Sea Change: a big and sudden change: a marked change
Microcap idea – read no further if you are not interested in a $50 mill EV name…
If you are interested…
Expectations for SEAC are exceedingly low and if management can achieve profitability a strategic buyer
or the market will revalue the equity to the tune of 1.5x EV/Revenue multiple equating to a $5.75 to $6.00
equity price. The patents, the maintenance revenue stream, customer base and the strategy to develop
additional products and drive revenue has value above and beyond the current $46 MM EV.
SeaChange International, Inc. (SEAC) has been a struggling, yet asset rich industry leader in the delivery of
multiscreen video. SEAC was founded in 1993 as a hardware and software business but recently divested
their hardware business in 2012 to solely focus on software and services. Their products and services
facilitate the aggregation, licensing and management and distribution of video (primarily movies and
television programming) and television advertising content to cable system operators,
telecommunications and media companies. SEAC also has a “Who’s Who” customer list, albeit very lumpy
and at the current juncture unprofitable.
SEAC’s stated Mission and Focus is: “Deliver innovative software solutions that empower video service
providers to monetize video assets through multiple delivery platforms via multiple business models (linear
broadcast, VOD, OTT) and multiple revenue models (subscription, transactional and advertising).
In 2016, SEAC began implementing organizational and operational improvements to execute its strategy
and return to profitability. This restructuring began with the promotion of COO and software veteran Ed
Terino as CEO in April 2016. Mr. Terino has been on the board of directors of SEAC since 2010 and began
as COO in June of 2015. “Since joining the team as COO, Ed’s performed a crucial role in driving SEAC’s
operations to far greater efficiency, quality and strategic orientation toward profitability and growth,”
said Steve Craddock, Board Chairman. Prior to joining SEAC, Terino was SVP and CFO of Art Technology
Group (ARTG) which was acquired by ORCL in January 2011.
Also, the management musical-chairs included the hiring of digital media veteran Peter Faubert as CFO.
Faubert most recently served as CFO for This Technology Inc., a video advertising solutions provider to
cable, telco and broadcast television operators, which was acquired by Comcast in 2015 and prior to that
he was CFO and Treasurer with Turbine Inc., the largest privately held video game developer in North
America that was acquired by Warner Brothers in 2010. CEO Terino highlighted Faubert’s “accounting as
well as buy-and-sell side M&A” experience upon Faubert’s hiring which is an integral part of our thesis
that SEAC is acquired at a substantial premium and/or returns to positive operating cash flow.
It is important to highlight that Terino is fourth CEO since 2011 and Faubert is the fourth CFO since 2014.
Insider optimism
We recognize that management and a solid turnaround plan cannot save a sinking ship, but the macro for
SEAC is definitely on their side. It is no secret that the consumption of high quality video across vertical
markets and mobile devices continues a massive upward trajectory. It is encouraging and anecdotal to
see insiders participate somewhat meaningful in the open market and take advantage of (in our opinion)
