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Comverse Announces Fiscal 2013 First Quarter Results; Conference Call to Be Held Today at 8:00 AM(GlobeNewswire Via Acquire Media NewsEdge) WAKEFIELD, Mass., June 13, 2013 (GLOBE NEWSWIRE) -- Comverse, Inc. ("Comverse") (Nasdaq:CNSI) today announced its results for the three months ended April 30, 2013. Consolidated Highlights: Below is selected consolidated financial information for the three months ended April 30, 2013 and 2012, prepared in accordance with generally accepted accounting principles ("GAAP"), except as noted. Comverse, Inc.:Three Months Ended April 30,(In thousands expect per share data)20132012 Total revenue $155,818 $137,750 Costs and expenses Cost of revenue 90,964 95,423 Research and development, net 16,080 19,072 Selling, general and administrative 36,710 45,458 Other operating expenses 4,221 680 Total costs and expenses 147,975 160,633 Income (loss) from operations 7,843 (22,883) Expense adjustments (2,116) 6,786 Comverse performance (1) 5,727 (16,097) Interest expense (188) (196) Depreciation and Amortization (4,569) (8,045) Operating Margin 5.0% (16.6)% Comverse performance margin 3.7% (11.7)% Net cash provided by (used in) operating activities - continuing operations (2) $9,863 $(45,699)(1) "Comverse performance" has not been prepared in accordance with GAAP. See "Presentation of Non-GAAP Financial Measures" below. (2) Includes approximately $10.9 million of cash proceeds related to an Italian VAT refund received on April 30, 2013. Philippe Tartavull, President & CEO of Comverse, Inc., said, "Comverse continues to focus on improving operating efficiency and performance. We have advanced our BSS delivery and professional services capabilities, successfully achieving 18 go-live deployments of Comverse ONE in the past 12 months, with customers gaining immediate business results. Additionally, we have invested in supporting our Kenan customer base offering multiple roadmap options that fit their business needs. Our VAS offering continues to demonstrate global market leadership, and we are focusing our roadmap and go-live activities in IP messaging, SaaS and hosting initiatives. As previously discussed, we are seeing good momentum in our managed services offering. Finally, we continue to build upon our strong financial position, and we now have $336 million in total cash, including restricted cash, and no debt." Comverse BSS and VAS Segment Highlights: Comverse's reportable segments consist of Comverse Business Support Systems ("Comverse BSS") and Comverse Value Added Services ("Comverse VAS"). The results of operations of all the other operations of the company, including the Comverse Mobile Internet operating segment, Comverse's Netcentrex operations, Comverse's global corporate functions that support its business units and Exalink, are included in the column captioned "Comverse Other" as part of Comverse's business segment presentation. As a result of the completion of the sale of Starhome on October 19, 2012, Starhome's results of operations are included in discontinued operations for the three months ended April 30, 2012. Below is selected financial information for the three months ended April 30, 2013 and 2012 for the Comverse BSS and Comverse VAS segments, as well as Comverse Other: Three Months Ended April 30, 20132012 (Dollars in thousands)SEGMENT RESULTS Comverse BSS Segment revenue $71,665 $57,680 Gross margin 39.3% 32.8% Income from operations 15,002 4,397 Operating margin 20.9% 7.6% Segment performance 15,799 9,101 Segment performance margin 22.0% 15.8%Comverse VAS Segment revenue $76,214 $65,922 Gross margin 39.8% 42.0% Income from operations 22,678 15,840 Operating margin 29.8% 24.0% Segment performance 22,686 16,613 Segment performance margin 29.8% 25.2%Comverse Other (a) Segment revenue $7,939 $14,148 Gross margin 80.0% (30.4)% Loss from operations (29,837) (43,120) Operating margin (375.8)% (304.8)% Segment performance (32,758) (41,811) Segment performance margin (412.6)% (295.5)%(a) Consists of all of our operations other than the Comverse BSS and Comverse VAS segments. Selected Balance Sheet Highlights: Below is selected balance sheet data as of April 30, 2013 and January 31, 2013: As of (In millions)April 30, 2013January 31, 2013 Cash and cash equivalents 268.5 262.9 Restricted cash (including long-term restricted cash) and bank time deposits 67.5 42.5 Total 336.0 305.4 On February 4, 2013, in connection with the closing of the Verint Merger Agreement, CTI placed $25.0 million in escrow to support indemnification claims to the extent made against us by Verint and any cash balance remaining in such escrow fund 18 months after the closing of the Verint Merger, less any claims made on or prior to such date, will be released to us. On April 30, 2013, the Company received an Italian VAT refund approximating $10.9 million, which was recognized as a reduction of service costs in the condensed consolidated statement of operations for the three months ended April 30, 2013. Conference Call Details Comverse will be conducting a conference call today, June 13, 2013 at 8:00 a.m. EDT. To listen to the conference call live, dial 678-825-8369. Please dial-in at least five minutes before the scheduled start time. A live webcast can be accessed at www.comverse.com. A replay of the call will be available, beginning at approximately 11:00 a.m. on June 13, 2013 for two days, at 404-537-3406, and archived via webcast at www.comverse.com. The replay access code is 93261649. Segment Performance We evaluate our business by assessing the performance of each of our operating segments. Our Chief Executive Officer is our 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 we define 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 property and equipment; (vi) litigation settlements and related costs; (vii) Italian VAT refund recovery recorded within operating expenses; (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 and our efforts to (a) complete financial statements and audits of such financial statements and (b) remediate material weaknesses in internal control over financial reporting. Presentation of Non-GAAP Financial Measures We provide Comverse performance, a non-GAAP financial measure, as additional information for our 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. We believe that the presentation of this non-GAAP financial measure provides useful information to investors regarding certain additional financial and business trends relating to our results of operations as viewed by management in monitoring our businesses, reviewing financial results and for planning purposes. See "Consolidated Reconciliation of GAAP to Non-GAAP Financial Measures" below. About Comverse, Inc. Comverse® is a leading provider of telecom business enablement solutions that support service innovation and smart monetization through a rich portfolio of BSS, Data Management and Monetization, Digital Services, Value Added Services, IP Communications and Professional Services. Comverse's extensive customer base spans more than 125 countries and covers over 450 communication service providers serving more than two billion subscribers. Our innovative product portfolio enables communication service providers to unleash the value of the network for their customers by making their networks smarter. Comverse's solutions are available in a variety of delivery models, including on-site, cloud, hosted and managed services. Comverse is ranked number 55 in PwC's Global 100 Software Leaders list. For more information, visit www.comverse.com 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 risk that our managed service offering may not grow as expected and the additional risks described in the sections entitled "Forward-Looking Statements" and Item 1A, "Risk Factors" and elsewhere in the company's Annual Report on Form 10-K filed with the SEC on May 16, 2013, or in subsequently filed periodic, current or other reports. We undertake no commitment to update or revise any forward-looking statements except as required by law. These risks and uncertainties discussed above, as well as others, are discussed in greater detail in our filings with the SEC. 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. COMVERSE, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS(UNAUDITED)(In thousands, except share and per share data) Three Months Ended April 30, 20132012 Revenue: Product revenue $52,904 $47,586 Service revenue 102,914 90,164 Total revenue 155,818 137,750 Costs and expenses: Product costs 27,634 25,833 Service costs 63,330 69,590 Research and development, net 16,080 19,072 Selling, general and administrative 36,710 45,458 Other operating expenses: Restructuring charges 4,221 680 Total costs and expenses 147,975 160,633 Income (loss) from operations 7,843 (22,883) Interest income 172 222 Interest expense (188) (196) Interest expense on notes payable to CTI — (109) Other expense, net (6,130) (1,437) Income (loss) before income tax provision 1,697 (24,403) Income tax provision (4,837) (2,194) Net loss from continuing operations (3,140) (26,597) Income from discontinued operations, net of tax — 429 Net loss (3,140) (26,168) Less: Net income attributable to noncontrolling interest — (154) Net loss attributable to Comverse, Inc. $(3,140) $(26,322) Weighted average common shares outstanding: Basic and diluted 22,005,506 21,923,241 Net loss attributable to Comverse, Inc. Net loss from continuing operations $(3,140) $(26,597) Income from discontinued operations, net of tax — 275 Net loss attributable to Comverse, Inc. $(3,140) $(26,322) Loss per share attributable to Comverse, Inc.'s stockholders: Basic and diluted (loss) earnings per share Continuing operations $(0.14) $(1.21) Discontinued operations — 0.01 Basic and diluted loss per share $(0.14) $(1.20) COMVERSE, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)(In thousands, except share and per share data) April 30,January 31, 20132013ASSETS Current assets: Cash and cash equivalents $268,502 $262,921 Restricted cash and bank time deposits 28,719 28,484 Accounts receivable, net of allowance of $8,173 and $8,841, respectively 114,170 123,612 Inventories 23,893 24,800 Deferred cost of revenue 30,972 34,031 Deferred income taxes 17,296 17,938 Prepaid expenses and other current assets 32,699 35,119 Total current assets 516,251 526,905 Property and equipment, net 38,852 37,442 Goodwill 149,777 149,987 Intangible assets, net 7,250 7,909 Deferred cost of revenue 64,647 72,121 Deferred income taxes 8,602 9,421 Other assets 79,222 54,005 Total assets $864,601 $857,790LIABILITIES AND EQUITY Current liabilities: Accounts payable and accrued expenses $174,008 $185,611 Deferred revenue 321,241 320,347 Deferred income taxes 7,484 7,689 Income taxes payable 3,694 8,538 Total current liabilities 506,427 522,185 Deferred revenue 135,656 143,725 Deferred income taxes 41,773 41,767 Other long-term liabilities 177,375 168,876 Total liabilities 861,231 876,553 Commitments and contingencies Equity: Comverse, Inc. stockholders' equity: Common stock, $0.01 par value - authorized, 100,000,000 shares; issued 22,188,312 and 21,934,569 shares, respectively; outstanding, 22,164,349 and 21,933,427 shares, respectively 222 219 Treasury stock, at cost, 23,963 and 1,142 shares, respectively (663) (33) Accumulated deficit (46,077) (42,937) Additional paid in capital 26,335 2,237 Accumulated other comprehensive income 23,553 21,751 Total equity 3,370 (18,763) Total liabilities and equity $864,601 $857,790 COMVERSE, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS(UNAUDITED)(In thousands) Three Months Ended April 30, 20132012 Cash flows from operating activities: Net cash provided by (used in) operating activities - continuing operations $9,863 $(45,699) Net cash used in operating activities - discontinued operations — (1,336) Net cash provided by (used in) operating activities 9,863 (47,035) Cash flows from investing activities: Purchase of property and equipment (3,038) (1,683) Net change in restricted cash and bank time deposits (25,000) 88 Proceeds from asset sales 47 265 Other, net — (75) Net cash used in investing activities (27,991) (1,405) Cash flows from financing activities: Decrease in net investment by CTI — (728) Borrowings under note payable to CTI — 500 CTI capital contribution 25,000 — Repayment of financing obligations — (29) Repurchase of common stock (629) — Proceeds from exercises of stock options 25 — Net cash provided by (used in) financing activities 24,396 (257) Effects of exchange rates on cash and cash equivalents (687) 545 Net increase (decrease) in cash and cash equivalents 5,581 (48,152) Cash and cash equivalents, beginning of period including cash from discontinued operations 262,921 193,192 Cash and cash equivalents, end of period including cash from discontinued operations 268,502 145,040 Less: cash and cash equivalents of discontinued operations, end of period — (31,055) Cash and cash equivalents, end of period $268,502 $113,985 Non-cash investing and financing transactions: Accrued but unpaid purchases of property and equipment $1,205 $405 Inventory transfers to property and equipment $1,544 $589 COMVERSE, INC. AND SUBSIDIARIES CONSOLIDATED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (Unaudited) Table of Reconciliation from GAAP Income (loss) from operations to Non GAAP Comverse PerformanceThree Months Ended April 30,(Dollars in thousands)20132012 Income (loss) from operations $7,843 $(22,883) Expense Adjustments: Stock-based compensation expense 3,094 1,431 Amortization of acquisition-related intangibles 649 4,074 Compliance-related professional fees 436 (136) Compliance-related compensation and other expenses 52 1,118 Impairment of property and equipment 38 22 Litigation settlements and related costs, net of recoveries (24) (230) Italian VAT refund recovery recorded within operating expenses (10,861) — Restructuring charges 4,221 680 Gain on sale of fixed asset (11) — Other, net 290 (173) Total expense adjustments (2,116) 6,786 Comverse performance $5,727 $(16,097) COMVERSE, INC. AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Unaudited) ComverseComverseComverse BSSVAS OtherConsolidated (In thousands)Three Months Ended April 30, 2013 Total revenue $71,665 $76,214 $7,939 $155,818 Total costs and expenses $56,663 $53,536 $37,776 $147,975 Income (loss) from operations $15,002 $22,678 $(29,837) $7,843 Computation of segment performance: Segment revenue $71,665 $76,214 $7,939 Total costs and expenses $56,663 $53,536 $37,776 Segment expense adjustments: Stock-based compensation expense — — 3,094 Amortization of acquisition-related intangibles 649 — — Compliance-related professional fees — — 436 Compliance-related compensation and other expenses 122 7 (77) Impairment of property and equipment 26 1 11 Litigation settlements and related cost, net of recoveries — — (24) Italian VAT refund recovery recorded within operating expenses — — (10,861) Restructuring charges — — 4,221 Gain on sale of fixed assets — — (11) Other, net — — 290 Segment expense adjustments 797 8 (2,921) Segment expenses 55,866 53,528 40,697 Segment performance $15,799 $22,686 $(32,758) Interest expense $— $— $(188) $(188) Depreciation and amortization $(1,486) $(1,220) $(1,863) $(4,569) COMVERSE, INC. AND SUBSIDIARIES BUSINESS SEGMENT INFORMATION (Unaudited) ComverseComverseComverse BSSVASOtherConsolidated (In thousands)Three Months Ended April 30, 2012 Total revenue $57,680 $65,922 $14,148 $137,750 Total costs and expenses $53,283 $50,082 $57,268 $160,633 Income (loss) from operations $4,397 $15,840 $(43,120) $(22,883) Computation of segment performance: Segment revenue $57,680 $65,922 $14,148 Total costs and expenses $53,283 $50,082 $57,268 Segment expense adjustments: Stock-based compensation expense — — 1,431 Amortization of acquisition-related intangibles 4,074 — — Compliance-related professional fees — — (136) Compliance-related compensation and other expenses 630 773 (285) Impairment of property and equipment — — 22 Litigation settlements and related costs, net of recoveries — — (230) Restructuring charges — — 680 Other, net — — (173) Segment expense adjustments 4,704 773 1,309 Segment expenses 48,579 49,309 55,959 Segment performance $9,101 $16,613 $(41,811) Interest expense $— $— $(196) $(196) Depreciation and amortization $(4,863) $(1,201) $(1,981) $(8,045)CONTACT: Paul D. Baker Comverse, Inc. 212 739-1060 Source: Comverse, Inc. 2013 GlobeNewswire, Inc. |