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SeaChange Shares Dive 44% on Big Q2 Shortfall

Shares in SeaChange International fell 44% Tuesday after the company issued preliminary Q2 results that fell far short of the mark and triggered a massive selloff.

SeaChange International Inc. (Nasdaq: SEAC) shares closed Tuesday at $1.62, down $1.28 (44.14%). According to Yahoo Finance, share volumes in SeaChange eclipsed 5.2 million Tuesday, compared to an average volume of about 102,000. MarketWatch said SeaChange shares were on track for the biggest one-day selloff since the company went public 22 years ago.

The Acton, Mass.-based multiscreen video software company said it now expects fiscal Q2 revenues of $11.5 million to $12.5 million, versus prior guidance of $17 million to $19 million, and a GAAP loss of 20 cents to 22 cents per basic share, compared to an expected GAAP loss of 4 cents to 8 cents per share. SeaChange's cash, cash equivalents restricted cash and marketable securities as of July 31 were $35 million, compared to $49 million as of April 30.

The Q2 shortfall was due to a confluence of factors, including order delays that moved from Q2 to Q3, revenues that came in toward the end of the period that could not be recognized in Q2, and delays in other purchasing decisions as customers evaluate SeaChange's introduction of new subscription-based products that use a software-as-a-service model, company CEO Ed Terino said in Tuesday's announcement.

"We are encouraged, however, by the interest among customers in these new product offerings and remain confident in their appeal to a broader set of potential customers," Terino added.

SeaChange, which counts Liberty Global Inc. (Nasdaq: LBTY) among its key customers and has been undergoing a corporate streamlining, also noted that the prelim results represent a "triggering event" requiring the company to perform a valuation of its goodwill and other "long-lived assets" as of July 31, 2018, and that the outcome of that analysis could impact GAAP earnings per share for Q2.

SeaChange said it will discuss Q2 results in more detail on Wednesday, Sept. 5.

The company recently overhauled its product lineup, along with new product branding, that reflects a new cloud-based platform and a new mix of software tools designed to help partners manage and personalize their video services. SeaChange is also looking for the updated approach to help in its pursuit of the mobile video market. (See SeaChange Wants to Make Waves.)

SeaChange has been the subject of M&A rumors for several years. About a year ago, Roumell Asset Management, a SeaChange investor, urged the board to seek a sale of the company.

SeaChange isn't the only company to suffer from customer order delays. Earlier this month, Casa Systems Inc. said its Q2 fell short in part because cable operators were putting off big bandwidth capacity add-ons as they mull deployment strategies for emerging distributed access architectures. (See Casa Systems Shares Slide on Slashed Guidance .)

— Jeff Baumgartner, Senior Editor, Light Reading

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