Revenue Increases by 58% as Framework Offering Gains Traction
Management Reiterates Full Year Guidance
Yossi Aloni Named Chief Executive Officer
ACTON, MA / ACCESSWIRE / August 29, 2019 / SeaChange International, Inc. (SEAC) today reported second quarter fiscal 2020 revenue of $18.8 million and a net loss of $0.2 million, or $0.00 per basic share, compared to second quarter fiscal 2019 revenue of $11.9 million and a net loss of $9.1 million, or $0.26 per basic share.
Quarterly and Recent Highlights
- Announced the release of the Framework 7th generation Backoffice, a major milestone for this product family. This critical element of the Framework solution is significantly re-architected for ease of deployment and maintenance for the Framework customers. Also released Orchestrator and Analytics engines, which are critical value-adding components of the Framework.
- Won seven customers since the beginning of the fiscal year covering multi-year commitments for the Framework video delivery platform amounting to more than $20 million in total deal value.
- Ended the quarter with $16 million in backlog, an increase of $5 million, or 45%, from April 30, 2019.
- Recorded $18.8 million of revenue with the majority from Framework deals.
- Recorded nearly break-even net earnings on a GAAP basis and non-GAAP operating income of $1.0 million in the quarter.
- Initiated a share repurchase program in June; purchased 100,000 shares for a total consideration of approximately $140,000 in the quarter.
Today SeaChange is also announcing that effective immediately, Yossi Aloni, has been appointed President and Chief Executive Officer of the Company. Mr. Aloni, who joined SeaChange in January 2019 as Chief Commercial Officer, strategized, developed and implemented the Framework solution and Go-to-Market strategy that is responsible for the Company’s recent growth. Chad Hassler, who has served as Head of North American Sales, has been named Chief Commercial Officer; Mr. Hassler joined SeaChange earlier this year and brings more than 20 years of experience in sales and marketing in the video delivery domain to the Company.
Mark J. Bonney, Executive Chairman said, “We are very pleased with our achievements in the second quarter. The number of Framework deals closed and in the pipeline is solid evidence that the strategy of offering an end-to-end video delivery platform is working. Revenues, mainly from the Framework deals, along with the benefits of the consolidation of our R&D resources in Warsaw, which produced the Backoffice 7th generation in one year, and our continual focus on every element of cost in the business allowed us to achieve non-GAAP operating profitability in the second quarter and earlier than previously expected.” Mr. Bonney added, “I congratulate Yossi on his appointment, which reflects the entire Board’s confidence in his ability to step up to the Chief Executive Officer role and lead SeaChange going forward.”
Yossi Aloni, Chief Executive Officer, commented, “I thank the Board for showing their confidence in me and I look forward to leading SeaChange as CEO during these exciting times for the Company and the industry”. Mr. Aloni added “I am pleased with our Framework wins in the first half of this year. In the second quarter we began to recognize revenue from some of the customers who have adopted our solution. Based upon our expanding engagement with new and existing customers, we continue to expect transactions involving the Framework solution to increase materially in the back half of the year, in line with our annual guidance. With our results in the first half of this fiscal year, and the second quarter particularly, we remain confident about our ability to achieve our annual revenue guidance.”
The Company’s U.S. GAAP second quarter fiscal 2020 results included charges of $1.7 million used in non-GAAP calculations, which consisted of amortization of intangible assets from prior acquisitions of $0.3 million, severance and other restructuring costs of $0.7 million, stock-based compensation of $0.6 million and professional fees of $0.1 million. Second quarter fiscal 2019 results included charges of $1.9 million used in non-GAAP calculations, which consisted of stock-based compensation of $0.9million, amortization of intangible assets from prior acquisitions of $0.4million and severance and other restructuring costs of $0.5 million. Non-GAAP income from operations in the second quarter of fiscal 2020 was $1.0 million, or $0.03 per fully diluted share, compared to a non-GAAP net loss from operations in the second quarter of fiscal 2019 of $6.4 million, or $0.18 per basic share.
For the first six months of fiscal 2020, the Company reported revenue of $27.3 million and a net loss of $11.0 million, or $0.30 per basic share, compared to revenue of $26.8 million and a net loss of $14.6 million, or $0.41 per basic share in the same period in the prior fiscal year. The non-GAAP loss from operations for the first six months of fiscal 2020 was $6.5million, or $0.18 per basic share, compared to a non-GAAP loss from operations of $10.2 million, or $0.29 per basic share, in the first half of fiscal 2019.
Update on the Company’s key metrics for fiscal 2020:
- Goal: Close 20-25 significant deals for multiple product/service offerings on an annual basis. Progress: Closed seven significant deals since the beginning of the fiscal year on February 1, 2019.
- Goal: Increase total annual revenue in the low to mid double digits percentage range to $70-80 million, despite lower year-over-year service revenues. Progress: The Company is encouraged by the growth of the Framework deal pipeline and remains confident in the full year revenue target.
- Goal: Maintain GAAP gross margins in the low 60 percentage range. Progress: While legacy gross margins resulted in lower overall gross margins in the first half of fiscal 2020, gross margins contributed by the Framework deals in the first half of the fiscal year exceeded 60% and will drive overall gross margins above 60% in the second half of fiscal 2020.
- Goal: Complete the development of three significant new product offerings. Progress: With the release of flagship Adrenalin 7.0, along with Orchestrator 1.0 and Analytics 1.0, product development efforts have already achieved this goal.
- Goal: Continue to reduce costs by focusing on reducing essential third-party costs and eliminating non-essential costs. Progress: Efforts to reduce third-party costs were significantly achieved in Q2 with full annualized savings impact anticipated beginning in Q3. Work here is continuing as we align the organization with the realities of the business needs as the Framework solution continues to roll out. As a result of these continuing efforts, which are anticipated to be competed in the fourth quarter of this fiscal year, we anticipate significant additional savings in FY 2021.
- Goal: 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. Progress: Management continues to believe this goal can be met for the full year.
- Goal: Increase cash by $3-6 million to $28-31 million. Progress: The Company has re-evaluated this goal based on the early Framework deals where payments have been spread over time as opposed to our original goal which assumed payments for Framework deals would be more front-end loaded. We now expect cash to be in the range of $22-25 million at year end.
SeaChange management continues to believe 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 second quarter Fiscal 2020 results at 5:00 p.m. ET today, Thursday, August 29, 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
SeaChange is a leading supplier of Video Delivery Software Solutions. Our solution powers hundreds of cloud and on-premise video delivery platforms, servicing over 50 million subscribers worldwide. SeaChange offers value-based engagement which provides content and service providers with a complete software delivery platform for linear, VOD and TSTV over managed and unmanaged networks. The SeaChange Framework solution includes video back-office, media asset management, targeted advertising management, analytics and the client interface for STBs, Smart-TVs and mobile devices. Our solution is available as a product or managed service deployed on-premises, in the cloud or as a hybrid. 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 changes currently underway, our framework video delivery model, the share repurchase authorization, 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 adoption of our value-based selling approach; 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; 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; any impairment of the Company’s assets; the ability of the Company to use its net operating losses; 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; evolving data privacy regulations; service interruptions or delays from our third-party data center hosting facilities; disruptions to the Company’s information technology systems; stock price volatility and compliance with Nasdaq continued listing standards; 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; the performance of companies in which the Company has made investments; the impact of changes in the market on the value of our investments; changes in the regulatory environment; uncertainties of regulation of the Internet and data traveling over the Internet; the ability of the Company and its intermediaries to comply with the Foreign Corrupt Practices Act; 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 12, 2019. 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