SEACHANGE INTERNATIONAL REPORTS
FOURTH QUARTER AND FULL YEAR FISCAL 2019 RESULTS
ACTON, Mass. (April 10, 2019) –SeaChange International, Inc. (NASDAQ: SEAC) today reported fourth quarter fiscal 2019 revenue of $17.0 million and a U.S. GAAP loss from operations of $19.9 million, or $0.56 per basic share, compared to fourth quarter fiscal 2018 revenue of $22.9 million and U.S. GAAP income from operations of $1.2 million, or $0.04 per fully diluted share.
The Company’s U.S. GAAP fourth quarter fiscal 2019 results included non-GAAP charges of $18.7 million, which consisted primarily of impairment charges of $17.0 million, stock-based compensation of $0.4 million, amortization of intangible assets from prior acquisitions of $0.5 million and severance and other restructuring costs of $0.8 million, while fourth quarter fiscal 2018 results included non-GAAP charges of $2.1 million. Non-GAAP loss from operations in the fourth quarter of fiscal 2019 was $1.2 million, or $0.03 per basic share, compared to the fourth quarter of fiscal 2018 non-GAAP income from operations of $3.3 million, or $0.09 per fully diluted share.
For the full fiscal year ended January 31, 2019, the Company reported revenue of $62.4 million and a U.S. GAAP loss from operations of $35.8 million, or $1.00 per basic share, compared to revenue of $80.3 million and a U.S.GAAP loss from operations of $5.4 million, or $0.15 per basic share, in the same period in the prior fiscal year. The non-GAAP loss from operations for fiscal 2019 was $11.7 million, or $0.33 per basic share, compared to non-GAAP operating income of $3.9 million, or $0.11 per fully diluted share, in fiscal 2018.
In the fourth quarter of fiscal 2019, the Company performed impairment reviews of its goodwill and long-lived assets. The impairment reviews were triggered by a decline in the stock price, actual operating results and revised forecasts, which were considered to be triggering events for such reviews. As a result, SeaChange determined that the carrying value of goodwill and certain long-lived assets exceeded their fair value, and therefore an impairment charge of $17.0 million was recorded for fiscal 2019, compared to no charge in fiscal 2018.
Of the total impairment charge, $1.2 million was recorded to reduce the carrying value of the Company’s headquarters building from $4.7 million to $3.5 million; $0.3 million to reduce the carrying value of intangible assets from $0.3 million to zero, representing fair value of these long-lived assets; and $15.5 million to reduce goodwill from $24.3 million to $8.8 million, based on the difference between carrying value, after accounting for the impairment charges of long-lived assets, and fair value determined using a discounted cash flow approach.
Mark J. Bonney, Executive Chairman, SeaChange, said, “Fiscal 2019 was an extremely challenging year for the Company. We significantly underperformed quarter to quarter and for the full year. The underperformance was principally the result of sales pipeline deficiencies, an ineffective go-to-market strategy and a lengthening of the sales cycle. While we made progress in developing relationships with several new customers during the year, we recognized the need for significant improvement in our approach to the market and have made substantial changes over the past three months. Those changes included naming Yossi Aloni as our new Chief Commercial Officer, adjusting our product offering and upgrading our sales team. We also completed the realignment of all development resources under Marek Kielczewski, as Chief Technology Officer, and closed a small, but very meaningful acquisition, adding important technology to our product offering.”
Mr. Bonney continued, “As we move through Fiscal 2020, we believe that the changes we have already made, and more that are underway, including the full integration of the acquisition of Xstream, which closed in early February, will allow us to generate revenue growth and a return to positive cash flow for the year. It is important to note that the Company has a strong Balance Sheet and ended the fourth quarter of Fiscal 2019 with cash, cash equivalents and marketable securities of $30.7 million, and had no debt outstanding.”
Peter Faubert, Chief Financial Officer, stated, “To more closely align with industry practices, beginning in Fiscal 2020, SeaChange will no longer provide quarterly revenue and earnings outlooks. We will continue to provide an annual outlook, which we will update on a quarterly basis, as appropriate.”
For fiscal 2020, the Company is striving to:
- Close 20-25 significant deals for multiple product/service offerings on an annual basis;
- Increase total annual revenue in the low to mid double digits percentage range to $70-80 million, despite lower year-over-year service revenues;
- Maintain GAAP gross margins in the low 60 percentage range;
- Complete the development of three significant new product offerings;
- Continue to reduce costs by focusing on reducing essential third-party costs and eliminating non-essential costs;
- Deliver GAAP operating results between a loss of $0.09 per basic share to income of $0.07 per fully diluted share, and non-GAAP operating income between $0.03 to $0.19 per fully diluted share.
- Increase cash by $3-6 million to $33-36 million, from approximately $30 million at the end of Fiscal year 2019.
The Company believes that achieving these goals will establish the foundation for a business model that could result in sustainable double-digit revenue growth and non-GAAP operating income growth of 12-15% in 2 to 3 years.
These GAAP estimates are subject to a number of variables that are outside of management’s control, including the size of restructuring expenses, which are influenced by the timing of certain non-U.S. restructuring activities and stock price fluctuations.
The Company will host a conference call to discuss its fourth quarter and full year Fiscal 2019 results at 5:00 p.m. ET today, Wednesday, April 10, 2019. The call may be accessed by dialing 877-407-8037 (U.S.) and 201-689-8037 (international) and via live webcast on the Events page at investors.seachange.com. The webcast replay will be archived the same location following completion of the call.
About SeaChange International
For 25 years, SeaChange (Nasdaq: SEAC) has pioneered solutions to help video providers around the world manage and monetize their content. As the video industry rapidly evolves to meet the “anytime, anywhere” demands of today’s viewers, SeaChange’s comprehensive content, business, advertising, and experience management solutions provide a mature, network-agnostic, cloud-enabled platform of scalable core capabilities that video service providers, broadcasters, content owners and brand advertisers need to create the personalized, indivisual™ experiences that drive viewer engagement and monetization. For more information, please visit www.seachange.com.
Safe Harbor Provision
Any statements contained in this press release that do not describe historical facts, including the impact of the integration of Xstream A/S and other changes currently underway, guidance frequency, and the anticipated closing of deals, revenue, gross margins, development of new product offerings, cost savings, income from operations, cash balance and other financial matters, are neither promises nor guarantees and may constitute “forward-looking statements” as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements may include words such as “may,” “might,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “seeks,” “intends,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. Any such forward-looking statements contained herein are based on current assumptions, estimates and expectations, but are subject to a number of known and unknown risks and significant business, economic and competitive uncertainties that may cause actual results to differ materially from expectations. Numerous factors could cause actual future results to differ materially from current expectations expressed or implied by such forward-looking statements, including, without limitation, the following: the continued spending by the Company’s customers on video solutions and services and expenses we may incur in fulfilling customer arrangements; the success of our efforts to introduce SaaS-based multiscreen service offerings; the Company’s ability to successfully introduce new products or enhancements to existing products; the manner in which the multiscreen video and OTT markets develop; the Company’s transition to being a company that primarily provides software solutions; the Company’s ability to compete in the marketplace; any failure by the Company to respond to changing technology; measures taken to address the variability in the market for our products and services; the loss of or reduction in demand, or the return of product, by one of the Company’s large customers or the failure of revenue acceptance criteria in a given fiscal quarter; consolidation in the markets the Company serves; the cancellation or deferral of purchases of the Company’s products; the length of the Company’s sales cycles; any decline in demand or average selling prices for our products and services; failure to manage product transitions; failure to achieve our financial forecasts due to inaccurate sales forecasts or other factors, including due to expenses we may incur in fulfilling customer arrangements; the impact of restructuring programs; the Company’s ability to manage its growth; the risks associated with international operations; the ability of the Company and its intermediaries to comply with the Foreign Corrupt Practices Act; foreign currency fluctuation; the Company’s ability to protect its intellectual property rights and the expenses that may be incurred by the Company to protect its intellectual property rights; an unfavorable result of current or future litigation relating to the Company’s intellectual property; content providers limiting the scope of content licensed for use in the video-on-demand and OTT market or other limitations in materials we use to provide our products and services; the Company’s ability to realize the benefits of completed or future acquisitions, including Xstream A/S; the impact of acquisitions, divestitures or investments made by the Company,; the Company’s ability to raise additional funds through capital markets on favorable terms and in a timely manner; the Company’s ability to access sufficient funding to finance desired growth and operations; the performance of the companies in which the Company has made equity investments; any impairment of the Company’s assets; the impact of changes in the market on the value of our investments; changes in the regulatory environment; the Company’s ability to hire and retain highly skilled employees; the ability of the Company to manage and oversee the outsourcing of engineering work; additional tax liabilities to which the Company may be subject, including should the Company’s net operating loss carry-forwards be impaired, notwithstanding the Company’s Tax Benefits Preservation Plan; possible adjustments to estimates resulting from the new tax legislation; any breach of the Company’s security measures and customer data or our data being obtained unlawfully; service interruptions or delays from our third-party data center hosting facilities; disruptions to the Company’s information technology systems; uncertainties of regulation of Internet and data traveling over the Internet; the volatility of our stock; actions that may be taken by significant stockholders, notwithstanding the February 2019 Cooperation Agreement with TAR Holdings LLC; if securities analysts do not publish favorable research or reports about our business; our use of non-GAAP reporting; change in accounting standards; any weakness in the Company’s internal controls over financial reporting; the Company’s use of estimates in accounting for the Company’s contracts; the performance of the Company’s third-party vendors; the Company’s entry into fixed price contracts and the related risk of cost overruns; the risks associated with purchasing material components from sole suppliers and using a limited number of third-party manufacturers; terrorist acts, conflicts, wars and geopolitical uncertainties; and the Company’s Delaware anti-takeover provisions. These risks and other risk factors that could cause actual results to differ from those anticipated are detailed in various publicly available documents filed by the Company from time to time with the Securities and Exchange Commission (SEC), which are available at www.sec.gov, including but not limited to, such information appearing under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC on April 16, 2018. Any forward-looking statements should be considered in light of those risk factors. The Company cautions readers not to rely on any such forward-looking statements, which speak only as of the date they are made. The Company disclaims any intent or obligation to publicly update or revise any such forward-looking statements to reflect any change in Company expectations or future events, conditions or circumstances on which any such forward-looking statements may be based, or that may affect the likelihood that actual results may differ from those set forth in such forward-looking statements.
Mary T. Conway