Comverse Technology Announces Fourth Quarter and Full Fiscal 2011 Results
Posted on April 03, 2012 at 07:40 AM EDT
Files Form 10-K;
Conference Call to Discuss Selected Financial Information to be Held Today at 8:30 AM
NEW YORK, April 3, 2012 (GLOBE NEWSWIRE) -- Comverse Technology, Inc. ("CTI") (Nasdaq:CMVT) today announced its results for the fourth quarter ("Q4") and full fiscal year ended January 31, 2012 and filed its annual report on Form 10-K for the fiscal year ended January 31, 2012 ("fiscal 2011").
Consolidated Highlights: Below is selected consolidated financial information for Q4 and fiscal 2011 prepared in accordance with generally accepted accounting principles ("GAAP") and, where indicated, not in accordance with GAAP ("non-GAAP").
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") and Starhome B.V. ("Starhome"). As previously disclosed, CTI intends to distribute 100% of the shares of Comverse to CTI shareholders on a pro rata basis. For the current fiscal periods, CTI's reportable segments were Comverse Business Support Systems ("Comverse BSS"), Comverse Value-Added Services ("Comverse VAS"), and Verint. The results of operations of all of the other operations of the company, including the Comverse Mobile Internet operating segment ("Comverse MI"), Comverse's Netcentrex operations, Comverse's global corporate functions that support its business units, Starhome, miscellaneous operations and CTI's holding company operations are included in the column captioned "All Other" in the business segment information provided.
Charles Burdick, Chairman and Chief Executive Officer of CTI said, "We achieved operating income and positive operating cash flow for the quarter in each of our three subsidiaries, building a solid foundation to support our future success. The financial results of our Comverse subsidiary continue to reflect the impact of our business transformation and the revenue recognition of significant backlog attributable to prior fiscal years due to the application of current accounting policies. Although due to several project deferrals we did not experience expected fourth quarter strength in BSS customer solution order activity, our pipeline remains strong and we expect growth in BSS customer order activity. We continue to gain recognition as a leader in the emerging converged billing BSS segment, with additional new Comverse ONE customer wins along with marketplace and analyst endorsements. Comverse also continues to reinforce its leading market position in value-added services, and its new IP messaging platform and cloud-based Service Enablement Middleware solution has attracted considerable interest among service providers. Our majority-owned Verint and Starhome subsidiaries again delivered strong operating and market performance."
Comverse Subsidiary Highlights: Below is selected financial information for the three months and fiscal years ended January 31, 2012 and 2011 for the company's Comverse subsidiary.
Revenue from customer solutions for the quarters and fiscal years ended January 31, 2012 and 2011 was $103.8 million, $151.9 million, $448.8 million and $531.7 million, respectively, and maintenance revenue for such fiscal periods was $77.7 million, $83.9 million, $322.4 million and $331.1 million, respectively.
Comverse BSS and VAS Segment Highlights: Below is selected financial information for the three months and fiscal years ended January 31, 2012 and 2011 the company's Comverse BSS and Comverse VAS segments, as well as Comverse Other:
Revenue from Comverse BSS customer solutions for the quarters and fiscal years ended January 31, 2012 and 2011 was $41.6 million, $63.8 million, $210.0 million and $198.8 million, respectively, and BSS maintenance revenue for such fiscal periods was $45.0 million, $34.6 million, $155.0 million and $141.7 million, respectively.
Revenue from Comverse VAS customer solutions for the quarters and fiscal years ended January 31, 2012 and 2011 was $49.8 million, $73.9 million, $202.3 million and $284.8 million, respectively, and VAS maintenance revenue for such fiscal periods was $30.4 million, $46.0 million, $154.1 million and $176.1 million, respectively.
Revenue from customer solutions at Comverse Other for the quarters and fiscal years ended January 31, 2012 and 2011 was $12.5 million, $14.3 million, $36.4 million and $48.1 million, respectively, and maintenance revenue at Comverse Other for such fiscal periods was $2.3 million, $3.3 million, $13.3 million and $13.3 million, respectively.
In addition, costs and operating expenses at Comverse Other for the current fiscal year decreased by $113.6 million due to a significant decline in compliance-related professional fees incurred in connection with our efforts to file periodic reports and the successful implementation of the Phase II Business Transformation.
Starhome Highlights: Below is selected financial information for the three months and fiscal years ended January 31, 2012 and 2011 for the company's Starhome subsidiary.
Selected Balance Sheet Highlights: Below is selected balance sheet data as of January 31, 2012, October 31, 2011 and January 31, 2011 for CTI and its Comverse subsidiary:
During the fiscal quarter ended January 31, 2012, cash and cash equivalents, restricted cash and bank time deposits increased as a result of the $49.2 million of proceeds received from sales of substantially all of CTI's ARS portfolio. In addition, for the current fiscal quarter, Comverse had positive cash flows from operations.
Such increases were partially offset primarily by $18.3 million in payments under shareholder litigation settlement agreements, $7.5 million paid for professional fees, $7.0 million in restructuring payments and $5.5 million in strategic evaluation related costs. In addition, during the fiscal quarter ended January 31, 2012, CTI had cash outflows attributable to expenses associated with its holding company structure.
As of January 31, 2012 and 2011, Comverse had a backlog of approximately $982 million and $1,173 million, respectively. Approximately 55% of Comverse's backlog as of January 31, 2012 is not expected to be filled in the fiscal year ending January 31, 2013. Comverse defines "backlog" as projected revenue from signed orders not yet recognized, excluding revenue from maintenance agreements. Orders constituting backlog may be reduced, cancelled or deferred by customers. Approximately $20 million of the decline in backlog is attributable to order cancellations by customers due to project cancellations and project size reductions.
Verint is a majority-owned subsidiary of CTI. Its common stock is traded on the NASDAQ Global Market under the symbol "VRNT." As previously disclosed, CTI is exploring options to maximize the value of its equity interests in Verint for the benefit of the shareholders of both CTI and Verint. The ultimate execution of any alternative will take into account a number of considerations, including, without limitation, tax efficiency and, depending upon the circumstances, the separate recommendation of Verint's directors who are not directors or officers of CTI.
For additional information concerning Verint's results for the fourth quarter and full fiscal year ended January 31, 2012, please see the press release issued by Verint on March 28, 2012, which is available on Verint's website, www.verint.com and is included as an exhibit to the Current Report on Form 8-K filed by Verint with the Securities and Exchange Commission (the "SEC"), and Verint's annual report on Form 10-K for the fiscal year ended January 31, 2012.
Conference Call Information
We will be conducting a conference call today at 8:30 am Eastern Daylight Time to discuss our results for the fourth quarter and full fiscal year. An on-line, real-time webcast of the conference call will be available on our website at www.cmvt.com. The conference call can also be accessed live via telephone at 1-678-825-8369. Please dial in 5-10 minutes prior to the scheduled start time.
A replay of the call will be available, beginning at approximately 11:00 am on April 3, 2012, for thirty days, at 1-404-537-3406, and archived via webcast at www.cmvt.com. The replay access code is 66479453.
CTI evaluates its business by assessing the performance of each of its operating segments. CTI'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, 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 or remain current in periodic reporting obligations under the federal securities laws which are expected to be eliminated over time, certain non-cash charges, and certain other gains and charges.
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) strategic evaluation related costs; (vi) impairment of property and equipment (vii) impairment charges; (viii) litigation settlements and related costs; (ix) acquisition-related charges; (x) restructuring and integration charges; and (xi) certain other gains and charges. Compliance-related professional fees and compliance-related compensation and other expenses relate to fees and expenses incurred in connection with the Company's efforts to (a) complete current and previously issued financial statements and audits of such financial statements, (b) become current in its periodic reporting obligations under the federal securities laws, and (c) remediate material weaknesses in internal control over financial reporting. Compliance-related professional fees and compliance-related compensation and other expenses recorded for the fiscal year ended January 31, 2012 also relate to fees and expenses incurred in connection with the timely filing of certain periodic reports which fees and expenses are expected to be eliminated over time as the company enhances its internal finance and accounting personnel to replace external consultants currently assisting it in the preparation of periodic reports. Strategic evaluation related costs include financial advisory, accounting, tax, consulting and legal fees incurred in connection with the proposed Comverse share distribution.
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 income (loss) from operations, while, from time to time, certain segment performance adjustments may be presented as adjustments to revenue. In calculating Verint's segment performance for the fiscal year ended January 31, 2012, the presentation of segment revenue gives effect to segment revenue adjustments that represent the impact of fair value adjustments required under the FASB's guidance relating to acquired customer support contracts that would have otherwise been recognized as revenue on a stand-alone basis with respect to acquisitions consummated by Verint during the periods presented. Verint did not have segment revenue adjustments for the fiscal years ended January 31, 2011 and 2010.
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 "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.
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. The risks, uncertainties and other important factors that could cause actual results, performance and the timing of events to differ materially are described in CTI's filings with the SEC, including, without limitation, in Item 1A, "Risk Factors" and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the fiscal 2011 Form 10-K, and include the risk of diminishment in our capital resources as a result of, among other things, future negative cash flows from operations at Comverse, the continued incurrence of professional fees by CTI and Comverse in connection with the filing by CTI of periodic reports under the federal securities laws and the remediation of material weaknesses in internal control over financial reporting and the costs associated with the proposed distribution by CTI of 100% of the shares of Comverse, Inc. to CTI shareholders on a pro rata basis (the "Comverse share distribution"); the risk that if Comverse BSS customer solution order activity does not increase, Comverse's 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 cash position; risks related to the implementation of Comverse's strategy to expand its BSS business and pursue primarily higher margin VAS projects that resulted and may continue to result in lower VAS revenue, which may not be offset by increases in BSS revenue, if any; Comverse's advanced offerings may not be widely adopted by existing and potential customers and increases in revenue from Comverse's 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 the high percentage of orders typically generated late in the fiscal quarter and in the fiscal year, lengthy and variable sales cycles, competitive bidding process required by customers, focus on large customers and installations and short delivery windows required by customers; the effects of any potential decline or weakness in the global economy on the telecommunications industry, which may result in reduced information technology spending and reduced demand for our subsidiaries' products and services; risks associated with the proposed Comverse share distribution, including, the potential harm to our business as a result of management's distraction from our business due to our efforts to complete the Comverse share distribution, the incurrence of expenses in connection therewith in excess of our expectations, and the risks that if the Comverse share distribution is completed, each of CTI and Comverse will be smaller companies that may be subject to increased instability, our share price may decline if there are excessive sales of our stock by shareholders that invested in our company because of our holdings in Comverse and, prior to any elimination of the CTI holding company structure, our dependence on Comverse's performance of various transition services agreements necessary for our ongoing operations; the risk that we will not be able to complete the proposed Comverse share distribution due to our inability to satisfy the requisite conditions thereto, including, among others, receipt of Board and shareholder approval, completion of review process of the related registration statement by the SEC and, if required, a favorable ruling from the Internal Revenue Service; rapidly changing technology in our subsidiaries' industries and our subsidiaries' ability to enhance existing products and develop and market new products; our subsidiaries' dependence on contracts for large systems and large installations for a significant portion of their sales and operating results, including, among other things, the lengthy, complex and highly competitive bidding and selection process, the difficulty predicting their ability to obtain particular contracts and the timing and scope of these opportunities; 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; the potential incurrence by our subsidiaries of penalties if their solutions develop operational problems and significant costs to correct previously undetected operational problems in their complex solutions; and other risks described in the company's filings with the SEC. 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.
CONTACT: Paul D. Baker Comverse Technology, Inc. (212) 739-1060
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