Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of VASCO Data Security International (NASDAQ:OSPN) jumped as much as 14% on Tuesday morning after the company beat analyst estimates for its first-quarter earnings by a wide margin. By 11:30 a.m., the stock was up about 10% from the previous close.
So what: VASCO reported $65.1 million of revenue during the first quarter, $10.6 million higher than the average analyst estimate and 67.7% higher year-over-year. The main driver of this revenue growth was a big increase in sales of VASCO's card readers to Rabobank, a Dutch multinational bank. Over 30% of VASCO's first-quarter revenue was derived from sales to Rabobank. Revenue from all other customers only increased by 15% year-over-year.
VASCO reported EPS of $0.34 for the first quarter, well above analyst estimates of $0.21 and significantly higher than the $0.09 in EPS VASCO reported in the first quarter of 2014. The vast increase in earnings was driven by both the strong revenue growth as well as a slight decline in operating expenses.
VASCO used its earnings report to increase its guidance for the full year. The company now expects revenue between $230 million and $240 million, compared to a range of $220 million to $230 million announced previously. The company also hiked its guidance for non-GAAP operating margin to a range of 19%-22%, up from 17%-20%.
Now what: VASCO had an incredible quarter, but having more than 30% of sales coming from a single customer is a risk that investors need to consider. Relatively weak revenue growth from all other customers is a concern as well.
VASCO's growth in the past has come in fits and starts. Revenue was essentially stagnant from 2007 to 2010, jumping in 2011 only to decline over the next few years. Revenue jumped again in 2014, and VASCO's guidance suggests that we'll see another jump in 2015. Given the history of the company, it's difficult to say how sustainable its current growth really is.
VASCO trades at about 30 times earnings, but with its erratic record of growth and a history of revenue and earnings declines following strong years, it's difficult to get too excited about VASCO's strong quarter.