10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 0-21393

SEACHANGE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	04-3197974
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

50 Nagog Park, Acton, MA 01720

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (978) 897-0100

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    YES  ¨    NO  x

The number of shares outstanding of the registrant’s Common Stock on August 29, 2016 was 35,183,623.

SEACHANGE INTERNATIONAL, INC.

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (interim periods unaudited)		3
	Consolidated Balance Sheets at July 31, 2016 and January 31, 2016		3
	Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended July 31, 2016 and July 31, 2015		4
	Consolidated Statements of Cash Flows for the six months ended July 31, 2016 and July 31, 2015		5
	Notes to Consolidated Financial Statements		6-23
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24-40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 4.	Controls and Procedures		41
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		41
Item 1A.	Risk Factors		41
Item 6.	Exhibits		42
SIGNATURES			43

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PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

	July 31,			January 31,
	2016			2016
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	38,666		$	58,733
Restricted cash		185			82
Marketable securities		5,760			1,504
Accounts and other receivables, net of allowance for doubtful accounts of $340 and $415 at July 31, 2016 and January 31, 2016, respectively		13,103			26,331
Unbilled receivables		11,592			10,680
Inventories, net		1,465			1,682
Prepaid expenses and other current assets		3,190			3,827
Total current assets		73,961			102,839
Property and equipment, net		13,096			14,129
Marketable securities, long-term		6,271			10,764
Investments in affiliates		2,500			2,500
Intangible assets, net		6,079			4,126
Goodwill		45,807			40,175
Other assets		2,658			3,136
Total assets	$	150,372		$	177,669
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,184		$	6,132
Deferred stock consideration		—			3,205
Deferred revenues		10,972			16,201
Other accrued expenses		12,240			17,414
Total current liabilities		28,396			42,952
Deferred revenue, long-term		1,177			1,209
Deferred tax liabilities, long-term		15,232			—
Taxes payable, long-term		1,819			1,389
Other liabilities, long-term		1,272			1,101
Total liabilities		47,896			46,651
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.01 par value;100,000,000 shares authorized; 35,212,530 shares issued and 35,172,040 outstanding at July 31, 2016, and 33,818,777 shares issued and 33,778,871 outstanding at January 31, 2016		352			338
Additional paid-in capital		235,081			228,164
Treasury stock, at cost; 40,490 and 39,906 common shares at July 31, 2016 and January 31, 2016, respectively		(5	)		(2	)
Accumulated loss		(126,660	)		(90,869	)
Accumulated other comprehensive loss		(6,292	)		(6,613	)
Total stockholders’ equity		102,476			131,018
Total liabilities and stockholders’ equity	$	150,372		$	177,669

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

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SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, amounts in thousands, except per share data)

	Three Months Ended						Six Months Ended
	July 31,						July 31,
	2016			2015			2016			2015
Revenues:
Products	$	2,535		$	6,955		$	6,735		$	10,119
Services		15,917			20,916			33,287			40,929
Total revenues		18,452			27,871			40,022			51,048
Cost of revenues:
Products		1,108			1,561			2,682			3,238
Services		9,487			11,663			19,946			22,866
Amortization of intangible assets		316			192			632			373
Stock-based compensation expense		85			28			157			28
Total cost of revenues		10,996			13,444			23,417			26,505
Gross profit		7,456			14,427			16,605			24,543
Operating expenses:
Research and development		7,727			8,370			16,426			17,903
Selling and marketing		3,862			3,630			7,419			7,298
General and administrative		3,835			3,911			7,906			7,798
Amortization of intangible assets		582			1,024			1,032			1,965
Stock-based compensation expense		854			1,128			894			1,839
Earn-outs and change in fair value of earn-outs		249			481			249			983
Professional fees - other		172			16			304			144
Severance and other restructuring costs		1,843			617			3,618			829
Total operating expenses		19,124			19,177			37,848			38,759
Loss from operations		(11,668	)		(4,750	)		(21,243	)		(14,216	)
Other (expense) income, net		(635	)		(199	)		287			(428	)
Loss before income taxes and equity income in earnings of affiliates		(12,303	)		(4,949	)		(20,956	)		(14,644	)
Income tax provision		14,581			78			14,835			225
Equity income in earnings of affiliates, net of tax		—			—			—			17
Net loss	$	(26,884	)	$	(5,027	)	$	(35,791	)	$	(14,852	)
Net loss	$	(26,884	)	$	(5,027	)	$	(35,791	)	$	(14,852	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment		(304	)		(347	)		303			(624	)
Unrealized gain (loss) on marketable securities		9			(3	)		18			(15	)
Comprehensive loss	$	(27,179	)	$	(5,377	)	$	(35,470	)	$	(15,491	)
Net loss per share:
Basic	$	(0.77	)	$	(0.16	)	$	(1.03	)	$	(0.45	)
Diluted	$	(0.77	)	$	(0.16	)	$	(1.03	)	$	(0.45	)
Weighted average common shares outstanding:
Basic		35,115			33,350			34,739			33,339
Diluted		35,115			33,350			34,739			33,339

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

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SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

	Six Months Ended July 31,
	2016			2015
Cash flows from operating activities:
Net loss	$	(35,791	)	$	(14,852	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment		1,567			1,703
Amortization of intangible assets		1,664			2,338
Fair value of acquisition-related contingent consideration		249			983
Stock-based compensation expense		1,051			1,867
Deferred income taxes		14,649			44
Other		195			58
Changes in operating assets and liabilities, excluding impact of acquisition:
Accounts receivable		14,023			(1,147	)
Unbilled receivables		(565	)		(3,850	)
Inventories		19			(732	)
Prepaid expenses and other assets		1,053			(598	)
Accounts payable		(1,607	)		1,875
Accrued expenses		(5,398	)		(3,127	)
Deferred revenues		(5,419	)		(1,929	)
Other		122			(832	)
Total cash used in operating activities		(14,188	)		(18,199	)
Cash flows from investing activities:
Purchases of property and equipment		(403	)		(795	)
Investment in capitalized software		—			(1,453	)
Purchases of marketable securities		—			(2,002	)
Proceeds from sale and maturity of marketable securities		252			4,003
Cash paid for acquisition of business, net of cash acquired		(5,243	)		(11,686	)
Other investing activities		(83	)		—
Total cash used in investing activities		(5,477	)		(11,933	)
Cash flows from financing activities:
Proceeds from issuance of common stock		33			20
Other financing activities		(4	)		—
Total cash provided by financing activities		29			20
Effect of exchange rate changes on cash		(431	)		653
Net decrease in cash and cash equivalents		(20,067	)		(29,459	)
Cash and cash equivalents, beginning of period		58,733			90,019
Cash and cash equivalents, end of period	$	38,666		$	60,560
Supplemental disclosure of cash flow information:
Income taxes paid	$	83		$	364
Supplemental disclosure of non-cash investing activities:
Fair value of common stock issued for acquisition of DCC Labs	$	2,640		$	—
Fair value of common stock issued for deferred stock consideration obligation	$	3,454		$	—
Fair value of common stock issued for acquisition of TLL LLC	$	—		$	3,025
Transfer of items originally classified as inventories to equipment	$	24		$	293

The accompanying notes are an integral part of these unaudited, consolidated financial statements.

5

SEACHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Basis of Presentation

The Company

SeaChange International, Inc. and its consolidated subsidiaries (collectively “SeaChange”, “we”, or the “Company”) is an industry leader in the delivery of multiscreen video, advertising and premium over-the-top (“OTT”) video. Our products and services facilitate the aggregation, licensing, management and distribution of video and advertising content to cable television system operators, telecommunications companies, satellite operators and media companies.

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of SeaChange International, Inc. and its subsidiaries (“SeaChange” or the “Company”) and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reports as well as rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany transactions and balances have been eliminated. Certain information and footnote disclosures normally included in financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to such regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying financial statements include all adjustments, consisting of only normal recurring items, necessary to present a fair presentation of the consolidated financial statements for the periods shown. These consolidated financial statements should be read in conjunction with our most recently audited financial statements and related footnotes included in our Annual Report on Form 10-K (“Form 10-K”) as filed with the SEC. The balance sheet data as of January 31, 2016 that is included in this Quarterly Report on Form 10-Q (“Form 10-Q”) was derived from our audited financial statements. We have reclassified certain amounts previously reported in our financial statements to conform to current presentation.

The preparation of these financial statements in conformity with U.S. GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Interim results are not necessarily indicative of the operating results for the full fiscal year or any future periods and actual results may differ from our estimates. During the three and six months ended July 31, 2016, there have been no material changes to our significant accounting policies that were described in our fiscal 2016 Form 10-K, as filed with the SEC.

2. Significant Accounting Policies

Revenue Recognition

Our transactions frequently involve the sales of hardware, software, systems and services in multiple-element arrangements. Revenues from sales of hardware, software and systems that do not require significant modification or customization of the underlying software are recognized when:

• persuasive evidence of an arrangement exists;

• delivery has occurred, and title and risk of loss have passed to the customer;

• fees are fixed or determinable; and

• collection of the related receivable is considered probable.

Customers are billed for installation, training, project management and at least one year of product maintenance and technical support at the time of the product sale. Revenue from these activities is deferred at the time of the product sale and recognized ratably over the period these services are performed. Revenue from ongoing product maintenance and technical support agreements is recognized ratably over the period of the related agreements. Revenue from software development contracts that include significant modification or customization, including software product enhancements, is recognized based on the percentage of completion contract accounting method using labor efforts expended in relation to estimates of total labor efforts to complete the contract. The percentage of completion method requires that adjustments or re-evaluations to estimated project revenues and costs be recognized on a project-to-date cumulative basis, as changes to the estimates are identified. Revisions to project estimates are made as additional information becomes known, including information that becomes available subsequent to the date of the consolidated financial statements up through the date such consolidated financial statements are filed with the SEC. If the final estimated profit

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to complete a long-term contract indicates a loss, a provision is recorded immediately for the total loss anticipated. Accounting for contract amendments and customer change orders are included in contract accounting when executed. Revenue from shipping and handling costs and other out-of-pocket expenses reimbursed by customers are included in revenues and cost of revenues. Our share of intercompany profits associated with sales and services provided to affiliated companies are eliminated in consolidation in proportion to our equity ownership.

Contract accounting requires judgment relative to assessing risks, estimating revenues and costs and making assumptions including, in the case of our professional services contracts, the total amount of labor required to complete a project and the complexity of the development and other technical work to be completed. Due to the size and nature of many of our contracts, the estimation of total revenues and cost at completion is complicated and subject to many variables. Assumptions have to be made regarding the length of time to complete the contract because costs also include estimated third-party vendor and contract labor costs. Penalties related to performance on contracts are considered in estimating sales and profit, and are recorded when there is sufficient information for us to assess anticipated performance. Third-party vendors’ assertions are also assessed and considered in estimating costs and margin.

Revenue from the sale of software-only products remains within the scope of the software revenue recognition rules. Maintenance and support, training, consulting, and installation services no longer fall within the scope of the software revenue recognition rules, except when they are sold with and relate to a software-only product. Revenue recognition for products that no longer fall under the scope of the software revenue recognition rules is similar to that for other tangible products and Accounting Standard Update No. (“ASU”) 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements,” amended ASC 605 and is applicable for multiple-deliverable revenue arrangements. ASU 2009-13 allows companies to allocate revenue in a multiple-deliverable arrangement in a manner that better reflects the transaction’s economics.

Under the software revenue recognition rules, the fee is allocated to the various elements based on vendor-specific objective evidence (“VSOE”) of fair value. Under this method, the total arrangement value is allocated first to undelivered elements based on their fair values, with the remainder being allocated to the delivered elements. Where fair value of undelivered service elements has not been established, the total arrangement value is recognized over the period during which the services are performed. The amounts allocated to undelivered elements, which may include project management, training, installation, maintenance and technical support and certain hardware and software components, are based upon the price charged when these elements are sold separately and unaccompanied by the other elements. The amount allocated to installation, training and project management revenue is based upon standard hourly billing rates and the estimated time necessary to complete the service. These services are not essential to the functionality of systems as these services do not alter the equipment’s capabilities, are available from other vendors and the systems are standard products. For multiple-element arrangements that include software development with significant modification or customization and systems sales where VSOE of the fair value does not exist for the undelivered elements of the arrangement (other than maintenance and technical support), percentage of completion accounting is applied for revenue recognition purposes to the entire arrangement with the exception of maintenance and technical support.

Under the revenue recognition rules for tangible products as amended by ASU 2009-13, the fee from a multiple-deliverable arrangement is allocated to each of the deliverables based upon their relative selling prices as determined by a selling-price hierarchy. A deliverable in an arrangement qualifies as a separate unit of accounting if the delivered item has value to the customer on a stand-alone basis. A delivered item that does not qualify as a separate unit of accounting is combined with the other undelivered items in the arrangement and revenue is recognized for those combined deliverables as a single unit of accounting. The selling price used for each deliverable is based upon VSOE if available, third-party evidence (“TPE”) if VSOE is not available, and best estimate of selling price (“BESP”) if neither VSOE nor TPE are available. TPE is the price of the Company’s, or any competitor’s, largely interchangeable products or services in stand-alone sales to similarly situated customers. BESP is the price at which we would sell the deliverable if it were sold regularly on a stand-alone basis, considering market conditions and entity-specific factors.

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The selling prices used in the relative selling price allocation method for certain of our services are based upon VSOE. The selling prices used in the relative selling price allocation method for third-party products from other vendors are based upon TPE. The selling prices used in the relative selling price allocation method for our hardware products, software, subscriptions, and customized services for which VSOE does not exist are based upon BESP. We do not believe TPE exists for these products and services because they are differentiated from competing products and services in terms of functionality and performance and there are no competing products or services that are largely interchangeable. Management establishes BESP with consideration for market conditions, such as the impact of competition and geographic considerations, and entity-specific factors, such as the cost of the product, discounts provided and profit objectives. Management believes that BESP is reflective of reasonable pricing of that deliverable as if priced on a stand-alone basis.

For our cloud and managed service revenues, we generate revenue from two sources: (1) subscription and support services; and (2) professional services and other. Subscription and support revenue includes subscription fees from customers accessing our cloud-based software platform and support fees. Our arrangements with customers do not provide the customer with the right to take possession of the software supporting the cloud-based software platform at any time. Professional services and other revenue include fees from implementation and customization to support customer requirements. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. For the most part, subscription and support agreements are entered into for 12 to 36 months. Generally, a majority of the professional services component of the arrangements with customers is performed within a year of entering into a contract with the customer.

In most instances, revenue from a new customer acquisition is generated under sales agreements with multiple elements, comprised of subscription and support and other professional services. We evaluate each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within our control.

In determining when to recognize revenue from a customer arrangement, we are often required to exercise judgment regarding the application of our accounting policies to a particular arrangement. The primary judgments used in evaluating revenue recognized in each period involve: determining whether collection is probable, assessing whether the fee is fixed or determinable, and determining the fair value of the maintenance and service elements included in multiple-element software arrangements. Such judgments can materially impact the amount of revenue that we record in a given period. While we follow specific and detailed rules and guidelines related to revenue recognition, we make and use significant management judgments and estimates in connection with the revenue recognized in any reporting period, particularly in the areas described above. If management made different estimates or judgments, material differences in the timing of the recognition of revenue could occur.

Impairment of Assets

Indefinite-lived intangible assets, such as goodwill, are not amortized but are evaluated for impairment at the reporting unit level annually, in our third quarter beginning August 1^st. Indefinite-lived intangible assets may be tested for impairment on an interim basis in addition to the annual evaluation if an event occurs or circumstances change such as declines in sales, earnings or cash flows, decline in the Company’s stock price, or material adverse changes in the business climate, which would more likely than not reduce the fair value of a reporting unit below its carrying amount. See Note 6, “Goodwill and Intangible Assets,” to our consolidated financial statements for more information.

We also evaluate other long-lived assets such as property and equipment and intangible assets with finite useful lives, on a regular basis for the existence of facts or circumstances, both internal and external that may suggest an asset is not recoverable. If such circumstances exist, we evaluate the carrying value of long-lived assets to determine if impairment exists based upon estimated undiscounted future cash flows over the remaining useful life of the assets and compares that value to the carrying value of the assets. Our cash flow estimates contain management’s best estimates, using appropriate and customary assumptions and projections at the time.

In the second quarter of fiscal 2017, we determined there to be triggering events that might possibly indicate that the carrying amount of our long-lived assets may not be recoverable. These triggering events included a sustained decrease in share price during the period and our current-period operating loss combined with a history of operating losses. As a result, we were required to test for the recoverability of our long-lived assets to determine whether an impairment loss should have been measured as mentioned above. We determined that the estimated undiscounted future cash flows over the remaining useful life of the long-lived assets exceeded the carrying value. Therefore, the assets were deemed recoverable and no impairment of long-lived assets existed as of July 31, 2016.

3. Fair Value Measurements

Definition and Hierarchy

The applicable accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance establishes a framework for measuring fair value and expands required disclosure about the fair value measurements of assets and liabilities. This guidance requires us to classify and disclose assets and liabilities measured at fair value on a recurring basis, as well as fair value measurements of assets and liabilities measured on a non-recurring basis in periods subsequent to initial measurement, in a fair value hierarchy.

The fair value hierarchy is broken down into three levels based on the reliability of inputs and requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required, as well as the assets and liabilities that we value using those levels of inputs:

• Level 1 – Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

• Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not very active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value of the contingent consideration obligations related to our business acquisitions are valued using Level 3 inputs.

Valuation Techniques

Inputs to valuation techniques are observable and unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. When developing fair value estimates for certain financial assets and liabilities, we maximize the use of observable inputs and minimize the use of unobservable inputs. When available, we use quoted market prices, market comparables and discounted cash flow projections. Financial assets include money market funds, U.S. treasury notes or bonds and U.S. government agency bonds.

In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly. In periods of market inactivity, the observability of prices and inputs may be reduced for certain instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of July 31, 2016 and January 31, 2016. There were no fair value measurements of our financial assets and liabilities using significant level 3 inputs for the periods presented:

			Fair Value at July 31, 2016 Using
			Quoted
			Prices in		Significant
			Active		Other
			Markets for		Observable
	July 31,		Identical Assets		Inputs
	2016		(Level 1)		(Level 2)
	(Amounts in thousands)
Financial assets:
Money market accounts (a)	$	945	$	945	$	—
Available for sale marketable securities:
Current marketable securities:
U.S. treasury notes and bonds - conventional		4,759		4,759		—
U.S. government agency issues		1,001		—		1,001
Non-current marketable securities:
U.S. treasury notes and bonds - conventional		2,761		2,761		—
U.S. government agency issues		3,510		—		3,510
Total	$	12,976	$	8,465	$	4,511

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			Fair Value at January 31, 2016 Using
			Quoted
			Prices in		Significant
			Active		Other
			Markets for		Observable
	January 31,		Identical Assets		Inputs
	2016		(Level 1)		(Level 2)
	(Amounts in thousands)
Financial assets:
Money market accounts (a)	$	3,654	$	3,654	$	—
Available for sale marketable securities:
Current marketable securities:
U.S. treasury notes and bonds - conventional		502		502		—
U.S. government agency issues		1,002		—		1,002
Non-current marketable securities:
U.S. treasury notes and bonds - conventional		7,762		7,762
U.S. government agency issues		3,002		—		3,002
Total	$	15,922	$	11,918	$	4,004

(a) Money market funds and U.S. treasury bills are included in cash and cash equivalents on the accompanying consolidated balance sheets and are valued at quoted market prices for identical instruments in active markets.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible property and equipment, goodwill, and other intangible assets, which are re-measured when the derived fair value is below carrying value on our consolidated balance sheets. For these assets and liabilities, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded to loss from impairment in our consolidated statements of operations and comprehensive loss. We did not record any significant charges to assets measured at fair value on a nonrecurring basis during the six months ended July 31, 2016 and 2015. See Note 6, “Goodwill and Intangible Assets,” to our consolidated financial statements for more information.

Available-For-Sale Securities

We determine the appropriate classification of debt investment securities at the time of purchase and reevaluate such designation as of each balance sheet date. Our investment portfolio consists of money market funds, U.S. treasury notes and bonds, and U.S. government agency notes and bonds as of July 31, 2016 and January 31, 2016. All highly liquid investments with an original maturity of three months or less when purchased are considered to be cash equivalents. All cash equivalents are carried at cost, which approximates fair value. Our marketable securities are classified as available-for-sale and are reported at fair value with unrealized gains and losses, net of tax, reported in stockholders’ equity as a component of accumulated other comprehensive loss. The amortization of premiums and accretion of discounts to maturity are computed under the effective interest method and are included in other (expenses) income, net, in our consolidated statements of operations and comprehensive loss. Interest on securities is recorded as earned and is also included in other (expenses) income, net. Any realized gains or losses would be shown in the accompanying consolidated statements of operations and comprehensive loss in other (expenses) income, net. We provide fair value measurement disclosures of available-for-sale securities in accordance with one of three levels of fair value measurement mentioned above.

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The following is a summary of cash, cash equivalents and available-for-sale securities, including the cost basis, aggregate fair value and gross unrealized gains and losses, for short- and long-term marketable securities portfolio as of July 31, 2016 and January 31, 2016:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Amounts in thousands)
July 31, 2016:
Cash	$	37,721	$	—	$	—		$	37,721
Cash equivalents		945		—		—			945
Cash and cash equivalents		38,666		—		—			38,666
U.S. treasury notes and bonds - short-term		4,753		6		—			4,759
U.S. treasury notes and bonds - long-term		2,750		11		—			2,761
U.S, government agency issues - short-term		1,000		1		—			1,001
U.S, government agency issues - long-term		3,479		31		—			3,510
Total cash, cash equivalents and marketable securities	$	50,648	$	49	$	—		$	50,697
January 31, 2016:
Cash	$	55,079	$	—	$	—		$	55,079
Cash equivalents		3,654		—		—			3,654
Cash and cash equivalents		58,733		—		—			58,733
U.S. treasury notes and bonds - short-term		503		—		(1	)		502
U.S. treasury notes and bonds - long-term		7,756		6		—			7,762
U.S, government agency issues - short-term		1,001		1		—			1,002
U.S, government agency issues - long-term		2,977		25					3,002
Total cash, cash equivalents and marketable securities	$	70,970	$	32	$	(1	)	$	71,001

The gross realized gains and losses on sale of available-for-sale securities as of July 31, 2016 and January 31, 2016 were immaterial. For purposes of determining gross realized gains and losses, the cost of securities is based on specific identification.

Contractual maturities of available-for-sale investments as of July 31, 2016 are as follows (amounts in thousands):

	Estimated
	Fair Value
Maturity of one year or less	$	5,760
Maturity between one and five years		6,271
Total	$	12,031

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist primarily of highly liquid investments in money market mutual funds, government sponsored enterprise obligations, treasury bills, commercial paper and other money market securities with remaining maturities at date of purchase of 90 days or less.

The fair value of cash, cash equivalents, restricted cash and marketable securities at July 31, 2016 and January 31, 2016 was $50.9 million and $71.1 million, respectively.

Restricted Cash

At times, we may be required to maintain cash held as collateral for performance obligations with our customers which we classify as restricted cash on our consolidated balance sheets. As of July 31, 2016 and January 31, 2016 we had $0.2 million and $0.1 million, respectively, in restricted cash related to performance obligations.

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4. Acquisitions and Loss on Impairment

DCC Labs

On May 5, 2016 we acquired a 100% share of DCC Labs in exchange for an aggregate of $2.6 million in newly issued shares of SeaChange common stock and $5.2 million in cash, net of cash acquired, resulting in a total net purchase price of $7.9 million. DCC Labs is a developer of set-top and multiscreen device software. Of the total consideration, $0.5 million in cash and all of the stock is initially held in escrow as security for the indemnification obligations of the former DCC Labs owners to SeaChange under the purchase agreement. The stock consideration was determined by dividing the total value of $2.6 million by the volume weighted average closing price of our common stock for the twenty trading days preceding the closing.

The acquisition of DCC Labs enables us to optimize the operations of our In Home business, which is our developer of deployed software solutions including the SeaChange Nucleus home video gateway. In addition, the acquisition brings market-ready products, including an optimized television software stack for Europe’s Digital Video Broadcasting community and an HTML5 framework for building future-proof user interfaces for CPE devices.

We accounted for the acquisition of DCC Labs as a business combination, which requires us to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of the net assets acquired is recorded as goodwill. We engaged an independent appraiser to assist management in assessing the fair values of the tangible and intangible assets acquired and liabilities assumed and the amount of goodwill to be recognized as of the acquisition date. Assets acquired as a result of the acquisition include receivables, prepaid expenses and property and equipment while liabilities assumed include accounts payable, other accrued expenses, deferred taxes and income taxes payable. The amounts recorded for these assets and liabilities are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date. The final determination of the fair values of the acquired assets and liabilities will be completed within the measurement period of up to one year from the acquisition date, as permitted under U.S. GAAP.

The allocation of purchase price was as follows (amounts in thousands):

Estimated Fair value of consideration:
Cash, net of cash acquired	$	5,243
Stock consideration		2,640
Total purchase price	$	7,883
Estimated Fair value of assets acquired and liabilities assumed:
Current assets		1,156
Other long-term assets		116
Finite-life intangible assets		3,100
Goodwill		5,071
Current liabilities		(618	)
Other long-term liabilities		(942	)
Allocated purchase price	$	7,883

Acquired Goodwill

The preliminary purchase price allocation is subject to our final determination of fair value. We recorded the $5.1 million excess of the purchase price over the fair value of the identified tangible and intangible assets as goodwill, primarily due to expected synergies between the combined companies and expanded market opportunities. The goodwill is not deductible for tax purposes.

Intangible Assets

In determining the fair value of the intangible assets, the Company considered, among other factors, the intended use of the assets and the estimates of future performance of DCC Labs, based on analyses of historical financial performance. The fair values of identified intangible assets were calculated using an income-based approach based on estimates and assumptions provided by DCC Labs’ and the Company’s management.

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The following table sets forth the components of the identified intangible assets associated with the DCC Labs acquisition and their estimated useful lives:

	Useful life		Fair Value
			(Amounts in thousands)
Tradename		5 years	$	200
Customer contracts		9 years		1,400
Non-compete agreements		2 years		100
Existing technology		7 years		1,400
			$	3,100

Impact to Fiscal 2017 Financial Results

DCC Labs’ financial results have been included in our consolidated financial results only for the period from the May 5, 2016 acquisition date through July 31, 2016. As a result, our consolidated financial results for the three and six months ended July 31, 2016 do not reflect a full three and six months of DCC Labs’ results. From the May 5, 2016 acquisition date through July 31, 2016, DCC Labs generated revenue of $0.2 million and an operating loss of $0.9 million.

Acquisition-related Costs

In connection with the acquisition, we incurred approximately $0.2 million in acquisition-related costs, including legal, accounting and other professional services for fiscal 2017. The acquisition costs were expensed as incurred and included in professional fees – other, in our consolidated statements of operations and comprehensive loss for the period ended July 31, 2016.

TLL, LLC

On February 2, 2015, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of December 22, 2014, we acquired 100% of the member interests in TLL, LLC (“Timeline Labs”), a privately-owned California-based software-as-a-service (“SaaS”) company.

We accounted for the acquisition of Timeline Labs as a business combination and the financial results of Timeline Labs have been included in our consolidated financial statements as of the date of acquisition. Under the acquisition method of accounting, the purchase price was allocated to SeaChange’s net tangible and intangible assets based upon their fair values as of February 2, 2015.

The allocation of the purchase price was as follows (amounts in thousands):

Fair value of consideration:
Cash, net of cash acquired	$	14,186
Closing stock consideration		3,019
Deferred stock consideration		4,959
Contingent consideration		475
Total purchase price	$	22,639
Fair value of assets acquired and liabilities assumed:
Current assets		95
Other long-term assets		108
Finite-life intangible assets		6,720
Goodwill		15,787
Current liabilities		(71	)
Allocated purchase price	$	22,639

Fair Value of Consideration Transferred

Upon completion of the acquisition, the Company made cash consideration payments to the former members of Timeline Labs in the amount of $14.2 million (“Closing Cash Consideration”). The Closing Cash Consideration included $1.4 million

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deposited in escrow to secure certain indemnification obligations of the former members of Timeline Labs under the Merger Agreement. Also upon completion of the acquisition, the Company issued 344,055 shares of common stock to the former members of Timeline Labs and deposited 173,265 shares of common stock into escrow.

On August 3, 2015, we issued 260,537 shares of our common stock with a value of $1.8 million to the former members of Timeline Labs, in satisfaction of the six-month deferred stock consideration obligation pursuant to the Merger Agreement. In satisfaction of the twelve-month deferred stock consideration obligation pursuant to the Merger Agreement, on February 2, 2016 we issued 542,274 shares of our common stock with a value of $3.2 million and in May 2016, pursuant to an adjustment mechanism based on stock price provided for in the Merger Agreement with respect to deferred stock consideration issuances, we issued an additional 70,473 shares of our common stock with a value of $0.2 million.

Contingent Consideration

The former interest holders of Timeline Labs were eligible to receive earn-out compensation, consisting of shares of our common stock, if defined performance criteria were achieved for fiscal 2016 and 2017. We recorded a liability of $3.2 million in February 2015 in our consolidated balance sheets that represented the fair value of the estimated shares at full achievement of the defined performance criteria on the date of acquisition. As of January 31, 2016, the Company determined that the defined performance criteria would not be achieved and the liability was reduced to zero with a $0.4 million reversal of liability credited to loss on impairment of TLL, LLC net assets in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016.

Intangible Assets

In determining the fair value of the intangible assets, the Company considered, among other factors, the intended use of the assets, the estimates of future performance of Timeline Lab’s products and analyses of historical financial performance. The fair values of identified intangible assets were calculated using an income-based approach based on estimates and assumptions provided by Timeline Labs’ and the Company’s management.

The following table sets forth the components of the identified intangible assets associated with the Timeline Labs acquisition and their estimated useful lives:

	Useful life		Fair Value
			(Amounts in thousands)
Tradename		7 years	$	620
Customer contracts		7 years		4,760
Non-compete agreements		2 years		170
Existing technology		5 years		1,170
			$	6,720

Acquired Goodwill

We finalized the purchase price allocation in January 2016. We recorded the $15.8 million excess of the purchase price over the fair value of the identified tangible and intangible assets as goodwill, primarily due to expected synergies between the combined companies and expanded market opportunities. The goodwill was deductible for tax purposes.

Acquisition-related Costs

In connection with the acquisition, we incurred approximately $0.1 million in acquisition-related costs, including legal, accounting and other professional services for fiscal 2016. The acquisition costs were expensed as incurred and included in professional fees – other, in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016.

Loss on Impairment of Assets

In January 2016, our Board of Directors authorized a restructuring plan (including a possible winding down of the Timeline Labs operations), as previously reported in a Current Report on Form 8-K filed with the SEC on February 17, 2016. Based on the decision to enter into the restructuring plan and the plan’s impact on the projected future cash flows of the Timeline Labs operations, we determined that the carrying amount of all long-term assets that resulted from the February 2015 acquisition had exceeded their fair value as of January 31, 2016. As a result, these long-term assets were

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deemed fully impaired and we recorded the $21.9 million net book value of these long-term assets as a component of loss on impairment of TLL, LLC net assets in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016. Additionally, we reduced the contingent consideration liability associated with the Timeline Labs acquisition to zero, as we determined that the defined performance criteria would not be achieved, and credited the reversal of the liability of $0.4 million to loss on impairment of TLL, LLC net assets in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016.

In addition, we incurred $0.7 million in severance and other restructuring charges during the first half of fiscal 2017 related to cost-saving actions taken with respect to the Timeline Labs business.

5. Consolidated Balance Sheet Detail

Inventories consist primarily of hardware and related component parts and are stated at the lower of cost (on a first-in, first-out basis) or market. Inventories consist of the following:

	As of
	July 31,		January 31,
	2016		2016
	(Amounts in thousands)
Components and assemblies	$	680	$	1,223
Finished products		785		459
Total inventories, net	$	1,465	$	1,682

Property and equipment, net consists of the following:

	Estimated		As of
	Useful		July 31,			January 31,
	Life (Years)		2016			2016
			(Amounts in thousands)
Land			$	2,880		$	2,880
Buildings		20		12,010			11,908
Office furniture and equipment		5		1,148			1,099
Computer equipment, software and demonstration equipment		3		19,020			18,639
Service and spare components		5		1,158			1,158
Leasehold improvements		1-7		1,091			1,087
				37,307			36,771
Less - Accumulated depreciation and amortization				(24,211	)		(22,642	)
Total property and equipment, net			$	13,096		$	14,129

Depreciation and amortization expense on property and equipment, net was $0.8 million and $1.6 million for the three and six months ended July 31, 2016, respectively, and $0.8 million and $1.7 million for the three and six months ended July 31, 2015, respectively.

Other accrued expenses consist of the following:

	As of
	July 31,		January 31,
	2016		2016
	(Amounts in thousands)
Accrued compensation and commissions	$	921	$	1,676
Accrued bonuses		1,834		2,902
Accrued severance		730		47
Accrued restructuring		404		—
Employee benefits		782		1,484
Accrued provision for contract loss		4,497		6,497
Accrued other		3,072		4,808
Total other accrued expenses	$	12,240	$	17,414

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6. Goodwill and Intangible Assets

Goodwill

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. We are required to perform impairment tests related to our goodwill annually, which we perform during the third quarter of each fiscal year, or when we identify certain triggering events or circumstances that would more likely than not reduce the estimated fair value of the goodwill of the Company below its carrying amount. Changes in the carrying amount of goodwill for the six months ended July 31, 2016 were as follows (amounts in thousands):

Balance as of February 1, 2016
Goodwill	$	55,962
Accumulated impairment losses		(15,787	)
		40,175
Acquisition of DCC Labs		5,071
Cumulative translation adjustment		561
Balance as of July 31, 2016
Goodwill		61,594
Accumulated impairment losses		(15,787	)
	$	45,807

In the second quarter of fiscal 2017, we recorded preliminary goodwill of $5.1 million related to the acquisition of DCC Labs based on the preliminary allocation of the estimated purchase price. We will continue to evaluate certain assets, liabilities and tax estimates that are subject to change within the measurement period (up to one year from the acquisition date).

In the second quarter of fiscal 2017, a number of triggering events prompted us to perform step one of the goodwill impairment test on our goodwill balance as of July 31, 2016. The triggering events included; a sustained decrease in our stock price during the period, the withdrawal of the permanent reinvestment assertion on earnings generated by our Irish operations (see Note 12, “Income Taxes” to our consolidated financial statements for more information) and a decline in actual revenue for the quarter compared to projected amounts, which was previously reported in a Current Report on Form 8-K furnished to the SEC on August 23, 2016. The outcome of the preliminary step one analysis revealed that fair value exceeded carrying value at July 31, 2016. In aggregate, there was an excess fair value over and above the carrying value of the net assets ranging from $15.4 million to $25.0 million, or 15.0% to 24.4% of the carrying value of our net assets. To the extent that the finalization of this assessment of goodwill requires an impairment charge, such adjustment would be recorded in the third quarter of fiscal 2017.

Intangible Assets

Intangible assets, net, consisted of the following at July 31, 2016 and January 31, 2016:

			As of July 31, 2016							As of January 31, 2016
	Weighted average remaining life (Years)		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(Amounts in thousands)
Finite-life intangible assets:
Customer contracts		4.1	$	31,672	$	(27,475	)	$	4,197	$	29,956	$	(26,284	)	$	3,672
Non-compete agreements		1.8		2,515		(2,429	)		86		2,365		(2,365	)		—
Completed technology		5.6		11,632		(10,023	)		1,609		10,075		(9,621	)		454
Trademarks, patents and other		4.8		7,276		(7,089	)		187		7,068		(7,068	)		—
Total finite-life intangible assets		4.4	$	53,095	$	(47,016	)	$	6,079	$	49,464	$	(45,338	)	$	4,126

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As of July 31, 2016, the estimated future amortization expense for our finite-life intangible assets for the remainder of fiscal 2017 and the four succeeding fiscal years is as follows (amounts in thousands):

	Estimated
	Amortization
Fiscal Year Ended January 31,	Expense
2017 (for the remaining six months)	$	1,259
2018		1,729
2019		1,040
2020		555
2021		390
2022 and thereafter		1,106
Total	$	6,079

7. Commitments and Contingencies

Indemnification and Warranties

We provide indemnification, to the extent permitted by law, to our officers, directors, employees and agents for liabilities arising from certain events or occurrences while the officer, director, employee or agent is, or was, serving at our request in such capacity. With respect to acquisitions, we provide indemnification to, or assume indemnification obligations for, the current and former directors, officers and employees of the acquired companies in accordance with the acquired companies’ governing documents. As a matter of practice, we have maintained directors’ and officers’ liability insurance including coverage for directors and officers of acquired companies.

We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of these agreements require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to our products. From time to time, we also indemnify customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, and environmental claims relating to the use of our products and services or resulting from the acts or omissions of us, our employees, authorized agents or subcontractors. From time to time we have received requests from customers for indemnification of patent litigation claims. Management cannot reasonably estimate any potential losses, but these claims could result in material liability for us. There are no current pending legal proceedings, in the opinion of management that would have a material adverse effect on our financial position, results from operations and cash flows. There is no assurance that future legal proceedings arising from ordinary course of business or otherwise, will not have a material adverse effect on our financial position, results from operations or cash flows.

We warrant that our products, including software products, will substantially perform in accordance with our standard published specifications in effect at the time of delivery. In addition, we provide maintenance support to our customers and therefore allocate a portion of the product purchase price to the initial warranty period and recognize revenue on a straight line basis over that warranty period related to both the warranty obligation and the maintenance support agreement. When we enter into arrangements that include revenue for extended warranties beyond the standard duration, the revenue is deferred and recognized on a straight line basis over the contract period. Related costs are expensed as incurred.

Revolving Line of Credit/Demand Note Payable

We had a letter agreement with JP Morgan Chase Bank, N.A. (“JP Morgan”) for a demand discretionary line of credit and a Demand Promissory Note in the aggregate amount of $20.0 million, which expired on August 31, 2016 with no outstanding balance. This line of credit and Demand Promissory Note was not renewed.

8. Severance and Other Restructuring Costs

Restructuring Costs

During the six months ended July 31, 2016, we incurred restructuring charges of $2.2 million primarily from employee-related benefits for terminated employees.

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The following table shows the activity in accrued restructuring reported as a component of other accrued expenses on the consolidated balance sheet as of July 31, 2016 (amounts in thousands):

	Employee- Related			Closure of Leased
	Benefits			Facilities			Total
Accrual balance as of January 31, 2016	$	—		$	—		$	—
Restructuring charges incurred		1,586			321			1,907
Cash payments		(1,385	)		(116	)		(1,501	)
Other charges		(2	)		—			(2	)
Accrual balance as of July 31, 2016	$	199		$	205		$	404

During the second quarter of fiscal 2017, we restructured our operations in connection with the acquisition of DCC Labs. This restructuring resulted in a workforce reduction within our In Home engineering and services organization and in the closing of a facility in Portland, Oregon. We incurred charges totaling $1.5 million in severance and other restructuring costs during fiscal 2017 related to the acquisition of DCC Labs. Once we complete our integration plan, any further reduction in workforce may result in additional restructuring charges.

As a result of restructuring activities relating to our Timeline Labs operations in fiscal 2017, we incurred $0.7 million of charges, which include $0.5 million in severance to former Timeline Labs employees and $0.2 million in other restructuring charges relating to our remaining lease obligation of our Timeline Labs facilities in San Francisco and Santa Monica, California.

Severance Costs

During the six months ended July 31, 2016, we incurred severance charges of $1.4 million primarily from the departure of our former Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) during the first half of fiscal 2017 as well as the termination of 11 other former employees.

Effective April 6, 2016, we terminated the employment of Jay Samit, our former Chief Executive Officer (“CEO”). In connection with his termination, Mr. Samit and SeaChange entered into a Separation Agreement and Release of Claims (the “CEO Separation Agreement”). Under the terms of the CEO Separation Agreement and consistent with our pre-existing obligations to Mr. Samit in connection with a termination without cause, we incurred a charge of $1.0 million in the first quarter of fiscal 2017, which included $0.2 million for satisfaction of his remaining fiscal 2016 and 2017 annual bonuses and $0.8 million in severance payable in twelve equal monthly installments which will be completed in the first quarter of fiscal 2018. In addition, on July 6, 2016, Anthony Dias resigned as CFO of SeaChange, though he continued as an employee until July 31, 2016. In connection with his resignation, Mr. Dias and SeaChange entered into an Employment Separation Agreement and Voluntary Release, dated July 6, 2016 (the “CFO Separation Agreement”). Under the terms of the CFO Separation Agreement, we incurred a charge of $0.2 million, which included his fiscal 2017 pro-rated bonus (paid in fiscal 2018) and six months’ base salary as severance payable in twelve equal semimonthly installments, which will be completed by the end of fiscal 2017.

9. Stockholders’ Equity

2011 Compensation and Incentive Plan

In July 2011, our stockholders approved the adoption of our 2011 Compensation and Incentive Plan (the “2011 Plan”). Under the 2011 Plan, as amended in July 2013, the number of shares of common stock authorized for grant is equal to 5,300,000 shares plus the number of shares that expired, terminated, surrendered or forfeited awards subsequent to July 20, 2011 under the Amended and Restated 2005 Equity Compensation and Incentive Plan (the “2005 Plan”). Following approval of the 2011 Plan, we terminated the 2005 Plan. The 2011 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units (“RSUs”), deferred stock units (“DSUs”) and other equity based non-stock option awards as determined by the plan administrator to officers, employees, consultants, and directors of the Company. On July 13, 2016, shareholders approved an amendment to the 2011 Plan which:

• Approved the removal of minimum vesting periods for stock option, RSU and other stock-based awards, but excluding restricted stock, under the 2011 Plan; and

• Approved the material terms of the performance goals of the 2011 Plan under which tax-deductible compensation may be paid for purposes of rules under the Internal Revenue Code of 1986, as amended, including the business criteria on which performance goals may be based.

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Effective February 1, 2014, SeaChange gave its non-employee members of the Board of Directors the option to receive DSUs in lieu of RSUs, beginning with the annual grant for fiscal 2015. The number of units subject to the DSUs is determined as of the grant date and shall fully vest one year from the grant date. The shares underlying the DSUs are not vested and issued until the earlier of the director ceasing to be a member of the Board of Directors (provided such time is subsequent to the first day of the succeeding fiscal year) or immediately prior to a change in control. Commencing with fiscal 2016, we changed the policy regarding the timing of the equity grant from the first day of the applicable fiscal year to the date of our annual meeting of stockholders. To facilitate the transition, a partial year grant was made to our non-employee directors, effective February 1, 2015, and a full year grant was made to our non-employee directors, effective July 15, 2015.

We may satisfy awards upon the exercise of stock options or the vesting of stock units with newly issued shares or treasury shares. The Board of Directors is responsible for the administration of the 2011 Plan and determining the terms of each award, award exercise price, the number of shares for which each award is granted and the rate at which each award vests. In certain instances the Board of Directors may elect to modify the terms of an award. As of July 31, 2016, there were 1,184,298 shares available for future grant under the 2011 Plan.

Option awards may be granted to employees at an exercise price per share of not less than 100% of the fair market value per common share on the date of the grant. Stock units may be granted to any officer, employee, director, or consultant at a purchase price per share as determined by the Board of Directors. Option awards granted under the 2011 Plan generally vest over a period of one to four years and expire ten years from the date of the grant.

In fiscal 2016, the Board of Directors developed a new Long-Term Incentive (“LTI”) Program under which the named executive officers of the Company will receive long-term equity-based incentive awards, which are intended to align the interests of our named executive officers with the long-term interests of our stockholders and to emphasize and reinforce our focus on team success. Long-term equity-based incentive compensation awards are made in the form of stock options, RSUs and performance stock units (“PSUs”) subject to vesting based in part on the extent to which employment continues for three years.

We have granted market-based options to certain newly appointed officers. These stock options have an exercise price equal to our closing stock price on the date of grant and will vest in approximately equal increments based upon the closing price of SeaChange’s common stock. We record the fair value of these stock options using the Monte Carlo simulation model, since the stock option vesting is variable depending on the closing price of our traded common stock. The model simulated the daily trading price of the market-based stock options’ expected terms to determine if the vesting conditions would be triggered during the term. Effective April 6, 2016, Ed Terino, who previously served as our Chief Operating Officer (“COO”), was appointed Chief Executive Officer (“CEO”) of SeaChange and was granted 600,000 market-based options, bringing the total of his market-based options, when added to the 200,000 market-based options he received upon hire as COO in June 2015, to 800,000 market-based options. The fair value of these stock options was estimated to be $2.0 million. As of July 31, 2016, $1.3 million remained unamortized on these market-based stock options, which will be expensed over the next 1.6 years, the remaining weighted average amortization period.

2015 Employee Stock Purchase Plan

In July 2015 we adopted the 2015 Employee Stock Purchase Plan (the “ESPP”). The purpose of the ESPP is to provide eligible employees, including executive officers of SeaChange, with the opportunity to purchase shares of our common stock at a discount through accumulated payroll deductions of up to 15%, but not less than one percent of their eligible compensation, subject to any plan limitations. Offering periods typically commence on October 1^st and April 1^st and end on March 31^st and September 30^th with the last trading day being the exercise date for the offering period. On each purchase date, eligible employees will purchase our stock at a price per share equal to 85% of the closing price of our common stock on the exercise date, but no less than par value. The maximum number of shares of our common stock which will be authorized for sale under the ESPP is 1,150,000 shares. Stock-based compensation expense related to the ESPP was immaterial for the three and six months ended July 31, 2016.

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10. Accumulated Other Comprehensive Loss

The following shows the changes in the components of accumulated other comprehensive loss for the six months ended July 31, 2016:

				Changes in
	Foreign			Fair Value of
	Currency			Available
	Translation			for Sale
	Adjustment			Investments		Total
	(Amounts in thousands)
Balance at January 31, 2016	$	(6,644	)	$	31	$	(6,613	)
Other comprehensive income		303			18		321
Balance at July 31, 2016	$	(6,341	)	$	49	$	(6,292	)

Unrealized holding gains (losses) on securities available for sale are not material for the periods presented.

Comprehensive loss consists of our net loss and other comprehensive income (loss), which includes foreign currency translation adjustments and changes in unrealized gains and losses on marketable securities available for sale. For purposes of comprehensive loss disclosures, we do not record tax expense or benefits for the net changes in the foreign currency translation adjustments, as we intend to permanently reinvest all undistributed earnings of the related foreign subsidiaries.

11. Segment Information, Significant Customers and Geographic Information

Segment Information

Our operations are organized into one reportable segment. Operating segments are defined as components of an enterprise evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and assess performance. Our reportable segment was determined based upon the nature of the products offered to customers, the market characteristics of each operating segment and the Company’s management structure.

Significant Customers

The following summarizes revenues by significant customer where such revenue exceeded 10% of total revenues for the indicated period:

	Three Months Ended		Six Months Ended
	July 31,		July 31,
	2016	2015	2016	2015
Customer A	28%	25%	30%	22%
Customer B	N/A	11%	N/A	14%
Customer C	N/A	11%	N/A	N/A

Geographic Information

The following table summarizes revenues by customers’ geographic locations for the periods presented:

	Three Months Ended July 31,										Six Months Ended July 31,
	2016					2015					2016					2015
	Amount		%			Amount		%			Amount		%			Amount		%
	(Amounts in thousands, except percentages)
Revenues by customers’ geographic locations:
North America(1)	$	8,520		46	%	$	16,010		58	%	$	19,191		48	%	$	29,789		58	%
Europe and Middle East		8,439		46	%		10,090		36	%		17,580		44	%		17,656		35	%
Latin America		1,265		7	%		1,354		5	%		2,450		6	%		2,452		5	%
Asia Pacific		228		1	%		417		1	%		801		2	%		1,151		2	%
Total	$	18,452				$	27,871				$	40,022				$	51,048

(1) Includes total revenues for the United States for the periods shown as follows (amounts in thousands, except percentage data):

	Three Months Ended						Six Months Ended
	July 31,						July 31,
	2016			2015			2016			2015
U.S. Revenue	$	6,689		$	11,794		$	15,135		$	23,729
% of total revenues		36.3	%		42.3	%		37.8	%		46.5	%

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12. Income Taxes

We recorded an income tax provision of $14.6 million and $14.8 million for the three and six months ended July 31, 2016, respectively, primarily relating to deferred income tax expense of $14.7 million related to the change in assertion regarding the undistributed foreign earnings of certain of our foreign subsidiaries. Our effective tax rate in fiscal 2017 and in future periods may fluctuate on a quarterly basis as a result of changes in our jurisdictional forecasts where losses cannot be benefitted due to the existence of valuation allowances on our deferred tax assets, changes in actual results versus our estimates, or changes in tax laws, regulations, accounting principles, or interpretations thereof.

Our foreign subsidiaries generate earnings that are not subject to U.S. income taxes so long as they are permanently reinvested in our operations outside of the U.S. Pursuant to Accounting Standard Codification Topic No. 740-30, “Income Taxes – Other Considerations or Special Areas,” undistributed earnings of foreign subsidiaries that are no longer permanently reinvested would become subject to deferred income taxes under U.S. tax law. Prior to the second quarter of fiscal 2017, we asserted that the undistributed earnings of all our foreign subsidiaries were permanently reinvested.

In the second quarter of fiscal 2017, following a review of our operations, liquidity and funding, and investment in our product roadmap, we determined that the ability to access certain amounts of foreign earnings would provide greater flexibility to meet the Company’s working capital needs. Accordingly, in the second quarter of fiscal 2017, we withdrew the permanent reinvestment assertion on $58.6 million of earnings generated by our Irish operations through July 2016. We recorded a deferred tax liability of $14.7 million related to the foreign income taxes on $58.6 million of undistributed earnings.

There is no certainty as to the timing of when such foreign earnings will be distributed to the United States in whole or in part. Further, when the foreign earnings are distributed to the United States, we anticipate that a substantial portion of the resulting U.S. income taxes would be reduced by existing tax attributes.

We have not provided for U.S. federal or foreign income taxes on $5.8 million of our non-U.S. subsidiaries’ undistributed earnings as of July 31, 2016. The $5.8 million of undistributed foreign earnings have been reinvested in our foreign operations, as we have determined that these earnings are necessary to support our planned ongoing investments in our foreign operations, and as a result, these earnings remain indefinitely reinvested in those operations. In making this decision, we considered cash needs for: investing in our existing businesses, potential acquisitions and capital transactions.

The Company reviews all available evidence to evaluate the recovery of deferred tax assets, including the recent history of losses in all tax jurisdictions, as well as its ability to generate income in future periods. As of July 31, 2016, due to the uncertainty related to the ultimate use of certain deferred income tax assets, the Company has recorded a valuation allowance on certain of its deferred assets.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign jurisdictions. We have closed out an audit with the Internal Revenue Service (“IRS”) through fiscal 2013, however, the taxing authorities will still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers.

13. Net Loss Per Share

Net loss per share is presented in accordance with authoritative guidance which requires the presentation of “basic” and “diluted” earnings per share. Basic earnings (loss) per share is computed by dividing earnings (loss) available to common shareholders by the weighted-average shares of common stock outstanding during the period. For the purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding during the period and the weighted average number of shares of potential dilutive shares of common stock, such as stock awards, calculated using the treasury stock method. Basic and diluted net loss per share was the same for all the periods presented as the impact of potential dilutive shares outstanding was anti-dilutive.

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The following table sets forth our computation of basic and diluted net loss per common share (amounts in thousands, except per share amounts):

	Three Months Ended						Six Months Ended
	July 31,						July 31,
	2016			2015			2016			2015
Net loss	$	(26,884	)	$	(5,027	)	$	(35,791	)	$	(14,852	)
Weighted average shares used in computing net loss per share - basic and diluted		35,115			33,350			34,739			33,339
Net loss per share:
Basic	$	(0.77	)	$	(0.16	)	$	(1.03	)	$	(0.45	)
Diluted	$	(0.77	)	$	(0.16	)	$	(1.03	)	$	(0.45	)

The number of common shares used in the computation of diluted net loss per share for the three and six months ended July 31, 2016 and 2015 does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive (amounts in thousands):

	Three Months Ended				Six Months Ended
	July 31,				July 31,
	2016		2015		2016		2015
Stock options		1,633		1,526		1,284		1,468
Restricted stock units		827		179		845		152
Deferred stock units		45		18		42		12
Total		2,505		1,723		2,171		1,632

14. Recent Accounting Standard Updates

We consider the applicability and impact of all ASUs. Updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

Recently Issued Accounting Standard Updates – Not Yet Adopted

Revenue from Contracts with Customers (Topic 606)

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and the International Financial Reporting Standards. This guidance supersedes previously issued guidance on revenue recognition and gives a five step process an entity should follow so that the entity recognizes revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date of this guidance to annual reporting periods beginning after December 15, 2017, which would be our fiscal 2019 reporting period. It must be applied either retrospectively during each prior reporting period presented or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of the initial application. Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date for ASU 2016-08 is the same as the effective date for ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

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In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” ASU 2016-10 provides clarification on two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improve the guidance for determining whether promises are separately identifiable. The effective date of ASU 2016-10 is the same as the effective date for ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 600): Narrow-Scope Improvements and Practical Expedients.” ASU 2016 clarifies aspects of ASU 2014-09, including clarifying noncash consideration, and provides a practical expedient for reflecting contract modifications at transition. The effective date of ASU 2016-12 is the same as the effective date of ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability for operating leases with terms over twelve months, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. It also requires lessees to classify leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. ASU 2016-02 is effective for us in the first quarter of fiscal 2020. Early adoption is permitted. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

Stock Compensation

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statements of cash flows. ASU 2016-09 is effective for us in the first quarter of fiscal 2018. Early adoption is permitted. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. The following information should be read in conjunction with the unaudited consolidated financial information and the notes thereto included in this Form 10-Q. You should not place undue reliance on these forward-looking statements. Actual events or results may differ materially due to competitive factors and other factors referred to in Part I, Item 1A. “Risk Factors” in our Form 10-K for our fiscal year ended January 31, 2016 and elsewhere in this Form 10-Q. These factors may cause our actual results to differ materially from any forward-looking statement. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate, and management’s beliefs and assumptions. We undertake no obligation to publicly update or revise the statements in light of future developments. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “project,” or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict.

Business Overview

We are an industry leader in the delivery of multiscreen video, advertising and premium over the top (“OTT”) video headquartered in Acton, Massachusetts. Our products and services facilitate the aggregation, licensing, management and distribution of video and advertising content for cable television system operators, telecommunications companies, satellite operators and media companies. We currently operate under one reporting segment.

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We continue to address what we see as the continuing rise of OTT services by such companies as Netflix, Hulu and Amazon and by media companies such as HBO, CBS and BBC. This rise of OTT video services in the United States has increased the demand for multiscreen capabilities on a range of consumer devices operating on cloud-based platforms. We have been increasing our strategic investments in research and development related to our cloud-based offerings, as well as in sales and marketing as we work to increase our go-to-market efforts in this area.

We continue to invest in our Rave premium OTT platform (“Rave”), which is our cloud-based software-as-a-service (“SaaS”) offering that permits service providers and media companies to offer features and functions through a service hosted and managed by SeaChange, reducing cost and increasing speed and ease of use for end-users. We believe that by delivering innovative solutions to both our existing customer base and to content owners that are looking to provide OTT services, we can meet their growing needs and help them get to market faster, which will help them drive new revenue growth. Recognizing the importance of OTT, we have architected our cloud solutions and products to make integrating with existing networks simple and a core competency of our platform. We have optimized our software solutions to serve a wide range of consumer devices.

We expect an increase in software sales in the United States and EMEA in the second half of 2017. We also believe that we have the opportunity for continued revenue growth by expanding our sales efforts in new geographic areas such as Asia Pacific and Latin America. We also believe that our existing service operator customers will continue upgrading to new features that enable the capacity to increase average revenue per subscriber, reduced operating and capital expenses, and lower customer churn.

We continue to experience fluctuations in our revenues from period to period due to the following factors:

• Budgetary approvals by our customers for capital purchases;

• The ability of our customers to process the purchase order within their organization in a timely manner;

• The time required to deliver and install the product and for the customer to accept the product and services;

• Changes in estimated times to complete long-term projects;

• Uncertainty caused by potential consolidation in the industry;

• Timing of our customers in selecting programs to launch our services to their end users; and

• Changes in foreign exchange rates.

These, together with other factors, could result in the reduction in sales of our products, longer sales cycles, difficulties in collection of accounts receivable, a longer period of time before we may recognize revenue attributable to a sale, changes in cost estimates in long-term contracts which could result in a loss provision, gross margin deterioration, slower adoption of new technologies, the transition to SaaS, and an increase in price competition.

On February 2, 2015, we acquired TLL, LLC (“Timeline Labs”), a California-based SaaS company. In January 2016, our Board of Directors authorized a restructuring plan (including a possible winding down of the Timeline Labs operations), as previously reported in a Form 8-K filed with the SEC on February 17, 2016. Based on the decision to enter into the restructuring plan and the plan’s impact on the projected future cash flows of the Timeline Labs operations, we determined that the carrying amount of all long-term assets that resulted from the February 2015 acquisition had exceeded their fair value as of January 31, 2016. As a result, these long-term assets were deemed fully impaired and we recorded the $21.9 million net book value of these long-term assets as a component of loss on impairment of TLL, LLC net assets in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016. Additionally, we reduced the contingent consideration liability associated with the Timeline Labs acquisition to zero, as we determined that the defined performance criteria would not be achieved, and credited the reversal of the liability of $0.4 million to loss on impairment of TLL, LLC net assets in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016. In February 2016, we implemented cost-saving actions related to the restructuring plan resulting in charges of $0.7 million related to severance paid to former TLL, LLC employees and facility closings. See Note 4, “Acquisitions and Loss on Impairment,” to our consolidated financial statements for more information.

Effective April 6, 2016, Edward Terino, who previously served as our Chief Operating Officer, was appointed Chief Executive Officer (“CEO”) of SeaChange, following the termination of the employment of Jay Samit as CEO, as previously reported in a Current Report on Form 8-K filed with the SEC on April 7, 2016.

On May 5, 2016 we acquired a 100% share of DCC Labs in exchange for an aggregate of $2.6 million in newly issued shares of SeaChange common stock and $5.2 million in cash, net of cash acquired, resulting in a total net purchase price of $7.9 million. DCC Labs is a developer of set-top and multiscreen device software. Of the total consideration, $0.5 million in cash and all of the stock is initially held in escrow as security for the indemnification obligations of the former

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DCC Labs owners to SeaChange under the purchase agreement. The stock consideration is determined by dividing the total value of $2.6 million by the volume weighted average closing price of our common stock for the twenty trading days preceding the closing.

The acquisition of DCC Labs enables us to optimize the operations of our In Home business, which is our developer of deployed software solutions including the SeaChange Nucleus home video gateway. In addition, the acquisition brings market-ready products, including an optimized television software stack for Europe’s Digital Video Broadcasting community, and an HTML5 framework for building future-proof user interfaces for CPE devices.

In conjunction with the DCC Labs acquisition, SeaChange commenced a workforce reduction within its In Home engineering and services organization, which we anticipate will achieve approximately $8 million in annualized cost savings. This initial reduction in workforce resulted in aggregate charges of $1.5 million in severance and other restructuring costs during the first half of fiscal 2017. Once we complete our integration plan, any further reduction in workforce may result in additional restructuring charges.

Effective July 6, 2016, Peter Faubert was appointed Chief Financial Officer (“CFO”) of SeaChange, following the resignation of Anthony Dias as CFO, as previously reported in a Current Report on Form 8-K filed with the SEC on July 7, 2016.

We recorded an income tax provision of $14.6 million and $14.8 million for the three and six months ended July 31, 2016, respectively, primarily relating to deferred income tax expense of $14.7 million related to the undistributed foreign earnings of certain of our foreign subsidiaries. Prior to the end of the second quarter of fiscal 2017, we asserted that the undistributed earnings of all our foreign subsidiaries were permanently reinvested and, accordingly were not subject to U.S. income taxes. In the second quarter of fiscal 2017, following a review of our operations, liquidity and funding, and investment in our product roadmap, we determined that the ability to access certain amounts of foreign earnings would provide greater flexibility to meet the Company’s working capital needs. Accordingly, in the second quarter of fiscal 2017, we withdrew the permanent reinvestment assertion on $58.6 million of earnings generated by our Irish operations through July 2016, and recorded a deferred tax liability of $14.7 million related to the foreign income on the $58.6 million of undistributed earnings. There is no certainty as to the timing of when such foreign earnings will be distributed to the United States in whole or in part. In addition, when the foreign earnings are distributed to the United States, we anticipate that a substantial portion of the resulting U.S. income taxes would be reduced by existing tax attributes.

Results of Operations

The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.

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Revenues

The following table summarizes information about our revenues for the three and six months ended July 31, 2016 and 2015:

	Three Months Ended						Increase/			Increase/			Six Months Ended						Increase/			Increase/
	July 31,						(Decrease)			(Decrease)			July 31,						(Decrease)			(Decrease)
	2016			2015			$ Amount			% Change			2016			2015			$ Amount			% Change
	(Amounts in thousands, except for percentage data)
Revenues:
Product	$	2,535		$	6,955		$	(4,420	)		(63.6	%)	$	6,735		$	10,119		$	(3,384	)		(33.4	%)
Service		15,917			20,916			(4,999	)		(23.9	%)		33,287			40,929			(7,642	)		(18.7	%)
Total revenues		18,452			27,871			(9,419	)		(33.8	%)		40,022			51,048			(11,026	)		(21.6	%)
Cost of product revenues		1,190			1,753			(563	)		(32.1	%)		2,847			3,611			(764	)		(21.2	%)
Cost of service revenues		9,806			11,691			(1,885	)		(16.1	%)		20,570			22,894			(2,324	)		(10.1	%)
Total cost of revenues		10,996			13,444			(2,448	)		(18.2	%)		23,417			26,505			(3,088	)		(11.7	%)
Gross profit	$	7,456		$	14,427		$	(6,971	)		(48.3	%)	$	16,605		$	24,543		$	(7,938	)		(32.3	%)
Gross product profit margin		53.0	%		74.8	%					(21.8	%)		57.7	%		64.3	%					(6.6	%)
Gross service profit margin		38.4	%		44.1	%					(5.7	%)		38.2	%		44.1	%					(5.9	%)
Gross profit margin		40.4	%		51.8	%					(11.4	%)		41.5	%		48.1	%					(6.6	%)

Product Revenue. The decrease in product revenue for the three and six months ended July 31, 2016 of $4.4 million and $3.4 million, respectively, was primarily due to a $1.8 million decrease and a $2.7 million decrease in hardware revenue for the three and six months ended July 31, 2016, as compared to the same periods of fiscal 2016. Also, there was a $2.1 million decrease and $0.8 million decrease in our video platform revenue during the same period. We had two opportunities that we expected to close during the second quarter of fiscal 2017 totaling $2.4 million that got delayed by customers. We expect those opportunities to close in the second half of the year.

Service Revenue. Service revenue decreased $5.0 million for the three months ended July 31, 2016, and decreased $7.6 million for the six months ended July 31, 2016, as compared to the same periods of fiscal 2016. The decline was primarily due to less revenue recognized under the percentage of completion accounting method during the three and six months ended July 31, 2016. An evaluation of our existing percentage of completion contracts was performed and resulted in an increase in the estimated time to complete active statements of work. Additionally, there was a decrease in professional services related to our In Home business, mainly from several customers in North America and two European customers.

During the three and six months ended July 31, 2016, one customer accounted for more than 10% of our total revenue. Three and two customers accounted for more than 10% of our total revenue during the three and six months ended July 31, 2015, respectively. See Note 11, “Segment Information, Significant Customers and Geographic Information,” to our consolidated financial statements for more information.

International sales accounted for 64% and 58% of total revenues in the three months ended July 31, 2016 and 2015, respectively. For the six months ended July 31, 2016 and 2015, international sales accounted for 62% and 54% of total revenues. The increase in the international sales as a percentage of total revenue for the three and six months ended July 31, 2016, as compared to the same prior period is primarily due to a 43% and 36% decrease in domestic revenue, respectively.

Gross Profit and Margin. Cost of revenues consists primarily of the cost of resold third-party products and services, purchased components and subassemblies, labor and overhead relating to the assembly and testing of complete systems and costs related to customized software development contracts.

Our gross profit margin decreased 11 percentage points for the three months ended July 31, 2016, as compared to the same period of the prior fiscal year and decreased seven percentage points for the six months. Product gross margin decreased 22 percentage points for the three months and seven percentage points for the six months ended July 31, 2016, as compared to the same period in the prior fiscal year due to lower hardware and license revenue. Service profit margins

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decreased six percentage points for the three and six months ended July 31, 2016, as compared to the same periods of 2015, reflecting the lower utilization of our Americas professional services organization and the revised estimated hours to complete one project accounted for on the percentage of completion basis mentioned above. As a result of this revision, we incurred costs with no related revenue in the second quarter of fiscal 2017.

Operating Expenses

Research and Development

The following table provides information regarding the change in research and development expenses during the periods presented:

	Three Months Ended						Increase/			Increase/			Six Months Ended						Increase/			Increase/
	July 31,						(Decrease)			(Decrease)			July 31,						(Decrease)			(Decrease)
	2016			2015			$ Amount			% Change			2016			2015			$ Amount			% Change
	(Amounts in thousands, except for percentage data)
Research and development expenses	$	7,727		$	8,370		$	(643	)		(7.7	%)	$	16,426		$	17,903		$	(1,477	)		(8.3	%)
% of total revenues		41.9	%		30.0	%								41.0	%		35.1	%

Research and development expenses consist primarily of employee costs, which include salaries, benefits and related payroll taxes, depreciation of development and test equipment and an allocation of related facility expenses. During the three and six months ended July 31, 2016, research and development costs decreased $0.6 million and $1.5 million, respectively, as compared to the same periods of fiscal 2016, primarily due to lower labor costs and a decrease in headcount relating to the Timeline Labs restructuring in February 2016 and to the previously announced actions taken in January 2015, which were implemented during fiscal 2016. These restructuring efforts would have resulted in a higher decrease in our research and development costs period over period if we did not capitalize $0.8 million and $1.4 million of costs related to the development of our internal-use software in the three and six months ended July 31, 2015, respectively, which has since been put into service.

Selling and Marketing

The following table provides information regarding the change in selling and marketing expenses during the periods presented:

	Three Months Ended						Increase/		Increase/			Six Months Ended						Increase/		Increase/
	July 31,						(Decrease)		(Decrease)			July 31,						(Decrease)		(Decrease)
	2016			2015			$ Amount		% Change			2016			2015			$ Amount		% Change
	(Amounts in thousands, except for percentage data)
Selling and marketing expenses	$	3,862		$	3,630		$	232		6.4	%	$	7,419		$	7,298		$	121		1.7	%
% of total revenues		20.9	%		13.0	%							18.5	%		14.3	%

Selling and marketing expenses consist primarily of payroll costs, which include salaries and related payroll taxes, benefits and commissions, travel expenses and certain promotional expenses. Selling and marketing expenses increased $0.2 million and $0.1 million for the three and six months ended July 31, 2016, respectively, primarily due to an increase in marketing payroll costs resulting from the addition of DCC Labs in May 2016 and to the hiring of a new Senior Vice President of marketing in February 2016. These increases were offset by a decrease in the sales group headcount and commissions in fiscal 2017.

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General and Administrative

The following table provides information regarding the change in general and administrative expenses during the periods presented:

	Three Months Ended						Increase/			Increase/			Six Months Ended						Increase/		Increase/
	July 31,						(Decrease)			(Decrease)			July 31,						(Decrease)		(Decrease)
	2016			2015			$ Amount			% Change			2016			2015			$ Amount		% Change
	(Amounts in thousands, except for percentage data)
General and administrative expenses	$	3,835		$	3,911		$	(76	)		(1.9	%)	$	7,906		$	7,798		$	108		1.4	%
% of total revenues		20.8	%		14.0	%								19.8	%		15.3	%

General and administrative expenses consist primarily of employee costs, which include salaries and related payroll taxes and benefit-related costs, legal and accounting services and an allocation of related facilities expenses. General and administrative expenses remained relatively stable for the three and six months ended July 31, 2016, respectively, when compared to the same periods of fiscal 2016. The decrease in the estimated fiscal 2017 bonus resulting from the departure of our former CEO and CFO, as well as management’s decision to decrease the fiscal 2017 bonus accrual, was offset by an increase in professional and legal fees.

Amortization of Intangible Assets

The following table provides information regarding the change in amortization of intangible assets expenses during the periods presented:

	Three Months Ended						Increase/			Increase/			Six Months Ended						Increase/			Increase/
	July 31,						(Decrease)			(Decrease)			July 31,						(Decrease)			(Decrease)
	2016			2015			$ Amount			% Change			2016			2015			$ Amount			% Change
	(Amounts in thousands, except for percentage data)
Amortization of intangible assets	$	898		$	1,216		$	(318	)		(26.2	%)	$	1,664		$	2,338		$	(674	)		(28.8	%)
% of total revenues		4.9	%		4.4	%								4.2	%		4.6	%

Amortization expense relates to the costs of acquired intangible assets and capitalized internally-developed software costs. The decrease in amortization expense for the three and six months ended July 31, 2016, as compared to the same periods of fiscal 2016, is primarily due to the impairment of intangible assets related to our acquisition of Timeline Labs recorded in fiscal 2016 and to fully amortized intangible assets offset by an increase in amortization expense on our capitalized internally-developed software which was put into service at the end of fiscal 2016 and to the addition of amortization of intangible assets related to our acquisition of DCC Labs in May 2016.

Stock-based Compensation Expense

The following table provides information regarding the change in stock-based compensation expense during the periods presented:

	Three Months Ended						Increase/			Increase/			Six Months Ended						Increase/			Increase/
	July 31,						(Decrease)			(Decrease)			July 31,						(Decrease)			(Decrease)
	2016			2015			$ Amount			% Change			2016			2015			$ Amount			% Change
	(Amounts in thousands, except for percentage data)
Stock-based compensation expense	$	939		$	1,156		$	(217	)		(18.8	%)	$	1,051		$	1,867		$	(816	)		(43.7	%)
% of total revenues		5.1	%		4.1	%								2.6	%		3.7	%

Stock-based compensation expense is related to the issuance of stock grants to our employees, executives and members of our Board of Directors. Stock-based compensation expense decreased $0.2 million for the three months ended July 31, 2016, as compared to the same period in fiscal 2016 primarily due to the decision of certain employees to take cash in

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lieu of restricted stock units for their fiscal 2016 incentive compensation. The $0.8 million decrease in stock-based compensation expense during the six months ended July 31, 2016, as compared to the same periods of fiscal 2016, is primarily due to the reversal of previously recognized stock compensation expense on our former CEO’s market-based stock options of $0.8 million and to certain employees electing, as contemplated by the original incentive plan established in May 2015, a discounted cash payment in lieu of restricted stock units for their fiscal 2016 incentive compensation, resulting in a decrease of $0.4 million. These decreases are partially offset by stock compensation expense on stock options granted in fiscal 2017 of $0.3 and the addition of stock compensation expense of $0.2 million recorded on performance stock units issued at the end of fiscal 2016.

Severance and Other Restructuring Costs

The following table provides information regarding the change in severance and other restructuring costs during the periods presented:

	Three Months Ended						Increase/		Increase/			Six Months Ended						Increase/		Increase/
	July 31,						(Decrease)		(Decrease)			July 31,						(Decrease)		(Decrease)
	2016			2015			$ Amount		% Change			2016			2015			$ Amount		% Change
	(Amounts in thousands, except for percentage data)
Severance and other restructuring costs	$	1,843		$	617		$	1,226		>100	%	$	3,618		$	829		$	2,789		>100	%
% of total revenues		10.0	%		2.2	%							9.0	%		1.6	%

Severance and other restructuring costs increased $1.2 million for the three months ended July 31, 2016, as compared to the same period of fiscal 2016, primarily due to restructuring charges of $1.5 million recorded during the quarter related to the reduction in workforce in our In Home engineering and services organization in conjunction with our acquisition of DCC Labs in May 2016 and to severance charges not related to a restructuring plan of $0.4 million, including severance related to our former CFO. Severance and other restructuring costs for the three months ended July 31, 2015 of $0.6 million included severance for a former General Manager of our EMEA operations.

Severance and other restructuring costs increased $2.8 million for the six months ended July 31, 2016, as compared to the same period of fiscal 2016, primarily due to restructuring activities relating to our Timeline Labs operation and DCC Labs acquisition, which resulted in charges totaling $2.2 million recorded during the first half of fiscal 2017. In addition, severance charges not related to a restructuring plan of $1.4 million, which included the $1.0 million severance to our former CEO and severance to our former CFO, were recorded in fiscal 2017. Severance and other restructuring costs for the six months ended July 31, 2015 of $0.8 million included severance for a former General Manager of our EMEA operations and nine other former employees.

On August 23, 2016, we announced that we intend to implement additional company-wide cost savings initiatives in our third quarter.

Earn-outs and Change in Fair Value of Earn-outs

The following table provides information regarding the change in earn-outs and change in fair value of earn-outs during the periods presented:

	Three Months Ended						Increase/			Increase/			Six Months Ended						Increase/			Increase/
	July 31,						(Decrease)			(Decrease)			July 31,						(Decrease)			(Decrease)
	2016			2015			$ Amount			% Change			2016			2015			$ Amount			% Change
	(Amounts in thousands, except for percentage data)
Earn-outs and change in fair value of earn-outs	$	249		$	481		$	(232	)		(48.2	%)	$	249		$	983		$	(734	)		(74.7	%)
% of total revenues		1.3	%		1.7	%								0.6	%		1.9	%

The $0.2 million and $0.7 million decreases in earn-outs costs for the three and six months ended July 31, 2016, compared to the same periods of last fiscal year are due to the determination made in January 2016 that the performance criteria defined in accordance with the Timeline Labs acquisition, would not be achieved. Therefore, no further adjustment to the fair value was necessary in fiscal 2017. However, in the second quarter of fiscal 2017, a charge was

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recorded that represents the fair value (at the issuance date) of additional shares issued to the former holders of Timeline Labs pursuant to the terms of the Timeline Labs purchase agreement based on our stock price at the time of deferred stock consideration issuances.

Other (Expenses) Income, Net

The table below provides detail regarding our other (expenses) income, net:

	Three Months Ended						Increase/			Increase/			Six Months Ended					Increase/			Increase/
	July 31,						(Decrease)			(Decrease)			July 31,					(Decrease)			(Decrease)
	2016			2015			$ Amount			% Change			2016		2015			$ Amount			% Change
	(Amounts in thousands, except for percentage data)
Interest income, net	$	38		$	46		$	(8	)		(17.4	%)	$	77	$	78		$	(1	)		(1.3	%)
Foreign exchange (loss) gain		(676	)		(256	)		(420	)		>(100	%)		198		(542	)		740			>100	%
Miscellaneous income		3			11			(8	)		(72.7	%)		12		36			(24	)		(66.7	%)
	$	(635	)	$	(199	)	$	(436	)				$	287	$	(428	)	$	715

For the three months ended July 31, 2016, foreign exchange losses increased by $0.4 million, as compared to the same period of fiscal 2016 due to the strengthening of the U.S. dollar compared to other foreign currencies, primarily the British Pound and Euro. Foreign exchange losses decreased $0.7 million for the six months ended July 31, 2016 to become a foreign exchange gain of $0.2 million, primarily due to the weakening of the U.S. dollar compared to other foreign currencies, primarily the British Pound and Euro.

Income Tax Provision

	Three Months Ended						Increase/		Increase/			Six Months Ended						Increase/		Increase/
	July 31,						(Decrease)		(Decrease)			July 31,						(Decrease)		(Decrease)
	2016			2015			$ Amount		% Change			2016			2015			$ Amount		% Change
	(Amounts in thousands, except for percentage data)
Income tax provision (benefit)	$	14,581		$	78		$	14,503		>100	%	$	14,835		$	225		$	14,610		>100	%
% of total revenues		79.0	%		0.3	%							37.1	%		0.4	%

We recorded an income tax provision of $14.6 million and $14.8 million for the three and six months ended July 31, 2016, respectively, primarily relating to deferred income tax expense of $14.7 million related to the change in assertion regarding the undistributed foreign earnings of certain of our foreign subsidiaries. Our effective tax rate in fiscal 2017 and in future periods may fluctuate on a quarterly basis as a result of changes in our jurisdictional forecasts where losses cannot be benefitted due to the existence of valuation allowances on our deferred tax assets, changes in actual results versus our estimates, or changes in tax laws, regulations, accounting principles, or interpretations thereof.

Our foreign subsidiaries generate earnings that are not subject to U.S. income taxes so long as they are permanently reinvested in our operations outside of the U.S. Pursuant to Accounting Standard Codification Topic No. 740-30, “Income Taxes – Other Considerations or Special Areas,” undistributed earnings of foreign subsidiaries that are no longer permanently reinvested would become subject to deferred income taxes under U.S. tax law. Prior to the second quarter of fiscal 2017, we asserted that the undistributed earnings of all our foreign subsidiaries were permanently reinvested.

In the second quarter of fiscal 2017, following a review of our operations, liquidity and funding, and investment in our product roadmap, we determined that the ability to access certain amounts of foreign earnings would provide greater flexibility to meet the Company’s working capital needs. Accordingly, in the second quarter of fiscal 2017, we withdrew the permanent reinvestment assertion on $58.6 million of earnings generated by our Irish operations through July 2016. We recorded a deferred tax liability of $14.7 million related to the foreign income taxes on $58.6 million of undistributed earnings.

There is no certainty as to the timing of when such foreign earnings will be distributed to the United States in whole or in part. Further, when the foreign earnings are distributed to the United States, we anticipate that a substantial portion of the resulting U.S. income taxes would be reduced by existing tax attributes.

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We have not provided for U.S. federal or foreign income taxes on $5.8 million of our non-U.S. subsidiaries’ undistributed earnings as of July 31, 2016. The $5.8 million of undistributed foreign earnings have been reinvested in our foreign operations, as we have determined that these earnings are necessary to support our planned ongoing investments in our foreign operations, and as a result, these earnings remain indefinitely reinvested in those operations. In making this decision, we considered cash needs for: investing in our existing businesses, potential acquisitions and capital transactions.

The Company reviews all available evidence to evaluate the recovery of deferred tax assets, including the recent history of losses in all tax jurisdictions, as well as its ability to generate income in future periods. As of July 31, 2016, due to the uncertainty related to the ultimate use of certain deferred income tax assets, the Company has recorded a valuation allowance on certain of its deferred assets.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign jurisdictions. We have closed out an audit with the Internal Revenue Service (“IRS”) through fiscal 2013, however, the taxing authorities will still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers.

Non-GAAP Measures.

We define non-GAAP income (loss) from operations as U.S. GAAP operating loss plus stock-based compensation expenses, amortization of intangible assets, earn-outs and change in fair value of earn-outs, professional fees – other and severance and other restructuring costs. We discuss non-GAAP income (loss) from operations in our quarterly earnings releases and certain other communications as we believe non-GAAP operating income (loss) from operations is an important measure that is not calculated according to U.S. GAAP. We use non-GAAP income (loss) from operations in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our Board of Directors, determining a component of bonus compensation for executive officers and other key employees based on operating performance and evaluating short-term and long-term operating trends in our operations. We believe that non-GAAP income (loss) from operations financial measure assists in providing an enhanced understanding of our underlying operational measures to manage the business, to evaluate performance compared to prior periods and the marketplace, and to establish operational goals. We believe that the non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making.

Non-GAAP income (loss) from operations is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with U.S. GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenses similar to the financial adjustments described above in arriving at non-GAAP income (loss) from operations and investors should not infer from our presentation of this non-GAAP financial measure that these costs are unusual, infrequent or non-recurring.

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The following table includes the reconciliations of our U.S. GAAP loss from operations, the most directly comparable U.S. GAAP financial measure, to our non-GAAP income (loss) from operations for the three and six months ended July 31, 2016 and 2015 (amounts in thousands, except per share and percentage data):

	Three Months Ended									Three Months Ended
	July 31, 2016									July 31, 2015
	GAAP									GAAP
	As Reported			Adjustments			Non- GAAP			As Reported			Adjustments			Non- GAAP
Revenues:
Products	$	2,535		$	—		$	2,535		$	6,955		$	—		$	6,955
Services		15,917			—			15,917			20,916			—			20,916
Total revenues		18,452			—			18,452			27,871			—			27,871
Cost of revenues:
Products		1,108			—			1,108			1,561			—			1,561
Services		9,487			—			9,487			11,663			—			11,663
Amortization of intangible assets		316			(316	)		—			192			(192	)		—
Stock-based compensation		85			(85	)		—			28			(28	)		—
Total cost of revenues		10,996			(401	)		10,595			13,444			(220	)		13,224
Gross profit		7,456			401			7,857			14,427			220			14,647
Gross profit percentage		40.4	%		2.2	%		42.6	%		51.8	%		0.8	%		52.6	%
Operating expenses:
Research and development		7,727			—			7,727			8,370			—			8,370
Selling and marketing		3,862			—			3,862			3,630			—			3,630
General and administrative		3,835			—			3,835			3,911			—			3,911
Amortization of intangible assets		582			(582	)		—			1,024			(1,024	)		—
Stock-based compensation expense		854			(854	)		—			1,128			(1,128	)		—
Earn-outs and change in fair value of earn-outs		249			(249	)		—			481			(481	)		—
Professional fees: other		172			(172	)		—			16			(16	)		—
Severance and other restructuring costs		1,843			(1,843	)		—			617			(617	)		—
Total operating expenses		19,124			(3,700	)		15,424			19,177			(3,266	)		15,911
(Loss) income from operations	$	(11,668	)	$	4,101		$	(7,567	)	$	(4,750	)	$	3,486		$	(1,264	)
(Loss) income from operations percentage		(63.2	%)		22.2	%		(41.0	%)		(17.0	%)		12.5	%		(4.5	%)
Weighted average common shares outstanding:
Basic		35,115			35,115			35,115			33,350			33,350			33,350
Diluted		35,115			35,171			35,115			33,350			33,546			33,350
Non-GAAP operating (loss) income per share:
Basic	$	(0.33	)	$	0.12		$	(0.21	)	$	(0.14	)	$	0.10		$	(0.04	)
Diluted	$	(0.33	)	$	0.12		$	(0.21	)	$	(0.14	)	$	0.10		$	(0.04	)

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	Six Months Ended									Six Months Ended
	July 31, 2016									July 31, 2015
	GAAP						Non-			GAAP						Non-
	As Reported			Adjustments			GAAP			As Reported			Adjustments			GAAP
Revenues:
Products	$	6,735		$	—		$	6,735		$	10,119		$	—		$	10,119
Services		33,287			—			33,287			40,929			—			40,929
Total revenues		40,022			—			40,022			51,048			—			51,048
Cost of revenues:
Products		2,682			—			2,682			3,238			—			3,238
Services		19,946			—			19,946			22,866			—			22,866
Amortization of intangible assets		632			(632	)		—			373			(373	)		—
Stock-based compensation		157			(157	)		—			28			(28	)		—
Total cost of revenues		23,417			(789	)		22,628			26,505			(401	)		26,104
Gross profit		16,605			789			17,394			24,543			401			24,944
Gross profit percentage		41.5	%		2.0	%		43.5	%		48.1	%		0.8	%		48.9	%
Operating expenses:
Research and development		16,426			—			16,426			17,903			—			17,903
Selling and marketing		7,419			—			7,419			7,298			—			7,298
General and administrative		7,906			—			7,906			7,798			—			7,798
Amortization of intangible assets		1,032			(1,032	)		—			1,965			(1,965	)		—
Stock-based compensation expense		894			(894	)		—			1,839			(1,839	)		—
Earn-outs and change in fair value of earn-outs		249			(249	)		—			983			(983	)		—
Professional fees: other		304			(304	)		—			144			(144	)		—
Severance and other restructuring costs		3,618			(3,618	)		—			829			(829	)		—
Total operating expenses		37,848			(6,097	)		31,751			38,759			(5,760	)		32,999
(Loss) income from operations	$	(21,243	)	$	6,886		$	(14,357	)	$	(14,216	)	$	6,161		$	(8,055	)
(Loss) income from operations percentage		(53.1	%)		17.2	%		(35.9	%)		(27.8	%)		12.0	%		(15.8	%)
Weighted average common shares outstanding:
Basic		34,739			34,739			34,739			33,339			33,339			33,339
Diluted		34,739			34,804			34,739			33,339			33,512			33,339
Non-GAAP operating (loss) income per share:
Basic	$	(0.61	)	$	0.20		$	(0.41	)	$	(0.42	)	$	0.18		$	(0.24	)
Diluted	$	(0.61	)	$	0.20		$	(0.41	)	$	(0.42	)	$	0.18		$	(0.24	)

The changes in the tables above during the three and six months ended July 31, 2016, compared to the same periods of 2015, were a result of the factors described in connection with revenues and operating expenses under Item 2. “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Results of Operations,” of this Form 10-Q.

In managing and reviewing our business performance, we exclude a number of items required by U.S. GAAP. Management believes that excluding these items is useful in understanding the trends and managing our operations. We provide these supplemental non-GAAP measures in order to assist the investment community to see SeaChange through the “eyes of management,” and therefore enhance the understanding of SeaChange’s operating performance. Non-GAAP financial measures should be viewed in addition to, not as an alternative to, our reported results prepared in accordance with U.S. GAAP. Our non-GAAP financial measures reflect adjustments based on the following items:

Amortization of Intangible Assets. We incur amortization expense of intangible assets related to various acquisitions that have been made in recent years. These intangible assets are valued at the time of acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition. We believe that exclusion of these expenses allows comparisons of operating results that are consistent over time for the Company’s newly-acquired and long-held businesses.

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Stock-based Compensation Expense. We incur expenses related to stock-based compensation included in our U.S. GAAP presentation of cost of revenues and operating expenses. Although stock-based compensation is an expense we incur and is viewed as a form of compensation, the expense varies in amount from period to period, and is affected by market forces that are difficult to predict and are not within the control of management, such as the market price and volatility of our shares, risk-free interest rates and the expected term and forfeiture rates of the awards.

Earn-outs and Change in Fair Value of Earn-outs. Earn-outs and the change in the fair value of earn-outs are considered by management to be non-recurring expenses to the former shareholders of the businesses we acquire. We also incur expenses due to changes in fair value related to contingent consideration that we believe would otherwise impair comparability among periods.

Professional Fees - Other. We have excluded the effect of legal and other professional costs associated with our acquisitions, divestitures, litigation and strategic alternatives because the amounts are considered significant non-operating expenses.

Severance and Other Restructuring Costs. We incur charges due to the restructuring of our business, including severance charges and facility charges resulting from our restructuring and streamlining efforts and any changes due to revised estimates, which we generally would not have otherwise incurred in the periods presented as part of our continuing operations.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Liquidity and Capital Resources

The following table includes key line items of our consolidated statements of cash flows:

	Six Months Ended						Increase/
	July 31,						(Decrease)
	2016			2015			$ Amount
	(Amounts in thousands)
Total cash used in operating activities	$	(14,188	)	$	(18,199	)	$	4,011
Total cash used in investing activities		(5,477	)		(11,933	)		6,456
Total cash provided by financing activities		29			20			9
Effect of exchange rate changes on cash		(431	)		653			(1,084	)
Net decrease in cash and cash equivalents	$	(20,067	)	$	(29,459	)	$	9,392

Historically, we have financed our operations and capital expenditures primarily with cash on-hand. Cash, cash equivalents, restricted cash, and marketable securities decreased from $71.1 million at January 31, 2016 to $50.9 million at July 31, 2016.

We had a letter agreement with JP Morgan Chase Bank, N.A. (“JP Morgan”) for a demand discretionary line of credit and a Demand Promissory Note in the aggregate amount of $20.0 million, which expired on August 31, 2016 with no outstanding balance. This line of credit and Demand Promissory Note was not renewed.

We believe that existing funds and cash provided by future operating activities are adequate to satisfy our working capital, potential acquisitions and capital expenditure requirements and other contractual obligations for the foreseeable future, including at least the next 12 months. However, if our expectations are incorrect, we may need to raise additional funds to fund our operations, to take advantage of unanticipated strategic opportunities or to strengthen our financial position. In the future, we may enter into other arrangements for potential investments in, or acquisitions of, complementary businesses, services or technologies, which could require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable.

In addition, we actively review potential acquisitions that would complement our existing product offerings, enhance our technical capabilities or expand our marketing and sales presence. Any future transaction of this nature could require potentially significant amounts of capital or could require us to issue our stock and dilute existing stockholders. If adequate funds are not available, or are not available on acceptable terms, we may not be able to take advantage of market opportunities, to develop new products or to otherwise respond to competitive pressures.

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In the second quarter of fiscal 2017, following a review of our operations, liquidity and funding, and investment in our product roadmap, we determined that the ability to access cash resulting from earnings in prior fiscal years that had previously been deemed permanently restricted for foreign investment would provide greater flexibility to meet the Company’s working capital needs. Accordingly, in the second quarter of fiscal 2017, we withdrew the permanent reinvestment assertion on $58.6 million of earnings generated by our Irish operations through July 2016. We recorded a deferred tax liability of $14.7 million related to the foreign income taxes on $58.6 million of undistributed earnings.

Operating Activities

Below are key line items affecting cash from operating activities:

	Six Months Ended						Increase/
	July 31,						(Decrease)
	2016			2015			$ Amount
	(Amounts in thousands)
Net loss	$	(35,791	)	$	(14,852	)	$	(20,939	)
Adjustments to reconcile net loss to cash used in operating activities		19,375			6,993			12,382
Net loss including adjustments		(16,416	)		(7,859	)		(8,557	)
Decrease (increase) in receivables		13,458			(4,997	)		18,455
Decrease (increase) in inventory		19			(732	)		751
Decrease (increase) in prepaid expenses and other current assets		1,053			(598	)		2,108
Decrease in accrued expenses		(5,398	)		(3,127	)		(2,728	)
Decrease in deferred revenues		(5,419	)		(1,929	)		(3,490	)
All other - net		(1,485	)		1,043			(2,528	)
Net cash used in operating activities	$	(14,188	)	$	(18,199	)	$	4,011

We used net cash in operating activities of $14.2 million for the six months ended July 31, 2016. This cash used in operating activities was primarily the result of our net loss including adjustments of $16.4 million offset by changes in working capital, which include a decrease in receivables of $13.5 million due to the timing of customer payments, offset by a decrease in accrued expenses of $5.4 million related to the payment of severance and bonuses, and a $5.4 million decrease in deferred revenue.

Investing Activities

Cash flows from investing activities are as follows:

	Six Months Ended						Increase/
	July 31,						(Decrease)
	2016			2015			$ Amount
	(Amounts in thousands)
Purchases of property and equipment	$	(403	)	$	(795	)	$	392
Investment in capitalized software		—			(1,453	)		1,453
Purchases of marketable securities		—			(2,002	)		2,002
Proceeds from sale and maturity of marketable securities		252			4,003			(3,751	)
Cash paid for acquisition of business, net of cash acquired		(5,243	)		(11,686	)		6,443
Other investing activities		(83	)		—			(83	)
Net cash used in investing activities	$	(5,477	)	$	(11,933	)	$	6,456

We used $5.5 million in cash related to investing activities primarily due to use of $5.2 million for the acquisition of DCC Labs and the purchase of capital assets of $0.4 million.

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Financing Activities

Cash flows from financing activities are as follows:

	Six Months Ended					Increase/
	July 31,					(Decrease)
	2016			2015		$ Amount
	(Amounts in thousands)
Proceeds from issuance of common stock	$	33		$	20	$	13
Other financing activities		(4	)		—		(4	)
Net cash provided by financing activities	$	29		$	20	$	9

In fiscal 2017, cash provided by financing activities is from the issuance of common stock for the exercise of employee stock options.

Effect of exchange rate changes decreased cash and cash equivalents by $0.4 million for the six months ended July 31, 2016, primarily due to the translation of European subsidiaries’ cash balances, which use the Euro as their functional currency, to U.S. dollars.

Effects of Inflation

Management believes that financial results have not been significantly impacted by inflation and price changes in materials we use in manufacturing our products.

Contractual Obligations

There have been no significant changes outside the ordinary course of our business in our contractual obligations disclosed in our Form 10-K for the fiscal year ended January 31, 2016.

Critical Accounting Policies and Significant Judgment and Estimates

The accounting and financial reporting policies of SeaChange are in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and liabilities. We evaluate our estimates on an on-going basis, including those related to revenue recognition, allowance for doubtful accounts, acquired intangible assets and goodwill, stock-based compensation, impairment of long-lived assets and accounting for income taxes. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

There have been no significant changes in our critical accounting policies during the six months ended July 31, 2016, as compared to those disclosed in our fiscal 2016 Form 10-K.

Revenue Recognition

Our transactions frequently involve the sales of hardware, software, systems and services in multiple-element arrangements. Revenues from sales of hardware, software and systems that do not require significant modification or customization of the underlying software are recognized when:

• persuasive evidence of an arrangement exists;

• delivery has occurred, and title and risk of loss have passed to the customer;

• fees are fixed or determinable; and

• collection of the related receivable is considered probable.

Customers are billed for installation, training, project management and at least one year of product maintenance and technical support at the time of the product sale. Revenue from these activities is deferred at the time of the product sale and recognized ratably over the period these services are performed. Revenue from ongoing product maintenance and technical support agreements is recognized ratably over the period of the related agreements. Revenue from software development contracts that include significant modification or customization, including software product enhancements, is recognized based on the percentage of completion contract accounting method using labor efforts expended in relation to estimates of total labor efforts to complete the contract. The percentage of completion method requires that adjustments or re-evaluations to estimated project revenues and costs be recognized on a project-to-date cumulative

37

basis, as changes to the estimates are identified. Revisions to project estimates are made as additional information becomes known, including information that becomes available subsequent to the date of the consolidated financial statements up through the date such consolidated financial statements are filed with the SEC. If the final estimated profit to complete a long-term contract indicates a loss, a provision is recorded immediately for the total loss anticipated. Accounting for contract amendments and customer change orders are included in contract accounting when executed. Revenue from shipping and handling costs and other out-of-pocket expenses reimbursed by customers are included in revenues and cost of revenues. Our share of intercompany profits associated with sales and services provided to affiliated companies are eliminated in consolidation in proportion to our equity ownership.

Contract accounting requires judgment relative to assessing risks, estimating revenues and costs and making assumptions including, in the case of our professional services contracts, the total amount of labor required to complete a project and the complexity of the development and other technical work to be completed. Due to the size and nature of many of our contracts, the estimation of total revenues and cost at completion is complicated and subject to many variables. Assumptions have to be made regarding the length of time to complete the contract because costs also include estimated third-party vendor and contract labor costs. Penalties related to performance on contracts are considered in estimating sales and profit, and are recorded when there is sufficient information for us to assess anticipated performance. Third-party vendors’ assertions are also assessed and considered in estimating costs and margin.

Revenue from the sale of software-only products remains within the scope of the software revenue recognition rules. Maintenance and support, training, consulting, and installation services no longer fall within the scope of the software revenue recognition rules, except when they are sold with and relate to a software-only product. Revenue recognition for products that no longer fall under the scope of the software revenue recognition rules is similar to that for other tangible products and Accounting Standard Update No. (“ASU”) 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements,” amended ASC 605 and is applicable for multiple-deliverable revenue arrangements. ASU 2009-13 allows companies to allocate revenue in a multiple-deliverable arrangement in a manner that better reflects the transaction’s economics.

Under the software revenue recognition rules, the fee is allocated to the various elements based on vendor-specific objective evidence (“VSOE”) of fair value. Under this method, the total arrangement value is allocated first to undelivered elements based on their fair values, with the remainder being allocated to the delivered elements. Where fair value of undelivered service elements has not been established, the total arrangement value is recognized over the period during which the services are performed. The amounts allocated to undelivered elements, which may include project management, training, installation, maintenance and technical support and certain hardware and software components, are based upon the price charged when these elements are sold separately and unaccompanied by the other elements. The amount allocated to installation, training and project management revenue is based upon standard hourly billing rates and the estimated time necessary to complete the service. These services are not essential to the functionality of systems as these services do not alter the equipment’s capabilities, are available from other vendors and the systems are standard products. For multiple-element arrangements that include software development with significant modification or customization and systems sales where VSOE of the fair value does not exist for the undelivered elements of the arrangement (other than maintenance and technical support), percentage of completion accounting is applied for revenue recognition purposes to the entire arrangement with the exception of maintenance and technical support.

Under the revenue recognition rules for tangible products as amended by ASU 2009-13, the fee from a multiple-deliverable arrangement is allocated to each of the deliverables based upon their relative selling prices as determined by a selling-price hierarchy. A deliverable in an arrangement qualifies as a separate unit of accounting if the delivered item has value to the customer on a stand-alone basis. A delivered item that does not qualify as a separate unit of accounting is combined with the other undelivered items in the arrangement and revenue is recognized for those combined

38

deliverables as a single unit of accounting. The selling price used for each deliverable is based upon VSOE if available, third-party evidence (“TPE”) if VSOE is not available, and best estimate of selling price (“BESP”) if neither VSOE nor TPE are available. TPE is the price of the Company’s, or any competitor’s, largely interchangeable products or services in stand-alone sales to similarly situated customers. BESP is the price at which we would sell the deliverable if it were sold regularly on a stand-alone basis, considering market conditions and entity-specific factors.

The selling prices used in the relative selling price allocation method for certain of our services are based upon VSOE. The selling prices used in the relative selling price allocation method for third-party products from other vendors are based upon TPE. The selling prices used in the relative selling price allocation method for our hardware products, software, subscriptions, and customized services for which VSOE does not exist are based upon BESP. We do not believe TPE exists for these products and services because they are differentiated from competing products and services in terms of functionality and performance and there are no competing products or services that are largely interchangeable. Management establishes BESP with consideration for market conditions, such as the impact of competition and geographic considerations, and entity-specific factors, such as the cost of the product, discounts provided and profit objectives. Management believes that BESP is reflective of reasonable pricing of that deliverable as if priced on a stand-alone basis.

For our cloud and managed service revenues, we generate revenue from two sources: (1) subscription and support services; and (2) professional services and other. Subscription and support revenue includes subscription fees from customers accessing our cloud-based software platform and support fees. Our arrangements with customers do not provide the customer with the right to take possession of the software supporting the cloud-based software platform at any time. Professional services and other revenue include fees from implementation and customization to support customer requirements. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. For the most part, subscription and support agreements are entered into for 12 to 36 months. Generally, a majority of the professional services component of the arrangements with customers is performed within a year of entering into a contract with the customer.

In most instances, revenue from a new customer acquisition is generated under sales agreements with multiple elements, comprised of subscription and support and other professional services. We evaluate each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within our control.

In determining when to recognize revenue from a customer arrangement, we are often required to exercise judgment regarding the application of our accounting policies to a particular arrangement. The primary judgments used in evaluating revenue recognized in each period involve: determining whether collection is probable, assessing whether the fee is fixed or determinable, and determining the fair value of the maintenance and service elements included in multiple-element software arrangements. Such judgments can materially impact the amount of revenue that we record in a given period. While we follow specific and detailed rules and guidelines related to revenue recognition, we make and use significant management judgments and estimates in connection with the revenue recognized in any reporting period, particularly in the areas described above. If management made different estimates or judgments, material differences in the timing of the recognition of revenue could occur.

Recent Accounting Standard Updates

We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

Recently Issued Accounting Standard Updates – Not Yet Adopted

Revenue from Contracts with Customers (Topic 606)

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and the International Financial Reporting Standards. This guidance supersedes previously issued guidance on revenue recognition and gives a five step process an entity should follow so that the entity recognizes revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date of this guidance to annual reporting periods beginning after December 15, 2017, which would be our fiscal 2019 reporting period. It must be applied either retrospectively during each prior reporting period presented or retrospectively

39

with the cumulative effect of initially applying this guidance recognized at the date of the initial application. Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date for ASU 2016-08 is the same as the effective date for ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” ASU 2016-10 provides clarification on two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improve the guidance for determining whether promises are separately identifiable. The effective date of ASU 2016-10 is the same as the effective date for ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 600): Narrow-Scope Improvements and Practical Expedients.” ASU 2016 clarifies aspects of ASU 2014-09, including clarifying noncash consideration, and provides a practical expedient for reflecting contract modifications at transition. The effective date of ASU 2016-12 is the same as the effective date of ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability for operating leases with terms over twelve months, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. It also requires lessees to classify leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. ASU 2016-02 is effective for us in the first quarter of fiscal 2020. Early adoption is permitted. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

Stock Compensation

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statements of cash flows. ASU 2016-09 is effective for us in the first quarter of fiscal 2018. Early adoption is permitted. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk

We face exposure to financial market risks, including adverse movements in foreign currency exchange rates and changes in interest rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results. Our foreign currency exchange exposure is primarily associated with product sales arrangements or settlement of intercompany payables and receivables among subsidiaries and their parent company, and/or investment/equity contingency considerations denominated in the local currency where the functional currency of the foreign subsidiary is the U.S. dollar.

Our principal currency exposures relate primarily to the U.S. dollar, the Euro and the Philippine peso. All foreign currency gains and losses are included in other (expenses) income, net, in the accompanying consolidated statements of operations and comprehensive loss. For the six months ended July 31, 2016, we recorded approximately $0.2 million in gains due to the international subsidiary translations and cash settlements of revenues and expenses.

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A substantial portion of our earnings are generated by our foreign subsidiaries whose functional currency is other than the U.S. dollar. Therefore, our earnings could be materially impacted by movements in foreign currency exchange rates upon the translation of the subsidiary’s earnings into the U.S. dollar. If the U.S. dollar had strengthened by 10% compared to the Euro, our total revenues would have decreased by $0.7 million and $1.4 million for the three and six months ended July 31, 2016 and would have increased our operations by $0.3 million and $0.4 million, respectively.

In addition, the announcement of the referendum by British voters to exit the European Union (referred to as “Brexit”) in June 2016 has resulted in significant decline of the British pound sterling against the U.S. dollar. In the short-term, volatility in the British pound sterling could continue as the United Kingdom negotiates its anticipated exit from the European Union. The announcement of Brexit may create further global economic uncertainty, which may cause our customers to closely monitor their costs and reduce their spending budget on our products and services. If the referendum is passed into law, there could be further uncertainty as the United Kingdom determines the future terms of its relationship with the European Union. The impact of Brexit to our results of operations for the period ended July 31, 2016 was not material. However, there can be no assurance that there will not be a material impact in the future.

Interest Rate Risk

Exposure to market risk for changes in interest rates relates primarily to our investment portfolio of marketable debt securities of various issuers, types and maturities and to our borrowings under our demand note payable. We do not use derivative instruments in our investment portfolio, and our investment portfolio only includes highly liquid instruments. Our cash and marketable securities include cash equivalents, which we consider to be investments purchased with original maturities of 90 days or less. There is risk that losses could be incurred if we were to sell any of our securities prior to stated maturity. Given the short maturities and investment grade quality of the portfolio holdings at July 31, 2016, a hypothetical 10% adverse change in interest rates should not have a material adverse impact on the fair value of our investment portfolio. However, our long-term marketable securities, which are carried at the lower of cost or market value, have fixed interest rates, and therefore are not subject to changes in fair value due to changes in interest rates.

ITEM 4. Controls and Procedures

Evaluation of disclosure controls and procedures. We evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Form 10-Q. Edward Terino, our Chief Executive Officer, and Peter R. Faubert, our Chief Financial Officer, reviewed and participated in this evaluation. Based upon that evaluation, Messrs. Terino and Faubert concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report and as of the date of the evaluation.

Changes in internal control over financial reporting. As a result of the evaluation completed by us, and in which Messrs. Terino and Faubert participated, we have concluded that there were no changes during the fiscal quarter ended July 31, 2016 in our internal control over financial reporting, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of these agreements require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to our products. From time to time, we also indemnify customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, and environmental claims relating to the use of our products and services or resulting from the acts or omissions of us, our employees, authorized agents or subcontractors. Management cannot reasonably estimate any potential losses, but these claims could result in material liability for us.

ITEM 1A. Risk Factors

In addition to other information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Form 10-K for the fiscal year ended January 31, 2016, which could materially affect our business, financial conditions, and results of operations. The risks described in our Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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ITEM 6. Exhibits

(a) Exhibits

See the Exhibit Index following the signature page to this Form 10-Q.

42

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, SeaChange International, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: September 6, 2016

SEACHANGE INTERNATIONAL, INC.
by:	/s/ PETER R. FAUBERT
	Peter R. Faubert
	Chief Financial Officer, Senior Vice President,    Finance and Administration and    Treasurer

43

Index to Exhibits

No.	Description
10.1	Employee Separation Agreement and Voluntary Release, dated as of July 6, 2016, by and between SeaChange International, Inc. and Anthony Dias (filed as Exhibit 10.1 to Current Report on Form 8-K filed on July 7, 2016 (File No. 000-21393) and incorporated herein by reference).
10.2	Change-In-Control Severance Agreement, dated as of July 6, 2016, by and between SeaChange International, Inc. and Peter Faubert (filed as Exhibit 10.2 to Current Report on Form 8-K filed on July 7, 2016 (File No. 000-21393) and incorporated herein by reference).
10.3	Indemnification Agreement, dated as of July 6, 2016, by and between SeaChange International, Inc. and Peter Faubert (filed as Exhibit 10.3 to Current Report on Form 8-K filed on July 7, 2016 (File No. 000-21393) and incorporated herein by reference).
10.4	Second Amended and Restated 2011 Compensation and Incentive Plan (filed as Appendix A to the Company’s Proxy Statement on Schedule 14A previously filed May 20, 2016 with the Commission (File No. 000-21393) and incorporated herein by reference).
31.1	Certification Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification Pursuant to Rule 13a-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

44

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Edward Terino, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SeaChange International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: September 6, 2016

/S/ EDWARD TERINO

Edward Terino

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Peter R. Faubert, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SeaChange International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: September 6, 2016

/S/ PETER R. FAUBERT

Peter R. Faubert

Chief Financial Officer, Senior Vice President, Finance and Administration and Treasurer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SeaChange International, Inc. (the “Company”) on Form 10-Q for the period ending July 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward Terino, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ EDWARD TERINO

Edward Terino

Chief Executive Officer

Dated: September 6, 2016

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of SeaChange International, Inc. (the “Company”) on Form 10-Q for the period ending July 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter R. Faubert, Chief Financial Officer, Senior Vice President, Finance and Administration and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ PETER R. FAUBERT

Peter R. Faubert

Chief Financial Officer, Senior Vice President,

Finance and Administration and Treasurer

Dated: September 6, 2016

XML

Document and Entity Information - shares	6 Months Ended
	Jul. 31, 2016	Aug. 29, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 31, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Trading Symbol	SEAC
Entity Registrant Name	SEACHANGE INTERNATIONAL INC
Entity Central Index Key	0001019671
Current Fiscal Year End Date	--01-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		35,183,623

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Current assets:
Cash and cash equivalents	$ 38,666	$ 58,733
Restricted cash	185	82
Marketable securities	5,760	1,504
Accounts and other receivables, net of allowance for doubtful accounts of $340 and $415 at July 31, 2016 and January 31, 2016, respectively	13,103	26,331
Unbilled receivables	11,592	10,680
Inventories, net	1,465	1,682
Prepaid expenses and other current assets	3,190	3,827
Total current assets	73,961	102,839
Property and equipment, net	13,096	14,129
Marketable securities, long-term	6,271	10,764
Investments in affiliates	2,500	2,500
Intangible assets, net	6,079	4,126
Goodwill	45,807	40,175
Other assets	2,658	3,136
Total assets	150,372	177,669
Current liabilities:
Accounts payable	5,184	6,132
Deferred stock consideration		3,205
Deferred revenues	10,972	16,201
Other accrued expenses	12,240	17,414
Total current liabilities	28,396	42,952
Deferred revenue, long-term	1,177	1,209
Deferred tax liabilities, long-term	15,232
Taxes payable, long-term	1,819	1,389
Other liabilities, long-term	1,272	1,101
Total liabilities	47,896	46,651
Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock, $0.01 par value;100,000,000 shares authorized; 35,212,530 shares issued and 35,172,040 outstanding at July 31, 2016, and 33,818,777 shares issued and 33,778,871 outstanding at January 31, 2016	352	338
Additional paid-in capital	235,081	228,164
Treasury stock, at cost; 40,490 and 39,906 common shares at July 31, 2016 and January 31, 2016, respectively	(5)	(2)
Accumulated loss	(126,660)	(90,869)
Accumulated other comprehensive loss	(6,292)	(6,613)
Total stockholders' equity	102,476	131,018
Total liabilities and stockholders' equity	$ 150,372	$ 177,669

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 340	$ 415
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	35,212,530	33,818,777
Common stock, shares outstanding	35,172,040	33,778,871
Treasury stock, common shares	40,490	39,906

XML

Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Revenues:
Products	$ 2,535	$ 6,955	$ 6,735	$ 10,119
Services	15,917	20,916	33,287	40,929
Total revenues	18,452	27,871	40,022	51,048
Cost of revenues:
Products	1,108	1,561	2,682	3,238
Services	9,487	11,663	19,946	22,866
Amortization of intangible assets	316	192	632	373
Stock-based compensation expense	85	28	157	28
Total cost of revenues	10,996	13,444	23,417	26,505
Gross profit	7,456	14,427	16,605	24,543
Operating expenses:
Research and development	7,727	8,370	16,426	17,903
Selling and marketing	3,862	3,630	7,419	7,298
General and administrative	3,835	3,911	7,906	7,798
Amortization of intangible assets	582	1,024	1,032	1,965
Stock-based compensation expense	854	1,128	894	1,839
Earn-outs and change in fair value of earn-outs	249	481	249	983
Professional fees - other	172	16	304	144
Severance and other restructuring costs	1,843	617	3,618	829
Total operating expenses	19,124	19,177	37,848	38,759
Loss from operations	(11,668)	(4,750)	(21,243)	(14,216)
Other (expense) income, net	(635)	(199)	287	(428)
Loss before income taxes and equity income in earnings of affiliates	(12,303)	(4,949)	(20,956)	(14,644)
Income tax provision	14,581	78	14,835	225
Equity income in earnings of affiliates, net of tax				17
Net loss	(26,884)	(5,027)	(35,791)	(14,852)
Net loss	(26,884)	(5,027)	(35,791)	(14,852)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment	(304)	(347)	303	(624)
Unrealized gain (loss) on marketable securities	9	(3)	18	(15)
Comprehensive loss	$ (27,179)	$ (5,377)	$ (35,470)	$ (15,491)
Net loss per share:
Basic	$ (0.77)	$ (0.16)	$ (1.03)	$ (0.45)
Diluted	$ (0.77)	$ (0.16)	$ (1.03)	$ (0.45)
Weighted average common shares outstanding:
Basic	35,115	33,350	34,739	33,339
Diluted	35,115	33,350	34,739	33,339

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Cash flows from operating activities:
Net loss	$ (35,791)	$ (14,852)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment	1,567	1,703
Amortization of intangible assets	1,664	2,338
Fair value of acquisition-related contingent consideration	249	983
Stock-based compensation expense	1,051	1,867
Deferred income taxes	14,649	44
Other	195	58
Changes in operating assets and liabilities, excluding impact of acquisition:
Accounts receivable	14,023	(1,147)
Unbilled receivables	(565)	(3,850)
Inventories	19	(732)
Prepaid expenses and other assets	1,053	(598)
Accounts payable	(1,607)	1,875
Accrued expenses	(5,398)	(3,127)
Deferred revenues	(5,419)	(1,929)
Other	122	(832)
Total cash used in operating activities	(14,188)	(18,199)
Cash flows from investing activities:
Purchases of property and equipment	(403)	(795)
Investment in capitalized software		(1,453)
Purchases of marketable securities		(2,002)
Proceeds from sale and maturity of marketable securities	252	4,003
Cash paid for acquisition of business, net of cash acquired	(5,243)	(11,686)
Other investing activities	(83)
Total cash used in investing activities	(5,477)	(11,933)
Cash flows from financing activities:
Proceeds from issuance of common stock	33	20
Other financing activities	(4)
Total cash provided by financing activities	29	20
Effect of exchange rate changes on cash	(431)	653
Net decrease in cash and cash equivalents	(20,067)	(29,459)
Cash and cash equivalents, beginning of period	58,733	90,019
Cash and cash equivalents, end of period	38,666	60,560
Supplemental disclosure of cash flow information:
Income taxes paid	83	364
Supplemental disclosure of non-cash investing activities:
Transfer of items originally classified as inventories to equipment	24	293
DCC Labs [Member]
Supplemental disclosure of non-cash investing activities:
Fair value of common stock issued for acquisition	2,640
Timeline Labs [Member]
Supplemental disclosure of non-cash investing activities:
Fair value of common stock issued for acquisition		$ 3,025
Common Stock [Member]
Supplemental disclosure of non-cash investing activities:
Fair value of common stock issued for deferred stock consideration obligation	$ 3,454

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Nature of Business and Basis of Presentation

6 Months Ended

Jul. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business and Basis of Presentation

1. Nature of Business and Basis of Presentation

The Company

SeaChange International, Inc. and its consolidated subsidiaries (collectively “SeaChange”, “we”, or the “Company”) is an industry leader in the delivery of multiscreen video, advertising and premium over-the-top (“OTT”) video. Our products and services facilitate the aggregation, licensing, management and distribution of video and advertising content to cable television system operators, telecommunications companies, satellite operators and media companies.

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of SeaChange International, Inc. and its subsidiaries (“SeaChange” or the “Company”) and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reports as well as rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany transactions and balances have been eliminated. Certain information and footnote disclosures normally included in financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to such regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying financial statements include all adjustments, consisting of only normal recurring items, necessary to present a fair presentation of the consolidated financial statements for the periods shown. These consolidated financial statements should be read in conjunction with our most recently audited financial statements and related footnotes included in our Annual Report on Form 10-K (“Form 10-K”) as filed with the SEC. The balance sheet data as of January 31, 2016 that is included in this Quarterly Report on Form 10-Q (“Form 10-Q”) was derived from our audited financial statements. We have reclassified certain amounts previously reported in our financial statements to conform to current presentation.

The preparation of these financial statements in conformity with U.S. GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Interim results are not necessarily indicative of the operating results for the full fiscal year or any future periods and actual results may differ from our estimates. During the three and six months ended July 31, 2016, there have been no material changes to our significant accounting policies that were described in our fiscal 2016 Form 10-K, as filed with the SEC.

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Significant Accounting Policies

6 Months Ended

Jul. 31, 2016

Accounting Policies [Abstract]

Significant Accounting Policies

2. Significant Accounting Policies

Revenue Recognition

Our transactions frequently involve the sales of hardware, software, systems and services in multiple-element arrangements. Revenues from sales of hardware, software and systems that do not require significant modification or customization of the underlying software are recognized when:

• persuasive evidence of an arrangement exists;

• delivery has occurred, and title and risk of loss have passed to the customer;

• fees are fixed or determinable; and

• collection of the related receivable is considered probable.

Customers are billed for installation, training, project management and at least one year of product maintenance and technical support at the time of the product sale. Revenue from these activities is deferred at the time of the product sale and recognized ratably over the period these services are performed. Revenue from ongoing product maintenance and technical support agreements is recognized ratably over the period of the related agreements. Revenue from software development contracts that include significant modification or customization, including software product enhancements, is recognized based on the percentage of completion contract accounting method using labor efforts expended in relation to estimates of total labor efforts to complete the contract. The percentage of completion method requires that adjustments or re-evaluations to estimated project revenues and costs be recognized on a project-to-date cumulative basis, as changes to the estimates are identified. Revisions to project estimates are made as additional information becomes known, including information that becomes available subsequent to the date of the consolidated financial statements up through the date such consolidated financial statements are filed with the SEC. If the final estimated profit to complete a long-term contract indicates a loss, a provision is recorded immediately for the total loss anticipated. Accounting for contract amendments and customer change orders are included in contract accounting when executed. Revenue from shipping and handling costs and other out-of-pocket expenses reimbursed by customers are included in revenues and cost of revenues. Our share of intercompany profits associated with sales and services provided to affiliated companies are eliminated in consolidation in proportion to our equity ownership.

Contract accounting requires judgment relative to assessing risks, estimating revenues and costs and making assumptions including, in the case of our professional services contracts, the total amount of labor required to complete a project and the complexity of the development and other technical work to be completed. Due to the size and nature of many of our contracts, the estimation of total revenues and cost at completion is complicated and subject to many variables. Assumptions have to be made regarding the length of time to complete the contract because costs also include estimated third-party vendor and contract labor costs. Penalties related to performance on contracts are considered in estimating sales and profit, and are recorded when there is sufficient information for us to assess anticipated performance. Third-party vendors’ assertions are also assessed and considered in estimating costs and margin.

Revenue from the sale of software-only products remains within the scope of the software revenue recognition rules. Maintenance and support, training, consulting, and installation services no longer fall within the scope of the software revenue recognition rules, except when they are sold with and relate to a software-only product. Revenue recognition for products that no longer fall under the scope of the software revenue recognition rules is similar to that for other tangible products and Accounting Standard Update No. (“ASU”) 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements,” amended ASC 605 and is applicable for multiple-deliverable revenue arrangements. ASU 2009-13 allows companies to allocate revenue in a multiple-deliverable arrangement in a manner that better reflects the transaction’s economics.

Under the software revenue recognition rules, the fee is allocated to the various elements based on vendor-specific objective evidence (“VSOE”) of fair value. Under this method, the total arrangement value is allocated first to undelivered elements based on their fair values, with the remainder being allocated to the delivered elements. Where fair value of undelivered service elements has not been established, the total arrangement value is recognized over the period during which the services are performed. The amounts allocated to undelivered elements, which may include project management, training, installation, maintenance and technical support and certain hardware and software components, are based upon the price charged when these elements are sold separately and unaccompanied by the other elements. The amount allocated to installation, training and project management revenue is based upon standard hourly billing rates and the estimated time necessary to complete the service. These services are not essential to the functionality of systems as these services do not alter the equipment’s capabilities, are available from other vendors and the systems are standard products. For multiple-element arrangements that include software development with significant modification or customization and systems sales where VSOE of the fair value does not exist for the undelivered elements of the arrangement (other than maintenance and technical support), percentage of completion accounting is applied for revenue recognition purposes to the entire arrangement with the exception of maintenance and technical support.

Under the revenue recognition rules for tangible products as amended by ASU 2009-13, the fee from a multiple-deliverable arrangement is allocated to each of the deliverables based upon their relative selling prices as determined by a selling-price hierarchy. A deliverable in an arrangement qualifies as a separate unit of accounting if the delivered item has value to the customer on a stand-alone basis. A delivered item that does not qualify as a separate unit of accounting is combined with the other undelivered items in the arrangement and revenue is recognized for those combined deliverables as a single unit of accounting. The selling price used for each deliverable is based upon VSOE if available, third-party evidence (“TPE”) if VSOE is not available, and best estimate of selling price (“BESP”) if neither VSOE nor TPE are available. TPE is the price of the Company’s, or any competitor’s, largely interchangeable products or services in stand-alone sales to similarly situated customers. BESP is the price at which we would sell the deliverable if it were sold regularly on a stand-alone basis, considering market conditions and entity-specific factors.

The selling prices used in the relative selling price allocation method for certain of our services are based upon VSOE. The selling prices used in the relative selling price allocation method for third-party products from other vendors are based upon TPE. The selling prices used in the relative selling price allocation method for our hardware products, software, subscriptions, and customized services for which VSOE does not exist are based upon BESP. We do not believe TPE exists for these products and services because they are differentiated from competing products and services in terms of functionality and performance and there are no competing products or services that are largely interchangeable. Management establishes BESP with consideration for market conditions, such as the impact of competition and geographic considerations, and entity-specific factors, such as the cost of the product, discounts provided and profit objectives. Management believes that BESP is reflective of reasonable pricing of that deliverable as if priced on a stand-alone basis.

For our cloud and managed service revenues, we generate revenue from two sources: (1) subscription and support services; and (2) professional services and other. Subscription and support revenue includes subscription fees from customers accessing our cloud-based software platform and support fees. Our arrangements with customers do not provide the customer with the right to take possession of the software supporting the cloud-based software platform at any time. Professional services and other revenue include fees from implementation and customization to support customer requirements. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. For the most part, subscription and support agreements are entered into for 12 to 36 months. Generally, a majority of the professional services component of the arrangements with customers is performed within a year of entering into a contract with the customer.

In most instances, revenue from a new customer acquisition is generated under sales agreements with multiple elements, comprised of subscription and support and other professional services. We evaluate each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within our control.

In determining when to recognize revenue from a customer arrangement, we are often required to exercise judgment regarding the application of our accounting policies to a particular arrangement. The primary judgments used in evaluating revenue recognized in each period involve: determining whether collection is probable, assessing whether the fee is fixed or determinable, and determining the fair value of the maintenance and service elements included in multiple-element software arrangements. Such judgments can materially impact the amount of revenue that we record in a given period. While we follow specific and detailed rules and guidelines related to revenue recognition, we make and use significant management judgments and estimates in connection with the revenue recognized in any reporting period, particularly in the areas described above. If management made different estimates or judgments, material differences in the timing of the recognition of revenue could occur.

Impairment of Assets

Indefinite-lived intangible assets, such as goodwill, are not amortized but are evaluated for impairment at the reporting unit level annually, in our third quarter beginning August 1^st. Indefinite-lived intangible assets may be tested for impairment on an interim basis in addition to the annual evaluation if an event occurs or circumstances change such as declines in sales, earnings or cash flows, decline in the Company’s stock price, or material adverse changes in the business climate, which would more likely than not reduce the fair value of a reporting unit below its carrying amount. See Note 6, “Goodwill and Intangible Assets,” to our consolidated financial statements for more information.

We also evaluate other long-lived assets such as property and equipment and intangible assets with finite useful lives, on a regular basis for the existence of facts or circumstances, both internal and external that may suggest an asset is not recoverable. If such circumstances exist, we evaluate the carrying value of long-lived assets to determine if impairment exists based upon estimated undiscounted future cash flows over the remaining useful life of the assets and compares that value to the carrying value of the assets. Our cash flow estimates contain management’s best estimates, using appropriate and customary assumptions and projections at the time.

In the second quarter of fiscal 2017, we determined there to be triggering events that might possibly indicate that the carrying amount of our long-lived assets may not be recoverable. These triggering events included a sustained decrease in share price during the period and our current-period operating loss combined with a history of operating losses. As a result, we were required to test for the recoverability of our long-lived assets to determine whether an impairment loss should have been measured as mentioned above. We determined that the estimated undiscounted future cash flows over the remaining useful life of the long-lived assets exceeded the carrying value. Therefore, the assets were deemed recoverable and no impairment of long-lived assets existed as of July 31, 2016.

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Fair Value Measurements

6 Months Ended

Jul. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

Definition and Hierarchy

The applicable accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance establishes a framework for measuring fair value and expands required disclosure about the fair value measurements of assets and liabilities. This guidance requires us to classify and disclose assets and liabilities measured at fair value on a recurring basis, as well as fair value measurements of assets and liabilities measured on a non-recurring basis in periods subsequent to initial measurement, in a fair value hierarchy.

The fair value hierarchy is broken down into three levels based on the reliability of inputs and requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required, as well as the assets and liabilities that we value using those levels of inputs:

• Level 1 – Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

• Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not very active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value of the contingent consideration obligations related to our business acquisitions are valued using Level 3 inputs.

Valuation Techniques

Inputs to valuation techniques are observable and unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. When developing fair value estimates for certain financial assets and liabilities, we maximize the use of observable inputs and minimize the use of unobservable inputs. When available, we use quoted market prices, market comparables and discounted cash flow projections. Financial assets include money market funds, U.S. treasury notes or bonds and U.S. government agency bonds.

In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly. In periods of market inactivity, the observability of prices and inputs may be reduced for certain instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of July 31, 2016 and January 31, 2016. There were no fair value measurements of our financial assets and liabilities using significant level 3 inputs for the periods presented:

			Fair Value at July 31, 2016 Using
			Quoted
			Prices in		Significant
			Active		Other
			Markets for		Observable
	July 31,		Identical Assets		Inputs
	2016		(Level 1)		(Level 2)
	(Amounts in thousands)
Financial assets:
Money market accounts (a)	$	945	$	945	$	—
Available for sale marketable securities:
Current marketable securities:
U.S. treasury notes and bonds - conventional		4,759		4,759		—
U.S. government agency issues		1,001		—		1,001
Non-current marketable securities:
U.S. treasury notes and bonds - conventional		2,761		2,761		—
U.S. government agency issues		3,510		—		3,510
Total	$	12,976	$	8,465	$	4,511

			Fair Value at January 31, 2016 Using
			Quoted
			Prices in		Significant
			Active		Other
			Markets for		Observable
	January 31,		Identical Assets		Inputs
	2016		(Level 1)		(Level 2)
	(Amounts in thousands)
Financial assets:
Money market accounts (a)	$	3,654	$	3,654	$	—
Available for sale marketable securities:
Current marketable securities:
U.S. treasury notes and bonds - conventional		502		502		—
U.S. government agency issues		1,002		—		1,002
Non-current marketable securities:
U.S. treasury notes and bonds - conventional		7,762		7,762
U.S. government agency issues		3,002		—		3,002
Total	$	15,922	$	11,918	$	4,004

(a) Money market funds and U.S. treasury bills are included in cash and cash equivalents on the accompanying consolidated balance sheets and are valued at quoted market prices for identical instruments in active markets.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible property and equipment, goodwill, and other intangible assets, which are re-measured when the derived fair value is below carrying value on our consolidated balance sheets. For these assets and liabilities, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded to loss from impairment in our consolidated statements of operations and comprehensive loss. We did not record any significant charges to assets measured at fair value on a nonrecurring basis during the six months ended July 31, 2016 and 2015. See Note 6,“Goodwill and Intangible Assets,” to our consolidated financial statements for more information.

Available-For-Sale Securities

We determine the appropriate classification of debt investment securities at the time of purchase and reevaluate such designation as of each balance sheet date. Our investment portfolio consists of money market funds, U.S. treasury notes and bonds, and U.S. government agency notes and bonds as of July 31, 2016 and January 31, 2016. All highly liquid investments with an original maturity of three months or less when purchased are considered to be cash equivalents. All cash equivalents are carried at cost, which approximates fair value. Our marketable securities are classified as available-for-sale and are reported at fair value with unrealized gains and losses, net of tax, reported in stockholders’ equity as a component of accumulated other comprehensive loss. The amortization of premiums and accretion of discounts to maturity are computed under the effective interest method and are included in other (expenses) income, net, in our consolidated statements of operations and comprehensive loss. Interest on securities is recorded as earned and is also included in other (expenses) income, net. Any realized gains or losses would be shown in the accompanying consolidated statements of operations and comprehensive loss in other (expenses) income, net. We provide fair value measurement disclosures of available-for-sale securities in accordance with one of three levels of fair value measurement mentioned above.

The following is a summary of cash, cash equivalents and available-for-sale securities, including the cost basis, aggregate fair value and gross unrealized gains and losses, for short- and long-term marketable securities portfolio as of July 31, 2016 and January 31, 2016:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Amounts in thousands)
July 31, 2016:
Cash	$	37,721	$	—	$	—		$	37,721
Cash equivalents		945		—		—			945
Cash and cash equivalents		38,666		—		—			38,666
U.S. treasury notes and bonds - short-term		4,753		6		—			4,759
U.S. treasury notes and bonds - long-term		2,750		11		—			2,761
U.S, government agency issues - short-term		1,000		1		—			1,001
U.S, government agency issues - long-term		3,479		31		—			3,510
Total cash, cash equivalents and marketable securities	$	50,648	$	49	$	—		$	50,697
January 31, 2016:
Cash	$	55,079	$	—	$	—		$	55,079
Cash equivalents		3,654		—		—			3,654
Cash and cash equivalents		58,733		—		—			58,733
U.S. treasury notes and bonds - short-term		503		—		(1	)		502
U.S. treasury notes and bonds - long-term		7,756		6		—			7,762
U.S, government agency issues - short-term		1,001		1		—			1,002
U.S, government agency issues - long-term		2,977		25					3,002
Total cash, cash equivalents and marketable securities	$	70,970	$	32	$	(1	)	$	71,001

The gross realized gains and losses on sale of available-for-sale securities as of July 31, 2016 and January 31, 2016 were immaterial. For purposes of determining gross realized gains and losses, the cost of securities is based on specific identification.

Contractual maturities of available-for-sale investments as of July 31, 2016 are as follows (amounts in thousands):

	Estimated
	Fair Value
Maturity of one year or less	$	5,760
Maturity between one and five years		6,271
Total	$	12,031

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist primarily of highly liquid investments in money market mutual funds, government sponsored enterprise obligations, treasury bills, commercial paper and other money market securities with remaining maturities at date of purchase of 90 days or less.

The fair value of cash, cash equivalents, restricted cash and marketable securities at July 31, 2016 and January 31, 2016 was $50.9 million and $71.1 million, respectively.

Restricted Cash

At times, we may be required to maintain cash held as collateral for performance obligations with our customers which we classify as restricted cash on our consolidated balance sheets. As of July 31, 2016 and January 31, 2016 we had $0.2 million and $0.1 million, respectively, in restricted cash related to performance obligations.

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Acquisitions and Loss on Impairment

6 Months Ended

Jul. 31, 2016

Business Combinations [Abstract]

Acquisitions and Loss on Impairment

4. Acquisitions and Loss on Impairment

DCC Labs

On May 5, 2016 we acquired a 100% share of DCC Labs in exchange for an aggregate of $2.6 million in newly issued shares of SeaChange common stock and $5.2 million in cash, net of cash acquired, resulting in a total net purchase price of $7.9 million. DCC Labs is a developer of set-top and multiscreen device software. Of the total consideration, $0.5 million in cash and all of the stock is initially held in escrow as security for the indemnification obligations of the former DCC Labs owners to SeaChange under the purchase agreement. The stock consideration was determined by dividing the total value of $2.6 million by the volume weighted average closing price of our common stock for the twenty trading days preceding the closing.

The acquisition of DCC Labs enables us to optimize the operations of our In Home business, which is our developer of deployed software solutions including the SeaChange Nucleus home video gateway. In addition, the acquisition brings market-ready products, including an optimized television software stack for Europe’s Digital Video Broadcasting community and an HTML5 framework for building future-proof user interfaces for CPE devices.

We accounted for the acquisition of DCC Labs as a business combination, which requires us to record the assets acquired and liabilities assumed at fair value. The amount by which the purchase price exceeds the fair value of the net assets acquired is recorded as goodwill. We engaged an independent appraiser to assist management in assessing the fair values of the tangible and intangible assets acquired and liabilities assumed and the amount of goodwill to be recognized as of the acquisition date. Assets acquired as a result of the acquisition include receivables, prepaid expenses and property and equipment while liabilities assumed include accounts payable, other accrued expenses, deferred taxes and income taxes payable. The amounts recorded for these assets and liabilities are preliminary in nature and are subject to adjustment as additional information is obtained about the facts and circumstances that existed as of the acquisition date. The final determination of the fair values of the acquired assets and liabilities will be completed within the measurement period of up to one year from the acquisition date, as permitted under U.S. GAAP.

The allocation of purchase price was as follows (amounts in thousands):

Estimated Fair value of consideration:
Cash, net of cash acquired	$	5,243
Stock consideration		2,640
Total purchase price	$	7,883
Estimated Fair value of assets acquired and liabilities assumed:
Current assets		1,156
Other long-term assets		116
Finite-life intangible assets		3,100
Goodwill		5,071
Current liabilities		(618	)
Other long-term liabilities		(942	)
Allocated purchase price	$	7,883

Acquired Goodwill

The preliminary purchase price allocation is subject to our final determination of fair value. We recorded the $5.1 million excess of the purchase price over the fair value of the identified tangible and intangible assets as goodwill, primarily due to expected synergies between the combined companies and expanded market opportunities. The goodwill is not deductible for tax purposes.

Intangible Assets

In determining the fair value of the intangible assets, the Company considered, among other factors, the intended use of the assets and the estimates of future performance of DCC Labs, based on analyses of historical financial performance. The fair values of identified intangible assets were calculated using an income-based approach based on estimates and assumptions provided by DCC Labs’ and the Company’s management.

The following table sets forth the components of the identified intangible assets associated with the DCC Labs acquisition and their estimated useful lives:

	Useful life		Fair Value
			(Amounts in thousands)
Tradename		5 years	$	200
Customer contracts		9 years		1,400
Non-compete agreements		2 years		100
Existing technology		7 years		1,400
			$	3,100

Impact to Fiscal 2017 Financial Results

DCC Labs’ financial results have been included in our consolidated financial results only for the period from the May 5, 2016 acquisition date through July 31, 2016. As a result, our consolidated financial results for the three and six months ended July 31, 2016 do not reflect a full three and six months of DCC Labs’ results. From the May 5, 2016 acquisition date through July 31, 2016, DCC Labs generated revenue of $0.2 million and an operating loss of $0.9 million.

Acquisition-related Costs

In connection with the acquisition, we incurred approximately $0.2 million in acquisition-related costs, including legal, accounting and other professional services for fiscal 2017. The acquisition costs were expensed as incurred and included in professional fees – other, in our consolidated statements of operations and comprehensive loss for the period ended July 31, 2016.

TLL, LLC

On February 2, 2015, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of December 22, 2014, we acquired 100% of the member interests in TLL, LLC (“Timeline Labs”), a privately-owned California-based software-as-a-service (“SaaS”) company.

We accounted for the acquisition of Timeline Labs as a business combination and the financial results of Timeline Labs have been included in our consolidated financial statements as of the date of acquisition. Under the acquisition method of accounting, the purchase price was allocated to SeaChange’s net tangible and intangible assets based upon their fair values as of February 2, 2015.

The allocation of the purchase price was as follows (amounts in thousands):

Fair value of consideration:
Cash, net of cash acquired	$	14,186
Closing stock consideration		3,019
Deferred stock consideration		4,959
Contingent consideration		475
Total purchase price	$	22,639
Fair value of assets acquired and liabilities assumed:
Current assets		95
Other long-term assets		108
Finite-life intangible assets		6,720
Goodwill		15,787
Current liabilities		(71	)
Allocated purchase price	$	22,639

Fair Value of Consideration Transferred

Upon completion of the acquisition, the Company made cash consideration payments to the former members of Timeline Labs in the amount of $14.2 million (“Closing Cash Consideration”). The Closing Cash Consideration included $1.4 million deposited in escrow to secure certain indemnification obligations of the former members of Timeline Labs under the Merger Agreement. Also upon completion of the acquisition, the Company issued 344,055 shares of common stock to the former members of Timeline Labs and deposited 173,265 shares of common stock into escrow.

On August 3, 2015, we issued 260,537 shares of our common stock with a value of $1.8 million to the former members of Timeline Labs, in satisfaction of the six-month deferred stock consideration obligation pursuant to the Merger Agreement. In satisfaction of the twelve-month deferred stock consideration obligation pursuant to the Merger Agreement, on February 2, 2016 we issued 542,274 shares of our common stock with a value of $3.2 million and in May 2016, pursuant to an adjustment mechanism based on stock price provided for in the Merger Agreement with respect to deferred stock consideration issuances, we issued an additional 70,473 shares of our common stock with a value of $0.2 million.

Contingent Consideration

The former interest holders of Timeline Labs were eligible to receive earn-out compensation, consisting of shares of our common stock, if defined performance criteria were achieved for fiscal 2016 and 2017. We recorded a liability of $3.2 million in February 2015 in our consolidated balance sheets that represented the fair value of the estimated shares at full achievement of the defined performance criteria on the date of acquisition. As of January 31, 2016, the Company determined that the defined performance criteria would not be achieved and the liability was reduced to zero with a $0.4 million reversal of liability credited to loss on impairment of TLL, LLC net assets in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016.

Intangible Assets

In determining the fair value of the intangible assets, the Company considered, among other factors, the intended use of the assets, the estimates of future performance of Timeline Lab’s products and analyses of historical financial performance. The fair values of identified intangible assets were calculated using an income-based approach based on estimates and assumptions provided by Timeline Labs’ and the Company’s management.

The following table sets forth the components of the identified intangible assets associated with the Timeline Labs acquisition and their estimated useful lives:

	Useful life		Fair Value
			(Amounts in thousands)
Tradename		7 years	$	620
Customer contracts		7 years		4,760
Non-compete agreements		2 years		170
Existing technology		5 years		1,170
			$	6,720

Acquired Goodwill

We finalized the purchase price allocation in January 2016. We recorded the $15.8 million excess of the purchase price over the fair value of the identified tangible and intangible assets as goodwill, primarily due to expected synergies between the combined companies and expanded market opportunities. The goodwill was deductible for tax purposes.

Acquisition-related Costs

In connection with the acquisition, we incurred approximately $0.1 million in acquisition-related costs, including legal, accounting and other professional services for fiscal 2016. The acquisition costs were expensed as incurred and included in professional fees – other, in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016.

Loss on Impairment of Assets

In January 2016, our Board of Directors authorized a restructuring plan (including a possible winding down of the Timeline Labs operations), as previously reported in a Current Report on Form 8-K filed with the SEC on February 17, 2016. Based on the decision to enter into the restructuring plan and the plan’s impact on the projected future cash flows of the Timeline Labs operations, we determined that the carrying amount of all long-term assets that resulted from the February 2015 acquisition had exceeded their fair value as of January 31, 2016. As a result, these long-term assets were deemed fully impaired and we recorded the $21.9 million net book value of these long-term assets as a component of loss on impairment of TLL, LLC net assets in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016. Additionally, we reduced the contingent consideration liability associated with the Timeline Labs acquisition to zero, as we determined that the defined performance criteria would not be achieved, and credited the reversal of the liability of $0.4 million to loss on impairment of TLL, LLC net assets in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016.

In addition, we incurred $0.7 million in severance and other restructuring charges during the first half of fiscal 2017 related to cost-saving actions taken with respect to the Timeline Labs business.

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Consolidated Balance Sheet Detail

6 Months Ended

Jul. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidated Balance Sheet Detail

5. Consolidated Balance Sheet Detail

Inventories consist primarily of hardware and related component parts and are stated at the lower of cost (on a first-in, first-out basis) or market. Inventories consist of the following:

	As of
	July 31,		January 31,
	2016		2016
	(Amounts in thousands)
Components and assemblies	$	680	$	1,223
Finished products		785		459
Total inventories, net	$	1,465	$	1,682

Property and equipment, net consists of the following:

	Estimated		As of
	Useful		July 31,			January 31,
	Life (Years)		2016			2016
			(Amounts in thousands)
Land			$	2,880		$	2,880
Buildings		20		12,010			11,908
Office furniture and equipment		5		1,148			1,099
Computer equipment, software and demonstration equipment		3		19,020			18,639
Service and spare components		5		1,158			1,158
Leasehold improvements		1-7		1,091			1,087
				37,307			36,771
Less - Accumulated depreciation and amortization				(24,211	)		(22,642	)
Total property and equipment, net			$	13,096		$	14,129

Depreciation and amortization expense on property and equipment, net was $0.8 million and $1.6 million for the three and six months ended July 31, 2016, respectively, and $0.8 million and $1.7 million for the three and six months ended July 31, 2015, respectively.

Other accrued expenses consist of the following:

	As of
	July 31,		January 31,
	2016		2016
	(Amounts in thousands)
Accrued compensation and commissions	$	921	$	1,676
Accrued bonuses		1,834		2,902
Accrued severance		730		47
Accrued restructuring		404		—
Employee benefits		782		1,484
Accrued provision for contract loss		4,497		6,497
Accrued other		3,072		4,808
Total other accrued expenses	$	12,240	$	17,414

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Goodwill and Intangible Assets

6 Months Ended

Jul. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

6. Goodwill and Intangible Assets

Goodwill

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. We are required to perform impairment tests related to our goodwill annually, which we perform during the third quarter of each fiscal year, or when we identify certain triggering events or circumstances that would more likely than not reduce the estimated fair value of the goodwill of the Company below its carrying amount. Changes in the carrying amount of goodwill for the six months ended July 31, 2016 were as follows (amounts in thousands):

Balance as of February 1, 2016
Goodwill	$	55,962
Accumulated impairment losses		(15,787	)
		40,175
Acquisition of DCC Labs		5,071
Cumulative translation adjustment		561
Balance as of July 31, 2016
Goodwill		61,594
Accumulated impairment losses		(15,787	)
	$	45,807

In the second quarter of fiscal 2017, we recorded preliminary goodwill of $5.1 million related to the acquisition of DCC Labs based on the preliminary allocation of the estimated purchase price. We will continue to evaluate certain assets, liabilities and tax estimates that are subject to change within the measurement period (up to one year from the acquisition date).

In the second quarter of fiscal 2017, a number of triggering events prompted us to perform step one of the goodwill impairment test on our goodwill balance as of July 31, 2016. The triggering events included; a sustained decrease in our stock price during the period, the withdrawal of the permanent reinvestment assertion on earnings generated by our Irish operations (see Note 12, “Income Taxes” to our consolidated financial statements for more information) and a decline in actual revenue for the quarter compared to projected amounts, which was previously reported in a Current Report on Form 8-K furnished to the SEC on August 23, 2016. The outcome of the preliminary step one analysis revealed that fair value exceeded carrying value at July 31, 2016. In aggregate, there was an excess fair value over and above the carrying value of the net assets ranging from $15.4 million to $25.0 million, or 15.0% to 24.4% of the carrying value of our net assets. To the extent that the finalization of this assessment of goodwill requires an impairment charge, such adjustment would be recorded in the third quarter of fiscal 2017.

Intangible Assets

Intangible assets, net, consisted of the following at July 31, 2016 and January 31, 2016:

			As of July 31, 2016							As of January 31, 2016
	Weighted average remaining life (Years)		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(Amounts in thousands)
Finite-life intangible assets:
Customer contracts		4.1	$	31,672	$	(27,475	)	$	4,197	$	29,956	$	(26,284	)	$	3,672
Non-compete agreements		1.8		2,515		(2,429	)		86		2,365		(2,365	)		—
Completed technology		5.6		11,632		(10,023	)		1,609		10,075		(9,621	)		454
Trademarks, patents and other		4.8		7,276		(7,089	)		187		7,068		(7,068	)		—
Total finite-life intangible assets		4.4	$	53,095	$	(47,016	)	$	6,079	$	49,464	$	(45,338	)	$	4,126

As of July 31, 2016, the estimated future amortization expense for our finite-life intangible assets for the remainder of fiscal 2017 and the four succeeding fiscal years is as follows (amounts in thousands):

	Estimated
	Amortization
Fiscal Year Ended January 31,	Expense
2017 (for the remaining six months)	$	1,259
2018		1,729
2019		1,040
2020		555
2021		390
2022 and thereafter		1,106
Total	$	6,079

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Commitments and Contingencies

6 Months Ended

Jul. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

Indemnification and Warranties

We provide indemnification, to the extent permitted by law, to our officers, directors, employees and agents for liabilities arising from certain events or occurrences while the officer, director, employee or agent is, or was, serving at our request in such capacity. With respect to acquisitions, we provide indemnification to, or assume indemnification obligations for, the current and former directors, officers and employees of the acquired companies in accordance with the acquired companies’ governing documents. As a matter of practice, we have maintained directors’ and officers’ liability insurance including coverage for directors and officers of acquired companies.

We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers. Most of these agreements require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect to our products. From time to time, we also indemnify customers and business partners for damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability, and environmental claims relating to the use of our products and services or resulting from the acts or omissions of us, our employees, authorized agents or subcontractors. From time to time we have received requests from customers for indemnification of patent litigation claims. Management cannot reasonably estimate any potential losses, but these claims could result in material liability for us. There are no current pending legal proceedings, in the opinion of management that would have a material adverse effect on our financial position, results from operations and cash flows. There is no assurance that future legal proceedings arising from ordinary course of business or otherwise, will not have a material adverse effect on our financial position, results from operations or cash flows.

We warrant that our products, including software products, will substantially perform in accordance with our standard published specifications in effect at the time of delivery. In addition, we provide maintenance support to our customers and therefore allocate a portion of the product purchase price to the initial warranty period and recognize revenue on a straight line basis over that warranty period related to both the warranty obligation and the maintenance support agreement. When we enter into arrangements that include revenue for extended warranties beyond the standard duration, the revenue is deferred and recognized on a straight line basis over the contract period. Related costs are expensed as incurred.

Revolving Line of Credit/Demand Note Payable

We had a letter agreement with JP Morgan Chase Bank, N.A. (“JP Morgan”) for a demand discretionary line of credit and a Demand Promissory Note in the aggregate amount of $20.0 million, which expired on August 31, 2016 with no outstanding balance. This line of credit and Demand Promissory Note was not renewed.

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Severance and Other Restructuring Costs

6 Months Ended

Jul. 31, 2016

Restructuring and Related Activities [Abstract]

Severance and Other Restructuring Costs

8. Severance and Other Restructuring Costs

Restructuring Costs

During the six months ended July 31, 2016, we incurred restructuring charges of $2.2 million primarily from employee-related benefits for terminated employees.

The following table shows the activity in accrued restructuring reported as a component of other accrued expenses on the consolidated balance sheet as of July 31, 2016 (amounts in thousands):

	Employee- Related			Closure of Leased
	Benefits			Facilities			Total
Accrual balance as of January 31, 2016	$	—		$	—		$	—
Restructuring charges incurred		1,586			321			1,907
Cash payments		(1,385	)		(116	)		(1,501	)
Other charges		(2	)		—			(2	)
Accrual balance as of July 31, 2016	$	199		$	205		$	404

During the second quarter of fiscal 2017, we restructured our operations in connection with the acquisition of DCC Labs. This restructuring resulted in a workforce reduction within our In Home engineering and services organization and in the closing of a facility in Portland, Oregon. We incurred charges totaling $1.5 million in severance and other restructuring costs during fiscal 2017 related to the acquisition of DCC Labs. Once we complete our integration plan, any further reduction in workforce may result in additional restructuring charges.

As a result of restructuring activities relating to our Timeline Labs operations in fiscal 2017, we incurred $0.7 million of charges, which include $0.5 million in severance to former Timeline Labs employees and $0.2 million in other restructuring charges relating to our remaining lease obligation of our Timeline Labs facilities in San Francisco and Santa Monica, California.

Severance Costs

During the six months ended July 31, 2016, we incurred severance charges of $1.4 million primarily from the departure of our former Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) during the first half of fiscal 2017 as well as the termination of 11 other former employees.

Effective April 6, 2016, we terminated the employment of Jay Samit, our former Chief Executive Officer (“CEO”). In connection with his termination, Mr. Samit and SeaChange entered into a Separation Agreement and Release of Claims (the “CEO Separation Agreement”). Under the terms of the CEO Separation Agreement and consistent with our pre-existing obligations to Mr. Samit in connection with a termination without cause, we incurred a charge of $1.0 million in the first quarter of fiscal 2017, which included $0.2 million for satisfaction of his remaining fiscal 2016 and 2017 annual bonuses and $0.8 million in severance payable in twelve equal monthly installments which will be completed in the first quarter of fiscal 2018. In addition, on July 6, 2016, Anthony Dias resigned as CFO of SeaChange, though he continued as an employee until July 31, 2016. In connection with his resignation, Mr. Dias and SeaChange entered into an Employment Separation Agreement and Voluntary Release, dated July 6, 2016 (the “CFO Separation Agreement”). Under the terms of the CFO Separation Agreement, we incurred a charge of $0.2 million, which included his fiscal 2017 pro-rated bonus (paid in fiscal 2018) and six months’ base salary as severance payable in twelve equal semimonthly installments, which will be completed by the end of fiscal 2017.

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Stockholders' Equity

6 Months Ended

Jul. 31, 2016

Equity [Abstract]

Stockholders' Equity

9. Stockholders’ Equity

2011 Compensation and Incentive Plan

In July 2011, our stockholders approved the adoption of our 2011 Compensation and Incentive Plan (the “2011 Plan”). Under the 2011 Plan, as amended in July 2013, the number of shares of common stock authorized for grant is equal to 5,300,000 shares plus the number of shares that expired, terminated, surrendered or forfeited awards subsequent to July 20, 2011 under the Amended and Restated 2005 Equity Compensation and Incentive Plan (the “2005 Plan”). Following approval of the 2011 Plan, we terminated the 2005 Plan. The 2011 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units (“RSUs”), deferred stock units (“DSUs”) and other equity based non-stock option awards as determined by the plan administrator to officers, employees, consultants, and directors of the Company. On July 13, 2016, shareholders approved an amendment to the 2011 Plan which:

• Approved the removal of minimum vesting periods for stock option, RSU and other stock-based awards, but excluding restricted stock, under the 2011 Plan; and

• Approved the material terms of the performance goals of the 2011 Plan under which tax-deductible compensation may be paid for purposes of rules under the Internal Revenue Code of 1986, as amended, including the business criteria on which performance goals may be based.

Effective February 1, 2014, SeaChange gave its non-employee members of the Board of Directors the option to receive DSUs in lieu of RSUs, beginning with the annual grant for fiscal 2015. The number of units subject to the DSUs is determined as of the grant date and shall fully vest one year from the grant date. The shares underlying the DSUs are not vested and issued until the earlier of the director ceasing to be a member of the Board of Directors (provided such time is subsequent to the first day of the succeeding fiscal year) or immediately prior to a change in control. Commencing with fiscal 2016, we changed the policy regarding the timing of the equity grant from the first day of the applicable fiscal year to the date of our annual meeting of stockholders. To facilitate the transition, a partial year grant was made to our non-employee directors, effective February 1, 2015, and a full year grant was made to our non-employee directors, effective July 15, 2015.

We may satisfy awards upon the exercise of stock options or the vesting of stock units with newly issued shares or treasury shares. The Board of Directors is responsible for the administration of the 2011 Plan and determining the terms of each award, award exercise price, the number of shares for which each award is granted and the rate at which each award vests. In certain instances the Board of Directors may elect to modify the terms of an award. As of July 31, 2016, there were 1,184,298 shares available for future grant under the 2011 Plan.

Option awards may be granted to employees at an exercise price per share of not less than 100% of the fair market value per common share on the date of the grant. Stock units may be granted to any officer, employee, director, or consultant at a purchase price per share as determined by the Board of Directors. Option awards granted under the 2011 Plan generally vest over a period of one to four years and expire ten years from the date of the grant.

In fiscal 2016, the Board of Directors developed a new Long-Term Incentive (“LTI”) Program under which the named executive officers of the Company will receive long-term equity-based incentive awards, which are intended to align the interests of our named executive officers with the long-term interests of our stockholders and to emphasize and reinforce our focus on team success. Long-term equity-based incentive compensation awards are made in the form of stock options, RSUs and performance stock units (“PSUs”) subject to vesting based in part on the extent to which employment continues for three years.

We have granted market-based options to certain newly appointed officers. These stock options have an exercise price equal to our closing stock price on the date of grant and will vest in approximately equal increments based upon the closing price of SeaChange’s common stock. We record the fair value of these stock options using the Monte Carlo simulation model, since the stock option vesting is variable depending on the closing price of our traded common stock. The model simulated the daily trading price of the market-based stock options’ expected terms to determine if the vesting conditions would be triggered during the term. Effective April 6, 2016, Ed Terino, who previously served as our Chief Operating Officer (“COO”), was appointed Chief Executive Officer (“CEO”) of SeaChange and was granted 600,000 market-based options, bringing the total of his market-based options, when added to the 200,000 market-based options he received upon hire as COO in June 2015, to 800,000 market-based options. The fair value of these stock options was estimated to be $2.0 million. As of July 31, 2016, $1.3 million remained unamortized on these market-based stock options, which will be expensed over the next 1.6 years, the remaining weighted average amortization period.

2015 Employee Stock Purchase Plan

In July 2015 we adopted the 2015 Employee Stock Purchase Plan (the “ESPP”). The purpose of the ESPP is to provide eligible employees, including executive officers of SeaChange, with the opportunity to purchase shares of our common stock at a discount through accumulated payroll deductions of up to 15%, but not less than one percent of their eligible compensation, subject to any plan limitations. Offering periods typically commence on October 1^st and April 1^st and end on March 31^st and September 30^th with the last trading day being the exercise date for the offering period. On each purchase date, eligible employees will purchase our stock at a price per share equal to 85% of the closing price of our common stock on the exercise date, but no less than par value. The maximum number of shares of our common stock which will be authorized for sale under the ESPP is 1,150,000 shares. Stock-based compensation expense related to the ESPP was immaterial for the three and six months ended July 31, 2016.

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Accumulated Other Comprehensive Loss

6 Months Ended

Jul. 31, 2016

Equity [Abstract]

Accumulated Other Comprehensive Loss

10. Accumulated Other Comprehensive Loss

The following shows the changes in the components of accumulated other comprehensive loss for the six months ended July 31, 2016:

				Changes in
	Foreign			Fair Value of
	Currency			Available
	Translation			for Sale
	Adjustment			Investments		Total
	(Amounts in thousands)
Balance at January 31, 2016	$	(6,644	)	$	31	$	(6,613	)
Other comprehensive income		303			18		321
Balance at July 31, 2016	$	(6,341	)	$	49	$	(6,292	)

Unrealized holding gains (losses) on securities available for sale are not material for the periods presented.

Comprehensive loss consists of our net loss and other comprehensive income (loss), which includes foreign currency translation adjustments and changes in unrealized gains and losses on marketable securities available for sale. For purposes of comprehensive loss disclosures, we do not record tax expense or benefits for the net changes in the foreign currency translation adjustments, as we intend to permanently reinvest all undistributed earnings of the related foreign subsidiaries.

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Segment Information, Significant Customers and Geographic Information

6 Months Ended

Jul. 31, 2016

Segment Reporting [Abstract]

Segment Information, Significant Customers and Geographic Information

11. Segment Information, Significant Customers and Geographic Information

Segment Information

Our operations are organized into one reportable segment. Operating segments are defined as components of an enterprise evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and assess performance. Our reportable segment was determined based upon the nature of the products offered to customers, the market characteristics of each operating segment and the Company’s management structure.

Significant Customers

The following summarizes revenues by significant customer where such revenue exceeded 10% of total revenues for the indicated period:

	Three Months Ended		Six Months Ended
	July 31,		July 31,
	2016	2015	2016	2015
Customer A	28%	25%	30%	22%
Customer B	N/A	11%	N/A	14%
Customer C	N/A	11%	N/A	N/A

Geographic Information

The following table summarizes revenues by customers’ geographic locations for the periods presented:

	Three Months Ended July 31,										Six Months Ended July 31,
	2016					2015					2016					2015
	Amount		%			Amount		%			Amount		%			Amount		%
	(Amounts in thousands, except percentages)
Revenues by customers’ geographic locations:
North America(1)	$	8,520		46	%	$	16,010		58	%	$	19,191		48	%	$	29,789		58	%
Europe and Middle East		8,439		46	%		10,090		36	%		17,580		44	%		17,656		35	%
Latin America		1,265		7	%		1,354		5	%		2,450		6	%		2,452		5	%
Asia Pacific		228		1	%		417		1	%		801		2	%		1,151		2	%
Total	$	18,452				$	27,871				$	40,022				$	51,048

(1) Includes total revenues for the United States for the periods shown as follows (amounts in thousands, except percentage data):

	Three Months Ended						Six Months Ended
	July 31,						July 31,
	2016			2015			2016			2015
U.S. Revenue	$	6,689		$	11,794		$	15,135		$	23,729
% of total revenues		36.3	%		42.3	%		37.8	%		46.5	%

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Income Taxes

6 Months Ended

Jul. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

We recorded an income tax provision of $14.6 million and $14.8 million for the three and six months ended July 31, 2016, respectively, primarily relating to deferred income tax expense of $14.7 million related to the change in assertion regarding the undistributed foreign earnings of certain of our foreign subsidiaries. Our effective tax rate in fiscal 2017 and in future periods may fluctuate on a quarterly basis as a result of changes in our jurisdictional forecasts where losses cannot be benefitted due to the existence of valuation allowances on our deferred tax assets, changes in actual results versus our estimates, or changes in tax laws, regulations, accounting principles, or interpretations thereof.

Our foreign subsidiaries generate earnings that are not subject to U.S. income taxes so long as they are permanently reinvested in our operations outside of the U.S. Pursuant to Accounting Standard Codification Topic No. 740-30, “Income Taxes – Other Considerations or Special Areas,” undistributed earnings of foreign subsidiaries that are no longer permanently reinvested would become subject to deferred income taxes under U.S. tax law. Prior to the second quarter of fiscal 2017, we asserted that the undistributed earnings of all our foreign subsidiaries were permanently reinvested.

In the second quarter of fiscal 2017, following a review of our operations, liquidity and funding, and investment in our product roadmap, we determined that the ability to access certain amounts of foreign earnings would provide greater flexibility to meet the Company’s working capital needs. Accordingly, in the second quarter of fiscal 2017, we withdrew the permanent reinvestment assertion on $58.6 million of earnings generated by our Irish operations through July 2016. We recorded a deferred tax liability of $14.7 million related to the foreign income taxes on $58.6 million of undistributed earnings.

There is no certainty as to the timing of when such foreign earnings will be distributed to the United States in whole or in part. Further, when the foreign earnings are distributed to the United States, we anticipate that a substantial portion of the resulting U.S. income taxes would be reduced by existing tax attributes.

We have not provided for U.S. federal or foreign income taxes on $5.8 million of our non-U.S. subsidiaries’ undistributed earnings as of July 31, 2016. The $5.8 million of undistributed foreign earnings have been reinvested in our foreign operations, as we have determined that these earnings are necessary to support our planned ongoing investments in our foreign operations, and as a result, these earnings remain indefinitely reinvested in those operations. In making this decision, we considered cash needs for: investing in our existing businesses, potential acquisitions and capital transactions.

The Company reviews all available evidence to evaluate the recovery of deferred tax assets, including the recent history of losses in all tax jurisdictions, as well as its ability to generate income in future periods. As of July 31, 2016, due to the uncertainty related to the ultimate use of certain deferred income tax assets, the Company has recorded a valuation allowance on certain of its deferred assets.

We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign jurisdictions. We have closed out an audit with the Internal Revenue Service (“IRS”) through fiscal 2013, however, the taxing authorities will still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers.

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Net Loss Per Share

6 Months Ended

Jul. 31, 2016

Earnings Per Share [Abstract]

Net Loss Per Share

13. Net Loss Per Share

Net loss per share is presented in accordance with authoritative guidance which requires the presentation of “basic” and “diluted” earnings per share. Basic earnings (loss) per share is computed by dividing earnings (loss) available to common shareholders by the weighted-average shares of common stock outstanding during the period. For the purposes of calculating diluted earnings per share, the denominator includes both the weighted average number of shares of common stock outstanding during the period and the weighted average number of shares of potential dilutive shares of common stock, such as stock awards, calculated using the treasury stock method. Basic and diluted net loss per share was the same for all the periods presented as the impact of potential dilutive shares outstanding was anti-dilutive.

The following table sets forth our computation of basic and diluted net loss per common share (amounts in thousands, except per share amounts):

	Three Months Ended						Six Months Ended
	July 31,						July 31,
	2016			2015			2016			2015
Net loss	$	(26,884	)	$	(5,027	)	$	(35,791	)	$	(14,852	)
Weighted average shares used in computing net loss per share - basic and diluted		35,115			33,350			34,739			33,339
Net loss per share:
Basic	$	(0.77	)	$	(0.16	)	$	(1.03	)	$	(0.45	)
Diluted	$	(0.77	)	$	(0.16	)	$	(1.03	)	$	(0.45	)

The number of common shares used in the computation of diluted net loss per share for the three and six months ended July 31, 2016 and 2015 does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive (amounts in thousands):

	Three Months Ended				Six Months Ended
	July 31,				July 31,
	2016		2015		2016		2015
Stock options		1,633		1,526		1,284		1,468
Restricted stock units		827		179		845		152
Deferred stock units		45		18		42		12
Total		2,505		1,723		2,171		1,632

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Recent Accounting Standard Updates

6 Months Ended

Jul. 31, 2016

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Standard Updates

14. Recent Accounting Standard Updates

We consider the applicability and impact of all ASUs. Updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

Recently Issued Accounting Standard Updates – Not Yet Adopted

Revenue from Contracts with Customers (Topic 606)

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and the International Financial Reporting Standards. This guidance supersedes previously issued guidance on revenue recognition and gives a five step process an entity should follow so that the entity recognizes revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date of this guidance to annual reporting periods beginning after December 15, 2017, which would be our fiscal 2019 reporting period. It must be applied either retrospectively during each prior reporting period presented or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of the initial application. Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date for ASU 2016-08 is the same as the effective date for ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” ASU 2016-10 provides clarification on two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improve the guidance for determining whether promises are separately identifiable. The effective date of ASU 2016-10 is the same as the effective date for ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 600): Narrow-Scope Improvements and Practical Expedients.” ASU 2016 clarifies aspects of ASU 2014-09, including clarifying noncash consideration, and provides a practical expedient for reflecting contract modifications at transition. The effective date of ASU 2016-12 is the same as the effective date of ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability for operating leases with terms over twelve months, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. It also requires lessees to classify leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. ASU 2016-02 is effective for us in the first quarter of fiscal 2020. Early adoption is permitted. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

Stock Compensation

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statements of cash flows. ASU 2016-09 is effective for us in the first quarter of fiscal 2018. Early adoption is permitted. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

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Nature of Business and Basis of Presentation (Policies)

6 Months Ended

Jul. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of SeaChange International, Inc. and its subsidiaries (“SeaChange” or the “Company”) and are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reports as well as rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany transactions and balances have been eliminated. Certain information and footnote disclosures normally included in financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to such regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying financial statements include all adjustments, consisting of only normal recurring items, necessary to present a fair presentation of the consolidated financial statements for the periods shown. These consolidated financial statements should be read in conjunction with our most recently audited financial statements and related footnotes included in our Annual Report on Form 10-K (“Form 10-K”) as filed with the SEC. The balance sheet data as of January 31, 2016 that is included in this Quarterly Report on Form 10-Q (“Form 10-Q”) was derived from our audited financial statements. We have reclassified certain amounts previously reported in our financial statements to conform to current presentation.

The preparation of these financial statements in conformity with U.S. GAAP, requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Interim results are not necessarily indicative of the operating results for the full fiscal year or any future periods and actual results may differ from our estimates. During the three and six months ended July 31, 2016, there have been no material changes to our significant accounting policies that were described in our fiscal 2016 Form 10-K, as filed with the SEC.

Revenue Recognition

Revenue Recognition

Our transactions frequently involve the sales of hardware, software, systems and services in multiple-element arrangements. Revenues from sales of hardware, software and systems that do not require significant modification or customization of the underlying software are recognized when:

• persuasive evidence of an arrangement exists;

• delivery has occurred, and title and risk of loss have passed to the customer;

• fees are fixed or determinable; and

• collection of the related receivable is considered probable.

Customers are billed for installation, training, project management and at least one year of product maintenance and technical support at the time of the product sale. Revenue from these activities is deferred at the time of the product sale and recognized ratably over the period these services are performed. Revenue from ongoing product maintenance and technical support agreements is recognized ratably over the period of the related agreements. Revenue from software development contracts that include significant modification or customization, including software product enhancements, is recognized based on the percentage of completion contract accounting method using labor efforts expended in relation to estimates of total labor efforts to complete the contract. The percentage of completion method requires that adjustments or re-evaluations to estimated project revenues and costs be recognized on a project-to-date cumulative basis, as changes to the estimates are identified. Revisions to project estimates are made as additional information becomes known, including information that becomes available subsequent to the date of the consolidated financial statements up through the date such consolidated financial statements are filed with the SEC. If the final estimated profit to complete a long-term contract indicates a loss, a provision is recorded immediately for the total loss anticipated. Accounting for contract amendments and customer change orders are included in contract accounting when executed. Revenue from shipping and handling costs and other out-of-pocket expenses reimbursed by customers are included in revenues and cost of revenues. Our share of intercompany profits associated with sales and services provided to affiliated companies are eliminated in consolidation in proportion to our equity ownership.

Contract accounting requires judgment relative to assessing risks, estimating revenues and costs and making assumptions including, in the case of our professional services contracts, the total amount of labor required to complete a project and the complexity of the development and other technical work to be completed. Due to the size and nature of many of our contracts, the estimation of total revenues and cost at completion is complicated and subject to many variables. Assumptions have to be made regarding the length of time to complete the contract because costs also include estimated third-party vendor and contract labor costs. Penalties related to performance on contracts are considered in estimating sales and profit, and are recorded when there is sufficient information for us to assess anticipated performance. Third-party vendors’ assertions are also assessed and considered in estimating costs and margin.

Revenue from the sale of software-only products remains within the scope of the software revenue recognition rules. Maintenance and support, training, consulting, and installation services no longer fall within the scope of the software revenue recognition rules, except when they are sold with and relate to a software-only product. Revenue recognition for products that no longer fall under the scope of the software revenue recognition rules is similar to that for other tangible products and Accounting Standard Update No. (“ASU”) 2009-13, “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements,” amended ASC 605 and is applicable for multiple-deliverable revenue arrangements. ASU 2009-13 allows companies to allocate revenue in a multiple-deliverable arrangement in a manner that better reflects the transaction’s economics.

Under the software revenue recognition rules, the fee is allocated to the various elements based on vendor-specific objective evidence (“VSOE”) of fair value. Under this method, the total arrangement value is allocated first to undelivered elements based on their fair values, with the remainder being allocated to the delivered elements. Where fair value of undelivered service elements has not been established, the total arrangement value is recognized over the period during which the services are performed. The amounts allocated to undelivered elements, which may include project management, training, installation, maintenance and technical support and certain hardware and software components, are based upon the price charged when these elements are sold separately and unaccompanied by the other elements. The amount allocated to installation, training and project management revenue is based upon standard hourly billing rates and the estimated time necessary to complete the service. These services are not essential to the functionality of systems as these services do not alter the equipment’s capabilities, are available from other vendors and the systems are standard products. For multiple-element arrangements that include software development with significant modification or customization and systems sales where VSOE of the fair value does not exist for the undelivered elements of the arrangement (other than maintenance and technical support), percentage of completion accounting is applied for revenue recognition purposes to the entire arrangement with the exception of maintenance and technical support.

Under the revenue recognition rules for tangible products as amended by ASU 2009-13, the fee from a multiple-deliverable arrangement is allocated to each of the deliverables based upon their relative selling prices as determined by a selling-price hierarchy. A deliverable in an arrangement qualifies as a separate unit of accounting if the delivered item has value to the customer on a stand-alone basis. A delivered item that does not qualify as a separate unit of accounting is combined with the other undelivered items in the arrangement and revenue is recognized for those combined deliverables as a single unit of accounting. The selling price used for each deliverable is based upon VSOE if available, third-party evidence (“TPE”) if VSOE is not available, and best estimate of selling price (“BESP”) if neither VSOE nor TPE are available. TPE is the price of the Company’s, or any competitor’s, largely interchangeable products or services in stand-alone sales to similarly situated customers. BESP is the price at which we would sell the deliverable if it were sold regularly on a stand-alone basis, considering market conditions and entity-specific factors.

The selling prices used in the relative selling price allocation method for certain of our services are based upon VSOE. The selling prices used in the relative selling price allocation method for third-party products from other vendors are based upon TPE. The selling prices used in the relative selling price allocation method for our hardware products, software, subscriptions, and customized services for which VSOE does not exist are based upon BESP. We do not believe TPE exists for these products and services because they are differentiated from competing products and services in terms of functionality and performance and there are no competing products or services that are largely interchangeable. Management establishes BESP with consideration for market conditions, such as the impact of competition and geographic considerations, and entity-specific factors, such as the cost of the product, discounts provided and profit objectives. Management believes that BESP is reflective of reasonable pricing of that deliverable as if priced on a stand-alone basis.

For our cloud and managed service revenues, we generate revenue from two sources: (1) subscription and support services; and (2) professional services and other. Subscription and support revenue includes subscription fees from customers accessing our cloud-based software platform and support fees. Our arrangements with customers do not provide the customer with the right to take possession of the software supporting the cloud-based software platform at any time. Professional services and other revenue include fees from implementation and customization to support customer requirements. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. For the most part, subscription and support agreements are entered into for 12 to 36 months. Generally, a majority of the professional services component of the arrangements with customers is performed within a year of entering into a contract with the customer.

In most instances, revenue from a new customer acquisition is generated under sales agreements with multiple elements, comprised of subscription and support and other professional services. We evaluate each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within our control.

In determining when to recognize revenue from a customer arrangement, we are often required to exercise judgment regarding the application of our accounting policies to a particular arrangement. The primary judgments used in evaluating revenue recognized in each period involve: determining whether collection is probable, assessing whether the fee is fixed or determinable, and determining the fair value of the maintenance and service elements included in multiple-element software arrangements. Such judgments can materially impact the amount of revenue that we record in a given period. While we follow specific and detailed rules and guidelines related to revenue recognition, we make and use significant management judgments and estimates in connection with the revenue recognized in any reporting period, particularly in the areas described above. If management made different estimates or judgments, material differences in the timing of the recognition of revenue could occur.

Impairment of Assets

Impairment of Assets

Indefinite-lived intangible assets, such as goodwill, are not amortized but are evaluated for impairment at the reporting unit level annually, in our third quarter beginning August 1^st. Indefinite-lived intangible assets may be tested for impairment on an interim basis in addition to the annual evaluation if an event occurs or circumstances change such as declines in sales, earnings or cash flows, decline in the Company’s stock price, or material adverse changes in the business climate, which would more likely than not reduce the fair value of a reporting unit below its carrying amount. See Note 6, “Goodwill and Intangible Assets,” to our consolidated financial statements for more information.

We also evaluate other long-lived assets such as property and equipment and intangible assets with finite useful lives, on a regular basis for the existence of facts or circumstances, both internal and external that may suggest an asset is not recoverable. If such circumstances exist, we evaluate the carrying value of long-lived assets to determine if impairment exists based upon estimated undiscounted future cash flows over the remaining useful life of the assets and compares that value to the carrying value of the assets. Our cash flow estimates contain management’s best estimates, using appropriate and customary assumptions and projections at the time.

In the second quarter of fiscal 2017, we determined there to be triggering events that might possibly indicate that the carrying amount of our long-lived assets may not be recoverable. These triggering events included a sustained decrease in share price during the period and our current-period operating loss combined with a history of operating losses. As a result, we were required to test for the recoverability of our long-lived assets to determine whether an impairment loss should have been measured as mentioned above. We determined that the estimated undiscounted future cash flows over the remaining useful life of the long-lived assets exceeded the carrying value. Therefore, the assets were deemed recoverable and no impairment of long-lived assets existed as of July 31, 2016.

Fair Value Measurements

Fair Value Measurements

Definition and Hierarchy

The applicable accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance establishes a framework for measuring fair value and expands required disclosure about the fair value measurements of assets and liabilities. This guidance requires us to classify and disclose assets and liabilities measured at fair value on a recurring basis, as well as fair value measurements of assets and liabilities measured on a non-recurring basis in periods subsequent to initial measurement, in a fair value hierarchy.

The fair value hierarchy is broken down into three levels based on the reliability of inputs and requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required, as well as the assets and liabilities that we value using those levels of inputs:

• Level 1 – Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

• Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not very active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value of the contingent consideration obligations related to our business acquisitions are valued using Level 3 inputs.

Valuation Techniques

Inputs to valuation techniques are observable and unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. When developing fair value estimates for certain financial assets and liabilities, we maximize the use of observable inputs and minimize the use of unobservable inputs. When available, we use quoted market prices, market comparables and discounted cash flow projections. Financial assets include money market funds, U.S. treasury notes or bonds and U.S. government agency bonds.

In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly. In periods of market inactivity, the observability of prices and inputs may be reduced for certain instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3.

Recent Accounting Standard Updates

Recent Accounting Standard Updates

We consider the applicability and impact of all ASUs. Updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

Recently Issued Accounting Standard Updates – Not Yet Adopted

Revenue from Contracts with Customers (Topic 606)

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and the International Financial Reporting Standards. This guidance supersedes previously issued guidance on revenue recognition and gives a five step process an entity should follow so that the entity recognizes revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date of this guidance to annual reporting periods beginning after December 15, 2017, which would be our fiscal 2019 reporting period. It must be applied either retrospectively during each prior reporting period presented or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of the initial application. Early adoption is permitted to the original effective date of December 15, 2016 (including interim reporting periods within those periods). We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” ASU 2016-08 is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date for ASU 2016-08 is the same as the effective date for ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” ASU 2016-10 provides clarification on two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improve the guidance for determining whether promises are separately identifiable. The effective date of ASU 2016-10 is the same as the effective date for ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 600): Narrow-Scope Improvements and Practical Expedients.” ASU 2016 clarifies aspects of ASU 2014-09, including clarifying noncash consideration, and provides a practical expedient for reflecting contract modifications at transition. The effective date of ASU 2016-12 is the same as the effective date of ASU 2014-09. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability for operating leases with terms over twelve months, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. It also requires lessees to classify leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. ASU 2016-02 is effective for us in the first quarter of fiscal 2020. Early adoption is permitted. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

Stock Compensation

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statements of cash flows. ASU 2016-09 is effective for us in the first quarter of fiscal 2018. Early adoption is permitted. We are currently evaluating what impact the adoption of this update will have on our consolidated financial statements.

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Fair Value Measurements (Tables)

6 Months Ended

Jul. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets and Liabilities Measured on Recurring Basis

The following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of July 31, 2016 and January 31, 2016. There were no fair value measurements of our financial assets and liabilities using significant level 3 inputs for the periods presented:

			Fair Value at July 31, 2016 Using
			Quoted
			Prices in		Significant
			Active		Other
			Markets for		Observable
	July 31,		Identical Assets		Inputs
	2016		(Level 1)		(Level 2)
	(Amounts in thousands)
Financial assets:
Money market accounts (a)	$	945	$	945	$	—
Available for sale marketable securities:
Current marketable securities:
U.S. treasury notes and bonds - conventional		4,759		4,759		—
U.S. government agency issues		1,001		—		1,001
Non-current marketable securities:
U.S. treasury notes and bonds - conventional		2,761		2,761		—
U.S. government agency issues		3,510		—		3,510
Total	$	12,976	$	8,465	$	4,511

			Fair Value at January 31, 2016 Using
			Quoted
			Prices in		Significant
			Active		Other
			Markets for		Observable
	January 31,		Identical Assets		Inputs
	2016		(Level 1)		(Level 2)
	(Amounts in thousands)
Financial assets:
Money market accounts (a)	$	3,654	$	3,654	$	—
Available for sale marketable securities:
Current marketable securities:
U.S. treasury notes and bonds - conventional		502		502		—
U.S. government agency issues		1,002		—		1,002
Non-current marketable securities:
U.S. treasury notes and bonds - conventional		7,762		7,762
U.S. government agency issues		3,002		—		3,002
Total	$	15,922	$	11,918	$	4,004

(a) Money market funds and U.S. treasury bills are included in cash and cash equivalents on the accompanying consolidated balance sheets and are valued at quoted market prices for identical instruments in active markets.

Summary of Available-for-Sale Securities

The following is a summary of cash, cash equivalents and available-for-sale securities, including the cost basis, aggregate fair value and gross unrealized gains and losses, for short- and long-term marketable securities portfolio as of July 31, 2016 and January 31, 2016:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Amounts in thousands)
July 31, 2016:
Cash	$	37,721	$	—	$	—		$	37,721
Cash equivalents		945		—		—			945
Cash and cash equivalents		38,666		—		—			38,666
U.S. treasury notes and bonds - short-term		4,753		6		—			4,759
U.S. treasury notes and bonds - long-term		2,750		11		—			2,761
U.S, government agency issues - short-term		1,000		1		—			1,001
U.S, government agency issues - long-term		3,479		31		—			3,510
Total cash, cash equivalents and marketable securities	$	50,648	$	49	$	—		$	50,697
January 31, 2016:
Cash	$	55,079	$	—	$	—		$	55,079
Cash equivalents		3,654		—		—			3,654
Cash and cash equivalents		58,733		—		—			58,733
U.S. treasury notes and bonds - short-term		503		—		(1	)		502
U.S. treasury notes and bonds - long-term		7,756		6		—			7,762
U.S, government agency issues - short-term		1,001		1		—			1,002
U.S, government agency issues - long-term		2,977		25					3,002
Total cash, cash equivalents and marketable securities	$	70,970	$	32	$	(1	)	$	71,001

Schedule of Contractual Maturities Available-for-Sale Investments

Contractual maturities of available-for-sale investments as of July 31, 2016 are as follows (amounts in thousands):

	Estimated
	Fair Value
Maturity of one year or less	$	5,760
Maturity between one and five years		6,271
Total	$	12,031

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Acquisitions and Loss on Impairment (Tables)

6 Months Ended

Jul. 31, 2016

DCC Labs [Member]

Summary of Allocation of Purchase Price

The allocation of purchase price was as follows (amounts in thousands):

Estimated Fair value of consideration:
Cash, net of cash acquired	$	5,243
Stock consideration		2,640
Total purchase price	$	7,883
Estimated Fair value of assets acquired and liabilities assumed:
Current assets		1,156
Other long-term assets		116
Finite-life intangible assets		3,100
Goodwill		5,071
Current liabilities		(618	)
Other long-term liabilities		(942	)
Allocated purchase price	$	7,883

Components of Identified Intangible Assets Associated with Acquisition and their Estimated Useful Lives

The following table sets forth the components of the identified intangible assets associated with the DCC Labs acquisition and their estimated useful lives:

	Useful life		Fair Value
			(Amounts in thousands)
Tradename		5 years	$	200
Customer contracts		9 years		1,400
Non-compete agreements		2 years		100
Existing technology		7 years		1,400
			$	3,100

Timeline Labs [Member]

Summary of Allocation of Purchase Price

The allocation of the purchase price was as follows (amounts in thousands):

Fair value of consideration:
Cash, net of cash acquired	$	14,186
Closing stock consideration		3,019
Deferred stock consideration		4,959
Contingent consideration		475
Total purchase price	$	22,639
Fair value of assets acquired and liabilities assumed:
Current assets		95
Other long-term assets		108
Finite-life intangible assets		6,720
Goodwill		15,787
Current liabilities		(71	)
Allocated purchase price	$	22,639

Components of Identified Intangible Assets Associated with Acquisition and their Estimated Useful Lives

The following table sets forth the components of the identified intangible assets associated with the Timeline Labs acquisition and their estimated useful lives:

	Useful life		Fair Value
			(Amounts in thousands)
Tradename		7 years	$	620
Customer contracts		7 years		4,760
Non-compete agreements		2 years		170
Existing technology		5 years		1,170
			$	6,720

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Consolidated Balance Sheet Detail (Tables)

6 Months Ended

Jul. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Inventories

Inventories consist primarily of hardware and related component parts and are stated at the lower of cost (on a first-in, first-out basis) or market. Inventories consist of the following:

	As of
	July 31, 2016		January 31, 2016
	(Amounts in thousands)
Components and assemblies	$	680	$	1,223
Finished products		785		459
Total inventories, net	$	1,465	$	1,682

Property and Equipment, Net

Property and equipment, net consists of the following:

	Estimated		As of
	Useful		July 31,			January 31,
	Life (Years)		2016			2016
			(Amounts in thousands)
Land			$	2,880		$	2,880
Buildings		20		12,010			11,908
Office furniture and equipment		5		1,148			1,099
Computer equipment, software and demonstration equipment		3		19,020			18,639
Service and spare components		5		1,158			1,158
Leasehold improvements		1-7		1,091			1,087
				37,307			36,771
Less - Accumulated depreciation and amortization				(24,211	)		(22,642	)
Total property and equipment, net			$	13,096		$	14,129

Other Accrued Expenses

Other accrued expenses consist of the following:

	As of
	July 31,		January 31,
	2016		2016
	(Amounts in thousands)
Accrued compensation and commissions	$	921	$	1,676
Accrued bonuses		1,834		2,902
Accrued severance		730		47
Accrued restructuring		404		—
Employee benefits		782		1,484
Accrued provision for contract loss		4,497		6,497
Accrued other		3,072		4,808
Total other accrued expenses	$	12,240	$	17,414

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jul. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Change in Carrying Amount of Goodwill

Changes in the carrying amount of goodwill for the six months ended July 31, 2016 were as follows (amounts in thousands):

Balance as of February 1, 2016
Goodwill	$	55,962
Accumulated impairment losses		(15,787	)
		40,175
Acquisition of DCC Labs		5,071
Cumulative translation adjustment		561
Balance as of July 31, 2016
Goodwill		61,594
Accumulated impairment losses		(15,787	)
	$	45,807

Schedule of Intangible Assets

Intangible assets, net, consisted of the following at July 31, 2016 and January 31, 2016:

			As of July 31, 2016							As of January 31, 2016
	Weighted average remaining life (Years)		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(Amounts in thousands)
Finite-life intangible assets:
Customer contracts		4.1	$	31,672	$	(27,475	)	$	4,197	$	29,956	$	(26,284	)	$	3,672
Non-compete agreements		1.8		2,515		(2,429	)		86		2,365		(2,365	)		—
Completed technology		5.6		11,632		(10,023	)		1,609		10,075		(9,621	)		454
Trademarks, patents and other		4.8		7,276		(7,089	)		187		7,068		(7,068	)		—
Total finite-life intangible assets		4.4	$	53,095	$	(47,016	)	$	6,079	$	49,464	$	(45,338	)	$	4,126

Schedule of Finite-Life Intangible Assets, Future Amortization Expense

As of July 31, 2016, the estimated future amortization expense for our finite-life intangible assets for the remainder of fiscal 2017 and the four succeeding fiscal years is as follows (amounts in thousands):

	Estimated
	Amortization
Fiscal Year Ended January 31,	Expense
2017 (for the remaining six months)	$	1,259
2018		1,729
2019		1,040
2020		555
2021		390
2022 and thereafter		1,106
Total	$	6,079

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Severance and Other Restructuring Costs (Tables)

6 Months Ended

Jul. 31, 2016

Restructuring and Related Activities [Abstract]

Activity in Accrued Restructuring Liability

The following table shows the activity in accrued restructuring reported as a component of other accrued expenses on the consolidated balance sheet as of July 31, 2016 (amounts in thousands):

	Employee- Related			Closure of Leased
	Benefits			Facilities			Total
Accrual balance as of January 31, 2016	$	—		$	—		$	—
Restructuring charges incurred		1,586			321			1,907
Cash payments		(1,385	)		(116	)		(1,501	)
Other charges		(2	)		—			(2	)
Accrual balance as of July 31, 2016	$	199		$	205		$	404

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jul. 31, 2016

Equity [Abstract]

Schedule of Changes in Components of Accumulated Other Comprehensive Loss

The following shows the changes in the components of accumulated other comprehensive loss for the six months ended July 31, 2016:

				Changes in
	Foreign			Fair Value of
	Currency			Available
	Translation			for Sale
	Adjustment			Investments		Total
	(Amounts in thousands)
Balance at January 31, 2016	$	(6,644	)	$	31	$	(6,613	)
Other comprehensive income		303			18		321
Balance at July 31, 2016	$	(6,341	)	$	49	$	(6,292	)

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Segment Information, Significant Customers and Geographic Information (Tables)

6 Months Ended

Jul. 31, 2016

Segment Reporting [Abstract]

Schedule of Revenue by Major Customers by Reporting Segments

The following summarizes revenues by significant customer where such revenue exceeded 10% of total revenues for the indicated period:

	Three Months Ended		Six Months Ended
	July 31,		July 31,
	2016	2015	2016	2015
Customer A	28%	25%	30%	22%
Customer B	N/A	11%	N/A	14%
Customer C	N/A	11%	N/A	N/A

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area

The following table summarizes revenues by customers’ geographic locations for the periods presented:

	Three Months Ended July 31,										Six Months Ended July 31,
	2016					2015					2016					2015
	Amount		%			Amount		%			Amount		%			Amount		%
	(Amounts in thousands, except percentages)
Revenues by customers’ geographic locations:
North America(1)	$	8,520		46	%	$	16,010		58	%	$	19,191		48	%	$	29,789		58	%
Europe and Middle East		8,439		46	%		10,090		36	%		17,580		44	%		17,656		35	%
Latin America		1,265		7	%		1,354		5	%		2,450		6	%		2,452		5	%
Asia Pacific		228		1	%		417		1	%		801		2	%		1,151		2	%
Total	$	18,452				$	27,871				$	40,022				$	51,048

(1) Includes total revenues for the United States for the periods shown as follows (amounts in thousands, except percentage data):

	Three Months Ended						Six Months Ended
	July 31,						July 31,
	2016			2015			2016			2015
U.S. Revenue	$	6,689		$	11,794		$	15,135		$	23,729
% of total revenues		36.3	%		42.3	%		37.8	%		46.5	%

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Net Loss Per Share (Tables)

6 Months Ended

Jul. 31, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table sets forth our computation of basic and diluted net loss per common share (amounts in thousands, except per share amounts):

	Three Months Ended						Six Months Ended
	July 31,						July 31,
	2016			2015			2016			2015
Net loss	$	(26,884	)	$	(5,027	)	$	(35,791	)	$	(14,852	)
Weighted average shares used in computing net loss per share - basic and diluted		35,115			33,350			34,739			33,339
Net loss per share:
Basic	$	(0.77	)	$	(0.16	)	$	(1.03	)	$	(0.45	)
Diluted	$	(0.77	)	$	(0.16	)	$	(1.03	)	$	(0.45	)

Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share

The number of common shares used in the computation of diluted net loss per share for the three and six months ended July 31, 2016 and 2015 does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive (amounts in thousands):

	Three Months Ended				Six Months Ended
	July 31,				July 31,
	2016		2015		2016		2015
Stock options		1,633		1,526		1,284		1,468
Restricted stock units		827		179		845		152
Deferred stock units		45		18		42		12
Total		2,505		1,723		2,171		1,632

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Significant Accounting Policies - Additional Information (Detail)	6 Months Ended
	Jul. 31, 2016
Significant Accounting Policies [Line Items]
Minimum period warranty of product	1 year
Minimum [Member]
Significant Accounting Policies [Line Items]
Support agreements	12 months
Maximum [Member]
Significant Accounting Policies [Line Items]
Support agreements	36 months

XML

Fair Value Measurements - Additional Information (Detail) - USD ($)	6 Months Ended
	Jul. 31, 2016	Jan. 31, 2016	Jul. 31, 2015
Fair Value Measurements Disclosure [Line Items]
Fair value measurements of our financial assets and liabilities	$ 12,976,000	$ 15,922,000
Assets measured at fair value on nonrecurring basis	$ 0		$ 0
Maximum maturity of marketable securities	Three months or less
Cash equivalents and marketable securities	$ 50,900,000	71,100,000
Restricted cash related to performance obligations	185,000	82,000
Fair Value, Inputs, Level 3 [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value measurements of our financial assets and liabilities	0	0
Cash Related to Performance Obligations [Member]
Fair Value Measurements Disclosure [Line Items]
Restricted cash related to performance obligations	$ 200,000	$ 100,000

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Fair Value Measurements - Fair Value of Financial Assets and Liabilities Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Available for sale marketable securities:
Marketable securities, short-term	$ 5,760	$ 1,504
Non-current marketable securities:
Marketable securities, long-term	6,271	10,764
Total	12,976	15,922
U.S. Treasury Notes and Bonds Conventional [Member]
Available for sale marketable securities:
Marketable securities, short-term	4,759	502
Non-current marketable securities:
Marketable securities, long-term	2,761	7,762
U.S. Government Agency Issues Short Term [Member]
Available for sale marketable securities:
Marketable securities, short-term	1,001	1,002
U.S. Government Agency Issues Long Term [Member]
Non-current marketable securities:
Marketable securities, long-term	3,510	3,002
Money Market Accounts [Member]
Financial assets:
Cash and cash equivalents	945	3,654
Fair Value, Inputs, Level 1 [Member]
Non-current marketable securities:
Total	8,465	11,918
Fair Value, Inputs, Level 1 [Member] | U.S. Treasury Notes and Bonds Conventional [Member]
Available for sale marketable securities:
Marketable securities, short-term	4,759	502
Non-current marketable securities:
Marketable securities, long-term	2,761	7,762
Fair Value, Inputs, Level 1 [Member] | Money Market Accounts [Member]
Financial assets:
Cash and cash equivalents	945	3,654
Fair Value, Inputs, Level 2 [Member]
Non-current marketable securities:
Total	4,511	4,004
Fair Value, Inputs, Level 2 [Member] | U.S. Government Agency Issues Short Term [Member]
Available for sale marketable securities:
Marketable securities, short-term	1,001	1,002
Fair Value, Inputs, Level 2 [Member] | U.S. Government Agency Issues Long Term [Member]
Non-current marketable securities:
Marketable securities, long-term	$ 3,510	$ 3,002

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Fair Value Measurements - Summary of Available-for-Sale Securities (Detail) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Schedule of Available-for-Sale Securities [Line Items]
Amortized Cost	$ 50,648	$ 70,970
Gross Unrealized Gains	49	32
Gross Unrealized Losses		(1)
Estimated Fair Value	50,697	71,001
Cash [Member]
Schedule of Available-for-Sale Securities [Line Items]
Amortized Cost	37,721	55,079
Estimated Fair Value	37,721	55,079
Cash Equivalents [Member]
Schedule of Available-for-Sale Securities [Line Items]
Amortized Cost	945	3,654
Estimated Fair Value	945	3,654
Cash and Cash Equivalents [Member]
Schedule of Available-for-Sale Securities [Line Items]
Amortized Cost	38,666	58,733
Estimated Fair Value	38,666	58,733
U.S. Treasury Notes and Bonds - Short Term [Member]
Schedule of Available-for-Sale Securities [Line Items]
Amortized Cost	4,753	503
Gross Unrealized Gains	6
Gross Unrealized Losses		(1)
Estimated Fair Value	4,759	502
U.S. Treasury Notes and Bonds - Long Term [Member]
Schedule of Available-for-Sale Securities [Line Items]
Amortized Cost	2,750	7,756
Gross Unrealized Gains	11	6
Estimated Fair Value	2,761	7,762
U.S. Government Agency Issues Short Term [Member]
Schedule of Available-for-Sale Securities [Line Items]
Amortized Cost	1,000	1,001
Gross Unrealized Gains	1	1
Estimated Fair Value	1,001	1,002
U.S. Government Agency Issues Long Term [Member]
Schedule of Available-for-Sale Securities [Line Items]
Amortized Cost	3,479	2,977
Gross Unrealized Gains	31	25
Estimated Fair Value	$ 3,510	$ 3,002

XML

Fair Value Measurements - Schedule of Contractual Maturities Available-for-Sale Investments (Detail) $ in Thousands	Jul. 31, 2016 USD ($)
Fair Value Disclosures [Abstract]
Maturity of one year or less	$ 5,760
Maturity between one and five years	6,271
Total	$ 12,031

XML

Acquisitions and Loss on Impairment - Additional Information (Detail) - USD ($)					1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	May 05, 2016	Feb. 02, 2016	Aug. 03, 2015	Feb. 02, 2015	May 31, 2016	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015	Jan. 31, 2016	Feb. 28, 2015
Business Acquisition [Line Items]
Payments to acquire business								$ 5,243,000	$ 11,686,000
Acquisition, goodwill identified								5,071,000
Revenue						$ 18,452,000	$ 27,871,000	40,022,000	51,048,000
Operating loss						(11,668,000)	(4,750,000)	(21,243,000)	(14,216,000)
Contingent consideration liability, fair value										$ 0	$ 3,200,000
Severance and other restructuring charges						1,843,000	$ 617,000	3,618,000	$ 829,000
Timeline Labs [Member]
Business Acquisition [Line Items]
Percentage of equity interest acquired				100.00%
Net purchase price of acquired business				$ 22,639,000
Payments to acquire business				14,186,000
Acquisition, goodwill identified				15,800,000
Business acquisition related costs										100,000
Indemnification assets				$ 1,400,000
Business acquisition, number of common stock issued		542,274	260,537	344,055	70,473
Common stock deposited into escrow				173,265
Business acquisition, value of common stock issued		$ 3,200,000	$ 1,800,000	$ 4,959,000	$ 200,000
Loss on impairment due to reversal of contingent consideration liability										400,000
Loss on impairment										$ 21,900,000
Severance and other restructuring charges								700,000
DCC Labs [Member]
Business Acquisition [Line Items]
Percentage of equity interest acquired	100.00%
Net purchase price of acquired business	$ 7,883,000
Payments to acquire business	5,243,000
Payments to acquire business, paid in shares	2,600,000
Cash held in escrow	500,000
Acquisition, goodwill identified	$ 5,100,000
Revenue						200,000
Operating loss						$ 900,000
Business acquisition date						May 05, 2016
Business acquisition related costs								$ 200,000
Severance and other restructuring charges						$ 1,500,000

XML

Acquisition and Loss on Impairment - Summary of Allocation of Purchase Price (Detail) - USD ($) $ in Thousands			6 Months Ended
	May 05, 2016	Feb. 02, 2015	Jul. 31, 2016	Jul. 31, 2015	May 31, 2016	Feb. 02, 2016	Jan. 31, 2016	Aug. 03, 2015
Estimated Fair value of consideration:
Cash, net of cash acquired			$ 5,243	$ 11,686
Estimated Fair value of assets acquired and liabilities assumed:
Goodwill			45,807				$ 40,175
DCC Labs [Member]
Estimated Fair value of consideration:
Cash, net of cash acquired	$ 5,243
Closing stock consideration	2,640
Total purchase price	7,883
Estimated Fair value of assets acquired and liabilities assumed:
Current assets	1,156
Other long-term assets	116
Finite-life intangible assets	3,100
Goodwill	5,071		$ 5,100
Current liabilities	(618)
Other long-term liabilities	(942)
Allocated purchase price	$ 7,883
Timeline Labs [Member]
Estimated Fair value of consideration:
Cash, net of cash acquired		$ 14,186
Closing stock consideration		3,019
Deferred stock consideration		4,959			$ 200	$ 3,200		$ 1,800
Contingent consideration		475
Total purchase price		22,639
Estimated Fair value of assets acquired and liabilities assumed:
Current assets		95
Other long-term assets		108
Finite-life intangible assets		6,720
Goodwill		15,787
Current liabilities		(71)
Allocated purchase price		$ 22,639

XML

Acquisitions and Loss on Impairment - Components of Identified Intangible Assets Associated with Acquisition and their Estimated Useful Lives (Detail) - USD ($) $ in Thousands			6 Months Ended
	May 05, 2016	Feb. 02, 2015	Jul. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life			4 years 4 months 24 days
Customer Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life			4 years 1 month 6 days
Non-Compete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life			1 year 9 months 18 days
DCC Labs [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Fair Value	$ 3,100
DCC Labs [Member] | Tradename [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life	5 years
Identified intangible assets, Fair Value	$ 200
DCC Labs [Member] | Customer Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life	9 years
Identified intangible assets, Fair Value	$ 1,400
DCC Labs [Member] | Non-Compete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life	2 years
Identified intangible assets, Fair Value	$ 100
DCC Labs [Member] | Existing Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life	7 years
Identified intangible assets, Fair Value	$ 1,400
Timeline Labs [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Fair Value		$ 6,720
Timeline Labs [Member] | Tradename [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life		7 years
Identified intangible assets, Fair Value		$ 620
Timeline Labs [Member] | Customer Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life		7 years
Identified intangible assets, Fair Value		$ 4,760
Timeline Labs [Member] | Non-Compete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life		2 years
Identified intangible assets, Fair Value		$ 170
Timeline Labs [Member] | Existing Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Identified intangible assets, Useful life		5 years
Identified intangible assets, Fair Value		$ 1,170

XML

Consolidated Balance Sheet Detail - Schedule of Inventories (Detail) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Inventory Disclosure [Abstract]
Components and assemblies	$ 680	$ 1,223
Finished products	785	459
Total inventories, net	$ 1,465	$ 1,682

XML

Consolidated Balance Sheet Detail - Property and Equipment, Net (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2016	Jan. 31, 2016
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 37,307	$ 36,771
Less - Accumulated depreciation and amortization	(24,211)	(22,642)
Total property and equipment, net	13,096	14,129
Land [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 2,880	2,880
Buildings [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	20
Property, Plant and Equipment, Gross	$ 12,010	11,908
Office Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	5
Property, Plant and Equipment, Gross	$ 1,148	1,099
Computer Equipment, Software and Demonstration Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	3
Property, Plant and Equipment, Gross	$ 19,020	18,639
Service and Spare Components [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	5
Property, Plant and Equipment, Gross	$ 1,158	1,158
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 1,091	$ 1,087
Leasehold Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	1
Leasehold Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life (Years)	7

XML

Consolidated Balance Sheet Detail - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Balance Sheet Related Disclosures [Abstract]
Depreciation and amortization expense	$ 800	$ 800	$ 1,567	$ 1,703

XML

Consolidated Balance Sheet Detail - Other Accrued Expenses (Detail) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Balance Sheet Related Disclosures [Abstract]
Accrued compensation and commissions	$ 921	$ 1,676
Accrued bonuses	1,834	2,902
Accrued severance	730	47
Accrued restructuring	404
Employee benefits	782	1,484
Accrued provision for contract loss	4,497	6,497
Accrued other	3,072	4,808
Total other accrued expenses	$ 12,240	$ 17,414

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Goodwill and Intangible Assets - Schedule of Change in Carrying Amount of Goodwill (Detail) $ in Thousands	6 Months Ended
	Jul. 31, 2016 USD ($)
Goodwill [Roll Forward]
Goodwill gross, Beginning balance	$ 55,962
Accumulated impairment losses	(15,787)
Goodwill, Beginning balance	40,175
Acquisition of DCC Labs	5,071
Cumulative translation adjustment	561
Goodwill gross, Ending balance	61,594
Accumulated impairment losses	(15,787)
Goodwill, Ending balance	$ 45,807

XML

Goodwill and Intangible Assets - Additional Information (Detail) - USD ($)	6 Months Ended
	Jul. 31, 2016	May 05, 2016	Jan. 31, 2016
Goodwill And Intangible Assets [Line Items]
Goodwill	$ 45,807,000		$ 40,175,000
Goodwill, Impairment charges	$ 0
Maximum [Member]
Goodwill And Intangible Assets [Line Items]
Percentage of fair value of goodwill exceeding carrying value	24.40%
Fair value of goodwill exceeding carrying value	$ 25,000,000
Minimum [Member]
Goodwill And Intangible Assets [Line Items]
Percentage of fair value of goodwill exceeding carrying value	15.00%
Fair value of goodwill exceeding carrying value	$ 15,400,000
DCC Labs [Member]
Goodwill And Intangible Assets [Line Items]
Goodwill	$ 5,100,000	$ 5,071,000

XML

Goodwill and Intangible Assets - Schedule of Intangible Assets (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2016	Jan. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Weighted average remaining life (Years)	4 years 4 months 24 days
Finite-life intangible assets, Gross	$ 53,095	$ 49,464
Accumulated Amortization	(47,016)	(45,338)
Finite-life intangible assets, Net	$ 6,079	4,126
Customer Contracts [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average remaining life (Years)	4 years 1 month 6 days
Finite-life intangible assets, Gross	$ 31,672	29,956
Accumulated Amortization	(27,475)	(26,284)
Finite-life intangible assets, Net	$ 4,197	3,672
Non-Compete Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average remaining life (Years)	1 year 9 months 18 days
Finite-life intangible assets, Gross	$ 2,515	2,365
Accumulated Amortization	(2,429)	(2,365)
Finite-life intangible assets, Net	$ 86
Completed Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average remaining life (Years)	5 years 7 months 6 days
Finite-life intangible assets, Gross	$ 11,632	10,075
Accumulated Amortization	(10,023)	(9,621)
Finite-life intangible assets, Net	$ 1,609	454
Trademarks, Patents and Other [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted average remaining life (Years)	4 years 9 months 18 days
Finite-life intangible assets, Gross	$ 7,276	7,068
Accumulated Amortization	(7,089)	$ (7,068)
Finite-life intangible assets, Net	$ 187

XML

Goodwill and Intangible Assets - Schedule of Finite-Life Intangible Assets, Future Amortization Expense (Detail) - USD ($) $ in Thousands	Jul. 31, 2016	Jan. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
2017 (for the remaining six months)	$ 1,259
2018	1,729
2019	1,040
2020	555
2021	390
2022 and thereafter	1,106
Finite-life intangible assets, Net	$ 6,079	$ 4,126

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Commitments and Contingencies - Additional Information (Detail) - Demand Debt Instrument [Member]	6 Months Ended
	Jul. 31, 2016 USD ($)
Contingencies And Commitments [Line Items]
Demand notes payable	$ 20,000,000
Line of credit expiration date	Aug. 31, 2016
Demand notes payable, amount outstanding	$ 0

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Severance and Other Restructuring Costs - Additional Information (Detail) $ in Thousands			3 Months Ended		6 Months Ended
	Jul. 06, 2016 USD ($) Installments	Apr. 06, 2016 USD ($) Installments	Jul. 31, 2016 USD ($)	Jul. 31, 2015 USD ($)	Jul. 31, 2016 USD ($) Employee	Jul. 31, 2015 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring charges			$ 1,843	$ 617	$ 3,618	$ 829
Former Employees [Member]
Restructuring Cost and Reserve [Line Items]
Number of employees terminated | Employee					11
CEO [Member] | CEO Separation Agreement [Member]
Restructuring Cost and Reserve [Line Items]
Employee separation related liabilities including bonus payable	$ 200	$ 1,000
Bonus payable		200
Employee separation liability payable		$ 800
Number of equal monthly installments | Installments		12
Number of equal semimonthly installments | Installments	12
Former Chief Executive Officer and Chief Financial Officer [Member]
Restructuring Cost and Reserve [Line Items]
Severance costs					$ 1,400
DCC Labs [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges			$ 1,500
Timeline Labs [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges					700
Timeline Labs [Member] | Canada [Member]
Restructuring Cost and Reserve [Line Items]
Other restructuring charges, (relating to remaining lease obligation)					200
Timeline Labs [Member] | Former Employees [Member]
Restructuring Cost and Reserve [Line Items]
Severance costs					$ 500

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Severance and Other Restructuring Costs - Activity in Accrued Restructuring Liability (Detail) $ in Thousands	6 Months Ended
	Jul. 31, 2016 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring charges incurred	$ 1,907
Cash payments	(1,501)
Other charges	(2)
Accrual balance at the ending of the period	404
Employee-Related Benefits [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges incurred	1,586
Cash payments	(1,385)
Other charges	(2)
Accrual balance at the ending of the period	199
Closure of Leased Facilities [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges incurred	321
Cash payments	(116)
Accrual balance at the ending of the period	$ 205

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Stockholders' Equity - Additional Information (Detail) - USD ($) $ in Millions		1 Months Ended		6 Months Ended	12 Months Ended
	Apr. 06, 2016	Jun. 30, 2016	Jul. 31, 2015	Jul. 31, 2016	Jan. 31, 2016	Jul. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Market based options granted				800,000
Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, options, vested in period, fair value				$ 2.0
Share-based compensation arrangement by share-based payment award, options, vested in period				1 year 7 months 6 days
Employee service share-based compensation, nonvested awards, total compensation cost not yet recognized				$ 1.3
CEO [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Market based options granted	600,000
Chief Operating Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Market based options granted		200,000
Compensation and Incentive Plan 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, number of shares authorized						5,300,000
Share-based compensation arrangement by share-based payment award, Description				Option awards may be granted to employees at an exercise price per share of not less than 100% of the fair market value per common share on the date of the grant.
Share-based compensation arrangement by share based payment award, Option award expiration period				10 years
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent				100.00%
Compensation and Incentive Plan 2011 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by Share-based payment award, Option award vesting period				1 year
Compensation and Incentive Plan 2011 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by Share-based payment award, Option award vesting period				4 years
Compensation and Incentive Plan 2011 [Member] | Stock Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, number of shares available for grant				1,184,298
2015 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, Description				On each purchase date, eligible employees will purchase our stock at a price per share equal to 85% of the closing price of our common stock on the exercise date, but no less than par value.
Minimum payroll deductions at base compensation under employee stock purchase plan			1.00%
Maximum payroll deductions at base compensation under employee stock purchase plan			15.00%
Offering period commence date			Oct. 01, 2015
Percentage of stock to be purchased under the plan			85.00%
2015 Employee Stock Purchase Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, number of shares authorized			1,150,000
Long Term Incentive Program [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by Share-based payment award, Option award vesting period					3 years

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Accumulated Other Comprehensive Loss - Schedule of Changes in Components of Accumulated Other Comprehensive Loss (Detail) $ in Thousands	6 Months Ended
	Jul. 31, 2016 USD ($)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ (6,613)
Other comprehensive income	321
Ending balance	(6,292)
Cumulative Translation Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(6,644)
Other comprehensive income	303
Ending balance	(6,341)
Unrealized Gain/Loss on Investments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	31
Other comprehensive income	18
Ending balance	$ 49

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Segment Information, Significant Customers and Geographic Information - Additional Information (Detail)	6 Months Ended
	Jul. 31, 2016 Segment
Segment Reporting [Abstract]
Number of reportable segment	1

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Segment Information, Significant Customers and Geographic Information - Schedule of Revenue by Major Customers by Reporting Segments (Detail) - Customer Concentration Risk [Member] - Total Revenue [Member]	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Customer A [Member]
Revenue, Major Customer [Line Items]
% of total revenues	28.00%	25.00%	30.00%	22.00%
Customer B [Member]
Revenue, Major Customer [Line Items]
% of total revenues		11.00%		14.00%
Customer C [Member]
Revenue, Major Customer [Line Items]
% of total revenues		11.00%

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Segment Information, Significant Customers and Geographic Information - Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Segment Reporting Information [Line Items]
Total revenues	$ 18,452	$ 27,871	$ 40,022	$ 51,048
North America [Member]
Segment Reporting Information [Line Items]
Total revenues	8,520	16,010	19,191	29,789
Europe and Middle East [Member]
Segment Reporting Information [Line Items]
Total revenues	8,439	10,090	17,580	17,656
Latin America [Member]
Segment Reporting Information [Line Items]
Total revenues	1,265	1,354	2,450	2,452
Asia Pacific [Member]
Segment Reporting Information [Line Items]
Total revenues	$ 228	$ 417	$ 801	$ 1,151
Customer Concentration Risk [Member] | Total Revenue [Member] | North America [Member]
Segment Reporting Information [Line Items]
% of total revenues	46.00%	58.00%	48.00%	58.00%
Customer Concentration Risk [Member] | Total Revenue [Member] | Europe and Middle East [Member]
Segment Reporting Information [Line Items]
% of total revenues	46.00%	36.00%	44.00%	35.00%
Customer Concentration Risk [Member] | Total Revenue [Member] | Latin America [Member]
Segment Reporting Information [Line Items]
% of total revenues	7.00%	5.00%	6.00%	5.00%
Customer Concentration Risk [Member] | Total Revenue [Member] | Asia Pacific [Member]
Segment Reporting Information [Line Items]
% of total revenues	1.00%	1.00%	2.00%	2.00%

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Segment Information, Significant Customers and Geographic Information - Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area (Parenthetical) (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Segment Reporting Information [Line Items]
Total revenues	$ 18,452	$ 27,871	$ 40,022	$ 51,048
United States Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	$ 6,689	$ 11,794	$ 15,135	$ 23,729
Total Revenue [Member] | Customer Concentration Risk [Member] | United States Revenue [Member]
Segment Reporting Information [Line Items]
% of total revenues	36.30%	42.30%	37.80%	46.50%

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Income Taxes Disclosure [Line Items]
Income tax provision (benefit)	$ 14,581	$ 78	$ 14,835	$ 225
Deferred tax liability related to the foreign income	14,700		14,700
Non-U.S. Subsidiaries [Member]
Income Taxes Disclosure [Line Items]
Undistributed earnings of foreign subsidiaries	5,800		5,800
Irish Operations [Member]
Income Taxes Disclosure [Line Items]
Deferred tax liability related to the foreign income	14,700		14,700
Undistributed earnings of foreign subsidiaries	$ 58,600		$ 58,600

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Net Loss Per Share - Schedule of Earnings Per Share, Basic and Diluted (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Earnings Per Share [Abstract]
Net loss	$ (26,884)	$ (5,027)	$ (35,791)	$ (14,852)
Weighted average shares used in computing net loss per share - basic and diluted	35,115	33,350	34,739	33,339
Net loss per share:
Basic	$ (0.77)	$ (0.16)	$ (1.03)	$ (0.45)
Diluted	$ (0.77)	$ (0.16)	$ (1.03)	$ (0.45)

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Net Loss Per Share - Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share (Detail) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive potentially outstanding common shares	2,505	1,723	2,171	1,632
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive potentially outstanding common shares	1,633	1,526	1,284	1,468
Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive potentially outstanding common shares	827	179	845	152
Deferred Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive potentially outstanding common shares	45	18	42	12