Jim Roumell presented his in-depth investment thesis on SeaChange (SEAC) at Best Ideas 2015.
SeaChange: Misunderstood technology company. SEAC’s technology is a truly global multiscreen video software platform. In today’s growing direct to consumer over-the-top world (OTT) market, it enables a cable company to distribute its content on demand to any device (laptop, tablet, smartphone, or TV). Multiscreen capability is essential for these companies to compete in today’s marketplace. SEAC’s next-generation Adrenalin software platform is best-in-class and increasingly the choice of large, medium, and small cable companies alike. Adrenalin has now been selected by more than 50 video service providers. Finally, SeaChange has entered the OTT market itself and recently received its first pure-OTT win. Marty Whitman, one of our mentors, once (appropriately applied to SEAC), remarked “Conventional security analysis puts overemphasis on the primacy of the income account (to the exclusion of the balance sheet). Securities of an issuer lacking a good earnings record frequently are highly attractive.”
SeaChange offers: (1) market leader in back-office software enabling cable companies to deliver high margin VOD content; roughly 50% North American market share and 60% European market share; (2) legacy product declines bottoming out and now down to 10% of product revenue; (3) sitting in front of built-in organic growth resulting from over 50 next-generation software design wins, representing 80 million subscribers, over the past three years including the world’s largest cable company (Liberty Global); (4) the revenues from these design wins are in process of converting from lower margin professional service revenue to higher margin recurring software revenue and have a long (ten-year estimated) life-cycle given high switching costs; (5) sitting in front of over-the-top (OTT) software opportunity with flexibility of its software underscored by its recent first pure OTT design win from the BBC; (6) exceptionally well-capitalized (cash represents roughly 50% of market cap, no debt); estimated cash-flow break-even; (7) new CEO, Jay Samit, provides vision, energy and a long list of media/tech accomplishments; and (8) significant strategic interest in the company.
About the instructor:
Jim Roumell entered the securities industry in 1986. Before founding the firm in 1998, he was a Registered Principal at Raymond James Financial Services, Inc. Mr. Roumell is a frequent contributor to Manual of Ideas Global and has been featured in such publications as Barron’s, Kiplinger’s, Value Investor Insight, Financial Planning Magazine, and The Washington Post. He is listed and quoted in “The Art of Value Investing: How the World’s Best Investors Beat the Market.” Mr. Roumell was selected to participate in, and won, two consecutive Wall Street Journal stock picking contests in 2001 and 2002. He is a Board Member and Chairman of the Investment Committee of Wayne State University Foundation. He is also a Board Member and serves on the Investment Committee of Amalgamated Casualty Insurance Company. Mr. Roumell is a graduate of Wayne State University in Detroit, Michigan.
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