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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 July 31, 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 August 31, 2020 was 37,556,067.

 



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

6

 

 

 

 

Notes to Consolidated Financial Statements

7

 

 

 

Item 2.

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

22

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

 

 

 

Item 4.

Controls and Procedures

28

 

PART II. OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

30

 

 

 

Item 1A.

Risk Factors

30

 

 

 

Item 5.

Other Information

30

 

 

 

Item 6.

Exhibits

30

 

 

SIGNATURES

32

 

 

 

 

 

 

 

 


PART I – FINANCIAL INFORMATION

ITEM 1.

Financial Statements

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share data)

 

 

 

July 31,

 

 

January 31,

 

 

 

2020

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

7,655

 

 

$

9,297

 

Marketable securities

 

 

2,141

 

 

 

3,835

 

Accounts receivable, net of allowance for doubtful accounts of $904

   and $947 at July 31, 2020 and January 31, 2020, respectively

 

 

6,011

 

 

 

12,127

 

Unbilled receivables

 

 

11,932

 

 

 

14,279

 

Prepaid expenses and other current assets

 

 

4,928

 

 

 

5,112

 

Total current assets

 

 

32,667

 

 

 

44,650

 

Property and equipment, net

 

 

636

 

 

 

554

 

Operating lease right-of-use assets

 

 

5,505

 

 

 

4,860

 

Marketable securities, long-term

 

 

 

 

 

782

 

Intangible assets, net

 

 

1,868

 

 

 

2,300

 

Goodwill

 

 

10,441

 

 

 

9,775

 

Unbilled receivables, long-term

 

 

9,033

 

 

 

9,031

 

Other assets

 

 

831

 

 

 

938

 

Total assets

 

$

60,981

 

 

$

72,890

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,717

 

 

$

4,007

 

Accrued expenses

 

 

5,656

 

 

 

7,986

 

Deferred revenue

 

 

4,674

 

 

 

5,041

 

Promissory note

 

 

1,072

 

 

 

 

Total current liabilities

 

 

14,119

 

 

 

17,034

 

Deferred revenue, long-term

 

 

423

 

 

 

1,140

 

Operating lease liabilities, long-term

 

 

4,607

 

 

 

4,348

 

Taxes payable, long-term

 

 

338

 

 

 

436

 

Promissory note, long-term

 

 

1,341

 

 

 

 

Deferred tax liabilities, long-term

 

 

186

 

 

 

 

Total liabilities

 

 

21,014

 

 

 

22,958

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

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

   July 31, 2020 and January 31, 2020; 37,727,987 shares issued

   and 37,556,067 shares outstanding at July 31, 2020; 37,303,952

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

 

 

377

 

 

 

373

 

Additional paid-in capital

 

 

245,817

 

 

 

245,067

 

Treasury stock, at cost; 171,920 shares at July 31, 2020 and 140,490 shares at January 31, 2020

 

 

(227

)

 

 

(147

)

Accumulated other comprehensive loss

 

 

(500

)

 

 

(2,137

)

Accumulated deficit

 

 

(205,500

)

 

 

(193,224

)

Total stockholders' equity

 

 

39,967

 

 

 

49,932

 

Total liabilities and stockholders' equity

 

$

60,981

 

 

$

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 July 31,

 

 

For the Six Months

Ended July 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

1,066

 

 

$

11,968

 

 

$

4,164

 

 

$

13,147

 

Service

 

 

3,929

 

 

 

6,844

 

 

 

7,746

 

 

 

14,150

 

Total revenue

 

 

4,995

 

 

 

18,812

 

 

 

11,910

 

 

 

27,297

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

788

 

 

 

3,039

 

 

 

2,368

 

 

 

3,948

 

Service

 

 

2,393

 

 

 

4,885

 

 

 

5,219

 

 

 

9,553

 

Total cost of revenue

 

 

3,181

 

 

 

7,924

 

 

 

7,587

 

 

 

13,501

 

Gross profit

 

 

1,814

 

 

 

10,888

 

 

 

4,323

 

 

 

13,796

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,360

 

 

 

3,775

 

 

 

7,526

 

 

 

8,027

 

Selling and marketing

 

 

1,728

 

 

 

2,963

 

 

 

3,854

 

 

 

5,815

 

General and administrative

 

 

2,367

 

 

 

4,150

 

 

 

4,421

 

 

 

8,399

 

Severance and restructuring costs

 

 

543

 

 

 

659

 

 

 

1,029

 

 

 

870

 

Total operating expenses

 

 

7,998

 

 

 

11,547

 

 

 

16,830

 

 

 

23,111

 

Loss from operations

 

 

(6,184

)

 

 

(659

)

 

 

(12,507

)

 

 

(9,315

)

Other income (expense), net

 

 

373

 

 

 

(78

)

 

 

165

 

 

 

(1,869

)

Loss before income taxes

 

 

(5,811

)

 

 

(737

)

 

 

(12,342

)

 

 

(11,184

)

Income tax benefit

 

 

45

 

 

 

563

 

 

 

66

 

 

 

161

 

Net loss

 

$

(5,766

)

 

$

(174

)

 

$

(12,276

)

 

$

(11,023

)

Net loss per share, basic

 

$

(0.15

)

 

$

 

 

$

(0.33

)

 

$

(0.30

)

Net loss per share, diluted

 

$

(0.15

)

 

$

 

 

$

(0.33

)

 

$

(0.30

)

Weighted average common shares outstanding, basic

 

 

37,527

 

 

 

36,602

 

 

 

37,376

 

 

 

36,532

 

Weighted average common shares outstanding, diluted

 

 

37,527

 

 

 

36,602

 

 

 

37,376

 

 

 

36,532

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(5,766

)

 

$

(174

)

 

$

(12,276

)

 

$

(11,023

)

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

1,665

 

 

 

133

 

 

 

1,641

 

 

 

1,340

 

Unrealized (losses) gains on marketable securities

 

 

(13

)

 

 

25

 

 

 

(4

)

 

 

60

 

Total other comprehensive income

 

 

1,652

 

 

 

158

 

 

 

1,637

 

 

 

1,400

 

Comprehensive loss

 

$

(4,114

)

 

$

(16

)

 

$

(10,639

)

 

$

(9,623

)

 

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 April 30, 2020

 

 

37,661,641

 

 

 

376

 

 

 

245,558

 

 

 

(147

)

 

 

(2,152

)

 

 

(199,734

)

 

$

43,901

 

Issuance of common stock pursuant to

   vesting of restricted stock units

 

 

66,346

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

260

 

 

 

 

 

 

 

 

 

 

 

 

260

 

Repurchases of common stock

 

 

 

 

 

 

 

 

 

 

 

(80

)

 

 

 

 

 

 

 

 

(80

)

Unrealized losses on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

 

 

 

(13

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,665

 

 

 

 

 

 

1,665

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,766

)

 

 

(5,766

)

Balances at July 31, 2020

 

 

37,727,987

 

 

$

377

 

 

$

245,817

 

 

$

(227

)

 

$

(500

)

 

$

(205,500

)

 

$

39,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Treasury

Stock

 

 

Comprehensive

Loss

 

 

Accumulated

Deficit

 

 

Stockholders'

Equity

 

Balances at April 30, 2019

 

 

36,553,025

 

 

 

365

 

 

 

242,885

 

 

 

(5

)

 

 

(2,151

)

 

 

(195,152

)

 

$

45,942

 

Issuance of common stock pursuant to

   vesting of restricted stock units

 

 

258,036

 

 

 

2

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

631

 

 

 

 

 

 

 

 

 

 

 

 

631

 

Repurchases of common stock

 

 

 

 

 

 

 

 

 

 

 

(142

)

 

 

 

 

 

 

 

 

(142

)

Unrealized gains on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

25

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

133

 

 

 

 

 

 

133

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(174

)

 

 

(174

)

Balances at July 31, 2019

 

 

36,811,061

 

 

$

367

 

 

$

243,514

 

 

$

(147

)

 

$

(1,993

)

 

$

(195,326

)

 

$

46,415

 

 


4


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

 

 

379,063

 

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

617

 

Repurchases of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(80

)

 

 

 

 

 

 

 

 

 

 

 

 

(80

)

Unrealized losses on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

(4

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,641

 

 

 

 

 

 

 

 

1,641

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,276

)

 

 

(12,276

)

Balances at July 31, 2020

 

 

37,727,987

 

 

$

377

 

 

$

245,817

 

 

 

 

$

(227

)

 

 

 

$

(500

)

 

 

 

$

(205,500

)

 

$

39,967