seac-10q_20190430.htm

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): YES ☐ NO ☒

The number of shares outstanding of the registrant’s Common Stock on May 31, 2019 was 36,607,461.

	April 30,			January 31,
	2019			2019
Assets
Current assets:
Cash and cash equivalents	$	14,697		$	20,317
Marketable securities		3,282			4,020
Accounts receivable, net of allowance for doubtful accounts of $628 and $577 at April 30, 2019 and January 31, 2019, respectively		9,921			19,267
Unbilled receivables		5,961			5,448
Inventory		758			924
Prepaid expenses and other current assets		6,660			6,033
Total current assets		41,279			56,009
Property, plant and equipment, net		6,979			7,192
Operating lease right-of-use assets		1,964			—
Marketable securities, long-term		6,362			6,339
Intangible assets, net		3,287			—
Goodwill		9,812			8,753
Other assets		614			450
Total assets	$	70,297		$	78,743
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,565		$	4,503
Accrued expenses		8,626			7,762
Deferred revenue		7,804			8,104
Total current liabilities		19,995			20,369
Deferred revenue, long-term		2,114			2,642
Operating lease liabilities		1,255			—
Taxes payable, long-term		420			429
Deferred tax liabilities, long-term		571			203
Total liabilities		24,355			23,643
Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock, $0.01 par value; 100,000,000 shares authorized at April 30, 2019 and January 31, 2019; 36,553,025 shares issued and 36,512,535 shares outstanding at April 30, 2019, 35,946,100 shares issued and 35,905,610 outstanding at January 31, 2019		365			359
Additional paid-in capital		242,885			242,442
Treasury stock, at cost; 40,490 shares at April 30, 2019 and January 31, 2019		(5	)		(5	)
Accumulated other comprehensive loss		(2,151	)		(3,393	)
Accumulated deficit		(195,152	)		(184,303	)
Total stockholders' equity		45,942			55,100
Total liabilities and stockholders' equity	$	70,297		$	78,743

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

	For the Three Months Ended April 30,
	2019			2018
Revenue:
Product	$	1,179		$	3,091
Service		7,306			11,844
Total revenue		8,485			14,935
Cost of revenue:
Product		909			326
Service		4,668			5,703
Total cost of revenue		5,577			6,029
Gross profit		2,908			8,906
Operating expenses:
Research and development		4,252			5,729
Selling and marketing		2,852			3,667
General and administrative		4,249			4,572
Severance and restructuring costs		211			54
Total operating expenses		11,564			14,022
Loss from operations		(8,656	)		(5,116	)
Other expense, net		(1,791	)		(849	)
Loss from operations before income taxes		(10,447	)		(5,965	)
Income tax expense (benefit)		402			(494	)
Net loss	$	(10,849	)	$	(5,471	)
Net loss per share, basic and diluted	$	(0.30	)	$	(0.15	)
Weighted average common shares outstanding, basic and diluted		36,461			35,608

Comprehensive loss:
Net loss	$	(10,849	)	$	(5,471	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		1,207			575
Unrealized gains (losses) on marketable securities		35			(29	)
Total other comprehensive income		1,242			546
Comprehensive loss	$	(9,607	)	$	(4,925	)

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

	Common Stock				Additional						Accumulated Other						Total
	Number of Shares		Par Value		Paid-in Capital			Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at January 31, 2019		35,946,100	$	359		242,442		$	(5	)	$	(3,393	)	$	(184,303	)	$	55,100
Issuance of common stock pursuant to acquisition of Xstream		541,738		5		869			—			—			—			874
Issuance of common stock pursuant to vesting of restricted stock units		57,368		1		(1	)		—			—			—			—
Issuance of common stock pursuant to ESPP purchases		7,819		—		9			—			—			—			9
Stock-based compensation credit		—		—		(434	)		—			—			—			(434	)
Unrealized gains on marketable securities		—		—		—			—			35			—			35
Foreign currency translation adjustment		—		—		—			—			1,207			—			1,207
Net loss		—		—		—			—			—			(10,849	)		(10,849	)
Balances at April 30, 2019		36,553,025	$	365	$	242,885		$	(5	)	$	(2,151	)	$	(195,152	)	$	45,942

	Common Stock				Additional					Accumulated Other						Total
	Number of Shares		Par Value		Paid-in Capital		Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at January 31, 2018		35,634,984	$	356		239,423	$	(5	)		(5,434	)	$	(148,620	)	$	85,720
Adjustment resulting from the adoption of ASC 606		—		—		—		—			—			2,319			2,319
Issuance of common stock pursuant to exercise of stock options		5,875		—		16		—			—			—			16
Issuance of common stock pursuant to vesting of restricted stock units		8,356		—		—		—			—			—			—
Issuance of common stock pursuant to ESPP purchases		9,421		—		21		—			—			—			21
Stock-based compensation expense		—		—		879		—			—			—			879
Unrealized losses on marketable securities		—		—		—		—			(29	)		—			(29	)
Foreign currency translation adjustment		—		—		—		—			575			—			575
Net loss		—		—		—		—			—			(5,471	)		(5,471	)
Balances at April 30, 2018		35,658,636	$	356	$	240,339	$	(5	)	$	(4,888	)	$	(151,772	)	$	84,030

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

	For the Three Months Ended April 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(10,849	)	$	(5,471	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		550			787
Provision for bad debts		98			—
Stock-based compensation (credit) expense		(434	)		879
Deferred income taxes		368			—
Unrealized foreign currency transaction gain		1,207			575
Other		42			(7	)
Changes in operating assets and liabilities, including impact of acquisitions:
Accounts receivable		9,870			10,449
Unbilled receivables		(491	)		(3,571	)
Inventory		166			(80	)
Prepaid expenses and other current assets and other assets		(355	)		224
Accounts payable		(1,591	)		(576	)
Accrued expenses and other liabilities		(438	)		(6,139	)
Deferred revenue		(828	)		(2,778	)
Other operating activities		—			2,356
Net cash used in operating activities		(2,685	)		(3,352	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(50	)		(113	)
Cash paid for acquisitions, net		(3,838	)		—
Purchases of marketable securities		(6,231	)		(3,830	)
Proceeds from sales and maturities of marketable securities		6,946			2,009
Net cash used in investing activities		(3,173	)		(1,934	)
Cash flows from financing activities:
Proceeds from issuance of common stock		9			37
Other financing activities		—			(9	)
Net cash provided by financing activities		9			28
Effect of exchange rate on cash and cash equivalents		229			453
Net decrease in cash and cash equivalents		(5,620	)		(4,805	)
Cash and cash equivalents at beginning of period		20,317			43,661
Cash and cash equivalents at end of period	$	14,697		$	38,856
Supplemental disclosure of cash flow information
Income taxes paid	$	17		$	182
Non-cash activities:
Purchases of property and equipment included in accounts payable	$	19		$	—
Fair value of common stock issued in acquisition	$	874		$	—

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

SeaChange International, Inc., a Delaware corporation, was founded on July 9, 1993. We are an industry leader in the delivery of multiscreen, advertising and premium over-the-top (“OTT”) video management solutions. Our software products and services are designed to empower video providers to create, manage and monetize the increasingly personalized, highly engaging experiences that viewers demand.

We continue to realize the savings related to our restructuring activities. During fiscal 2019, we made significant reductions to our headcount as part of our ongoing restructuring effort from which we expect to generate annualized savings of more than $6 million. These measures are important steps in restoring us to profitability and positive cash flow. We believe that existing cash and investments and cash expected to be provided by future operating results, augmented by the plans highlighted below (see Note 9), are adequate to satisfy our working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months.

If our expectations are incorrect, we may need to raise additional funds to fund our operations, to take advantage of unanticipated strategic opportunities or to strengthen our financial position. In the future, we may enter into other arrangements for potential investments in, or acquisitions of, complementary businesses, services or technologies, which could require us to seek additional equity or debt financing. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of market opportunities, to develop new products or to otherwise respond to competitive pressures.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, those related to revenue recognition, allowance for doubtful accounts, goodwill and intangible assets, right-of-use operating leases, impairment of long-lived assets, accounting for income taxes, and the valuation of stock-based awards. We base our estimates on historical experience, known trends and other market-specific or relevant factors that are believed to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

Financial instruments which potentially expose us to concentrations of credit risk include cash and cash equivalents, marketable securities and accounts receivable. We have cash investment policies which, among other things, limit investments to investment-grade securities. We restrict our cash equivalents and marketable securities to repurchase agreements with major banks and U.S. government and corporate securities which are subject to minimal credit and market risk. We perform ongoing credit evaluations of our customers.

We sell our software products and services worldwide primarily to service providers, consisting of operators, telecommunications companies, satellite operators and broadcasters. One customer accounted for 17% of total revenue in the first quarter of fiscal 2020. Two customers accounted for 19% and 10%, respectively, of total revenue in the first quarter of fiscal 2019. Two customers accounted for 25% and 15%, respectively, of the accounts receivable balance as of April 30, 2019. Two customers accounted for 44% and 15%, respectively, of the accounts receivable balance as of January 31, 2019.

Our investments, consisting of debt securities, are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

We evaluate our investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, we consider such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, our ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that we consider to be “other than temporary,” we reduce the investment to fair value through a charge to the statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Our cash equivalents and marketable securities are carried at fair value determined according to the fair value hierarchy described above (see Note 3). The carrying values of our accounts and other receivables, unbilled receivables, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

We record goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but that are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results. Goodwill is not amortized, but rather is tested for impairment annually in our third quarter beginning August 1^st of each year, or more frequently if facts and circumstances warrant a review, such as the ones mentioned in impairments of long-lived assets below. We have determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment. We assess both the existence of potential impairment and the amount of impairment loss by comparing the fair value of the reporting unit with its carrying amount, including goodwill. Through April 30, 2019, we have recorded accumulated goodwill impairment charges of $54.8 million (see Note 6).

Intangible assets are recorded at their estimated fair values at the date of acquisition. We amortize acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Long-lived assets primarily consist of property, plant and equipment and intangible assets with finite lives. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future undiscounted cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. Determining the fair value of long-lived assets includes significant judgment by management, and different judgments could yield different results.

We assess the useful lives and possible impairment of existing recognized long-lived assets whenever events or changes in circumstances occur that indicate that it is more likely than not that an impairment has occurred. We test long-lived assets for impairment by comparing the carrying amount to the sum of the net undiscounted cash flows expected to be generated by the asset whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds its net undiscounted cash flows, then an impairment loss is recognized for the amount by which the carrying amount exceeds its fair value. We use a discounted cash flow approach or other methods, if appropriate, to assess fair value. Factors considered important which could trigger a review include:

Determining whether a triggering event has occurred involves significant judgment. (see Note 6).

Our revenue is derived from sales of hardware, software licenses, professional services, and maintenance fees related to the hardware and our software licenses.

Our contracts often contain multiple performance obligations. For contracts with multiple performance obligations, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. If the transaction price contains discounts or we expect to provide future price concessions, these elements are considered when determining the transaction price prior to allocation. Variable fees within the transaction price are estimated and recognized as revenue when we satisfy our performance obligations to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. If the contract grants the client the option to acquire additional products or services, we assess whether or not any discount on the products and services is in excess of levels normally available to similar clients and, if so, we account for that discount as an additional performance obligation.

We have concluded that hardware is either (1) a distinct performance obligation as the client can benefit from the product on its own or (2) a combined performance obligation with software licenses. This conclusion is dependent on the nature of the promise to the customer. In either scenario, hardware revenue is typically recognized at a point in time when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct, it is delivered before services are provided and is functional without services, therefore the point in time when control is transferred is upon delivery or acceptance by the customer. When hardware and software are combined, we have determined standalone selling price for hardware utilizing the relative allocation method based on observable evidence.

We have concluded that our software licenses are either (1) a distinct performance obligation as the client can benefit from the software on its own or (2) a combined performance obligation with hardware, depending on the nature of the promise to the customer. In either scenario, software license revenue is typically recognized at a point in time when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support. Our license arrangements generally contain multiple performance obligations, including hardware, installation services, training, and maintenance. We have determined standalone selling price for software utilizing the relative allocation method based on observable evidence.

Maintenance revenue, which is included in services revenue in our consolidated statements of operations and comprehensive loss, includes revenue from client support and related professional services. Client support includes software upgrades on a when and-if available basis, telephone support, bug fixes or patches and general hardware maintenance support. Maintenance is priced as a percentage of the list price of the related software license and hardware. We determined the standalone selling price of maintenance based on this pricing relationship and observable data from standalone sales of maintenance.

We have identified three separate distinct performance obligations of maintenance:

These performance obligations are distinct within the contract and, although they are not sold separately, the components are not essential to the functionality of the other components. Each of the performance obligations included in maintenance revenue is a stand ready obligation that is recognized ratably over the passage of the contractual term.

Our services revenue is comprised of software license implementation services, engineering services, training and reimbursable expenses. We have concluded that services are distinct performance obligations, with the exception of engineering services. Engineering services may be provided on a standalone basis, or bundled with a license, when we are providing custom development.

The standalone selling price for services in time and materials contracts is determined by observable prices in standalone services arrangements and recognized as revenue as the services are performed based on an input measure of hours incurred to total estimated hours.

We estimate the standalone selling price for fixed price services based on estimated hours adjusted for historical experience, at time and material rates charged in standalone services arrangements. Revenue for fixed price services is recognized over time as the services are provided based on an input measure of hours incurred to total estimated hours.

We occasionally enter into amendments to previously executed contracts that constitute contract modifications. We assess each of these contract modifications to determine:

A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract, or a cumulative catch-up basis.

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in the contract based on a relative standalone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

With the exception of travel and entertainment expenses, our contracts do not generally include a variable component to the transaction price. With certain statements of work, we explicitly state that we are to be reimbursed for reasonable travel and entertainment expenses incurred as part of the delivery of professional services. In the cases when we are entitled to collect all travel and entertainment expenses incurred, an estimate of the fulfillment costs is made at the onset of the contract in order to determine the transaction price. The revenue associated with travel and entertainment expenses is then recognized over time along with the professional services.

Some of our contracts have payment terms that differ from the timing of revenue recognition, which requires us to assess whether the transaction price for those contracts include a significant financing component. We have elected the practical expedient that permits an entity to not adjust for the effects of a significant financing component if we expect that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. For those contracts in which the period exceeds the one-year threshold, this assessment, as well as the quantitative estimate of the financing component and its relative significance, requires judgment. We estimate the significant financing component provided to our customers with extended payment terms by determining the present value of the future payments by applying a discount rate that reflects the customer’s creditworthiness.

Contract assets consist of unbilled revenue, which is recognized as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Unbilled receivables are expected to be billed and collected within one year. Contract liabilities consist of deferred revenue and customer deposits that arise when amounts are billed to or collected from customers in advance of revenue recognition.

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that commissions and special incentive payments (“Spiffs”) for hardware and software maintenance and support and professional services paid under our sales incentive programs meet the requirements to be capitalized under ASC 340-40. Costs to obtain a contract are amortized as selling and marketing expense over the expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period. The commissions and Spiffs related to professional services are amortized over time, as work is completed. The commissions and Spiffs for hardware and software maintenance are amortized over the life of the customer, which is estimated to be five years. These costs are periodically reviewed for impairment. We determined that no impairment existed as of April 30, 2019. We have elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less.

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs include direct labor for support services, software enhancements, reimbursable expenses and professional services for customized software development costs. The revenue associated with the support services, software enhancements and reimbursable expenses is recognized ratably over time; therefore, the costs associated are expensed as incurred. The professional services associated with the customized software are not recognized until completion. As such, the professional services costs are capitalized and recognized upon completion of the services.

We account for our leases in accordance with ASC 842, Leases. A contract is accounted for as a lease when we have the right to control the asset for a period of time while obtaining substantially all of the assets economic benefits. We determine if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, we determine the initial classification and measurement of our right-of-use operating lease asset and corresponding liability at the lease commencement date. We determine the classification and measurement of a modified lease at the date it is modified. The lease term includes only renewal options that it is reasonably assured to exercise. The present value of lease payments is typically determined by using its estimated secured incremental borrowing rate for the associated lease term as interest rates implicit in the leases are not normally readily determinable. Management’s policy is to utilize the practical expedient to not record leases with an original term of twelve months or less on our consolidated balance sheets, and lease payments are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Our existing leases are for facilities, automobiles and equipment. None of our leases are with related parties. In addition to rent, office leases may require us to pay additional amounts for taxes, insurance, maintenance and other expenses, which are generally referred to as non-lease components. As a practical expedient, we account for the non-lease components together with the lease components as a single lease component for all of our leases. Only the fixed costs for leases are accounted for as a single lease component and recognized as part of a right-of-use asset and liability. Rent expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expense in the consolidated statements of operations.

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of unrestricted common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the sum of the weighted average number of unrestricted common shares outstanding during the period and the weighted average number of potential common shares from the assumed exercise of stock options and the vesting of shares of restricted and deferred common stock units using the “treasury stock” method when the effect is not anti-dilutive. In periods in which we report a net loss, diluted net loss per share is the same as basic net loss per share.

The number of common shares used in the computation of diluted net income (loss) per share for the periods presented does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. We adopted ASU 2018-15 on February 1, 2019, which did not have a material impact to our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements. We adopted ASU 2018-13 on February 1, 2019, which did not have a material impact to our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” ASU 2018-07 expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. We adopted ASU 2018-07 on February 1, 2019, which did not have a material impact to our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (“Tax Cuts and Jobs Act”), which requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws. ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Reform Act. We adopted ASU 2018-02 effective February 1, 2019 and elected not to reclassify the income tax effects stranded in other comprehensive income to retained earnings and, as a result, there was no impact to our consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities which requires companies to amend the amortization period for premiums on debt securities with explicit call features to be the earliest call date rather than through the contractual life of the debt instrument. This amendment aims to more closely align the recognition of interest income with the manner in which market participants price such instruments. We adopted this guidance on February 1, 2019, which did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which is intended to improve financial reporting about leasing transactions. In July 2018, the Financial Accounting Standards Board issued ASU 2018-11 to amend ASU 2016-02 and provide an additional (and optional) transition method to adopt the new lease standard. This transition method allows entities to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption instead of using the original modified retrospective transition method of adoption which requires the restatement of all prior-period financial statements. Under this new transition method, the comparative periods in the financial statements will continue to be presented in accordance with prior GAAP. On February 1, 2019, we adopted the new lease standard on a prospective basis using the new transition method under ASU 2018-11. Under this guidance, as of February 2019, we recognized right-of-use assets and operating lease liabilities of $1.7 million for all leases with lease terms of more than 12 months. There was no impact to retained earnings as of that date. In addition, we adopted the guidance by electing the following practical expedients: (1) We did not reassess whether any expired or existing contracts contained leases, (2) We did not reassess the lease classification for any expired or existing leases, and (3) We excluded variable payments from the lease contract consideration and recorded those as incurred. The adoption of the standard did not have a material impact on our results of operations or cash flows. Our future commitments under lease obligations and additional disclosures are summarized in Note 8.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities and accounts receivable. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. ASU 2016-13 is effective in the first quarter of our fiscal 2021. We are currently evaluating if this guidance will have a material effect to our consolidated financial statements.

The following tables set forth our financial assets that were accounted for at fair value on a recurring basis. There were no fair value measurements of our financial assets using level 3 inputs for the periods presented:

			Fair Value at April 30, 2019 Using
	Total		Level 1		Level 2
	(Amounts in thousands)
Assets:
Cash equivalents	$	3,690	$	2,723	$	967
Marketable securities:
U.S. Treasury Notes and bonds		6,350		6,350		—
U.S. Agency bonds		995		—		995
Corporate bonds		2,299		—		2,299
Total	$	13,334	$	9,073	$	4,261

			Fair Value at January 31, 2019 Using
	Total		Level 1		Level 2
	(Amounts in thousands)
Assets:
Cash equivalents	$	2,887	$	2,724	$	163
Marketable securities:
U.S. Treasury Notes and bonds		7,072		7,072		—
U.S. Agency bonds		992		—		992
Corporate bonds		2,295		—		2,295
Total	$	13,246	$	9,796	$	3,450

	As of April 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Amounts in thousands)
U.S. Treasury Notes and bonds	$	6,306	$	44	$	—		$	6,350
U.S. Agency bonds		1,001		—		(6	)		995
Corporate bonds		2,306		—		(7	)		2,299
	$	9,613	$	44	$	(13	)	$	9,644

	As of January 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(Amounts in thousands)
U.S. Treasury Notes and bonds	$	7,055	$	17	$	—		$	7,072
U.S. Agency bonds		1,001		—		(9	)		992
Corporate Bonds		2,308		—		(13	)		2,295
	$	10,364	$	17	$	(22	)	$	10,359

As of April 30, 2019, marketable securities consisted of investments that mature within one year, with the exception of investments with a fair value of $4.6 million that mature between one and three years.

	As of
	April 30, 2019			January 31, 2019
	(Amounts in thousands)
Buildings	$	3,467		$	3,467
Land		2,780			2,780
Computer equipment, software and demonstration equipment		12,326			12,316
Service and spare components		1,158			1,158
Office furniture and equipment		726			738
Leasehold improvements		490			531
		20,947			20,990
Less: Accumulated depreciation and amortization		(13,968	)		(13,798	)
Total property, plant and equipment, net	$	6,979		$	7,192

Delaware		04-3197974
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

50 Nagog Park, Acton, MA		01720
Address of Principal Executive Offices		Zip Code

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	SEAC	The Nasdaq Global Select Market
Series A Participating Preferred Stock Purchase Rights	SEAC	The Nasdaq Global Select Market

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets	2

	Consolidated Statements of Operations and Comprehensive Loss	3

	Consolidated Statements of Stockholders Equity	4

	Consolidated Statements of Cash Flows	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 6.	Exhibits	30

SIGNATURES		31

	For Three Months Ended April 30,
	2019		2018
	(Amounts in thousands)
Stock options		2,937		3,195
Restricted stock units		291		387
Deferred stock units		188		163
Performance stock units		115		351
		3,531		4,096

	As of
	April 30, 2019		January 31, 2019
	(Amounts in thousands)
Accrued employee compensation and benefits	$	1,909	$	1,866
Accrued professional fees		2,103		1,521
Sales tax and VAT payable		1,774		1,502
Current obligation - right of use operating leases		709

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

		Emerging growth company	☐