup in overall activity in the European and U.S. markets, especially from our distribution network. While
the strong intake of new orders in the first quarter resulted in a strong backlog of orders to be shipped in future quarters to the Banking market, we believe that the Enterprise and Application Security market will also continue to offer
opportunities for significant growth.&#148; </P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Conference Call Details </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In conjunction with this announcement, VASCO Data Security International, Inc. will host a conference call today, April&nbsp;24, 2014, at 10:00 a.m.
EDT&#151;16:00h CET. During the conference call, Mr.&nbsp;Ken Hunt, CEO, Mr.&nbsp;Jan Valcke, President and COO, and Mr.&nbsp;Cliff Bown, CFO, will discuss VASCO&#146;s results for the first quarter 2014. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">To participate in this conference call, please dial one of the following numbers: </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">USA/Canada: +1 800-926-9801 </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">International: +1 212-231-2934 </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">And mention VASCO to be connected to the conference call. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The
Conference Call is also available in listen-only mode on <U>www.vasco.com</U>. Please log on 15 minutes before the start of the Conference Call in order to download and install any necessary software. The recorded version of the Conference Call will
be available on the VASCO website 24 hours a day for at least 60 days. </P>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>VASCO Data Security International, Inc. </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(In thousands, except per share data) </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(Unaudited) </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="86%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><B>Three months ended</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Revenue</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">38,823</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">35,365</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cost of goods sold</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">13,027</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">12,278</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Gross profit</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,796</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,087</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Operating costs:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Sales and marketing</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">10,371</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">9,631</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Research and development</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,141</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,847</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">General and administrative</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,273</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">5,453</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Amortization of purchased intangible assets</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,120</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">441</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total operating costs</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">21,905</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">20,372</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Operating income</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,891</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,715</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest income, net</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">24</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">42</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other income, net</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">438</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">149</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Income from continuing operations before income taxes</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,353</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,906</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Provision for income taxes</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">827</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">494</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income from continuing operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3,526</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2,412</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Income (loss) from discontinued operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(16</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">374</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3,510</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2,786</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic net income (loss) per share</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Continuing operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.09</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.06</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Discontinued operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.00</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.01</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total net income per share</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.09</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.07</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Diluted income (loss) per share</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Continuing operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.09</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.06</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Discontinued operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.00</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.01</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total net income per share</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.09</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.07</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Weighted average shares outstanding:</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Basic</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">39,272</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">38,687</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Diluted</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">39,389</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">39,064</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>VASCO Data Security International, Inc. </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>CONDENSED CONSOLIDATED BALANCE SHEETS </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center"><B>(In thousands, except per share data) </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="82%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><B>March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><B>December&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center"><B>(unaudited)</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD COLSPAN="2" VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>ASSETS</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Current assets</B></P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Cash and equivalents</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">109,492</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">98,607</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts receivable, net of allowance for doubtful accounts</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">21,438</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">28,528</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Inventories</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,816</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">25,653</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Prepaid expenses</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,544</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,719</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Foreign sales tax receivable</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">583</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">543</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred income taxes</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">870</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,634</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Assets of discontinued operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,898</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,910</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other current assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,324</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,051</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total current assets</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">164,965</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">161,645</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Property and equipment, net</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,054</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,145</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Goodwill, net of accumulated amortization</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,608</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">23,532</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Intangible assets, net of accumulated amortization</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,675</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">16,733</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other assets, net of accumulated amortization</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">8,742</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6,822</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Total assets</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">216,044</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">211,877</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Current liabilities</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accounts payable</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,614</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">6,378</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred revenue</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">14,977</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">15,703</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accrued wages and payroll taxes</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,608</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7,067</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Income taxes payable</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,829</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,087</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Liabilities of discontinued operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">7</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">30</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other accrued expenses</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">4,191</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">3,841</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Total current liabilities</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,226</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,106</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred compensation</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">6</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">115</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Deferred tax liability</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">320</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">321</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Other long-term liabilities</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">65</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">57</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Total liabilities</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,617</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">37,599</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Stockholders&#146; equity</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Common stock</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">40</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">40</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Additional paid-in capital</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">80,432</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">79,871</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated income</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">95,911</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">92,401</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Accumulated other comprehensive income</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">2,044</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">1,966</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Total stockholders&#146; equity</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">178,427</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">174,278</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman"><B>Total liabilities and stockholders&#146; equity</B></P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">216,044</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">211,877</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Non- GAAP Financial Measures </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company reports its financial results in accordance with GAAP, but Company management also evaluates its performance using EBITDA, Adjusted Net Income and
Adjusted Diluted EPS. The Company&#146;s management believes that these measures provide useful supplemental information regarding the performance of our business and facilitates comparisons to our historical operating results. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">These non-GAAP measures are not measures of performance under GAAP and should not be considered as alternatives or substitutes for the most directly
comparable financial measures calculated in accordance with GAAP. While we believe that these non-GAAP measures are useful within the context described below, they are in fact incomplete and are not a measure that should be used to evaluate our full
performance or our prospects. Such an evaluation needs to consider all of the complexities associated with our business including, but not limited to, how past actions are affecting current results and how they may affect future results, how we have
chosen to finance the business, and how taxes affect the final amounts that are or will be available to shareholders as a return on their investment. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>EBITDA </U></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We define EBITDA as net income from
continuing operations before interest, taxes, depreciation and amortization. We use EBITDA as a simplified measure of performance for use in communicating our performance to investors and analysts and for comparisons to other companies within our
industry. As a performance measure, we believe that EBITDA presents a view of our operating results that is most closely related to serving our customers. By excluding interest, taxes, depreciation and amortization we are able to evaluate
performance without considering decisions that, in most cases, are not directly related to meeting our customers&#146; requirements and were either made in prior periods (e.g., depreciation and amortization), or deal with the structure or financing
of the business (e.g., interest) or reflect the application of regulations that are outside of the control of our management team (e.g., taxes). Similarly, we find that the comparison of our results to those of our competitors is facilitated when we
do not need to consider the impact of those items on our competitors&#146; results. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"><B>Reconciliation of Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) from continuing operations to net income from continuing operations(in thousands): </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="80%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><B>Three months</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>ended March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center">(in&nbsp;thousands,&nbsp;unaudited)</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">EBITDA from continuing operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">5,895</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3,737</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Interest income, net</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">24</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">42</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Provision for income taxes</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(827</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(494</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Depreciation and amortization</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,566</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(873</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income from continuing operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3,526</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2,412</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><U>Adjusted Net Income&nbsp;&amp; Adjusted Diluted EPS </U></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We define Adjusted Net Income and Adjusted Diluted EPS, as net income or EPS from continuing operations before the consideration of long-term incentive
compensation expenses and the amortization of purchased intangible assets. We use these measures to assess the impact of our performance excluding items that though they are recurring, can significantly impact the comparison of our results between
periods and the comparison to competitors. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Long-term incentive compensation for management and others is directly tied to performance and this measure
allows management to see the relationship of the cost of incentives to the performance of the business operations directly if such incentives are based on that period&#146;s performance. To the extent that such incentives are based on performance
over a period of several years, there may be periods which have significant adjustments to the accruals in the period but which relate to a longer period of time, and which can make it difficult to assess the results of the business operations in
the current period. In addition, the Company&#146;s long-term incentives generally reflect the use of restricted stock grants or cash awards while other Companies may use different forms of incentives the cost of which is determined on a different
basis, which makes a comparison difficult. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company also excludes amortization of purchased intangible assets because it believes that the amount of
such expenses in any given period may not be correlated directly to the performance of the business operations and that such expenses can vary significantly between periods as a result of new acquisitions, the full amortization of previously
acquired intangible assets or the write down of such assets due to an impairment event. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>Reconciliation of Adusted Net Income from
Continuing Operations to Net Income from Continuing Operations </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="80%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><B>Three months</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>ended March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center">(in&nbsp;thousands,&nbsp;unaudited)</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjusted Net Income&#151;continuing operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">4,936</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3,368</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Long-term Incentive Compensation Expense</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(642</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(754</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Amortization of Purchased Intangible Assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(1,120</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(441</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Tax impact of Adjustments*</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">352</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">239</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Net income&#151;continuing operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">3,526</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">2,412</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE>

<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman"><B>Reconciliation of Adjusted Diluted EPS from Continuing Operations to Diluted EPS from
Continuing Operations </B></P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="76%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" ALIGN="center">


<TR>
<TD WIDTH="82%"></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="6%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><B>Three months</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>ended March&nbsp;31,</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2014</B></TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1.00pt solid #000000"><B>2013</B></TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:8pt">
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center">(in&nbsp;thousands,&nbsp;unaudited)</TD>
<TD VALIGN="bottom">&nbsp;</TD></TR>


<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Adjusted Diluted EPS&#151;continuing operations</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.13</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.08</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Long-term Incentive Compensation Expense</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.02</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.02</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Amortization of Purchased Intangible Assets</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.03</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">(0.01</TD>
<TD NOWRAP VALIGN="bottom">)&nbsp;</TD></TR>
<TR STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Tax impact of Adjustments*</P></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.01</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" ALIGN="right">0.01</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:1.00px solid #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff" STYLE="font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em; font-size:10pt; font-family:Times New Roman">Diluted EPS&#151;continuing operations</P></TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.09</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"><FONT STYLE="font-size:8pt">&nbsp;</FONT></TD>
<TD VALIGN="bottom">$</TD>
<TD VALIGN="bottom" ALIGN="right">0.06</TD>
<TD NOWRAP VALIGN="bottom">&nbsp;&nbsp;</TD></TR>
<TR STYLE="font-size:1px; ">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD VALIGN="bottom"> <P STYLE="border-top:3.00px double #000000">&nbsp;</P></TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left">*</TD>
<TD ALIGN="left" VALIGN="top">= The tax impact of adjustments is calculated at 20% of the adjustments in all periods </TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>About VASCO:
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">VASCO is a leading supplier of strong authentication and e-signature solutions and services specializing in Internet Security applications and
transactions.&nbsp;VASCO has positioned itself as global software company for Internet Security serving a customer base of approximately 10,000 companies in more than 100 countries, including approximately 1,700 international financial institutions.
VASCO&#146;s prime markets are the financial sector, enterprise security, e-commerce and e-government. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Forward Looking Statements: </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This press release contains forward-looking statements within the meaning of Section&nbsp;21E of the Securities Exchange Act of 1934 and Section&nbsp;27A of
the Securities Act of 1933. These forward-looking statements (1)&nbsp;are identified by use of terms and phrases such as &#147;expect&#148;, &#147;believe&#148;, &#147;will&#148;, &#147;anticipate&#148;, &#147;emerging&#148;, &#147;intend&#148;,
&#147;plan&#148;, &#147;could&#148;, &#147;may&#148;, &#147;estimate&#148;, &#147;should&#148;, &#147;objective&#148;, &#147;goal&#148;, &#147;possible&#148;, &#147;potential&#148;, &#147;project&#148; and similar words and expressions, but such
words and phrases are not the exclusive means of identifying them, and (2)&nbsp;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. These risks, uncertainties and other factors that have been described in our Annual Report on Form 10-K for the year
ended December&nbsp;31, 2013 and include, but are not limited to, (a)&nbsp;risks of general market conditions, including currency fluctuations and the uncertainties resulting from turmoil in world economic and financial markets, (b)&nbsp;risks
inherent to the computer and network security industry, including rapidly changing technology, evolving industry standards, increasingly sophisticated hacking attempts, increasing numbers of patent infringement claims, changes in customer
requirements, price competitive bidding, and changing government regulations, and (c)&nbsp;risks specific to VASCO, including, demand for our products and services, competition from more established firms and others, pressures on price levels and
our historical dependence on relatively few products, certain suppliers and certain key customers. Thus, the results that we actually achieve may differ </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
materially from any anticipated results included in, or implied by these statements. Except for our ongoing obligations to disclose material information as required by the U.S. federal securities
laws, we do not have any obligations or intention to release publicly any revisions to any forward-looking statements to reflect events or circumstances in the future or to reflect the occurrence of unanticipated events. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This&nbsp;document&nbsp;may contain trademarks of VASCO Data Security International, Inc. and its subsidiaries, including VASCO, the VASCO &#147;V&#148;
design, DIGIPASS, VACMAN, aXsGUARD and IDENTIKEY. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">For more information contact: </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Cliff Bown, +1 630 932 8844 ext. 304, Cliff.Bown@vasco.com </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right">Exhibit 99.2 </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">VASCO Data Security International, Inc. </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Q1 2014 Earnings Conference Call </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Prepared Remarks </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">April&nbsp;24,
2014 </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Comments by Ken Hunt: </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Good morning everyone.
For those listening in from Europe, good afternoon, and from Asia, good evening. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">My name is Ken Hunt, and I am the Chairman, Founder&nbsp;&amp; CEO of
VASCO Data Security International, Inc. On the call with me today are Jan Valcke, our President&nbsp;&amp; Chief Operating Officer, and Cliff Bown, our EVP and Chief Financial Officer. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Today, we are going to review the results for Q1, 2014. As always, we will host a question and answer session after the conclusion of management&#146;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. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Before we begin the conference call, I would like to brief all of you on </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>&#147;Forward Looking Statements.&#148; </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">STATEMENTS MADE
IN THIS CONFERENCE CALL THAT RELATE TO FUTURE PLANS, EVENTS OR PERFORMANCES ARE FORWARD-LOOKING STATEMENTS. ANY STATEMENT CONTAINING WORDS SUCH AS &#147;BELIEVES,&#148; &#147;ANTICIPATES,&#148; &#147;PLANS,&#148; &#147;EXPECTS,&#148;
&#147;PROJECTS&#148; 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&#146;S FILINGS WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION FOR A DISCUSSION OF SUCH RISKS AND UNCERTAINTIES IN THIS REGARD. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>General Comments &#150; Ken Hunt </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">First, let me say that
I will keep my comments brief today as I would like to focus on answering your questions after management&#146;s prepared remarks. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Revenue from
continuing operations was $38.8 million, an increase of 10% compared to the first quarter of 2013, and operating income was $3.9 million, an increase of 43% compared to the first quarter of 2013. Our gross profit for the quarter was approximately
66% of revenue. Our operating income from continuing operations, excluding amortization of intangibles, was approximately 13% of revenue for the quarter. Q1 2014 was our 45th consecutive positive quarter in terms of operating income. On
March&nbsp;31, 2014 our net cash balance was approximately $109.5 million and we had approximately $127.7 million in working capital. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The revenue reported for the first quarter of 2014 was the best first quarter in our history. We also had the
strongest intake of new orders of any quarter in our history. The increasing demand for our products is coming from both our traditional products as well as our new products using the Cronto technology. We are also making progress with our
cloud-based product offerings. As we have noted previously, while we do not expect to see any significant revenue from MYDIGIPASS.COM in 2014, we continue to believe that it is an important part of our product mix for the future. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Going forward, we are maintaining our focus on growth through five primary methods: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">First is to bring the next generation of authentication and digital signature technology to our current customers to coincide with their authentication replacement, or refresh cycles, </TD></TR></TABLE>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Second is to increase demand for our products in new applications or new markets, the U.S. retail banking market being an example, </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Third is to increase the use of our cloud-based authentication platform by application service providers, </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Fourth is to continue expanding our client base in enterprise and application security markets, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Fifth is to identify new security technology companies for tuck-in acquisitions. </TD></TR></TABLE> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Because of our strong
performance, we have the cash on hand and cash flow from operations that we need to aggressively pursue this growth strategy. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Two recent examples of our
next generation technology include the Cronto technology used in the DIGIPASS 760, and DIGIPASS for Apps. We invested in a breakthrough technology with our acquisition of Cronto Ltd. in May of last year. Cronto&#146;s solution utilizes a unique
visual challenge contained in a graphical cryptogram consisting of a matrix of colored dots displayed on the customer&#146;s PC screen &#150; what I am describing is essentially a high definition, color QR code. During an online banking transaction,
the customer uses the camera in their mobile phone, or in a dedicated VASCO hardware device, to capture the QR code from the screen of their PC or laptop. The customer is then presented with critical transaction information, such as the amount of
the transaction and the payee, decoded securely from the visual cryptogram image. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This enables the customer to verify that the transaction details on the
screen of the phone or hardware device to confirm that this transaction is genuine. This mitigates the risk of Banking Trojans and Man in the Middle attacks, and provides assurance that the payment instructions have not been altered. In the final
step, an authentication code is generated on the customer&#146;s phone or device, and is entered in the online banking application to complete the transaction. This simple process takes security beyond the use of authentication to verify online
banking customers and allows both the user and the financial institution to verify that the transaction has not been tampered with. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">DIGIPASS for Apps is a library of critical security functions that web and mobile application developers can
quickly and seamlessly integrate directly into their apps to enhance security. Some examples of the innovative functions available in DIGIPASS for APPS includes integrated One Time Password authentication to reduce fraud risk, a signature function
for transaction verification, a Geo-location feature to establish proof of presence, a secure storage module, and advanced functionality to detect if a mobile device has been compromised, all of which enable the application developer to easily
provide their users with a high level of security. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our ability to execute our technology road map combined with our success in acquiring and integrating
synergistic technologies is part of the reason we are optimistic. Our new solutions deliver critical security features that our competitors do not have. They also provide VASCO with a powerful opportunity to capitalize on the 4 to 5 year refresh
cycle of our current customers and to penetrate competitors&#146; accounts with superior solutions that will generate sustainable, repeatable revenue for us. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">As I conclude my remarks, I would like to inform you that John Gunn has recently joined VASCO as Vice President of Corporate Communications with
responsibility for analyst relations, investor relations, strengthening our global brand, and increasing demand for our solutions on a global basis with an emphasis on the U.S. John knows the IT security segment and our business well from his tenure
at VASCO competitor Aladdin Knowledge Systems. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>At this time, I would like to introduce Jan Valcke, VASCO&#146;s President and Chief Operating Officer,
Jan. </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Comments by Jan Valcke: </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Ken.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ladies and gentlemen, </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The first quarter was another
strong quarter that followed a strong Q4, 2013. Our results for the first quarter reflected a 6% increase in revenues from the Banking market and a 27% increase in revenues from the Enterprise and Application Security market. We believe that the
increase in the Enterprise and Application Security market was due primarily to our growing base of maintenance revenues, our increased focus on sales and marketing, and a pickup in overall activity in the European and U.S. markets, especially from
our distribution network. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The strong intake of new orders in the first quarter resulted in a strong backlog of orders to be shipped in future quarters to
the Banking market. We believe that the Enterprise and Application Security market will also continue to offer opportunities for significant growth. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">One
of our technology highlights for Q1 was the successful integration of our new Cronto technology into our VACMAN Controller. This means that we can deliver all of our solutions to VASCO customers on a stable and fully integrated platform.
Additionally, our field support staff and sales organizations have completed training and are fully-knowledgeable in the Cronto technology. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Cronto solution, which is integrated into the DIGIPASS 760, has been updated and improved, and will be
manufactured at two VASCO factories in China. We have already developed new business as a result of this acquisition, but the best still lies ahead as regulations become more demanding on banks and financial institutions around the world. The
DIGIPASS 760 is an ideal solution to answer these rigorous requirements. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">For the last several months, the press has been focused on major breaches such
as the Target breach and new vulnerabilities in online security. This has heightened awareness of the need for stronger security and increased the demand for effective security solutions. A powerful example of this is the groundbreaking move by HSBC
to improve their online banking security. HSBC North America announced that they will require their U.S. retail customers to use two-factor authentication for certain sensitive online transactions, such as money transfers, wire transfers and changes
to account beneficiaries. This has been an HSBC requirement for many years in many regions of the world. HSBC is demonstrating its leadership by being the first major bank in the U. S. to make this move. HSBC is offering customers the option of
using a DIGIPASS hardware token, or downloading a DIGIPASS Mobile App to their mobile phone. Both VASCO products generate a One Time Password security code for user authentication and electronic signing. There is no charge to the customer for either
option. We expect this forward-thinking move by HSBC to be followed by other major banks in the United States and we believe this will benefit VASCO. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Ken. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Ken: Thank you, Jan. </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>At this time, I would like to introduce you to Cliff Bown, VASCO&#146;s EVP and Chief Financial Officer, Cliff. </B></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Comments by Cliff Bown: </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you Ken and welcome to
everyone on the call. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">As noted earlier by Ken, revenues for the first quarter of 2014 were $38.8 million, an increase of $3.5 million or 10% from the
first quarter of 2013. As noted by Jan, the increase in revenue for the first quarter reflected a 6% increase from the Banking market and a 27% increase from the Enterprise and Application Security market. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We believe that the respective changes in revenue in both markets reflect a combination of the transactional nature of our business as well as improving
economic conditions Europe. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The distribution of our revenue in the first quarter of 2014 between our two primary markets was approximately 81% from the
Banking market and 19% from the Enterprise and Application Security market. In the first quarter of 2013, approximately 83% came from the Banking market and 17% came from Enterprise and Application Security market. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The geographic distribution of our revenue in the first quarter of 2014 was approximately 69% from EMEA, 6% from the United States, 17% from Asia and the
remaining 8% from other countries. For the first quarter of 2013, 62% of the revenue was from EMEA, 9% was from the U.S., 13% from Asia and 16% was from other countries. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Gross profit as a percentage of revenue, or gross margin, for the first quarter of 2014 was approximately 66% and
compares to 65% for first quarter of 2013. The increase in gross margin is primarily related to: </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">An increase in the percentage of our revenue that came from the Enterprise and Applications Security market, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">An increase in non-hardware revenues as a percentage of total revenue, </TD></TR></TABLE> <P STYLE="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">Partially offset by
</P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TR>
<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">A decline in the gross margin of deals done in the Banking market, in part due to an increase in card readers as a percentage of total revenue. </TD></TR></TABLE>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">As mentioned in previous calls, revenue from our Enterprise and Application Security market generally has margins that are 20 to 30 percentage points higher
than the Banking market. As noted earlier, the percentage of total revenue that came from the Enterprise and Application Security market increased from 17% in the first quarter of 2013 to 19% in the first quarter of 2014. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Similarly, revenue from on non-hardware products generally has margins that are 20 to 30 percentage points higher than our hardware products. Revenues from
our non-hardware products increased to 30% of revenue in the first quarter of 2014 from 29% of revenue in the first quarter of 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The gross margins
related to the banking market in any specific period will vary based on a number of factors including, but not limited to, the products sold, the quantity sold, the geographic location of the sales and competition based on product or geography.
Generally, we experience significant competition when the sale involves card readers and, as a result, card readers have a gross profit margin that is approximately 15 to 25 percentage points lower than other hardware-related margins. Card readers
represented 21% of our total revenue in the first quarter of 2014 as compared to 16% of our total revenue in the first quarter of 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating
expenses for the three months ended March&nbsp;31, 2014 were $21.9 million, an increase of $1.5 million or 8% from the quarter ended March&nbsp;31, 2013. The increase in consolidated operating expenses was primarily related to: </P>
<P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">Operating and amortization expenses related to Cronto Limited, which was acquired in May of 2013, </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">a 4% increase in our average headcount, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">The negative impacts of the weakening of the U.S.&nbsp;Dollar compared to the Euro and other European currencies. </TD></TR></TABLE>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating expenses reflected an increase of $0.7 million, or 8% in sales and marketing and an increase of $0.3
million or 6% in research and development, partially offset by a decrease of $0.2 million or 3% in general and administrative expenses. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating income
for the first quarter of 2014 was $3.9 million, an increase of $1.2 million, or 43%, from the first quarter of 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating income as a percent of
revenue, or operating margin, on a U.S. GAAP basis was 10% for first quarter of 2014 compared to 8% for the first quarter of 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company reported
income tax expense of $827 thousand for the first quarter of 2014 compared to $494 thousand for the first quarter of 2013. The increase in tax expense is attributable to an increase in our pretax income and an increase in our estimated full-year tax
rate for 2014 compared to 2013. The effective tax rate for the first quarter of 2014 was 19%, an increase of two percentage points from 17% in the first quarter of 2013. The increase in the tax rate was primarily related to changes in our estimated
distribution of earnings and changes in our estimates of the tax rate applicable to certain components of our deferred tax balances. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The makeup of our
workforce as of March&nbsp;31, 2014 was 389 people worldwide with 190 in sales, marketing, customer support and operations, 140 in research and development and 59 in general and administrative. The average headcount for the first quarter of 2014 was
393 persons, which was 4% higher than the average headcount for the first quarter of 2013 of 379 persons. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our balance sheet continued to show the
strength of our operations. Our net cash balance at March&nbsp;31, 2014 was $109.5 million, an increase of $10.9 million or 11% from December&nbsp;31, 2013 and our working capital balance at March&nbsp;31, 2014 was $127.7 million, an increase $3.2
million or 3% from December&nbsp;31, 2013. The increase in cash is primarily the result of a reduction in our receivable balances and the cash generated from operations. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We had no debt outstanding at either March&nbsp;31, 2014 or December&nbsp;31, 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you for your attention. I would now like to turn the meeting back to Ken. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Ken: Thank you, Cliff </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Ken Hunt: Closing Remarks
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">At this time I would like to highlight our guidance for 2014. </P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top">VASCO is increasing its guidance for revenue for the full-year 2014. We currently believe that our revenue from our traditional business, which excludes our new service product offerings, DIGIPASS as a Service and
MYDIGIPASS.COM, will be in the range of $168 million to $172 million, an increase from the range communicated previously of $160 million to $165 million, and </TD></TR></TABLE> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="5%">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left">&#149;</TD>
<TD WIDTH="1%" VALIGN="top">&nbsp;</TD>
<TD ALIGN="left" VALIGN="top">We are reiterating our guidance for operating income as a percentage of revenue. We expect that operating income as a percentage of revenue, excluding the amortization of purchased intangible assets, will be in the
range of 11% to 13%, which is consistent with the range communicated previously. </TD></TR></TABLE>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The reason for our revised guidance is the strong intake of new orders in Q1 and the increasing demand for our
solutions. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">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. </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="right">Exhibit 99.3 </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">VASCO Data Security International, Inc. </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Q1 2014 Earnings Conference Call </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">Edited Transcript </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman" ALIGN="center">April&nbsp;24,
2014 </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>CORPORATE PARTICIPANTS </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>T. Kendall
Hunt</B><I> VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Jan Valcke</B><I> VASCO Data Security International,
Inc.&#151;President and COO </I></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Cliff Bown</B><I> VASCO Data Security International, Inc.&#151;EVP and CFO </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>CONFERENCE CALL PARTICIPANTS </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Joe Maxa</B><I>
Dougherty&nbsp;&amp; Company&#151;Analyst </I></P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Ben Mackovack</B><I> Cavalier Capital&#151;Analyst </I></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Bridie Barrett</B><I> Edison Investment Research&#151;Analyst </I></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><I></I><B>Fred Ziegel</B><I> Topeka Capital Markets&#151;Analyst </I></P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>PRESENTATION </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ladies and gentlemen, thank you for standing by. Welcome to the VASCO Data Security International, Inc. Q1 2014 earnings conference call. (Operator
Instructions) As a reminder, this conference is being recorded Thursday, April&nbsp;24, 2014. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I would now like to turn the conference over to T. Kendall
Hunt, Founder, Chairman, and CEO. Please go ahead, sir. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>T. Kendall Hunt&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO
</B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, operator. Good morning everyone. For those listening in from Europe, good afternoon, and from Asia, good evening. My name is Ken Hunt, and
I&#146;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. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Today, we are going to review the results for Q1 2014. As always, we will host a question-and-answer session after the conclusion of management&#146;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. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Before we begin the conference call, I would like to brief all of you on forward-looking statements. Statements made in this conference call that relate to
future plans, events, or performance are forward-looking statements. Any statement containing words such as believes, anticipates, plans, expects, projects, and similar words is forward-looking and these statements involve risks and uncertainties
and are based on current expectations. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Consequently, actual results could differ materially from the expectations expressed in these forward-looking
statements. I direct your attention to the Company&#146;s filings with the US Securities and Exchange Commission for a discussion of such risks and uncertainties in this regard. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">First let me say that I will keep my comments brief today, as I would like to focus on answering your questions
after management&#146;s prepared remarks. Revenue from continuing operations was $38.8 million, an increase of 10% compared to the first quarter of 2013. And operating income was $3.9 million, an increase of 43% compared to the first quarter of
2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our gross profit for the quarter was approximately 66% of revenue. Our operating income from continuing operations, excluding amortization of
intangibles, was approximately 13% of revenue for the quarter. Q1 2014 was our 45th consecutive positive quarter in terms of operating income. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">On
March&nbsp;31, 2014, our cash balance was approximately $109.5 million and we had approximately $127.7 million in working capital. The revenue reported for the first quarter of 2014 was the best first quarter in our history. We also had the
strongest intake of new orders of any quarter in our history. The increasing demand for our products is coming from both our traditional products as well as our new products using the Cronto technology. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We are also making progress with our cloud-based product offerings. As we noted previously, while we do not expect to see any significant revenue from
MYDIGIPASS.COM, in 2014, we continue to believe it is an important part of our product mix for the future. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Going forward, we are maintaining our focus on
growth through five primary methods. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">First is to bring the next generation of authentication and digital signature technology to our current customers to
coincide with their authentication replacement or refresh cycles. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Second is to increase demand for our products in new applications or new markets, the
US retail banking market being an example. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Third is to increase the use of our cloud-based authentication platform by application service providers. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Fourth is to continue expanding our client base in enterprise and application security markets. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">And fifth is to identify new security technology companies for tuck-in acquisitions. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Because of our strong performance, we have the cash on hand and cash flow from operations that we need to aggressively pursue this growth strategy. Two recent
examples of our next generation technology include the Cronto technology used in the DIGIPASS 760 and DIGIPASS for APPS. We invested in a breakthrough technology with our acquisition of Cronto Limited in May of last year. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Cronto&#146;s solution utilizes a unique visual challenge contained in a graphical cryptogram consisting of a matrix of colored dots displayed on the
customer&#146;s PC screen. What I&#146;m describing is essentially a high definition color QR code. During an online banking transaction, the customer uses the camera in their mobile phone or in a dedicated VASCO hardware device to capture the QR
code from the screen of their PC or laptop. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The customer is then presented with critical transaction information, such as the amount of the transaction
and the payee, decoded securely from the visual cryptogram image. This enables the customer to verify that the transaction details on the screen of the phone or hardware device confirm that this transaction is genuine. This mitigates the risk of
banking Trojans and man-in-the-middle attacks and provides assurance that the payment instructions have not been altered. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In the final step, an
authentication code is generated on the customer&#146;s phone or device and is entered in the online banking application to complete the transaction. This simple process takes security beyond the use of authentication to verify online banking
customers and allows both the user and the financial institution to verify that the transaction has not been tampered with. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">DIGIPASS for APPS is a
library of critical security functions that web and mobile application developers can quickly and seamlessly integrate directly into their apps to enhance security. Some examples of the innovative functions available in DIGIPASS for APPS includes
integrated one-time password authentication to reduce fraud risk; a signature function for transaction verification; a geolocation feature to establish proof of presence; a secure storage module; and an advanced functionality to detect if a mobile
device has been compromised, all of which enable the application developer to easily provide their users with a high level of security. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our ability to execute our technology roadmap combined with our success in acquiring and integrating synergistic
technologies is part of the reason we are optimistic. Our new solutions deliver critical security features that our competitors do not have. They also provide VASCO with a powerful opportunity to capitalize on the four to five year refresh cycle of
our current customers and to penetrate competitors&#146; accounts with superior solutions that will generate sustainable, repeatable revenue for us. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">As I
conclude my remarks, I&#146;d like to inform you that John Gunn has recently joined VASCO as Vice President of Corporate Communications with responsibility for analysts&#146; relations, investor relations, strengthening our global brand, and
increasing demand for our solutions on a global basis with an emphasis on the US. John knows the IT security segment and our business well from his tenure at VASCO&#146;s competitor, Aladdin Knowledge Systems. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">At this time, I&#146;d like to introduce Jan Valcke, VASCO&#146;s President and Chief Operating Officer. Jan? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke</B><B><I>&#151;VASCO Data Security International, Inc.&#151;President and COO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Ken. Ladies and gentlemen, the first quarter was another strong quarter that followed a strong fourth quarter of 2013. Our results for the first
quarter reflected a 6% increase in the revenues from the banking market and a 27% increase in the revenues from the enterprise and application security market. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We believe that the increase in the enterprise and application security market was due primarily to a growing base of maintenance revenues, our increased
focus on sales and marketing, and a pickup in overall activity in the European and US markets, especially from our distribution network. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The strong
intake of new orders in the first quarter resulted in a strong backlog of orders to be shipped in the future quarters to the banking market. We believe that the enterprise and application security market will also continue to offer opportunities for
significant growth. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">One of our technology highlights for Q1 was the successful integration of our new Cronto technology into our VACMAN Controller. This
means that we can deliver all of our solutions to VASCO customers on a stable and fully integrated platform. Additionally, our senior support staff and sales organizations have completed training and are fully knowledgeable in the Cronto technology.
</P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Cronto solution which is integrated into the DIGIPASS 760 has been updated and improved and will be manufactured at two VASCO factories in China. We
have already developed new business as a result of this acquisition, but the best still lies ahead as regulations become more demanding on banks and financial institutions around the world. The DIGIPASS 760 is an ideal solution to answer these
rigorous requirements. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">For the last several months, the press has been focused on major breaches, such as the Target breach, and new vulnerabilities in
online security. This has heightened awareness of the need for stronger security and increased demand for effective security solutions. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">A perfect example
of this is a groundbreaking move by HSBC to improve their online banking security. HSBC North America announced that they will require their US retail customers to use two-factor authentication for certain sensitive online transactions, such as
money transfer, wire transfers, and changes to account beneficiaries. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">This has been an HSBC requirement for many years in many regions of the world and
HSBC has demonstrated its leadership by being the first major bank in the United States to make this move. HSBC is offering customers the option of using a DIGIPASS hardware token or downloading a DIGIPASS mobile app to their mobile phone. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Both VASCO products generate a one-time password security code for user authentication and electronic signing. There is no charge to the customer for either
option. We expect this forward-thinking move by HSBC to be followed by other major banks in the United States and we believe this will benefit VASCO. Thank you, Ken. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman,
and CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Jan. At this time, I would like to introduce you to Cliff Bown, VASCO&#146;s EVP and Chief Financial Officer. Cliff? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Ken, and welcome to everyone on the call. As noted earlier by Ken, revenues for the first quarter of 2014 were $38.8 million, an increase of $3.5
million or 10% from the first quarter of 2013. And also as noted by Jan, the increase in revenue for the first quarter reflected a 6% increase from the banking market and a 27% increase from the enterprise and application security market. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We believe that the respective changes in revenue in both markets reflect a combination of the transactional nature of our business as well as the improving
economic conditions in Europe. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The distribution of our revenue in the first quarter of 2014 between our two primary markets was approximately 81% from
the banking market and 19% from the enterprise and application security market. In the first quarter of 2013, approximately 83% of our revenue came from the banking market and 17% came from the enterprise and applications security market. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The geographic distribution of our revenue in the first quarter of 2014 was approximately 69% from EMEA, 6% from the United States, 17% from Asia, and the
remaining 8% from other countries. For the first quarter of 2013, 62% of the revenue was from EMEA, 9% was from the US, 13% from Asia, and 16% was from other countries. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Gross profit as a percentage of revenue or gross margin for the first quarter of 2014 was approximately 66% and compares to 65% for the first quarter of 2013.
The increase in gross margin is primarily related to an increase in the percentage of our revenue that came from the enterprise and application security market and an increase in non-hardware revenues as a percentage of our total revenue, partially
offset by a decline in the gross margin of deals done in the banking market, in part due to an increase in card readers as a percentage of total revenue. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">As mentioned in previous calls, revenue from our enterprise and application security market generally have margins that are 20 to 30 percentage points higher
than the banking market. As noted earlier, the percentage of total revenue that came from the enterprise and application security market increased from 17% in the first quarter of 2013 to 19% in the first quarter of 2014. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Similarly, revenue from non-hardware products generally has margins that are 20 to 30 percentage points higher than our hardware products. Revenues from our
non-hardware products increased to 30% of our revenue in the first quarter of 2014 from 29% of revenue in the first quarter of 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The gross margins
related to the banking market in any specific period will vary based on a number of factors, including, but not limited to, products sold, quantity sold, the geographic location of the sales, and the competition based on product or geography.
Generally, we experience significant competition when the sale involves card readers, and as a result, card readers have gross margin that is approximately 15 to 25 percentage points lower than other hardware-related margins. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Card readers represented 21% of our total revenue in the first quarter of 2014 as compared to 16% of our total revenue in the first quarter of 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating expenses for the three months ended March&nbsp;31, 2014, are $21.9 million, an increase of $1.5 million or 8% from the quarter ended March&nbsp;31,
2013. The increase in consolidated operating expenses was primarily related to operating and amortization expenses related to Cronto Limited, which was acquired in May 2013; a 4% increase in our average headcount; and the negative impacts of the
weakening of the US dollar compared to the euro and other European currencies. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating expenses reflected a $0.7 million or 8% increase in sales and
marketing, an increase of $0.3 million or 6% in research and development, partially offset by a decrease of $0.2 million or 3% in general and administrative expenses. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating income for the first quarter of 2014 was $3.9 million, an increase of $1.2 million or 43% from the
first quarter of 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Operating income as a percentage of revenue or operating margin on a US&nbsp;GAAP basis was 10% for the first quarter of 2014
compared to 8% for the first quarter of 2013. The Company reported income tax expense of $827,000 for the first quarter of 2014 compared to $494,000 for the first quarter of 2013. The increase in tax expense is attributable to an increase in our
pretax income and an increase in our estimated full-year tax rate for 2014 compared to 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The effective tax rate for the first quarter of 2014 was
19%, an increase of two percentage points from 17% in the first quarter of 2013. The increase in the tax rate was primarily related to changes in our estimated distribution of earnings and changes in our estimates of the tax rate applicable to
certain components of our deferred tax balances. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The makeup of our workforce as of March&nbsp;31, 2014, was 389 people worldwide, with 190 in sales,
marketing, customer support, and operations; 140 in research and development; and 59 in general and administrative. The average headcount for the first quarter of 2014 was 393 persons, which is 4% higher than the average headcount for the first
quarter of 2013, of 379 persons. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Our balance sheet continued to show the strength of our operations. Our net cash balance at March&nbsp;31, 2014, was
$109.5 million, an increase of $10.9 million or 11% from December&nbsp;31, 2013, and our working capital balance at March&nbsp;31, 2014, was $127.7 million, an increase of $3.2 million or 3% from December&nbsp;31, 2013. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The increase in cash is primarily the result of a reduction in our receivable balances and the cash generated from operations. We had no debt outstanding at
either March&nbsp;31, 2014, or December&nbsp;31, 2013. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you for your attention and now I&#146;d like to turn the call back to Ken. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Thank you, Cliff. At this time, I would like to highlight our guidance for 2014. VASCO is increasing its guidance for revenue for the full-year 2014. We
currently believe that our revenue from our traditional business, which excludes our new service product offerings&#151;DIGIPASS as a Service and MYDIGIPASS.COM&#151;will be in the range of $168 million to $172 million, an increase from the range
communicated previously of $160 million to $165 million. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">And we are reiterating our guidance for operating income as a percentage of revenue. We expect
that operating income as a percentage of revenue, excluding the amortization of purchased intangible assets, will be in the range of 11% to 13%, which is consistent with the range communicated previously. The reason for our revised guidance is the
strong intake of new orders in Q1 and the increasing demand for our solutions. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">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?
</P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>QUESTION AND ANSWER </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">(Operator Instructions) Joe Maxa, Dougherty&nbsp;&amp; Company. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa</B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So I wanted to ask a little bit about Jan&#146;s comment about other US banks following HSBC. So I&#146;m just curious&#151;are you in conversations or are
these banks coming to you because of HSBC or is&#151;maybe just give us a little bit more color on what you&#146;re seeing here in North America. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, I&#146;d say that that&#151;and Jan can also comment&#151;but I&#146;d say that particular comment is really based upon our experience from years ago when
I first bought the Company and ABN AMRO Bank was the first big bank. And my logic was that because they were such a prominent bank, others would notice it for competitive reasons, and for good customer service, they would also adopt our products,
which they did. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We have a large number of banks that use our products in the United States, but until this announcement by HSBC, it was pretty much
limited to our products being used by the banks&#146; corporate clients, not their retail clients. So this is the decision that&#146;s so dramatic, I think, is the fact that HSBC, our largest customer, has decided to do what they&#146;ve done for
years in other parts of the world and that is to require not only their corporate clients, but their retail clients, to use strong authentication for certain applications. Jan? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke</B><B><I>&#151;VASCO Data Security International, Inc.&#151;President and COO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, that may be something, Joe, you need to see that in the US. We have been successful by selling our DIGIPASSES to banks, like Ken mentioned, for a cash
management corporate banking application. That means basically that there is already a VACMAN&#151;a VASCO infrastructure installed at the banks. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So
it&#146;s not something that the banks are coming to us. We have regular contacts with them and if they decide to go to retail banking, I believe that you have quite the place to sell our products. But this is of course a banking decision to go that
direction. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa</B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, and another question along the lines&#151;your recent success&#151;are you seeing&#151;would you describe it as more of a general awareness of weak
authentication or are your customers actually having problems and using this is a solution or how would kind of classify the success you&#146;re seeing today? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Well, I think it&#146;s some pent-up demand in activity by a lot of the banks in the past. It&#146;s general business climate being better. Europe, the fact
that in many countries, the banking regulators are dramatically increasing the requirements for the banks; that has not yet happened in the United States, but countries like Switzerland, the Netherlands, Germany, and others will follow suit, I
think. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">They look at those requirements and they evaluate whether or not their current product&#151;and in many cases, perhaps VASCO products such as
DIGIPASSES, and they question whether or not those products are sufficient to meet the requirements as set out by these different banking regulators. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">And
so they issue RFIs&#151;request for information. They talk to us, and they determine that we have a new product, the Cronto product, that dramatically increases security and addresses the requirements of the banking regulators. So it produces an
opportunity for us. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Generally, every four or five years, the banks replace what they&#146;ve had before. We call that authentication replacement, we call
it refreshment, and that produces what&#151;the term that I invented a long time ago, sustainable, repeatable revenue&#151;and I think that&#146;s what we have to look forward&#151;this year and next year and beyond. Jan, do you have any other color
you would like to add? </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke</B><B><I>&#151;VASCO Data Security International, Inc.&#151;President and COO
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, I think you need to make here the difference, Joe, between awareness and the regulators. Awareness, like these different breaches that we see
on the market now, increases our business, certainly, in application security and enterprise security. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The second thing is this awareness gives also more
power to the regulator&#151;and I would not only talk here about bank regulators but also other government regulators&#151;to increase security to secure citizens&#146; application, to secure consumer application. So I think that will be certainly
in the benefit of VASCO in the next years. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa</B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Just one more, if I may. On the Cronto side of it, how does the gross margin of that product line fit in with your typical hardware products? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Joe, it will fit in a couple of ways. There will be cases where we sell hardware only and in those situations, it will be like our traditional pricing model;
it will be recognized when the transaction is done and the gross margin on Cronto will reflect the competitive situation. If it&#146;s a large volume deal, it will have lower gross margins than it would have if it was a smaller sized deal. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The other&#151;and we expect over the longer run to be a significant piece for Cronto&#151;is more of a term license, which would be a combination of some
hardware sold but also some software downloads and being a term device that would actually end up in deferred revenue first and be amortized over the life of the agreement. In those situations, we expect it to be a higher gross margin product
because of the software content. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">But you won&#146;t see that immediately and the first quarter is a good example. We had some good-sized Cronto activity
in Q1, but most of it ended up in deferred revenue, so we expect those balances to grow over time and as those roll off, they will be at higher margins. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa</B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Great, thanks a lot guys. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ben Mackovack, Cavalier Capital. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ben
Mackovack</B><B><I>&#151;Cavalier Capital&#151;Analyst </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Hi, congrats on a great quarter. Very nice to see. A couple of questions. For the R&amp;D
line, is this a good run rate? Were there any one-time costs still in there from the prior consolidation? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff
Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">No, none of significance, and I would think that it probably is a
reasonable run rate. The only thing that&#151;based on our current plans, anyway&#151;that would change that would be changes in exchange rate or, as Ken mentioned earlier, technology tuck-ins that we might do down the road. The majority of the
increase in this first quarter compared to the previous quarters&#151;same quarter last year&#151;was the Cronto acquisition that was done in May. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So if
we were to do another acquisition of similar size, you can expect a similar change in the quarter-over-quarter comparisons going forward. But otherwise, right now, no significant plans and new staff. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ben Mackovack</B><B><I>&#151;Cavalier Capital&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, great. In terms of the card reader revenue, did I hear that correctly? It was 21% in Q1? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">That&#146;s correct, yes. Compared to 16% in the first quarter of last year. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ben Mackovack</B><B><I>&#151;Cavalier Capital&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Any idea what that&#146;s going to look like for the rest the year? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We actually expect it to remain high, if not grow. We&#146;ve got some significant new rollouts, some including the Cronto product that&#146;s in our backlog.
So as I model it out, I would expect the card reader as a percentage of the total to remain high, if not increase slightly, and to have some pressure on our gross margins. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ben Mackovack</B><B><I>&#151;Cavalier Capital&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, and in the pace of the HSBC rollout, I think that started or will start in Q2 and then should we expect that to ramp-up in three and four? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Jan, would you address that please? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan
Valcke</B><B><I>&#151;VASCO Data Security International, Inc.&#151;President and COO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The short answer is yes. So HSBC is deploying as well the
hardware; DIGIPASS devices are sold the software DIGIPASS for Mobile devices. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ben Mackovack</B><B><I>&#151;Cavalier Capital&#151;Analyst
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, and final one. My last question is just on the cash balance. Has there been any discussion about initiating a dividend or perhaps a special
dividend? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">That&#146;s a common question and we think about it at the Board level every single quarter and we&#146;ve decided, once again, that that money is best used
opportunistically. We are always looking for interesting companies that have technology that they have invented, they&#146;ve funded, they&#146;ve built, they&#146;ve sold into the marketplace&#151;in other words, they&#146;ve vetted it. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">It works, and so when we find the technology like that, we approach the company or they approach us and we acquire them. And that&#146;s what we call the
technology tuck-in. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We&#146;re not really buying revenue of any magnitude. We&#146;re not buying a customer list; we&#146;re buying a product that works
and will fit into VASCO&#146;s channels, in our banking channel and our enterprise application security channels. So at least for now, no, we have no plans to buy shares back or issue any kind of dividend. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Ben Mackovack</B><B><I>&#151;Cavalier Capital&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay. Great quarter, thank you. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Bridie Barrett, Edison Investment Research. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Bridie Barrett</B><B><I>&#151;Edison Investment Research&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Hello, everyone, this is Bridie Barrett from Edison. And I&#146;ve got a few unrelated questions, if I may. Firstly, you&#146;ve been talking about changing
your distribution strategy and your sales strategy and you mentioned it again in the release. Would you be able to just give us some specifics on what you&#146;re doing differently compared to what you were doing before that? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Certainly. Jan, would you address that please? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke</B><B><I>&#151;VASCO Data Security International, Inc.&#151;President and COO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Sure. Okay. It&#146;s a program that has started many quarters ago, but need to have some time to see the first results. It&#146;s called Direct Touch. Direct
Touch means that we are going directly to larger customers and that, with the channel, we fulfill then the deployments, the proof of concept, the integration of our products into their solutions. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So the larger the companies&#151;you know that story. The larger the companies, the longer it takes to take the decision to have the order. So and we see the
first results basically of that strategy. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The second thing&#151;it is also, and I think we did a good job to be very present to the market. We see a
business increase in Europe and in the United States, but the climate in Europe is becoming much better and that is also a reason why you will see that or you see that increase in this enterprise security. So Direct Touch and a better business
climate. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Bridie Barrett</B><B><I>&#151;Edison Investment Research&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, and the Direct Touch strategy&#151;are you doing that in just one or two verticals or is it something that you are going to try in do generally across
the enterprise? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke</B><B><I>&#151;VASCO Data Security International, Inc.&#151;President and COO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">We have multiple verticals. I&#146;ll give you one&#151;government being one, gaming be another one that where we are now. So we have different verticals, but
indeed, this is a more vertical approach by country than a general approach. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Bridie Barrett</B><B><I>&#151;Edison Investment
Research&#151;Analyst </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, thank you. And just on a slightly different topic, the margin guidance for the full year&#151;you&#146;ve retained at
the previous level, despite the fact that you&#146;ve increased your revenue guidance quite significantly. Is that because you are investing more in sales and research or is it a function of the high proportion of card readers this year? </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">It&#146;s more the latter. We see the growing revenue, but we anticipate, as I noted before, that card readers will be a significant portion, so we&#146;re
anticipating a decline in the gross margin rate as we continue through the year. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In terms of the operating expenses, other than seasonal variations in
exchange and the impacts of acquisitions, we expect those to be relatively constant. So the guidance that we&#146;ve given very much reflects the impact of the card readers and where that new business is coming from. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Bridie Barrett</B><B><I>&#151;Edison Investment Research&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I see, okay. Thank you. And if I could just squeeze in a final question&#151; </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I&#146;m sorry, you&#146;ve asked your two. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Bridie Barrett</B><B><I>&#151;Edison Investment Research&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, sorry. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall
Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Next, operator. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Fred Ziegel, Topeka Capital Markets </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Do you know offhand how many retail customers HSBC has in the US? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Fred, I think probably the best thing to do is to Google that, but I think you&#146;ll see that it&#146;s probably around 3&nbsp;million to 4&nbsp;million
total. But I don&#146;t know what the percentage is that are consumers. But typically, in a normal bank, if you look at the customers, the great majority of the total customers are indeed consumers. Jan, do you have any more information on that?
</P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke</B><B><I>&#151;VASCO Data Security International, Inc.&#151;President and COO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">No, not really. I do agree with your 3&nbsp;million to 4 million. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay. What would you expect the mix to be, and I guess you could draw on some of your international banks, but the split would you guess between mobile and
hardware tokens? </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman,
and CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Well, all we can say is that the mobile platform is becoming more popular and so we are selling more DIGIPASS for Mobile, which produces
higher gross margins. I don&#146;t know that we have a percentage. All I know, personally, is that the percentage of mobile versus the physical calculators is indeed growing. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">But it&#146;s still less than&#151;it&#146;s still more than 50% hardware? Or tokens? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Today, Fred, yes. But as Ken mentioned, I believe our DIGIPASS for Mobile probably almost&#151;it was between two and three times increase in 2013 over 2012.
So with our DIGIPASS for APPS and the other focus that we have on mobile platforms and a lot of the banks going more and more to mobile applications, it&#146;s really hard to predict what the growth rate will be. But we expect it to become an
increasingly important part of the business. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder,
Chairman, and CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">And we like it because, as I mentioned before, DIGIPASS for APPS allows us to allow the customers to integrate strong
authentication, a number of these different functions right into their mobile banking app. And it makes it easy to use and secure. So that&#146;s an opportunity for us. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The fact that they have deployed mobile security with our DIGIPASS for Mobile&#151;in other words, software&#151;really are unique incremental opportunities,
because in the past, more than likely the audience that are getting the mobile apps and the DIGIPASS for Mobile never had security at all. So we look at that as a unique incremental opportunity. So that&#146;s good news for us. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Well, if Cliff likes the gross margin. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T.
Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">(laughter) He sure does. We all do. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I do, but I think it&#146;s very important to understand that the price per unit on the software devices is lower, so that&#146;s a little bit of the battle.
We are increasing our penetration in terms of number of devices in the hands of the users in our related footprint, which we think bodes very well for the cloud-based platform over the long run, but it does create some issues when we have the
quarter-over-quarter revenue comparisons, because the pricing on a software client device is much lower than a hardware device. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred
Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Is it lower in absolute dollars in gross profits? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Not necessarily in gross profits, but in revenue. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, correct but&#151;right. But at least you perhaps offset that with 95% margins or whatever the number is. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, it&#146;s hard to make a general statement that covers the entire waterfront, but conceptually, that is correct, Fred. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, okay. Let me ask you on this whole Heartbleed issue. How do you guys market opportunistically into that? Because it&#146;s really an SSL encryption
problem, not so much one-time passwords. So how do you guys approach that? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security
International, Inc.&#151;Founder, Chairman, and CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Well, you&#146;re right. The Heartbleed bug does attack the application and gets previously
used usernames and fixed passwords. Users&#151;it&#146;s shown that users typically use, I don&#146;t know, 47% to 50% of their passwords in other applications. So if those are exploited, then they are exploited for other applications. The beauty of
a one-time password: it&#146;s only generated once. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">So if they capture that one-time password that&#146;s already been used, it&#146;s of no use to them,
because it&#146;s a one-time password. So I&#146;d say that the Heartbleed bug is offering more attention to the requirement for two-factor authentication and, of course, that plays well with what we do. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay. Last question quickly for Cliff. FX impact in the quarter? </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">It certainly was. Because the euro strengthened just under 3% compared to first quarter of last year, so my calculations suggest that it increased our revenue
about $250,000 and increased our operating expenses about $310,000. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst
</I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, thanks. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Joe Maxa. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe
Maxa</B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I wanted to ask about the strong order intake in the first quarter. Does that have
any effect on your typical seasonality of your revenue generation through the year? </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Cliff Bown</B><B><I>&#151;VASCO Data Security International, Inc.&#151;EVP and CFO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">My review of the data, Joe, suggests no. When we look at that&#151;I think Ken mentioned that it was more than 100% increase over the first quarter of last
year and the best in the Company&#146;s history. And when we break it down a little bit further, we had a significant new banking customer and we also had significant orders from existing customers. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">But when I take the large orders out, we&#146;re still 25% to 30% on the rest of the business over last year. But when I look at the distribution of those
orders, it&#146;s comparable or similar to past years. So I wouldn&#146;t think there&#146;s any significant change in the general flow of the business, with Q3 being a little bit lower than Q2, given the seasonality. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa</B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, that&#146;s helpful. And also you talked about HSBC, but also Rabobank talked about rolling out the Rabo Scanner this year. Looks like your Cronto
product. Is that pretty much on track? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman,
and CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Jan, you can address that, please. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan Valcke</B><B><I>&#151;VASCO Data Security International, Inc.&#151;President and COO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, Rabobank announced that they would like to do or start the deployment in the fourth quarter. And today, we are on track with that, yes. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa</B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, that&#146;s the fourth quarter? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Jan
Valcke</B><B><I>&#151;VASCO Data Security International, Inc.&#151;President and COO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Joe Maxa</B><B><I>&#151;Dougherty&nbsp;&amp; Company&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, thank you. That&#146;s all I had. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Fred Ziegel, Topeka Capital Markets. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred
Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">On the orders&#151;to follow up on Joe&#146;s question, I assume that is almost all
banking, because, as I remember your application, security is kind of day-to-day business. Am I thinking about that right? </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall
Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Yes, Fred, you are. </P>

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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay. That was easy. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall
Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">You are. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">And in terms of that order flow, are you seeing&#151;what are you seeing in the US besides HSBC? Or not seeing. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">I don&#146;t think we have any specific information that we can talk to you about. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>Fred Ziegel</B><B><I>&#151;Topeka Capital Markets&#151;Analyst </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Okay, thanks. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Mr.&nbsp;Hunt, there are no further questions at this time. I will now turn the call back to you. </P>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B><I></I></B><B>T. Kendall Hunt</B><B><I>&#151;VASCO Data Security International, Inc.&#151;Founder, Chairman, and CEO </I></B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">All right, thank you, operator. Well, as always, I want to thank everybody for participating today and I, as always, want to thank the VASCO staff around the
world for your efforts and hard work and loyalty. Thanks very much. Have a nice day, everybody. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>Operator </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. </P>
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