Discusses Q2 result, recent management changes and an update on activist Karen Singer
The shares of video delivery software provider SeaChange (NASDAQ:SEAC), initially gapped 4.2% lower at the opening of trading on Tuesday morning before recovering most of the losses and finishing the day a mere 0.8% lower as the market digested the second quarter results.
Q2 2022 hedge fund letters, conferences and more
For comparison, the Nasdaq retreated -5.2% while the Russell 2000 index finished -3.9% lower.
SeaChange's Q2 Earnings
SeaChange over the second quarter grew sales to $7.3 million, representing 12.3% growth on the $6.5 million generated in 2021.
The majority of the growth came from the service segment which regenerated $4.3 million in revenue compared to $3.8 million in the prior year. The product segment also grew revenues by 10% over the year to $3 million from $2.7 million.
The positive momentum in revenue growth was offset by a significant jump in total operating expenses to $11.3 million from $6.6 million in the prior year. This was largely due to a $5.8 million loss on impairment of goodwill.
The bottom line saw the company generate a net loss of -$6.5 million for the quarter or EPS of -13 cents per share, compared to a net income of $227 thousand in the prior year.
At the end of the quarter, SEAC held $14.3 million of cash on the balance sheet and no debt, which equates to over 50% of the stock’s market cap.
Recent other highlights included SeaChange onboarding additional StreamVid customers, three of which will launch by the fourth quarter of 2023. These new customers are expected to provide an opportunity to generate additional SaaS-based and higher-margin recurring revenues.
SEAC also closed a deal with a large content network owner which will see services expand to support live streaming of the 22’ FIFA World Cup and also renewed and extended a contract with a Tier 1 operator in Latin America.
Analyst Rommel Dionisio from Ageis Capital commented on the result noting that the revenue growth reflects the company's successful efforts to capture growth opportunities in both products and services.
Dionisio noted that the company has transitioned from a mode of cost cutting and profit stabilisation to one with significant top line growth, which he believes should be reflected in the stock price.
Aegis remains ‘buy’ rated on the stock with a $3 price target.
Throughout August, SeaChange experienced some management changes which was likely driven by the stocks activist on the register, Karen Singer.
Since the last time Fintel analysts reported on the activist, Singer reported a further increase in ownership to 16.6% from 14.6% in the prior filing.
The first management change was the resignation of SeaChanges CFO, Michael Prinn who resigned on the 3rd of August. Prinn was replaced by Kathleen Mosher, who assumed the roles of SVP, CFO and Treasurer.
The second management movement was the promotion of the group's current SVP and Chief Revenue Officer, Chris Klimmer, who moved into the role of President.
Fintels insider accumulation score of 95.35 has remained bullish on SEAC over the past few months. SEAC ranks in 40th position out of 14,453 screened companies.
This scoring model is calculated by ranking companies with the highest levels of insiders buying stock against the total shares bought as a percentage of the float and total number of shares owned by insiders.
While SEAC has only had 2 net insiders purchasing stock in the past 90 days, a significant portion of the group's float has been purchased. Fintel estimates that 39% of the total float is owned by 42 insiders.
Article by Ben Ward, Fintel
