SeaChange Warns of Q2 Revenue Shortfall

Stock dips as company says some work will take longer to complete, while other deals are delayed
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Shares in SeaChange International dipped more than 7%  Tuesday after the company warned of a significant revenue shortfall in Q2 due to delays in the estimated time to complete some work and delays in closing other deals due to shifts in customer schedules.

In prelim Q2 results released today, SeaChange said it expects revenues to be in the range of $18.3 million to $18.5 million, below previous guidance of $23 million to $25 million. The company also expects a Q2 loss of 19 cents to 23 cents per basic share, widened from prior guidance of a loss of 10 cents to 15 cents.

Ed Terino, the CEO of SeaChange who took over for ousted CEO Jay Samit in April, said Tuesday on a call about the prelim results that about $4 million of the shortfall is attributed to changes in the estimated time to complete work on existing deals, and about $1 million tied to delays in getting deals closed.

To a lesser extent, Q2 results were impacted by a longer than expected time to “get our expanded sales team productive,” he added.

Terino said he is positive that better days are ahead as SeaChange builds its revenue pipeline in the second half of its fiscal year, noting that it will announce an OTT win with a “major content owner in Europe” at next month’s IBC show in Amsterdam.

He also said SeaChange, as part of its plan to reach financial targets by fiscal Q2, will implement new cost-saving measures during its fiscal Q3. Terino said more info about the cost-reduction plan will be revealed on the company’s scheduled Q2 call on September 1.

Peter Faubert, SeaChange’ recently appointed CFO, said the company was making good progressing positioning its in-home software development from Milpitas, Calif., to DCC Labs, the Warsaw, Poland-based company SeaChange acquired in May for $8 million.

That group, led by DCC Labs, has reevaluated the time to complete several projects and is expected to complete that current set of work at about one-fifth the cost that could be achieved by the California-based division.

As for deals that are delayed, Terino said a handful were tied to migrations or upgrades from SeaChange’s legacy Axiom video backoffice to the new multiscreen-focused Adrenalin platform, as well as a new customer. 

SeaChange shares were down 25 cents (7.68%) to $3.07 each in mid-day trading Tuesday. 

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