NEWS RELEASE
| Contact: | Jim Sheehan | Martha Schaefer |
| | SeaChange PR 1-978-897-0100 x3064 jim.sheehan@schange.com | SeaChange IR 1-978-897-0100 x3030 martha.schaefer@schange.com |
SEACHANGE INTERNATIONAL ANNOUNCES
FIRST QUARTER FISCAL 2012 RESULTS
| · | First Quarter Revenues and non-GAAP EPS Both Exceeded Prior Guidance |
| · | Full Year non-GAAP EPS Guidance Raised to $0.66-$0.74 |
| · | Continues to See Strength in Global Multi-Screen Software Deployments |
ACTON, Mass. (June 9, 2011) – SeaChange International, Inc. (NASDAQ: SEAC), a leading global multi-screen video software company, announced financial results for its fiscal 2012 first quarter ended April 30, 2011. Total revenues for the quarter were $52.1 million, which were $2.5 million lower than total revenues of $54.6 million for the first quarter of fiscal 2011. Non-GAAP net income for the first quarter was $2.1 million or $0.06 per share compared with non-GAAP net income of $3.1 million or $0.10 per share for the same period last year. GAAP net loss for the first quarter of fiscal 2012 was $0.4 million, or $0.01 per share, compared with GAAP net income of $20.3 million, or $0.64 per share, for the first quarter of fiscal 2011. Last year’s first quarter GAAP earnings included a pre-tax gain of $25.2 million related to the Company’s sale of its equity investment in Casa Systems.
Significant GAAP items that have been excluded in calculating non-GAAP net income include the gain related to the Casa divestiture in the first quarter of last year, deferred revenue adjustments related to recent acquisitions, acquisition-related costs, reversal of deferred tax valuation allowance, restructuring charges, amortization of intangible assets and stock compensation expense. A reconciliation of GAAP net income to non-GAAP net income is attached to this release and is available on the Company’s website (http://www.schange.com/ir).
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SeaChange Q1 FY2012/Page 2
The Company ended the first quarter of fiscal 2012 with cash, cash equivalents and marketable securities of $91.0 million and no debt compared to $86.2 million and no debt at the end of the fourth quarter of fiscal 2011. The $4.8 million increase in cash in this year’s first quarter was generated by cash flow from operations and a reduction in accounts receivable from improved collection efforts that were partially offset by acquisition payments made to the former shareholders of VividLogic.
Segment Revenue Results
Total revenues in the first quarter from the Company’s Software segment were $35.5 million, which were $4.6 million lower than Software segment revenues of $40.1 million in the first quarter of last year. The reduction in year over year revenues in the Software segment was driven by a large VOD back office software order that was delivered in last year’s first quarter to a large North American cable television provider as part of the displacement of a competitor at that customer. The impact of this significant order compared to last year’s first quarter was partially offset in this year’s first quarter by increased VOD software subscription revenues from a North American customer and higher VOD software revenues from eventIS.
The Servers and Storage segment generated $7.6 million of revenues for the first quarter of fiscal 2012, which were $0.5 million lower than comparable revenues of $8.1 million for the first quarter of fiscal 2011. The decrease in Servers and Storage revenues between years was due to lower VOD server maintenance and warranty revenues.
Media Services segment revenues for this year’s first quarter were $8.9 million, which were $2.5 million or 40% higher than revenues of $6.4 million for the first quarter of last year. The increase in Media Services revenues in this year’s first quarter compared to the first quarter of fiscal 2011 was due to increases from customers in Greece, France and Dubai.
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SeaChange Q1 FY2012/Page 3
“We are pleased with our financial performance for the first quarter of fiscal 2012 as we exceeded both our revenue and earnings guidance,” commented Bill Styslinger, SeaChange International CEO and Chairman. “We continue to be encouraged by the response from customers to our Adrenalin multi-screen video software. We have customer deployments in each major region of the world and are in contract discussions with several more prospects, both new and existing customers, for deployments this year. In addition, we saw our customer diversification strategy take hold in the first quarter as approximately 40 percent of our revenue in the quarter was derived from European customers fueled by strong revenue contributions from eventIS and On Demand Group.”
Styslinger continued, “The first quarter saw one of our largest customers extend its VOD software subscription agreement, demonstrating this customer’s confidence in our VOD back office solution for their expanding VOD needs. Combined with increased multi-screen video software deployments, improving revenue momentum from our home media gateway software products and continued strength from eventIS and On Demand Group, we are now forecasting second quarter revenues of $53 to $58 million and non-GAAP earnings per share of $0.13 to $0.19. In addition, we are raising our full year non-GAAP earnings per share target to $0.66 to $0.74 from our previous guidance of $0.62 to $0.70 per share.”
SeaChange will host its first quarter fiscal 2012 conference call today at 5:00 p.m. E.T. The live broadcast can be accessed at www.schange.com/ir. Supplemental financial information and prepared remarks for the conference call will be posted to the investor relations section of our website simultaneously with this press release.
About SeaChange International
SeaChange International (NASDAQ: SEAC) is a global leader in the delivery of multi-screen video. The Company provides innovative, Emmy award-winning solutions and services for back office, advertising, content, in-home devices and broadcast to hundreds of media companies, including blue chip companies such as Comcast, Virgin Media, AT&T, Hutchison Whampoa, Vodacom and DISH Network. Headquartered in Acton, Massachusetts, SeaChange has product development, support and sales offices around the world. Visit www.schange.com.
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SeaChange Q1 FY2012/Page 4
Safe Harbor Provision
Any statements contained in this document, including the accompanying prepared remarks of the Company's Chief Executive Officer and Chairman, that do not describe historical facts, including without limitation statements concerning expected future performance, product introductions and general market conditions, may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements contained herein are based on current expectations, but are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. The factors that could cause actual future results to differ materially from current expectations include the following: the Company's dependence on the continued spending of customers on video systems and services; the continued growth, development and acceptance of the video-on-demand market; the impact of worldwide economic cycles; the impact of measures the Company has taken to address slowdowns in the market for the Company's products and services; the uncertainties from our ongoing evaluation of strategic options and the restructuring of our Servers and Storage business; the loss of one of the Company's large customers; the cancellation or deferral of purchases of the Company's products; a decline in demand or average selling price for the Company's products; the Company's ability to manage its growth; the risks associated with international sales, including risks associated with changes in foreign currency exchange rates; 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 in current and any future litigation in which the Company is involved; content providers limiting the scope of content licensed for use in the video-on-demand market; the Company's ability to introduce new products or enhancements to existing products; the Company's dependence on certain sole source suppliers and third-party manufacturers; the Company's ability to obtain licenses or distribution rights for third-party technology at acceptable prices; the Company's ability to compete in its marketplace; the Company's ability to respond to changing technologies; the performance of companies in which the Company has made equity investments, including On Demand Deutschland GmBH & Co. KG and Minerva Networks, Inc.; the ability of the Company to realize the benefits of its acquisitions of eventIS Group B.V. and VividLogic, Inc. and to integrate these and any future acquisitions; future acquisitions or joint ventures that are unsuccessful; impairment of the Company's goodwill or intangible assets; risks in the Company's investments that adversely affect the value or liquidity of the investments; changes in the regulatory environment; the Company's ability to hire and retain highly skilled employees; any additional tax liabilities that the Company may be subject to; system errors, failures or disruptions; volatility of the Company's stock price; and any weaknesses over internal controls over financial reporting.
Further information on factors that could cause actual results to differ from those anticipated is detailed in various publicly available documents made by the Company from time to time with the Securities and Exchange Commission, including but not limited to, those appearing at Item 1A under the caption "Risk Factors" in the Company's Annual Report on Form 10-K filed with the Commission on April 14, 2011. Any forward-looking statements should be considered in light of those factors. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak as of the date they are made.
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The Company disclaims any obligation to publicly update or revise any such statements to reflect any change in Company expectations or events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results may differ from those set forth in the forward-looking statements.
Use of Non-GAAP Financial Information
To supplement our financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures that we believe are helpful in understanding our past financial performance and future results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand and manage our business and make operating decisions. Our non-GAAP financial measures include adjustments based on the following items, as well as the related income tax effects and adjustments to the valuation allowance:
Deferred software revenue: Business combination accounting rules require us to account for the fair value of customer contracts assumed in connection with our acquisitions. In connection with the acquisitions of eventIS Group B.V. on September 1, 2009, and VividLogic, Inc. on February 1, 2010, the book value of our deferred software revenue was reduced by approximately $6.0 million in the adjustment to fair value. Because these customer contracts may take up to 18 months to complete, our GAAP revenues subsequent to these acquisitions do not reflect the full amount of software revenues on assumed customer contracts that would have otherwise been recorded by eventIS Group B.V. and VividLogic, Inc. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we have historically experienced high renewal rates on similar customer contracts, although we cannot be certain that customers will renew these contracts.
Stock-based compensation expenses: We have excluded the effect of stock-based compensation and stock-based payroll expenses from our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.
Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP operating expenses and net income measures. Amortization of intangibles is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as well. Amortization of intangibles assets will recur in future periods.
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Acquisition related and other expenses: We incurred significant expenses in connection with our acquisitions of eventIS Group B.V. and VividLogic, Inc. and also incurred certain other operating and non-operating expenses, which we generally would not have otherwise incurred in the periods presented. Acquisition related and other expenses consist of transaction costs, costs for transitional employees, other acquired employee related costs, integration related professional services and the change of fair value related to contingent considerations. We believe it is useful for investors to understand the effects of these items on our total operating expenses.
Restructuring: We incurred significant expenses in connection with selected headcount reductions, a write-down of inventory to net realizable value reflecting the discontinuance of certain inventory components, and the disposal of fixed assets. We believe it is useful for investors to understand the effects of these items on our total operating expenses.
Gain on sale of equity investment: This reflects the gain, excluding any tax effects, on the sale of our investment in Casa Systems. This is considered a one-time event and not included in the financial results of our continuing operations.
Income tax benefit (provision): The income tax adjustment reflects the effective tax rate for the year in which the non-GAAP adjustment occurs and excludes any changes in the tax valuation allowance arising from the gain on the sale of the equity investment in Casa Systems.
SeaChange International, Inc.
