seac-10q_20200731.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38828

SEACHANGE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

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

500 Totten Pond Road, Waltham, MA		02451
Address of principal executive offices		(Zip Code)

(978) 897-0100

Registrant’s telephone number, including area code

Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

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

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.

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

		Emerging growth company	☐

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 August 31, 2020 was 37,556,067.

SEACHANGE INTERNATIONAL, INC.

Table of Contents

		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	6

	Notes to Consolidated Financial Statements	7

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 5.	Other Information	30

Item 6.	Exhibits	30

SIGNATURES		32

PART I – FINANCIAL INFORMATION

ITEM 1.

Financial Statements

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share data)

	July 31,			January 31,
	2020			2020
Assets
Current assets:
Cash, cash equivalents and restricted cash	$	7,655		$	9,297
Marketable securities		2,141			3,835
Accounts receivable, net of allowance for doubtful accounts of $904 and $947 at July 31, 2020 and January 31, 2020, respectively		6,011			12,127
Unbilled receivables		11,932			14,279
Prepaid expenses and other current assets		4,928			5,112
Total current assets		32,667			44,650
Property and equipment, net		636			554
Operating lease right-of-use assets		5,505			4,860
Marketable securities, long-term		—			782
Intangible assets, net		1,868			2,300
Goodwill		10,441			9,775
Unbilled receivables, long-term		9,033			9,031
Other assets		831			938
Total assets	$	60,981		$	72,890
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,717		$	4,007
Accrued expenses		5,656			7,986
Deferred revenue		4,674			5,041
Promissory note		1,072			—
Total current liabilities		14,119			17,034
Deferred revenue, long-term		423			1,140
Operating lease liabilities, long-term		4,607			4,348
Taxes payable, long-term		338			436
Promissory note, long-term		1,341			—
Deferred tax liabilities, long-term		186			—
Total liabilities		21,014			22,958
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, $0.01 par value; 100,000,000 shares authorized at July 31, 2020 and January 31, 2020; 37,727,987 shares issued and 37,556,067 shares outstanding at July 31, 2020; 37,303,952 shares issued and 37,163,462 outstanding at January 31, 2020		377			373
Additional paid-in capital		245,817			245,067
Treasury stock, at cost; 171,920 shares at July 31, 2020 and 140,490 shares at January 31, 2020		(227	)		(147	)
Accumulated other comprehensive loss		(500	)		(2,137	)
Accumulated deficit		(205,500	)		(193,224	)
Total stockholders' equity		39,967			49,932
Total liabilities and stockholders' equity	$	60,981		$	72,890

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

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, amounts in thousands, except per share data)

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2020			2019			2020			2019
Revenue:
Product	$	1,066		$	11,968		$	4,164		$	13,147
Service		3,929			6,844			7,746			14,150
Total revenue		4,995			18,812			11,910			27,297
Cost of revenue:
Product		788			3,039			2,368			3,948
Service		2,393			4,885			5,219			9,553
Total cost of revenue		3,181			7,924			7,587			13,501
Gross profit		1,814			10,888			4,323			13,796
Operating expenses:
Research and development		3,360			3,775			7,526			8,027
Selling and marketing		1,728			2,963			3,854			5,815
General and administrative		2,367			4,150			4,421			8,399
Severance and restructuring costs		543			659			1,029			870
Total operating expenses		7,998			11,547			16,830			23,111
Loss from operations		(6,184	)		(659	)		(12,507	)		(9,315	)
Other income (expense), net		373			(78	)		165			(1,869	)
Loss before income taxes		(5,811	)		(737	)		(12,342	)		(11,184	)
Income tax benefit		45			563			66			161
Net loss	$	(5,766	)	$	(174	)	$	(12,276	)	$	(11,023	)
Net loss per share, basic	$	(0.15	)	$	—		$	(0.33	)	$	(0.30	)
Net loss per share, diluted	$	(0.15	)	$	—		$	(0.33	)	$	(0.30	)
Weighted average common shares outstanding, basic		37,527			36,602			37,376			36,532
Weighted average common shares outstanding, diluted		37,527			36,602			37,376			36,532

Comprehensive loss:
Net loss	$	(5,766	)	$	(174	)	$	(12,276	)	$	(11,023	)
Other comprehensive income, net of tax:
Foreign currency translation adjustment		1,665			133			1,641			1,340
Unrealized (losses) gains on marketable securities		(13	)		25			(4	)		60
Total other comprehensive income		1,652			158			1,637			1,400
Comprehensive loss	$	(4,114	)	$	(16	)	$	(10,639	)	$	(9,623	)

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

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands except share data)

	Common Stock				Additional						Accumulated Other						Total
	Number of Shares		Par Value		Paid-in Capital			Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at April 30, 2020		37,661,641		376		245,558			(147	)		(2,152	)		(199,734	)	$	43,901
Issuance of common stock pursuant to vesting of restricted stock units		66,346		1		(1	)		—			—			—			—
Stock-based compensation expense		—		—		260			—			—			—			260
Repurchases of common stock		—		—		—			(80	)		—			—			(80	)
Unrealized losses on marketable securities		—		—		—			—			(13	)		—			(13	)
Foreign currency translation adjustment		—		—		—			—			1,665			—			1,665
Net loss		—		—		—			—			—			(5,766	)		(5,766	)
Balances at July 31, 2020		37,727,987	$	377	$	245,817		$	(227	)	$	(500	)	$	(205,500	)	$	39,967

	Common Stock				Additional						Accumulated Other						Total
	Number of Shares		Par Value		Paid-in Capital			Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at April 30, 2019		36,553,025		365		242,885			(5	)		(2,151	)		(195,152	)	$	45,942
Issuance of common stock pursuant to vesting of restricted stock units		258,036		2		(2	)		—			—			—			—
Stock-based compensation expense		—		—		631			—			—			—			631
Repurchases of common stock		—		—		—			(142	)		—			—			(142	)
Unrealized gains on marketable securities		—		—		—			—			25			—			25
Foreign currency translation adjustment		—		—		—			—			133			—			133
Net loss		—		—		—			—			—			(174	)		(174	)
Balances at July 31, 2019		36,811,061	$	367	$	243,514		$	(147	)	$	(1,993	)	$	(195,326	)	$	46,415

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands except share data)

	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, 2020		37,303,952	$	373	$	245,067		$	(147	)	$	(2,137	)	$	(193,224	)	$	49,932
Issuance of common stock pursuant to vesting of restricted stock units		379,063		4		(4	)		—			—			—			—
Issuance of common stock pursuant to exercise of stock options		39,270		—		119			—			—			—			119
Issuance of common stock pursuant to ESPP purchases		5,702		—		18			—			—			—			18
Stock-based compensation expense		—		—		617			—			—			—			617
Repurchases of common stock		—		—		—			(80	)		—			—			(80	)
Unrealized losses on marketable securities		—		—		—			—			(4	)		—			(4	)
Foreign currency translation adjustment		—		—		—			—			1,641			—			1,641
Net loss		—		—		—			—			—			(12,276	)		(12,276	)
Balances at July 31, 2020		37,727,987	$	377	$	245,817		$	(227	)	$	(500	)	$	(205,500	)	$	39,967