Comverse Technology Files Form 10-K for Fiscal 2010

NEW YORK, May 31, 2011 (GLOBE NEWSWIRE) -- Comverse Technology, Inc. ("CTI") (Pink Sheets:CMVT) today filed its annual report on Form 10-K for the fiscal year ended January 31, 2011 ("fiscal 2010").

Consolidated Highlights

• Revenue increased 5.8% to $1,623.4 million.
• GAAP net loss attributable to Comverse Technology, Inc. declined 51.4% to $132.3 million.
• GAAP basic loss per share attributable to Comverse Technology, Inc.'s shareholders declined from $1.33 to $0.64.
• GAAP diluted loss per share attributable to Comverse Technology, Inc.'s shareholders declined from $1.33 to $0.65.
• Non-GAAP net income attributable to Comverse Technology, Inc.¹ increased from $29.1 million to $140.0 million.
• Basic Non-GAAP earnings per share attributable to Comverse Technology, Inc.'s shareholders¹ increased from $0.14 to $0.68.
• Diluted Non-GAAP earnings per share attributable to Comverse Technology, Inc.'s shareholders¹ increased from $0.14 to $0.63.

Charles Burdick, Chairman and Chief Executive Officer of CTI said, "With this annual report on Form 10-K we are now up to date with the filing of our audited annual results. Despite many challenges during fiscal 2010, our consolidated revenue increased at both the Comverse and Verint segments and our operating performance improved."

CTI is a holding company that conducts business through its subsidiaries, principally its wholly-owned subsidiary, Comverse, Inc. ("Comverse"), and its majority-owned subsidiaries, Verint Systems Inc. ("Verint"), Starhome B.V. ("Starhome") and, prior to its sale during fiscal 2010, Ulticom, Inc. For fiscal 2010, CTI's reportable segments were Comverse, Verint and All Other.

Comverse Segment

• Revenue increased 8.5% to $860.2 million.
• GAAP loss from operations decreased 72.1% to $59.8 million.
• Segment performance² of $74.0 million, representing a segment performance margin of 8.6%, compared to a segment performance loss of $41.8 million for the prior fiscal year.

Revenue. Revenue for the Comverse segment was $860.2 million for fiscal 2010, an increase of 8.5% compared to $793.0 million for the fiscal year ended January 31, 2010 ("fiscal 2009"). Revenue from Value-Added Services ("VAS") was $519.7 million for fiscal 2010, an increase of 17.1% compared to $443.9 million for fiscal 2009. Revenue from Business Support Systems ("BSS") was $340.5 million for fiscal 2010, a decrease of 2.5% compared to $349.1 million for fiscal 2009.

Revenue from customer solutions (licenses, hardware professional services and training) was $529.2 million for fiscal 2010, an increase of 13.6% compared to $465.7 million for fiscal 2009. Maintenance revenue was $331.1 million for fiscal 2010, an increase of 1.2% compared to $327.3 million for fiscal 2009.

Loss from operations. Loss from operations was $59.8 million for fiscal 2010, a decrease of 72.1% compared to $214.2 million for fiscal 2009.

Financial Condition of CTI and the Comverse Segment

As of January 31, 2011, CTI and the Comverse segment had combined cash, cash equivalents, bank time deposits and restricted cash of approximately $457.6 million, compared to approximately $446.4 million as of January 31, 2010. Restricted cash aggregated $67.9 million as of January 31, 2011, compared to $83.4 million as of January 31, 2010. Cash, cash equivalents, bank time deposits and restricted cash excludes auction rate securities ("ARS"). As of January 31, 2011, CTI had $94.4 million aggregate principal amount of ARS valued as of such date at $72.4 million. As previously disclosed, proceeds from sales and redemptions of ARS (including interest thereon) are restricted under the terms of a consolidated shareholder class action settlement agreement. As of January 31, 2011, CTI and the Comverse segment had combined indebtedness of approximately $8.2 million.

Management forecasts that available cash and cash equivalents will be sufficient to meet the liquidity needs, including capital expenditures, of CTI and the Comverse segment for the foreseeable future. To further enhance the cash position of CTI and the Comverse segment, CTI continues to evaluate capital raising alternatives.

Management's current forecast is based upon a number of assumptions believed by management to be reasonable. These assumptions include the use of shares of CTI's common stock to satisfy $82.5 million of the $112.5 million payment obligation due by November 15, 2011 under the terms of the consolidated shareholder class action settlement agreement. Should one or more of the assumptions prove incorrect, CTI and the Comverse segment may need to pursue capital raising to avoid a shortfall in the cash required to support working capital needs. CTI's ability to use shares of its common stock to satisfy $82.5 million of its payment obligations under the shareholder class action settlement agreement is conditioned upon the listing of such shares on a national securities exchange on or before the payment date of November 15, 2011.

Verint Segment

Verint is a majority-owned subsidiary of CTI. Its common stock is traded on the NASDAQ Global Market under the symbol "VRNT." 

For additional information concerning Verint's results for the fourth quarter and fiscal 2010, please see the press release issued by Verint on April 5, 2011, which is available on Verint's website, www.verint.com and was also included as an exhibit to the Current Report on Form 8-K filed by Verint with the Securities and Exchange Commission (the "SEC") on April 5, 2011, and Verint's annual report on Form 10-K for fiscal 2010 which was filed by Verint with the SEC on April 6, 2011.

Filing Timeline Update

CTI expects to file its Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2011 in the second half of June 2011 and such additional Quarterly Reports on Form 10-Q as may be required of it to become current in its periodic reporting obligations under the federal securities laws as soon as practicable thereafter. This timeline is subject to completion of various milestones in our financial close, reporting and disclosure processes.

Segment Performance

CTI uses segment performance, as defined below, as the primary basis for assessing the financial results of its segments and for the allocation of resources. Segment performance, as defined by CTI's management in accordance with the FASB's guidance relating to segment reporting, is not necessarily comparable to other similarly titled captions of other companies. Segment performance, as defined by management, represents operating results of a segment without the impact of significant expenditures incurred by the segment in connection with the efforts to become current in periodic reporting obligations under the federal securities laws, certain non-cash charges, and certain other insignificant gains and charges.

Segment performance is computed by management as (loss) income from operations adjusted for the following: (i) stock-based compensation expense; (ii) amortization of acquisition-related intangibles; (iii) compliance-related professional fees; (iv) compliance-related compensation and other expenses; (v) impairment charges; (vi) litigation settlements and related costs; (vii) acquisition-related charges; (viii) restructuring and integration charges; and (ix) certain other insignificant gains and charges. Compliance-related professional fees and compliance-related compensation and other expenses relate to fees and expenses incurred in connection with (a) our efforts to complete current and previously issued financial statements and audits of such financial statements and (b) our efforts to become current in our periodic reporting obligations under the federal securities laws.

In evaluating each segment's performance, management uses segment revenue, which consists of revenue generated by the segment, including intercompany revenue. Certain segment performance adjustments relate to expenses included in the calculation of (loss) income from operations, while, from time to time, certain segment performance adjustments may be presented as adjustments to revenue. In the calculation of Comverse's segment performance for the fiscal year ended January 31, 2010 disclosed in CTI's previously filed Annual Report, the presentation of segment revenue gave effect to a segment revenue adjustment attributable to a patent litigation settlement. During the first quarter of the fiscal year ending January 31, 2012, management ceased utilizing this patent litigation segment revenue adjustment in assessing the financial results of the Comverse segment and for the allocation of resources. Accordingly, we have omitted this segment revenue adjustment from the presentation of Comverse's segment performance for all fiscal years presented in this press release.

For additional information concerning segment performance, see Note 23 to the Comverse Technology, Inc. and Subsidiaries Consolidated Financial Statements included in the fiscal 2010 Form 10-K.

Presentation of Non-GAAP Financial Measures

CTI provides Non-GAAP net income attributable to Comverse Technology, Inc. and Non-GAAP earnings per share attributable to Comverse Technology, Inc.'s shareholders as additional information for its operating results. These measures are not in accordance with, or alternatives for, GAAP financial measures and may be different from, or not comparable to similarly titled or other non-GAAP financial measures used by other companies. CTI believes that the presentation of these non-GAAP financial measures provides useful information to investors regarding certain additional financial and business trends relating to its results of operations as viewed by management in monitoring the company's businesses. In addition, management uses these non-GAAP financial measures for reviewing financial results and for planning purposes. See "Comverse Technology, Inc. and Subsidiaries Consolidated Reconciliation of GAAP to Non-GAAP Financial Measures" below.

About Comverse Technology, Inc.

Comverse Technology, Inc., through its wholly-owned subsidiary Comverse, is the world's leading provider of software and systems enabling converged billing and active customer management and value-added voice, messaging and mobile Internet services. Comverse's extensive customer base spans more than 125 countries and covers over 450 communication service providers serving more than two billion subscribers. CTI also holds majority ownership positions in Verint (Nasdaq:VRNT) and privately-held Starhome.

The Comverse Technology logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7454

Forward-Looking Statements

Certain statements appearing in this press release constitute "forward-looking statements." Forward-looking statements include financial projections, statements of plans and objectives for future operations, statements of future economic performance, and statements of assumptions relating thereto. In some cases, forward-looking statements can be identified by the use of terminology such as "may," "expects," "plans," "anticipates," "estimates," "believes," "potential," "projects," "forecasts," "intends," or the negative thereof or other comparable terminology. By their very nature, forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results, performance and the timing of events to differ materially from those anticipated, expressed or implied by the forward-looking statements in this press release. These and other risks, uncertainties and other important factors are described in CTI's recent filings with the SEC, including, without limitation, in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the fiscal 2010 Form 10-K, and include, among other things, the following risks and uncertainties:  

• the risk of diminishment in capital resources as a result of negative cash flows from operations at the Comverse segment or the continued incurrence of significant expenses by CTI and the Comverse segment in connection with CTI's efforts to become current in its periodic reporting obligations and to remediate material weaknesses in internal control over financial reporting;
• the risk that the outcome of the review by the SEC of the adverse initial decision of the Administrative Law Judge in the administrative proceeding initiated by the SEC on March 23, 2010, pursuant to Section 12(j) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to revoke the registration of CTI's common stock under the Exchange Act due to CTI's failure to become current in its periodic reporting obligations under the federal securities laws, or any appeal therefrom, will be adverse to CTI. Should the registration of CTI's common stock be suspended or revoked, brokers, dealers and other market participants would be prohibited from buying, selling, making market in, publishing quotations of, or otherwise effecting transactions with respect to, such common stock and, as a result, public trading of CTI's common stock would cease and investors would find it difficult to acquire or dispose of CTI's common stock or obtain accurate price quotations for CTI's common stock, which could result in a significant decline in the value of CTI's common stock, and business may be adversely impacted, including, without limitation, an adverse impact on CTI's ability to issue stock to raise equity capital, engage in business combinations or provide employee incentives;
• CTI may be unable to relist its common stock on the NASDAQ Stock Market or another national securities exchange;
• the effects of any potential decline or weakness in the global economy on the telecommunications industry;
• the ability to operate effectively in a highly competitive industry with many participants;
• continued diversion of management's attention from business operations as a result of CTI's efforts to become current in its periodic reporting obligations under the federal securities laws and to remediate material weaknesses;
• potential loss of business opportunities due to continued concern about CTI's financial condition and its extended delay in becoming current in its periodic reporting obligations;
• constraints on CTI's ability to obtain new debt or equity financing or engage in business combinations due to CTI not being current in its periodic reporting obligations;
• the ability of the Comverse segment to successfully implement a second phase of restructuring measures that focuses on process reengineering to maximize business performance, productivity and operational efficiency;
• rapidly changing technology and the ability of CTI's subsidiaries to enhance existing products and develop and market new products;
• dependence on contracts for large systems and large installations for a significant portion of sales and operating results, including the lengthy and complex bidding and selection process, the difficulty predicting their ability to obtain particular contracts and the timing and scope of these opportunities;
• operating results are difficult to predict as a result of lengthy and variable sales cycles, focus on large customers and installations, short delivery windows required by customers, and the high percentage of revenue typically generated late in the fiscal quarter;
• the potential incurrence by CTI's subsidiaries of significant costs to correct previously undetected operational problems in their complex products;
• CTI's subsidiaries' dependence on a limited number of suppliers and manufacturers for certain components and third-party software could cause a supply shortage and/or interruptions in product supply;
• increased competition could force CTI's subsidiaries to lower their prices or take other actions to differentiate their products and changes in the competitive environment in the telecommunications industry worldwide could seriously affect the Comverse segment's business;
• increased costs or reduced demand for the Comverse segment's products resulting from compliance with evolving telecommunications regulations and the implementation of new standards may adversely affect CTI's business and financial condition;
• the failure or delay in achieving interoperability of the Comverse segment's products with its customers' systems could impair its ability to sell its products;
• the competitive bidding process used to generate sales requires CTI's subsidiaries to expend significant resources with no guarantee of recoupment;
• the Comverse segment's subsidiaries' inability to maintain relationships with value added resellers, systems integrators and other third parties that market and sell their products could adversely impact CTI's financial condition and results of operations;
• risks associated with significant foreign operations, including significant operations in Israel, and international sales; and
• the ability of Verint to pay its indebtedness as it becomes due and comply with the financial and other restrictive covenants contained therein.

The documents and reports we file with the SEC are available through CTI, or its website, www.cmvt.com, or through the SEC's Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) at www.sec.gov. CTI undertakes no commitment to update or revise any forward-looking statements except as required by law.

¹ "Non-GAAP net income attributable to Comverse Technology, Inc." and "Non-GAAP earnings per share attributable to Comverse Technology, Inc.'s shareholders" have not been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). See "Presentation of Non-GAAP Financial Measures" and "Comverse Technology, Inc. and Subsidiaries Consolidated Reconciliation of GAAP to Non-GAAP Financial Measures" below.

² For additional information concerning the computation of "segment performance" and the reasons for using this financial measure, see "Segment Performance" below and Note 23 to the Comverse Technology, Inc. and Subsidiaries Consolidated Financial Statements included in the fiscal 2010 Form 10-K. Segment performance margin reflects segment performance as a percentage of segment revenue.