Contact:
|
Jim Sheehan
|
Martha Schaefer
|
SeaChange PR | SeaChange IR | |
1-978-897-0100 x3064 | 1-978-897-0100 x3030 | |
jim.sheehan@schange.com | martha.schaefer@schange.com |
·
|
Year
over Year Growth in Software
|
·
|
Continued
strong revenue growth for Media
Services
|
·
|
Cost
reductions for Servers and Storage pave path to
profitability
|
SeaChange
International, Inc.
|
||||||||
Condensed
Consolidated Balance Sheets
|
||||||||
(in
thousands, except share data)
|
||||||||
October
31, 2010
|
January
31, 2010
|
|||||||
Assets
|
(unaudited)
|
|||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 61,417 | $ | 37,647 | ||||
Restricted
cash
|
1,335 | 73 | ||||||
Marketable
securities
|
5,077 | 2,114 | ||||||
Accounts
receivable, net
|
49,603 | 54,278 | ||||||
Inventories,
net
|
15,489 | 17,830 | ||||||
Prepaid
expenses and other current assets
|
5,465 | 7,253 | ||||||
Deferred
tax asset
|
4,326 | 2,474 | ||||||
Total
current assets
|
142,712 | 121,669 | ||||||
Property
and equipment, net
|
37,808 | 39,682 | ||||||
Marketable
securities, long-term
|
7,205 | 8,688 | ||||||
Investments
in affiliates
|
4,799 | 13,697 | ||||||
Intangible
assets, net
|
32,251 | 26,264 | ||||||
Goodwill
|
67,002 | 55,876 | ||||||
Other
assets
|
3,328 | 1,271 | ||||||
Total
assets
|
$ | 295,105 | $ | 267,147 | ||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 11,070 | $ | 10,371 | ||||
Other
accrued expenses
|
14,938 | 11,174 | ||||||
Customer
deposits
|
3,259 | 4,279 | ||||||
Deferred
revenues
|
32,521 | 34,158 | ||||||
Deferred
tax liability
|
717 | 800 | ||||||
Total
current liabilities
|
62,505 | 60,782 | ||||||
Deferred
revenue, long-term
|
12,864 | 12,635 | ||||||
Long
term liabilities
|
11,087 | 6,574 | ||||||
Distribution
and losses in excess of investment
|
1,836 | 1,469 | ||||||
Deferred
tax liabilities
|
7,516 | 7,765 | ||||||
Total
liabilities
|
95,808 | 89,225 | ||||||
Stockholders’
equity:
|
||||||||
Common
stock
|
316 | 326 | ||||||
Additional
paid-in capital
|
205,487 | 211,504 | ||||||
Treasury
stock
|
(1 | ) | (8,757 | ) | ||||
Accumulated
earning (deficit)
|
1,166 | (17,450 | ) | |||||
Accumulated
other comprehensive loss
|
(7,671 | ) | (7,701 | ) | ||||
Total
stockholders’ equity
|
199,297 | 177,922 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 295,105 | $ | 267,147 |
SeaChange
International, Inc.
|
||||||||||||||||
Condensed
Consolidated Statement of Operations - Unaudited
|
||||||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
October
31, 2010
|
October
31, 2009
|
October
31, 2010
|
October
31, 2009
|
|||||||||||||
Revenues
|
$ | 49,135 | $ | 53,290 | $ | 155,360 | $ | 148,673 | ||||||||
Cost
of revenues
|
25,894 | 25,733 | 79,881 | 72,384 | ||||||||||||
Gross
profit
|
23,241 | 27,557 | 75,479 | 76,289 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development
|
11,570 | 13,353 | 37,351 | 37,433 | ||||||||||||
Selling
and marketing
|
5,726 | 7,067 | 18,315 | 19,582 | ||||||||||||
General
and administrative
|
6,112 | 5,986 | 18,089 | 16,036 | ||||||||||||
Amortization
of intangibles
|
805 | 571 | 2,512 | 1,844 | ||||||||||||
Restructuring
|
2,435 | - | 6,944 | - | ||||||||||||
26,648 | 26,977 | 83,211 | 74,895 | |||||||||||||
(Loss)
income from operations
|
(3,407 | ) | 580 | (7,732 | ) | 1,394 | ||||||||||
Gain
on sale of investment in affiliate
|
- | - | 25,188 | - | ||||||||||||
Other
income (expense), net
|
173 | 455 | (257 | ) | 739 | |||||||||||
Income
(loss) before income taxes and equity loss in earnings of
affiliates
|
(3,234 | ) | 1,035 | 17,199 | 2,133 | |||||||||||
Income
tax (provision) benefit
|
(1,942 | ) | (105 | ) | 1,700 | (337 | ) | |||||||||
Equity
loss in earnings of affiliates
|
(39 | ) | (273 | ) | (284 | ) | (517 | ) | ||||||||
Net
(loss) income
|
$ | (5,215 | ) | $ | 657 | $ | 18,615 | $ | 1,279 | |||||||
Basic
(loss) income per share
|
$ | (0.17 | ) | $ | 0.02 | $ | 0.59 | $ | 0.04 | |||||||
Diluted
(loss) income per share
|
$ | (0.17 | ) | $ | 0.02 | $ | 0.58 | $ | 0.04 | |||||||
Weighted
average common shares outstanding:
|
||||||||||||||||
Basic
|
31,496 | 30,871 | 31,409 | 30,838 | ||||||||||||
Diluted
|
31,496 | 31,659 | 31,929 | 31,407 |
SeaChange
International, Inc.
|
||||||||||||||||
Condensed
Consolidated Operating Segments - Unaudited
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
October
31, 2010
|
October
31, 2009
|
October
31, 2010
|
October
31, 2009
|
|||||||||||||
Software
|
||||||||||||||||
Revenue:
|
||||||||||||||||
Products
|
$ | 15,543 | $ | 19,167 | $ | 51,712 | $ | 49,876 | ||||||||
Services
|
19,293 | 16,578 | 58,789 | 46,547 | ||||||||||||
Total
revenue
|
34,836 | 35,745 | 110,501 | 96,423 | ||||||||||||
Gross
profit
|
18,940 | 22,416 | 59,902 | 58,354 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development
|
9,074 | 10,437 | 28,934 | 29,233 | ||||||||||||
Selling
and marketing
|
4,395 | 4,868 | 13,241 | 12,550 | ||||||||||||
General
and administrative
|
421 | 173 | 935 | 173 | ||||||||||||
Amortization
of intangibles
|
733 | 635 | 2,300 | 1,404 | ||||||||||||
Restructuring
|
344 | - | 878 | - | ||||||||||||
14,967 | 16,113 | 46,288 | 43,360 | |||||||||||||
Income
from operations
|
$ | 3,973 | $ | 6,303 | $ | 13,614 | $ | 14,994 | ||||||||
Servers
and Storage
|
||||||||||||||||
Revenue:
|
||||||||||||||||
Products
|
$ | 2,835 | $ | 8,182 | $ | 13,281 | $ | 26,441 | ||||||||
Services
|
3,358 | 4,179 | 9,973 | 11,804 | ||||||||||||
Total
revenue
|
6,193 | 12,361 | 23,254 | 38,245 | ||||||||||||
Gross
profit
|
3,089 | 4,238 | 11,147 | 16,392 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development
|
2,497 | 2,916 | 8,417 | 8,200 | ||||||||||||
Selling
and marketing
|
1,331 | 2,199 | 5,074 | 7,032 | ||||||||||||
Restructuring
|
2,090 | - | 5,155 | - | ||||||||||||
5,918 | 5,115 | 18,646 | 15,232 | |||||||||||||
Income
(loss) from operations
|
$ | (2,829 | ) | $ | (877 | ) | $ | (7,499 | ) | $ | 1,160 | |||||
Media
Services
|
||||||||||||||||
Service
revenue
|
$ | 8,106 | $ | 5,184 | $ | 21,605 | $ | 14,005 | ||||||||
Gross
profit
|
1,213 | 903 | 4,431 | 1,543 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
General
and administrative
|
1,408 | 824 | 3,114 | 2,247 | ||||||||||||
Amortization
of intangibles
|
73 | (64 | ) | 213 | 440 | |||||||||||
1,481 | 760 | 3,327 | 2,687 | |||||||||||||
Income
(loss) from operations
|
$ | (268 | ) | $ | 143 | $ | 1,104 | $ | (1,144 | ) | ||||||
Unallocated
Corporate
|
||||||||||||||||
Operating
expenses:
|
||||||||||||||||
General
and administrative
|
$ | 4,283 | $ | 4,989 | $ | 14,039 | $ | 13,616 | ||||||||
Restructuring
|
- | - | 912 | - | ||||||||||||
Total
unallocated corporate expenses
|
$ | 4,283 | $ | 4,989 | $ | 14,951 | $ | 13,616 | ||||||||
Consolidated
income (loss) from operations
|
$ | (3,407 | ) | $ | 580 | $ | (7,732 | ) | $ | 1,394 |
SeaChange
International, Inc.
|
||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation
of Selected GAAP Measures to Non-GAAP Measures - Unaudited
|
||||||||||||||||||||||||||||||||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Three
months Ended
|
Three
months Ended
|
Nine
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||||||||||||||||
October
31, 2010
|
October
31, 2009
|
October
31, 2010
|
October
31, 2009
|
|||||||||||||||||||||||||||||||||||||||||||||
GAAP
|
Adjustment
|
Non-GAAP
|
GAAP
|
Adjustment
|
Non-GAAP
|
GAAP
|
Adjustment
|
Non-GAAP
|
GAAP
|
Adjustment
|
Non-GAAP
|
|||||||||||||||||||||||||||||||||||||
Revenues
(1)
|
$ | 49,135 | $ | 785 | $ | 49,920 | 53,290 | $ | 731 | $ | 54,021 | $ | 155,360 | $ | 3,888 | $ | 159,248 | $ | 148,673 | $ | 731 | $ | 149,404 | |||||||||||||||||||||||||
Operating
expenses
|
26,648 | 26,648 | 26,977 | 26,977 | 83,211 | 83,211 | 74,895 | 74,895 | ||||||||||||||||||||||||||||||||||||||||
Stock-based
compensation (2)
|
- | 413 | 413 | - | 870 | 870 | - | 1,258 | 1,258 | - | 2,365 | 2,365 | ||||||||||||||||||||||||||||||||||||
Amortization
of intangible assets (3)
|
- | 1,271 | 1,271 | - | 1,016 | 1,016 | - | 3,916 | 3,916 | - | 2,393 | 2,393 | ||||||||||||||||||||||||||||||||||||
Restructuring
(4)
|
- | 2,435 | 2,435 | - | - | - | - | 6,944 | 6,944 | - | - | - | ||||||||||||||||||||||||||||||||||||
Acquisition
related costs (5)
|
- | 105 | 105 | - | 430 | 430 | - | 1,134 | 1,134 | - | 960 | 960 | ||||||||||||||||||||||||||||||||||||
26,648 | 4,224 | 22,424 | 26,977 | 2,316 | 24,661 | 83,211 | 13,252 | 69,959 | 74,895 | 5,718 | 69,177 | |||||||||||||||||||||||||||||||||||||
(Loss)
income from operations
|
(3,407 | ) | 5,009 | 1,602 | 580 | 3,047 | 3,627 | (7,732 | ) | 17,140 | 9,408 | 1,394 | 6,449 | 7,843 | ||||||||||||||||||||||||||||||||||
Income
from sale of investment in affiliate (6)
|
- | - | - | - | - | - | 25,188 | (25,188 | ) | - | - | - | - | |||||||||||||||||||||||||||||||||||
Income
tax benefit (provision) impact (7)
|
(1,942 | ) | 1,667 | (275 | ) | (105 | ) | (309 | ) | (414 | ) | 1,700 | (3,118 | ) | (1,418 | ) | (337 | ) | (1,019 | ) | (1,356 | ) | ||||||||||||||||||||||||||
Net
(loss) income
|
(5,215 | ) | $ | 6,676 | $ | 1,461 | $ | 657 | $ | 2,738 | $ | 3,395 | $ | 18,615 | $ | (11,166 | ) | $ | 7,449 | $ | 1,279 | $ | 5,430 | $ | 6,709 | |||||||||||||||||||||||
Diluted
income per share
|
$ | (0.17 | ) | $ | 0.22 | $ | 0.05 | $ | 0.02 | $ | 0.09 | $ | 0.11 | $ | 0.58 | $ | (0.34 | ) | $ | 0.24 | $ | 0.04 | $ | 0.17 | $ | 0.21 | ||||||||||||||||||||||
Diluted
weighted average common shares outstanding
|
31,496 | 31,496 | 31,496 | 31,659 | 31,659 | 31,659 | 31,929 | 31,929 | 31,929 | 31,407 | 31,407 | 31,407 |
(1)
|
Business
combination accounting rules require us to account for the fair value of
deferred revenue assumed in connection with an acquisition. This
non-GAAP adjustment reflects the full amount of software contract revenue
that would otherwise have been recorded subsequent to our acquisitions
of eventIS Group B.V. and VividLogic Inc.
|
||||||||||||||
(2)
|
For
GAAP purposes, stock-based compensation is included in the following
expense
categories:
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
October
31, 2010
|
October
31, 2009
|
October
31, 2010
|
October
31, 2009
|
|||||||||||||
Cost
of revenues
|
$ | 27 | $ | 168 | $ | 147 | $ | 479 | ||||||||
Research
and development
|
108 | 245 | 339 | 634 | ||||||||||||
Selling
and marketing
|
72 | 134 | 270 | 425 | ||||||||||||
General
and administrative
|
206 | 323 | 502 | 827 | ||||||||||||
Total
stock-based compensation
|
$ | 413 | $ | 870 | $ | 1,258 | $ | 2,365 |
(3)
|
The
intangible assets recorded at fair value as a result of our acquisitions
are amortized over the estimated useful life of the related asset.
Amortization expense related to intangible assets is included in the
following expense
categories:
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
October
31, 2010
|
October
31, 2009
|
October
31, 2010
|
October
31, 2009
|
|||||||||||||
Cost
of revenues:
|
$ | 466 | $ | 445 | $ | 1,404 | $ | 549 | ||||||||
Operating
expenses:
|
805 | 571 | 2,512 | 1,844 | ||||||||||||
Total
amortization of intangibles
|
$ | 1,271 | $ | 1,016 | $ | 3,916 | $ | 2,393 |
(4)
|
We
incurred severance costs in connection with selected reductions that
impacted all but the Media Services segment. We also incurred charges to
reflect the write-down of inventory to net realizable value reflecting the
discontinuance of certain inventory components within the Servers and
Storage segment due to technology changes and the disposal of fixed assets
resulting from the restructuring. These expenses would not have otherwise
occurred in the periods presented as part of our operating
expenses.
|
||||||||||||||
(5)
|
We
incurred expenses in connection with our acquisition of VividLogic Inc.
which would not have otherwise occurred in
the periods presented as part of our operating expenses and the change in
the fair value of the contingent consideration.
|
||||||||||||||
|
|||||||||||||||
(6)
|
Reflects
the gain on the sale of the equity investment in Casa
Systems.
|
||||||||||||||
(7)
|
The
non-GAAP income tax adjustment reflects the effective income tax rate in
which the non-GAAP adjustment occurs and
excludes
any changes in the tax valuation allowance arising from the gain on the
sale of the equity investment in Casa Systems,
Inc.
|
Q3
YTD FY 2011
|
|
Actual
|
|
Gross
Margin
|
54%
|
R&D
|
26%
|
Sales
& Marketing
|
12%
|
G&A
(incl. alloc. of Corp. G&A)
|
12%
|
Amortization
|
2%
|
Operating
Margin - GAAP
|
2%
|
Operating
Margin – non-GAAP
|
11%
|
1.
|
SeaChange
gained four new subscription customers, furthering the recurring revenue
strategy.
|
2.
|
There
were three new customers that were competitive replacements in the US –
one VOD, two advertising.
|
3.
|
SeaChange
is working an iPAD trial with a US
operator.
|
4.
|
The
company is seeing very positive interest and opportunities in multi screen
video, both in managed and over the top
networks.
|
5.
|
SeaChange
announced two major three screen deployments: StarHub and
Virgin Media. StarHub has mostly mobile subscribers and Virgin
Media has mostly television subscribers, but both are offering television
programming to all three screens: mobile, PC, and TV using
SeaChange’s software and managed services. Although there is
much multi-screen interest throughout the world, there are few customers
that are actually providing video services to all three screens under one
brand, so this is a major achievement for the industry as well as for
SeaChange.
|
6.
|
SeaChange
continues to implement its linear ad solution with a large US telco, as
started and announced in Q2 and announced a working relationship with
Black Arrow to deliver on demand advertising solutions throughout North
America.
|
7.
|
The
company won a new back office replacement order in Europe and obtained a
new second-screen customer in Europe, which is targeted for operation in
Q1.
|
8.
|
The
company expanded a new advertising and a new mobile customer in
Asia.
|
1.
|
SeaChange
video servers were selected for expansion business with a large North
American operator.
|
2.
|
SeaChange
has several good international opportunities in the next six
months.
|
3.
|
The
company expanded systems in Japan and was selected by a large operator in
China.
|
Software
|
Enterprise
|
|||||||||||||||||||||||||||||||
Magazine
|
Revenue
|
Gross
|
Enterprise
|
Value/
|
||||||||||||||||||||||||||||
Company
|
Ranking
|
Revenue
|
Growth
|
Margin %
|
EBITDA
|
EBITDA %
|
Value *
|
Revenue
|
||||||||||||||||||||||||
Openwave
|
155 | $ | 191.7 | -4.6 | % | 60.9 | % | (63.4 | ) | -33.1 | % | 85.8 | 0.45 | |||||||||||||||||||
Art
Tech
|
157 | $ | 179.4 | 9.0 | % | 66.0 | % | 26.0 | 14.5 | % | 795.7 | 4.44 | ||||||||||||||||||||
iPass
|
161 | $ | 171.4 | -10.4 | % | 39.7 | % | (8.3 | ) | -4.8 | % | 33.9 | 0.20 | |||||||||||||||||||
NetSuite
|
163 | $ | 166.5 | 9.2 | % | 66.3 | % | 7.2 | 4.3 | % | 1,640.0 | 9.85 | ||||||||||||||||||||
Kenexa
|
165 | $ | 157.7 | -22.6 | % | 66.1 | % | (14.4 | ) | -9.1 | % | 383.4 | 2.43 | |||||||||||||||||||
Right
Now
|
167 | $ | 152.7 | 8.7 | % | 68.9 | % | 10.2 | 6.7 | % | 697.9 | 4.57 | ||||||||||||||||||||
SeaChange
Software
|
168 | $ | 151.1 | 2.0 | % | 54.8 | % | 29.9 | 19.8 | % | n/a | n/a | ||||||||||||||||||||
SeaChange International,
Inc
|
- | $ | 201.7 | -0.1 | % | 51.2 | % | 13.8 | 6.8 | % | 196.6 | 0.97 | ||||||||||||||||||||
Magma
Design
|
170 | $ | 147.0 | -31.5 | % | 67.1 | % | (84.7 | ) | -57.7 | % | 269.1 | 1.83 | |||||||||||||||||||
Analysts
Int'l
|
172 | $ | 143.2 | -49.6 | % | 20.0 | % | (13.2 | ) | -9.2 | % | 6.1 | 0.04 | |||||||||||||||||||
Synchronoss
|
180 | $ | 128.8 | 16.1 | % | 50.0 | % | 27.7 | 21.5 | % | 837.9 | 6.51 | ||||||||||||||||||||
Bottomline
|
181 | $ | 138.0 | 5.2 | % | 55.9 | % | 7.6 | 5.5 | % | 491.9 | 3.56 | ||||||||||||||||||||
Opnet
|
184 | $ | 122.9 | 21.2 | % | 74.5 | % | 11.9 | 9.7 | % | 441.1 | 3.59 | ||||||||||||||||||||
Median
(ex SEAC)
|
$ | 152.7 | 5.2 | % | 66.0 | % | 7.2 | 4.3 | % | 441.1 | 3.56 |