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