Comverse Announces Fiscal 2012 Third Quarter Results

WAKEFIELD, Mass., Dec. 14, 2012 (GLOBE NEWSWIRE) -- Comverse, Inc. ("Comverse") (Nasdaq:CNSI) today announced its results for the three months ended October 31, 2012 and filed its Quarterly Report on Form 10-Q for the third quarter. The information presented in this press release supplements the preliminary results disclosed in Comverse's press release dated December 11, 2012.

Consolidated Highlights: Below is selected consolidated financial information for the three and nine months ended October 31, 2012 and 2011 prepared in accordance with generally accepted accounting principles ("GAAP") and, where indicated, not in accordance with GAAP ("non-GAAP").

Prior to October 31, 2012, the date of the Comverse Share Distribution (as defined below), Comverse, Inc. was a wholly-owned subsidiary of Comverse Technology, Inc. ("CTI") organized as a Delaware corporation in November 1997. On October 31, 2012, CTI completed its previously announced spin-off of Comverse as an independent, publicly-traded company, accomplished by means of a pro rata distribution of 100% of Comverse's outstanding common shares to CTI's stockholders (the "Share Distribution"). Upon completion of the Share Distribution, the Company's shares were listed, and began trading, on NASDAQ under the symbol "CNSI."

Comverse BSS and VAS Segment Highlights:

Comverse's reportable segments are Comverse Business Support Systems ("Comverse BSS") and Comverse Value-Added Services ("Comverse VAS"). The results of all of the other operations of the company, including the Comverse Mobile Internet operating segment ("Comverse MI"), Comverse's Netcentrex operations and Comverse's global corporate functions are included in the column captioned "Comverse Other" in the business segment information provided. As a result of the Starhome Disposition, Starhome's results of operations, including the gain on the sale of Starhome, are included in discontinued operations for the three and nine months ended October 31, 2012 and 2011.

Below is selected financial information for the three and nine months ended October 31, 2012 and 2011 for the Comverse BSS and Comverse VAS segments, as well as Comverse Other:

Selected Balance Sheet Highlights: Below is selected balance sheet data as of October 31, 2012 and July 31, 2012:

During the three months ended October 31, 2012, in connection with the completion of the Share Distribution, Comverse received from CTI a cash capital contribution of $38.5 million and all indebtedness payable by Comverse to CTI was settled through a capital contribution to our equity by CTI. In addition, we received $37.2 million of cash consideration from the disposition of Starhome, including $4.9 million held in escrow.

Segment Performance

Comverse evaluates its business by assessing the performance of each of its operating segments. Comverse's Chief Executive Officer is its chief operating decision maker ("CODM"). The CODM uses segment performance, as defined below, as the primary basis for assessing the financial results of the operating segments and for the allocation of resources. Segment performance, as the company defines it in accordance with the Financial Accounting Standard Board's ("FASB") guidance relating to segment reporting, is not necessarily comparable to other similarly titled captions of other companies.

Segment performance is computed by management as income (loss) 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 of goodwill; (vi) impairment of property and equipment; (vii) litigation settlements and related costs; (viii) restructuring charges; and (ix) certain other gains and charges. Compliance-related professional fees and compliance-related compensation and other expenses relate to fees and expenses recorded in connection with CTI's efforts to (a) complete certain financial statements and audits of such financial statements, (b) become current in periodic reporting obligations under the federal securities laws, and (c) remediate material weaknesses in internal control over financial reporting.

In evaluating each segment's performance, management uses segment revenue, which consists of revenue generated by the segment. Certain segment performance adjustments relate to expenses included in the calculation of income (loss) from operations, while, from time to time, certain segment performance adjustments may be presented as adjustments to revenue. We had no segment performance adjustments to revenue for any periods presented.

Presentation of Non-GAAP Financial Measures

Comverse provides Comverse Performance as additional information for its operating results. This measure is not in accordance with, or an alternative 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. Comverse believes that the presentation of this non-GAAP financial measure 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 this non-GAAP financial measure for reviewing financial results and for planning purposes. See "Consolidated Reconciliation of GAAP to Non-GAAP Financial Measures" below.

About Comverse, Inc.

Comverse, Inc. 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.

The Comverse, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=15512

Forward-Looking Statements

This press release includes "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. Such risks or uncertainties may give rise to future claims and increase exposure to contingent liabilities. These risks and uncertainties arise from (among other factors): the effect of the share distribution on our business relationships, operating results and business generally; general competitive, economic, political and market conditions and fluctuations; the risk that if our BSS customer solution order activity, including customer order activity for Comverse ONE, does not increase, our revenue and profitability would likely be materially adversely affected and we may be required to implement further cost reduction measures to preserve or enhance our operating results and cash position; our advanced offerings may not be widely adopted by existing and potential customers and increases in revenue from our advanced offerings, if any, may not exceed or fully offset potential declines in revenue from traditional solutions; the potential loss of business opportunities due to continued concern on the part of customers and partners, about our financial condition; the difficulty in predicting quarterly and annual operating results as a result of a high percentage of orders typically generated late in fiscal quarters and in fiscal years, lengthy and variable sales cycles, the competitive bidding process required by customers, our focus on large customers and installations and short delivery windows required by customers; the risk that the occurrence of implementation delays or performance issues in projects accounted for using the percentage-of-completion ("POC") method which are not provided for in our estimates for a given fiscal period may result in significant decreases in our revenue in subsequent fiscal periods; the risk that as we focus our efforts to further industrialize our BSS offerings to offer a stronger pre-packaged offering that improves ease of use and faster deployment times, near-term bookings may be impacted; the effects of any potential decline or weakness in the global economy (due to among other things, the downgrade of the U.S. credit rating and European sovereign debt crisis) on the telecommunications industry, which may result in reduced information technology ("IT") spending and reduced demand for our products and services; the risk that restructuring initiatives to align operating costs and expenses with anticipated revenue could have an adverse impact on our product development, project deployment and the timely execution of our business strategy and there is no assurance that these initiatives will reduce costs and the costs to implement them may offset any savings for a period of time; the risk of disruption in the credit and capital markets which may limit our ability to access capital; rapidly changing technology in our industries and our ability to enhance existing products and develop and market new products; the deferral or loss of one or more significant orders or customers or a delay in an expected implementation of such an order could materially and adversely affect our results of operations in any fiscal period, particularly if there are significant sales and marketing expenses associated with the deferred, lost or delayed sales; the potential incurrence of penalties if our solutions develop operational problems and significant costs to correct previously undetected operational problems in our complex solutions; our 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; the risk that increased competition could force us to lower our prices or take other actions to differentiate our products and changes in the competitive environment in the telecommunications industry worldwide could seriously affect our business; the risk that increased costs or reduced demand for our products resulting from compliance with evolving telecommunications regulations and the implementation of new standards may adversely affect our business and financial condition; the risk that the failure or delay in achieving interoperability of our products with our customers' systems could impair our ability to sell our products; third parties' infringement of our proprietary technology and the infringement by us of the intellectual property of third parties, including through the use of free or open source software; risks of certain of our contractual obligations exposing us to uncapped or other significant liabilities; the risk of diminishment in our capital resources as a result of, among other things, potential future negative operating results and cash flows; we may need to recognize future impairment of goodwill and intangible assets; risks associated with significant foreign operations and international sales, including the impact of geopolitical, economic and military conditions in foreign countries, conducting operations in countries with a history of corruption, entering into transactions with foreign governments and ensuring compliance with laws that prohibit improper payments; potential adverse fluctuations of currency exchange rates; and risks relating to our significant operations in Israel, including economic, political and/or military conditions in Israel and the Middle East, and uncertainties relating to research and development grants, tax benefits and the ability of our Israeli subsidiaries to pay dividends. These risks and uncertainties discussed above, as well as others, are discussed in greater detail in "Risk Factors" included in our Preliminary Information Statement filed as Exhibit 99.1 to our Registration Statement on Form 10 filed by us with the SEC on October 10, 2012 and in Part II, Item 1A "Risk Factors" of the Quarterly Report on Form 10-Q. for the quarterly period ended October 31, 2012. The documents and reports we file with the SEC are available through us, or our website, www.comverse.com, or through the SEC's Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) at www.sec.gov. We undertake no commitment to update or revise any forward-looking statements except as required by law.