SeaChange International, Inc. (SEAC) in Acton, Mass., is an over-the-top (OTT) video management platform that offers multiscreen, advertising, and premium OTT services to cable system operators, telecommunications companies, satellite operators, broadcasters, and other content providers.

The company entered a reverse merger agreement with Triller Hold Co LLC last December. According to the terms of the deal, SEAC shareholders will retail 2.3% of the newly merged company, while Triller will retain a 97.7% stake. SEAC filed the registration statement for the proposed merger with the SEC on Feb. 22, 2022.

The company will be renamed TrillerVerz Corp upon the merger’s completion. However, several law firms have been investigating the merger agreement to determine whether SEAC’s board of directors acted in the best interest of existing shareholders. Since the reverse merger deal’s announcement, shares of SEAC have declined 39.1% in price. Furthermore, the stock plummeted 31.9% year-to-date.

Here is what could shape SEAC’s performance in the near term:

Mixed Growth Story

SEAC’s total revenues have declined at a 24.1% rate per annum over the past three years and at a rate of 20.1% over the past five years. The company’s tangible book value and total assets have fallen at an 11% rate over the past five years. Furthermore, they declined at a 5.6% rate per annum over the past five years.

However, SEAC’s trailing-12-month revenues rose 24.1% year-over-year. In addition, its trailing-12-month tangible book value and total assets improved 65.8% versus the same period last year.

Negative Profit Margins

SEAC’s trailing-12-month EBITDA margin is negative 21.13%, while its net income margin is negative 27.21%. Also, the company’s negative 5.95% trailing-12-month levered free cash flow margin compares with the 10.37% industry average. In addition, the company’s trailing-12-month ROE, ROA, and ROTC are negative 20.06%, 13.46%, and 10.71%, respectively.

Nonetheless, SEAC’s 59.87% trailing-12-month gross profit margin is 19.9% higher than the 49.96% industry average.

Mixed Growth Prospects

Analysts expect SEAC’s revenues to rise 37.5% year-over-year to $6.95 million in its fiscal year 2023 first quarter (ending April 31, 2022). The company’s revenue is expected to improve 16.8% in its fiscal second quarter, 38.7% in the third quarter, and 15.5% in the current year (ending Jan. 31, 2023).

The Street expects SEAC’s EPS to improve 28.6% in the current quarter. However, its EPS is expected to decline 33.3% in the next quarter and 66.7% in its  fiscal third quarter. In addition, the annual consensus EPS estimate indicates a 111.1% decline year-over-year in fiscal 2023 (ending Jan. 31, 2023). The company’s EPS is expected to remain negative until at least this year.

POWR Ratings Reflect Uncertainty

SEAC has an overall C rating which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a C grade for Momentum and Value. SEAC is currently trading slightly below its 50-day and 200-day moving averages of $1.19 and $1.14, respectively, indicating a downtrend in sync with its Momentum grade. Also, the stock is currently trading at 1.7 times its forward sales, which is 47.3% lower than the 3.23 industry average. However, its EV/EBITDA multiple is negative 3.96, justifying the Value grade.

Among the 158 stocks in the F-rated Software – Application industry, SEAC is ranked #91.

Beyond what I have stated above, view SEAC ratings for Growth, Sentiment, Stability, and Quality here.

Click here to check out our Software Industry Report for 2022

Bottom Line

With more than 350 million downloads, Triller is a globally popular AI-powered social media and music discovery platform. Through this business combination, SEAC is expected to witness robust long-term growth, thanks to the unique-industry first features of the Triller platform. However, existing shareholders are expected to be diluted significantly upon the completion of this merger, reducing total shareholder returns. Thus, investors should wait until the reverse merger is completed before investing in the stock.

How Does SeaChange International (SEAC) Stack Up Against its Peers?

While SEAC has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Commvault Systems, Inc. (CVLT), Rimini Street Inc. (RMNI), and Progress Software Corporation (PRGS), which have an A (Strong Buy) rating.

SEAC shares were trading at $1.11 per share on Wednesday afternoon, up $0.02 (+1.38%). Year-to-date, SEAC has declined -30.63%, versus a -6.50% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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