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SeaChange International Inc. Reports Operating Results (10-Q)

June 09, 2009 | About:

SeaChange International Inc. (SEAC) filed Quarterly Report for the period ended 2009-04-30.

SeaChange International Inc. develops markets and supports products to manage store and distribute digital video for television operators broadcast and telecommunications companies. The company's products utilize its proprietary distributed application software and standard industry components to automate the management and distribution of short- andlong-form video streams including advertisements movies news updates and other video programming requiring precise accurate and continuous execution. SeaChange International Inc. has a market cap of $226.5 million; its shares were traded at around $7.39 with a P/E ratio of 24.6 and P/S ratio of 1.1.

Highlight of Business Operations:

Servers and Storage Revenues. Revenues from the Servers and Storage segment for the three months ended April 30, 2009 increased $2.7 million or 24% compared to related revenues in the three months ended April 30, 2008. The increase in product revenues in the three months ended April 30, 2009 of $2.2 million compared to the same quarter in the previous year was primarily due to increased shipments of VOD servers of $2.9 million primarily to Verizon, and increased services revenues of $500,000 due to higher VOD server maintenance revenue which was partially offset by lower order driven Broadcast server revenue of $600,000 year over year.

Selling and Marketing. Selling and marketing expenses consist primarily of compensation expenses, including sales commissions, travel expenses and certain promotional expenses. Selling and marketing expenses decreased from $6.4 million, or 14% of total revenues, in the three months ended April 30, 2008, to $6.3 million, or 13% of total revenues, in the three months ended April 30, 2009. This decrease is primarily due to lower travel expenses of $75,000 and lower marketing-related expenses of $100,000 offset by higher commission expense of $100,000 related to higher revenues.

Equity Loss in Earnings of Affiliates. Equity loss in earnings of affiliates was $197,000 in the three months ended April 30, 2009 in comparison to equity loss in earnings of affiliates of $283,000 in the three months ended April 30, 2008. For the three months ended April 30, 2009, $328,000 of equity loss was recognized from On Demand Deutschland, net of $131,000 in accreted gains related to customer contracts and content licensing agreements and a capital distribution related to reimbursement of previously incurred costs. For the three months ended April 30, 2008, the On Demand Deutschland loss was $462,000 net of $179,000 in accreted gains related to customer contracts and content licensing agreements and a capital distribution related to reimbursement of previously incurred costs.

Historically, we have financed our operations and capital expenditures primarily with cash on-hand and the proceeds from sales of our common stock. Cash and marketable securities increased $4.9 million from $85.8 million at January 31, 2009 to $90.7 million at April 30, 2009. Working capital, excluding long-term marketable securities, decreased from $89.5 million at January 31, 2009 to $89.1 million at April 30, 2009.

Net cash provided by operating activities was $9.9 million for the three months ended April 30, 2009 compared to net cash used by operating activities of $7.3 million for the three months ended April 30, 2008. The net cash provided by operating activities for the three months ended April 30, 2009 was primarily the result of an increase in net income and non-cash expenses of $4.3 million and an increase of $7.4 million of customer deposits, offset by a decrease of $1.7 million in accrued expenses and an increase of $1.8 million in inventories. The increase in customer deposits was from Comcast related to their payment for software subscription services for calendar 2009. The decrease in accrued expenses was a result of the payments of commissions and performance based compensation during the first quarter of fiscal 2010 that had been accrued as of January 31, 2009.

Net cash used by investing activities was $3.9 million for the three months ended April 30, 2009 compared to net cash used by investing activities of $2.3 million for the three months ended April 30, 2008. Investment activity for the three months ended April 30, 2009 consisted primarily of the net purchase of $600,000 of marketable securities, the purchase of property and equipment of $2.4 million and a $700,000 payment to the former shareholders of Mobix due to Mobix meeting the first performance goal as part of the Share Purchase Agreement.

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