SeaChange International Announces Second Quarter Fiscal 2009 Results
-- Total revenues 15% higher year-over-year
-- Fourth consecutive quarter of profitability
-- $4 million in shares repurchased during the second quarter
-- Reiterated Guidance of FY '09 revenue growth of 10%
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 second quarter ended July 31, 2008. Total revenues for the quarter were $50.7 million which was $6.5 million or 15% higher than total revenues of $44.2 million for the second quarter of fiscal 2008. Net income for the second quarter was $1.5 million or $0.05 per share compared with a net loss of $7.9 million, or $0.27 per share for the same period last year. Last year's second quarter net loss included $6.0 million, or $0.20 per share, of expenses related to severance charges in connection with selected headcount reductions and impairment charges related primarily to capitalized software licenses.
Total revenues for the first six months of fiscal 2009, ended July 31, 2008, were $96.1 million, which was $13.1 million or 16% higher than total revenues of $83.0 million for the first six months of fiscal 2008. Net income for the first half of fiscal 2009 was $1.8 million, or $0.06 per share compared with a net loss of $12.4 million, or $0.42 per share for the same period last year. The net loss for the first six months of fiscal 2008 included $6.0 million, or $0.20 per share, of expenses in connection with the previously mentioned cost reduction initiatives implemented in the second quarter of last year.
The Company ended the second quarter of fiscal 2009 with cash, cash equivalents and marketable securities of $78.1 million and no debt compared with $79.0 million and no debt at the end of the first quarter of fiscal 2009. Net income and non-cash expenses of $4.6 million along with improvements in working capital were offset by capital expenditures of $7.2 million in the second quarter. The capital expenditures related principally to a facility purchase for the Company's Media Services operation. In addition, the Company repurchased 551,000 shares of common stock at a cost of $4.0 million under the Company's previously disclosed stock buyback program.
Total revenues in the second quarter of fiscal 2009 from the Company's Software segment were $32.0 million, which was $4.6 million or 17% higher than comparable revenues in the second quarter of last year. Year-over-year revenue growth in the Software segment was driven primarily by higher Advertising Insertion revenue from North American service providers, the result of increased high-definition television channel requirements. In addition, higher SeaChange Axiom software-related license and maintenance revenue, derived primarily from North American cable and telephone customers, contributed to the increase in Software segment revenue between quarters.
The Servers and Storage segment generated $14.9 million in revenue for the second quarter of fiscal 2009, which was $2.5 million or 20% higher than revenue for the second quarter of fiscal 2008. The growth in revenue was mainly due to increased VOD server shipments to several domestic customers and higher installation and maintenance revenues related to increased year-over-year server deployments.
The Media Services operating segment's revenue for the second quarter of fiscal 2009 of $3.9 million was $0.6 million lower than comparable revenue from last year's second quarter. The decrease in Media Services revenue between years was due primarily to non-recurring professional services revenue generated in last year's second quarter.
"We are very pleased with our financial performance for the second quarter which builds on the strong start for fiscal 2009," commented Bill Styslinger, President and CEO, SeaChange International. "We exceeded $50 million in quarterly revenue for the first time in the Company's history on continued strong North American service provider spending for VOD server and software products. We're particularly pleased that the first commercial deployment of flash memory servers by two of our largest North American cable television customers significantly contributed to our VOD server revenue this quarter."
Styslinger continued, "Solid, top-line performance, improved margins and control of operating expense growth all contributed to the Company's fourth consecutive quarter of profitability. We aggressively redeployed cash generated during the second quarter by repurchasing $4 million of the Company's stock, in addition to the facility purchase. Our cash position at the end of the second quarter, however, was essentially unchanged from the first quarter demonstrating the cash generation power of our business."
Commenting on guidance for the remainder of fiscal 2009, Styslinger noted, "We continue to expect that revenue for all of fiscal 2009 will be approximately 10% higher than fiscal 2008 revenue and that we will be profitable for the second half of the year. Our confidence in our financial expectations for the rest of fiscal 2009 lies in continued strong spending on VOD and Advertising Insertion software-related products by our core North American cable and telephone customers, as well as continued focus on controlling our selling, general and administrative expenses."
The Company will discuss its financial results and business outlook in more detail today during its webcast conference call at 5:00 p.m. ET, which will be available live and archived at www.schange.com/IR/.
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 www.schange.com.
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.
(a)SeaChange and MediaCluster are registered trademarks of SeaChange International, Inc. SeaChange Axiom is a trademark of SeaChange International, Inc.
SeaChange International, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
July 31, January
2008 31, 2008
----------- ---------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 56,886 $ 63,359
Marketable securities 14,530 19,266
Accounts receivable, net 47,693 35,743
Inventories, net 15,605 14,315
Prepaid expenses and other current assets 3,244 2,656
----------- ---------
Total current assets 137,958 135,339
Property and equipment, net 34,691 28,066
Marketable securities 6,673 5,272
Investments in affiliates 13,043 12,668
Intangible assets, net 5,828 6,809
Goodwill 29,384 29,471
Other assets 364 271
----------- ---------
Total assets $227,941 $217,896
=========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 12,026 $ 9,636
Income taxes payable 570 1,625
Other accrued expenses 8,561 17,387
Customer deposits 3,914 1,259
Deferred revenues 26,888 19,103
Deferred tax liabilities 92 93
----------- ---------
Total current liabilities 52,051 49,103
Distribution and losses in excess of investment 1,874 1,458
Deferred tax liabilities and income taxes
payable 2,075 1,933
----------- ---------
Total liabilities 56,000 52,494
----------- ---------
Stockholders' equity:
Common stock, $0.01 par value; 30,476,835 and
29,904,311 shares
outstanding at July 31, 2008 and January 31,
2008, respectively 313 299
Additional paid-in capital 202,796 191,627
Accumulated deficit (26,917) (28,747)
Accumulated other comprehensive gain 1,738 2,223
Treasury stock, at cost; 873,381 and 39,784
shares at
July 31, 2008 and January 31, 2008,
respectively (5,989) -
----------- ---------
Total stockholders' equity 171,941 165,402
----------- ---------
Total liabilities and stockholders' equity $227,941 $217,896
=========== =========
SeaChange International, Inc.
Condensed Consolidated Statement of Operations - Unaudited
(in thousands, except per share data)
Three months Six months ended
ended
----------------- ------------------
July 31, July 31, July 31, July 31,
2008 2007 2008 2007
------------------------------------
Revenues $50,705 $44,194 $96,089 $ 83,038
Cost of revenues 26,065 29,049 48,687 50,076
-------- -------- -------- ---------
Gross profit 24,640 15,145 47,402 32,962
-------- -------- -------- ---------
Operating expenses:
Research and development 11,047 11,474 21,523 21,811
Selling and marketing 7,265 5,895 13,688 11,680
General and administrative 4,755 5,520 9,866 10,423
Amortization of intangibles 397 802 793 1,599
-------- -------- -------- ---------
23,464 23,691 45,870 45,513
-------- -------- -------- ---------
Income (loss) from operations 1,176 (8,546) 1,532 (12,551)
Interest income and gains on
sales of marketable securities,
net 633 430 1,328 897
-------- -------- -------- ---------
Income (loss) before income
taxes and equity income in
earnings of affiliates 1,809 (8,116) 2,860 (11,654)
Income tax provision (208) (95) (633) (1,358)
Equity (loss) income in earnings
of affiliates (114) 361 (397) 579
-------- -------- -------- ---------
Net income (loss) $ 1,487 $(7,850) $ 1,830 $(12,433)
======== ======== ======== =========
Basic income (loss) per share $ 0.05 $ (0.27) $ 0.06 $ (0.42)
======== ======== ======== =========
Diluted income (loss) per share $ 0.05 $ (0.27) $ 0.06 $ (0.42)
======== ======== ======== =========
Weighted average common shares
outstanding:
Basic 30,684 29,539 30,837 29,466
Diluted 31,148 29,539 31,255 29,466
SeaChange International, Inc.
Condensed Consolidated Operating Segments - Unaudited
(in thousands)
Three months Six months ended
ended
----------------- ------------------
July 31, July 31, July 31, July 31,
2008 2007 2008 2007
----------------- ------------------
Software
Revenue:
Products $18,906 $17,221 $38,059 $ 32,558
Services 13,005 10,151 23,915 20,642
-------- -------- -------- ---------
Total revenue 31,911 27,372 61,974 53,200
Gross profit 17,507 10,398 34,003 24,485
Operating expenses:
Research and development 8,668 7,849 16,855 14,891
Selling and marketing 4,522 3,506 8,242 6,714
Amortization of intangibles 364 536 728 1,073
-------- -------- -------- ---------
13,554 11,891 25,825 22,678
-------- -------- -------- ---------
Income (loss) from operations $ 3,953 $(1,493) $ 8,178 $ 1,807
======== ======== ======== =========
Servers and Storage
Revenue:
Products $10,580 $ 9,367 $18,421 $ 14,958
Services 4,320 2,987 7,786 6,029
-------- -------- -------- ---------
Total revenue 14,900 12,354 26,207 20,987
Gross profit 6,650 3,676 12,249 6,772
Operating expenses:
Research and development 2,379 3,625 4,668 6,920
Selling and marketing 2,742 2,384 5,415 4,900
-------- -------- -------- ---------
5,121 6,009 10,083 11,820
-------- -------- -------- ---------
Income (loss) from operations $ 1,529 $(2,333) $ 2,166 $ (5,048)
======== ======== ======== =========
Media Services
Service revenue $ 3,894 $ 4,468 $ 7,908 $ 8,851
Gross profit 483 1,071 1,150 1,705
Operating expenses:
Selling and marketing 1 5 31 66
General and administrative 796 982 1,611 1,567
Amortization of intangibles 33 266 65 526
-------- -------- -------- ---------
830 1,253 1,707 2,159
-------- -------- -------- ---------
Loss from operations $ (347) $ (182) $ (557) $ (454)
======== ======== ======== =========
Unallocated Corporate
Operating expenses:
General and administrative $ 3,959 $ 4,538 $ 8,255 $ 8,856
-------- -------- -------- ---------
Total unallocated corporate
expenses $ 3,959 $ 4,538 $ 8,255 $ 8,856
======== ======== ======== =========
-------- -------- -------- ---------
Consolidated income (loss) from
operations $ 1,176 $(8,546) $ 1,532 $(12,551)
======== ======== ======== =========
Source: SeaChange International
Released September 4, 2008