UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-38828

 

SEACHANGE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

04-3197974

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

500 Totten Pond Road, Waltham, MA

 

02451

Address of principal executive offices

 

(Zip Code)

(978) 897-0100

 

Registrant’s telephone number, including area code

 

Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 Par Value

SEAC

The Nasdaq Global Select Market

Series A Participating Preferred Stock Purchase Rights

SEAC

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    YES      NO  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    YES      NO  

 

The number of shares outstanding of the registrant’s Common Stock on May 28, 2020 was 37,528,325.

 



EXPLANATORY NOTE

SeaChange International, Inc. (the “Company”) is filing this Form 10-Q after the June 9, 2020 (the “Original Due Date”) deadline applicable to it for the filing of a Form 10-Q for the quarter ended April 30, 2020 (the “Quarterly Report”) in reliance on the 45-day extension provided by an order issued by the Securities and Exchange Commission (the “SEC”) under Section 36 of the Securities Exchange Act of 1934, as amended, dated March 4, 2020 (Release No. 34-88318), as modified by a new SEC order issued on March 25, 2020 (Release No. 34-88465) (collectively, the “Order”).

On June 9, 2020, the Company filed a Current Report on Form 8-K to indicate its intention to rely on the Order for such extension.  Consistent with its statements in the Form 8-K, the Company was unable to file the Quarterly Report by the Original Due Date, and therefore relied on the Order due to circumstances related to coronavirus, or COVID-19. Specifically, the Company’s operations and business continue to be challenged due to the conditions and travel restrictions surrounding the COVID-19 pandemic. These challenges have resulted in limited access to the Company’s facilities and interfered with management’s ability to work with its independent accountants, professional advisors and support staff in order to complete the Quarterly Report by the Original Due Date.  The Quarterly Report is hereby filed before the extended due date permitted under the Order, i.e., 45 days after the Original Due Date.

 

 


SEACHANGE INTERNATIONAL, INC.

Table of Contents

 

 

Page

PART I. FINANCIAL  INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Balance Sheets

2

 

 

 

 

Consolidated Statements of Operations and Comprehensive Loss

3

 

 

 

 

Consolidated Statements of Stockholders’ Equity

4

 

 

 

 

Consolidated Statements of Cash Flows

5

 

 

 

 

Notes to Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

 

 

 

Item 4.

Controls and Procedures

27

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

28

 

 

 

Item 1A.

Risk Factors

28

 

 

 

Item 5.

Other Information

28

 

 

 

Item 6.

Exhibits

28

 

 

SIGNATURES

30

 

 

 

 

 

 

 

 


PART I – FINANCIAL INFORMATION

ITEM 1.

Financial Statements

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share data)

 

 

 

April 30,

 

 

January 31,

 

 

 

2020

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

6,387

 

 

$

9,297

 

Marketable securities

 

 

3,173

 

 

 

3,835

 

Accounts receivable, net of allowance for doubtful accounts of $633

   and $947 at April 30, 2020 and January 31, 2020, respectively

 

 

9,332

 

 

 

12,127

 

Unbilled receivables

 

 

12,366

 

 

 

14,279

 

Prepaid expenses and other current assets

 

 

5,792

 

 

 

5,112

 

Total current assets

 

 

37,050

 

 

 

44,650

 

Property and equipment, net

 

 

601

 

 

 

554

 

Operating lease right-of-use assets

 

 

4,929

 

 

 

4,860

 

Marketable securities, long-term

 

 

257

 

 

 

782

 

Intangible assets, net

 

 

1,987

 

 

 

2,300

 

Goodwill

 

 

9,655

 

 

 

9,775

 

Unbilled receivables, long-term

 

 

10,355

 

 

 

9,031

 

Other assets

 

 

812

 

 

 

938

 

Total assets

 

$

65,646

 

 

$

72,890

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,424

 

 

$

4,007

 

Accrued expenses

 

 

6,279

 

 

 

7,986

 

Deferred revenue

 

 

5,251

 

 

 

5,041

 

Total current liabilities

 

 

15,954

 

 

 

17,034

 

Deferred revenue, long-term

 

 

920

 

 

 

1,140

 

Operating lease liabilities, long-term

 

 

4,464

 

 

 

4,348

 

Taxes payable, long-term

 

 

407

 

 

 

436

 

Total liabilities

 

 

21,745

 

 

 

22,958

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; 100,000,000 shares authorized at

   April 30, 2020 and January 31, 2020; 37,661,641 shares issued

   and 37,521,151 shares outstanding at April 30, 2020; 37,303,952

   shares issued and 37,163,462 outstanding at January 31, 2020

 

 

376

 

 

 

373

 

Additional paid-in capital

 

 

245,558

 

 

 

245,067

 

Treasury stock, at cost; 140,490 shares at April 30, 2020 and January 31, 2020

 

 

(147

)

 

 

(147

)

Accumulated other comprehensive loss

 

 

(2,152

)

 

 

(2,137

)

Accumulated deficit

 

 

(199,734

)

 

 

(193,224

)

Total stockholders' equity

 

 

43,901

 

 

 

49,932

 

Total liabilities and stockholders' equity

 

$

65,646

 

 

$

72,890

 

 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

 

2


SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, amounts in thousands, except per share data)

 

 

For the Three Months

Ended April 30,

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

Product

$

3,098

 

 

$

1,179

 

Service

 

3,817

 

 

 

7,306

 

Total revenue

 

6,915

 

 

 

8,485

 

Cost of revenue:

 

 

 

 

 

 

 

Product

 

1,580

 

 

 

909

 

Service

 

2,826

 

 

 

4,668

 

Total cost of revenue

 

4,406

 

 

 

5,577

 

Gross profit

 

2,509

 

 

 

2,908

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

4,166

 

 

 

4,252

 

Selling and marketing

 

2,126

 

 

 

2,852

 

General and administrative

 

2,054

 

 

 

4,249

 

Severance and restructuring costs

 

486

 

 

 

211

 

Total operating expenses

 

8,832

 

 

 

11,564

 

Loss from operations

 

(6,323

)

 

 

(8,656

)

Other expense, net

 

(208

)

 

 

(1,791

)

Loss before income taxes

 

(6,531

)

 

 

(10,447

)

Income tax (benefit) provision

 

(21

)

 

 

402

 

Net loss

$

(6,510

)

 

$

(10,849

)

Net loss per share, basic

$

(0.17

)

 

$

(0.30

)

Net loss per share, diluted

$

(0.17

)

 

$

(0.30

)

Weighted average common shares outstanding, basic

 

37,521

 

 

 

36,461

 

Weighted average common shares outstanding, diluted

 

37,521

 

 

 

36,461

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

Net loss

$

(6,510

)

 

$

(10,849

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

(24

)

 

 

1,207

 

Unrealized gains on marketable securities

 

9

 

 

 

35

 

Total other comprehensive loss

 

(15

)

 

 

1,242

 

Comprehensive loss

$

(6,525

)

 

$

(9,607

)

 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

3


SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands except share data)

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

 

 

Total

 

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

 

 

Treasury

Stock

 

 

 

 

Comprehensive

Loss

 

 

 

 

Accumulated

Deficit

 

 

Stockholders'

Equity

 

Balances at January 31, 2020

 

 

37,303,952

 

 

$

373

 

 

$

245,067

 

 

 

 

$

(147

)

 

 

 

$

(2,137

)

 

 

 

$

(193,224

)

 

$

49,932

 

Issuance of common stock pursuant to

   vesting of restricted stock units

 

 

312,717

 

 

 

3

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock pursuant to

   exercise of stock options

 

 

39,270

 

 

 

 

 

 

119

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

119

 

Issuance of common stock pursuant to

   ESPP purchases

 

 

5,702

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

357

 

Unrealized gains on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

9

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24

)

 

 

 

 

 

 

 

(24

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,510

)

 

 

(6,510

)

Balances at April 30, 2020

 

 

37,661,641

 

 

$

376

 

 

$

245,558

 

 

 

 

$

(147

)

 

 

 

$

(2,152

)

 

 

 

$

(199,734

)

 

$

43,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 31, 2019

 

 

35,946,100

 

 

$

359

 

 

$

242,442

 

 

 

 

$

(5

)

 

 

 

$

(3,393

)

 

 

 

$

(184,303

)

 

$

55,100

 

Issuance of common stock pursuant to

   acquisition of Xstream

 

 

541,738

 

 

 

5

 

 

 

869

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

874

 

Issuance of common stock pursuant to

   vesting of restricted stock units

 

 

57,368

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock pursuant to

   ESPP purchases

 

 

7,819

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

(434

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(434

)

Unrealized gains on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35

 

 

 

 

 

 

 

 

35

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,207

 

 

 

 

 

 

 

 

1,207

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,849

)

 

 

(10,849

)

Balances at April 30, 2019

 

 

36,553,025

 

 

$

365

 

 

$

242,885

 

 

 

 

$

(5

)

 

 

 

$

(2,151

)

 

 

 

$

(195,152

)

 

$

45,942

 

 

 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

4


SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(6,510

)

 

$

(10,849

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

357

 

 

 

550

 

(Recovery of) provision for bad debts

 

 

(316

)

 

 

98

 

Stock-based compensation expense (credit)

 

 

357

 

 

 

(434

)

Deferred income taxes

 

 

 

 

 

368

 

Realized and unrealized foreign currency transaction (gain) loss

 

 

(29

)

 

 

1,207

 

Other

 

 

14

 

 

 

42

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

3,111

 

 

 

9,870

 

Unbilled receivables

 

 

589

 

 

 

(491

)

Inventory

 

 

 

 

 

166

 

Prepaid expenses and other current assets and other assets

 

 

(554

)

 

 

(355

)

Accounts payable

 

 

417

 

 

 

(1,591

)

Accrued expenses and other liabilities

 

 

(1,689

)

 

 

(438

)

Deferred revenue

 

 

(10

)

 

 

(828

)

Net cash used in operating activities

 

 

(4,263

)

 

 

(2,685

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(138

)

 

 

(50

)

Cash paid for acquisitions, net

 

 

 

 

 

(3,838

)

Purchases of marketable securities

 

 

 

 

 

(6,231

)

Proceeds from sales and maturities of marketable securities

 

 

1,201

 

 

 

6,946

 

Net cash provided by (used in) investing activities

 

 

1,063

 

 

 

(3,173

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

137

 

 

 

9

 

Net cash provided by financing activities

 

 

137

 

 

 

9

 

Effect of exchange rate on cash and cash equivalents

 

 

153

 

 

 

229

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(2,910

)

 

 

(5,620

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

9,297

 

 

 

20,317

 

Cash, cash equivalents and restricted cash at end of period

 

$

6,387

 

 

$

14,697

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Income taxes paid

 

$

11

 

 

$

17

 

Non-cash activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable

 

$

 

 

$

19

 

Right-of-use assets obtained in exchange for lease obligations

 

$

402

 

 

$

2,048

 

Fair value of common stock issued in acquisition

 

$

 

 

$

874

 

 

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

 

5


SEACHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.

Nature of Business and Basis of Presentation

SeaChange International, Inc. (“we” or the “Company”), a Delaware corporation, was founded on July 9, 1993. We are an industry leader in the delivery of multiscreen, advertising and premium over-the-top (“OTT”) video management solutions.  Our software products and services are designed to empower video providers to create, manage and monetize the increasingly personalized, highly engaging experiences that viewers demand.

Liquidity

We continue to realize the savings related to our restructuring activities. In fiscal 2020, we continued to streamline our operations and closed our service organizations in Ireland and the Netherlands. These measures are important steps in restoring us to profitability and positive cash flow. We believe that existing cash and investments and cash expected to be provided by future operating results are adequate to satisfy our working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months.

If our expectations are incorrect, we may need to raise additional funds to fund our operations, to take advantage of unanticipated strategic opportunities or to strengthen our financial position. In the future, we may enter into other arrangements for potential investments in, or acquisitions of, complementary businesses, services or technologies, which could require us to seek additional equity or debt financing. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of market opportunities, to develop new products or to otherwise respond to competitive pressures.

Impact of COVID-19 Pandemic

In the first quarter of fiscal 2021, concerns related to the spread of COVID-19 began to create global business disruptions as well as disruptions in our operations and to create potential negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on factors including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Due to our business model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications. These decisions may delay or reduce sales and harm productivity and collaboration. We have observed other companies and governments making similar alterations to their normal business operations, and in general, the markets are experiencing a significant level of uncertainty at the current time. Virtualization of our team’s sales activities could foreclose future business opportunities, particularly as our customers limit spending, which could negatively impact the willingness of our customers to enter into or renew contracts with us.  The pandemic has impacted our ability to complete certain implementations, negatively impacting our ability to recognize revenue, and could also negatively impact the payment of accounts receivable and collections. We may take further actions that alter our business operations as the situation evolves. As a result, the ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (the “CARES) Act”).  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  We continue to examine the impact that the CARES Act may have on our business, including our ability to utilize our net operating losses.

The Paycheck Protection Program

On May 5, 2020, the Company entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured loan in an aggregate principal amount of $2,412,890 pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act administered by the U.S. Small Business Administration (“SBA”).

Interest accrues on the Note at a fixed rate of one percent (1%) per annum, with the payment of the first six months of interest and principal deferred. The Note has an initial term of two years, is unsecured and is guaranteed by the SBA. The Company may apply to the Lender for forgiveness of the Note, with the amount which may be forgiven equal to the sum of qualifying expenses, including payroll costs, covered rent obligations, and covered utility payments incurred by the Company during the eight-week period beginning on May 7, 2020, calculated in accordance with the terms of the CARES Act.

6


Subject to any forgiveness under the PPP, the Note will mature on May 5, 2022. Beginning on the seven-month anniversary of the date of the Note, the Company is required to make 18 monthly payments of principal and interest. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default including, among others, those relating to breaches of the Company’s obligations under the Note, including a failure to make payments, any bankruptcy or similar proceedings involving the Company, and certain material effects on the Company’s ability to repay the Note. The Note may be accelerated upon the occurrence of an event of default.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in U.S. GAAP have been omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for a fair presentation have been included. The year-end consolidated balance sheet data as of January 31, 2020 was derived from our audited consolidated financial statements and may not include all disclosures required by U.S. GAAP. The results of operations for the three months ended April 30, 2020 are not necessarily indicative of the results to be expected for the entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the SEC on April 20, 2020.

2.

Significant Accounting Policies

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, those related to revenue recognition, allowance for doubtful accounts, goodwill and intangible assets, right-of-use operating leases, impairment of long-lived assets, accounting for income taxes, the valuation of stock-based awards, and ongoing legal matters.  We base our estimates on historical experience, known trends and other market-specific or relevant factors that are believed to be reasonable under the circumstances.  On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known.  Actual results may differ from those estimates or assumptions.

Business Combinations

We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations. We allocate the purchase price of the acquisition to the tangible assets acquired, liabilities assumed, and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred. During the measurement period, we record adjustments to provisional amounts recorded for assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could be up to one year after the transaction date, subsequent adjustments are recorded to the Company’s consolidated statements of operations.

Cash, cash equivalents and restricted cash

Cash and cash equivalents include cash on hand and on deposit and highly liquid investments in money market mutual funds, government sponsored enterprise obligations, treasury bills, commercial paper and other money market securities with remaining maturities at the date of purchase of 90 days or less. All cash equivalents are carried at cost, which approximates fair value. Restricted cash represents cash that is restricted as to withdrawal or usage and consists primarily of cash held as collateral in relation to obligations set forth by the landlord of our Poland facility.

7


The following table provides a summary of cash, cash equivalents and restricted cash that constitutes the total amounts shown in the consolidated statements of cash flows as of April 30, 2020 and 2019:

 

 

 

As of April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Cash and cash equivalents

 

$

6,187

 

 

$

14,697

 

Restricted cash

 

 

200

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

6,387

 

 

$

14,697

 

 

Concentration of Credit Risk and of Significant Customers

Financial instruments which potentially expose us to concentrations of credit risk include cash, cash equivalents and restricted cash, marketable securities and accounts receivable. We have cash investment policies which, among other things, limit investments to investment-grade securities. We restrict our cash equivalents and marketable securities to repurchase agreements with major banks and U.S. government and corporate securities which are subject to minimal credit and market risk. We perform ongoing credit evaluations of our customers.

We sell our software products and services worldwide primarily to service providers consisting of operators, telecommunications companies, satellite operators and broadcasters. Two customers accounted for 13% and 15% of total revenue in the first quarter of fiscal 2021 and one customer accounted for 17% of total revenue in the first quarter of fiscal 2020. Two customers accounted for 22% and 13% of the accounts receivable balance as of April 30, 2020. Two customers accounted for 16% and 10% of the accounts receivable balance as of January 31, 2020.

Marketable Securities

Our investments in debt securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other expense, net in the consolidated statements of operations and comprehensive loss.

We evaluate our investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, we consider such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, our ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that we consider to be “other than temporary,” we reduce the investment to fair value through a charge to the consolidated statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Our cash equivalents and marketable securities are carried at fair value determined according to the fair value hierarchy described above. The carrying values of our accounts and other receivables, unbilled receivables, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

Goodwill and Acquired Intangible Assets

We record goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but that are inherently uncertain and

8


unpredictable. Assumptions may be incomplete or inaccurate and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.  Goodwill is not amortized, but rather is tested for impairment annually on August 1st of each year, or more frequently if facts and circumstances warrant a review, such as the ones mentioned in impairments of long-lived assets below. We have determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment. We assess both the existence of potential impairment and the amount of impairment loss by comparing the fair value of the reporting unit with its carrying amount, including goodwill.  Through April 30, 2020, we have recorded accumulated goodwill impairment charges of $54.8 million.

Intangible assets are recorded at their estimated fair values at the date of acquisition. We amortize acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Impairment of Long-Lived Assets

Long-lived assets primarily consist of property, plant and equipment and intangible assets with finite lives. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future undiscounted cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. Determining the fair value of long-lived assets includes significant judgment by management and different judgments could yield different results.

We assess the useful lives and possible impairment of existing recognized long-lived assets whenever events or changes in circumstances occur that indicate that it is more likely than not that an impairment has occurred. We test long-lived assets for impairment by comparing the carrying amount to the sum of the net undiscounted cash flows expected to be generated by the asset whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds its net undiscounted cash flows, then an impairment loss is recognized for the amount by which the carrying amount exceeds its fair value. We use a discounted cash flow approach or other methods, if appropriate, to assess fair value. Factors considered important which could trigger a review include:

 

significant underperformance relative to historical or projected future operating results;

 

significant changes in the manner of use of the acquired assets or the strategy for our overall business;

 

identification of other impaired assets within a reporting unit;

 

significant negative industry or economic trends;

 

a significant decline in our stock price for a sustained period; and

 

a decline in our market capitalization relative to net book value.

Determining whether a triggering event has occurred involves significant judgment. (see Note 5).

Revenue Recognition

Our revenue is derived from sales of software licenses and associated hardware and support services, including professional services and maintenance fees related to our software licenses.

Our contracts, including contracts for our end-to-end software delivery platform solution (the “Framework”), often contain multiple performance obligations. For contracts with multiple performance obligations, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis when available or expected cost plus margin or residual approach. If the transaction price contains discounts or we expect to provide future price concessions, these elements are considered when determining the transaction price prior to allocation. Variable fees within the transaction price are estimated and recognized as revenue when we satisfy our performance obligations to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. If the contract grants the client the option to acquire additional products or services, we assess whether or not any discount on the products and services is in excess of levels normally available to similar clients and, if so, we account for that discount as an additional performance obligation.

Framework

9


We have concluded that the Framework has multiple performance obligations. The selling price of the Framework is highly variable as a result of our value-based engagement where pricing for our customers is based on the operating expense savings that we enable using the Framework engagement.

Framework Software Licenses

We have concluded that a Framework software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support. As a result of the highly variable selling price, revenue recognition and consideration related to the Framework software license is allocated under the residual method.

Framework Hardware

We have concluded that Framework hardware, when included in a Framework contract, is a distinct performance obligation as the client can benefit from the product.  Framework hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware.  In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Framework Support Services

We have concluded that Framework support services is a distinct performance obligation. Framework support services is included in services revenue in our consolidated statements of operations and comprehensive loss.  Support services includes software upgrades on a when-and-if available basis, support, bug fixes or patches and general maintenance support.  Framework support services is not sold on a standalone basis. The standalone selling price is determined using a cost-plus approach, and revenue is recognized ratably over the passage of the contractual term.

Legacy Software Licenses

We have concluded that a software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support.

Legacy Hardware

We have concluded that hardware is a distinct performance obligation as the client can benefit from the product on its own. Hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Legacy Maintenance

Historically, maintenance revenue, which is included in services revenue in our consolidated statements of operations and comprehensive loss, includes revenue from client support and related professional services. Client support includes software upgrades on a when-and-if available basis, telephone support, bug fixes or patches and general hardware maintenance support. Maintenance is priced as a percentage of the list price of the related software license and hardware. Historically, we determined the standalone selling price of maintenance based on this pricing relationship and observable data from standalone sales of maintenance.

We have identified three separate distinct performance obligations of maintenance:

 

Software upgrades and updates;

 

Technical support; and

 

Hardware support.

10


These performance obligations are distinct within the contract and, although they are not sold separately, the components are not essential to the functionality of the other components. Each of the performance obligations included in maintenance revenue is a stand ready obligation that is recognized ratably over the passage of the contractual term for products sold on a standalone basis.  

Legacy Services

Historically, our services revenue, excluding maintenance revenue, is comprised of software license implementation services, engineering services, training and reimbursable expenses. We have concluded that services are distinct performance obligations, with the exception of engineering services. Engineering services may be provided on a standalone basis or bundled with a license when we are providing custom development.

The standalone selling price for services in time and materials contracts is determined by observable prices in standalone services arrangements and recognized as revenue as the services are performed based on an input measure of hours incurred to total estimated hours.

We estimate the standalone selling price for fixed price services based on estimated hours adjusted for historical experience at time and material rates charged in standalone services arrangements. Revenue for fixed price services is recognized over time as the services are provided based on an input measure of hours incurred to total estimated hours.

Contract Modifications

We occasionally enter into amendments to previously executed contracts that constitute contract modifications. We assess each of these contract modifications to determine:

 

If the additional products and services are distinct from the product and services in the original arrangement; and

 

If the amount of consideration expected for the added products and services reflects the standalone selling price of those products and services.

 

A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract or a cumulative catch-up basis.

Significant Judgments

 

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in the contract based on a relative standalone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

 

Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price, taking into account available information such as market conditions, and internally approved pricing guidelines related to the performance obligations. In instances where stand-alone selling price is not directly observable, such as when we don’t sell the product or service separately, we determine the stand-alone selling price based on a cost-plus model as market and other observable inputs are seldom present based on the proprietary nature of our products and services.

 

Our contracts do not generally include a variable component to the transaction price. With certain statements of work, we explicitly state that we are to be reimbursed for reasonable travel and entertainment expenses incurred as part of the delivery of professional services. In the cases when we are entitled to collect all travel and entertainment expenses incurred, an estimate of the fulfillment costs is made at the onset of the contract in order to determine the transaction price. The revenue associated with travel and entertainment expenses is then recognized over time along with the professional services.

Some of our contracts have payment terms that differ from the timing of revenue recognition, which requires us to assess whether the transaction price for those contracts include a significant financing component. We have elected the practical expedient that permits an entity to not adjust for the effects of a significant financing component if we expect that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service, will be one year or less. For those contracts in which the period exceeds the one-year threshold, this assessment, as well as the quantitative estimate of the financing component and its relative significance, requires judgment. We estimate the significant financing component provided to our customers with extended payment terms by determining the present value of the future payments by applying a discount rate that reflects the customer’s creditworthiness.

 

11


Contract Balances

Contract assets consist of unbilled revenue, which is recognized as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones.  Unbilled receivables expected to be billed and collected within one year are classified as current assets or long-term assets if expected to be billed and collected after one year. Contract liabilities consist of deferred revenue and customer deposits that arise when amounts are billed to or collected from customers in advance of revenue recognition.

Costs to Obtain and Fulfill a Contract

 

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that commissions and special incentive payments (“Spiffs”) for hardware and software maintenance and support and professional services paid under our sales incentive programs meet the requirements to be capitalized under ASC 340-40. Costs to obtain a contract are amortized as selling and marketing expense over the expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period. The commissions and Spiffs related to professional services are amortized over time as work is completed. The commissions and Spiffs for hardware and software maintenance are amortized over the life of the contract. These costs are periodically reviewed for impairment. We determined that no impairment of these assets existed as of April 30, 2020 or January 31, 2020. We have elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Total deferred capitalized commission costs were $893 thousand as of April 30, 2020 compared to $958 thousand as of January 31, 2020. Current deferred capitalized commission costs are included in prepaid expense and other current assets in our consolidated balance sheets and non-current deferred capitalized commission costs are included in other assets in our consolidated balance sheets. Capitalized commissions expensed during the three months ended April 30, 2020 and 2019 included in the consolidated statement of operations and comprehensive loss were $135 thousand and $38 thousand, respectively.

 

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs include direct labor for support services, software enhancements, reimbursable expenses and professional services for customized software development costs. The revenue associated with the support services, software enhancements and reimbursable expenses is recognized ratably over time; therefore, the associated costs are expensed as incurred. The professional services associated with the customized software are not recognized until completion. As such, the professional services costs are capitalized and recognized upon completion of the services.

Leases

We account for our leases in accordance with ASC 842, Leases. A contract is accounted for as a lease when we have the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, we determine the initial classification and measurement of our right-of-use operating lease asset and corresponding liability at the lease commencement date. We determine the classification and measurement of a modified lease at the date it is modified. The lease term includes only renewal options that are reasonably assured to exercise. The present value of lease payments is typically determined by using the Company’s estimated secured incremental borrowing rate for the associated lease term as interest rates implicit in the leases are not normally readily determinable. Management’s policy is to utilize the practical expedient to not record leases with an original term of twelve months or less on our consolidated balance sheets. Lease payments are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Our existing leases are for facilities and equipment. None of our leases are with related parties. In addition to rent, office leases may require us to pay additional amounts for taxes, insurance, maintenance and other expenses, which are generally referred to as non-lease components. As a practical expedient, we account for the non-lease components together with the lease components as a single lease component for all of our leases. Only the fixed costs for leases are accounted for as a single lease component and recognized as part of a right-of-use asset and liability.

12


Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of unrestricted common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of unrestricted common shares outstanding during the period and the weighted average number of potential common shares from the assumed exercise of stock options and the vesting of shares of restricted and deferred common stock units using the “treasury stock” method when the effect is not anti-dilutive. In periods in which we report a net loss, diluted net loss per share is the same as basic net loss per share.

The number of common shares used in the computation of diluted net loss per share for the periods presented does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Stock options

 

 

766

 

 

 

2,937

 

Restricted stock units

 

 

58

 

 

 

291

 

Deferred stock units

 

 

81

 

 

 

188

 

Performance stock units

 

 

 

 

 

115

 

 

 

 

905

 

 

 

3,531

 

 

Recently Issued Accounting Pronouncement

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities and accounts receivable. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. ASU 2016-13 is effective in the first quarter of our fiscal 2024. We are currently evaluating if this guidance will have a material effect to our consolidated financial statements.

3.

Fair Value Measurements

The following tables set forth our financial assets that were accounted for at fair value on a recurring basis. There were no fair value measurements of our financial assets using level 3 inputs for the periods presented:

 

 

 

 

 

 

 

Fair Value at April 30, 2020 Using

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

134

 

 

$

 

 

$

134

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes and bonds

 

 

3,173

 

 

 

3,173

 

 

 

 

Corporate bonds

 

 

257

 

 

 

 

 

 

257

 

Total

 

$

3,564

 

 

$

3,173

 

 

$

391

 

 

 

 

 

 

 

 

Fair Value at January 31, 2020 Using

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

1,408

 

 

$

1,408

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes and bonds

 

 

3,360

 

 

 

3,360

 

 

 

 

Corporate bonds

 

 

1,257

 

 

 

 

 

 

1,257

 

Total

 

$

6,025

 

 

$

4,768

 

 

$

1,257

 

 

Cash equivalents include money market funds and U.S. treasury bills.

  

13


Marketable securities by security type consisted of the following:

 

 

 

As of April 30, 2020

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

 

(Amounts in thousands)

 

U.S. Treasury Notes and bonds

 

$

3,114

 

 

$

59

 

 

$

 

 

$

3,173

 

Corporate bonds

 

 

253

 

 

 

4

 

 

 

 

 

 

257

 

 

 

$

3,367

 

 

$

63

 

 

$

 

 

$

3,430

 

 

 

 

As of January 31, 2020

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

 

(Amounts in thousands)

 

U.S. Treasury Notes and bonds

 

$

3,310

 

 

$

50

 

 

$

 

 

$

3,360

 

Corporate Bonds

 

 

1,254

 

 

 

3

 

 

 

 

 

 

1,257

 

 

 

$

4,564

 

 

$

53

 

 

$

 

 

$

4,617

 

 

As of April 30, 2020, marketable securities consisted of investments that mature within one year, with the exception of investments with a fair value of $257 thousand that mature between one and two years.

4.

Consolidated Balance Sheet Detail

 

Property and equipment, net

Property and equipment, net consists of the following:

 

 

 

As of

 

 

 

April 30, 2020

 

 

January 31, 2020

 

 

 

(Amounts in thousands)

 

Computer equipment, software and demonstration equipment

 

$

9,710

 

 

$

9,695

 

Service and spare components

 

 

 

 

 

1,158

 

Office furniture and equipment

 

 

232

 

 

 

170

 

Leasehold improvements

 

 

177

 

 

 

154

 

 

 

 

10,119

 

 

 

11,177

 

Less:  Accumulated depreciation and amortization

 

 

(9,518

)

 

 

(10,623

)

Total property and equipment, net

 

$

601

 

 

$

554

 

 

Accrued expenses

Accrued expenses consist of the following:

 

 

 

As of

 

 

 

April 30, 2020

 

 

January 31, 2020

 

 

 

(Amounts in thousands)

 

Accrued employee compensation and benefits

 

$

2,593

 

 

$

3,236

 

Accrued professional fees

 

 

268

 

 

 

928

 

Sales tax and VAT payable

 

 

531

 

 

 

317

 

Accrued restructuring

 

 

51

 

 

 

744

 

Current obligation - right of use operating leases

 

 

808

 

 

 

722

 

Accrued third party hardware costs

 

 

 

 

 

1,169

 

Accrued other

 

 

2,028

 

 

 

870

 

Total accrued expenses

 

$

6,279

 

 

$

7,986

 

14


 

 

5.

Goodwill and Intangible Assets

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. We are required to perform impairment tests related to our goodwill annually, which we perform during the third quarter of each fiscal year or if we identify certain events or circumstances that would more likely than not reduce the estimated fair value of the goodwill below its carrying amount. The following table represents the changes in goodwill since January 31, 2020:

 

 

 

Goodwill

 

 

 

(Amounts in

thousands)

 

Balance as of January 31, 2020

 

$

9,775

 

Cumulative translation adjustment

 

 

(120

)

Balance as of April 30, 2020

 

$

9,655

 

Intangible assets, net, consisted of the following at April 30, 2020:

 

 

 

As of April 30, 2020

 

 

 

Gross

 

 

Accumulated

Amortization

 

 

Cumulative

Translation

Adjustment

 

 

Net

 

 

 

(Amounts in thousands)

 

Finite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired customer contracts

 

$

2,205

 

 

$

892

 

 

$

(86

)

 

$

1,227

 

Acquired existing technology

 

 

1,364

 

 

 

553

 

 

 

(51

)

 

 

760

 

Total finite-lived intangible assets

 

$

3,569

 

 

$

1,445

 

 

$

(137

)

 

$

1,987

 

 

 

 

We recognized amortization expense of intangible assets in operating expense categories on the consolidated statement of operations and comprehensive loss as follows:

 

 

 

For the Three Months Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Selling and marketing

 

$

 

 

$

185

 

Research and development

 

 

284

 

 

 

113

 

 

 

$

284

 

 

$

298

 

Future estimated amortization expense of acquired intangibles as of April 30, 2020 is as follows:

 

For the Fiscal Years Ended January 31,

 

Estimated

Amortization

Expense

 

 

 

(Amounts in

thousands)

 

2021

 

$

852

 

2022

 

 

1,135

 

Total

 

$

1,987

 

 

15


6.

Commitments and Contingencies

Litigation

Certain conditions may exist as of the date the consolidated financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us, or unasserted claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our consolidated financial statements. If our assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed.

Indemnification and Warranties

We provide indemnification, to the extent permitted by law, to our officers, directors, employees and agents for liabilities arising from certain events or occurrences while the officer, director, employee or agent is, or was, serving at our request in such capacity. With respect to acquisitions, we provide indemnification to, or assume indemnification obligations for, the current and former directors, officers and employees of the acquired companies in accordance with the acquired companies’ governing documents. As a matter of practice, we have maintained directors’ and officers’ liability insurance including coverage for directors and officers of acquired companies.

We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of our historical agreements require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third-party with respect to our products. From time to time, we also indemnify customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, and environmental claims relating to the use of our products and services or resulting from the acts or omissions of us, our employees, authorized agents or subcontractors. From time to time, we have received requests from customers for indemnification of patent litigation claims. Management cannot reasonably estimate any potential losses, but these claims could result in material liability for us. There are no current pending legal proceedings, in the opinion of management that would have a material adverse effect on our financial position, results from operations and cash flows. There is no assurance that future legal proceedings arising from ordinary course of business or otherwise, will not have a material adverse effect on our financial position, results from operations or cash flows.

We warrant that our products, including software products, will substantially perform in accordance with our standard published specifications in effect at the time of delivery. In addition, we provide maintenance support to our customers and therefore allocate a portion of the product purchase price to the initial warranty period and recognize revenue on a straight-line basis over that warranty period related to both the warranty obligation and the maintenance support agreement. When we receive revenue for extended warranties beyond the standard duration, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred.

Cyber Security

We experienced a ransomware attack on our information technology system in the first quarter of fiscal 2021. While such attack did not have a material adverse effect on our business operation, it caused a temporary disruption. A forensic investigation is being conducted to determine if any data was compromised.

At April 30, 2020, we recorded a loss contingency of $0.8 million within accrued expenses on the consolidated balance sheet. At April 30, 2020, we also recorded a corresponding receivable for expected insurance recovery proceeds of $0.8 million included within prepaid expenses and other current assets on the consolidated balance sheet.

 

7.

Operating Leases

The Company has noncancelable operating leases for facilities and equipment expiring at various dates through 2025 and thereafter.  

 

16


The components of lease expense are as follows:

 

 

 

Three Months Ended

April 30, 2020

 

 

Three Months Ended

April 30, 2019

 

 

 

(Amounts in thousands)

 

Operating lease cost

 

$

322

 

 

$

206

 

Short term lease cost

 

 

31

 

 

11

 

Total lease cost

 

$

353

 

 

$

217

 

 

Supplemental cash flow information related to the Company’s operating leases was as follows:

 

 

 

Three Months Ended

April 30, 2020

 

 

Three Months Ended

April 30, 2019

 

 

 

(Amounts in thousands)

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

322

 

 

$

206

 

 

Supplemental balance sheet information related to the Company's operating leases was as follows:

 

 

 

April 30, 2020

 

 

January 31, 2020

 

 

 

(Amounts in thousands)

 

Operating lease right-of-use assets

 

$

4,929

 

 

$

4,860

 

 

 

 

 

 

 

 

 

 

Current portion, operating lease liabilities

 

 

808

 

 

 

722

 

Operating lease liabilities, long term

 

 

4,464

 

 

 

4,348

 

Total operating lease liabilities

 

$

5,272

 

 

$

5,070

 

 

 

 

 

 

 

 

 

 

Weighted average remaining lease term (years)

 

 

4.8

 

 

 

 

 

Weighted average incremental borrowing rate

 

 

5.0

%

 

 

 

 

 

The current portion, operating lease liabilities is included in the balance of accrued expenses at April 30, 2020. Rent payments for continuing operations were approximately $0.4 million for the three months ended April 30, 2020. Future minimum lease payments for operating leases, with initial or remaining terms in excess of one year at April 30, 2020, are as follows:

 

 

 

Payments for

Operating Leases

 

For the fiscal years ended January 31,

 

(Amounts in thousands)

 

2021

 

$

769

 

2022

 

 

1,161

 

2023

 

 

1,284

 

2024

 

 

1,318

 

2025

 

 

1,357

 

Thereafter

 

 

59

 

Total lease payments

 

 

5,948

 

Less interest

 

 

676

 

Total operating lease liabilities

 

$

5,272

 

 

8.

Severance and Restructuring Costs

During the three months ended April 30, 2020, we incurred severance and restructuring costs of $0.5 million, primarily for employee-related termination benefits driven by the COVID-19 pandemic. In fiscal 2020, we continued to streamline our operations and closed our service organizations in Ireland and the Netherlands.

17


The following table shows the change in accrued restructuring balances since January 31, 2020 primarily related to our fiscal 2020 restructuring efforts, reported as a component of accrued expenses on the consolidated balance sheets:

 

 

 

Employee-

Related

Benefits

 

 

 

(Amounts in thousands)

 

Accrued balance as of January 31, 2020

 

$

744

 

Restructuring charges incurred

 

 

6

 

Cash payments

 

 

(690

)

Other charges

 

 

(9

)

Accrued balance as of April 30, 2020

 

 

51

 

 

 

9.

Stock-Based Compensation Expense

Equity Plans

2011 Compensation and Incentive Plan.

Our 2011 Compensation and Incentive Plan (the “2011 Plan”) provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units (“RSUs”), deferred stock units (“DSUs”), performance stock units (“PSUs”) and other equity based non-stock option awards as determined by the plan administrator to our officers, employees, consultants and directors. We may satisfy awards upon the exercise of stock options or the vesting of stock units with newly issued shares or treasury shares. The Board of Directors is responsible for the administration of the 2011 Plan and determining the terms of each award, award exercise price, the number of shares for which each award is granted and the rate at which each award vests. In certain instances, the Board of Directors may elect to modify the terms of an award. The number of shares authorized for issuance under the 2011 Plan is 9,300,000. Additionally, outstanding awards under the 2005 Equity Compensation and Incentive Plan that, since adoption of the 2011 Plan, expire, terminate, or are surrendered or canceled without having been fully exercised are available for issuance under the 2011 Plan. As of April 30, 2020, there were 2,862,095 shares available for future grant.      

Nonemployee members of the Board of Directors may elect to receive DSUs or stock options in lieu of RSUs. The number of units subject to the DSUs is determined as of the grant date and shall fully vest one year from the grant date. The shares underlying the DSUs are not vested and issued until the earlier of the director ceasing to be a member of the Board of Directors (provided such time is subsequent to the first day of the succeeding fiscal year) or immediately prior to a change in control.

Option awards may be granted to employees at an exercise price per share of not less than 100% of the fair market value per common share on the date of the grant. Option awards granted under the 2011 Plan generally vest over a period of one to three years and expire ten years from the date of the grant.

We have a Long-Term Incentive Program, adopted in fiscal 2016, under which the named executive officers and other of our key employees may receive long-term equity-based incentive awards, which are intended to align the interests of our named executive officers and other key employees with the long-term interests of our stockholders and to emphasize and reinforce our focus on team success. Long-term equity-based incentive compensation awards are made in the form of stock options, RSUs and PSUs subject to vesting based in part on the extent to which employment continues. 

2015 Employee Stock Purchase Plan

Under our 2015 Employee Stock Purchase Plan (the “ESPP), six-month offering periods begin on October 1 and April 1 of each year during which eligible employees may elect to purchase shares of our common stock according to the terms of the offering.  On each purchase date, eligible employees can purchase our stock at a price per share equal to 85% of the closing price of our common stock on the exercise date, but no less than par value.  The maximum number of shares of our common stock authorized for sale under the ESPP is 1,150,000 shares, of which 1,075,024 remain available under the ESPP as of April 30, 2020. Under the ESPP, 5,702 and 7,819 shares were purchased during the first three months of fiscal 2021 and fiscal 2020, respectively.

18


Stock-Based Compensation

We recognized stock-based compensation expense within the accompanying consolidated statements of operations and comprehensive loss as follows:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Cost of revenue

 

$

(8

)

 

$

(3

)

Research and development

 

 

67

 

 

 

68

 

Sales and marketing

 

 

40

 

 

 

(86

)

General and administrative

 

 

258

 

 

 

(413

)

 

 

$

357

 

 

$

(434

)

 

 

There were no grants in the first quarter of fiscal 2020. As of April 30, 2020, unrecognized stock-based compensation expense related to unvested stock options was approximately $1.4 million, which is expected to be recognized over a weighted average period of 2.1 years. As of April 30, 2020, unrecognized stock-based compensation expense related to unvested RSUs and DSUs was $0.8 million, which is expected to be recognized over a weighted average amortization period of 1.1 years. As of April 30, 2020, there was no unrecognized stock-based compensation expense related to unvested PSUs.

10.

Revenues from Contracts with Customers

 

Disaggregated Revenue

 

 

The following table shows our revenue disaggregated by revenue stream for the three months ended April 30, 2020 and 2019:

 

 

 

For the Three Months

April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Product

 

$

3,098

 

 

$

1,179

 

Professional services

 

 

1,171

 

 

 

2,081

 

Maintenance

 

 

2,646

 

 

 

5,225

 

Total revenue

 

$

6,915

 

 

$

8,485

 

 

Transaction Price Allocated to Future Performance Obligations

 

The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as of April 30, 2020 is $29.5 million. This amount includes amounts billed for undelivered services that are included in deferred revenue.

11.

Segment Information and Geographic Information

We have determined that we operate in one segment.

Geographic Information

The following summarizes revenue by customers’ geographic locations:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

%

 

 

2019

 

 

%

 

 

 

(Amounts in thousands, except percentages)

 

Revenue by customers' geographic

   locations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America (1)

 

$

3,578

 

 

52%

 

 

$

4,089

 

 

49%

 

Europe and Middle East

 

 

1,982

 

 

29%

 

 

 

2,970

 

 

35%

 

Latin America

 

 

1,133

 

 

16%

 

 

 

1,047

 

 

12%

 

Asia Pacific

 

 

222

 

 

3%

 

 

 

379

 

 

4%

 

Total revenue

 

$

6,915

 

 

 

 

 

 

$

8,485

 

 

 

 

 

 

19


 

(1)

Includes total revenue for the United States for the periods shown as follows: 

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands,

except percentages)

 

US Revenue

 

$

2,343

 

 

$

3,398

 

% of total revenue

 

 

34

%

 

 

40

%

 

The following summarizes long-lived assets by geographic locations:

 

 

 

As of April 30, 2020

 

 

%

 

 

As of January 31, 2020

 

 

%

 

 

 

(Amounts in thousands, except percentages)

 

Long-lived assets by geographic locations (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

14,059

 

 

75%

 

 

$

13,293

 

 

75%

 

Europe and Middle East

 

 

4,594

 

 

25%

 

 

 

4,359

 

 

25%

 

Asia Pacific

 

 

31

 

 

0%

 

 

 

31

 

 

0%

 

Total long-lived assets by geographic location

 

$

18,684

 

 

 

 

 

 

$

17,683

 

 

 

 

 

 

 

(1)

Excludes long-term marketable securities and goodwill.

12.

Income Taxes

Each interim period is considered an integral part of the annual period and, accordingly, we measure our income tax expense using an estimated annual effective tax rate.  A company is required, at the end of each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period.

We recorded an income tax benefit of $21 thousand and an income tax provision of $0.4 million for the three months ended April 30, 2020 and April 30, 2019, respectively. Our effective tax rate in fiscal 2021 and in future periods may fluctuate on a quarterly basis as a result of changes in our jurisdictional forecasts where losses cannot be benefitted due to the existence of valuation allowances on our deferred tax assets, changes in actual results versus our estimates, or changes in tax laws, regulations, accounting principles or interpretations thereof.

 

We review all available evidence to evaluate the recovery of deferred tax assets, including the recent history of losses in all tax jurisdictions, as well as its ability to generate income in future periods. As of April 30, 2020, due to the uncertainty related to the ultimate use of certain deferred income tax assets, we have recorded a valuation allowance on certain deferred assets.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and various foreign jurisdictions. We have closed out an audit with the Internal Revenue Service (“IRS”) through fiscal 2013; however, the taxing authorities will still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers.

On March 4, 2019, our Board of Directors approved and adopted a Tax Benefits Preservation Plan to potentially limit our ability to use net operating loss carryforwards and certain other tax attributes (“NOLs”) to reduce our potential future federal income tax obligations.  In connection with the Tax Benefits Preservation Plan, we declared a dividend of one preferred share purchase right for each share of our common stock issued and outstanding as of March 15, 2019 to our stockholders of record on that date. The Tax Benefits Preservation Plan expires no later than March 4, 2022, and was approved by our stockholders at our 2019 annual meeting of stockholders on July 11, 2019.

In response to the COVID-19 pandemic, the CARES Act was signed into law in March 2020. The CARES Act includes several provisions that provide economic relief for individuals and businesses. The Company will continue to evaluate the impact of the CARES Act but does not expect it to result in a material impact. 

20


ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and such statements involve risks and uncertainties. The following information should be read in conjunction with the unaudited consolidated financial information and the notes thereto included in this Form 10-Q. You should not place undue reliance on these forward-looking statements. Actual events or results may differ materially due to competitive factors and other factors referred to in Part I, Item 1A. “Risk Factors” in our Form 10-K for our fiscal year ended January 31, 2020 and elsewhere in this Form 10-Q. These factors may cause our actual results to differ materially from any forward-looking statement. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate, and management’s beliefs and assumptions. We undertake no obligation to publicly update or revise the statements in light of future developments. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “seek,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “project,” or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict.

Business Overview  

SeaChange International, Inc., a Delaware corporation (“SeaChange,” the “Company,” “us,” or “we”) founded on July 9, 1993, is an industry leader in the delivery of multiscreen, advertising and premium over the top (“OTT”) video management solutions headquartered in Waltham, Massachusetts. Our software products and services facilitate the aggregation, licensing, management and distribution of video and advertising content for service providers, telecommunications companies, satellite operators and broadcasters. We sell our software products and services worldwide, primarily to service providers including: operators, such as Liberty Global, plc., Altice NV, Cox Communications, Inc. and Rogers Communications, Inc.; telecommunications companies, such as Verizon Communications, Inc., AT&T, Inc. and Frontier Communications Corporation; satellite operators such as Direct TV and Dish Network Corporation; and broadcasters.

Our software products and services are designed to empower video providers to create, manage and monetize the increasingly personalized, highly engaging experiences that viewers demand. Using our products and services, we believe customers can increase revenue by offering services such as video-on-demand (“VOD”) programming on a variety of consumer devices, including televisions (“TVs”), mobile telephones (“smart phones”), personal computers (“PCs”), tablets and OTT streaming players. Our solutions enable service providers to offer other interactive television services that allow subscribers to receive personalized services and interact with their video devices, thereby enhancing their viewing experience. Our products also allow our customers to insert advertising into broadcast and VOD content.

SeaChange serves an exciting global marketplace where multiscreen viewing is increasing, consumer device options are evolving rapidly, and viewing habits are shifting. The primary driver of our business is enabling the delivery of video assets in the changing multiscreen television environment. Through strategic collaborations, we have expanded our capabilities, products and services to address the delivery of content to devices other than television set-top boxes, namely PCs, tablets, smart phones and OTT streaming players. We believe that our strategy of expanding into adjacent product lines will also position us to further support and maintain our existing service provider customer base. Providing our customers with more scalable software platforms enables them to further reduce their infrastructure costs, improve reliability and expand service offerings to their customers. Additionally, we believe we are well positioned to capitalize on new customers entering the multiscreen marketplace and increasingly serve adjacent markets. Our core technologies provide a foundation for software products and services that can be deployed in next generation video delivery systems capable of increased levels of subscriber activity across multiple devices.

We have historically sold and licensed our products and services on a standalone basis. Commencing February 2019, we adopted a value-based selling approach as part of which we offer our customers the ability to license all of our product and services, including specified upgrades, for a fixed period of time for a fixed price which we refer to as Framework deals.

We initiated restructuring efforts in fiscal 2020 to improve operations and optimize our cost structure. In October 2019, we continued to streamline our operations and closed our service organizations in Ireland and the Netherlands resulting in annualized cost savings of approximately $6.0 million. We will also realize cost savings in fiscal 2021 related to the reduction in headcount driven by COVID-19.

On February 28, 2019, we entered into a Cooperation Agreement with TAR Holdings LLC and Karen Singer (collectively, “TAR Holdings”).  As of the date of the Cooperation Agreement, TAR Holdings beneficially owned approximately 20.6% of our outstanding common stock.  Pursuant to the Cooperation Agreement, we agreed to set the size of the Board of Directors of the Company (the “Board”) at eight members, appoint Robert Pons to the Board as a Class II Director, and appoint Jeffrey Tuder to the Board as a Class III Director.  Mr. Pons and Mr. Tuder were accordingly appointed to our Board upon execution of the Cooperation Agreement on February 28, 2019. On August 8, 2019, we amended the Cooperation Agreement to permit TAR Holdings, together with its affiliates, to own up to 25% of our securities.

21


On March 4, 2019, our Board approved and adopted a Tax Benefits Preservation Plan to deter acquisitions of our common stock that would potentially limit our ability to use net operating loss carryforwards and certain other tax attributes (“NOLs”) to reduce our potential future federal income tax obligations, which was subsequently approved by our stockholders at our 2019 annual meeting of stockholders.  In connection with the Tax Benefits Preservation Plan, we declared a dividend of one preferred share purchase right for each share of our common stock issued and outstanding as of March 15, 2019 to our stockholders of record on that date.  The Tax Benefits Preservation Plan expires no later than March 4, 2022. On August 8, 2019, we amended the Tax Benefits Preservation Plan to permit TAR Holdings, together with its affiliates, to own up to 25% of our securities.

 

Results of Operations

The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.  

Revenue and Gross Profit

The components of our total revenue and gross profit are described in the following table:

 

 

 

For the Three Months Ended April 30,

 

 

Change

 

 

 

2020

 

 

2019

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

3,098

 

 

$

1,179

 

 

$

1,919

 

 

 

162.8

%

Service

 

 

3,817

 

 

 

7,306

 

 

 

(3,489

)

 

 

(47.8

%)

Total revenue

 

 

6,915

 

 

 

8,485

 

 

 

(1,570

)

 

 

(18.5

%)

Cost of product revenue

 

 

1,580

 

 

 

909

 

 

 

671

 

 

 

73.8

%

Cost of service revenue

 

 

2,826

 

 

 

4,668

 

 

 

(1,842

)

 

 

(39.5

%)

Total cost of revenue

 

 

4,406

 

 

 

5,577

 

 

 

(1,171

)

 

 

(21.0

%)

Gross profit

 

$

2,509

 

 

$

2,908

 

 

$

(399

)

 

 

(13.7

%)

Gross product profit margin

 

 

49.0

%

 

 

22.9

%

 

 

 

 

 

 

26.1

%

Gross service profit margin

 

 

26.0

%

 

 

36.1

%

 

 

 

 

 

 

(10.1

%)

Gross profit margin

 

 

36.3

%

 

 

34.3

%

 

 

 

 

 

 

2.0

%

 

Two customers accounted for 13% and 15% of total revenue in the first quarter of fiscal 2021 and one customer accounted for 17% of total revenue in the first quarter of fiscal 2020. See Part I Item I, Note 2, “Significant Accounting Policies,” to this Form 10-Q for more information.

International revenue accounted for 66% and 60% of total revenue in the three months ended April 30, 2020 and 2019, respectively. The increase in international sales as a percentage of total revenue in the three months ended April 30, 2020 as compared to the same period in fiscal 2020 is primarily due to a decrease in U.S. revenue generated.

Product Revenue

Product revenue increased by $1.9 million for the three months ended April 30, 2020 as compared to the three ended April 30, 2019. The increase for the three months ended April 30, 2020 was primarily due to revenue generated from a shift in sales to our end-to-end Framework offering, which did not begin until the end of our first quarter in fiscal 2020.

Service Revenue

Service revenue decreased by $3.5 million for the three months ended April 30, 2020 as compared to the three months ended April 30, 2019. The decrease for the three months ended April 30, 2020 was primarily due to a decrease in our legacy professional service revenue related to our individual product sales and upgrades and a reduction to maintenance and support revenue provided on post warranty contracts as customers continue to provide their own solutions and legacy products are decommissioned.

Gross Profit and Margin

Cost of revenue consists primarily of the cost of resold third-party products and services, purchased components and subassemblies, labor and overhead relating to the assembly, testing and implementation and ongoing maintenance of complete systems.

22


Our gross profit margin increased by 2% for the three months ended April 30, 2020 compared to the three months ended April 30, 2019 primarily due to a shift to our end-to-end Framework model during the period. Product profit margin increased by 26% for the three months ended April 30, 2020 compared to the three months ended April 30, 2019 primarily due to a shift to our end-to-end Framework model and a decrease in lower margin hardware sales. Service profit margins decreased by 10% for the three months ended April 30, 2020 compared to the three months ended April 30, 2019 primarily due to lower service revenue to absorb our fixed costs from professional services and maintenance and support revenue during the three months ended April 30, 2020 as customers continue to provide their own solutions and legacy products are decommissioned as well as a reduction in headcount.

Operating Expenses

Research and Development

Research and development expenses consist of salaries and related costs, including stock-based compensation, for personnel in software development and engineering functions as well as contract labor costs, depreciation of development and test equipment and an allocation of related facility expenses. The following table provides information regarding the change in research and development expenses during the periods presented:

 

 

 

For the Three Months Ended April 30,

 

 

Change

 

 

 

2020

 

 

2019

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

Research and development expenses

 

$

4,166

 

 

$

4,252

 

 

$

(86

)

 

 

(2.0

%)

% of total revenue

 

 

60.2

%

 

 

50.1

%

 

 

 

 

 

 

 

 

 

Research and development expenses decreased by $0.1 million for the three months ended April 30, 2020 as compared to the same period in fiscal 2020 primarily due to a decrease in labor costs associated with the lower headcount resulting from the cost-savings efforts implemented as part of our restructuring program in fiscal 2020 as well as a reduction in headcount in the first quarter of fiscal 2021 driven by the COVID-19 pandemic.

Selling and Marketing

Selling and marketing expenses consist of salaries and related costs, including stock-based compensation, for personnel engaged in selling and marketing functions, as well as commissions, travel expenses, certain promotional expenses and an allocation of related facility expenses. The following table provides information regarding the change in selling and marketing expenses during the periods presented:

 

 

 

For the Three Months Ended April 30,

 

 

Change

 

 

 

2020

 

 

2019

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

Selling and marketing expenses

 

$

2,126

 

 

$

2,852

 

 

$

(726

)

 

 

(25.5

%)

% of total revenue

 

 

30.7

%

 

 

33.6

%

 

 

 

 

 

 

 

 

 

Selling and marketing expenses decreased by $0.7 million for the three months ended April 30, 2020 as compared to the same period in fiscal 2020 primarily due to a decrease in labor costs associated with lower headcount from the cost-saving efforts implemented as part of our restructuring program in fiscal 2020 as well as a decrease in travel related expenses due to the COVID-19 pandemic.

General and Administrative

General and administrative expenses consist of salaries and related costs, including stock-based compensation, for personnel in executive, finance, legal, human resources, information technology and administrative functions, as well as legal and accounting services, insurance premiums and an allocation of related facilities expenses. The following table provides information regarding the change in general and administrative expenses during the periods presented:

 

 

 

For the Three Months Ended April 30,

 

 

Change

 

 

 

2020

 

 

2019

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

General and administrative expenses

 

$

2,054

 

 

$

4,249

 

 

$

(2,195

)

 

 

(51.7

%)

% of total revenue

 

 

29.7

%

 

 

50.1

%

 

 

 

 

 

 

 

 

23


 

General and administrative expenses decreased by $2.2 million for the three months ended April 30, 2020 as compared to the same period in fiscal 2020 primarily due to a $0.2 million decrease in labor costs associated with lower headcount from the cost-saving efforts implemented as part of our restructuring program in fiscal 2020 as well as a $1.6 million reduction in the use of outside services and a $0.4 million reduction in bad debt expense.

Severance and Restructuring Costs

Severance costs consist of employee-related severance charges not related to a restructuring plan. Restructuring costs consist of charges related to restructuring including employee-related severance charges, remaining lease obligations and termination costs, and the disposal of equipment.

 

 

 

For the Three Months Ended April 30,

 

 

Change

 

 

 

2020

 

 

2019

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

Severance and restructuring costs

 

$

486

 

 

$

211

 

 

$

275

 

 

 

130.3

%

% of total revenue

 

 

7.0

%

 

 

2.5

%

 

 

 

 

 

 

 

 

 

Severance and other restructuring costs increased by $0.3 million for the three months ended April 30, 2020 as compared to the same period of fiscal 2020 primarily due to the termination costs related to a reduction in headcount driven by the COVID-19 pandemic.

Other Expense, Net

The table below provides detail regarding our other expense, net:

 

 

 

For the Three Months Ended April 30,

 

 

Change

 

 

 

2020

 

 

2019

 

 

$

 

 

%

 

 

 

(Amounts in thousands, except for percentage data)

 

Interest income, net

 

 

119

 

 

 

83

 

 

 

36

 

 

 

43.4

%

Foreign exchange loss, net

 

 

(331

)

 

 

(1,895

)

 

 

1,564

 

 

 

(82.5

%)

Miscellaneous (expense) income, net

 

 

4

 

 

 

21

 

 

 

(17

)

 

 

(81.0

%)

 

 

$

(208

)

 

$

(1,791

)

 

$

1,583

 

 

 

 

 

 

The principal components of other expense, net were interest income, net of $0.1 million and foreign exchange loss, net of $0.3 million for the three months ended April 30, 2020 and foreign exchange loss, net of $1.9 million for the three months ended April 30, 2019. Our foreign exchange loss, net is primarily due to the revaluation of intercompany notes.

Income Tax (Benefit) Provision

We recorded an income tax benefit of $21 thousand and an income tax provision of $0.4 million for the three months ended April 30, 2020 and April 30, 2019, respectively. Our effective tax rate in fiscal 2021 and in future periods may fluctuate on a quarterly basis, as a result of changes in our jurisdictional forecasts where losses cannot be benefitted due to the existence of valuation allowances on our deferred tax assets, variance in actual results from our estimates, or changes in tax laws, regulations, accounting principles or interpretations thereof.

We review all available evidence to evaluate the recovery of deferred tax assets, including the recent history of losses in all tax jurisdictions, as well as its ability to generate income in future periods. As of April 30, 2020, due to the uncertainty related to the ultimate use of certain deferred income tax assets, we have recorded a valuation allowance on certain deferred assets.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign jurisdictions. We have closed out an audit with the Internal Revenue Service (“IRS”) through fiscal 2013. We are no longer subject to U.S. federal examinations before fiscal 2015. However, the taxing authorities will still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers.

 

24


Liquidity and Capital Resources

The following table includes key line items of our consolidated statements of cash flows:

 

 

 

For the Three Months Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Net cash used in operating activities

 

$

(4,263

)

 

$

(2,685

)

Net cash provided by (used in) investing activities

 

 

1,063

 

 

 

(3,173

)

Net cash provided by financing activities

 

 

137

 

 

 

9

 

Effect of exchange rate changes on cash, cash equivalents

   and restricted cash

 

 

153

 

 

 

229

 

Net decrease in cash, cash equivalents and restricted cash

 

$

(2,910

)

 

$

(5,620

)

 

Historically, we have financed our operations and capital expenditures primarily with our cash and investments. Our cash, cash equivalents, and restricted cash and marketable securities totaled $9.8 million at April 30, 2020.

In fiscal 2020, we closed our Ireland and Netherlands service organizations in the continued streamlining of our operations resulting in annualized cost savings of approximately $6.0 million. In the first quarter of fiscal 2021, we reduced our headcount across all departments in response to the COVID-19 pandemic, which will result in approximately $4.0 million of annualized cost savings.  

We believe that existing cash and investments and cash expected to be provided by future operating activities, augmented by the plans highlighted above, are adequate to satisfy our working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months.

If our expectations are incorrect, we may need to raise additional funds to fund our operations, to take advantage of unanticipated strategic opportunities or to strengthen our financial position. In the future, we may enter into other arrangements for potential investments in, or acquisitions of, complementary businesses, services or technologies, which could require us to seek additional equity or debt financing. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of market opportunities, to develop new products or to otherwise respond to competitive pressures.

On June 4, 2019, the Board authorized a share repurchase program, which expired on June 4, 2020, of up to $5.0 million of then outstanding shares of the Company. Under the share repurchase program, the Company is authorized to repurchase outstanding shares of common stock in accordance with applicable laws both on the open market, including under trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and in privately negotiated transactions. There was no stock repurchase activity in the first quarter of fiscal 2021.

Net cash used in operating activities

Net cash used in operating activities was $4.3 million for the three months ended April 30, 2020. Net cash used in operating activities was primarily the result of our net loss of $6.5 million and changes in working capital, which includes a $3.1 million decrease in accounts receivable and a $0.6 million decrease in unbilled, partially offset by a $0.6 million increase in prepaid expenses and other current assets and other assets and a $1.7 million decrease in accrued expenses and other liabilities.

Net cash used in operating activities was $2.7 million for the three months ended April 30, 2019. Net cash used in operating activities was primarily the result of our net loss of $10.8 million and changes in working capital, which includes a $9.9 million decrease in accounts receivable partially offset by a $1.6 million decrease in accounts payable and a $.8 million decrease in deferred revenue.

Net cash provided by (used in) investing activities

Net cash provided by investing activities was $1.1 million for the three months ended April 30, 2020 and was primarily due to the sales and maturities of marketable securities. Net cash used in investing activities was $3.2 million for the three months ended April 30, 2019 and was primarily due to cash paid for the acquisition of Xstream A/S partially offset by the proceeds from the sale of marketable securities.

 

Net cash provided by financing activities

Net cash provided by financing activities was $0.1 million for the three months ended April 30, 2020 due to the proceeds from the issuance of common stock related to option exercises and purchases through the Employee Stock Purchase Plan (“ESPP”). Net cash provided by financing activities was $9 thousand for the three months ended April 30, 2019 due to the proceeds from the issuance of common stock.

25


Impact of COVID-19 Pandemic

In the first quarter of fiscal 2021, concerns related to the spread of COVID-19 began to create global business disruptions as well as disruptions in our operations and to create potential negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on factors including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Due to our business model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications. These decisions may delay or reduce sales and harm productivity and collaboration. We have observed other companies and governments making similar alterations to their normal business operations, and in general, the markets are experiencing a significant level of uncertainty at the current time. Virtualization of our team’s sales activities could foreclose future business opportunities, particularly as our customers limit spending, which could negatively impact the willingness of our customers to enter into or renew contracts with us.  The pandemic has impacted our ability to complete certain implementations, negatively impacting our ability to recognize revenue, and could also negatively impact the payment of accounts receivable and collections. We may take further actions that alter our business operations as the situation evolves. As a result, the ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES) Act”).  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. We continue to examine the impact that the CARES Act may have on our business, including our ability to utilize our NOLs.

The Paycheck Protection Program

On May 5, 2020, the Company entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured loan in an aggregate principal amount of $2,412,890 pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act administered by the U.S. Small Business Administration (“SBA”).

Interest accrues on the Note at a fixed rate of one percent (1%) per annum, with the payment of the first six months of interest and principal deferred. The Note has an initial term of two years, is unsecured and is guaranteed by the SBA. The Company may apply to the Lender for forgiveness of the Note, with the amount which may be forgiven equal to the sum of qualifying expenses, including payroll costs, covered rent obligations, and covered utility payments incurred by the Company during the eight-week period beginning on May 7, 2020, calculated in accordance with the terms of the CARES Act.

Subject to any forgiveness under the PPP, the Note will mature on May 5, 2022. Beginning on the seven-month anniversary of the date of the Note, the Company is required to make 18 monthly payments of principal and interest. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default including, among others, those relating to breaches of the Company’s obligations under the Note, including a failure to make payments, any bankruptcy or similar proceedings involving the Company, and certain material effects on the Company’s ability to repay the Note. The Note may be accelerated upon the occurrence of an event of default.

Critical Accounting Policies and Significant Judgments and Estimates

We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management.

There have been no material changes to our critical accounting policies and estimates from those disclosed in our financial statements and the related notes and other financial information included in our Annual Report on Form 10-K on file with the Securities and Exchange Commission.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

26


Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

ITEM 4.

Controls and Procedures

Evaluation of disclosure controls and procedures. We maintain “disclosure controls and procedures,” as defined in Rules 13a‑15(e) and 15d‑15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and chief financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of April 30, 2020, our chief executive officer and chief financial officer concluded that, as of that date, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting. There were no changes in our internal controls over financial reporting during the three months ended April 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

27


PART II. OTHER INFORMATION

ITEM 1.

Legal Proceedings

We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of our historical agreements require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to our products. From time to time, we also indemnify customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, and environmental claims relating to the use of our products and services or resulting from the acts or omissions of us, our employees, authorized agents or subcontractors. Management cannot reasonably estimate any potential losses, but these claims could result in material liability for us (see Note 6).

ITEM 1A.

Risk Factors

In addition to other information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Form 10-K for the fiscal year ended January 31, 2020, which could materially affect our business, financial conditions, and results of operations. The risks described in our Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those disclosed in the Form 10-K.

ITEM 5.

Other Information

None.

ITEM 6.

Exhibits

 

(a)

Exhibits

The following list of exhibits includes exhibits submitted with this Form 10-Q as filed with the SEC and those incorporated by reference to other filings.

28


Index to Exhibits

 

No. 

 

Description 

 

 

 

10.1

 

Note, dated May 5, 2020, between SeaChange International, Inc. and Silicon Valley Bank (filed as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 11, 2020 with the Commission and incorporated herein by reference).

 

 

 

31.1*

 

Certification Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2*

 

Certification Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1*

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2*

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase

 

   *Filed herewith

29


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, SeaChange International, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: June 12, 2020

 

SEACHANGE INTERNATIONAL, INC.

 

 

by:

/s/ YOSSI ALONI

 

Yossi Aloni

 

Chief Executive Officer

 

by:

/s/ MICHAEL PRINN

 

Michael Prinn

 

Chief Financial Officer, Senior Vice President and Treasurer

 

30

seac-ex311_10.htm

Exhibit 31.1

CERTIFICATION

I, Yossi Aloni, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of SeaChange International, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: June 12, 2020

 

By:

/s/ YOSSI ALONI

 

 

 

Yossi Aloni

 

 

 

Chief Executive Officer

 

 

 

(Principal Executive Officer)

 

seac-ex312_8.htm

Exhibit 31.2

CERTIFICATION

I, Michael D. Prinn, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of SeaChange International, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: June 12, 2020

 

By:

/s/ MICHAEL D. PRINN

 

 

 

Michael D. Prinn

 

 

 

Chief Financial Officer, Senior Vice President and Treasurer

 

 

 

(Principal Financial and Accounting Officer)

 

seac-ex321_7.htm

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SeaChange International, Inc. (the “Company”) on Form 10-Q for the period ending April 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yossi Aloni, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 12, 2020

/s/ YOSSI ALONI 

 

Yossi Aloni

 

Chief Executive Officer

 

(Principal Executive Officer)

 

seac-ex322_6.htm

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SeaChange International, Inc. (the “Company”) on Form 10-Q for the period ending April 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael D. Prinn, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 12, 2020

/s/ MICHAEL D. PRINN

 

Michael D. Prinn

 

Chief Financial Officer, Senior Vice President and Treasurer

 

(Principal Financial and Accounting Officer)

 

v3.20.1
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Treasury Stock [Member]
Accumulated Other Comprehensive Loss [Member]
Accumulated Deficit [Member]
Beginning balance at Jan. 31, 2019 $ 55,100 $ 359 $ 242,442 $ (5) $ (3,393) $ (184,303)
Beginning balance, Shares at Jan. 31, 2019   35,946,100        
Issuance of common stock pursuant to acquisition of Xstream 874 $ 5 869      
Issuance of common stock pursuant to acquisition of Xstreme, Shares   541,738        
Issuance of common stock pursuant to vesting of restricted stock units   $ 1 (1)      
Issuance of common stock pursuant to vesting of restricted stock units, Shares   57,368        
Issuance of common stock pursuant to ESPP purchases 9   9      
Issuance of common stock pursuant to ESPP purchases, Shares   7,819        
Stock-based compensation expense (434)   (434)      
Unrealized gains (losses) on marketable securities 35       35  
Foreign currency translation adjustment 1,207       1,207  
Net loss (10,849)         (10,849)
Ending balance at Apr. 30, 2019 45,942 $ 365 242,885 (5) (2,151) (195,152)
Ending balance, Shares at Apr. 30, 2019   36,553,025        
Beginning balance at Jan. 31, 2020 49,932 $ 373 245,067 (147) (2,137) (193,224)
Beginning balance, Shares at Jan. 31, 2020   37,303,952        
Issuance of common stock pursuant to vesting of restricted stock units   $ 3 (3)      
Issuance of common stock pursuant to vesting of restricted stock units, Shares   312,717        
Issuance of common stock pursuant to exercise of stock options 119   119      
Issuance of common stock pursuant to exercise of stock options, shares   39,270        
Issuance of common stock pursuant to ESPP purchases 18   18      
Issuance of common stock pursuant to ESPP purchases, Shares   5,702        
Stock-based compensation expense 357   357      
Unrealized gains (losses) on marketable securities 9       9  
Foreign currency translation adjustment (24)       (24)  
Net loss (6,510)         (6,510)
Ending balance at Apr. 30, 2020 $ 43,901 $ 376 $ 245,558 $ (147) $ (2,152) $ (199,734)
Ending balance, Shares at Apr. 30, 2020   37,661,641        
v3.20.1
Document and Entity Information - shares
3 Months Ended
Apr. 30, 2020
May 28, 2020
Document Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Apr. 30, 2020  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
Entity Registrant Name SEACHANGE INTERNATIONAL INC  
Entity Central Index Key 0001019671  
Current Fiscal Year End Date --01-31  
Entity Filer Category Accelerated Filer  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   37,528,325
Entity File Number 001-38828  
Entity Tax Identification Number 04-3197974  
Entity Address, Address Line One 500 Totten Pond Road  
Entity Address, City or Town Waltham  
Entity Address, State or Province MA  
Entity Incorporation, State or Country Code DE  
Entity Address, Postal Zip Code 02451  
City Area Code (978)  
Local Phone Number 897-0100  
Document Quarterly Report true  
Document Transition Report false  
Common Stock [Member]    
Document Information [Line Items]    
Trading Symbol SEAC  
Title of 12(b) Security Common Stock, $0.01 Par Value  
Security Exchange Name NASDAQ  
Series A Preferred Stock [Member]    
Document Information [Line Items]    
Trading Symbol SEAC  
Title of 12(b) Security Series A Participating Preferred Stock Purchase Rights  
Security Exchange Name NASDAQ  
v3.20.1
Fair Value Measurements
3 Months Ended
Apr. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

3.

Fair Value Measurements

The following tables set forth our financial assets that were accounted for at fair value on a recurring basis. There were no fair value measurements of our financial assets using level 3 inputs for the periods presented:

 

 

 

 

 

 

 

Fair Value at April 30, 2020 Using

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

134

 

 

$

 

 

$

134

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes and bonds

 

 

3,173

 

 

 

3,173

 

 

 

 

Corporate bonds

 

 

257

 

 

 

 

 

 

257

 

Total

 

$

3,564

 

 

$

3,173

 

 

$

391

 

 

 

 

 

 

 

 

Fair Value at January 31, 2020 Using

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

1,408

 

 

$

1,408

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes and bonds

 

 

3,360

 

 

 

3,360

 

 

 

 

Corporate bonds

 

 

1,257

 

 

 

 

 

 

1,257

 

Total

 

$

6,025

 

 

$

4,768

 

 

$

1,257

 

 

Cash equivalents include money market funds and U.S. treasury bills.

  

Marketable securities by security type consisted of the following:

 

 

 

As of April 30, 2020

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

 

(Amounts in thousands)

 

U.S. Treasury Notes and bonds

 

$

3,114

 

 

$

59

 

 

$

 

 

$

3,173

 

Corporate bonds

 

 

253

 

 

 

4

 

 

 

 

 

 

257

 

 

 

$

3,367

 

 

$

63

 

 

$

 

 

$

3,430

 

 

 

 

As of January 31, 2020

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

 

(Amounts in thousands)

 

U.S. Treasury Notes and bonds

 

$

3,310

 

 

$

50

 

 

$

 

 

$

3,360

 

Corporate Bonds

 

 

1,254

 

 

 

3

 

 

 

 

 

 

1,257

 

 

 

$

4,564

 

 

$

53

 

 

$

 

 

$

4,617

 

 

As of April 30, 2020, marketable securities consisted of investments that mature within one year, with the exception of investments with a fair value of $257 thousand that mature between one and two years.

v3.20.1
Segment Information and Geographic Information - Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area (Parenthetical) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Segment Reporting Information [Line Items]    
Total revenues $ 6,915 $ 8,485
United States Revenue [Member]    
Segment Reporting Information [Line Items]    
Total revenues $ 2,343 $ 3,398
Total Revenue [Member] | Customer Concentration Risk [Member] | United States Revenue [Member]    
Segment Reporting Information [Line Items]    
% of total revenue 34.00% 40.00%
v3.20.1
Revenues from Contracts with Customers - Schedule of Revenue Disaggregated by Revenue Stream (Detail) - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Disaggregation Of Revenue [Line Items]    
Total revenue $ 6,915 $ 8,485
Product [Member]    
Disaggregation Of Revenue [Line Items]    
Total revenue 3,098 1,179
Professional Services [Member]    
Disaggregation Of Revenue [Line Items]    
Total revenue 1,171 2,081
Maintenance [Member]    
Disaggregation Of Revenue [Line Items]    
Total revenue $ 2,646 $ 5,225
v3.20.1
Severance and Restructuring Costs
3 Months Ended
Apr. 30, 2020
Restructuring And Related Activities [Abstract]  
Severance and Restructuring Costs

8.

Severance and Restructuring Costs

During the three months ended April 30, 2020, we incurred severance and restructuring costs of $0.5 million, primarily for employee-related termination benefits driven by the COVID-19 pandemic. In fiscal 2020, we continued to streamline our operations and closed our service organizations in Ireland and the Netherlands.

The following table shows the change in accrued restructuring balances since January 31, 2020 primarily related to our fiscal 2020 restructuring efforts, reported as a component of accrued expenses on the consolidated balance sheets:

 

 

 

Employee-

Related

Benefits

 

 

 

(Amounts in thousands)

 

Accrued balance as of January 31, 2020

 

$

744

 

Restructuring charges incurred

 

 

6

 

Cash payments

 

 

(690

)

Other charges

 

 

(9

)

Accrued balance as of April 30, 2020

 

 

51

 

 

v3.20.1
Consolidated Balance Sheet Detail
3 Months Ended
Apr. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Consolidated Balance Sheet Detail

4.

Consolidated Balance Sheet Detail

 

Property and equipment, net

Property and equipment, net consists of the following:

 

 

 

As of

 

 

 

April 30, 2020

 

 

January 31, 2020

 

 

 

(Amounts in thousands)

 

Computer equipment, software and demonstration equipment

 

$

9,710

 

 

$

9,695

 

Service and spare components

 

 

 

 

 

1,158

 

Office furniture and equipment

 

 

232

 

 

 

170

 

Leasehold improvements

 

 

177

 

 

 

154

 

 

 

 

10,119

 

 

 

11,177

 

Less:  Accumulated depreciation and amortization

 

 

(9,518

)

 

 

(10,623

)

Total property and equipment, net

 

$

601

 

 

$

554

 

 

Accrued expenses

Accrued expenses consist of the following:

 

 

 

As of

 

 

 

April 30, 2020

 

 

January 31, 2020

 

 

 

(Amounts in thousands)

 

Accrued employee compensation and benefits

 

$

2,593

 

 

$

3,236

 

Accrued professional fees

 

 

268

 

 

 

928

 

Sales tax and VAT payable

 

 

531

 

 

 

317

 

Accrued restructuring

 

 

51

 

 

 

744

 

Current obligation - right of use operating leases

 

 

808

 

 

 

722

 

Accrued third party hardware costs

 

 

 

 

 

1,169

 

Accrued other

 

 

2,028

 

 

 

870

 

Total accrued expenses

 

$

6,279

 

 

$

7,986

 

 

v3.20.1
Income Taxes
3 Months Ended
Apr. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

12.

Income Taxes

Each interim period is considered an integral part of the annual period and, accordingly, we measure our income tax expense using an estimated annual effective tax rate.  A company is required, at the end of each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period.

We recorded an income tax benefit of $21 thousand and an income tax provision of $0.4 million for the three months ended April 30, 2020 and April 30, 2019, respectively. Our effective tax rate in fiscal 2021 and in future periods may fluctuate on a quarterly basis as a result of changes in our jurisdictional forecasts where losses cannot be benefitted due to the existence of valuation allowances on our deferred tax assets, changes in actual results versus our estimates, or changes in tax laws, regulations, accounting principles or interpretations thereof.

 

We review all available evidence to evaluate the recovery of deferred tax assets, including the recent history of losses in all tax jurisdictions, as well as its ability to generate income in future periods. As of April 30, 2020, due to the uncertainty related to the ultimate use of certain deferred income tax assets, we have recorded a valuation allowance on certain deferred assets.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and various foreign jurisdictions. We have closed out an audit with the Internal Revenue Service (“IRS”) through fiscal 2013; however, the taxing authorities will still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers.

On March 4, 2019, our Board of Directors approved and adopted a Tax Benefits Preservation Plan to potentially limit our ability to use net operating loss carryforwards and certain other tax attributes (“NOLs”) to reduce our potential future federal income tax obligations.  In connection with the Tax Benefits Preservation Plan, we declared a dividend of one preferred share purchase right for each share of our common stock issued and outstanding as of March 15, 2019 to our stockholders of record on that date. The Tax Benefits Preservation Plan expires no later than March 4, 2022, and was approved by our stockholders at our 2019 annual meeting of stockholders on July 11, 2019.

In response to the COVID-19 pandemic, the CARES Act was signed into law in March 2020. The CARES Act includes several provisions that provide economic relief for individuals and businesses. The Company will continue to evaluate the impact of the CARES Act but does not expect it to result in a material impact. 

v3.20.1
Fair Value Measurements - Additional Information (Detail)
Apr. 30, 2020
USD ($)
Fair Value Measurements Disclosure [Line Items]  
Marketable securities fair value, mature between one and two years $ 257,000
Fair Value, Inputs, Level 3 [Member]  
Fair Value Measurements Disclosure [Line Items]  
Fair value measurements of our financial assets $ 0
v3.20.1
Consolidated Balance Sheet Detail - Accrued Expenses (Detail) - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Balance Sheet Related Disclosures [Abstract]    
Accrued employee compensation and benefits $ 2,593 $ 3,236
Accrued professional fees 268 928
Sales tax and VAT payable 531 317
Accrued restructuring 51 744
Current obligation - right of use operating leases 808 722
Accrued third party hardware costs   1,169
Accrued other 2,028 870
Total accrued expenses $ 6,279 $ 7,986
v3.20.1
Stock-Based Compensation Expense (Tables)
3 Months Ended
Apr. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Summary of Stock Based Compensation Expense Recognized

We recognized stock-based compensation expense within the accompanying consolidated statements of operations and comprehensive loss as follows:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Cost of revenue

 

$

(8

)

 

$

(3

)

Research and development

 

 

67

 

 

 

68

 

Sales and marketing

 

 

40

 

 

 

(86

)

General and administrative

 

 

258

 

 

 

(413

)

 

 

$

357

 

 

$

(434

)

 

v3.20.1
Consolidated Balance Sheet Detail (Tables)
3 Months Ended
Apr. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Property and Equipment, Net

Property and equipment, net consists of the following:

 

 

 

As of

 

 

 

April 30, 2020

 

 

January 31, 2020

 

 

 

(Amounts in thousands)

 

Computer equipment, software and demonstration equipment

 

$

9,710

 

 

$

9,695

 

Service and spare components

 

 

 

 

 

1,158

 

Office furniture and equipment

 

 

232

 

 

 

170

 

Leasehold improvements

 

 

177

 

 

 

154

 

 

 

 

10,119

 

 

 

11,177

 

Less:  Accumulated depreciation and amortization

 

 

(9,518

)

 

 

(10,623

)

Total property and equipment, net

 

$

601

 

 

$

554

 

Accrued Expenses

Accrued expenses consist of the following:

 

 

 

As of

 

 

 

April 30, 2020

 

 

January 31, 2020

 

 

 

(Amounts in thousands)

 

Accrued employee compensation and benefits

 

$

2,593

 

 

$

3,236

 

Accrued professional fees

 

 

268

 

 

 

928

 

Sales tax and VAT payable

 

 

531

 

 

 

317

 

Accrued restructuring

 

 

51

 

 

 

744

 

Current obligation - right of use operating leases

 

 

808

 

 

 

722

 

Accrued third party hardware costs

 

 

 

 

 

1,169

 

Accrued other

 

 

2,028

 

 

 

870

 

Total accrued expenses

 

$

6,279

 

 

$

7,986

 

v3.20.1
Operating Leases - Schedule of Components of Lease Expense (Detail) - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Leases [Abstract]    
Operating lease cost $ 322 $ 206
Short term lease cost 31 11
Total lease cost $ 353 $ 217
v3.20.1
Operating Leases - Schedule of Future Minimum Lease Payments for Operating Leases (Detail) - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Leases [Abstract]    
2021 $ 769  
2022 1,161  
2023 1,284  
2024 1,318  
2025 1,357  
Thereafter 59  
Total lease payments 5,948  
Less interest 676  
Total operating lease liabilities $ 5,272 $ 5,070
v3.20.1
Revenues from Contracts with Customers (Tables)
3 Months Ended
Apr. 30, 2020
Revenue From Contract With Customer [Abstract]  
Schedule of Revenue Disaggregated by Revenue Stream

The following table shows our revenue disaggregated by revenue stream for the three months ended April 30, 2020 and 2019:

 

 

 

For the Three Months

April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Product

 

$

3,098

 

 

$

1,179

 

Professional services

 

 

1,171

 

 

 

2,081

 

Maintenance

 

 

2,646

 

 

 

5,225

 

Total revenue

 

$

6,915

 

 

$

8,485

 

v3.20.1
Goodwill and Intangible Assets (Tables)
3 Months Ended
Apr. 30, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Schedule of Change in Carrying Amount of Goodwill The following table represents the changes in goodwill since January 31, 2020:

 

 

Goodwill

 

 

 

(Amounts in

thousands)

 

Balance as of January 31, 2020

 

$

9,775

 

Cumulative translation adjustment

 

 

(120

)

Balance as of April 30, 2020

 

$

9,655

 

Schedule of Intangible Assets

Intangible assets, net, consisted of the following at April 30, 2020:

 

 

 

As of April 30, 2020

 

 

 

Gross

 

 

Accumulated

Amortization

 

 

Cumulative

Translation

Adjustment

 

 

Net

 

 

 

(Amounts in thousands)

 

Finite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired customer contracts

 

$

2,205

 

 

$

892

 

 

$

(86

)

 

$

1,227

 

Acquired existing technology

 

 

1,364

 

 

 

553

 

 

 

(51

)

 

 

760

 

Total finite-lived intangible assets

 

$

3,569

 

 

$

1,445

 

 

$

(137

)

 

$

1,987

 

Schedule of Finite-Life Intangible Assets, Amortization Expense

We recognized amortization expense of intangible assets in operating expense categories on the consolidated statement of operations and comprehensive loss as follows:

 

 

 

For the Three Months Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Selling and marketing

 

$

 

 

$

185

 

Research and development

 

 

284

 

 

 

113

 

 

 

$

284

 

 

$

298

 

Schedule of Future Estimated Amortization Expense of Acquired Intangibles

Future estimated amortization expense of acquired intangibles as of April 30, 2020 is as follows:

 

For the Fiscal Years Ended January 31,

 

Estimated

Amortization

Expense

 

 

 

(Amounts in

thousands)

 

2021

 

$

852

 

2022

 

 

1,135

 

Total

 

$

1,987

 

v3.20.1
Commitments and Contingencies - Additional Information (Detail) - Ransomware Attack [Member]
$ in Millions
3 Months Ended
Apr. 30, 2020
USD ($)
Accrued Expenses [Member]  
Loss Contingencies [Line Items]  
Loss contingency $ 0.8
Prepaid Expenses and Other Current Assets [Member]  
Loss Contingencies [Line Items]  
Insurance recovery proceeds $ 0.8
v3.20.1
Operating Leases - Additional Information (Detail)
$ in Millions
3 Months Ended
Apr. 30, 2020
USD ($)
Leases [Abstract]  
Rent payments $ 0.4
v3.20.1
Significant Accounting Policies
3 Months Ended
Apr. 30, 2020
Accounting Policies [Abstract]  
Significant Accounting Policies

2.

Significant Accounting Policies

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, those related to revenue recognition, allowance for doubtful accounts, goodwill and intangible assets, right-of-use operating leases, impairment of long-lived assets, accounting for income taxes, the valuation of stock-based awards, and ongoing legal matters.  We base our estimates on historical experience, known trends and other market-specific or relevant factors that are believed to be reasonable under the circumstances.  On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known.  Actual results may differ from those estimates or assumptions.

Business Combinations

We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations. We allocate the purchase price of the acquisition to the tangible assets acquired, liabilities assumed, and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred. During the measurement period, we record adjustments to provisional amounts recorded for assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could be up to one year after the transaction date, subsequent adjustments are recorded to the Company’s consolidated statements of operations.

Cash, cash equivalents and restricted cash

Cash and cash equivalents include cash on hand and on deposit and highly liquid investments in money market mutual funds, government sponsored enterprise obligations, treasury bills, commercial paper and other money market securities with remaining maturities at the date of purchase of 90 days or less. All cash equivalents are carried at cost, which approximates fair value. Restricted cash represents cash that is restricted as to withdrawal or usage and consists primarily of cash held as collateral in relation to obligations set forth by the landlord of our Poland facility.

The following table provides a summary of cash, cash equivalents and restricted cash that constitutes the total amounts shown in the consolidated statements of cash flows as of April 30, 2020 and 2019:

 

 

 

As of April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Cash and cash equivalents

 

$

6,187

 

 

$

14,697

 

Restricted cash

 

 

200

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

6,387

 

 

$

14,697

 

 

Concentration of Credit Risk and of Significant Customers

Financial instruments which potentially expose us to concentrations of credit risk include cash, cash equivalents and restricted cash, marketable securities and accounts receivable. We have cash investment policies which, among other things, limit investments to investment-grade securities. We restrict our cash equivalents and marketable securities to repurchase agreements with major banks and U.S. government and corporate securities which are subject to minimal credit and market risk. We perform ongoing credit evaluations of our customers.

We sell our software products and services worldwide primarily to service providers consisting of operators, telecommunications companies, satellite operators and broadcasters. Two customers accounted for 13% and 15% of total revenue in the first quarter of fiscal 2021 and one customer accounted for 17% of total revenue in the first quarter of fiscal 2020. Two customers accounted for 22% and 13% of the accounts receivable balance as of April 30, 2020. Two customers accounted for 16% and 10% of the accounts receivable balance as of January 31, 2020.

Marketable Securities

Our investments in debt securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other expense, net in the consolidated statements of operations and comprehensive loss.

We evaluate our investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, we consider such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, our ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that we consider to be “other than temporary,” we reduce the investment to fair value through a charge to the consolidated statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Our cash equivalents and marketable securities are carried at fair value determined according to the fair value hierarchy described above. The carrying values of our accounts and other receivables, unbilled receivables, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

Goodwill and Acquired Intangible Assets

We record goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but that are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.  Goodwill is not amortized, but rather is tested for impairment annually on August 1st of each year, or more frequently if facts and circumstances warrant a review, such as the ones mentioned in impairments of long-lived assets below. We have determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment. We assess both the existence of potential impairment and the amount of impairment loss by comparing the fair value of the reporting unit with its carrying amount, including goodwill.  Through April 30, 2020, we have recorded accumulated goodwill impairment charges of $54.8 million.

Intangible assets are recorded at their estimated fair values at the date of acquisition. We amortize acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Impairment of Long-Lived Assets

Long-lived assets primarily consist of property, plant and equipment and intangible assets with finite lives. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future undiscounted cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. Determining the fair value of long-lived assets includes significant judgment by management and different judgments could yield different results.

We assess the useful lives and possible impairment of existing recognized long-lived assets whenever events or changes in circumstances occur that indicate that it is more likely than not that an impairment has occurred. We test long-lived assets for impairment by comparing the carrying amount to the sum of the net undiscounted cash flows expected to be generated by the asset whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds its net undiscounted cash flows, then an impairment loss is recognized for the amount by which the carrying amount exceeds its fair value. We use a discounted cash flow approach or other methods, if appropriate, to assess fair value. Factors considered important which could trigger a review include:

 

significant underperformance relative to historical or projected future operating results;

 

significant changes in the manner of use of the acquired assets or the strategy for our overall business;

 

identification of other impaired assets within a reporting unit;

 

significant negative industry or economic trends;

 

a significant decline in our stock price for a sustained period; and

 

a decline in our market capitalization relative to net book value.

Determining whether a triggering event has occurred involves significant judgment. (see Note 5).

Revenue Recognition

Our revenue is derived from sales of software licenses and associated hardware and support services, including professional services and maintenance fees related to our software licenses.

Our contracts, including contracts for our end-to-end software delivery platform solution (the “Framework”), often contain multiple performance obligations. For contracts with multiple performance obligations, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis when available or expected cost plus margin or residual approach. If the transaction price contains discounts or we expect to provide future price concessions, these elements are considered when determining the transaction price prior to allocation. Variable fees within the transaction price are estimated and recognized as revenue when we satisfy our performance obligations to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. If the contract grants the client the option to acquire additional products or services, we assess whether or not any discount on the products and services is in excess of levels normally available to similar clients and, if so, we account for that discount as an additional performance obligation.

Framework

We have concluded that the Framework has multiple performance obligations. The selling price of the Framework is highly variable as a result of our value-based engagement where pricing for our customers is based on the operating expense savings that we enable using the Framework engagement.

Framework Software Licenses

We have concluded that a Framework software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support. As a result of the highly variable selling price, revenue recognition and consideration related to the Framework software license is allocated under the residual method.

Framework Hardware

We have concluded that Framework hardware, when included in a Framework contract, is a distinct performance obligation as the client can benefit from the product.  Framework hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware.  In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Framework Support Services

We have concluded that Framework support services is a distinct performance obligation. Framework support services is included in services revenue in our consolidated statements of operations and comprehensive loss.  Support services includes software upgrades on a when-and-if available basis, support, bug fixes or patches and general maintenance support.  Framework support services is not sold on a standalone basis. The standalone selling price is determined using a cost-plus approach, and revenue is recognized ratably over the passage of the contractual term.

Legacy Software Licenses

We have concluded that a software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support.

Legacy Hardware

We have concluded that hardware is a distinct performance obligation as the client can benefit from the product on its own. Hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Legacy Maintenance

Historically, maintenance revenue, which is included in services revenue in our consolidated statements of operations and comprehensive loss, includes revenue from client support and related professional services. Client support includes software upgrades on a when-and-if available basis, telephone support, bug fixes or patches and general hardware maintenance support. Maintenance is priced as a percentage of the list price of the related software license and hardware. Historically, we determined the standalone selling price of maintenance based on this pricing relationship and observable data from standalone sales of maintenance.

We have identified three separate distinct performance obligations of maintenance:

 

Software upgrades and updates;

 

Technical support; and

 

Hardware support.

These performance obligations are distinct within the contract and, although they are not sold separately, the components are not essential to the functionality of the other components. Each of the performance obligations included in maintenance revenue is a stand ready obligation that is recognized ratably over the passage of the contractual term for products sold on a standalone basis.  

Legacy Services

Historically, our services revenue, excluding maintenance revenue, is comprised of software license implementation services, engineering services, training and reimbursable expenses. We have concluded that services are distinct performance obligations, with the exception of engineering services. Engineering services may be provided on a standalone basis or bundled with a license when we are providing custom development.

The standalone selling price for services in time and materials contracts is determined by observable prices in standalone services arrangements and recognized as revenue as the services are performed based on an input measure of hours incurred to total estimated hours.

We estimate the standalone selling price for fixed price services based on estimated hours adjusted for historical experience at time and material rates charged in standalone services arrangements. Revenue for fixed price services is recognized over time as the services are provided based on an input measure of hours incurred to total estimated hours.

Contract Modifications

We occasionally enter into amendments to previously executed contracts that constitute contract modifications. We assess each of these contract modifications to determine:

 

If the additional products and services are distinct from the product and services in the original arrangement; and

 

If the amount of consideration expected for the added products and services reflects the standalone selling price of those products and services.

 

A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract or a cumulative catch-up basis.

Significant Judgments

 

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in the contract based on a relative standalone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

 

Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price, taking into account available information such as market conditions, and internally approved pricing guidelines related to the performance obligations. In instances where stand-alone selling price is not directly observable, such as when we don’t sell the product or service separately, we determine the stand-alone selling price based on a cost-plus model as market and other observable inputs are seldom present based on the proprietary nature of our products and services.

 

Our contracts do not generally include a variable component to the transaction price. With certain statements of work, we explicitly state that we are to be reimbursed for reasonable travel and entertainment expenses incurred as part of the delivery of professional services. In the cases when we are entitled to collect all travel and entertainment expenses incurred, an estimate of the fulfillment costs is made at the onset of the contract in order to determine the transaction price. The revenue associated with travel and entertainment expenses is then recognized over time along with the professional services.

Some of our contracts have payment terms that differ from the timing of revenue recognition, which requires us to assess whether the transaction price for those contracts include a significant financing component. We have elected the practical expedient that permits an entity to not adjust for the effects of a significant financing component if we expect that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service, will be one year or less. For those contracts in which the period exceeds the one-year threshold, this assessment, as well as the quantitative estimate of the financing component and its relative significance, requires judgment. We estimate the significant financing component provided to our customers with extended payment terms by determining the present value of the future payments by applying a discount rate that reflects the customer’s creditworthiness.

 

Contract Balances

Contract assets consist of unbilled revenue, which is recognized as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones.  Unbilled receivables expected to be billed and collected within one year are classified as current assets or long-term assets if expected to be billed and collected after one year. Contract liabilities consist of deferred revenue and customer deposits that arise when amounts are billed to or collected from customers in advance of revenue recognition.

Costs to Obtain and Fulfill a Contract

 

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that commissions and special incentive payments (“Spiffs”) for hardware and software maintenance and support and professional services paid under our sales incentive programs meet the requirements to be capitalized under ASC 340-40. Costs to obtain a contract are amortized as selling and marketing expense over the expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period. The commissions and Spiffs related to professional services are amortized over time as work is completed. The commissions and Spiffs for hardware and software maintenance are amortized over the life of the contract. These costs are periodically reviewed for impairment. We determined that no impairment of these assets existed as of April 30, 2020 or January 31, 2020. We have elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Total deferred capitalized commission costs were $893 thousand as of April 30, 2020 compared to $958 thousand as of January 31, 2020. Current deferred capitalized commission costs are included in prepaid expense and other current assets in our consolidated balance sheets and non-current deferred capitalized commission costs are included in other assets in our consolidated balance sheets. Capitalized commissions expensed during the three months ended April 30, 2020 and 2019 included in the consolidated statement of operations and comprehensive loss were $135 thousand and $38 thousand, respectively.

 

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs include direct labor for support services, software enhancements, reimbursable expenses and professional services for customized software development costs. The revenue associated with the support services, software enhancements and reimbursable expenses is recognized ratably over time; therefore, the associated costs are expensed as incurred. The professional services associated with the customized software are not recognized until completion. As such, the professional services costs are capitalized and recognized upon completion of the services.

Leases

We account for our leases in accordance with ASC 842, Leases. A contract is accounted for as a lease when we have the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, we determine the initial classification and measurement of our right-of-use operating lease asset and corresponding liability at the lease commencement date. We determine the classification and measurement of a modified lease at the date it is modified. The lease term includes only renewal options that are reasonably assured to exercise. The present value of lease payments is typically determined by using the Company’s estimated secured incremental borrowing rate for the associated lease term as interest rates implicit in the leases are not normally readily determinable. Management’s policy is to utilize the practical expedient to not record leases with an original term of twelve months or less on our consolidated balance sheets. Lease payments are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Our existing leases are for facilities and equipment. None of our leases are with related parties. In addition to rent, office leases may require us to pay additional amounts for taxes, insurance, maintenance and other expenses, which are generally referred to as non-lease components. As a practical expedient, we account for the non-lease components together with the lease components as a single lease component for all of our leases. Only the fixed costs for leases are accounted for as a single lease component and recognized as part of a right-of-use asset and liability.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of unrestricted common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of unrestricted common shares outstanding during the period and the weighted average number of potential common shares from the assumed exercise of stock options and the vesting of shares of restricted and deferred common stock units using the “treasury stock” method when the effect is not anti-dilutive. In periods in which we report a net loss, diluted net loss per share is the same as basic net loss per share.

The number of common shares used in the computation of diluted net loss per share for the periods presented does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Stock options

 

 

766

 

 

 

2,937

 

Restricted stock units

 

 

58

 

 

 

291

 

Deferred stock units

 

 

81

 

 

 

188

 

Performance stock units

 

 

 

 

 

115

 

 

 

 

905

 

 

 

3,531

 

 

Recently Issued Accounting Pronouncement

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities and accounts receivable. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. ASU 2016-13 is effective in the first quarter of our fiscal 2024. We are currently evaluating if this guidance will have a material effect to our consolidated financial statements.

v3.20.1
Segment Information and Geographic Information - Long-Lived Assets by Geographic Locations (Detail) - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Revenues from External Customers and Long-Lived Assets [Line Items]    
Total long-lived assets by geographic location $ 18,684 $ 17,683
North America [Member]    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Total long-lived assets by geographic location $ 14,059 $ 13,293
Long-lived assets, Percentage 75.00% 75.00%
Europe and Middle East [Member]    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Total long-lived assets by geographic location $ 4,594 $ 4,359
Long-lived assets, Percentage 25.00% 25.00%
Asia Pacific [Member]    
Revenues from External Customers and Long-Lived Assets [Line Items]    
Total long-lived assets by geographic location $ 31 $ 31
Long-lived assets, Percentage 0.00% 0.00%
v3.20.1
Revenues from Contracts with Customers - Additional Information (Detail)
$ in Millions
Apr. 30, 2020
USD ($)
Revenue From Contract With Customer [Abstract]  
Transaction price allocated to performance obligations $ 29.5
v3.20.1
Consolidated Statements of Operations and Comprehensive Loss - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Revenue:    
Total revenue $ 6,915 $ 8,485
Cost of revenue:    
Total cost of revenue 4,406 5,577
Gross profit 2,509 2,908
Operating expenses:    
Research and development 4,166 4,252
Selling and marketing 2,126 2,852
General and administrative 2,054 4,249
Severance and restructuring costs 486 211
Total operating expenses 8,832 11,564
Loss from operations (6,323) (8,656)
Other expense, net (208) (1,791)
Loss before income taxes (6,531) (10,447)
Income tax (benefit) provision (21) 402
Net loss $ (6,510) $ (10,849)
Net loss per share, basic $ (0.17) $ (0.30)
Net loss per share, diluted $ (0.17) $ (0.30)
Weighted average common shares outstanding, basic 37,521 36,461
Weighted average common shares outstanding, diluted 37,521 36,461
Comprehensive loss:    
Net loss $ (6,510) $ (10,849)
Other comprehensive loss, net of tax:    
Foreign currency translation adjustment (24) 1,207
Unrealized gains on marketable securities 9 35
Total other comprehensive loss (15) 1,242
Comprehensive loss (6,525) (9,607)
Product [Member]    
Revenue:    
Total revenue 3,098 1,179
Cost of revenue:    
Cost of revenue 1,580 909
Service [Member]    
Revenue:    
Total revenue 3,817 7,306
Cost of revenue:    
Cost of revenue $ 2,826 $ 4,668
v3.20.1
Significant Accounting Policies (Policies)
3 Months Ended
Apr. 30, 2020
Accounting Policies [Abstract]  
Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in U.S. GAAP have been omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for a fair presentation have been included. The year-end consolidated balance sheet data as of January 31, 2020 was derived from our audited consolidated financial statements and may not include all disclosures required by U.S. GAAP. The results of operations for the three months ended April 30, 2020 are not necessarily indicative of the results to be expected for the entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the SEC on April 20, 2020.

Use of Estimates

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, those related to revenue recognition, allowance for doubtful accounts, goodwill and intangible assets, right-of-use operating leases, impairment of long-lived assets, accounting for income taxes, the valuation of stock-based awards, and ongoing legal matters.  We base our estimates on historical experience, known trends and other market-specific or relevant factors that are believed to be reasonable under the circumstances.  On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known.  Actual results may differ from those estimates or assumptions.

Business Combinations

Business Combinations

We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations. We allocate the purchase price of the acquisition to the tangible assets acquired, liabilities assumed, and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred. During the measurement period, we record adjustments to provisional amounts recorded for assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could be up to one year after the transaction date, subsequent adjustments are recorded to the Company’s consolidated statements of operations.

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents and restricted cash

Cash and cash equivalents include cash on hand and on deposit and highly liquid investments in money market mutual funds, government sponsored enterprise obligations, treasury bills, commercial paper and other money market securities with remaining maturities at the date of purchase of 90 days or less. All cash equivalents are carried at cost, which approximates fair value. Restricted cash represents cash that is restricted as to withdrawal or usage and consists primarily of cash held as collateral in relation to obligations set forth by the landlord of our Poland facility.

The following table provides a summary of cash, cash equivalents and restricted cash that constitutes the total amounts shown in the consolidated statements of cash flows as of April 30, 2020 and 2019:

 

 

 

As of April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Cash and cash equivalents

 

$

6,187

 

 

$

14,697

 

Restricted cash

 

 

200

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

6,387

 

 

$

14,697

 

Concentration of Credit Risk and of Significant Customers

 

Concentration of Credit Risk and of Significant Customers

Financial instruments which potentially expose us to concentrations of credit risk include cash, cash equivalents and restricted cash, marketable securities and accounts receivable. We have cash investment policies which, among other things, limit investments to investment-grade securities. We restrict our cash equivalents and marketable securities to repurchase agreements with major banks and U.S. government and corporate securities which are subject to minimal credit and market risk. We perform ongoing credit evaluations of our customers.

We sell our software products and services worldwide primarily to service providers consisting of operators, telecommunications companies, satellite operators and broadcasters. Two customers accounted for 13% and 15% of total revenue in the first quarter of fiscal 2021 and one customer accounted for 17% of total revenue in the first quarter of fiscal 2020. Two customers accounted for 22% and 13% of the accounts receivable balance as of April 30, 2020. Two customers accounted for 16% and 10% of the accounts receivable balance as of January 31, 2020.

Marketable Securities

Marketable Securities

Our investments in debt securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other expense, net in the consolidated statements of operations and comprehensive loss.

We evaluate our investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, we consider such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, our ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that we consider to be “other than temporary,” we reduce the investment to fair value through a charge to the consolidated statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Fair Value Measurements

Fair Value Measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Our cash equivalents and marketable securities are carried at fair value determined according to the fair value hierarchy described above. The carrying values of our accounts and other receivables, unbilled receivables, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

Goodwill and Acquired Intangible Assets

Goodwill and Acquired Intangible Assets

We record goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but that are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.  Goodwill is not amortized, but rather is tested for impairment annually on August 1st of each year, or more frequently if facts and circumstances warrant a review, such as the ones mentioned in impairments of long-lived assets below. We have determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment. We assess both the existence of potential impairment and the amount of impairment loss by comparing the fair value of the reporting unit with its carrying amount, including goodwill.  Through April 30, 2020, we have recorded accumulated goodwill impairment charges of $54.8 million.

Intangible assets are recorded at their estimated fair values at the date of acquisition. We amortize acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets primarily consist of property, plant and equipment and intangible assets with finite lives. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future undiscounted cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. Determining the fair value of long-lived assets includes significant judgment by management and different judgments could yield different results.

We assess the useful lives and possible impairment of existing recognized long-lived assets whenever events or changes in circumstances occur that indicate that it is more likely than not that an impairment has occurred. We test long-lived assets for impairment by comparing the carrying amount to the sum of the net undiscounted cash flows expected to be generated by the asset whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds its net undiscounted cash flows, then an impairment loss is recognized for the amount by which the carrying amount exceeds its fair value. We use a discounted cash flow approach or other methods, if appropriate, to assess fair value. Factors considered important which could trigger a review include:

 

significant underperformance relative to historical or projected future operating results;

 

significant changes in the manner of use of the acquired assets or the strategy for our overall business;

 

identification of other impaired assets within a reporting unit;

 

significant negative industry or economic trends;

 

a significant decline in our stock price for a sustained period; and

 

a decline in our market capitalization relative to net book value.

Determining whether a triggering event has occurred involves significant judgment. (see Note 5).

Revenue Recognition

Revenue Recognition

Our revenue is derived from sales of software licenses and associated hardware and support services, including professional services and maintenance fees related to our software licenses.

Our contracts, including contracts for our end-to-end software delivery platform solution (the “Framework”), often contain multiple performance obligations. For contracts with multiple performance obligations, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis when available or expected cost plus margin or residual approach. If the transaction price contains discounts or we expect to provide future price concessions, these elements are considered when determining the transaction price prior to allocation. Variable fees within the transaction price are estimated and recognized as revenue when we satisfy our performance obligations to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. If the contract grants the client the option to acquire additional products or services, we assess whether or not any discount on the products and services is in excess of levels normally available to similar clients and, if so, we account for that discount as an additional performance obligation.

Framework

We have concluded that the Framework has multiple performance obligations. The selling price of the Framework is highly variable as a result of our value-based engagement where pricing for our customers is based on the operating expense savings that we enable using the Framework engagement.

Framework Software Licenses

We have concluded that a Framework software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support. As a result of the highly variable selling price, revenue recognition and consideration related to the Framework software license is allocated under the residual method.

Framework Hardware

We have concluded that Framework hardware, when included in a Framework contract, is a distinct performance obligation as the client can benefit from the product.  Framework hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware.  In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Framework Support Services

We have concluded that Framework support services is a distinct performance obligation. Framework support services is included in services revenue in our consolidated statements of operations and comprehensive loss.  Support services includes software upgrades on a when-and-if available basis, support, bug fixes or patches and general maintenance support.  Framework support services is not sold on a standalone basis. The standalone selling price is determined using a cost-plus approach, and revenue is recognized ratably over the passage of the contractual term.

Legacy Software Licenses

We have concluded that a software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support.

Legacy Hardware

We have concluded that hardware is a distinct performance obligation as the client can benefit from the product on its own. Hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Legacy Maintenance

Historically, maintenance revenue, which is included in services revenue in our consolidated statements of operations and comprehensive loss, includes revenue from client support and related professional services. Client support includes software upgrades on a when-and-if available basis, telephone support, bug fixes or patches and general hardware maintenance support. Maintenance is priced as a percentage of the list price of the related software license and hardware. Historically, we determined the standalone selling price of maintenance based on this pricing relationship and observable data from standalone sales of maintenance.

We have identified three separate distinct performance obligations of maintenance:

 

Software upgrades and updates;

 

Technical support; and

 

Hardware support.

These performance obligations are distinct within the contract and, although they are not sold separately, the components are not essential to the functionality of the other components. Each of the performance obligations included in maintenance revenue is a stand ready obligation that is recognized ratably over the passage of the contractual term for products sold on a standalone basis.  

Legacy Services

Historically, our services revenue, excluding maintenance revenue, is comprised of software license implementation services, engineering services, training and reimbursable expenses. We have concluded that services are distinct performance obligations, with the exception of engineering services. Engineering services may be provided on a standalone basis or bundled with a license when we are providing custom development.

The standalone selling price for services in time and materials contracts is determined by observable prices in standalone services arrangements and recognized as revenue as the services are performed based on an input measure of hours incurred to total estimated hours.

We estimate the standalone selling price for fixed price services based on estimated hours adjusted for historical experience at time and material rates charged in standalone services arrangements. Revenue for fixed price services is recognized over time as the services are provided based on an input measure of hours incurred to total estimated hours.

Contract Modifications

We occasionally enter into amendments to previously executed contracts that constitute contract modifications. We assess each of these contract modifications to determine:

 

If the additional products and services are distinct from the product and services in the original arrangement; and

 

If the amount of consideration expected for the added products and services reflects the standalone selling price of those products and services.

 

A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract or a cumulative catch-up basis.

Significant Judgments

 

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in the contract based on a relative standalone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

 

Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price, taking into account available information such as market conditions, and internally approved pricing guidelines related to the performance obligations. In instances where stand-alone selling price is not directly observable, such as when we don’t sell the product or service separately, we determine the stand-alone selling price based on a cost-plus model as market and other observable inputs are seldom present based on the proprietary nature of our products and services.

 

Our contracts do not generally include a variable component to the transaction price. With certain statements of work, we explicitly state that we are to be reimbursed for reasonable travel and entertainment expenses incurred as part of the delivery of professional services. In the cases when we are entitled to collect all travel and entertainment expenses incurred, an estimate of the fulfillment costs is made at the onset of the contract in order to determine the transaction price. The revenue associated with travel and entertainment expenses is then recognized over time along with the professional services.

Some of our contracts have payment terms that differ from the timing of revenue recognition, which requires us to assess whether the transaction price for those contracts include a significant financing component. We have elected the practical expedient that permits an entity to not adjust for the effects of a significant financing component if we expect that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service, will be one year or less. For those contracts in which the period exceeds the one-year threshold, this assessment, as well as the quantitative estimate of the financing component and its relative significance, requires judgment. We estimate the significant financing component provided to our customers with extended payment terms by determining the present value of the future payments by applying a discount rate that reflects the customer’s creditworthiness.

 

Contract Balances

Contract assets consist of unbilled revenue, which is recognized as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones.  Unbilled receivables expected to be billed and collected within one year are classified as current assets or long-term assets if expected to be billed and collected after one year. Contract liabilities consist of deferred revenue and customer deposits that arise when amounts are billed to or collected from customers in advance of revenue recognition.

Costs to Obtain and Fulfill a Contract

 

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that commissions and special incentive payments (“Spiffs”) for hardware and software maintenance and support and professional services paid under our sales incentive programs meet the requirements to be capitalized under ASC 340-40. Costs to obtain a contract are amortized as selling and marketing expense over the expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period. The commissions and Spiffs related to professional services are amortized over time as work is completed. The commissions and Spiffs for hardware and software maintenance are amortized over the life of the contract. These costs are periodically reviewed for impairment. We determined that no impairment of these assets existed as of April 30, 2020 or January 31, 2020. We have elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Total deferred capitalized commission costs were $893 thousand as of April 30, 2020 compared to $958 thousand as of January 31, 2020. Current deferred capitalized commission costs are included in prepaid expense and other current assets in our consolidated balance sheets and non-current deferred capitalized commission costs are included in other assets in our consolidated balance sheets. Capitalized commissions expensed during the three months ended April 30, 2020 and 2019 included in the consolidated statement of operations and comprehensive loss were $135 thousand and $38 thousand, respectively.

 

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs include direct labor for support services, software enhancements, reimbursable expenses and professional services for customized software development costs. The revenue associated with the support services, software enhancements and reimbursable expenses is recognized ratably over time; therefore, the associated costs are expensed as incurred. The professional services associated with the customized software are not recognized until completion. As such, the professional services costs are capitalized and recognized upon completion of the services.

Leases

Leases

We account for our leases in accordance with ASC 842, Leases. A contract is accounted for as a lease when we have the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, we determine the initial classification and measurement of our right-of-use operating lease asset and corresponding liability at the lease commencement date. We determine the classification and measurement of a modified lease at the date it is modified. The lease term includes only renewal options that are reasonably assured to exercise. The present value of lease payments is typically determined by using the Company’s estimated secured incremental borrowing rate for the associated lease term as interest rates implicit in the leases are not normally readily determinable. Management’s policy is to utilize the practical expedient to not record leases with an original term of twelve months or less on our consolidated balance sheets. Lease payments are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Our existing leases are for facilities and equipment. None of our leases are with related parties. In addition to rent, office leases may require us to pay additional amounts for taxes, insurance, maintenance and other expenses, which are generally referred to as non-lease components. As a practical expedient, we account for the non-lease components together with the lease components as a single lease component for all of our leases. Only the fixed costs for leases are accounted for as a single lease component and recognized as part of a right-of-use asset and liability.

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of unrestricted common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of unrestricted common shares outstanding during the period and the weighted average number of potential common shares from the assumed exercise of stock options and the vesting of shares of restricted and deferred common stock units using the “treasury stock” method when the effect is not anti-dilutive. In periods in which we report a net loss, diluted net loss per share is the same as basic net loss per share.

The number of common shares used in the computation of diluted net loss per share for the periods presented does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Stock options

 

 

766

 

 

 

2,937

 

Restricted stock units

 

 

58

 

 

 

291

 

Deferred stock units

 

 

81

 

 

 

188

 

Performance stock units

 

 

 

 

 

115

 

 

 

 

905

 

 

 

3,531

 

Recently Issued Accounting Pronouncement

 

Recently Issued Accounting Pronouncement

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities and accounts receivable. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. ASU 2016-13 is effective in the first quarter of our fiscal 2024. We are currently evaluating if this guidance will have a material effect to our consolidated financial statements.

v3.20.1
Stock-Based Compensation Expense
3 Months Ended
Apr. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-Based Compensation Expense

 

9.

Stock-Based Compensation Expense

Equity Plans

2011 Compensation and Incentive Plan.

Our 2011 Compensation and Incentive Plan (the “2011 Plan”) provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units (“RSUs”), deferred stock units (“DSUs”), performance stock units (“PSUs”) and other equity based non-stock option awards as determined by the plan administrator to our officers, employees, consultants and directors. We may satisfy awards upon the exercise of stock options or the vesting of stock units with newly issued shares or treasury shares. The Board of Directors is responsible for the administration of the 2011 Plan and determining the terms of each award, award exercise price, the number of shares for which each award is granted and the rate at which each award vests. In certain instances, the Board of Directors may elect to modify the terms of an award. The number of shares authorized for issuance under the 2011 Plan is 9,300,000. Additionally, outstanding awards under the 2005 Equity Compensation and Incentive Plan that, since adoption of the 2011 Plan, expire, terminate, or are surrendered or canceled without having been fully exercised are available for issuance under the 2011 Plan. As of April 30, 2020, there were 2,862,095 shares available for future grant.      

Nonemployee members of the Board of Directors may elect to receive DSUs or stock options in lieu of RSUs. The number of units subject to the DSUs is determined as of the grant date and shall fully vest one year from the grant date. The shares underlying the DSUs are not vested and issued until the earlier of the director ceasing to be a member of the Board of Directors (provided such time is subsequent to the first day of the succeeding fiscal year) or immediately prior to a change in control.

Option awards may be granted to employees at an exercise price per share of not less than 100% of the fair market value per common share on the date of the grant. Option awards granted under the 2011 Plan generally vest over a period of one to three years and expire ten years from the date of the grant.

We have a Long-Term Incentive Program, adopted in fiscal 2016, under which the named executive officers and other of our key employees may receive long-term equity-based incentive awards, which are intended to align the interests of our named executive officers and other key employees with the long-term interests of our stockholders and to emphasize and reinforce our focus on team success. Long-term equity-based incentive compensation awards are made in the form of stock options, RSUs and PSUs subject to vesting based in part on the extent to which employment continues. 

2015 Employee Stock Purchase Plan

Under our 2015 Employee Stock Purchase Plan (the “ESPP), six-month offering periods begin on October 1 and April 1 of each year during which eligible employees may elect to purchase shares of our common stock according to the terms of the offering.  On each purchase date, eligible employees can purchase our stock at a price per share equal to 85% of the closing price of our common stock on the exercise date, but no less than par value.  The maximum number of shares of our common stock authorized for sale under the ESPP is 1,150,000 shares, of which 1,075,024 remain available under the ESPP as of April 30, 2020. Under the ESPP, 5,702 and 7,819 shares were purchased during the first three months of fiscal 2021 and fiscal 2020, respectively.

Stock-Based Compensation

We recognized stock-based compensation expense within the accompanying consolidated statements of operations and comprehensive loss as follows:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Cost of revenue

 

$

(8

)

 

$

(3

)

Research and development

 

 

67

 

 

 

68

 

Sales and marketing

 

 

40

 

 

 

(86

)

General and administrative

 

 

258

 

 

 

(413

)

 

 

$

357

 

 

$

(434

)

 

 

There were no grants in the first quarter of fiscal 2020. As of April 30, 2020, unrecognized stock-based compensation expense related to unvested stock options was approximately $1.4 million, which is expected to be recognized over a weighted average period of 2.1 years. As of April 30, 2020, unrecognized stock-based compensation expense related to unvested RSUs and DSUs was $0.8 million, which is expected to be recognized over a weighted average amortization period of 1.1 years. As of April 30, 2020, there was no unrecognized stock-based compensation expense related to unvested PSUs.

v3.20.1
Goodwill and Intangible Assets
3 Months Ended
Apr. 30, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

5.

Goodwill and Intangible Assets

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. We are required to perform impairment tests related to our goodwill annually, which we perform during the third quarter of each fiscal year or if we identify certain events or circumstances that would more likely than not reduce the estimated fair value of the goodwill below its carrying amount. The following table represents the changes in goodwill since January 31, 2020:

 

 

 

Goodwill

 

 

 

(Amounts in

thousands)

 

Balance as of January 31, 2020

 

$

9,775

 

Cumulative translation adjustment

 

 

(120

)

Balance as of April 30, 2020

 

$

9,655

 

Intangible assets, net, consisted of the following at April 30, 2020:

 

 

 

As of April 30, 2020

 

 

 

Gross

 

 

Accumulated

Amortization

 

 

Cumulative

Translation

Adjustment

 

 

Net

 

 

 

(Amounts in thousands)

 

Finite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquired customer contracts

 

$

2,205

 

 

$

892

 

 

$

(86

)

 

$

1,227

 

Acquired existing technology

 

 

1,364

 

 

 

553

 

 

 

(51

)

 

 

760

 

Total finite-lived intangible assets

 

$

3,569

 

 

$

1,445

 

 

$

(137

)

 

$

1,987

 

 

 

 

We recognized amortization expense of intangible assets in operating expense categories on the consolidated statement of operations and comprehensive loss as follows:

 

 

 

For the Three Months Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Selling and marketing

 

$

 

 

$

185

 

Research and development

 

 

284

 

 

 

113

 

 

 

$

284

 

 

$

298

 

Future estimated amortization expense of acquired intangibles as of April 30, 2020 is as follows:

 

For the Fiscal Years Ended January 31,

 

Estimated

Amortization

Expense

 

 

 

(Amounts in

thousands)

 

2021

 

$

852

 

2022

 

 

1,135

 

Total

 

$

1,987

 

 

v3.20.1
Significant Accounting Policies - Schedule of Anti-dilutive Securities Excluded from Computation of Loss Per Share (Detail) - shares
shares in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Anti-dilutive potentially outstanding common shares 905 3,531
Stock Options [Member]    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Anti-dilutive potentially outstanding common shares 766 2,937
Restricted Stock Units [Member]    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Anti-dilutive potentially outstanding common shares 58 291
Deferred Stock Units [Member]    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Anti-dilutive potentially outstanding common shares 81 188
Performance Stock Units (PSUs) [Member]    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Anti-dilutive potentially outstanding common shares   115
v3.20.1
Consolidated Balance Sheet Detail - Property and Equipment, Net (Detail) - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Property Plant And Equipment [Line Items]    
Property and Equipment, Gross $ 10,119 $ 11,177
Less: Accumulated depreciation and amortization (9,518) (10,623)
Total property and equipment, net 601 554
Computer Equipment, Software and Demonstration Equipment [Member]    
Property Plant And Equipment [Line Items]    
Property and Equipment, Gross 9,710 9,695
Service and Spare Components [Member]    
Property Plant And Equipment [Line Items]    
Property and Equipment, Gross   1,158
Office Furniture and Equipment [Member]    
Property Plant And Equipment [Line Items]    
Property and Equipment, Gross 232 170
Leasehold Improvements [Member]    
Property Plant And Equipment [Line Items]    
Property and Equipment, Gross $ 177 $ 154
v3.20.1
Severance and Restructuring Costs (Tables)
3 Months Ended
Apr. 30, 2020
Restructuring And Related Activities [Abstract]  
Activity in Accrued Restructuring Liability

The following table shows the change in accrued restructuring balances since January 31, 2020 primarily related to our fiscal 2020 restructuring efforts, reported as a component of accrued expenses on the consolidated balance sheets:

 

 

 

Employee-

Related

Benefits

 

 

 

(Amounts in thousands)

 

Accrued balance as of January 31, 2020

 

$

744

 

Restructuring charges incurred

 

 

6

 

Cash payments

 

 

(690

)

Other charges

 

 

(9

)

Accrued balance as of April 30, 2020

 

 

51

 

 

v3.20.1
Fair Value Measurements (Tables)
3 Months Ended
Apr. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value of Financial Assets Measured on Recurring Basis

The following tables set forth our financial assets that were accounted for at fair value on a recurring basis. There were no fair value measurements of our financial assets using level 3 inputs for the periods presented:

 

 

 

 

 

 

 

Fair Value at April 30, 2020 Using

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

134

 

 

$

 

 

$

134

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes and bonds

 

 

3,173

 

 

 

3,173

 

 

 

 

Corporate bonds

 

 

257

 

 

 

 

 

 

257

 

Total

 

$

3,564

 

 

$

3,173

 

 

$

391

 

 

 

 

 

 

 

 

Fair Value at January 31, 2020 Using

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

1,408

 

 

$

1,408

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Notes and bonds

 

 

3,360

 

 

 

3,360

 

 

 

 

Corporate bonds

 

 

1,257

 

 

 

 

 

 

1,257

 

Total

 

$

6,025

 

 

$

4,768

 

 

$

1,257

 

Summary of Marketable Securities by Security Type

Marketable securities by security type consisted of the following:

 

 

 

As of April 30, 2020

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

 

(Amounts in thousands)

 

U.S. Treasury Notes and bonds

 

$

3,114

 

 

$

59

 

 

$

 

 

$

3,173

 

Corporate bonds

 

 

253

 

 

 

4

 

 

 

 

 

 

257

 

 

 

$

3,367

 

 

$

63

 

 

$

 

 

$

3,430

 

 

 

 

As of January 31, 2020

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

 

(Amounts in thousands)

 

U.S. Treasury Notes and bonds

 

$

3,310

 

 

$

50

 

 

$

 

 

$

3,360

 

Corporate Bonds

 

 

1,254

 

 

 

3

 

 

 

 

 

 

1,257

 

 

 

$

4,564

 

 

$

53

 

 

$

 

 

$

4,617

 

v3.20.1
Nature of Business and Basis of Presentation - Additional Information (Detail) - Promissory Note with Silicon Valley Bank [Member] - PPP [Member] - Subsequent Event [Member] - COVID-19 [Member]
May 05, 2020
USD ($)
Significant Accounting Policies [Line Items]  
Aggregate princial amout of unsecured loan $ 2,412,890
Fixed interest rate 1.00%
Initial term 2 years
Maturity date May 05, 2022
Payment terms, Description Beginning on the seven-month anniversary of the date of the Note, the Company is required to make 18 monthly payments of principal and interest.
Periodic payment 18 monthly
Prepayment penalties $ 0
v3.20.1
Severance and Restructuring Costs - Additional Information (Detail) - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Restructuring And Related Activities [Abstract]    
Severance and restructuring costs $ 486 $ 211
v3.20.1
Goodwill and Intangible Assets - Schedule of Finite-Life Intangible Assets, Amortization Expense (Detail) - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Goodwill And Intangible Assets [Line Items]    
Amortization expense $ 284 $ 298
Selling and Marketing [Member]    
Goodwill And Intangible Assets [Line Items]    
Amortization expense   185
Research and Development [Member]    
Goodwill And Intangible Assets [Line Items]    
Amortization expense $ 284 $ 113
v3.20.1
Operating Leases - Schedule of Supplemental Cash Flow Information Related to Operating Leases (Detail) - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Cash paid for amounts included in the measurement of lease liabilities    
Operating cash flows from operating leases $ 322 $ 206
v3.20.1
Segment Information and Geographic Information - Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area (Detail) - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Segment Reporting Information [Line Items]    
Total revenue $ 6,915 $ 8,485
North America [Member]    
Segment Reporting Information [Line Items]    
Total revenue 3,578 4,089
Europe and Middle East [Member]    
Segment Reporting Information [Line Items]    
Total revenue 1,982 2,970
Latin America [Member]    
Segment Reporting Information [Line Items]    
Total revenue 1,133 1,047
Asia Pacific [Member]    
Segment Reporting Information [Line Items]    
Total revenue $ 222 $ 379
Customer Concentration Risk [Member] | Total Revenue [Member] | North America [Member]    
Segment Reporting Information [Line Items]    
% of total revenues 52.00% 49.00%
Customer Concentration Risk [Member] | Total Revenue [Member] | Europe and Middle East [Member]    
Segment Reporting Information [Line Items]    
% of total revenues 29.00% 35.00%
Customer Concentration Risk [Member] | Total Revenue [Member] | Latin America [Member]    
Segment Reporting Information [Line Items]    
% of total revenues 16.00% 12.00%
Customer Concentration Risk [Member] | Total Revenue [Member] | Asia Pacific [Member]    
Segment Reporting Information [Line Items]    
% of total revenues 3.00% 4.00%
v3.20.1
Stock-Based Compensation Expense - Summary of Stock Based Compensation Expense Recognized (Detail) - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]    
Stock-based compensation expense $ 357 $ (434)
Cost of Revenue [Member]    
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]    
Stock-based compensation expense (8) (3)
Research and Development [Member]    
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]    
Stock-based compensation expense 67 68
Sales and Marketing [Member]    
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]    
Stock-based compensation expense 40 (86)
General and Administrative [Member]    
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]    
Stock-based compensation expense $ 258 $ (413)
v3.20.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Cash flows from operating activities:    
Net loss $ (6,510) $ (10,849)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization expense 357 550
(Recovery of) provision for bad debts (316) 98
Stock-based compensation expense (credit) 357 (434)
Deferred income taxes   368
Realized and unrealized foreign currency transaction (gain) loss (29) 1,207
Other 14 42
Changes in operating assets and liabilities:    
Accounts receivable 3,111 9,870
Unbilled receivables 589 (491)
Inventory   166
Prepaid expenses and other current assets and other assets (554) (355)
Accounts payable 417 (1,591)
Accrued expenses and other liabilities (1,689) (438)
Deferred revenue (10) (828)
Net cash used in operating activities (4,263) (2,685)
Cash flows from investing activities:    
Purchases of property and equipment (138) (50)
Cash paid for acquisitions, net   (3,838)
Purchases of marketable securities   (6,231)
Proceeds from sales and maturities of marketable securities 1,201 6,946
Net cash provided by (used in) investing activities 1,063 (3,173)
Cash flows from financing activities:    
Proceeds from issuance of common stock 137 9
Net cash provided by financing activities 137 9
Effect of exchange rate on cash and cash equivalents 153 229
Net decrease in cash, cash equivalents and restricted cash (2,910) (5,620)
Cash, cash equivalents and restricted cash at beginning of period 9,297 20,317
Cash, cash equivalents and restricted cash at end of period 6,387 14,697
Supplemental disclosure of cash flow information    
Income taxes paid 11 17
Non-cash activities:    
Purchases of property and equipment included in accounts payable   19
Right-of-use assets obtained in exchange for lease obligations $ 402 2,048
Fair value of common stock issued in acquisition   $ 874
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Current assets:    
Cash, cash equivalents and restricted cash $ 6,387 $ 9,297
Marketable securities 3,173 3,835
Accounts receivable, net of allowance for doubtful accounts of $633 and $947 at April 30, 2020 and January 31, 2020, respectively 9,332 12,127
Unbilled receivables 12,366 14,279
Prepaid expenses and other current assets 5,792 5,112
Total current assets 37,050 44,650
Property and equipment, net 601 554
Operating lease right-of-use assets 4,929 4,860
Marketable securities, long-term 257 782
Intangible assets, net 1,987 2,300
Goodwill 9,655 9,775
Unbilled receivables, long-term 10,355 9,031
Other assets 812 938
Total assets 65,646 72,890
Current liabilities:    
Accounts payable 4,424 4,007
Accrued expenses 6,279 7,986
Deferred revenue 5,251 5,041
Total current liabilities 15,954 17,034
Deferred revenue, long-term 920 1,140
Operating lease liabilities, long-term 4,464 4,348
Taxes payable, long-term 407 436
Total liabilities 21,745 22,958
Commitments and contingencies (Note 6)
Stockholders' equity:    
Common stock, $0.01 par value; 100,000,000 shares authorized at April 30, 2020 and January 31, 2020; 37,661,641 shares issued and 37,521,151 shares outstanding at April 30, 2020; 37,303,952 shares issued and 37,163,462 outstanding at January 31, 2020 376 373
Additional paid-in capital 245,558 245,067
Treasury stock, at cost; 140,490 shares at April 30, 2020 and January 31, 2020 (147) (147)
Accumulated other comprehensive loss (2,152) (2,137)
Accumulated deficit (199,734) (193,224)
Total stockholders' equity 43,901 49,932
Total liabilities and stockholders' equity $ 65,646 $ 72,890
v3.20.1
Goodwill and Intangible Assets - Schedule of Change in Carrying Amount of Goodwill (Detail)
$ in Thousands
3 Months Ended
Apr. 30, 2020
USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill, beginning balance $ 9,775
Cumulative translation adjustment (120)
Goodwill, ending balance $ 9,655
v3.20.1
Significant Accounting Policies - Summary of Cash, Cash Equivalents, and Restricted Cash (Detail) - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Apr. 30, 2019
Jan. 31, 2019
Accounting Policies [Abstract]        
Cash and cash equivalents $ 6,187   $ 14,697  
Restricted cash 200      
Total cash, cash equivalents and restricted cash $ 6,387 $ 9,297 $ 14,697 $ 20,317
v3.20.1
Fair Value Measurements - Fair Value of Financial Assets Measured on Recurring Basis (Detail) - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Marketable securities:    
Marketable securities $ 3,430 $ 4,617
U.S. Treasury Notes and Bonds [Member]    
Marketable securities:    
Marketable securities 3,173 3,360
Corporate Bonds [Member]    
Marketable securities:    
Marketable securities 257 1,257
Fair Value, Measurements, Recurring [Member]    
Assets:    
Cash equivalents 134 1,408
Marketable securities:    
Total 3,564 6,025
Fair Value, Measurements, Recurring [Member] | U.S. Treasury Notes and Bonds [Member]    
Marketable securities:    
Marketable securities 3,173 3,360
Fair Value, Measurements, Recurring [Member] | Corporate Bonds [Member]    
Marketable securities:    
Marketable securities 257 1,257
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]    
Assets:    
Cash equivalents   1,408
Marketable securities:    
Total 3,173 4,768
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | U.S. Treasury Notes and Bonds [Member]    
Marketable securities:    
Marketable securities 3,173 3,360
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]    
Assets:    
Cash equivalents 134  
Marketable securities:    
Total 391 1,257
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Bonds [Member]    
Marketable securities:    
Marketable securities $ 257 $ 1,257
v3.20.1
Segment Information and Geographic Information
3 Months Ended
Apr. 30, 2020
Segment Reporting [Abstract]  
Segment Information and Geographic Information

11.

Segment Information and Geographic Information

We have determined that we operate in one segment.

Geographic Information

The following summarizes revenue by customers’ geographic locations:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

%

 

 

2019

 

 

%

 

 

 

(Amounts in thousands, except percentages)

 

Revenue by customers' geographic

   locations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America (1)

 

$

3,578

 

 

52%

 

 

$

4,089

 

 

49%

 

Europe and Middle East

 

 

1,982

 

 

29%

 

 

 

2,970

 

 

35%

 

Latin America

 

 

1,133

 

 

16%

 

 

 

1,047

 

 

12%

 

Asia Pacific

 

 

222

 

 

3%

 

 

 

379

 

 

4%

 

Total revenue

 

$

6,915

 

 

 

 

 

 

$

8,485

 

 

 

 

 

 

 

(1)

Includes total revenue for the United States for the periods shown as follows: 

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands,

except percentages)

 

US Revenue

 

$

2,343

 

 

$

3,398

 

% of total revenue

 

 

34

%

 

 

40

%

 

The following summarizes long-lived assets by geographic locations:

 

 

 

As of April 30, 2020

 

 

%

 

 

As of January 31, 2020

 

 

%

 

 

 

(Amounts in thousands, except percentages)

 

Long-lived assets by geographic locations (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

14,059

 

 

75%

 

 

$

13,293

 

 

75%

 

Europe and Middle East

 

 

4,594

 

 

25%

 

 

 

4,359

 

 

25%

 

Asia Pacific

 

 

31

 

 

0%

 

 

 

31

 

 

0%

 

Total long-lived assets by geographic location

 

$

18,684

 

 

 

 

 

 

$

17,683

 

 

 

 

 

 

 

(1)

Excludes long-term marketable securities and goodwill.

v3.20.1
Operating Leases
3 Months Ended
Apr. 30, 2020
Leases [Abstract]  
Operating Leases

7.

Operating Leases

The Company has noncancelable operating leases for facilities and equipment expiring at various dates through 2025 and thereafter.  

 

The components of lease expense are as follows:

 

 

 

Three Months Ended

April 30, 2020

 

 

Three Months Ended

April 30, 2019

 

 

 

(Amounts in thousands)

 

Operating lease cost

 

$

322

 

 

$

206

 

Short term lease cost

 

 

31

 

 

11

 

Total lease cost

 

$

353

 

 

$

217

 

 

Supplemental cash flow information related to the Company’s operating leases was as follows:

 

 

 

Three Months Ended

April 30, 2020

 

 

Three Months Ended

April 30, 2019

 

 

 

(Amounts in thousands)

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

322

 

 

$

206

 

 

Supplemental balance sheet information related to the Company's operating leases was as follows:

 

 

 

April 30, 2020

 

 

January 31, 2020

 

 

 

(Amounts in thousands)

 

Operating lease right-of-use assets

 

$

4,929

 

 

$

4,860

 

 

 

 

 

 

 

 

 

 

Current portion, operating lease liabilities

 

 

808

 

 

 

722

 

Operating lease liabilities, long term

 

 

4,464

 

 

 

4,348

 

Total operating lease liabilities

 

$

5,272

 

 

$

5,070

 

 

 

 

 

 

 

 

 

 

Weighted average remaining lease term (years)

 

 

4.8

 

 

 

 

 

Weighted average incremental borrowing rate

 

 

5.0

%

 

 

 

 

 

The current portion, operating lease liabilities is included in the balance of accrued expenses at April 30, 2020. Rent payments for continuing operations were approximately $0.4 million for the three months ended April 30, 2020. Future minimum lease payments for operating leases, with initial or remaining terms in excess of one year at April 30, 2020, are as follows:

 

 

 

Payments for

Operating Leases

 

For the fiscal years ended January 31,

 

(Amounts in thousands)

 

2021

 

$

769

 

2022

 

 

1,161

 

2023

 

 

1,284

 

2024

 

 

1,318

 

2025

 

 

1,357

 

Thereafter

 

 

59

 

Total lease payments

 

 

5,948

 

Less interest

 

 

676

 

Total operating lease liabilities

 

$

5,272

 

 

v3.20.1
Nature of Business and Basis of Presentation
3 Months Ended
Apr. 30, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Nature of Business and Basis of Presentation

1.

Nature of Business and Basis of Presentation

SeaChange International, Inc. (“we” or the “Company”), a Delaware corporation, was founded on July 9, 1993. We are an industry leader in the delivery of multiscreen, advertising and premium over-the-top (“OTT”) video management solutions.  Our software products and services are designed to empower video providers to create, manage and monetize the increasingly personalized, highly engaging experiences that viewers demand.

Liquidity

We continue to realize the savings related to our restructuring activities. In fiscal 2020, we continued to streamline our operations and closed our service organizations in Ireland and the Netherlands. These measures are important steps in restoring us to profitability and positive cash flow. We believe that existing cash and investments and cash expected to be provided by future operating results are adequate to satisfy our working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months.

If our expectations are incorrect, we may need to raise additional funds to fund our operations, to take advantage of unanticipated strategic opportunities or to strengthen our financial position. In the future, we may enter into other arrangements for potential investments in, or acquisitions of, complementary businesses, services or technologies, which could require us to seek additional equity or debt financing. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of market opportunities, to develop new products or to otherwise respond to competitive pressures.

Impact of COVID-19 Pandemic

In the first quarter of fiscal 2021, concerns related to the spread of COVID-19 began to create global business disruptions as well as disruptions in our operations and to create potential negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on factors including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Due to our business model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications. These decisions may delay or reduce sales and harm productivity and collaboration. We have observed other companies and governments making similar alterations to their normal business operations, and in general, the markets are experiencing a significant level of uncertainty at the current time. Virtualization of our team’s sales activities could foreclose future business opportunities, particularly as our customers limit spending, which could negatively impact the willingness of our customers to enter into or renew contracts with us.  The pandemic has impacted our ability to complete certain implementations, negatively impacting our ability to recognize revenue, and could also negatively impact the payment of accounts receivable and collections. We may take further actions that alter our business operations as the situation evolves. As a result, the ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (the “CARES) Act”).  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  We continue to examine the impact that the CARES Act may have on our business, including our ability to utilize our net operating losses.

The Paycheck Protection Program

On May 5, 2020, the Company entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured loan in an aggregate principal amount of $2,412,890 pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act administered by the U.S. Small Business Administration (“SBA”).

Interest accrues on the Note at a fixed rate of one percent (1%) per annum, with the payment of the first six months of interest and principal deferred. The Note has an initial term of two years, is unsecured and is guaranteed by the SBA. The Company may apply to the Lender for forgiveness of the Note, with the amount which may be forgiven equal to the sum of qualifying expenses, including payroll costs, covered rent obligations, and covered utility payments incurred by the Company during the eight-week period beginning on May 7, 2020, calculated in accordance with the terms of the CARES Act.

Subject to any forgiveness under the PPP, the Note will mature on May 5, 2022. Beginning on the seven-month anniversary of the date of the Note, the Company is required to make 18 monthly payments of principal and interest. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default including, among others, those relating to breaches of the Company’s obligations under the Note, including a failure to make payments, any bankruptcy or similar proceedings involving the Company, and certain material effects on the Company’s ability to repay the Note. The Note may be accelerated upon the occurrence of an event of default.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in U.S. GAAP have been omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for a fair presentation have been included. The year-end consolidated balance sheet data as of January 31, 2020 was derived from our audited consolidated financial statements and may not include all disclosures required by U.S. GAAP. The results of operations for the three months ended April 30, 2020 are not necessarily indicative of the results to be expected for the entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the SEC on April 20, 2020.

v3.20.1
Income Taxes - Additional Information (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 04, 2019
Apr. 30, 2020
Apr. 30, 2019
Income Tax Disclosure [Abstract]      
Income tax (benefit) provision   $ (21) $ 402
Preferred shares purchase rights, declared date as dividend Mar. 04, 2019    
Preferred shares purchase rights for each common stock 1    
Preferred shares purchase rights, record date as dividend Mar. 15, 2019    
Tax benefits preservation plan expiration date   Mar. 04, 2022  
v3.20.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Statement Of Financial Position [Abstract]    
Allowance for doubtful accounts receivable $ 633 $ 947
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 37,661,641 37,303,952
Common stock, shares outstanding 37,521,151 37,163,462
Treasury stock, common shares 140,490 140,490
v3.20.1
Segment Information and Geographic Information - Additional Information (Detail)
3 Months Ended
Apr. 30, 2020
Segment
Segment Reporting [Abstract]  
Number of operating segments 1
v3.20.1
Stock-Based Compensation Expense - Additional Information (Detail) - USD ($)
3 Months Ended
Apr. 30, 2020
Apr. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Options granted 0  
Stock Options [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Employee service share-based compensation, nonvested awards, total compensation cost not yet recognized $ 1,400,000  
Share based compensation arrangement by share based payment award expected weighted average recognition period 2 years 1 month 6 days  
Restricted Stock Units and Deferred Stock Units [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Employee service share-based compensation, nonvested awards, total compensation cost not yet recognized $ 800,000  
Share based compensation arrangement by share based payment award expected weighted average recognition period 1 year 1 month 6 days  
Performance Stock Units (PSUs) [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Employee service share-based compensation, nonvested awards, total compensation cost not yet recognized $ 0  
2011 Compensation and Incentive Plan [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation arrangement by share-based payment award, Description Option awards may be granted to employees at an exercise price per share of not less than 100% of the fair market value per common share on the date of the grant.  
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent 100.00%  
Share-based compensation arrangement by share based payment award, Option award expiration period 10 years  
2011 Compensation and Incentive Plan [Member] | Minimum [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation arrangement by Share-based payment award, vesting period 1 year  
2011 Compensation and Incentive Plan [Member] | Maximum [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation arrangement by Share-based payment award, vesting period 3 years  
2011 Compensation and Incentive Plan [Member] | Stock Compensation Plan    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation arrangement by share-based payment award, number of shares authorized 9,300,000  
Share-based compensation arrangement by share-based payment award, number of shares available for grant 2,862,095  
2011 Compensation and Incentive Plan [Member] | Deferred Stock Units [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation arrangement by Share-based payment award, vesting period 1 year  
2015 Employee Stock Purchase Plan [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation arrangement by share-based payment award, number of shares available for grant 1,075,024  
Share-based compensation arrangement by share-based payment award, Description On each purchase date, eligible employees can purchase our stock at a price per share equal to 85% of the closing price of our common stock on the exercise date, but no less than par value.  
Discount percentage from market price of stock 85.00%  
Shares purchased under ESPP 5,702 7,819
2015 Employee Stock Purchase Plan [Member] | Maximum [Member]    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation arrangement by share-based payment award, number of shares authorized 1,150,000  
v3.20.1
Significant Accounting Policies - Additional Information (Detail)
3 Months Ended 12 Months Ended
Apr. 30, 2020
USD ($)
Customer
Apr. 30, 2019
USD ($)
Customer
Jan. 31, 2020
USD ($)
Customer
Significant Accounting Policies [Line Items]      
Accumulated goodwill impairment charges $ 54,800,000    
Impairment costs 0   $ 0
Deferred capitalized commission costs 893,000   $ 958,000
Amortization expense $ 135,000 $ 38,000  
Maximum [Member]      
Significant Accounting Policies [Line Items]      
Contractual customer payment terms for goods or service. 1 year    
Customer Concentration Risk [Member] | Total Revenue [Member]      
Significant Accounting Policies [Line Items]      
Number of customers accounted | Customer 2 1  
Customer Concentration Risk [Member] | Total Revenue [Member] | Customer One [Member]      
Significant Accounting Policies [Line Items]      
Concentration risk percentage 13.00% 17.00%  
Customer Concentration Risk [Member] | Total Revenue [Member] | Customer Two [Member]      
Significant Accounting Policies [Line Items]      
Concentration risk percentage 15.00%    
Credit Concentration Risk [Member] | Accounts Receivable [Member]      
Significant Accounting Policies [Line Items]      
Number of customers accounted | Customer 2   2
Credit Concentration Risk [Member] | Accounts Receivable [Member] | Customer One [Member]      
Significant Accounting Policies [Line Items]      
Concentration risk percentage 22.00%   16.00%
Credit Concentration Risk [Member] | Accounts Receivable [Member] | Customer Two [Member]      
Significant Accounting Policies [Line Items]      
Concentration risk percentage 13.00%   10.00%
v3.20.1
Fair Value Measurements - Summary of Marketable Securities by Security Type (Detail) - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Schedule Of Available For Sale Securities [Line Items]    
Amortized Cost $ 3,367 $ 4,564
Gross Unrealized Gains 63 53
Fair Value 3,430 4,617
U.S. Treasury Notes and Bonds [Member]    
Schedule Of Available For Sale Securities [Line Items]    
Amortized Cost 3,114 3,310
Gross Unrealized Gains 59 50
Fair Value 3,173 3,360
Corporate Bonds [Member]    
Schedule Of Available For Sale Securities [Line Items]    
Amortized Cost 253 1,254
Gross Unrealized Gains 4 3
Fair Value $ 257 $ 1,257
v3.20.1
Goodwill and Intangible Assets - Schedule of Intangible Assets (Detail) - USD ($)
$ in Thousands
3 Months Ended
Apr. 30, 2020
Jan. 31, 2020
Finite Lived Intangible Assets [Line Items]    
Finite-lived intangible assets, Gross $ 3,569  
Accumulated Amortization 1,445  
Cumulative Translation Adjustment (137)  
Intangible assets, net 1,987 $ 2,300
Acquired customer contracts    
Finite Lived Intangible Assets [Line Items]    
Finite-lived intangible assets, Gross 2,205  
Accumulated Amortization 892  
Cumulative Translation Adjustment (86)  
Intangible assets, net 1,227  
Acquired existing technology    
Finite Lived Intangible Assets [Line Items]    
Finite-lived intangible assets, Gross 1,364  
Accumulated Amortization 553  
Cumulative Translation Adjustment (51)  
Intangible assets, net $ 760  
v3.20.1
Revenues from Contracts with Customers
3 Months Ended
Apr. 30, 2020
Revenue From Contract With Customer [Abstract]  
Revenues from Contracts with Customers

10.

Revenues from Contracts with Customers

 

Disaggregated Revenue

 

 

The following table shows our revenue disaggregated by revenue stream for the three months ended April 30, 2020 and 2019:

 

 

 

For the Three Months

April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Product

 

$

3,098

 

 

$

1,179

 

Professional services

 

 

1,171

 

 

 

2,081

 

Maintenance

 

 

2,646

 

 

 

5,225

 

Total revenue

 

$

6,915

 

 

$

8,485

 

 

Transaction Price Allocated to Future Performance Obligations

 

The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as of April 30, 2020 is $29.5 million. This amount includes amounts billed for undelivered services that are included in deferred revenue.

v3.20.1
Commitments and Contingencies
3 Months Ended
Apr. 30, 2020
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

6.

Commitments and Contingencies

Litigation

Certain conditions may exist as of the date the consolidated financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us, or unasserted claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our consolidated financial statements. If our assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed.

Indemnification and Warranties

We provide indemnification, to the extent permitted by law, to our officers, directors, employees and agents for liabilities arising from certain events or occurrences while the officer, director, employee or agent is, or was, serving at our request in such capacity. With respect to acquisitions, we provide indemnification to, or assume indemnification obligations for, the current and former directors, officers and employees of the acquired companies in accordance with the acquired companies’ governing documents. As a matter of practice, we have maintained directors’ and officers’ liability insurance including coverage for directors and officers of acquired companies.

We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of our historical agreements require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third-party with respect to our products. From time to time, we also indemnify customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, and environmental claims relating to the use of our products and services or resulting from the acts or omissions of us, our employees, authorized agents or subcontractors. From time to time, we have received requests from customers for indemnification of patent litigation claims. Management cannot reasonably estimate any potential losses, but these claims could result in material liability for us. There are no current pending legal proceedings, in the opinion of management that would have a material adverse effect on our financial position, results from operations and cash flows. There is no assurance that future legal proceedings arising from ordinary course of business or otherwise, will not have a material adverse effect on our financial position, results from operations or cash flows.

We warrant that our products, including software products, will substantially perform in accordance with our standard published specifications in effect at the time of delivery. In addition, we provide maintenance support to our customers and therefore allocate a portion of the product purchase price to the initial warranty period and recognize revenue on a straight-line basis over that warranty period related to both the warranty obligation and the maintenance support agreement. When we receive revenue for extended warranties beyond the standard duration, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred.

Cyber Security

We experienced a ransomware attack on our information technology system in the first quarter of fiscal 2021. While such attack did not have a material adverse effect on our business operation, it caused a temporary disruption. A forensic investigation is being conducted to determine if any data was compromised.

At April 30, 2020, we recorded a loss contingency of $0.8 million within accrued expenses on the consolidated balance sheet. At April 30, 2020, we also recorded a corresponding receivable for expected insurance recovery proceeds of $0.8 million included within prepaid expenses and other current assets on the consolidated balance sheet.

 

v3.20.1
Segment Information and Geographic Information (Tables)
3 Months Ended
Apr. 30, 2020
Segment Reporting [Abstract]  
Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area

The following summarizes revenue by customers’ geographic locations:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

%

 

 

2019

 

 

%

 

 

 

(Amounts in thousands, except percentages)

 

Revenue by customers' geographic

   locations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America (1)

 

$

3,578

 

 

52%

 

 

$

4,089

 

 

49%

 

Europe and Middle East

 

 

1,982

 

 

29%

 

 

 

2,970

 

 

35%

 

Latin America

 

 

1,133

 

 

16%

 

 

 

1,047

 

 

12%

 

Asia Pacific

 

 

222

 

 

3%

 

 

 

379

 

 

4%

 

Total revenue

 

$

6,915

 

 

 

 

 

 

$

8,485

 

 

 

 

 

 

 

(1)

Includes total revenue for the United States for the periods shown as follows: 

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands,

except percentages)

 

US Revenue

 

$

2,343

 

 

$

3,398

 

% of total revenue

 

 

34

%

 

 

40

%

 

Long-Lived Assets by Geographic Locations

The following summarizes long-lived assets by geographic locations:

 

 

 

As of April 30, 2020

 

 

%

 

 

As of January 31, 2020

 

 

%

 

 

 

(Amounts in thousands, except percentages)

 

Long-lived assets by geographic locations (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

14,059

 

 

75%

 

 

$

13,293

 

 

75%

 

Europe and Middle East

 

 

4,594

 

 

25%

 

 

 

4,359

 

 

25%

 

Asia Pacific

 

 

31

 

 

0%

 

 

 

31

 

 

0%

 

Total long-lived assets by geographic location

 

$

18,684

 

 

 

 

 

 

$

17,683

 

 

 

 

 

 

v3.20.1
Operating Leases (Tables)
3 Months Ended
Apr. 30, 2020
Leases [Abstract]  
Schedule of Components of Lease Expense

The components of lease expense are as follows:

 

 

 

Three Months Ended

April 30, 2020

 

 

Three Months Ended

April 30, 2019

 

 

 

(Amounts in thousands)

 

Operating lease cost

 

$

322

 

 

$

206

 

Short term lease cost

 

 

31

 

 

11

 

Total lease cost

 

$

353

 

 

$

217

 

Schedule of Supplemental Cash Flow Information Related to Operating Leases

Supplemental cash flow information related to the Company’s operating leases was as follows:

 

 

 

Three Months Ended

April 30, 2020

 

 

Three Months Ended

April 30, 2019

 

 

 

(Amounts in thousands)

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$

322

 

 

$

206

 

Schedule of Supplemental Balance Sheet Information Related to Operating Leases

Supplemental balance sheet information related to the Company's operating leases was as follows:

 

 

 

April 30, 2020

 

 

January 31, 2020

 

 

 

(Amounts in thousands)

 

Operating lease right-of-use assets

 

$

4,929

 

 

$

4,860

 

 

 

 

 

 

 

 

 

 

Current portion, operating lease liabilities

 

 

808

 

 

 

722

 

Operating lease liabilities, long term

 

 

4,464

 

 

 

4,348

 

Total operating lease liabilities

 

$

5,272

 

 

$

5,070

 

 

 

 

 

 

 

 

 

 

Weighted average remaining lease term (years)

 

 

4.8

 

 

 

 

 

Weighted average incremental borrowing rate

 

 

5.0

%

 

 

 

 

Schedule of Future Minimum Lease Payments for Operating Leases Future minimum lease payments for operating leases, with initial or remaining terms in excess of one year at April 30, 2020, are as follows:

 

 

 

Payments for

Operating Leases

 

For the fiscal years ended January 31,

 

(Amounts in thousands)

 

2021

 

$

769

 

2022

 

 

1,161

 

2023

 

 

1,284

 

2024

 

 

1,318

 

2025

 

 

1,357

 

Thereafter

 

 

59

 

Total lease payments

 

 

5,948

 

Less interest

 

 

676

 

Total operating lease liabilities

 

$

5,272

 

 

v3.20.1
Significant Accounting Policies (Tables)
3 Months Ended
Apr. 30, 2020
Accounting Policies [Abstract]  
Summary of Cash, Cash Equivalents, and Restricted Cash

The following table provides a summary of cash, cash equivalents and restricted cash that constitutes the total amounts shown in the consolidated statements of cash flows as of April 30, 2020 and 2019:

 

 

 

As of April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Cash and cash equivalents

 

$

6,187

 

 

$

14,697

 

Restricted cash

 

 

200

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

6,387

 

 

$

14,697

 

Schedule of Anti-dilutive Securities Excluded from Computation of Loss Per Share

The number of common shares used in the computation of diluted net loss per share for the periods presented does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:

 

 

 

For the Three Months

Ended April 30,

 

 

 

2020

 

 

2019

 

 

 

(Amounts in thousands)

 

Stock options

 

 

766

 

 

 

2,937

 

Restricted stock units

 

 

58

 

 

 

291

 

Deferred stock units

 

 

81

 

 

 

188

 

Performance stock units

 

 

 

 

 

115

 

 

 

 

905

 

 

 

3,531

 

v3.20.1
Goodwill and Intangible Assets - Schedule of Future Estimated Amortization Expense of Acquired Intangibles (Detail) - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Goodwill And Intangible Assets Disclosure [Abstract]    
2021 $ 852  
2022 1,135  
Total $ 1,987 $ 2,300
v3.20.1
Operating Leases - Schedule of Supplemental Balance Sheet Information Related to Operating Leases (Detail) - USD ($)
$ in Thousands
Apr. 30, 2020
Jan. 31, 2020
Leases [Abstract]    
Operating lease right-of-use assets $ 4,929 $ 4,860
Current portion, operating lease liabilities 808 722
Operating lease liabilities, long-term 4,464 4,348
Total operating lease liabilities $ 5,272 $ 5,070
Weighted average remaining lease term (years) 4 years 9 months 18 days  
Weighted average incremental borrowing rate 5.00%  
v3.20.1
Severance and Restructuring Costs - Activity in Accrued Restructuring Liability (Detail) - Employee-Related Benefits [Member]
$ in Thousands
3 Months Ended
Apr. 30, 2020
USD ($)
Restructuring Cost and Reserve [Line Items]  
Accrual balance at the beginning of the period $ 744
Restructuring charges incurred 6
Cash payments (690)
Other charges (9)
Accrual balance at the ending of the period $ 51