OSPN
#Okay.
That's a good question.
It's a concept that I don't understand myself.
I have always been one that invest my money in stories that I like, instead of the opposite.
And certainly shorting is legitimate, there is nothing against the law at it.
So it's there and so the way we combat shorts, the only way we can do it, is we don't get angry, I don't get angry at anybody that's shorting our stock, as I said it's legitimate.
The only thing we can do is perform.
So, that's what we focus on is building the business, managing the business well, and making very good profits and very good cash flow.
<UNK> I would offer the interpretation that we haven't been widely successful in creating term licenses or recurring revenue.
With those products I think those do provide good opportunities for moving from a sales and license model, to a recurring revenue model but a lot of the customers we have talked to, have been existing customers and they are more familiar with sales and licensing than they are term revenue.
So the deferred revenue balances that you're seeing today are primarily due to maintenance and items that didn't meet revenue recognition criteria at the end of the quarter.
That's right.
Well I think when we first captured that phrase, sustainable repeatable revenue, and started describing that after three to five years, they would do something different.
I think it's extended just a little bit because when we first started describing this 10 years ago or so, we talked about three to five years and a fairly long refresh cycle.
Rabobank is an example, is doing a very large refresh cycle in a relatively short period of time and it's because they have done it several times, they know what they are doing and so.
Yes <UNK>, I would say that the cycle hasn't changed a lot may be increasing slightly but the speed with which they do the rollout has accelerated.
So when they do a major rollout, Rabo being a prime example, are doing it very quickly especially considering the volume of units that they're deploying to their customer base.
I would think they started more than five years ago and probably went over six to eight quarters instead of four.
Again, those are subjective numbers, those are off the top of my head, I don't have that hard data in front of me.
I don't have any particular update on that, <UNK>, sorry.
Please remember that one of the misconcepts is that, or maybe a misconcept, so I'll try to clear it up is that when one of our banks does a refresh like this, perhaps they take two years to replace what they had before, perhaps they take six quarters, five quarters, it is really a daunting thing to distribute that many 1 million, 2 million, 5 million DIGIPASS devices, that's a daunting task.
And so as you look at the business and how it grows, we have a lot of opportunities where like for DIGIPASS for Apps, IDENTIKEY Risk Manager, these are incremental to what the companies already have.
So it offers the potential of another multiple refresh cycle.
If you think about all the banks we have, they don't all get together and have a meeting and decide that they want to refresh and replace what they have.
They all have their own time frames, they all their own plans, so as we add more banks to our portfolio of customers, by definition it's going to smooth out, as we add more products that are subscription based or a time based, term license based, that's going to introduce more predictability in our model.
As we look for companies that we think can be additive to what we sell to that banking channel, many of the products that are out there today are all subscription or term license, so over time our model is going to change, our revenue model is going to change.
Yes.
I'd like to speak about that anecdotally, because in all the cases of these refresh cycles, it's not like they refresh everything and then stop, there always seems to be a tail because the banks add more customers, so there's always a stream of orders, not nearly as big of course as the major refresh, but there is always a stream of additional orders.
HSBC is an example, was a 10% customers for many years, than they had that major roll out over about six quarters in around 2011.
HSBC U.K. participated for the first time with a purchase of 4.5 million units and HSBC continues to be a meaningful customer because of the tail continuing to order products for new customers.
I think part of the answer there <UNK> is, we don't know what the follow on orders would be.
With Rabobank, they continue to order the old technology that they had, at the same time they're ordering the new technology.
Then the other way they were rolling it out was new technology to existing customers, their most important customers, the old technology to new customers that were coming on, only with the idea that in a short time they were going to replace that old technology with the new but they just needed to buy more.
So it's very common as <UNK> was saying for them to have a base level of purchases that continue year-after-year after that initial roll out.
Well, in the prepared remarks we said that it was a decline in the second quarter, and we said it was a decline of less than 10% on a year-to-date basis it was still an increase but an increase of less than 5%.
The issues surrounding that particular disclosure are that it's also obviously impacted by currency exchange.
When we get to that number or when we talk about Rabo, Rabo is generally a dollar denominated transaction, but most of the currencies falls to that other group.
So if you were to put that $5 million or even the $2.5 million per quarter into the other group, it looks different.
So when you do consider that group, consider currency effects, also when you consider that group, consider the fact that we have different volumes of new customers coming on in each year and when you look at last year's results, you see the increase from Q1 to Q2, that was due to large part to new customers coming on, so the comp in Q2 is more difficult, it's also attributable to a significant degree to those new customers of which would not be buying more new product now.
So there is a number of factors that go into that other group and I think <UNK>'s comments in his prepared remarks are key that we've always got new customers coming onboard with different roll out cycles, we always have refresh that because of our sales and licensing model, the comparisons in any given quarter are quite difficult to understand to explain.
So for us that's why we give annual guidance, the annual number that includes all of the refreshes, all of the new customers, all of the maintenance makes more sense to us than a quarter-to-quarter comparison.
Sure, thanks <UNK>.
Well, as far as the U.S. is concerned, I think I've addressed this before.
The U.S. has a different attitude, a different culture about security and about the need for security.
Now that's kind of an old statement.
I think that the U.S. has finally awakened and they know that they have to do something to protect not only their employees but their customers, their corporate customers, their retail customers.
HSBC is an example, about nine months ago stood up, said that all of their retail customers in North America had to use a DIGIPASS 275, that's a model of our little DIGIPASS calculator, or the software equivalent, same functionality, that the customer could download to their smartphone as an App.
So, other banks are also doing the same thing.
Unfortunately I got something, I got a notice an email from one of my banks, I think I have three different banks personally, and they said that they are going to distribute this very strong security and they described that you have to pick out an emblem or a picture and you have to respond and answer questions like, what's your first car, and I looked at that and I thought how incredible.
So, we are still not here.
We are still not here in the United States although they are making the right moves.
Mobile is driving our business in the United States.
That's good because more and more of our current banks and we have a large number of banks, over 300 as clients.
But it's mostly for the corporate side.
The mobile banking is for the retail or the consumer.
So we are seeing many projects as I described before, the RFI, the proof-of-concepts and we're involved in a lot of them.
And as in the past we expect to win our fair share.
So that's what's going to change the nature of our business in United States.
All right.
Well, everybody thanks for attending as usual and have a good afternoon to all the people, all the VASCO people around the world.
Thanks as always for your hard efforts, your positive attitude and professionalism.
Good afternoon everybody.
