The theory is that transitioning from a hardware to services company will hit the top line numbers but improve the bottom line as margins in software are so much higher.
So far it’s working……..if they can deliver the top line growth with new customers, and its seems they are getting traction there, this could be a home run.
The results:
Company improves EPS guidance and adjusts revenue guidance amid transition to subscription revenue model
ACTON, Mass. (September 6, 2017) – SeaChange International, Inc. (NASDAQ: SEAC) today reported second quarter fiscal 2018 revenue of $17.2 million and U.S. GAAP loss from operations of $2.1 million, or $0.06 per basic share, compared to second quarter fiscal 2017 revenue of $18.5 million and U.S. GAAP loss from operations of $11.7 million, or $0.33 per basic share.
The Company’s U.S. GAAP second quarter fiscal 2018 results included non-GAAP charges of $1.1 million, which consisted primarily of severance and other restructuring costs of $0.6 million, stock-based compensation of $0.7 million, amortization of intangible assets from prior acquisitions of $0.6 million and a reduction of $0.8 million in the previously recorded provision for loss contract, while the second quarter fiscal 2017 results included $4.1 million of non-GAAP charges. The non-GAAP loss from operations for the second quarter of fiscal 2018 was $1.0 million, or $0.03 per basic share, compared to the second quarter of fiscal 2017 non-GAAP loss from operations of $7.6 million, or $0.21 per basic share.
For the first six months of fiscal 2018, the Company reported revenue of $33.9 million and a U.S. GAAP loss from operations of $7.6 million, or $0.22 per basic share, compared to revenue of $40.0 million and a U.S.GAAP loss from operations of $21.2 million, or $0.61 per basic share in the same period in the prior fiscal year. The non-GAAP loss from operations for the first six months of fiscal 2018 was $2.7 million, or $0.08 per basic share, compared to a non-GAAP loss from operations of $14.4 million, or $0.41 per basic share, in the first half of fiscal 2017.
Ed Terino, Chief Executive Officer, SeaChange, said, “In the second quarter of fiscal 2018, we saw continued success with existing and new customers for IP video and cloud-based deployments, including the first sale of our new NitroX platform. We are continuing to generate green field customer opportunities globally for our end-to-end subscription solution, with yet another new multi-million dollar transaction in the quarter, which provides stronger support for revenue growth next year. Because larger transactions are moving to a subscription model, we are narrowing and lowering our annual revenue guidance at this point, but improving bottom-line expectations that include achieving a return to profitability in the second half of this fiscal year.”
Peter Faubert, Chief Financial Officer, SeaChange, said, “The second fiscal quarter represented good progress in achieving improved gross margins and lower operating expenses. Our revenue came in within our guidance range, despite some pressure from the increase in subscription model revenues, but as importantly, our non-GAAP EPS results were at the high end of the guidance range. Our GAAP and non-GAAP gross profit margin improved sequentially, reaching 66 percent and 63 percent, respectively, providing further evidence of our ability to achieve our goal of attaining non-GAAP gross profit margins in the low 60s on a recurring basis, especially as our revenue mix continues to transition from perpetual licenses to a subscription or SaaS model.”
Faubert added, “In terms of cost savings from the restructuring initiatives we have implemented, we remain on target to achieve a total of $38 million in cost savings on an annual run-rate basis, including approximately $17 million to $18 million in annual run-rate savings in fiscal 2018 alone. We remain focused on returning the company to profitability as well as revenue growth in the second half of fiscal 2018. Despite the top-line pressure from the transition to subscription or SaaS-based revenue models for more opportunities, we continue to believe this evolution will improve both the visibility into and predictability of our revenue growth.”
SeaChange ended the second quarter of fiscal 2018 with cash, cash equivalents, restricted cash and marketable securities of approximately $36 million, and no debt outstanding.
Outlook
SeaChange anticipates third quarter fiscal 2018 revenue to be in the range of $19 million to $21 million, U.S. GAAP loss from operations to be in the range of $0.04 to $0.01 per basic share, and non-GAAP income from operations to be in the range of $0.00 to $0.03 per diluted share. For full fiscal 2018, SeaChange has lowered and narrowed its expectations to revenue in the range of $75 million to $80 million, U.S. GAAP loss from operations in the range of $0.28 to $0.23 per basic share and non-GAAP operating income in the range of a loss of $0.03 per basic share to income of $0.02 per diluted share.
These GAAP estimates are subject to a number of variables that are outside of management’s control, including the size of restructuring expenses, which are influenced by the timing of certain non-U.S. restructuring activities, and stock price fluctuations. The Company has made no provision for restructuring expense in its outlook for the third quarter of fiscal 2018.