Exhibit 99.1
NEWS RELEASE
| For more information: |
Media: John Coulbourn SeaChange International 978/897-0100 x3098 johnc@schange.com |
Investor Relations: Martha Schaefer SeaChange International 978/897-0100 x3030 mschaefer@schange.com |
SEACHANGE INTERNATIONAL ANNOUNCES
THIRD QUARTER FISCAL 2005 RESULTS
Company Diversifies with New International and Telco Customers
MAYNARD, Mass. (November 23, 2004) – SeaChange International, Inc. (Nasdaq: SEAC) today announced financial results for its third quarter of fiscal 2005 ended October 31, 2004. Revenues for the quarter were $42.6 million compared to revenues of $38.2 million in the third quarter of fiscal 2004, a 12% increase. The Company recorded net income of $5.5 million, or $0.19 per diluted share, for the third quarter of fiscal 2005 versus net income of $1.5 million, or $0.05 per diluted share, for the third quarter of fiscal 2004. Net income for the third quarter of fiscal 2005 included an adjustment in the Company’s tax provision which increased net income by $1.9 million or $0.06 per diluted share, reflecting the recent change in the law regarding the tax treatment of deferred revenues. Revenues and net income per share for the third quarter of fiscal 2005 were in line with the guidance of revenues of $43.0 million and diluted net income per share of $0.12 that the Company had previously provided in its press release dated August 24, 2004.
Video-on-Demand (VOD) systems revenues for the third quarter of fiscal 2005 were $23.8 million, up 6% compared to $22.5 million in the comparable period last year. Total systems revenues for the quarter were $31.3 million, which, in addition to VOD, included revenues of $3.2 million from advertising systems and $4.3 million from broadcast systems. Service revenues for the quarter were a record $11.3 million.
For the quarter ended October 31, 2004, EBITDA was $7.1 million, or $0.24 per diluted share, as compared to $5.9 million, or $0.21 per share, in the comparable period last year.1The continued improvement in EBITDA helped to increase the Company’s cash and marketable securities balance by $7.5 million from the prior quarter of this fiscal year to a record $139.1 million at quarter end.
For the quarter ending January 31, 2005, the Company expects total revenues of approximately $41.0 million and net income of $0.10 per share.
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SeaChange Q3 ‘05/2
“There’s a seasonality to domestic cable spending that we’ve seen for our 11 years in this business, nevertheless, based on our fourth quarter guidance, the Company is on track to grow total revenues 14% and earnings 160% in fiscal 2005, compared to the previous fiscal year,” said Bill Styslinger, president and CEO, SeaChange International. “This quarter we shipped to a number of new customers, further diversifying our customer base with new telco operators and international cable operators. International revenues for this quarter climbed to 23% and are anticipated to grow further as a proportion of our business.
“We’ve installed over 1.3 million streams to date, including 139,000 in this quarter,” said Styslinger. “This quarter we’ve begun delivering to two of the top telecommunications operators in the world – one in North America and one in Japan. Our new international cable customers include ntl, representing Europe’s largest commercial on-demand deployment; as well as Golden Channels, Matav and Tevel in Israel. And in South Korea, we’re now working with three cable operators as the proliferation of broadband access in that country drives new video applications.”
Styslinger continued, “We achieved yet another record quarter in service revenues, which includes significant contribution from our Digital Video Arts subsidiary where our software developers helped Music Choice to usher in breakthrough capabilities in music on demand.
“Our new broadcast systems also play an important role in the business of television as broadcasters repurpose their content and seek new efficiencies. This quarter we sold additional systems to China Central Television, and gained new customers that include Hang Zhou TV in China, JBS in Japan, and Vietnam’s largest broadcaster, HTV.
“I’m also proud to note that this month SeaChange received an Emmy Award from the National Television Academy for our contribution to on-demand television. This is our second Emmy and we appreciate the validation of our technical contribution to television.”
Potential subscribers in systems planned for SeaChange VOD (estimates)
Worldwide Telcos
COUNTRY | ESTIMATED SUBSCRIBERS | |
| Canada | 2,500,000 | |
| Asia | 3,000,000 | |
U.S. | 3,000,000 | |
| TOTAL TELCO OPERATORS: 5 | 8,500,000 | |
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SeaChange Q3 ‘05/3
International Cable Operators
OPERATOR | ESTIMATED BASIC SUBSCRIBERS | |
| Guandong CATV China | 6,000,000 | |
HOT: Golden Channels, MATAV, Tevel Israel | 1,000,000 | |
| Intercable Venezuela | 1,200,000 | |
| Ntl United Kingdom | 2,400,000 | |
| QRIX So. Korea | 450,000 | |
| Unannounced (7) | 3,600,000 | |
| TOTAL CABLE OPERATORS: 14 | 14,650,000 | |
North American Cable Operators
OPERATOR | ESTIMATED BASIC SUBSCRIBERS | |
| Adelphia | 1,877,000 | |
| Cablevision | 2,952,000 | |
| Comcast | 12,062,000 | |
| Cox | 704,000 | |
| Insight | 1,283,000 | |
| Mediacom | 282,000 | |
| Rogers | 2,200,000 | |
| Time Warner & Bright House | 3,590,000 | |
| Other | 706,000 | |
| TOTAL CABLE OPERATORS: 17 | 25,656,000 | |
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SeaChange Q3 ‘05/4
SeaChange Total On-Demand Customers Worldwide
OPERATORS | ESTIMATED CUSTOMER BASE | |||
| N. American Cable | 17 | 25,656,000 | ||
| International Cable | 14 | 14,650,000 | ||
| Worldwide Telcos | 4 | 8,500,000 | ||
| TOTAL: | 31 | 48,806,000 | ||
SEAC Revenues and Streams
(Trailing Five Quarters)
Q3 (Oct. ‘04) | Q2 (July ‘04) | Q1 (April ‘04) | Q4 (Jan. ‘04) | Q3 (Oct. ‘03) | ||||||
Total Revenue (in millions) | $42.6 | $43.0 | $41.6 | $38.9 | $38.2 | |||||
VOD Revenue (in millions) | $23.8 | $25.2 | $25.2 | $25.4 | $22.5 | |||||
Streams Shipped | 139,000 | 178,000 | 179,000 | 124,000 | 123,000 | |||||
Diluted EPS | $0.19 | $0.12 | $0.11 | $0.09 | $0.05 |
The Company will discuss its financial results and business outlook in more detail today during its webcast conference call at 5:00 p.m. EDT, which will be available live and archived atwww.schange.com.
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SeaChange Q3 ‘05/5
1. EBITDA is a non-GAAP number that the Company defines as operating income excluding depreciation and amortization. A reconciliation of EBITDA to net income for these periods is contained in the financial schedules that accompany this release. EBITDA is an important measurement used by management to measure the operating profits or losses of the business. EBITDA is one of several metrics used by management to measure the cash generated from operations, excluding the operating cash requirements of interest and income taxes. The Company believes that inclusion of this non-GAAP measure enhances investors’ overall understanding of the Company’s current financial performance. EBITDA should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America.
Safe Harbor Provision
Any statements contained in this press release that do not describe historical facts, including without limitation statements concerning expected revenues, earnings, 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 continued growth, development and acceptance of the video-on-demand market; 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 broadband products; the Company’s ability to manage its growth; 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, including the Company’s current patent litigation with nCube Corp. and the securities class action lawsuits; 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 compete in its marketplace; the Company’s ability to respond to changing technologies; the risks associated with international sales; changes in the regulatory environment; the performance of companies in which the Company has made equity investments, including the ON Demand Group Limited; the Company’s ability to hire and retain highly skilled employees; and increasing social and political turmoil.
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 under the caption “Certain Risk Factors” in the Company’s Annual Report on Form 10-K filed with the Commission on April 14, 2004. 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. 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.
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SeaChange Q3 ‘05/6
About SeaChange
SeaChange International, Inc. is a world leader in digital video systems, spanning broadcast and broadband. The Company creates powerful server and software systems that manage, store and distribute professional quality digital video. SeaChange’s innovative products are based on a scalable, distributed software architecture and standard technology components to continually deliver exponential improvements in digital video cost-performance. As a result, SeaChange enables broadband, broadcast, satellite and new media companies to streamline operations and reduce costs, allowing for expanded services, new applications and increased revenues. SeaChange is headquartered in Maynard, Massachusetts and has product development, support and sales offices throughout the world. Visit www.schange.com.
MediaCluster is a patent and trademark of SeaChange International, Inc.
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SeaChange Q3 ‘05/7
SeaChange International, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
| Three months ended | Nine months ended | |||||||||||||||
| October 31, 2004 | October 31, 2003 | October 31, 2004 | October 31, 2003 | |||||||||||||
Revenues | $ | 42,597 | $ | 38,157 | $ | 127,263 | $ | 109,278 | ||||||||
Cost of revenues | 21,692 | 22,823 | 67,792 | 65,376 | ||||||||||||
Gross profit | 20,905 | 15,334 | 59,471 | 43,902 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 7,570 | 6,646 | 21,772 | 19,355 | ||||||||||||
Selling and marketing | 4,254 | 4,180 | 12,879 | 12,531 | ||||||||||||
General and administrative | 3,383 | 2,650 | 8,707 | 8,355 | ||||||||||||
| 15,207 | 13,476 | 43,358 | 40,241 | |||||||||||||
Income from operations | 5,698 | 1,858 | 16,113 | 3,661 | ||||||||||||
Interest income (expense), net | (371 | ) | 404 | 534 | 1,235 | |||||||||||
Other expense | — | — | — | (313 | ) | |||||||||||
Income before income taxes and equity loss in earnings of affiliates | 5,327 | 2,262 | 16,647 | 4,583 | ||||||||||||
Income tax (benefit) expense | (112 | ) | 789 | 4,404 | 1,566 | |||||||||||
Equity income (loss) in earnings of affiliates | 110 | (9 | ) | (143 | ) | (49 | ) | |||||||||
Net income | $ | 5,549 | $ | 1,464 | $ | 12,100 | $ | 2,968 | ||||||||
Basic income per share | $ | 0.20 | $ | 0.05 | $ | 0.44 | $ | 0.11 | ||||||||
Diluted income per share | $ | 0.19 | $ | 0.05 | $ | 0.42 | $ | 0.11 | ||||||||
Weighted average common shares outstanding- | ||||||||||||||||
Basic | 27,652 | 27,006 | 27,494 | 26,892 | ||||||||||||
Diluted | 29,097 | 28,117 | 28,854 | 27,669 | ||||||||||||
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SeaChange Q3 ‘05/8
SeaChange International, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
| October 31, 2004 | January 31, 2004 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 104,609 | $ | 87,597 | ||||
Marketable securities | 18,066 | 7,777 | ||||||
Accounts receivable, net | 27,728 | 16,572 | ||||||
Inventories | 17,535 | 19,738 | ||||||
Prepaid expenses and other current assets | 3,285 | 3,640 | ||||||
Total current assets | 171,223 | 135,324 | ||||||
Property and equipment, net | 14,389 | 14,757 | ||||||
Marketable securities | 16,420 | 26,669 | ||||||
Investments in affiliates | 3,666 | 3,809 | ||||||
Intangibles, net | 821 | 1,293 | ||||||
Goodwill | 1,629 | 253 | ||||||
Other assets | 114 | 151 | ||||||
| $ | 208,262 | $ | 182,256 | |||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 23,301 | $ | 17,587 | ||||
Current portion of line of credit and obligations under capital leases | 311 | 399 | ||||||
Customer deposits | 262 | 401 | ||||||
Deferred revenue | 18,733 | 16,437 | ||||||
Income taxes payable | 860 | 1,336 | ||||||
Total current liabilities | 43,467 | 36,160 | ||||||
Long-term debt and other long-term liabilities | — | 209 | ||||||
Common stock and other equity | 172,331 | 165,683 | ||||||
Accumulated deficit | (7,293 | ) | (19,393 | ) | ||||
Accumulated other comprehensive loss | (243 | ) | (403 | ) | ||||
Total stockholders’ equity | 164,795 | 145,887 | ||||||
| $ | 208,262 | $ | 182,256 | |||||
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SeaChange Q3 ‘05/9
SeaChange International, Inc.
Reconciliation Between Condensed Consolidated Statements of Operations
and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
(In thousands, except per share data)
| Three months ended | ||||||||
| October 31, 2004 | October 31, 2003 | |||||||
Net income | $ | 5,549 | $ | 1,464 | ||||
Income tax expense (benefit) | (113 | ) | 789 | |||||
Interest (income) expense, net | 371 | (404 | ) | |||||
Equity (income) loss in earnings of affiliates | (110 | ) | 9 | |||||
Depreciation and amortization | 1,410 | 3,993 | ||||||
EBITDA | $ | 7,107 | $ | 5,851 | ||||
Net income per share— diluted | $ | 0.19 | $ | 0.05 | ||||
Income tax expense (benefit) | — | 0.03 | ||||||
Interest (income) expense, net | 0.01 | (0.01 | ) | |||||
Equity (income) loss in earnings of affiliates | — | — | ||||||
Depreciation and amortization | 0.04 | 0.14 | ||||||
EBITDA per share— diluted | $ | 0.24 | $ | 0.21 | ||||
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