SeaChange International Announces Fourth Quarter and Fiscal Year 2007 Results
-- Record fiscal 2007 revenue; 28% increase year over year to $161 million
-- Software subscription program adds five new customers
-- Continued VOD market drivers support FY'08 first half revenue growth and second half profitability
ACTON, Mass.--(BUSINESS WIRE)--
SeaChange International, Inc. (NASDAQ: SEAC), a leading provider of software and hardware solutions for the world's growing video-on-demand and IPTV industry, today announced financial results for its fiscal fourth quarter ended January 31, 2007 and for the fiscal year. Total revenues for the quarter were $40.1 million, a 21% increase compared to total revenues of $33.2 million for the fourth quarter of fiscal 2006. Approximately $2 million of VOD-related revenue was deferred as of January 31, 2007, to reflect the bundling of 12 month software subscription services with five system orders. Net loss for the fourth quarter was $3.7 million, or $0.13 per share, compared with a net loss of $3.1 million, or $0.11 per share for the same period last year. Adjusted EBITDA (Earnings before Interest, Taxes, Depreciation, Amortization and stock-based compensation expense) in the fourth quarter of fiscal 2007 was a loss of $0.5 million compared to a loss of $1.0 million in the fourth quarter of fiscal 2006. (See note 1 below)
For the fiscal year 2007 ended January 31, 2007, revenues were a record $161.3 million, a 28% increase from total revenues of $126.3 million in the prior fiscal year. The net loss for fiscal 2007 was $8.2 million, or $0.28 per share, compared with a net loss of $12.3 million, or $0.44 per share, for fiscal 2006. Adjusted EBITDA for fiscal 2007 was $5.4 million as compared to a loss of $8.2 million for fiscal 2006.
The Company ended the fourth quarter of fiscal 2007 with cash, cash equivalents and marketable securities of $55.3 million and no debt, compared to $55.0 million and no debt at the end of the third quarter.
Broadband Revenues impacted by VOD software subscription
Revenues in the fourth quarter of fiscal 2007 from the Company's Broadband segment, which includes Video on Demand (VOD) and Advertising Insertion hardware and software, were $20.1 million, an increase of $5.8 million or 41% over comparable revenue in the fourth quarter of fiscal 2006. It should be noted that within the VOD product line the Company deferred approximately $2.0 million of VOD-related revenue on January 31, 2007 for five orders with three separate customers who purchased the Company's VOD software subscription service as part of its systems order. The Company deferred the revenue associated with these orders and will recognize the revenue ratably over the 12 month subscription period.
VOD Systems Revenue Increases 82% year over year
Year over year revenue growth in the Broadband segment for the fourth quarter was driven by an 82% increase in VOD systems revenue, from $6.3 million in the fourth quarter of last year to $11.5 million in the fourth quarter of this year. Consistent with the last several quarters, the Company continued to benefit from strong demand from North American cable customers as well as strength from several European accounts. Remaining VOD revenues for the fourth quarter, comprised principally of software subscription and middleware development revenues, were $4.8 million, an increase of $1.4 million compared to last year's fourth quarter. Higher year over year software subscription revenue was partially offset by lower middleware development revenue as the Company recorded approximately $1.0 million of fiscal 2007 sales discounts in the fourth quarter in connection with the 18 month extension of a middleware development contract.
Advertising Insertion revenue in the fourth quarter of $3.8 million was $0.8 million lower than the fourth quarter of fiscal 2006 due to a significant amount of revenue recognized in last year's fourth quarter that had been shipped in prior quarters.
Total Services segment revenue for the fourth quarter of fiscal 2007 was $18.4 million, which was $2.2 million or 13% higher than related revenue from last year's fourth quarter due primarily to higher revenues from the Company's On Demand Group (ODG) subsidiary for VOD-related services for customers in Germany and South America as well as higher VOD-related services revenue tied to the Company's year over year increase in its installed base of VOD systems.
Software Subscription Traction and Fiscal '08 Outlook
"We are very pleased with our top-line performance in fiscal 2007 with annual growth of 28% to record revenue of $161 million," commented Bill Styslinger, president, CEO and founder of SeaChange International. "We not only saw substantial growth in our core VOD server and Axiom software business, but we successfully launched a VOD software subscription program with Comcast as our initial customer in July of 2006. I am happy to report that in addition to the three new customers that purchased software subscription services in the fourth quarter, two additional customers have subsequently purchased these services providing traction to this important initiative. In addition, fiscal 2007 saw an expansion of SeaChange's presence outside of North America with key customer wins for several of its product lines in high growth markets such as Germany, India, Brazil and Russia."
Styslinger continued, "Fiscal 2007 also saw an expansion of our investment in engineering and customer service to focus on new product development in VOD server, Axiom software and middleware as well as servicing a wider array of customers. This certainly impacted bottom line results for fiscal 2007 but we believe it provides us the opportunity to fully leverage our projected revenue growth in fiscal 2008. To that end, we reiterate that first half revenue growth in fiscal 2008 should exceed second half revenue growth in fiscal 2007. Furthermore, our initial review of fiscal 2008 second half revenue should allow SeaChange to achieve profitability for the second half of fiscal 2008."
The Company will discuss its financial results and business outlook in more detail today during its webcast conference call at 5:00 p.m. EDT, 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.
(1) Adjusted EBITDA is a non-GAAP number that the Company defines as net income excluding interest, taxes, depreciation, amortization and stock-based compensation expenses. A reconciliation of Adjusted EBITDA to net income for these periods is contained in the financial schedules that accompany this release. Adjusted EBITDA is an important measurement used by management to measure the cash generated from or used for operations, excluding the operating cash requirements of interest and income taxes. The Company believes that inclusion of this non-GAAP measure enhances investors' overall understanding of the Company's current financial performance. Adjusted EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America.
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 broadband products; the Company's ability to manage its growth; the ability of the Company to integrate businesses acquired by the Company, including The On Demand Group Limited; 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 of current or 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; changes in the regulatory environment; the performance of companies in which the Company has made equity investments, including Casa Systems; the Company's ability to hire and retain highly skilled employees; and increasing social and political turmoil.
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 17, 2006. 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 Axiom is a trademark of SeaChange International, Inc.
SeaChange International, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three months ended Twelve months
ended
------------------- ------------------
January January January January
31, 31, 31, 31,
2007 2006 2007 2006
--------------------------------------
unaudited unaudited unaudited
Revenues $40,073 $33,236 $161,334 $126,264
Cost of revenues 22,995 18,403 85,485 74,133
--------------------------------------
Gross profit 17,078 14,833 75,849 52,131
Operating expenses:
Research and development 10,248 9,241 40,914 34,378
Selling and marketing 5,579 4,116 22,412 18,646
General and administrative 4,880 4,425 19,141 14,241
Amortization of intangibles 1,434 1,040 5,664 2,201
--------------------------------------
22,141 18,822 88,132 69,466
--------------------------------------
Income (loss) from operations (5,063) (3,989) (12,283) (17,335)
Interest income, net 416 494 1,355 2,038
Impairment on investment in
affiliate (150) -- (150) --
--------------------------------------
Loss before income taxes and
equity income (loss) in
earnings of affiliates (4,797) (3,495) (11,078) (15,297)
Income tax benefit (553) (666) (1,632) (2,941)
Equity income (loss) in earnings
of affiliates 499 (244) 1,272 39
--------------------------------------
Net loss $(3,745) $(3,073) $(8,174)$(12,317)
======================================
Basic loss per share $(0.13) $(0.11) $(0.28) $(0.44)
======================================
Diluted loss per share $(0.13) $(0.11) $(0.28) $(0.44)
======================================
Weighted average common shares
outstanding-
Basic 29,235 28,438 28,857 28,303
======================================
Diluted 29,235 28,438 28,857 28,303
======================================
SeaChange International, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
January January
31, 31,
2007 (1) 2006
--------------------
unaudited
Assets
Current assets:
Cash and cash equivalents $31,179 $21,594
Marketable securities 11,231 14,596
Accounts receivable, net 34,416 34,472
Inventories 19,350 19,299
Prepaid expenses and other current assets 3,399 7,875
--------------------
Total current assets 99,575 97,836
Property and equipment, net 30,720 27,191
Marketable securities 12,885 24,689
Investments in affiliates 14,312 12,812
Intangibles, net 13,054 18,904
Goodwill 23,726 20,379
Other assets 5,024 5,363
--------------------
$199,296 $ 207,174
====================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $15,887 $ 26,410
Customer deposits 2,016 2,170
Deferred revenue 21,806 20,045
Income taxes payable 941 2,843
Deferred taxes liability - short term 366 556
--------------------
Total current liabilities 41,016 52,024
Deferred tax liability - long-term 1,121 1,353
Common stock and other equity 185,269 176,523
Accumulated deficit (29,685) (22,264)
Accumulated other comprehensive income (loss) 1,575 (462)
--------------------
Total stockholders' equity 157,159 153,797
--------------------
$199,296 $ 207,174
====================
(1) The consolidated balance sheet at January 31, 2007 reflects the impact of the adoption in the fourth quarter by the Company of SEC Staff Accounting Bulleting No. 108 ("SAB 108"), "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." In accordance with SAB 108, the Company recorded a cumulative effect adjustment as of February 1, 2006 to increase inventory by $623,000, decrease other comprehensive income by $130,000 and increase stockholders' equity by $762,000.
SeaChange International, Inc.
Reconciliation between Condensed Consolidated Statements of Operations
and Earnings before Interest, Taxes, Depreciation, Amortization and
Stock-Based Compensation
(Adjusted EBITDA)
(In thousands)
(Unaudited)
Three months ended Twelve months ended
-------------------- --------------------
January January January January
31, 31, 31, 31,
2007 2006 2007 2006
Net loss $(3,745) $(3,074) $(8,174) $(12,317)
Income tax benefit (553) (666) (1,632) (2,941)
Interest (income), net (416) (494) (1,355) (2,038)
Equity (income) loss in the
earnings of affiliates (499) 244 (1,273) (39)
Stock compensation expense 863 --- 3,507 ---
Depreciation and amortization 3,894 3,040 14,353 9,140
-------- ----------- -------- -----------
Adjusted EBITDA $(456) $(950) $5,426 $(8,195)
======== =========== ======== ===========
Source: SeaChange International, Inc.
Released March 13, 2007