SeaChange Losses Widen in Q1

SeaChange had another tough quarter as it tries to shift business away from its legacy product line. The company recorded 32% YOY decline in revenue in the period led by a 49% decline in product revenue. It blamed lower sales volumes and increased investments in R&D for its 2 cents per share loss (versus 4 cents per share profit in the year-ago period). Cable MSO consolidation is also affecting the business, at least in certain markets in the short-term, CEO Raghu Rau said during the company’s earnings conference call last week. Without naming the specific MSO, he said for the 1st time, the company is seeing delays in product orders related to “certain expansions that were going to happen with one of our existing customers.” SeaChange counts Comcast and Charter as customers. The customer “wanted to upgrade to the next-generation product. It was an advertising product and because of the consolidation and the fact that some markets may change…We have seen a slowdown,” Rau said. “Other than that, we have not seen that consolidation has affected us in anyway.” As for the company itself, it doesn’t expect any major M&A moves, though “we are looking at some small tuck-in acquisitions,” the CEO said. On the bright side, the company has started to receive orders from 3 large US service providers since the end of 1Q, Rau noted. In addition, he expects the 1st commercial deployment of Nucleus by “a large multi-country service provider” in the 2nd half of fiscal 2015. The RDK-based video gateway software platform aims to enable multiscreen, media sharing, apps and guides. Enhancing Nucleus will be the focus of SeaChange’s increased R&D efforts. The company has already delivered more than 1K features in Nucleus which are currently in field trials and it expects several hundred additional features in the next few quarters, Rau said. The company is forecasting 2Q revenue to be between $26mln and $30mln with an operating loss of between 10 cents to 20 cents per share. Full year revenue was expected to be in the range of $125mln and $135mln.