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Tide Turns for SeaChange in Q2

Jeff Baumgartner
8/30/2019

SeaChange shares surged more than 26% in after-hours trading Thursday after the video software company announced greatly improved Q2 revenues and the installation of a new CEO.

Following several quarters of revenue declines, SeaChange reversed that in Q2 as revenues reached $18.8 million, up from $11.9 million a year ago. The company also shrunk its net loss -- to $200,000 in Q2 2019 versus a net loss of $9.1 million in Q2 2018.

SeaChange attributed a healthy portion of the financial improvement to customer traction for Framework, a reworked video delivery platform that was launched in April and encompasses all products previously offered by SeaChange on a standalone basis.

"Typical integration and delivery of an end-to-end Framework Solution from agreement to production is now less than 90 days," Marek Kielczewski, SeaChange's CTO, said on Thursday's earnings call. "Onboarding new customers takes significantly less time today than it did in prior quarters."

SeaChange said it closed seven Framework deals, with a total value of more than $20 million, so far in its fiscal year.

Framework also ties into a broader reorganization of the company's product line and its leadership. On that latter front, the company announced Thursday that Yossi Aloni was elevated to president and CEO. Aloni, a former Ateme exec who joined SeaChange in January 2019, succeeds Ed Terino, who resigned in February after citing "great frustration" over his lack of support for a then-proposed cooperation agreement with an activist shareholder.

That cooperation agreement involved Karen Singer and TAR Holdings, which owns about 20% of SeaChange's outstanding shares. TAR Holdings had expressed disappointment with SeaChange's financial performance, believing it "may be a result of mismanagement" and agitated for the company to consider "strategic and operational alternatives" that could include a possible sale of assets.

"SeaChange is a different company now than it was six months ago," Aloni said on the call. "We have a new vision and strategy along with the tactics and measures of success in place."

That strategy includes the integration of the company's various standalone products into the Framework platform debuted in April, along with a new sales team.

Aloni said the change in approach with Framework allows SeaChange to move away from a model in which it sold standalone components of a video delivery platform primarily to cable operators with large engineering organizations that integrated components from several other suppliers toward a "custom delivery platform."

With Framework, SeaChange believes the sum is greater (and more economical) than the parts. Aloni likened the old approach to selling a customer's car engine to another customer that needed to invest more in other components and integration work to customize it to suit its own needs. "With our new go-to-market, we sell the car with little customization, which improves both the customer's cost structure and ours," he said.

SeaChange, which counts Liberty Global among its major customers, didn't identify its recently added Framework customers by name. But Aloni said those deals are being derived from three sources: customers that previously used SeaChange for a component of the video delivery system, brand new customers and former SeaChange customers that have returned.

SeaChange has also set some specific goals for its 2020 fiscal year, including closing 20 to 25 "significant deals," improving annual revenue growth to the "low to mid double digits" and hitting a target in the range of $70 million to $80 million.

SeaChange shares were up 32 cents (16.59%) to $2.25 each in Friday morning trading.

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— Jeff Baumgartner, Senior Editor, Light Reading

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