Annual Report 2009 (1 MB, pdf) - Vasco

Our top 10 customers contributed 34%, 44% and 45%, in 2009, 2008 and 2007, respectively, of total
worldwide revenue. There was no single customer that accounted for more than 10% of our revenue in 2009,
2008 or in 2007.
A significant portion of our sales is denominated in foreign currencies and changes in exchange rates
could impact results of operations. To minimize exposure to risks associated with fluctuations in currency
exchange rates, we attempt to denominate an amount of billings in a currency such that it would provide a hedge
against operating expenses being incurred in that currency. For additional information regarding how currency
fluctuations can affect our business, please refer to “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Quantitative and Qualitative Disclosures about Market Risk.”
We also experience seasonality in our business. Historically, these seasonal trends are most notable in
the summer months, particularly in Europe, when many businesses defer purchase decisions; however, given the
relatively small size of our business, the timing of any one or more large orders may temper or offset this
seasonality.
We organize our sales group and report our results in two vertical markets:
• Banking and Financial Institutions: Our traditional stronghold where we believe that there are
substantial opportunities for future growth.
• Enterprise and Application Security: Our second market that has grown into a robust source of
revenue and includes:
- Various corporations for network and remote access: We have enjoyed growing success in
this market and have developed new products that we believe will allow us to compete more
effectively for both SME (small and medium enterprises) as well as large corporations.
- Other application-specific markets: Our products are being used in more than 50 different
applications and we believe that we will be able to identify and leverage our knowledge with
those applications to increase our penetration in the more promising markets.
- E-commerce: Both business-to-business and business-to-consumer e-commerce are
becoming ever more important for us.
- E-government: Our revenue in this market is still small, but we are ready to take advantage of
the market’s evolution.
Our channel partners are critical to our success in the Enterprise and Application Security markets. We
serve this market exclusively via our two-tier indirect sales channel. We train employees of our resellers and
distributors on-site and in our offices. In addition, we have developed online video training software that allows
us to train people worldwide, resulting in cost and time benefits.
We invest in and support our channel with marketing and public relations actions. Distributors and
resellers get the tools they need to be successful, such as campaigns, case studies, marketing funds and more. We
expect our Enterprise and Application Security market to become even more successful in the future.
Backlog
Our backlog at December 31, 2009 was approximately $19.9 million compared to $29.1 million at
December 31, 2008. We anticipate that substantially all of the backlog at the end of 2009 will be shipped in 2010.
We do not believe that the specific amount of backlog at any point in time is indicative of the trends in our
markets or the expected results of our business. Given the relatively small size of our business and the large size
of potential orders, the backlog number can change significantly with the receipt of a new order or modification
of an existing order, for example, shipment timing.
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