SeaChange International Reports First Quarter Fiscal 2017 Results

Company Maintains Outlook for Growth and Profitability for Full Fiscal Year 2017

ACTON, Mass., June 07, 2016 (GLOBE NEWSWIRE) -- SeaChange International, Inc. (NASDAQ:SEAC) today reported first quarter fiscal 2017 revenue of $21.6 million and U.S. GAAP loss from operations of $9.6 million, or $0.28 per basic share, compared to first quarter fiscal 2016 revenue of $23.2 million and U.S. GAAP operating loss of $9.5 million, or $0.28 per basic share.

The Company’s U.S. GAAP first quarter fiscal 2017 results included non-GAAP charges of $2.8 million, which consisted primarily of severance and other restructuring costs, stock-based compensation, amortization of intangible assets from prior acquisitions, and other non-operating expense professional fees, while the first quarter fiscal 2016 results included $2.7 million of similar non-GAAP charges.  Non-GAAP loss from operations for the first quarter of fiscal 2017 was $6.8 million, or $0.20 per basic share, which was identical to the first quarter of fiscal 2016 of $6.8 million, or $0.20 per basic share.

“We’re pleased to have achieved first quarter results that are in line with our guidance, which primarily reflect our ability to more rapidly secure customer acceptance of our next-generation software products, as well as our ongoing progress in converting our legacy back office customer base to Adrenalin, including two additional North American service providers during the quarter,” said Ed Terino, Chief Executive Officer, SeaChange.  “Based on accelerated customer delivery and ongoing operational improvements, which are further bolstered by our acquisition of DCC Labs last month to reduce our software development costs, SeaChange is on track for achieving full-year profitability, year-over-year revenue growth and double-digit operating margins.”

Anthony Dias, Chief Financial Officer, SeaChange, said, “In the first quarter, we successfully controlled our expenses as expected, while continuing to ramp up our sales and marketing operations for more effective regional reach in the Americas and Europe, and in emerging markets including OTT.  By continuing to improve our operational performance, as well as realizing the benefits from our restructuring efforts, we anticipate achieving cost savings of approximately $9 million for this fiscal year.  Some of these savings will enable us to invest in our sales and marketing initiatives, as well as contribute significantly to our goal of achieving profitability on a full-year basis for fiscal 2017.”

Commenting on the Company’s outlook, Dias added, “We anticipate our second quarter fiscal 2017 revenue to be in the range of $23 million to $25 million, and non-GAAP operating loss to be in the range of $0.10 to $0.15 per basic share.  For full fiscal 2017, we maintain our outlook for revenues to be in the range of $110 million to $120 million and non-GAAP operating income to be in the range of $0.05 to $0.15 per fully diluted share.  Today, we’re providing investors with greater visibility into SeaChange revenues, by type, in a supplemental schedule that we’ve included in our press release.  We anticipate updating this schedule in our quarterly announcements going forward.”

SeaChange continues to have a strong balance sheet and ended the first quarter of fiscal 2017 with cash, cash equivalents, restricted cash and marketable securities of $64.5 million, and no debt outstanding.

The Company will host a conference call to discuss its first quarter fiscal 2017 results at 5:00 p.m. ET today, Tuesday, June 7, 2016.  The call may be accessed at 877-407-8037 (U.S.) and 201-689-8037 (international) and via live webcast at  A replay of the conference call will be available by phone through June 21, 2016 at 877-660-6853 (U.S.) or 201-612-7415 (international), conference ID 1363-7347.  The webcast will be archived on the investor relations section of the Company’s website at

About SeaChange International
Enabling our customers to deliver billions of premium video streams across a matrix of pay-TV and OTT platforms, SeaChange (Nasdaq:SEAC) empowers service providers, broadcasters, content owners and brand advertisers to entertain audiences, engage consumers and expand business opportunities. As a three-time Emmy award-winning organization with 23 years of experience, we give media businesses the content management, delivery and monetization capabilities they need to craft an individualized branded experience for every viewer that sets the pace for quality and value worldwide. For more information, please visit

Safe Harbor Provision
Any statements contained in this press release that do not describe historical facts, including regarding anticipated revenue, cost savings and other financial matters, are neither promises nor guarantees and 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 assumptions and expectations, but are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. Factors that could cause actual future results to differ materially from current expectations include the following:  the continued spending by the Company’s customers on video systems and services and expenses we may incur in fulfilling customer arrangements; the continued development of the multiscreen video and OTT market; the inability to meet revenue targets for our SaaS-based multiscreen service offering; the Company’s ability to successfully introduce new products or enhancements to existing products and the rate of decline in revenue attributable to our legacy products; the Company’s transition to being a company that primarily provides software solutions; worldwide economic cycles; measures taken to address the variability in the market for our products and services;  the loss of or reduction in demand by one of the Company’s large customers; consolidation in the television service providers industry; the cancellation or deferral of purchases of the Company’s products; the length of the Company’s sales cycles; the timing of revenue recognition of new products due to customer integration and acceptance requirements; any decline in demand or average selling prices for our products and services; failure to manage product transitions; failure to achieve our financial forecasts due to inaccurate sales forecasts or other factors, including due to expenses we may incur in fulfilling customer arrangements; the Company’s ability to generate sufficient revenues to reduce its losses or regain profitability; the Company’s ability to manage its growth; the risks associated with international operations; the ability of the Company and its intermediaries to comply with the Foreign Corrupt Practices Act; foreign currency fluctuation; 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 and OTT market or other limitations in materials we use to provide our products and services; the Company’s ability to obtain necessary licenses or distribution rights for third-party technology; the Company’s ability to compete in its marketplace; the Company’s ability to respond to changing technologies; the impact of acquisitions, divestitures or investments made by the Company; the Company’s ability to access sufficient funding to finance desired growth and operations; the impact of changes in the market on the value of our investments; any impairment of the Company’s assets; changes in the regulatory environment; the Company’s ability to hire and retain highly skilled employees; the ability of the Company to manage and oversee the outsourcing of engineering work; additional tax liabilities to which the Company may be subject; the security measures of the Company are breached and customer data or our data is obtained unlawfully; service interruptions or delays from our third-party data center hosting facilities; the implementation of restructuring programs; disruptions to the Company’s information technology systems; uncertainties of regulation of Internet and data traveling over the Internet; if securities analysts do not publish favorable research or reports about our business; our use of non-GAAP reporting; the effectiveness of the Company’s disclosure controls and procedures and internal controls over financial reporting; the Company’s use of estimates in accounting for the Company’s contracts; the performance of the Company’s third-party vendors; the Company’s entry into fixed price contracts and the related risk of cost overruns; the risks associated with purchasing material components from sole suppliers and using a limited number of third-party manufacturers; compliance with conflict minerals regulations; terrorist acts, conflicts, wars and geopolitical uncertainties; the Company’s Delaware anti-takeover provisions; and the effect on revenue and reported results of a change in financial accounting standards.

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 under the caption “Certain Risk Factors” in the Company’s Annual Report on Form 10-K filed on April 13, 2016. 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 International, Inc.
Preliminary Condensed Consolidated Balance Sheets
(Amounts in thousands)
    April 30,   January 31,
      2016       2016  
Cash and cash equivalents   $ 51,512     $ 58,733  
Marketable securities and restricted cash     12,964       12,350  
Accounts and other receivables, net     33,317       37,011  
Inventories, net     1,748       1,682  
Prepaid expenses and other current assets     3,346       3,827  
Property and equipment, net     13,537       14,129  
Goodwill and intangible assets, net     45,051       44,301  
Other assets     5,409       5,636  
Total assets   $ 166,884     $ 177,669  
Liabilities and Stockholders’ Equity        
Accounts payable and other current liabilities   $ 20,642     $ 23,546  
Deferred stock consideration     -       3,205  
Deferred revenues     17,774       17,410  
Deferred tax liabilities and income taxes payable     1,462       1,389  
Other long term liabilities     1,170       1,101  
Total liabilities     41,048       46,651  
Total stockholders’ equity     125,836       131,018  
Total liabilities and stockholders’ equity   $ 166,884     $ 177,669  

SeaChange International, Inc. 
Preliminary Condensed Consolidated Statements of Operations 
(Unaudited, amounts in thousands, except per share data) 
    Three Months Ended
    April 30,
      2016       2015  
Products   $   4,200     $   3,164  
Services        17,370         20,013  
Total revenues       21,570         23,177  
Cost of revenues:        
Products       1,574         1,677  
Services        10,459         11,203  
Amortization of intangible assets       316         181  
Stock-based compensation expense       72         -  
Total cost of revenues       12,421         13,061  
Gross profit        9,149         10,116  
Operating expenses:        
Research and development        8,699         9,533  
Selling and marketing        3,557         3,668  
General and administrative        4,071         3,887  
Amortization of intangible assets       450         941  
Stock-based compensation expense       40         711  
Earn-outs and change in fair value of earn-outs       -         502  
Professional fees - other       132         128  
Severance and other restructuring costs       1,775         212  
Total operating expenses       18,724         19,582  
Loss from operations       (9,575 )       (9,466 )
Other income (expenses), net       922         (229 )
Loss before income taxes and equity income in earnings of affiliates       (8,653 )       (9,695 )
Income tax provision       254         147  
Equity income in earnings of affiliates, net of tax       -         17  
Net loss   $   (8,907 )   $   (9,825 )
Net loss per share:        
Basic   $   (0.26 )   $   (0.29 )
Diluted   $   (0.26 )   $   (0.29 )
Weighted average common shares outstanding:        
Basic        34,354         33,328  
Diluted        34,354         33,328  

SeaChange International, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(Unaudited, amounts in thousands)
    Three Months Ended
    April 30,
      2016       2015  
Cash flows from operating activities:      
Net loss   $ (8,907 )   $ (9,825 )
Adjustments to reconcile net loss to net cash used in operating activities from continuing operations:      
Depreciation and amortization of property and equipment   794       870  
Amortization of intangible assets   766       1,122  
Fair value of contingent consideration   -       502  
Stock-based compensation expense   112       711  
Other   40       89  
Changes in operating assets and liabilities, excluding impact of acquisition:      
Accounts receivable   5,363       7,822  
Unbilled receivables   (664 )     (2,864 )
Inventories   (91 )     (148 )
Prepaid expenses and other assets   853       (1,091 )
Accounts payable   (1,736 )     119  
Accrued expenses   (2,201 )     (2,118 )
Deferred revenues   80       (1,467 )
Other   29       (465 )
Total cash used in operating activities   (5,562 )     (6,743 )
Cash flows from investing activities:      
Purchases of property and equipment     (159 )     (282 )
Investment in capitalized software     -       (749 )
Purchases of marketable securities     (502 )     (2,033 )
Proceeds from sale and maturity of marketable securities     -       4,034  
Cash paid for acquisition of business, net of cash acquired     -       (11,686 )
Other investing activities     (106 )     -  
Total cash used in investing activities   (767 )     (10,716 )
Cash flows from financing activities:      
Proceeds from issuance of common stock relating to stock option exercises   33       -  
Other financing activities   (3 )     -  
Total cash provided by financing activities   30       -  
Effect of exchange rate changes on cash   (922 )     411  
Net decrease in cash and cash equivalents   (7,221 )     (17,048 )
Cash and cash equivalents, beginning of period   58,733       90,019  
Cash and cash equivalents, end of period $ 51,512     $ 72,971  

Use of Non-GAAP Financial Information

We define non-GAAP income (loss) from operations as U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) operating loss plus stock-based compensation expenses, amortization of intangible assets, earn-outs and change in fair value of earn-outs, non-operating expense professional fees and  severance and other restructuring costs. We discuss non-GAAP income (loss) from operations in our quarterly earnings releases and certain other communications as we believe non-GAAP income (loss) from operations is an important measure that is not calculated according to U.S. GAAP. We use non-GAAP income (loss) from operations in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our Board of Directors, determining a component of bonus compensation for executive officers and other key employees based on operating performance and evaluating short-term and long-term operating trends in our operations. We believe that non-GAAP income (loss) from operations assists in providing an enhanced understanding of our underlying operational measures to manage the business, to evaluate performance compared to prior periods and the marketplace, and to establish operational goals. We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making.

Non-GAAP income (loss) from operations is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with U.S. GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenses similar to the non-GAAP income (loss) from operations financial adjustments described above, and investors should not infer from our presentation of this non-GAAP financial measure that these costs are unusual, infrequent or non-recurring.

In managing and reviewing our business performance, we exclude a number of items required by U.S. GAAP. Management believes that excluding these items is useful in understanding the trends and managing our operations. We provide these supplemental non-GAAP measures in order to assist the investment community to see SeaChange through the “eyes of management,” and therefore enhance the understanding of SeaChange’s operating performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, our reported results prepared in accordance with U.S. GAAP. Our non-GAAP financial measures reflect adjustments based on the following items:

Amortization of Intangible Assets. We incur amortization expense of intangible assets related to various acquisitions that have been made in recent years. These intangible assets are valued at the time of acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition. We believe that exclusion of these expenses allows comparisons of operating results that are consistent over time for both the Company’s newly-acquired and long-held businesses.

Stock-based Compensation Expense. We incur expenses related to stock-based compensation included in our U.S. GAAP presentation of cost of revenues and operating expenses. Although stock-based compensation is an expense we incur and is viewed as a form of compensation, the expense varies in amount from period to period, and is affected by market forces that are difficult to predict and are not within the control of management, such as the market price and volatility of our shares, risk-free interest rates and the expected term and forfeiture rates of the awards.

Earn-outs and Change in Fair Value of Earn-outs. Earn-outs and the change in the fair value of earn-outs are considered by management to be non-recurring expenses to the former shareholders of the businesses we acquire. We also incur expenses due to changes in fair value related to contingent consideration that we believe would otherwise impair comparability among periods.

Professional Fees - Other. We have excluded the effect of legal and other professional fees associated with our acquisitions, divestitures, litigation and strategic alternatives because the amounts are considered significant non-operating expenses.

Severance and Other Restructuring. We incur charges due to the restructuring of our business, including severance charges and facility reductions resulting from our restructuring and streamlining efforts and any changes due to revised estimates, which we generally would not have otherwise incurred in the periods presented as part of our continuing operations.

Depreciation Expense. We incur depreciation expense related to capital assets purchased to support the ongoing operations of the business. These assets are recorded at cost and are depreciated using the straight-line method over the useful life of the asset. Purchases of such assets may vary significantly from period to period and without any correlation to underlying operating performance. Management believes that exclusion of depreciation expense allows comparisons of operating results that are consistent across past, present and future periods.

The following table reconciles the Company’s estimated U.S. GAAP income (loss) from operations to the Company’s non-GAAP income (loss) from operations:

SeaChange International, Inc.
Preliminary Reconciliation of GAAP to Non-GAAP
(Unaudited, amounts in thousands)
    Three Months Ended   Three Months Ended
    April 30, 2016   April 30, 2015
    GAAP           GAAP        
    As Reported   Adjustments   Non-GAAP   As Reported   Adjustments   Non-GAAP
Products   $ 4,200     $ -     $    4,200     $ 3,164     $ -     $    3,164  
Services     17,370       -         17,370       20,013       -         20,013  
Total revenues     21,570       -         21,570       23,177       -         23,177  
Cost of revenues:                        
Products     1,574       -         1,574       1,677       -         1,677  
Services     10,459       -         10,459       11,203       -         11,203  
Amortization of intangible assets     316       (316 )       -       181       (181 )       -  
Stock-based compensation     72       (72 )       -       -       -         -  
Total cost of revenues     12,421       (388 )       12,033       13,061       (181 )       12,880  
Gross profit     9,149       388         9,537       10,116       181         10,297  
Gross profit percentage     42.4 %     1.8 %     44.2 %     43.6 %     0.8 %     44.4 %
Operating expenses:                        
Research and development     8,699       -         8,699       9,533       -         9,533  
Selling and marketing     3,557       -         3,557       3,668       -         3,668  
General and administrative     4,071       -         4,071       3,887       -         3,887  
Amortization of intangible assets     450       (450 )       -       941       (941 )       -  
Stock-based compensation expense     40       (40 )       -       711       (711 )       -  
Earn-outs and change in fair value of earn-outs   -       -         -       502       (502 )       -  
Professional fees - other     132       (132 )       -       128       (128 )       -  
Severance and other restructuring costs     1,775       (1,775 )       -       212       (212 )       -  
Total operating expenses     18,724       (2,397 )       16,327       19,582       (2,494 )       17,088  
(Loss) income from operations   $ (9,575 )   $ 2,785     $    (6,790 )   $ (9,466 )   $ 2,675     $    (6,791 )
(Loss) income from operations percentage     (44.4 %)     12.9 %     (31.5 %)     (40.8 %)     11.5 %     (29.3 %)
Weighted average common shares outstanding:                        
Basic     34,354       34,354         34,354       33,328       33,328         33,328  
Diluted     34,354       34,492         34,354       33,328       33,464         33,328  
Non-GAAP operating (loss) income per share:                        
Basic   $ (0.28 )   $ 0.08     $    (0.20 )   $ (0.28 )   $ 0.08     $    (0.20 )
Diluted   $ (0.28 )   $ 0.08     $    (0.20 )   $ (0.28 )   $ 0.08     $    (0.20 )
Adjusted EBITDA:                        
Loss from operations           $    (9,575 )           $    (9,466 )
Depreciation expense             794               870  
Amortization of intangible assets             766               1,122  
Stock-based compensation expense             112               711  
Earn-outs and changes in fair value             -               502  
Professional fees: acquisitions, divestitures, etc.             132               128  
Severance and other restructuring             1,775               212  
Adjusted EBITDA           $    (5,996 )           $    (5,921 )
Adjusted EBITDA %             (27.8 %)             (25.5 %)

SeaChange International, Inc.   
Supplemental Schedule - Revenue Breakout for Last Nine Quarters   
(Unaudited, amounts in thousands)   
                      Fiscal                   Fiscal      
      Q1 FY15   Q2 FY15   Q3 FY15   Q4 FY15     2015     Q1 FY16   Q2 FY16   Q3 FY16   Q4 FY16     2016     Q1 FY17  
Product Revenues:                                                
Video Platform     $   2,166     $   3,271     $   1,757     $   4,942     $   12,136     $   1,281     $   3,890     $   3,051     $   2,819     $   11,041     $   2,566    
Advertising         360         592         904         704         2,560         96         241         650         470         1,457         121    
User Experience         791         980         765         388         2,924         (142 ) *     27         168         357         410         377    
Hardware         1,389         3,897         2,464         3,912         11,662         1,355         2,240         2,146         1,862         7,603         526    
Third-party Products          352         -          1,421         452         2,225         574         557         180         74         1,385         610    
Total Product Revenues         5,058         8,740         7,311         10,398         31,507         3,164         6,955         6,195         5,582         21,896         4,200    
Service Revenues:                                                
Maintenance and Support     $   11,993     $   12,098     $   11,825     $   10,873     $   46,789     $   9,414     $   10,151     $   10,724     $   9,882     $   40,171     $   9,677    
SaaS         707         592         387         802         2,488         499         814         1,967         1,035         4,315         987    
Professional Services - Video Platform         5,303         6,519         8,427         7,315         27,564         4,896         5,541         8,063         6,856         25,356         4,712    
User Experience         1,276         1,900         2,020         1,891         7,087         5,204         4,410         1,798         3,842         15,254         1,994    
Total Service Revenues         19,279         21,109         22,659         20,881         83,928         20,013         20,916         22,552         21,615         85,096         17,370    
Total Revenues   $   24,337     $   29,849     $   29,970     $   31,279     $   115,435     $   23,177     $   27,871     $   28,747     $   27,197     $   106,992     $   21,570    
*Revenue reclassification between product and service revenue.  


Jim Sheehan
1-978-897-0100 x3064

Monica Gould
The Blueshirt Group

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Source: SeaChange International, Inc.