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What happened

Shares of VASCO Data Security International (NASDAQ:OSPN) took a drastic haircut on Wednesday morning, falling as much as 22% in early trading before stabilizing at a 15% drop. The data security specialist reported preliminary third-quarter results on Tuesday night, along with reduced full-year guidance targets.

So what

For the third quarter, VASCO now expects to see adjusted earnings of roughly $0.08 per diluted share and sales near $43 million. The company did not originally offer any guidance for this period in the second-quarter report. For what it's worth, a grand total of two analyst firms were looking for at least $51 million in third-quarter sales. VASCO looks likely to top their highest earnings forecast at $0.05 per share, though.

But the real damage came from the guidance department after all.

Management did reinforce its full-year guidance targets three months ago, aiming for total sales of approximately $210 million and adjusted operating margins in the 11% range. That forecast has been slashed to full-year sales near $190 million. The operating margins is now seen heading "lower," though management declined to pin a firm number on the new trend.

Now what

CEO Kendall Hunt pinned the disappointing year-end performance on slow orders from European banks. Under pressure to update their digital transaction and security operations, some of VASCO's largest customers are pushing back their orders for security tools into future quarters. The tech teams need to sketch out their new strategies, after all.

The Europe, Middle East, and Africa (EMEA) segment accounts for about half of VASCO's quarterly sales. Softness in that crucial market can and will change the company's fortunes.

The full earnings report is scheduled for Oct. 27. Come back then for a complete report of VASCO's European issues and what management is doing about them.

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