Comverse Announces Fiscal 2012 Third Quarter Results

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").

Comverse, Inc.:              Three months ended     Nine months ended October
                             October 31,            31,
(In thousands except per     2012        2011       2012          2011
share data)
Total revenue                $ 185,200   $ 243,797  $ 494,176     $ 589,616
Costs and expenses:                                            
Cost of revenue              118,171     143,968    316,772       365,485
Research and development,    20,379      25,273     59,243        73,990
net
Selling, general and         39,756      43,217     119,253       133,836
administrative
Other operating expenses     5,582       1,838      6,689         14,888
Total costs and expenses     $ 183,888   $ 214,296  $ 501,957     $ 588,199
Income (loss) from           $ 1,312     $ 29,501   $ (7,781)     $ 1,417
operations
Expense adjustments          $ 12,333    $ 13,904   $ 26,294      $ 52,605
Comverse performance ^ (1)   $ 13,645    $ 43,405   $ 18,513      $ 54,022
                                                              
Interest expense             $ (218)     $ (283)    $ (594)       $ (754)
Depreciation and             $ (7,838)   $ (8,566)  $ (23,793)    $ (25,914)
amortization
                                                              
Operating margin             0.7%        12.1%      (1.6)%        0.2%
Comverse performance margin  7.4%        17.8%      3.7%          9.2%
                                                              
GAAP earnings (loss) from    $ (10,575)  $ 16,040   $ (31,071)    $ (26,220)
continuing operations
                                                              
GAAP earnings (loss) per
share fromcontinuing        $ (0.48)    $ 0.73     $ (1.42)      $ (1.20)
operations - Basic and
Diluted
                                                              
Weighted average common      21,923      21,923     21,923        21,923
shares outstanding
Basic and Diluted                                              
                                                              
Net cash provided by (used
in) operating activities -   $ 21,089    $ 3,163    $ (29,407)    $ (34,871)
continuing operations

^(1) "Comverse performance" has not been prepared in accordance with GAAP. See
"Presentation of Non-GAAP Financial Measures" below.
                                                              

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:

                                               
                     Three months ended October Nine months ended October 31,
                      31,
                     2012          2011         2012           2011
                     (Dollars in thousands)
SEGMENT RESULTS                                              
Comverse BSS                                                 
Segment revenue       $ 65,947      $ 117,731    $ 192,679      $ 278,403
Gross margin          29.4%         44.9%        33.7%          44.6%
Income from           6,860         30,413       25,889         56,261
operations
Operating margin      10.4%         25.8%        13.4%          20.2%
Segment performance   10,838        34,657       38,617         71,568
Segment performance   16.4%         29.4%        20.0%          25.7%
margin
Comverse VAS                                                 
Segment revenue       $ 111,457     $ 112,655    $ 268,668      $ 276,234
Gross margin          48.5%         50.6%        46.3%          45.2%
Income from           43,879        48,372       90,899         99,017
operations
Operating margin      39.4%         42.9%        33.8%          35.8%
Segment performance   43,879        48,667       91,815         100,553
Segment performance   39.4%         43.2%        34.2%          36.4%
margin
Comverse Other ^(a)                                          
Segment revenue       $ 7,796       $ 13,411     $ 32,829       $ 34,979
Gross margin          (82.5)%       (75.3)%      (36.5)%        (71.1)%
Loss from operations  (49,427)      (49,284)     (124,569)      (153,861)
Operating margin      (634.0)%      (367.5)%     (379.4)%       (439.9)%
Segment performance   (41,072)      (39,919)     (111,919)      (118,099)
Segment performance   (526.8)%      (297.7)%     (340.9)%       (337.6)%
margin
                                                            
^(a)Consists of all of our operations other than the Comverse BSS and
Comverse VAS segments.
                                                            

                    Three Months Ended October    Nine Months Ended October
                     31,                           31,
(In millions)        2012            2011          2012          2011
Comverse BSS                                                  
Customer Solutions   $32.2         $82.3       $92.4       $168.3
Maintenance          33.7            35.4          100.3         110.1
Total                65.9            117.7         192.7         278.4
Comverse VAS                                                  
Customer Solutions   77.3            69.7          170.5         152.5
Maintenance          34.2            42.9          98.2          123.7
Total                111.5           112.6         268.7         276.2
Comverse Other                                                
Customer Solutions   5.6             8.6           24.7          24.1
Maintenance          2.2             4.9           8.1           10.9
Total                7.8             13.5          32.8          35.0
                                                             
Total Customer       115.1           160.6         287.6         344.9
Solutions
Total Maintenance    70.1            83.2          206.6         244.7
Total Revenue        $185.2        $243.8      $494.2      $589.6
                                                             

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

(In millions)                          October 31, 2012 July 31, 2012
Cash and cash equivalents              $ 205.3          $ 116.3
Restricted cash and bank time deposits 43.1             37.6
Total                                  $ 248.4          $ 153.9

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.

                                                              
COMVERSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except share and per share data)
                                                              
                         Three Months Ended October Nine Months Ended October
                          31,                        31,
                         2012          2011         2012         2011
Revenue:                                                       
Product revenue           $70,926     $96,975    $170,465   $211,604
Service revenue           114,274       146,822      323,711      378,012
Total revenue             185,200       243,797      494,176      589,616
Costs and expenses:                                            
Product costs             36,367        47,003       88,300       105,572
Service costs             81,804        96,965       228,472      259,913
Research and development, 20,379        25,273       59,243       73,990
net
Selling, general and      39,756        43,217       119,253      133,836
administrative
Other operating expenses:                                      
Impairment of goodwill    5,605         —            5,605        —
Restructuring charges     (23)          1,838        1,084        14,888
Total other operating     5,582         1,838        6,689        14,888
expenses
Total costs and expenses  183,888       214,296      501,957      588,199
Income (loss) from        1,312         29,501       (7,781)      1,417
operations
Interest income           163           377          606          1,260
Interest expense          (218)         (283)        (594)        (754)
Interest expense on notes (205)         (204)        (455)        (386)
payable to CTI
Other income (expense),   147           (2,670)      (3,749)      (5,226)
net
Income (loss) before      1,199         26,721       (11,973)     (3,689)
income tax provision
Income tax provision      (11,774)      (10,681)     (19,098)     (22,531)
Net income (loss) from    (10,575)      16,040       (31,071)     (26,220)
continuing operations
Income from discontinued  21,831        2,509        26,542       5,713
operations, net of tax
Net income (loss)         11,256        18,549       (4,529)      (20,507)
Less: Net income
attributable to           (157)         (619)        (1,167)      (2,026)
noncontrolling interest
Net income (loss)
attributable to Comverse, $11,099     $17,930    $ (5,696)    $ (22,533)
Inc.
Weighted average common                                        
shares outstanding:
Basic and diluted         21,923,241    21,923,241   21,923,241   21,923,241
Net income (loss)
attributable to Comverse,                                      
Inc.
Net income (loss) from    $ (10,575)    $16,040    $ (31,071)   $ (26,220)
continuing operations
Income from discontinued  21,674        1,890        25,375       3,687
operations, net of tax
Net income (loss)
attributable to Comverse, $11,099     $17,930    $ (5,696)    $ (22,533)
Inc.
Earnings (loss) per share
attributable to Comverse,                                      
Inc.'s stockholders:
Basic and diluted                                              
earnings (loss) per share
Continuing operations     $ (0.48)      $0.73      $ (1.42)     $ (1.20)
Discontinued operations   0.99          0.09         1.16         0.17
Basic and diluted         $0.51       $0.82      $ (0.26)     $ (1.03)
earnings (loss) per share
                                                              

                                                                 
COMVERSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share and per share data)
                                                                 
                                                      October31, January31,
                                                      2012        2012
ASSETS                                                            
Current assets:                                                   
Cash and cash equivalents                              $205,250  $160,726
Restricted cash and bank time deposits                 28,655      28,893
Accounts receivable, net of allowance of $8,581 and    113,678     132,003
$9,168, respectively
Inventories                                            28,400      27,275
Deferred cost of revenue                               28,497      34,364
Deferred income taxes                                  10,849      8,441
Prepaid expenses and other current assets              40,275      53,074
Receivables from affiliates                            —           2,576
Current assets of discontinued operations              —           40,773
Total current assets                                   455,604     488,125
Property and equipment, net                            40,606      44,687
Goodwill                                               150,151     155,517
Intangible assets, net                                 9,996       22,034
Deferred cost of revenue                               88,501      107,878
Deferred income taxes                                  9,020       10,153
Restricted cash - long-term                            14,411      9,753
Other assets                                           54,955      55,839
Noncurrent assets of discontinued operations           —           8,961
Total assets                                           $823,244  $902,947
LIABILITIES AND EQUITY                                            
Current liabilities:                                              
Accounts payable and accrued expenses                  $173,224  $187,773
Deferred revenue                                       314,992     347,891
Deferred income taxes                                  7,839       8,742
Income taxes payable                                   8,416       2,647
Current liabilities of discontinued operations         —           27,984
Total current liabilities                              504,471     575,037
Deferred revenue                                       145,119     201,998
Deferred income taxes                                  39,512      40,595
Note payable to CTI                                    —           8,536
Other long-term liabilities                            162,523     147,438
Noncurrent liabilities of discontinued operations      —           5,430
Total liabilities                                      851,625     979,034
Commitments and contingencies                                     
Equity:                                                           
Comverse, Inc. stockholders' equity:                              
Common stock, $0.01 par value - authorized,
100,000,000 shares; issued and outstanding, 21,923,241 219         —
shares
Accumulated deficit                                    (53,714)    —
Net investment of CTI                                  —           (104,073)
Accumulated other comprehensive income                 25,114      20,999
Total Comverse, Inc. stockholders' equity              (28,381)    (83,074)
Noncontrolling interest                                —           6,987
Total equity                                           (28,381)    (76,087)
Total liabilities and equity                           $823,244  $902,947
                                                                 

                                                              
COMVERSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
                                                              
                                                Nine Months Ended October 31,
                                                2012           2011
Cash flows from operating activities:                          
Net cash used in operating activities -          $ (29,407)     $ (34,871)
continuing operations
Net cash (used in) provided by operating         (1,277)        8,492
activities - discontinued operations
Net cash used in operating activities            (30,684)       (26,379)
Cash flows from investing activities:                          
Proceeds from sale of Starhome BV., net of cash  6,340          —
sold $30.9 million
Purchase of property and equipment               (3,896)        (3,440)
Net change in restricted cash and bank time      (5,300)        (11,336)
deposits
Proceeds from asset sales                        309            1,419
Other, net                                       (386)          168
Net cash used in investing activities -          (2,933)        (13,189)
continuing operations
Net cash used in investing activities -          (297)          (416)
discontinued operations
Net cash used in investing activities            (3,230)        (13,605)
Cash flows from financing activities:                          
(Decrease) increase in net investment by CTI     (285)          3,041
Borrowings under note payable to CTI             9,500          500
Comverse Technology Inc., capital contribution   38,500         —
Repayment of bank loans, long-term debt and      (35)           (6,028)
other financing obligations
Net cash provided by (used in) financing         47,680         (2,487)
activities - continuing operations
Net cash provided by (used in) financing         —              —
activities - discontinued operations
Net cash provided by (used in) financing         47,680         (2,487)
activities
Effects of exchange rates on cash and cash       (1,708)        3,608
equivalents
Net increase (decrease) in cash and cash         12,058         (38,863)
equivalents
Cash and cash equivalents, beginning of period   193,192        213,038
including cash from discontinued operations
Cash and cash equivalents, end of period         205,250        174,175
including cash from discontinued operations
Less: cash and cash equivalents of discontinued  —              (29,285)
operations, end of period
Cash and cash equivalents, end of period         $205,250     $144,890
                                                              

                                                                 
COMVERSE, INC. AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
                                                                 
Table of Reconciliation from GAAP
Income (Loss) from                     Three Months Ended  Nine Months Ended
Operations to Non-GAAP Comverse        October 31,         October 31,
Performance
(In thousands)                         2012      2011      2012      2011
Income (loss) from operations          $1,312  $29,501 $ (7,781) $1,417
Expense Adjustments:                                              
Stock-based compensation expense       1,880     974       5,512     2,671
Amortization of acquisition-related    3,976     4,245     12,048    13,241
intangibles
Compliance-related professional fees   176       4,162     189       14,629
Compliance-related compensation and    288       1,575     1,841     5,482
other expenses
Impairment of goodwill                 5,605     —         5,605     —
Impairment of property and equipment   15        1,118     50        1,275
Litigation settlements and related     413       —         170       474
costs
Restructuring charges                  (23)      1,838     1,084     14,888
Other                                  3         (8)       (205)     (55)
Total expense adjustments              12,333    13,904    26,294    52,605
Comverse performance                   $13,645 $43,405 $18,513 $54,022
                                                                 

                                                             
COMVERSE, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
The tables below present information about total revenue, total costs and
expenses, income (loss) from operations, segment performance, interest expense
and depreciation and amortization, for the three and nine months ended October
31, 2012 and 2011:
                                                             
                           Comverse    Comverse     Comverse     Consolidated
                          BSS         VAS          Other        and
                                                                 Combined
                          (In thousands)
Three Months Ended October                                    
31, 2012
Total revenue              $65,947   $111,457   $7,796     $185,200
Total costs and expenses   $59,087   $67,578    $57,223    $183,888
Income (loss) from         $6,860    $43,879    $ (49,427)   $1,312
operations
Computation of segment                                        
performance:
Segment revenue            $65,947   $111,457   $7,796     
Total costs and expenses   $59,087   $67,578    $57,223    
Segment expense                                               
adjustments:
Stock-based compensation   —           —            1,880        
expense
Amortization of
acquisition-related        3,976       —            —            
intangibles
Compliance-related         —           —            176          
professional fees
Compliance-related
compensation and other     —           —            288          
expenses
Impairment of goodwill     —           —            5,605        
Impairment of property and —           —            15           
equipment
Litigation settlements and —           —            413          
related cost
Restructuring charges      —           —            (23)         
Other                      2           —            1            
Segment expense            3,978       —            8,355        
adjustments
Segment expenses           55,109      67,578       48,868       
Segment performance        $10,838   $43,879    $ (41,072)   
Interest expense           $ —         $ —          $ (218)      $ (218)
Depreciation and           $ (4,780)   $ (1,243)    $ (1,815)    $ (7,838)
amortization
                                                             

                                                              
COMVERSE, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (CONTINUED)
(Unaudited)
                                                              
                              Comverse   Comverse   Comverse     Consolidated
                               BSS        VAS        Other        and Combined
                              (In thousands)
Three Months Ended October 31,                                 
2011
Total revenue                  $117,731 $112,655 $13,411    $243,797
Total costs and expenses       $87,318  $64,283  $62,695    $214,296
Income (loss) from operations  $30,413  $48,372  $ (49,284) $29,501
Computation of segment                                         
performance:
Segment revenue                $117,731 $112,655 $13,411    
Total costs and expenses       $87,318  $64,283  $62,695    
Segment expense adjustments:                                   
Stock-based compensation       —          —          974          
expense
Amortization of
acquisition-related            4,245      —          —            
intangibles
Compliance-related             —          —          4,162        
professional fees
Compliance-related
compensation and other         (1)        295        1,281        
expenses
Impairment of property and     —          —          1,118        
equipment
Restructuring charges          —          —          1,838        
Other                          —          —          (8)          
Segment expense adjustments    4,244      295        9,365        
Segment expenses               83,074     63,988     53,330       
Segment performance            $34,657  $48,667  $ (39,919)   
Interest expense               $ —        $ —        $ (283)      $ (283)
Depreciation and amortization  $ (5,116)  $ (1,248)  $ (2,202)    $ (8,566)
                                                              

                                                              
COMVERSE, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (CONTINUED)
(Unaudited)
                                                              
                              Comverse   Comverse   Comverse      Consolidated
                             BSS        VAS        Other         and
                                                                  Combined
                             (In thousands)
Nine Months Ended October 31,                                  
2012
Total revenue                 $192,679 $268,668 $32,829     $494,176
Total costs and expenses      $166,790 $177,769 $157,398    $501,957
Income (loss) from operations $25,889  $90,899  $ (124,569) $ (7,781)
Computation of segment                                         
performance:
Segment revenue               $192,679 $268,668 $32,829     
Total costs and expenses      $166,790 $177,769 $157,398    
Segment expense adjustments:                                   
Stock-based compensation      —          —          5,512         
expense
Amortization of
acquisition-related           12,048     —          —             
intangibles
Compliance-related            —          —          189           
professional fees
Compliance-related
compensation and other        678        916        247           
expenses
Impairment of goodwill        —          —          5,605         
Impairment of property and    —          —          50            
equipment
Litigation settlements and    —          —          170           
related costs
Restructuring charges         —          —          1,084         
Other                         2          —          (207)         
Segment expense adjustments   12,728     916        12,650        
Segment expenses              154,062    176,853    144,748       
Segment performance           $38,617  $91,815  $ (111,919)   
Interest expense              $ —        $ —        $ (594)       $ (594)
Depreciation and amortization $ (14,443) $ (3,688)  $ (5,662)     $ (23,793)
                                                              

                                                              
COMVERSE, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (CONTINUED)
(Unaudited)
                                                              
                           Comverse     Comverse    Comverse      Consolidated
                          BSS          VAS         Other         and
                                                                  Combined
                          (In thousands)
Nine Months Ended October                                      
31, 2011
Total revenue              $278,403   $276,234  $34,979     $589,616
Total costs and expenses   $222,142   $177,217  $188,840    $588,199
Income (loss) from         $56,261    $99,017   $ (153,861) $1,417
operations
Computation of segment                                         
performance:
Segment revenue            $278,403   $276,234  $34,979     
Total costs and expenses   $222,142   $177,217  $188,840    
Segment expense                                                
adjustments:
Stock-based compensation   —            —           2,671         
expense
Amortization of
acquisition-related        13,241       —           —             
intangibles
Compliance-related         —            —           14,629        
professional fees
Compliance-related
compensation and other     2,066        1,531       1,885         
expenses
Impairment of property and —            5           1,270         
equipment
Litigation settlements and —            —           474           
related costs
Restructuring charges      —            —           14,888        
Other                      —            —           (55)          
Segment expense            15,307       1,536       35,762        
adjustments
Segment expenses           206,835      175,681     153,078       
Segment performance        $71,568    $100,553  $ (118,099) 
Interest expense           $ —        $ —       $ (754)     $ (754)
Depreciation and           $ (15,957) $ (3,281) $ (6,676)   $ (25,914)
amortization
                                                              

CONTACT: Paul D. Baker
         Comverse, Inc.
         (212) 739-1060

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