SeaChange International Announces Third Quarter Fiscal 2009 Results

Quarterly revenues of $52 million Software-driven margin strength drives quarterly profit of $0.11 per share Continued business strength expected for fourth quarter Mobix acquisition expands Media Services segment into wireless sector

ACTON, Mass.--(BUSINESS WIRE)-- SeaChange International, Inc. (Nasdaq: SEAC), a leading provider of software and hardware solutions for video-on-demand (VOD) television, announced financial results for its fiscal 2009 third quarter ended October 31, 2008. Total revenues for the quarter were $51.8 million, which was $2.8 million or 6% higher than total revenues of $49.0 million for the third quarter of last year. Net income for the third quarter was $3.4 million or $0.11 per share, compared with net income of $3.3 million or $0.11 per share for the same period last year.

Total revenues for the first nine months of fiscal 2009, ended October 31, 2008, were $147.9 million, which was $15.8 million or 12% higher than total revenues of $132.1 million, for the first nine months of fiscal 2008. Net income for the first nine months of fiscal 2009 was $5.2 million, or $0.17 per share, compared with a net loss of $9.1 million, or $0.31 per share, for the same period last year. The net loss for the first nine months of fiscal 2008 included $6.0 million or $0.20 per share of expenses in connection with cost reduction actions undertaken in the second quarter of last year.

The Company ended the third quarter of fiscal 2009 with cash, cash equivalents and marketable securities of $79.7 million and no debt compared with $78.1 million and no debt at the end of the second quarter of fiscal 2009. Net income and non-cash expenses of $6.8 million were offset by capital expenditures of $2.8 million during the third quarter along with $1.9 million of higher inventory.

Total revenues from the Company's Software segment in the third quarter of fiscal 2009 were $37.6 million, which was $8.4 million or 29% higher than Software segment revenues generated in last year's third quarter. The increase in Software segment revenues between years was attributable principally to software upgrade revenues from Comcast in connection with the execution during the quarter of a contract renewal with Comcast through 2009 for the purchase of the Company's VOD products and services. In addition, year-over-year Software segment revenue growth was driven by higher Advertising Insertion revenues from U.S. cable television customers resulting from a continued increase in high definition television channel requirements.

The Servers and Storage segment generated revenues of $10.4 million in the third quarter of fiscal 2009, which was $5.7 million lower than revenues for the third quarter of fiscal 2008. However, revenues for the first nine months of fiscal 2009 for the Servers and Storage business unit were $35.9 million, which was comparable to the $37.1 million of revenue for the first nine months of last year.

The Media Services operating segment revenue for the third quarter of fiscal 2009 of $3.9 million was $0.1 million higher than comparable revenue from last year's third quarter. Increased content services revenue in Germany, combined with new contracts from customers in Greece and Turkey, were essentially offset by changes in foreign exchange rates between years. Included in Media Services revenue in this year's third quarter was a $0.5 million reduction in revenues due to the weakening of the British pound in this year's third quarter compared to the same quarter last year.

"We are delighted to report another quarter of solid financial results marked by strong performance from our Software business," said Bill Styslinger, President and CEO, SeaChange International. "The third quarter also included the renewal of our VOD master purchase agreement with Comcast through 2009, further cementing our relationship with the world's largest service provider of VOD."

Styslinger continued, "Margin strength derived from record revenues from our Software segment combined with continued diligent management of operating expenses drove improved sequential profitability and positive cash flow in the quarter. We continue to maintain a solid balance sheet with ample liquidity for future investments in the business."

Commenting on guidance for the fourth quarter of fiscal 2009 Styslinger noted, "We continue to forecast fiscal 2009 revenue to be approximately 10% higher than fiscal 2008 revenue and that we will be profitable for the fourth quarter. Our confidence in our fourth quarter guidance stems from continued high levels of spending on VOD and Advertising Insertion software primarily from North American service providers and our continued focus on minimizing growth in our operating expenses."

Mobix Interactive Acquisition

The Company also announced today the acquisition of all the outstanding shares of Mobix Interactive, Ltd., a U.K.-based company that provides software, content aggregation services and branded content for mobile phone operators. Mobix's current customers include U.K. network operators 02 (Telefonica Europe plc) and 3 (Hutchison Whampoa), as well as Vodacom of South Africa. In addition, it has working relationships with content providers Warner Music Group, Turner and MGM Universal.

Under terms of the acquisition, the Company paid GBP 3 million ($4.5 million) upon the closing of the transaction on Nov. 19, of which GBP 1 million ($1.5 million) was held in escrow subject to potential post closing adjustments. In addition to the upfront payment, the purchase price includes additional contingent consideration of up to GBP 8.3 million ($12.5 million) based on Mobix achieving certain financial and commercial measures over the next three years.

Commenting on the Mobix acquisition, Styslinger noted, "This acquisition strengthens our Media Services segment by broadening the On Demand Group's (ODG's) video content service offering to include mobile applications. Mobix not only provides proven solutions to a new set of customers for ODG, but also allows ODG to offer one branded service across multiple platforms for many of its existing customers."

The Company will discuss its financial results and business outlook in more detail today during its webcast conference call at 5:00 p.m. EST, which will be available live and archived at

About SeaChange International

SeaChange International, Inc. is a world leader in digital video systems, spanning broadcast and broadband. Its powerful server and software systems enable television operators to provide new On Demand services and to gain greater efficiencies in advertising and content delivery. With its Emmy-winning MediaCluster(R) technology, thousands of SeaChange systems are helping broadband, broadcast and satellite television companies to streamline operations, expand services and increase revenues. SeaChange is headquartered in Acton, Massachusetts and has product development, support and sales offices throughout the world. Visit

Safe Harbor Provision

Any statements contained in this press release that do not describe historical facts, including without limitation statements concerning expected future performance, product introductions and general market conditions, may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements contained herein are based on current expectations, but are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. The factors that could cause actual future results to differ materially from current expectations include the following: the continued growth, development and acceptance of the video-on-demand market; the loss of one of the Company's large customers; the cancellation or deferral of purchases of the Company's products; a decline in demand or average selling price for the Company's products; the Company's ability to manage its growth; the Company's ability to protect its intellectual property rights and the expenses that may be incurred by the Company to protect its intellectual property rights; an unfavorable result in any future litigation; content providers limiting the scope of content licensed for use in the video-on-demand market; the Company's ability to introduce new products or enhancements to existing products; the Company's dependence on certain sole source suppliers and third-party manufacturers; the Company's ability to compete in its marketplace; the Company's ability to respond to changing technologies; the risks associated with international sales; the performance of companies in which the Company has made equity investments, including Casa Systems and On Demand Deutschland GmBH & Co. KG; the ability of the Company to integrate businesses acquired by the Company; changes in the regulatory environment; the Company's ability to hire and retain highly skilled employees; our current ineligibility to use a registration statement on Form S-3; any weaknesses over internal controls over financial reporting; any additional tax liabilities that the Company may be subject to; and system errors, failures or disruptions.

Further information on factors that could cause actual results to differ from those anticipated is detailed in various publicly available documents made by the Company from time to time with the Securities and Exchange Commission, including but not limited to, those appearing at Item 1A under the caption "Risk Factors" in the Company's Annual Report on Form 10-K filed with the Commission on April 14, 2008. Any forward-looking statements should be considered in light of those factors. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak as of the date they are made. The Company disclaims any obligation to publicly update or revise any such statements to reflect any change in Company expectations or events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results may differ from those set forth in the forward-looking statements.

*SeaChange and MediaCluster are registered trademarks of SeaChange International, Inc.

SeaChange International, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

                                              October 31, 2008  January 31, 2008

Assets                                        (unaudited)

Current assets:

 Cash and cash equivalents                    $ 56,667          $ 63,359

 Marketable securities                          10,994            19,266

 Accounts receivable, net                       47,701            35,743

 Inventories, net                               17,472            14,315

 Prepaid expenses and other current assets      3,589             2,656

       Total current assets                     136,423           135,339

Property and equipment, net                     34,676            28,066

Marketable securities                           11,990            5,272

Investments in affiliates                       13,043            12,668

Intangible assets, net                          5,188             6,809

Goodwill                                        26,326            29,471

Other assets                                    410               271

 Total assets                                 $ 228,056         $ 217,896

Liabilities and Stockholders' Equity

Current liabilities:

 Accounts payable                             $ 10,508          $ 9,636

 Income taxes payable                           1,857             1,625

 Other accrued expenses                         10,540            17,480

 Customer deposits                              5,901             1,259

 Deferred revenues                              25,691            19,103

       Total current liabilities                54,497            49,103

Distribution and losses in excess of            1,756             1,458

Deferred tax liabilities and income taxes       2,041             1,933

 Total liabilities                              58,294            52,494

Stockholders' equity:

Common stock, $0.01 par value; 31,446,094
and 29,904,311 shares

 outstanding at October 31, 2008 and January    314               299
 31, 2008, respectively

Additional paid-in capital                      204,425           191,627

Accumulated deficit                             (23,550 )         (28,747 )

Accumulated other comprehensive (loss) gain     (5,438  )         2,223

Treasury stock, at cost; 873,381 and 39,784
shares at

 October 31, 2008 and January 31, 2008,         (5,989  )         -

       Total stockholders' equity               169,762           165,402

       Total liabilities and stockholders'    $ 228,056         $ 217,896

SeaChange International, Inc.

Condensed Consolidated Statement of Operations - Unaudited

(in thousands, except share data)

                 Three months ended        Nine months ended

                 October 31,  October 31,  October 31, 2008  October 31, 2007
                 2008         2007

Revenues         $ 51,795     $ 49,024     $ 147,884         $ 132,062

Cost of            23,652       24,746       72,339            74,822

Gross profit       28,143       24,278       75,545            57,240


 Research and      10,488       10,662       32,011            32,473

 Selling and       6,831        5,505        20,519            17,185

 General and       5,464        4,240        15,549            14,737

 Amortization      393          806          1,186             2,405
 of intangibles

                   23,176       21,213       69,265            66,800

Income (loss)      4,967        3,065        6,280             (9,560  )
from operations

Interest and
other income       45           440          1,592             1,411
(expense), net

 Income (loss)
 before income
 taxes and         5,012        3,505        7,872             (8,149  )
 equity income
 in earnings of

Income tax         (1,466 )     (493   )     (2,099  )         (1,851  )

Equity (loss)
income in
earnings of        (179   )     293          (576    )         872
affiliates, net
of tax

Net income       $ 3,367      $ 3,305      $ 5,197           $ (9,128  )

 Basic income
 (loss) per      $ 0.11       $ 0.11       $ 0.17            $ (0.31   )

 Diluted income
 (loss) per      $ 0.11       $ 0.11       $ 0.17            $ (0.31   )

average common

 Basic             30,514       29,577       30,729            29,503

 Diluted           31,143       29,680       31,196            29,503

SeaChange International, Inc.

Condensed Consolidated Operating Segments - Unaudited

(in thousands)

                 Three months ended        Nine months ended

                 October 31,  October 31,  October 31, 2008  October 31, 2007
                 2008         2007



 Products        $ 22,857     $ 17,385     $ 60,916          $ 49,943

 Services          14,707       11,774       39,291            32,416

Total revenue      37,564       29,159       100,207           82,359

 Gross profit      23,158       16,207       57,830            40,692


 Research and      8,098        8,132        24,953            23,023

 Selling and       4,154        3,162        12,396            9,876

 Amortization      364          537          1,092             1,610
 of intangibles

                   12,616       11,831       38,441            34,509

Income from      $ 10,542     $ 4,376      $ 19,389          $ 6,183

Servers and


 Products        $ 6,834      $ 12,610     $ 25,255          $ 27,568

 Services          3,546        3,488        10,663            9,517

Total revenue      10,380       16,098       35,918            37,085

 Gross profit      4,448        7,779        16,028            14,551


 Research and      2,390        2,530        7,058             9,450

 Selling and       2,659        2,316        8,074             7,216

                   5,049        4,846        15,132            16,666

(Loss) income    $ (601   )   $ 2,933      $ 896             $ (2,115 )
from operations

Media Services

Service revenue  $ 3,851      $ 3,767      $ 11,759          $ 12,618

 Gross profit      537          292          1,687             1,997


 Selling and       18           27           49                93

 General and       839          468          2,450             2,035

 Amortization      29           269          94                795
 of intangibles

                   886          764          2,593             2,923

Loss from        $ (349   )   $ (472   )   $ (906    )       $ (926   )



 General and     $ 4,625      $ 3,772      $ 13,099          $ 12,702

unallocated      $ 4,625      $ 3,772      $ 13,099          $ 12,702

income (loss)    $ 4,967      $ 3,065      $ 6,280           $ (9,560 )
from operations

    Source: SeaChange International, Inc.