SeaChange International posted strong software sales growth in the first quarter, thanks primarily to a large deal for back-office video-on-demand software with one unnamed U.S. cable operator.
Revenue in SeaChange's software segment for the quarter was $40.9 million -- a 34% increase over $30.6 million for the first quarter of last year. Overall revenue for the quarter ended April 30 was $54.1 million, up 11% versus $48.9 million in the year-ago quarter.
SeaChange said other factors that contributed to the growth in software sales were increased advertising-insertion revenue from North American cable operators, and the inclusion of revenues from the recent acquisitions of eventIS and VividLogic.
Meanwhile, the company's servers and storage segment was again down, with $6.8 million of revenue for the first quarter of fiscal 2011 -- a sharp 52% decline from $14.1 million in the first quarter of fiscal 2010. SeaChange said the decline was due to lower shipments of VOD servers to North American service providers when compared with an unusually high level of shipments in last year's first quarter.
The media-services segment revenue for the quarter were a record $6.4 million, 51% higher than the first quarter of last year.
SeaChange's net income for the first quarter of fiscal 2011 was $24.6 million, versus net income of $1.0 million, in the year-ago period. The most recent quarter included the sale of the company's equity stake in Casa Systems, which generated cash proceeds of $34.1 million and a pre-tax gain of $25.2 million during the first quarter of fiscal 2011.
Excluding the Casa sale, as well as deferred revenue adjustments related to recent acquisitions, restructuring charges and other special items, SeaChange reported adjusted net income for the first quarter of $3.1 million, or $0.10 per share, compared with net income of $2.2 million, or $0.07 per share, for the same period last year.
"SeaChange has continued to expand its software business while reducing overall research and development costs, primarily through our ability to offshore some development and support, by introducing new market advantages from our recent acquisitions, and through the creation of a common software platform comprising interchangeable components," SeaChange chairman and CEO Bill Styslinger said in a statement.
The major U.S. cable customer referenced by SeaChange purchased Axiom licenses to complete the replacement of all non-SeaChange back-office software across 100% of its footprint. SeaChange said its software segment gross margin of 53.9% for the first quarter was four points lower than gross margin of 57.9% for the first quarter of last year, a decrease that was due to "lower-than-normal margins on the VOD software competitor displacement from one of the company's largest U.S. cable television customers."
SeaChange touted other customer wins during the period, although it didn't identify any by name.
The company disclosed that it was selected by a U.S. cable operator for a multiscreen trial that will use SeaChange's Mobix software in conjunction with Axiom software. The company said it "closed the first true three-screen opportunity with a major cable and communications operator in Asia Pacific," which expects to launch its service next month. SeaChange expects to formally announce the service at the BroadcastAsia trade convention.
Finally, the company won a large linear advertising account with a leading U.S. telco, which includes business through 2012.
During the quarter, SeaChange recorded a $4.3 million restructuring charge reflecting severance costs for layoffs of 64 employees, or approximately 5% of the company's work force, and a write-down of inventory. The severance expense incurred during the quarter totaled $1.8 million with annual earnings from the headcount reductions estimated to be $7 million with these savings beginning in the second quarter. The write-down of inventory was $2.5 million and reflected the decision late in the first quarter to discontinue certain products within SeaChange's servers and storage segment.
For the second quarter, SeaChange's expects $53 million to $55 million in revenue and earnings of $0.10 to $0.14 per share excluding special items. The company said it has reinstated its stock-buyback program and will repurchase shares as market conditions dictate.
The company ended the first quarter of fiscal 2011 with cash and equivalents of $85.6 million and no debt, compared with $48.5 million and no debt at the end of the fourth quarter of fiscal 2010.