Exhibit 99.2
COMVERSE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On April 29, 2015, Comverse, Inc., a Delaware corporation (the “Company”), and certain of its subsidiaries (together with the Company, the “Sellers”) entered into an Asset Purchase Agreement (as
amended, the “Purchase Agreement”) with Amdocs Limited, a Guernsey company (the “Purchaser”). Pursuant to the Purchase Agreement, the Sellers agreed to sell substantially all of the Sellers’ assets required for operating the Company’s converged, prepaid and postpaid billing and active customer management systems for wireless, wireline, cable and multi-play communication service providers (the “BSS Business”) to the Purchaser and the Purchaser agreed to assume certain post-closing liabilities of the Company (the “Asset Sale”).
The Asset Sale was completed on July 2, 2015. The total cash purchase price payable by the Purchaser to the Company in connection with the Asset Sale is approximately $273 million, subject to various purchase price adjustments, of which an aggregate of $6.5 million will be paid upon certain deferred closings. Upon the closing, $26 million of the purchase price was deposited into escrow to fund potential indemnification claims and certain adjustments for a period of twelve (12) months following the closing. The remainder of the purchase price was paid by the Purchaser to the Company at the closing.
In connection with the Purchase Agreement, the Sellers and Purchaser have also entered into a Transition Services Agreement (the “TSA”), which provides for support services between the Sellers and Buyer in connection with the transition of the BSS Business to Purchaser, for various periods up to 12 months following the closing of the Asset Sale.
On June 14, 2015, the Company, entered into an agreement (the “Acision Purchase Agreement”) with Bergkamp Coöperatief U.A., a cooperative with excluded liability formed under the laws of the Netherlands (the “Seller”) relating to the sale and purchase of Acision Global Limited, a private company formed under the laws of the United Kingdom (the “Target”). Pursuant to the Acision Purchase Agreement, the Company will acquire the Target for a purchase price consisting of $135 million in cash, certain earnout payments and 3.13 million shares of the Company’s common stock, par value $0.01 per share (the “Consideration Shares”) which will be issued in a private placement transaction conducted pursuant to Section 4(a)(2) or Regulation S under the Securities Act of 1933, as amended, subject to certain adjustments. The Company expects to use a significant portion of the cash proceeds received upon completion of the BSS Business Asset Sale to finance the cash portion of the purchase price of the Acision Purchase Agreement and the remainder for working capital and to maintain sufficient liquidity. The impact of the expected Acision Purchase Agreement is not reflected in the pro forma financial statements.
In the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 2015, the BSS Business met the criteria to be classified as held for sale as well as discontinued operations. As such, the BSS Business was reclassified and reflected as discontinued operations on the consolidated statements of operations for the three months ended April 30, 2015 and 2014. The estimated assets and liabilities related to BSS Business were reclassified and reflected as available for sale on the consolidated balance sheet at April 30, 2015.
The unaudited pro forma consolidated financial statements of Comverse, Inc. presented in this Exhibit were derived from the Company’s historical consolidated financial statements and are being presented to give effect to this sale of assets.
The unaudited pro forma condensed consolidated balance sheet assumes the sale occurred on April 30, 2015. The unaudited pro forma condensed consolidated statements of income are presented as if the sale occurred on February 1, 2012. The following unaudited pro forma condensed consolidated financial statements should be read in conjunction with our historical financial statements and accompanying notes.
The pro forma adjustments are based on the best information available and assumptions that management believes are (a) directly attributable to the sale, (b) are factually supportable and (c) with respect to the statement of operations, have a continuing impact on the consolidated results. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial information.
The pro forma adjustments for the unaudited consolidated balance sheet as of April 30, 2015 and the unaudited consolidated statements of operations for the three months ended April 30, 2015 also includes adjustments to reflect changes to the previously reported financial statements upon completion of the final terms of the Asset Sale.
The unaudited pro forma condensed consolidated financial information is provided herein for illustrative purposes only and is not necessarily indicative of the results of operations that would have occurred if the sale had occurred on February 1, 2012. The unaudited pro forma condensed consolidated financial information does not reflect future events that may occur after the sale, including potential general and administrative cost savings.
COMVERSE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share data)
April 30, 2015 | ||||||||||||
Historical(1) | Pro Forma Adjustments | Pro Forma | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 136,096 | $ | 238,814 | (a) | $ | 374,910 | |||||
Restricted cash and bank deposits | 36,054 | 36,054 | ||||||||||
Accounts receivable, net of allowance of $2,952 and $4,403, respectively | 33,914 | 6,868 | (b) | 40,782 | ||||||||
Inventories | 17,550 | 17,550 | ||||||||||
Deferred cost of revenue | 3,481 | 1,322 | (b) | 4,803 | ||||||||
Deferred income taxes | 14,314 | 14,314 | ||||||||||
Prepaid expenses | 12,635 | (1,089 | ) | (b) | 11,546 | |||||||
Other current assets | 13,758 | 1,410 | (b) | 15,168 | ||||||||
Assets held for sale | 154,829 | (154,829 | ) | (d) | — | |||||||
Total current assets | 422,631 | 92,496 | 515,127 | |||||||||
Property and equipment, net | 39,825 | 39,825 | ||||||||||
Goodwill | 67,585 | 67,585 | ||||||||||
Intangible assets, net | 1,561 | 1,561 | ||||||||||
Deferred cost of revenue | 20,305 | 20,305 | ||||||||||
Deferred income taxes | 2,875 | 2,875 | ||||||||||
Long-term restricted cash | 7,714 | 26,000 | (c) | 33,714 | ||||||||
Other assets | 15,365 | 15,365 | ||||||||||
Total assets | $ | 577,861 | $ | 118,496 | $ | 696,357 | ||||||
LIABILITIES AND (DEFICIT) EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable and accrued expenses | $ | 106,074 | $ | 106,074 | ||||||||
Deferred revenue | 116,738 | 28,913 | (b) | 145,651 | ||||||||
Deferred income taxes | 1,575 | 1,575 | ||||||||||
Income taxes payable | 4,339 | 4,339 | ||||||||||
Liabilities held for sale | 134,013 | (134,013 | ) | (d) | — | |||||||
Total current liabilities | 362,739 | (105,100 | ) | 257,639 | ||||||||
Deferred revenue | 56,729 | 56,729 | ||||||||||
Deferred income taxes | 51,034 | 51,034 | ||||||||||
Other long-term liabilities | 114,539 | 114,539 | ||||||||||
Total liabilities | 585,041 | (105,100 | ) | 479,941 | ||||||||
Commitments and contingencies | ||||||||||||
(Deficit) equity: | ||||||||||||
Common stock, $0.01 par value - authorized, 100,000,000 shares; issued 22,695,729 and 22,591,411 shares, respectively; outstanding, 21,930,512 and 21,830,081 shares, respectively | 227 | 227 | ||||||||||
Preferred stock, $0.01 par value - authorized, 100,000 shares | — | — | ||||||||||
Treasury stock, at cost, 765,217 and 761,330 shares, respectively | (17,292 | ) | (17,292 | ) | ||||||||
Accumulated deficit | (73,051 | ) | 223,596 | (e) | 150,545 | |||||||
Additional paid in capital | 48,990 | 48,990 | ||||||||||
Accumulated other comprehensive income | 33,946 | 33,946 | ||||||||||
Total (deficit) equity | (7,180 | ) | 223,596 | 216,416 | ||||||||
Total liabilities and (deficit) equity | $ | 577,861 | $ | 118,496 | $ | 696,357 |
(1) The historical consolidated balance sheet as of April 30, 2015 reflects the BSS business as available for sale. The pro forma adjustments assume the sale occurred on April 30, 2015. The pro forma adjustments also reflect changes to the previously reported financial statement upon completion of the final terms of the Asset Sale.
COMVERSE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
Three Months Ended April 30, 2015 | |||||||||||
Historical (1) | Pro Forma Adjustments | Pro Forma | |||||||||
Revenue: | |||||||||||
Product revenue | $ | 10,107 | $ | 3,006 | (b) | $ | 13,113 | ||||
Service revenue | 35,598 | 3,693 | (b) | 39,291 | |||||||
Total revenue | 45,705 | 6,699 | 52,404 | ||||||||
Costs and expenses: | |||||||||||
Product costs | 12,953 | 3,746 | (b) | 16,699 | |||||||
Service costs | 30,804 | 30,804 | |||||||||
Research and development, net | 8,280 | 8,280 | |||||||||
Selling, general and administrative | 19,873 | 19,873 | |||||||||
Other operating expenses: | |||||||||||
Restructuring expenses and write-off of property and equipment | 3,408 | 3,408 | |||||||||
Total other operating expenses | 3,408 | — | 3,408 | ||||||||
Total costs and expenses | 75,318 | 3,746 | 79,064 | ||||||||
Loss from operations | (29,613 | ) | 2,953 | (26,660 | ) | ||||||
Interest income | 84 | 84 | |||||||||
Interest expense | (193 | ) | (193 | ) | |||||||
Foreign currency transaction loss, net | (5,573 | ) | (5,573 | ) | |||||||
Other income, net | 102 | 102 | |||||||||
Loss before income tax expense | (35,193 | ) | 2,953 | (32,240 | ) | ||||||
Income tax expense | (4,787 | ) | (4,787 | ) | |||||||
Net loss from continuing operations | $ | (39,980 | ) | $ | 2,953 | $ | (37,027 | ) | |||
Weighted average common shares outstanding: | |||||||||||
Basic & Diluted | 21,865,326 | 21,865,326 | |||||||||
Loss per share - basic & diluted: | |||||||||||
Continuing operations | $ | (1.83 | ) | $ | (1.69 | ) |
(1) The historical consolidated statements of operations for the three months ended April 30, 2015 reflected the BSS business as a discontinued operation. The pro forma adjustments also reflect changes to the previously reported financial statement upon completion the final terms of the Asset Sale.
COMVERSE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
Fiscal Year Ended January 31, 2015 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Revenue: | ||||||||||||
Product revenue | $ | 99,768 | $ | (30,531 | ) | (d) | $ | 69,237 | ||||
Service revenue | 377,537 | (177,800 | ) | (d) | 199,737 | |||||||
Total revenue | 477,305 | (208,331 | ) | 268,974 | ||||||||
Costs and expenses: | ||||||||||||
Product costs | 55,572 | (465 | ) | (d) | 55,107 | |||||||
Service costs | 253,070 | (106,446 | ) | (d) | 146,624 | |||||||
Research and development, net | 56,334 | (19,477 | ) | (d) | 36,857 | |||||||
Selling, general and administrative | 111,832 | (30,573 | ) | (d) | 81,259 | |||||||
Other operating expenses: | ||||||||||||
Restructuring expenses and write-off of property and equipment | 16,333 | (2,759 | ) | (d) | 13,574 | |||||||
Total other operating expenses | 16,333 | (2,759 | ) | 13,574 | ||||||||
Total costs and expenses | 493,141 | (159,720 | ) | 333,421 | ||||||||
Loss from operations | (15,836 | ) | (48,611 | ) | (64,447 | ) | ||||||
Interest income | 480 | — | 480 | |||||||||
Interest expense | (641 | ) | — | (641 | ) | |||||||
Foreign currency transaction gain, net | 4,659 | — | 4,659 | |||||||||
Other expense, net | (517 | ) | — | (517 | ) | |||||||
Loss before income tax expense | (11,855 | ) | (48,611 | ) | (60,466 | ) | ||||||
Income tax expense | (10,284 | ) | 3,795 | (f) | (6,489 | ) | ||||||
Net loss from continuing operations | $ | (22,139 | ) | $ | (44,816 | ) | $ | (66,955 | ) | |||
Weighted average common shares outstanding: | ||||||||||||
Basic & diluted | 22,190,630 | 22,190,630 | ||||||||||
Loss per share - basic & diluted: | ||||||||||||
Basic & diluted | $ | (1.00 | ) | $ | (3.02 | ) |
COMVERSE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
Fiscal Year Ended January 31, 2014 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Revenue: | ||||||||||||
Product revenue | $ | 220,167 | $ | (65,461 | ) | (d) | $ | 154,706 | ||||
Service revenue | 432,334 | (171,070 | ) | (d) | 261,264 | |||||||
Total revenue | 652,501 | (236,531 | ) | 415,970 | ||||||||
Costs and expenses: | ||||||||||||
Product costs | 116,259 | (19,350 | ) | (d) | 96,909 | |||||||
Service costs | 286,217 | (118,984 | ) | (d) | 167,233 | |||||||
Research and development, net | 67,512 | (28,111 | ) | (d) | 39,401 | |||||||
Selling, general and administrative | 134,031 | (43,423 | ) | (d) | 90,608 | |||||||
Other operating expenses: | ||||||||||||
Restructuring expenses | 10,783 | (938 | ) | (d) | 9,845 | |||||||
Total other operating expenses | 10,783 | (938 | ) | 9,845 | ||||||||
Total costs and expenses | 614,802 | (210,806 | ) | 403,996 | ||||||||
Loss from operations | 37,699 | (25,725 | ) | 11,974 | ||||||||
Interest income | 614 | — | 614 | |||||||||
Interest expense | (847 | ) | — | (847 | ) | |||||||
Foreign currency transaction loss, net | (10,290 | ) | — | (10,290 | ) | |||||||
Other income, net | 699 | — | 699 | |||||||||
Income before income tax expense | 27,875 | (25,725 | ) | 2,150 | ||||||||
Income tax expense | (9,189 | ) | 6,397 | (f) | (2,792 | ) | ||||||
Net income (loss) from continuing operations | $ | 18,686 | $ | (19,328 | ) | $ | (642 | ) | ||||
Weighted average common shares outstanding: | ||||||||||||
Basic & diluted | 22,164,131 | 22,164,131 | ||||||||||
Diluted | 22,382,234 | 22,164,131 | ||||||||||
Income (loss) per share - basic & diluted: | ||||||||||||
Basic | $ | 0.84 | $ | (0.03 | ) | |||||||
Diluted | $ | 0.83 | $ | (0.03 | ) |
COMVERSE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
Fiscal Year Ended January 31, 2013 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Revenue: | ||||||||||||
Product revenue | $ | 242,104 | $ | (62,224 | ) | (d) | $ | 179,880 | ||||
Service revenue | 435,659 | (169,949 | ) | (d) | 265,710 | |||||||
Total revenue | 677,763 | (232,173 | ) | 445,590 | ||||||||
Costs and expenses: | ||||||||||||
Product costs | 123,152 | (19,377 | ) | (d) | 103,775 | |||||||
Service costs | 308,492 | (132,204 | ) | (d) | 176,288 | |||||||
Research and development, net | 76,461 | (25,137 | ) | (d) | 51,324 | |||||||
Selling, general and administrative | 160,340 | (30,386 | ) | (d) | 129,954 | |||||||
Other operating expenses: | ||||||||||||
Impairment of goodwill | 5,605 | 5,605 | ||||||||||
Restructuring expenses | 5,905 | (1,468 | ) | (d) | 4,437 | |||||||
Total other operating expenses | 11,510 | (1,468 | ) | 10,042 | ||||||||
Total costs and expenses | 679,955 | (208,572 | ) | 471,383 | ||||||||
Loss from operations | (2,192 | ) | (23,601 | ) | (25,793 | ) | ||||||
Interest income | 829 | — | 829 | |||||||||
Interest expense | (901 | ) | — | (901 | ) | |||||||
Interest expense on notes payable to CTI | (455 | ) | ||||||||||
Foreign currency transaction loss, net | (4,961 | ) | — | (4,961 | ) | |||||||
Other income, net | 912 | — | 912 | |||||||||
Loss before income tax expense | (6,768 | ) | (23,601 | ) | (29,914 | ) | ||||||
Income tax expense | (13,526 | ) | 13,036 | (f) | (490 | ) | ||||||
Net loss from continuing operations | $ | (20,294 | ) | $ | (10,565 | ) | $ | (30,404 | ) | |||
Weighted average common shares outstanding: | ||||||||||||
Basic & diluted | 21,923,981 | 21,923,981 | ||||||||||
Loss per share - basic & diluted: | ||||||||||||
Basic & diluted | $ | (0.93 | ) | $ | (1.39 | ) |
COMVERSE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following pro forma adjustments are included in the unaudited pro forma condensed consolidated balance sheet and/or the unaudited pro forma condensed consolidated statements of operations:
(a) | Includes cash proceeds from the sale of approximately $273 million, including $6.5 million of deferred closings pending regulatory approval for transfer of assets, net of $26 million deposited into escrow, approximately $4 million in income and other transaction related taxes and $4 million of transaction commissions. |
(b) | Represents adjustment upon the completion of the terms of the Asset Sale to the previously reported unaudited consolidated balance sheet as of April 30, 2015 and the unaudited consolidated statements of operations for the three months ended April 30, 2015. |
(c) | Restricted cash deposited into escrow to fund potential indemnification claims and certain adjustments for a period of twelve (12) months following the closing. |
(d) | Represents the elimination of assets, liabilities and historical operating results included in the Asset Sale. |
(e) | Includes the estimated after-tax effect on retained earnings from the disposition, including the after-tax gain on the sale. |
(f) | Includes the impact on the Company’s global consolidated estimated tax computation at the applicable statutory rate excluding the BSS Business. |
Items non-recurring in nature, including the one-time gain associated with the sale of the BSS business, are not reflected in the pro forma adjustments in the condensed consolidated statements of operations.