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SeaChange Shares Dip On Q1 Miss

Shares in SeaChange International fell almost 10% in pre-market trading Friday, the day after the video software specialist announced first quarter results that missed analyst estimates.

SeaChange posted a non-GAAP loss of 22 cents per share for the quarter, ended April 30, well off the 2 cents per share loss anticipated by Wall Street. SeaChange recorded net income of 4 cents per share in the year-ago period.  First quarter revenues came in at $24.33 million, down 32%, led by a 49% decline in product revenue.

“Our first quarter results reflect the short term challenges that we outlined on our fourth quarter fiscal 2014 earnings conference call,” SeaChange CEO Raghu Rau said on Thursday’s call, referring to challenges the company faces as it tries to shift business away from its legacy product line.

The decline in legacy product revenues is being compounded by delays in receiving customer acceptances for SeaChange’s new products, he added.

On the positive side, he said SeaChange has received acceptance for its Adrenalin video backoffice platform from two service providers that had previously been delayed. Adrenalin has been selected by operators that serve more than 50 million subscribers across 46 operators, the exec noted.

Rau noted that SeaChange is also increasing R&D efforts, focusing on Nucleus, its video gateway software platform, promising that it will offer “features and functionality above and beyond the industry Reference Design Kit,” the preintegrated stack for IP-capable devices being managed by Comcast, Time Warner Cable and Liberty Global.

Key features on that platform include parental controls and personalization, user profiles and recommendations, home network connectivity, power management, and cloud-based scheduling, among others, he said.

Despite the recent challenges, Rau said he’s confident that SeaChange’s “transition is over,” adding that the company’s long-term business model remains unchanged:  15% operating earnings and double-digit revenue cash flow growth.

Based on expected rollouts of next-get products, SeaChange expects revenue and profitability to improve sequentially in each of the next three quarters.

SeaChange is forecasting second quarter revenues in the range of $26 million to $30 million with a non-GAAP operating loss of between 10 cents to 20 cents per share. Full fiscal year revenues are projecting to the range of $125 million to $135 million, with non-GAAP operating results in the range of a loss of 12 cents per share to operating income of 10 cents per share.

Rau also said SeaChange is “looking at some small tuck-in acquisitions.” The company ended the quarter with $116.6 million in cash and cash equivalents, and no debt outstanding.

SeaChange shares were down 90 cents (9.68%) to $8.40 each in pre-market trading Friday.