seac-10q_20201031.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 October 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

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 November 30, 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) Income	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	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

SIGNATURES		34

PART I – FINANCIAL INFORMATION

ITEM 1.

Financial Statements

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share data)

	October 31,			January 31,
	2020			2020
Assets
Current assets:
Cash, cash equivalents and restricted cash	$	5,124		$	9,297
Marketable securities		1,034			3,835
Accounts receivable, net of allowance for doubtful accounts of $903 and $947 at October 31, 2020 and January 31, 2020, respectively		5,259			12,127
Unbilled receivables		11,509			14,279
Prepaid expenses and other current assets		4,755			5,112
Total current assets		27,681			44,650
Property and equipment, net		641			554
Operating lease right-of-use assets		5,231			4,860
Marketable securities, long-term		—			782
Intangible assets, net		1,528			2,300
Goodwill		10,249			9,775
Unbilled receivables, long-term		7,527			9,031
Other assets		756			938
Total assets	$	53,613		$	72,890
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,765		$	4,007
Accrued expenses		4,628			7,986
Deferred revenue		3,180			5,041
Promissory note		1,475			—
Total current liabilities		12,048			17,034
Deferred revenue, long-term		643			1,140
Operating lease liabilities, long-term		4,299			4,348
Taxes payable, long-term		328			436
Promissory note, long-term		938			—
Deferred tax liabilities, long-term		246			—
Total liabilities		18,502			22,958
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, $0.01 par value; 100,000,000 shares authorized at October 31, 2020 and January 31, 2020; 37,727,987 shares issued and 37,556,067 shares outstanding at October 31, 2020; 37,303,952 shares issued and 37,163,462 outstanding at January 31, 2020		377			373
Additional paid-in capital		246,254			245,067
Treasury stock, at cost; 171,920 shares at October 31, 2020 and 140,490 shares at January 31, 2020		(227	)		(147	)
Accumulated other comprehensive loss		(676	)		(2,137	)
Accumulated deficit		(210,617	)		(193,224	)
Total stockholders' equity		35,111			49,932
Total liabilities and stockholders' equity	$	53,613		$	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) INCOME

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

	For the Three Months Ended October 31,						For the Nine Months Ended October 31,
	2020			2019			2020			2019
Revenue:
Product	$	1,048		$	13,524		$	5,212		$	26,671
Service		3,918			7,020			11,664			21,170
Total revenue		4,966			20,544			16,876			47,841
Cost of revenue:
Product		435			466			2,803			4,414
Service		1,755			4,386			6,974			13,939
Total cost of revenue		2,190			4,852			9,777			18,353
Gross profit		2,776			15,692			7,099			29,488
Operating expenses:
Research and development		3,024			4,033			10,550			12,060
Selling and marketing		1,636			3,859			5,490			9,674
General and administrative		2,636			3,265			7,057			11,664
Severance and restructuring costs		53			2,282			1,082			3,152
Total operating expenses		7,349			13,439			24,179			36,550
(Loss) income from operations		(4,573	)		2,253			(17,080	)		(7,062	)
Other expense, net		(499	)		(161	)		(334	)		(2,030	)
(Loss) income before income taxes		(5,072	)		2,092			(17,414	)		(9,092	)
Income tax provision (benefit)		45			(53	)		(21	)		(214	)
Net (loss) income	$	(5,117	)	$	2,145		$	(17,393	)	$	(8,878	)
Net (loss) income per share, basic	$	(0.14	)	$	0.06		$	(0.46	)	$	(0.24	)
Net (loss) income per share, diluted	$	(0.14	)	$	0.06		$	(0.46	)	$	(0.24	)
Weighted average common shares outstanding, basic		37,556			36,751			37,436			36,606
Weighted average common shares outstanding, diluted		37,556			37,752			37,436			36,606

Comprehensive loss:
Net (loss) income	$	(5,117	)	$	2,145		$	(17,393	)	$	(8,878	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment		(143	)		59			1,498			1,399
Unrealized (losses) gains on marketable securities		(33	)		31			(37	)		91
Total other comprehensive (loss) income		(176	)		90			1,461			1,490
Comprehensive (loss) income	$	(5,293	)	$	2,235		$	(15,932	)	$	(7,388	)

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 July 31, 2020		37,727,987	$	377	$	245,817		$	(227	)	$	(500	)	$	(205,500	)	$	39,967
Stock-based compensation expense		—		—		437			—			—			—			437
Unrealized losses on marketable securities		—		—		—			—			(33	)		—			(33	)
Foreign currency translation adjustment		—		—		—			—			(143	)		—			(143	)
Net loss		—		—		—			—			—			(5,117	)		(5,117	)
Balances at October 31, 2020		37,727,987	$	377	$	246,254		$	(227	)	$	(676	)	$	(210,617	)	$	35,111

	Common Stock				Additional						Accumulated Other						Total
	Number of Shares		Par Value		Paid-in Capital			Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at July 31, 2019		36,811,061	$	367	$	243,514		$	(147	)	$	(1,993	)	$	(195,326	)	$	46,415
Issuance of common stock pursuant to vesting of restricted stock units		138,134		1		(1	)		—			—			—			—
Issuance of common stock pursuant to ESPP purchases		4,634		—		11			—			—			—			11
Issuance of common stock pursuant to exercise of stock options		17,146		1		45			—			—			—			46
Stock-based compensation expense		—		—		357			—			—			—			357
Unrealized gains on marketable securities		—		—		—			—			31			—			31
Foreign currency translation adjustment		—		—		—			—			59			—			59
Net income		—		—		—			—			—			2,145			2,145
Balances at October 31, 2019		36,970,975	$	369	$	243,926		$	(147	)	$	(1,903	)	$	(193,181	)	$	49,064

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		—		—		1,054			—			—			—			1,054
Repurchases of common stock		—		—		—			(80	)		—			—			(80	)
Unrealized losses on marketable securities		—		—		—			—			(37	)		—			(37	)
Foreign currency translation adjustment		—		—		—			—			1,498			—			1,498
Net loss		—		—		—			—			—			(17,393	)		(17,393	)
Balances at October 31, 2020		37,727,987	$	377	$	246,254		$	(227	)	$	(676	)	$	(210,617	)	$	35,111

	Common Stock				Additional						Accumulated Other