Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v2.4.0.6
Segment Information
 9 Months Ended
Oct. 31, 2011
Segment Information
11. Segment Information
 
The Company is managed and operated as three segments, Software, Servers and Storage, and Media Services. Effective February 1, 2011, the Company realigned its segments by reclassifying the Broadcast software solutions from the Software segment to the Servers and Storage segment. The Company believes the Broadcast software product line is better aligned with the Servers and Storage segment and therefore made the decision in the first quarter of fiscal 2012 to have this product line managed by the Servers and Storage Business Unit Manager. The Segment data for the three and nine months ended October 31, 2010 have been recast to reflect the reclassification of the Broadcast software solutions to Servers and Storage. The reclassification of the Broadcast software solutions resulted in a recast of $1.7 million and $5.7 million of revenue for the three and nine months ended October 31, 2010, respectively, and did not have a material impact to the income from operations for the Software segment and Servers and Storage segments for the three and nine months ended October 31, 2010. A description of the three reporting segments is as follows:
 
 
·
Software segment includes product revenues from the Company’s Advertising, VOD, Middleware, Home Networking and related services such as professional services, installation, training, project management, product maintenance, technical support and software development for those software products, and operating expenses relating to the Software segment such as research and development, selling and marketing and amortization of intangibles.
 
·
Servers and Storage segment includes product revenues from VOD server, Broadcast server and software solutions and related services such as professional services, installation, training, project management, product maintenance, and technical support for those products and operating expenses relating to the Servers and Storage segment, such as research and development and selling and marketing.
 
·
Media Services segment includes the operations of our ODG subsidiary, which include content acquisition and preparation services for television and wireless service providers and related operating expenses.
 
Under this reporting structure, the Company further determined that there are significant functions, and therefore costs, that are considered corporate expenses and are not allocated to the reportable segments for the purposes of assessing performance and making operating decisions. These unallocated costs include general and administrative expenses, other than direct general and administrative expenses related to Media Services and Software, other income (expense), net, taxes and equity income (losses) in earnings of affiliates, which are managed separately at the corporate level. The basis of the assumptions for all such revenues, costs and expenses includes significant judgments and estimations. There are no inter-segment revenues for the periods shown below. The Company does not separately track all assets by operating segments nor are the segments evaluated under this criterion.
 
 
   
Three Months Ended
    
Nine Months Ended
  
   
October 31,
    
October 31,
  
   
2011
    
2010
    
2011
    
2010
  
   
(in thousands)
    
(in thousands)
  
Software
                        
Revenue:
                        
Products
   $ 17,698     $ 14,443     $ 45,875     $ 47,492  
Services
     19,926       18,738       61,874       57,315  
Total revenue
     37,624       33,181       107,749       104,807  
Gross profit
     22,439       18,338       62,763       57,868  
Operating expenses:
                                
Research and development
     9,678       8,766       27,884       28,079  
Selling and marketing
     4,845       3,948       15,752       12,129  
General and administrative
     547       421       1,506       936  
Amortization of intangibles
     948       733       2,863       2,299  
Acquisition costs
     1,412       105       1,517       334  
Restructuring
         (5 )     344       74       878  
      17,425       14,317       49,596       44,655  
Income from operations
   $ 5,014     $ 4,021     $ 13,167     $ 13,213  
                                 
Servers and Storage
                                
Revenue:
                                
Products
   $ 4,607     $ 3,935     $ 13,033     $ 17,501  
Services
     3,265       3,913       10,188       11,447  
Total revenue
     7,872       7,848       23,221       28,948  
Gross profit
     2,836       3,691       9,762       13,180  
Operating expenses:
                                
Research and development
     1,801       2,804       5,622       9,272  
Selling and marketing
     1,186       1,778       3,192       6,186  
Restructuring
     -       2,091       148       5,154  
      2,987       6,673       8,962       20,612  
(Loss) income from operations
   $ (151 )   $ (2,982 )   $ 800     $ (7,432 )
                                 
Media Services
                                
Service revenue
   $ 7,865     $ 8,106     $ 24,541     $ 21,605  
Gross profit
     830       1,213       3,245       4,431  
Operating expenses:
                                
General and administrative
     994       1,408       2,896       3,114  
Amortization of intangibles
     35       73       106       213  
      1,029       1,481       3,002       3,327  
(Loss) income from operations
   $ (199 )   $ (268 )   $ 243     $ 1,104  
                                 
Unallocated Corporate
                                
Operating expenses:
                                
General and administrative
   $ 4,871     $ 4,283     $ 14,617     $ 14,039  
Restructuring
     -       -       -       912  
Total unallocated corporate expenses
   $ 4,871     $ 4,283     $ 14,617     $ 14,951  
                                 
Consolidated loss from operations
   $ (207 )   $ (3,512 )   $ (407 )   $ (8,066 )
 
 
The following table summarizes revenues by geographic locations:

   
Three Months Ended
    
Nine Months Ended
  
   
October 31,
    
October 31,
  
   
2011
    
2010
    
2011
    
2010
  
   
Amount
    
%
    
Amount
    
%
    
Amount
    
%
    
Amount
    
%
  
   
(in thousands, except percentages)
    
(in thousands, except percentages)
  
Revenues by customers' geographic locations:
                                                
North America
   $ 29,438       56 %   $ 27,323       55 %   $ 82,261       52 %   $ 90,045       58 %
Europe and Middle East
     20,494       38 %     16,176       33 %     61,645       40 %     46,864       30 %
Latin America
     1,143       2 %     1,392       3 %     4,389       3 %     7,430       5 %
Asia Pacific and other international locations
     2,286       4 %     4,244       9 %     7,216       5 %     11,021       7 %
Total
   $ 53,361             $ 49,135             $ 155,511             $ 155,360          
 
The following summarizes revenues by significant customer where such revenue exceeded 10% of total revenues for the indicated period:

   
Three Months Ended
    
Nine Months Ended
  
   
October 31,
    
October 31,
  
   
2011
    
2010
    
2011
    
2010
  
Customer A
     21 %     18 %     21 %     24 %
Customer B
     12 %     12 %     11 %     10 %
Customer C
     *       11 %     *       *  
 
At October 31, 2011, two different customers accounted for approximately 21% and 16%, respectively, of the accounts receivable and unbilled receivables balances, and at January 31, 2011, three customers accounted for 17%, 12% and 11%, respectively, of SeaChange’s accounts receivable and unbilled receivables balances.