SeaChange Reports Higher Revenues, Income

Video-on-demand, IPTV and digital advertising technology provider, SeaChange International, has released financial results for its fiscal first quarter (2010), ended April 30th:

• Combined revenues totaled $48.9 million, compared to $45.4 million for the year-ago quarter (an increase of 8%).
• Revenues from the company's software segment totaled $30.6 million, up $0.6 million from the year-ago quarter. The company said that the growth was driven by increased Comcast VOD software subscription revenue, as well as higher VOD maintenance, installation and professional services revenue.
• Revenues from the company's servers and storage segment totaled $14.1 million, up $2.7 million from the year-ago quarter. The company attributed the increase to "significantly higher deployments of VOD servers to our largest North American telecommunications customer" (note: on page 2 of its most recent annual report, SeaChange lists Verizon as one of its telco customers--the only North American telco that it lists) as well as to increased VOD server shipments to several North American cable operators. The segment also benefited from increased VOD server maintenance and installation revenue, the company said.
• Revenues from the company's media services segment totaled $4.2 million, up $0.2 million from the year-ago quarter. Excluding the impact of currency exchange-rate differences between years, the company said, media services revenue was 44% higher in fiscal Q1, 2010 than in the year-ago quarter, due primarily to multi-year content services contracts from customers in Greece and Turkey, as well as to the inclusion of revenue from the company's acquisition of Mobix Interactive in the fourth quarter of last year.
• Net income totaled $1 million, or $0.03 per share, compared to $0.3 million, or $0.01 per share, for the year-ago quarter.
• At the end of the quarter, the company's cash, cash-equivalents and marketable securities totaled $90.7 million and no debt, compared to $85.8 million and no debt at the end of the fourth quarter of fiscal 2009. The company said that net income and non-cash expenses for depreciation, amortization and stock compensation of $4.1 million, combined with $4.4 million of improved working capital performance, were partially offset by $2.4 million of capital expenditures. In addition, the company repurchased 298,000 shares of its common stock during the quarter at a cost of $1.7 million.

"We are pleased with our financial performance in the first quarter which marked our seventh consecutive quarter of profitability for the company," SeaChange chairman and CEO, Bill Styslinger, said in a prepared statement. "We cemented our strong competitive position with our largest and growing telecommunications customer on the heels of signing a multi-year VOD and advertising purchase agreement early in the first quarter, which produced substantial VOD server and software order strength throughout. We were also encouraged by the margin strength within the quarter as we exceeded 50% gross margins for the fourth time in the last five quarters. In addition, we continued to emphasize cost containment with operating expenses in the first quarter essentially flat with last year's fourth quarter. Two multi-year contracts with Virgin Media were extended during the first quarter. Our middleware contract, derived from our Liberate Technologies asset acquisition in 2005, was extended through January of 2011, while our media services VOD content processing agreement was extended through December of 2011. These contract extensions combined with our favorable competitive position with the largest deployers of VOD in North America substantiate the faith these customers have in SeaChange and our ability to deliver solutions to meet their growing video processing needs."

Styslinger's prepared statement also included some guidance for the current fiscal quarter: "We continue to see a challenging near-term capital expenditure environment for many of our customers, particularly in the broadcast and advertising insertion sectors. With that, we continue to believe that revenues for the first half of fiscal 2010 will be comparable to revenues generated in the first half of last year. Also we are cautiously optimistic that second half revenues for fiscal 2010 will be higher than first half revenues based on domestic VOD software upgrade opportunities, additional media services VOD content processing contracts, and increased professional services and maintenance revenue. In addition, we expect to be profitable for the second quarter."