10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended July 31, 2020

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: 001-38828

SEACHANGE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	04-3197974
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
500 Totten Pond Road, Waltham, MA	02451
Address of principal executive offices	(Zip Code)

(978) 897-0100

Registrant’s telephone number, including area code

Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	SEAC	The Nasdaq Global Select Market
Series A Participating Preferred Stock Purchase Rights	SEAC	The Nasdaq Global Select Market

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  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    YES  ☒    NO  ☐

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

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

The number of shares outstanding of the registrant’s Common Stock on August 31, 2020 was 37,556,067.

SEACHANGE INTERNATIONAL, INC.

Table of Contents

		Page
PART I. FINANCIAL  INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations and Comprehensive Loss	3
	Consolidated Statements of Stockholders’ Equity	4
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 5.	Other Information	30
Item 6.	Exhibits	30
SIGNATURES		32

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share data)

	July 31,			January 31,
	2020			2020
Assets
Current assets:
Cash, cash equivalents and restricted cash	$	7,655		$	9,297
Marketable securities		2,141			3,835
Accounts receivable, net of allowance for doubtful accounts of $904    and $947 at July 31, 2020 and January 31, 2020, respectively		6,011			12,127
Unbilled receivables		11,932			14,279
Prepaid expenses and other current assets		4,928			5,112
Total current assets		32,667			44,650
Property and equipment, net		636			554
Operating lease right-of-use assets		5,505			4,860
Marketable securities, long-term		—			782
Intangible assets, net		1,868			2,300
Goodwill		10,441			9,775
Unbilled receivables, long-term		9,033			9,031
Other assets		831			938
Total assets	$	60,981		$	72,890
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,717		$	4,007
Accrued expenses		5,656			7,986
Deferred revenue		4,674			5,041
Promissory note		1,072			—
Total current liabilities		14,119			17,034
Deferred revenue, long-term		423			1,140
Operating lease liabilities, long-term		4,607			4,348
Taxes payable, long-term		338			436
Promissory note, long-term		1,341			—
Deferred tax liabilities, long-term		186			—
Total liabilities		21,014			22,958
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, $0.01 par value; 100,000,000 shares authorized at    July 31, 2020 and January 31, 2020; 37,727,987 shares issued    and 37,556,067 shares outstanding at July 31, 2020; 37,303,952    shares issued and 37,163,462 outstanding at January 31, 2020		377			373
Additional paid-in capital		245,817			245,067
Treasury stock, at cost; 171,920 shares at July 31, 2020 and 140,490 shares at January 31, 2020		(227	)		(147	)
Accumulated other comprehensive loss		(500	)		(2,137	)
Accumulated deficit		(205,500	)		(193,224	)
Total stockholders' equity		39,967			49,932
Total liabilities and stockholders' equity	$	60,981		$	72,890

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

2

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2020			2019			2020			2019
Revenue:
Product	$	1,066		$	11,968		$	4,164		$	13,147
Service		3,929			6,844			7,746			14,150
Total revenue		4,995			18,812			11,910			27,297
Cost of revenue:
Product		788			3,039			2,368			3,948
Service		2,393			4,885			5,219			9,553
Total cost of revenue		3,181			7,924			7,587			13,501
Gross profit		1,814			10,888			4,323			13,796
Operating expenses:
Research and development		3,360			3,775			7,526			8,027
Selling and marketing		1,728			2,963			3,854			5,815
General and administrative		2,367			4,150			4,421			8,399
Severance and restructuring costs		543			659			1,029			870
Total operating expenses		7,998			11,547			16,830			23,111
Loss from operations		(6,184	)		(659	)		(12,507	)		(9,315	)
Other income (expense), net		373			(78	)		165			(1,869	)
Loss before income taxes		(5,811	)		(737	)		(12,342	)		(11,184	)
Income tax benefit		45			563			66			161
Net loss	$	(5,766	)	$	(174	)	$	(12,276	)	$	(11,023	)
Net loss per share, basic	$	(0.15	)	$	—		$	(0.33	)	$	(0.30	)
Net loss per share, diluted	$	(0.15	)	$	—		$	(0.33	)	$	(0.30	)
Weighted average common shares outstanding, basic		37,527			36,602			37,376			36,532
Weighted average common shares outstanding, diluted		37,527			36,602			37,376			36,532
Comprehensive loss:
Net loss	$	(5,766	)	$	(174	)	$	(12,276	)	$	(11,023	)
Other comprehensive income, net of tax:
Foreign currency translation adjustment		1,665			133			1,641			1,340
Unrealized (losses) gains on marketable securities		(13	)		25			(4	)		60
Total other comprehensive income		1,652			158			1,637			1,400
Comprehensive loss	$	(4,114	)	$	(16	)	$	(10,639	)	$	(9,623	)

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

3

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands except share data)

	Common Stock				Additional						Accumulated Other						Total
	Number of Shares		Par Value		Paid-in Capital			Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at April 30, 2020		37,661,641		376		245,558			(147	)		(2,152	)		(199,734	)	$	43,901
Issuance of common stock pursuant to    vesting of restricted stock units		66,346		1		(1	)		—			—			—			—
Stock-based compensation expense		—		—		260			—			—			—			260
Repurchases of common stock		—		—		—			(80	)		—			—			(80	)
Unrealized losses on marketable securities		—		—		—			—			(13	)		—			(13	)
Foreign currency translation adjustment		—		—		—			—			1,665			—			1,665
Net loss		—		—		—			—			—			(5,766	)		(5,766	)
Balances at July 31, 2020		37,727,987	$	377	$	245,817		$	(227	)	$	(500	)	$	(205,500	)	$	39,967
	Common Stock				Additional						Accumulated Other						Total
	Number of Shares		Par Value		Paid-in Capital			Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at April 30, 2019		36,553,025		365		242,885			(5	)		(2,151	)		(195,152	)	$	45,942
Issuance of common stock pursuant to    vesting of restricted stock units		258,036		2		(2	)		—			—			—			—
Stock-based compensation expense		—		—		631			—			—			—			631
Repurchases of common stock		—		—		—			(142	)		—			—			(142	)
Unrealized gains on marketable securities		—		—		—			—			25			—			25
Foreign currency translation adjustment		—		—		—			—			133			—			133
Net loss		—		—		—			—			—			(174	)		(174	)
Balances at July 31, 2019		36,811,061	$	367	$	243,514		$	(147	)	$	(1,993	)	$	(195,326	)	$	46,415

4

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands except share data)

	Common Stock				Additional						Accumulated Other						Total
	Number of Shares		Par Value		Paid-in Capital			Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at January 31, 2020		37,303,952	$	373	$	245,067		$	(147	)	$	(2,137	)	$	(193,224	)	$	49,932
Issuance of common stock pursuant to    vesting of restricted stock units		379,063		4		(4	)		—			—			—			—
Issuance of common stock pursuant to    exercise of stock options		39,270		—		119			—			—			—			119
Issuance of common stock pursuant to    ESPP purchases		5,702		—		18			—			—			—			18
Stock-based compensation expense		—		—		617			—			—			—			617
Repurchases of common stock		—		—		—			(80	)		—			—			(80	)
Unrealized losses on marketable securities		—		—		—			—			(4	)		—			(4	)
Foreign currency translation adjustment		—		—		—			—			1,641			—			1,641
Net loss		—		—		—			—			—			(12,276	)		(12,276	)
Balances at July 31, 2020		37,727,987	$	377	$	245,817		$	(227	)	$	(500	)	$	(205,500	)	$	39,967
	Common Stock				Additional						Accumulated Other						Total
	Number of Shares		Par Value		Paid-in Capital			Treasury Stock			Comprehensive Loss			Accumulated Deficit			Stockholders' Equity
Balances at January 31, 2019		35,946,100	$	359	$	242,442		$	(5	)	$	(3,393	)	$	(184,303	)	$	55,100
Issuance of common stock pursuant to    acquisition of Xstream		541,738		5		869			—			—			—			874
Issuance of common stock pursuant to    vesting of restricted stock units		315,404		3		(3	)		—			—			—			—
Issuance of common stock pursuant to    ESPP purchases		7,819		—		9			—			—			—			9
Stock-based compensation expense		—		—		197			—			—			—			197
Repurchases of common stock		—		—		—			(142	)		—			—			(142	)
Unrealized gains on marketable securities		—		—		—			—			60			—			60
Foreign currency translation adjustment		—		—		—			—			1,340			—			1,340
Net loss		—		—		—			—			—			(11,023	)		(11,023	)
Balances at July 31, 2019		36,811,061	$	367	$	243,514		$	(147	)	$	(1,993	)	$	(195,326	)	$	46,415

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

5

SEACHANGE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

	For the Six Months Ended July 31,
	2020			2019
Cash flows from operating activities:
Net loss	$	(12,276	)	$	(11,023	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		725			1,093
(Recovery of) provision for bad debts		(216	)		388
Stock-based compensation expense		617			197
Deferred income taxes		186			(203	)
Realized and unrealized foreign currency transaction loss		1,641			1,340
Other		(3	)		67
Changes in operating assets and liabilities:
Accounts receivable		6,332			8,482
Unbilled receivables		2,345			(6,598	)
Inventory		—			726
Prepaid expenses and other current assets and other assets		291			196
Accounts payable		(1,290	)		1,350
Accrued expenses and other liabilities		(2,814	)		(2,463	)
Deferred revenue		(1,084	)		(1,590	)
Net cash used in operating activities		(5,546	)		(8,038	)
Cash flows from investing activities:
Purchases of property and equipment		(202	)		(153	)
Cash paid for acquisitions, net		—			(3,838	)
Purchases of marketable securities		—			(823	)
Proceeds from sales and maturities of marketable securities		2,476			1,593
Net cash provided by (used in) investing activities		2,274			(3,221	)
Cash flows from financing activities:
Proceeds from issuance of common stock		137			9
Repurchases of common stock		(80	)		(142	)
Proceeds from Paycheck Protection Program		2,413			—
Net cash provided by (used in) financing activities		2,470			(133	)
Effect of exchange rate on cash and cash equivalents		(840	)		277
Net decrease in cash, cash equivalents and restricted cash		(1,642	)		(11,115	)
Cash, cash equivalents and restricted cash at beginning of period		9,297			20,317
Cash, cash equivalents and restricted cash at end of period	$	7,655		$	9,202
Supplemental disclosure of cash flow information
Income taxes paid	$	92		$	76
Non-cash activities:
Purchases of property and equipment included in accounts payable	$	—		$	58
Right-of-use assets obtained in exchange for lease obligations	$	987		$	2,048
Fair value of common stock issued in acquisition	$	—		$	874

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

6

SEACHANGE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Basis of Presentation

SeaChange International, Inc. (“we” or the “Company”), a Delaware corporation, was founded on July 9, 1993. We are an industry leader in the delivery of multiscreen, advertising and premium over-the-top (“OTT”) video management solutions.  Our software products and services are designed to empower video providers to create, manage and monetize the increasingly personalized, highly engaging experiences that viewers demand.

Liquidity

We continue to realize the savings related to our restructuring activities. In fiscal 2020, we continued to streamline our operations and closed our service organizations in Ireland and the Netherlands. These measures are important steps in restoring us to profitability and positive cash flow. We believe that existing cash and investments and cash expected to be provided by future operating results are adequate to satisfy our working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months.

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. 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.

Impact of COVID-19 Pandemic

In the first quarter of fiscal 2021, concerns related to the spread of COVID-19 began to create global business disruptions as well as disruptions in our operations and to create potential negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on factors including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Due to our business model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications. These decisions may delay or reduce sales and harm productivity and collaboration. We have observed other companies and governments making similar alterations to their normal business operations, and in general, the markets are experiencing a significant level of uncertainty at the current time. Virtualization of our team’s sales activities could foreclose future business opportunities, particularly as our customers limit spending, which could negatively impact the willingness of our customers to enter into or renew contracts with us.  The pandemic has impacted our ability to complete certain implementations, negatively impacting our ability to recognize revenue, and could also negatively impact the payment of accounts receivable and collections. We may take further actions that alter our business operations as the situation evolves. As a result, the ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (the “CARES) Act”).  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  We continue to examine the impact that the CARES Act may have on our business, including the extent of our Paycheck Protection Program (the “PPP”) loan forgiveness eligibility.

The Paycheck Protection Program

On May 5, 2020, the Company entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured loan in an aggregate principal amount of $2,412,890 pursuant to the PPP under the CARES Act administered by the U.S. Small Business Administration (“SBA”). The Note is included in our consolidated balance sheets.

Interest accrues on the Note at a fixed rate of one percent (1%) per annum, with the payment of the first six months of interest and principal deferred and is included in accrued expenses in our consolidated balance sheets. The Note has an initial term of two years, is unsecured and is guaranteed by the SBA. The Company may apply to the Lender for forgiveness of the Note, with the amount which may be forgiven equal to the sum of qualifying expenses, including payroll costs, covered rent obligations, and covered utility payments incurred by the Company during the twenty-four week period beginning on May 7, 2020, calculated in accordance with the terms of the CARES Act.

7

Subject to any forgiveness under the PPP, the Note will mature on May 5, 2022. Beginning on the seven-month anniversary of the date of the Note, the Company is required to make 18 monthly payments of principal and interest. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default including, among others, those relating to breaches of the Company’s obligations under the Note, including a failure to make payments, any bankruptcy or similar proceedings involving the Company, and certain material effects on the Company’s ability to repay the Note. The Note may be accelerated upon the occurrence of an event of default.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for a fair presentation have been included. The year-end consolidated balance sheet data as of January 31, 2020 was derived from our audited consolidated financial statements and may not include all disclosures required by U.S. GAAP. The results of operations for the three and six months ended July 31, 2020 are not necessarily indicative of the results to be expected for the entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the SEC on April 20, 2020.

2. Significant Accounting Policies

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, those related to revenue recognition, allowance for doubtful accounts, goodwill and intangible assets, right-of-use operating leases, impairment of long-lived assets, accounting for income taxes, the valuation of stock-based awards, and ongoing legal matters.  We base our estimates on historical experience, known trends and other market-specific or relevant factors that are believed to be reasonable under the circumstances.  On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known.  Actual results may differ from those estimates or assumptions.

Business Combinations

We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations. We allocate the purchase price of the acquisition to the tangible assets acquired, liabilities assumed, and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred. During the measurement period, we record adjustments to provisional amounts recorded for assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could be up to one year after the transaction date, subsequent adjustments are recorded to the Company’s consolidated statements of operations.

Cash, cash equivalents and restricted cash

Cash and cash equivalents include cash on hand and on deposit and 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 the date of purchase of 90 days or less. All cash equivalents are carried at cost, which approximates fair value. Restricted cash represents cash that is restricted as to withdrawal or usage and consists primarily of cash held as collateral in relation to obligations set forth by the landlord of our Poland facility.

8

The following table provides a summary of cash, cash equivalents and restricted cash that constitutes the total amounts shown in the consolidated statements of cash flows as of July 31, 2020 and 2019:

	As of July 31,
	2020		2019
	(Amounts in thousands)
Cash and cash equivalents	$	7,427	$	9,202
Restricted cash		228		—
Total cash, cash equivalents and restricted cash	$	7,655	$	9,202

Concentration of Credit Risk and of Significant Customers

Financial instruments which potentially expose us to concentrations of credit risk include cash, cash equivalents and restricted cash, marketable securities and accounts receivable. We have cash investment policies which, among other things, limit investments to investment-grade securities. We restrict our cash equivalents and marketable securities to repurchase agreements with major banks and U.S. government and corporate securities which are subject to minimal credit and market risk. We perform ongoing credit evaluations of our customers.

We sell our software products and services worldwide primarily to service providers consisting of operators, telecommunications companies, satellite operators and broadcasters. Two customers accounted for 22% and 11% of total revenue in the second quarter of fiscal 2021 and two customers accounted for 20% and 10% of total revenue in the second quarter of fiscal 2020. One customer accounted for 18% of total revenue in the first six months of fiscal 2021 and one customer accounted for 14% of total revenue in the first six months of fiscal 2020. Two customers accounted for 29% and 17% of the accounts receivable balance as of July 31, 2020. Two customers accounted for 16% and 10% of the accounts receivable balance as of January 31, 2020.

Marketable Securities

Our investments in debt securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other expense, net in the consolidated statements of operations and comprehensive loss.

We evaluate our investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, we consider such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, our ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that we consider to be “other than temporary,” we reduce the investment to fair value through a charge to the consolidated statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Our cash equivalents and marketable securities are carried at fair value determined according to the fair value hierarchy described above. The carrying values of our accounts and other receivables, unbilled receivables, accounts payable, accrued expenses, and the Note approximate their fair values due to the short-term nature of these assets and liabilities.

9

Goodwill and Acquired Intangible Assets

We record goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but that are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.  Goodwill is not amortized, but rather is tested for impairment annually on August 1^st of each year, or more frequently if facts and circumstances warrant a review, such as the ones mentioned in impairments of long-lived assets below. We have determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment. We assess both the existence of potential impairment and the amount of impairment loss by comparing the fair value of the reporting unit with its carrying amount, including goodwill. The Company tested for goodwill impairment as of July 31, 2020 in consideration of the COVID-19 pandemic and determined there was no impairment. Through July 31, 2020, we have recorded accumulated goodwill impairment charges of $54.8 million.

Intangible assets are recorded at their estimated fair values at the date of acquisition. We amortize acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Impairment of Long-Lived Assets

Long-lived assets primarily consist of property, plant and equipment and intangible assets with finite lives. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future undiscounted cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. Determining the fair value of long-lived assets includes significant judgment by management and different judgments could yield different results.

We assess the useful lives and possible impairment of existing recognized long-lived assets whenever events or changes in circumstances occur that indicate that it is more likely than not that an impairment has occurred. We test long-lived assets for impairment by comparing the carrying amount to the sum of the net undiscounted cash flows expected to be generated by the asset whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds its net undiscounted cash flows, then an impairment loss is recognized for the amount by which the carrying amount exceeds its fair value. We use a discounted cash flow approach or other methods, if appropriate, to assess fair value. Factors considered important which could trigger a review include:

• significant underperformance relative to historical or projected future operating results;

• significant changes in the manner of use of the acquired assets or the strategy for our overall business;

• identification of other impaired assets within a reporting unit;

• significant negative industry or economic trends;

• a significant decline in our stock price for a sustained period; and

• a decline in our market capitalization relative to net book value.

Determining whether a triggering event has occurred involves significant judgment. (see Note 5).

Revenue Recognition

Our revenue is derived from sales of software licenses and associated hardware and support services, including professional services and maintenance fees related to our software licenses.

Our contracts, including contracts for our end-to-end software delivery platform solution (the “Framework”), often contain multiple performance obligations. For contracts with multiple performance obligations, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis when available or expected cost plus margin or residual approach. If the transaction price contains discounts or we expect to provide future price concessions, these elements are considered when determining the transaction price prior to allocation. Variable fees within the transaction price are estimated and recognized as revenue when we satisfy our performance obligations to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. If the contract grants the client the option to acquire additional products or services, we assess whether or not any discount on the products and services is in excess of levels normally available to similar clients and, if so, we account for that discount as an additional performance obligation.

10

Framework

We have concluded that the Framework has multiple performance obligations. The selling price of the Framework is highly variable as a result of our value-based engagement where pricing for our customers is based on the operating expense savings that we enable using the Framework engagement.

Framework Software Licenses

We have concluded that a Framework software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support. As a result of the highly variable selling price, revenue recognition and consideration related to the Framework software license is allocated under the residual method.

Framework Hardware

We have concluded that Framework hardware, when included in a Framework contract, is a distinct performance obligation as the client can benefit from the product. Framework hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Framework Support Services

We have concluded that Framework support services is a distinct performance obligation. Framework support services is included in services revenue in our consolidated statements of operations and comprehensive loss.  Support services includes software upgrades on a when-and-if available basis, support, bug fixes or patches and general maintenance support.  Framework support services is not sold on a standalone basis. The standalone selling price is determined using a cost-plus approach, and revenue is recognized ratably over the passage of the contractual term.

Legacy Software Licenses

We have concluded that a software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support.

Legacy Hardware

We have concluded that hardware is a distinct performance obligation as the client can benefit from the product on its own. Hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Legacy Maintenance

Historically, maintenance revenue, which is included in services revenue in our consolidated statements of operations and comprehensive loss, includes revenue from client support and related professional services. Client support includes software upgrades on a when-and-if available basis, telephone support, bug fixes or patches and general hardware maintenance support. Maintenance is priced as a percentage of the list price of the related software license and hardware. Historically, we determined the standalone selling price of maintenance based on this pricing relationship and observable data from standalone sales of maintenance.

We have identified three separate distinct performance obligations of maintenance:

• Software upgrades and updates;

• Technical support; and

• Hardware support.

11

These performance obligations are distinct within the contract and, although they are not sold separately, the components are not essential to the functionality of the other components. Each of the performance obligations included in maintenance revenue is a stand ready obligation that is recognized ratably over the passage of the contractual term for products sold on a standalone basis.  

Legacy Services

Historically, our services revenue, excluding maintenance revenue, is comprised of software license implementation services, engineering services, training and reimbursable expenses. We have concluded that services are distinct performance obligations, with the exception of engineering services. Engineering services may be provided on a standalone basis or bundled with a license when we are providing custom development.

The standalone selling price for services in time and materials contracts is determined by observable prices in standalone services arrangements and recognized as revenue as the services are performed based on an input measure of hours incurred to total estimated hours.

We estimate the standalone selling price for fixed price services based on estimated hours adjusted for historical experience at time and material rates charged in standalone services arrangements. Revenue for fixed price services is recognized over time as the services are provided based on an input measure of hours incurred to total estimated hours.

Contract Modifications

We occasionally enter into amendments to previously executed contracts that constitute contract modifications. We assess each of these contract modifications to determine:

• If the additional products and services are distinct from the product and services in the original arrangement; and

• If the amount of consideration expected for the added products and services reflects the standalone selling price of those products and services.

A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract or a cumulative catch-up basis.

Significant Judgments

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in the contract based on a relative standalone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price, taking into account available information such as market conditions, and internally approved pricing guidelines related to the performance obligations. In instances where stand-alone selling price is not directly observable, such as when we do not sell the product or service separately, we determine the stand-alone selling price based on a cost-plus model as market and other observable inputs are seldom present based on the proprietary nature of our products and services.

Our contracts do not generally include a variable component to the transaction price. With certain statements of work, we explicitly state that we are to be reimbursed for reasonable travel and entertainment expenses incurred as part of the delivery of professional services. In the cases when we are entitled to collect all travel and entertainment expenses incurred, an estimate of the fulfillment costs is made at the onset of the contract in order to determine the transaction price. The revenue associated with travel and entertainment expenses is then recognized over time along with the professional services.

Some of our contracts have payment terms that differ from the timing of revenue recognition, which requires us to assess whether the transaction price for those contracts include a significant financing component. We have elected the practical expedient that permits an entity to not adjust for the effects of a significant financing component if we expect that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service, will be one year or less. For those contracts in which the period exceeds the one-year threshold, this assessment, as well as the quantitative estimate of the financing component and its relative significance, requires judgment. We estimate the significant financing component provided to our customers with extended payment terms by determining the present value of the future payments by applying a discount rate that reflects the customer’s creditworthiness.

12

Contract Balances

Contract assets consist of unbilled revenue, which is recognized as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones.  Unbilled receivables expected to be billed and collected within one year are classified as current assets or long-term assets if expected to be billed and collected after one year. Contract liabilities consist of deferred revenue and customer deposits that arise when amounts are billed to or collected from customers in advance of revenue recognition.

Costs to Obtain and Fulfill a Contract

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that commissions and special incentive payments (“Spiffs”) for hardware and software maintenance and support and professional services paid under our sales incentive programs meet the requirements to be capitalized under Accounting Standards Codification (“ASC”) 340-40. Costs to obtain a contract are amortized as selling and marketing expense over the expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period. The commissions and Spiffs related to professional services are amortized over time as work is completed. The commissions and Spiffs for hardware and software maintenance are amortized over the life of the contract. These costs are periodically reviewed for impairment. We determined that no impairment of these assets existed as of July 31, 2020 or January 31, 2020. We have elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Total deferred capitalized commission costs were $862 thousand as of July 31, 2020 compared to $958 thousand as of January 31, 2020. Current deferred capitalized commission costs are included in prepaid expense and other current assets in our consolidated balance sheets and non-current deferred capitalized commission costs are included in other assets in our consolidated balance sheets. Capitalized commissions expensed during the six months ended July 31, 2020 and 2019 included in the consolidated statement of operations and comprehensive loss were $218 thousand and $59 thousand, respectively.

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs include direct labor for support services, software enhancements, reimbursable expenses and professional services for customized software development costs. The revenue associated with the support services, software enhancements and reimbursable expenses is recognized ratably over time; therefore, the associated costs are expensed as incurred. The professional services associated with the customized software are not recognized until completion. As such, the professional services costs are capitalized and recognized upon completion of the services.

Leases

We account for our leases in accordance with ASC 842, Leases. A contract is accounted for as a lease when we have the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, we determine the initial classification and measurement of our right-of-use operating lease asset and corresponding liability at the lease commencement date. We determine the classification and measurement of a modified lease at the date it is modified. The lease term includes only renewal options that are reasonably assured to exercise. The present value of lease payments is typically determined by using the Company’s estimated secured incremental borrowing rate for the associated lease term as interest rates implicit in the leases are not normally readily determinable. Management’s policy is to utilize the practical expedient to not record leases with an original term of twelve months or less on our consolidated balance sheets. Lease payments are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Our existing leases are for facilities and equipment. None of our leases are with related parties. In addition to rent, office leases may require us to pay additional amounts for taxes, insurance, maintenance and other expenses, which are generally referred to as non-lease components. As a practical expedient, we account for the non-lease components together with the lease components as a single lease component for all of our leases. Only the fixed costs for leases are accounted for as a single lease component and recognized as part of a right-of-use asset and liability.

13

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of unrestricted common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of unrestricted common shares outstanding during the period and the weighted average number of potential common shares from the assumed exercise of stock options and the vesting of shares of restricted and deferred common stock units using the “treasury stock” method when the effect is not anti-dilutive. In periods in which we report a net loss, diluted net loss per share is the same as basic net loss per share.

The number of common shares used in the computation of diluted net loss per share for the periods presented does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2020		2019		2020		2019
	(Amounts in thousands)
Stock options		2,314		2,596		967		2,764
Restricted stock units		65		128		58		219
Deferred stock units		82		254		82		229
Performance stock units		—		120		—		111
		2,461		3,098		1,107		3,323

Recently Issued Accounting Pronouncement

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326) (“ASU 2016-13”), which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities and accounts receivable. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. ASU 2016-13 is effective in the first quarter of our fiscal 2024. We are currently evaluating if this guidance will have a material effect to our consolidated financial statements.

3. Fair Value Measurements

The following tables set forth our financial assets that were accounted for at fair value on a recurring basis. There were no fair value measurements of our financial assets using level 3 inputs for the periods presented:

			Fair Value at July 31, 2020 Using
	Total		Level 1		Level 2
	(Amounts in thousands)
Assets:
Cash equivalents	$	1,432	$	—	$	1,432
Marketable securities:
U.S. Treasury Notes and bonds		1,887		1,887		—
Corporate bonds		254		—		254
Total	$	3,573	$	1,887	$	1,686

			Fair Value at January 31, 2020 Using
	Total		Level 1		Level 2
	(Amounts in thousands)
Assets:
Cash equivalents	$	1,408	$	1,408	$	—
Marketable securities:
U.S. Treasury Notes and bonds		3,360		3,360		—
Corporate bonds		1,257		—		1,257
Total	$	6,025	$	4,768	$	1,257

Cash equivalents include money market funds and U.S. treasury bills.

14

Marketable securities by security type consisted of the following:

	As of July 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Amounts in thousands)
U.S. Treasury Notes and bonds	$	1,841	$	46	$	—	$	1,887
Corporate bonds		251		3		—		254
	$	2,092	$	49	$	—	$	2,141

	As of January 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Amounts in thousands)
U.S. Treasury Notes and bonds	$	3,310	$	50	$	—	$	3,360
Corporate Bonds		1,254		3		—		1,257
	$	4,564	$	53	$	—	$	4,617

As of July 31, 2020, marketable securities consisted of investments that mature within one year.

4. Consolidated Balance Sheet Detail

Property and equipment, net

Property and equipment, net consists of the following:

	As of
	July 31, 2020			January 31, 2020
	(Amounts in thousands)
Computer equipment, software and demonstration equipment	$	9,748		$	9,695
Service and spare components		—			1,158
Office furniture and equipment		307			170
Leasehold improvements		206			154
		10,261			11,177
Less:  Accumulated depreciation and amortization		(9,625	)		(10,623	)
Total property and equipment, net	$	636		$	554

Accrued expenses

Accrued expenses consist of the following:

	As of
	July 31, 2020		January 31, 2020
	(Amounts in thousands)
Accrued employee compensation and benefits	$	2,634	$	3,236
Accrued professional fees		328		928
Sales tax and VAT payable		438		317
Accrued restructuring		4		744
Current obligation - right of use operating leases		1,295		722
Accrued third party hardware costs		—		1,169
Accrued other		957		870
Total accrued expenses	$	5,656	$	7,986

15

5. Goodwill and Intangible Assets

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 if we identify certain events or circumstances that would more likely than not reduce the estimated fair value of the goodwill below its carrying amount. The following table represents the changes in goodwill since January 31, 2020:

	Goodwill
	(Amounts in thousands)
Balance as of January 31, 2020	$	9,775
Translation adjustment		666
Balance as of July 31, 2020	$	10,441

Intangible assets, net, consisted of the following at July 31, 2020:

	As of July 31, 2020
	Gross		Accumulated Amortization		Cumulative Translation Adjustment		Net
	(Amounts in thousands)
Finite-lived intangible assets:
Acquired customer contracts	$	2,205	$	1,084	$	32	$	1,153
Acquired existing technology		1,364		672		23		715
Total finite-lived intangible assets	$	3,569	$	1,756	$	55	$	1,868

We recognized amortization expense of intangible assets in operating expense categories on the consolidated statement of operations and comprehensive loss as follows:

	For the Three Months Ended July 31,					For the Six Months Ended July 31,
	2020			2019		2020		2019
	(Amounts in thousands)					(Amounts in thousands)
Selling and marketing	$	366		$	185	$	366	$	370
Research and development		(67	)		115		217		228
	$	299		$	300	$	583	$	598

Future estimated amortization expense of acquired intangibles as of July 31, 2020 is as follows:

For the Fiscal Years Ended January 31,	Estimated Amortization Expense
	(Amounts in thousands)
2021	$	623
2022		1,245
Total	$	1,868

16

6. Commitments and Contingencies

Litigation

Certain conditions may exist as of the date the consolidated financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us, or unasserted claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our consolidated financial statements. If our assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed.

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 our historical 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 receive revenue for extended warranties beyond the standard duration, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred.

7. Operating Leases

The Company has noncancelable operating leases for facilities and equipment expiring at various dates through 2025 and thereafter.  

The components of lease expense are as follows:

	Three Months Ended July 31, 2020		Six Months Ended July 31, 2020
	(Amounts in thousands)
Operating lease cost	$	306	$	628
Short term lease cost		9		40
Total lease cost	$	315	$	668

17

Supplemental cash flow information related to the Company’s operating leases was as follows:

	Three Months Ended July 31, 2020		Six Months Ended July 31, 2020
	(Amounts in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	244	$	566

Supplemental balance sheet information related to the Company's operating leases was as follows:

	July 31, 2020			January 31, 2020
	(Amounts in thousands)
Operating lease right-of-use assets	$	5,505		$	4,860
Current portion, operating lease liabilities		1,295			722
Operating lease liabilities, long term		4,607			4,348
Total operating lease liabilities	$	5,902		$	5,070
Weighted average remaining lease term (years)		4.5
Weighted average incremental borrowing rate		5.0	%

The current portion, operating lease liabilities is included in the balance of accrued expenses at July 31, 2020. Rent payments for continuing operations were approximately $0.3 million for the three months ended July 31, 2020 and $0.7 million for the six months ended July 31, 2020. Future minimum lease payments for operating leases, with initial or remaining terms in excess of one year at July 31, 2020, are as follows:

	Payments for Operating Leases
For the fiscal years ended January 31,	(Amounts in thousands)
2021	$	552
2022		1,213
2023		1,337
2024		1,373
2025		1,413
Thereafter		59
Total lease payments		5,947
Less interest		45
Total operating lease liabilities	$	5,902

8. Severance and Restructuring Costs

During the three and six months ended July 31, 2020, we incurred severance and restructuring costs of $0.5 million and $1 million, respectively, primarily for employee-related termination benefits driven by the COVID-19 pandemic and the transfer of our technical support operations to our Poland location. In fiscal 2020, we continued to streamline our operations and closed our service organizations in Ireland and the Netherlands.

The following table shows the change in accrued restructuring balances since January 31, 2020 primarily related to our fiscal 2020 restructuring efforts, reported as a component of accrued expenses on the consolidated balance sheets:

	Employee- Related Benefits
	(Amounts in thousands)
Accrued balance as of January 31, 2020	$	744
Restructuring charges incurred		6
Cash payments		(737	)
Other charges		(9	)
Accrued balance as of July 31, 2020		4

18

9. Stock-Based Compensation Expense

Equity Plans

2011 Compensation and Incentive Plan

Our 2011 Compensation and Incentive 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”), performance stock units (“PSUs”) and other equity based non-stock option awards as determined by the plan administrator to our officers, employees, consultants and directors. 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. The number of shares authorized for issuance under the 2011 Plan is 9,300,000. Additionally, outstanding awards under the 2005 Equity Compensation and Incentive Plan that, since adoption of the 2011 Plan, expire, terminate, or are surrendered or canceled without having been fully exercised are available for issuance under the 2011 Plan. As of July 31, 2020, there were 2,188,287 shares available for future grant.      

Nonemployee members of the Board of Directors may elect to receive DSUs or stock options in lieu of RSUs. 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.

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. Option awards granted under the 2011 Plan generally vest over a period of one to three years and expire ten years from the date of the grant.

We have a Long-Term Incentive Program, adopted in fiscal 2016, under which the named executive officers and other of our key employees may receive long-term equity-based incentive awards, which are intended to align the interests of our named executive officers and other key employees 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 PSUs subject to vesting based in part on the extent to which employment continues. 

2015 Employee Stock Purchase Plan

Under our 2015 Employee Stock Purchase Plan (the “ESPP), six-month offering periods begin on October 1 and April 1 of each year during which eligible employees may elect to purchase shares of our common stock according to the terms of the offering.  On each purchase date, eligible employees can 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 authorized for sale under the ESPP is 1,150,000 shares, of which 1,075,024 remain available under the ESPP as of July 31, 2020. Under the ESPP, 5,702 and 7,819 shares were purchased during the first three months of fiscal 2021 and fiscal 2020, respectively. The Company has suspended the ESPP as of April 1, 2020 and is still evaluating when suspension will be lifted, if at all.

Award Activity

There were no awards in the first quarter of fiscal 2021. In the second quarter of fiscal 2021, we granted 300,998 option awards, which include PSU options, and 607,807 RSU awards, which include DSUs and PSUs, with a combined fair value totaling $1.5 million. In the first quarter of fiscal 2021, we canceled 114,260 option awards and 98,841 RSU awards. In the second quarter of fiscal 2021, we canceled 184,999 option awards and 49,998 RSU awards.

Stock-Based Compensation

We recognized stock-based compensation expense within the accompanying consolidated statements of operations and comprehensive loss as follows:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2020		2019		2020			2019
	(Amounts in thousands)				(Amounts in thousands)
Cost of revenue	$	—	$	22	$	(8	)	$	19
Research and development		68		82		135			150
Sales and marketing		55		77		95			(9	)
General and administrative		137		450		395			37
	$	260	$	631	$	617		$	197

19

As of July 31, 2020, unrecognized stock-based compensation expense related to unvested stock options was approximately $1.4 million, which is expected to be recognized over a weighted average period of 1.8 years. As of July 31, 2020, unrecognized stock-based compensation expense related to unvested RSUs and DSUs was $1.2 million, which is expected to be recognized over a weighted average amortization period of 1.5 years. Additionally, as of July 31, 2020, unrecognized stock-based compensation expenses related to unvested PSUs was approximately $0.2 million, which is expected to be recognized over a weighted average amortization period of 1.6 years.

10. Revenues from Contracts with Customers

Disaggregated Revenue

The following table shows our revenue disaggregated by revenue stream for the three months ended July 30, 2020 and 2019:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2020		2019		2020		2019
	(Amounts in thousands)				(Amounts in thousands)
Product	$	1,066	$	11,968	$	4,164	$	13,147
Professional services		360		1,845		624		3,926
Maintenance		3,569		4,999		7,122		10,224
Total revenue	$	4,995	$	18,812	$	11,910	$	27,297

Transaction Price Allocated to Future Performance Obligations

The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as of July 31, 2020 is $26.7 million. This amount includes amounts billed for undelivered services that are included in deferred revenue.

11. Segment Information and Geographic Information

We have determined that we operate in one segment.

Geographic Information

The following summarizes revenue by customers’ geographic locations:

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2020		%	2019		%	2020		%	2019		%
	(Amounts in thousands, except percentages)						(Amounts in thousands, except percentages)
Revenue by customers' geographic locations:
North America (1)	$	2,318	46%	$	11,567	62%	$	5,896	50%	$	15,656	57%
Europe and Middle East		2,150	43%		2,724	14%		4,132	35%		5,694	21%
Latin America		343	7%		4,132	22%		1,476	12%		5,179	19%
Asia Pacific		184	4%		389	2%		406	3%		768	3%
Total revenue	$	4,995		$	18,812		$	11,910		$	27,297

(1) Includes total revenue for the United States for the periods shown as follows: 

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2020			2019			2020			2019
	(Amounts in thousands, except percentages)						(Amounts in thousands, except percentages)
US Revenue	$	1,662		$	9,666		$	4,005		$	13,064
% of total revenue		33	%		51	%		34	%		48	%

The following summarizes long-lived assets by geographic locations:

20

	As of July 31, 2020		%	As of January 31, 2020		%
	(Amounts in thousands, except percentages)
Long-lived assets by geographic locations (1):
North America	$	12,549	70%	$	13,293	75%
Europe and Middle East		5,293	30%		4,359	25%
Asia Pacific		31	0%		31	0%
Total long-lived assets by geographic location	$	17,873		$	17,683

(1) Excludes long-term marketable securities and goodwill.

12. Income Taxes

Each interim period is considered an integral part of the annual period and, accordingly, we measure our income tax expense using an estimated annual effective tax rate.  A company is required, at the end of each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period.

We recorded an income tax benefit of less than $0.1 million and $0.6 million for the three months ended July 31, 2020 and July 31, 2019, respectively. We recorded an income tax benefit of $0.1 million and $0.2 million for the six months ended July 31, 2020 and July 31, 2019, respectively. The tax provision for the six months ended July 31, 2020 includes a $0.2 million tax benefit related to the reversal of tax reserves for uncertain tax positions due to the expiration of the Polish statute of limitations. Our effective tax rate in fiscal 2021 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.

We review 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, 2020, due to the uncertainty related to the ultimate use of certain deferred income tax assets, we have recorded a valuation allowance on certain 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 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.

On March 4, 2019, our Board of Directors approved and adopted a Tax Benefits Preservation Plan to potentially limit our ability to use net operating loss carryforwards and certain other tax attributes (“NOLs”) to reduce our potential future federal income tax obligations.  In connection with the Tax Benefits Preservation Plan, we declared a dividend of one preferred share purchase right for each share of our common stock issued and outstanding as of March 15, 2019 to our stockholders of record on that date. The Tax Benefits Preservation Plan expires no later than March 4, 2022, and was approved by our stockholders at our 2019 annual meeting of stockholders on July 11, 2019.

In response to the COVID-19 pandemic, the CARES Act was signed into law in March 2020. The CARES Act includes several provisions that provide economic relief for individuals and businesses. The Company does not expect the CARES Act to result in a material impact on our income taxes. 

21

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, and such statements 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 Annual Report on Form 10-K (the “Form 10-K”) for our fiscal year ended January 31, 2020 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,” “seek,” “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  

SeaChange International, Inc., a Delaware corporation (“SeaChange,” the “Company,” “us,” or “we”) founded on July 9, 1993, is an industry leader in the delivery of multiscreen, advertising and premium over the top (“OTT”) video management solutions headquartered in Waltham, Massachusetts. Our software products and services facilitate the aggregation, licensing, management and distribution of video and advertising content for service providers, telecommunications companies, satellite operators and broadcasters. We sell our software products and services worldwide, primarily to service providers including: operators, such as Liberty Global, plc., Altice NV, Cox Communications, Inc. and Rogers Communications, Inc.; telecommunications companies, such as Verizon Communications, Inc., AT&T, Inc. and Frontier Communications Corporation; satellite operators such as Direct TV and Dish Network Corporation; and broadcasters.

Our software products and services are designed to empower video providers to create, manage and monetize the increasingly personalized, highly engaging experiences that viewers demand. Using our products and services, we believe customers can increase revenue by offering services such as video-on-demand (“VOD”) programming on a variety of consumer devices, including televisions, mobile telephones (“smart phones”), personal computers (“PCs”), tablets and OTT streaming players. Our solutions enable service providers to offer other interactive television services that allow subscribers to receive personalized services and interact with their video devices, thereby enhancing their viewing experience. Our products also allow our customers to insert advertising into broadcast and VOD content.

SeaChange serves an exciting global marketplace where multiscreen viewing is increasing, consumer device options are evolving rapidly, and viewing habits are shifting. The primary driver of our business is enabling the delivery of video assets in the changing multiscreen television environment. Through strategic collaborations, we have expanded our capabilities, products and services to address the delivery of content to devices other than television set-top boxes, namely PCs, tablets, smart phones and OTT streaming players. We believe that our strategy of expanding into adjacent product lines will also position us to further support and maintain our existing service provider customer base. Providing our customers with more scalable software platforms enables them to further reduce their infrastructure costs, improve reliability and expand service offerings to their customers. Additionally, we believe we are well positioned to capitalize on new customers entering the multiscreen marketplace and increasingly serve adjacent markets. Our core technologies provide a foundation for software products and services that can be deployed in next generation video delivery systems capable of increased levels of subscriber activity across multiple devices.

We have historically sold and licensed our products and services on a standalone basis. Commencing February 2019, we adopted a value-based selling approach as part of which we offer our customers the ability to license all of our product and services, including specified upgrades, for a fixed period of time for a fixed price which we refer to as Framework deals.

We initiated restructuring efforts in fiscal 2020 to improve operations and optimize our cost structure. In October 2019, we continued to streamline our operations and closed our service organizations in Ireland and the Netherlands resulting in annualized cost savings of approximately $6.0 million. We will also realize cost savings in fiscal 2021 related to the reduction in headcount driven by COVID-19.

On February 28, 2019, we entered into a Cooperation Agreement with TAR Holdings LLC and Karen Singer (collectively, “TAR Holdings”).  As of the date of the Cooperation Agreement, TAR Holdings beneficially owned approximately 20.6% of our outstanding common stock.  Pursuant to the Cooperation Agreement, we agreed to set the size of the Board of Directors of the Company (the “Board”) at eight members, appoint Robert Pons to the Board as a Class II Director, and appoint Jeffrey Tuder to the Board as a Class III Director.  Mr. Pons and Mr. Tuder were accordingly appointed to our Board upon execution of the Cooperation Agreement on February 28, 2019. On August 8, 2019, we amended the Cooperation Agreement to permit TAR Holdings, together with its affiliates, to own up to 25% of our securities.

22

On March 4, 2019, our Board approved and adopted a Tax Benefits Preservation Plan to deter acquisitions of our common stock that would potentially limit our ability to use net operating loss carryforwards and certain other tax attributes (“NOLs”) to reduce our potential future federal income tax obligations, which was subsequently approved by our stockholders at our 2019 annual meeting of stockholders.  In connection with the Tax Benefits Preservation Plan, we declared a dividend of one preferred share purchase right for each share of our common stock issued and outstanding as of March 15, 2019 to our stockholders of record on that date.  The Tax Benefits Preservation Plan expires no later than March 4, 2022. On August 8, 2019, we amended the Tax Benefits Preservation Plan to permit TAR Holdings, together with its affiliates, to own up to 25% of our securities.

In the first quarter of fiscal 2021, we experienced a ransomware attack on our information technology system. While such attack did not have a material adverse effect on our business operation, it caused a temporary disruption. A forensic investigation is being conducted to determine if any data was compromised.

Results of Operations

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

Revenue and Gross Profit

The components of our total revenue and gross profit are described in the following table:

	For the Three Months Ended July 31,						Change						For the Six Months Ended July 31,						Change
	2020			2019			$			%			2020			2019			$			%
	(Amounts in thousands, except for percentage data)												(Amounts in thousands, except for percentage data)
Revenue:
Product	$	1,066		$	11,968		$	(10,902	)		(91.1	%)	$	4,164		$	13,147		$	(8,983	)		(68.3	%)
Service		3,929			6,844			(2,915	)		(42.6	%)		7,746			14,150			(6,404	)		(45.3	%)
Total revenue		4,995			18,812			(13,817	)		(73.4	%)		11,910			27,297			(15,387	)		(56.4	%)
Cost of product revenue		788			3,039			(2,251	)		(74.1	%)		2,368			3,948			(1,580	)		(40.0	%)
Cost of service revenue		2,393			4,885			(2,492	)		(51.0	%)		5,219			9,553			(4,334	)		(45.4	%)
Total cost of revenue		3,181			7,924			(4,743	)		(59.9	%)		7,587			13,501			(5,914	)		(43.8	%)
Gross profit	$	1,814		$	10,888		$	(9,074	)		(83.3	%)	$	4,323		$	13,796		$	(9,473	)		(68.7	%)
Gross product profit margin		26.1	%		74.6	%					(48.5	%)		43.1	%		70.0	%					(26.9	%)
Gross service profit margin		39.1	%		28.6	%					10.5	%		32.6	%		32.5	%					0.1	%
Gross profit margin		36.3	%		57.9	%					(21.6	%)		36.3	%		50.5	%					(14.2	%)

Two customers accounted for 22% and 11% of total revenue for the three months ended July 31, 2020 and one customer accounted for 18% of total revenue for the six months ended July 31, 2020. Two customers accounted for 20% and 10% of total revenue for the three months ended July 2019 and one customer accounted for 14% of total revenue for the six months ended July 31, 2019. See Part I Item I, Note 2, “Significant Accounting Policies,” to this Form 10-Q for more information.

International revenue accounted for 67% and 49% of total revenue in the three months ended July 31, 2020 and 2019, respectively. International revenue accounted for 66% and 52% for the six months ended July 31, 2020 and 2019, respectively. The increase in international sales as a percentage of total revenue in the three and six months ended July 31, 2020 as compared to the three and six months ended July 31, 2019 is primarily due to a decrease in U.S. revenue generated.

Product Revenue

Product revenue decreased by $10.9 million and $9.0 million for the three and six months ended July 31, 2020, respectively, as compared to the three and six months ended July 31, 2019. The decrease for the three and six months ended July 31, 2020 was primarily due to the COVID-19 pandemic, resulting in lower sales.

Service Revenue

Service revenue decreased by $2.9 million and $6.4 million for the three and six months ended July 31, 2020, respectively, as compared to the three and six months ended July 31, 2019. The decrease for the three and six months ended July 31, 2020 was primarily due to a decrease in our legacy professional service revenue related to our individual product sales and upgrades and a reduction to maintenance and support revenue provided on post warranty contracts as customers continue to provide their own solutions and legacy products are decommissioned.

23

Gross Profit and Margin

Cost of revenue consists primarily of the cost of resold third-party products and services, purchased components and subassemblies, labor and overhead relating to the assembly, testing and implementation and ongoing maintenance of complete systems.

Our gross profit margin decreased by 22% and 14% for the three and six months ended July 31, 2020, respectively, as compared to the three and six months ended July 31, 2019 primarily due to lower revenue generated as a result of the COVID-19 pandemic. Product profit margin decreased by 49% and 27% for the three and six months ended July 31, 2020, respectively, as compared to the three and six months ended July 31, 2019 primarily due to lower revenue generated as a result of the COVID-19 pandemic. Service profit margins increased by 11% and 0.1% for the three and six months ended July 31, 2020, respectively, as compared to the three and six months ended July 31, 2019 primarily due to a reduction in headcount driven by the COVID-19 pandemic while still recognizing legacy revenue.

Operating Expenses

Research and Development

Research and development expenses consist of salaries and related costs, including stock-based compensation, for personnel in software development and engineering functions as well as contract labor costs, depreciation of development and test equipment and an allocation of related facility expenses. The following table provides information regarding the change in research and development expenses during the periods presented:

	For the Three Months Ended July 31,						Change						For the Six Months Ended July 31,						Change
	2020			2019			$			%			2020			2019			$			%
	(Amounts in thousands, except for percentage data)												(Amounts in thousands, except for percentage data)
Research and development expenses	$	3,360		$	3,775		$	(415	)		(11.0	%)	$	7,526		$	8,027		$	(501	)		(6.2	%)
% of total revenue		67.3	%		20.1	%								63.2	%		29.4	%

Research and development expenses decreased by $0.4 million and $0.5 million for the three and six months ended July 31, 2020, respectively, as compared to the three and six months ended July 31, 2019 primarily due to a decrease in labor costs associated with the lower headcount resulting from the cost-savings efforts implemented as part of our restructuring program in the second half of fiscal 2020 as well as a reduction in headcount in the first and second quarters of fiscal 2021 driven by the COVID-19 pandemic.

Selling and Marketing

Selling and marketing expenses consist of salaries and related costs, including stock-based compensation, for personnel engaged in selling and marketing functions, as well as commissions, travel expenses, certain promotional expenses and an allocation of related facility expenses. The following table provides information regarding the change in selling and marketing expenses during the periods presented:

	For the Three Months Ended July 31,						Change						For the Six Months Ended July 31,						Change
	2020			2019			$			%			2020			2019			$			%
	(Amounts in thousands, except for percentage data)												(Amounts in thousands, except for percentage data)
Selling and marketing expenses	$	1,728		$	2,963		$	(1,235	)		(41.7	%)	$	3,854		$	5,815		$	(1,961	)		(33.7	%)
% of total revenue		34.6	%		15.8	%								32.4	%		21.3	%

Selling and marketing expenses decreased by $1.2 and $2.0 million for the three and six months ended July 31, 2020, respectively, as compared to the three and six month ended July 31, 2019 primarily due to a decrease in labor costs associated with lower headcount from the cost-saving efforts implemented as part of our restructuring program in the second half of fiscal 2020 as well as a reduction in headcount, salaries and compensation, and a decrease in travel related expenses due to the COVID-19 pandemic.

24

General and Administrative

General and administrative expenses consist of salaries and related costs, including stock-based compensation, for personnel in executive, finance, legal, human resources, information technology and administrative functions, as well as legal and accounting services, insurance premiums and an allocation of related facilities expenses. The following table provides information regarding the change in general and administrative expenses during the periods presented:

	For the Three Months Ended July 31,						Change						For the Six Months Ended July 31,						Change
	2020			2019			$			%			2020			2019			$			%
	(Amounts in thousands, except for percentage data)												(Amounts in thousands, except for percentage data)
General and administrative expenses	$	2,367		$	4,150		$	(1,783	)		(43.0	%)	$	4,421		$	8,399		$	(3,978	)		(47.4	%)
% of total revenue		47.4	%		22.1	%								37.1	%		30.8	%

General and administrative expenses decreased by $1.8 million for the three months ended July 31, 2020 as compared to the three months ended July 31, 2019 primarily due to a $1.2 million reduction in salaries and compensation driven by the COVID-19 pandemic, a $0.2 million decrease in bad debt expense, and reduction in other general expenditures. General and administrative expenses decreased by $4.0 million for the six months ended July 31, 2020 as compared to the six months ended July 31, 2019 primarily due to a $0.9 million reduction in salaries and compensation driven by the COVID-19 pandemic, a $1.8 million reduction in the use of outside services, a $0.6 million reduction to bad debt expense, and a reduction in other general expenditures.

Severance and Restructuring Costs

Severance costs consist of employee-related severance charges not related to a restructuring plan. Restructuring costs consist of charges related to restructuring including employee-related severance charges, remaining lease obligations and termination costs, and the disposal of equipment.

	For the Three Months Ended July 31,						Change						For the Six Months Ended July 31,						Change
	2020			2019			$			%			2020			2019			$		%
	(Amounts in thousands, except for percentage data)												(Amounts in thousands, except for percentage data)
Severance and restructuring costs	$	543		$	659		$	(116	)		(17.6	%)	$	1,029		$	870		$	159		18.3	%
% of total revenue		10.9	%		3.5	%								8.6	%		3.2	%

Severance and restructuring costs decreased by $0.1 million for the three months ended July 31, 2020 as compared to the three months ended July 31, 2019 primarily due to the cost-saving efforts implemented as part of our restructuring program in fiscal 2020. Severance and restructuring costs increased by $0.2 million for the six months ended July 31, 2020 as compared to the six months ended July 31, 2019 primarily due to the termination costs related to a reduction in headcount driven by the COVID-19 pandemic.

Other Income (Expense), Net

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

	For the Three Months Ended July 31,					Change					For the Six Months Ended July 31,						Change
	2020		2019			$		%			2020			2019			$			%
	(Amounts in thousands, except for percentage data)										(Amounts in thousands, except for percentage data)
Interest income, net	$	113	$	90		$	23		25.6	%		232			173			59			34.1	%
Foreign exchange gain (loss), net		240		(186	)		426		(229.0	%)		(91	)		(2,081	)		1,990			(95.6	%)
Miscellaneous income (expense), net		20		18			2		11.1	%		24			39			(15	)		(38.5	%)
	$	373	$	(78	)	$	451				$	165		$	(1,869	)	$	2,034

The principal components of other income (expense), net were interest income, net of $0.1 million and foreign exchange gain, net of $0.2 million for the three months ended July 31, 2020 and interest income, net of $0.1 million and foreign exchange loss, net of $0.2 million for the three months ended July 31, 2019. The principal components of other income (expense), net were interest income, net of $0.2 million and foreign exchange loss, net of $0.1 million for the six months ended July 31, 2020 and

25

interest income, net of $0.2 million and foreign exchange loss, net of $2.1 million for the six months ended July 31, 2019. Our foreign exchange gain (loss), net is primarily due to the revaluation of intercompany notes.

Income Tax Benefit

We recorded an income tax benefit of less than $0.1 million and $0.6 million for the three months ended July 31, 2020 and July 31, 2019, respectively. We recorded an income tax benefit of $0.1 million and $0.2 million for the six months ended July 31, 2020 and July 31, 2019, respectively. The tax provision for the six months ended July 31, 2020 includes a $0.2 million tax benefit related to the reversal of tax reserves for uncertain tax positions due to the expiration of the Polish statute of limitations. Our effective tax rate in fiscal 2021 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.

We review 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, 2020, due to the uncertainty related to the ultimate use of certain deferred income tax assets, we have recorded a valuation allowance on certain 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 through fiscal 2013. We are no longer subject to U.S. federal examinations before fiscal 2015. 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.

Liquidity and Capital Resources

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

	For the Six Months Ended July 31,
	2020			2019
	(Amounts in thousands)
Net cash used in operating activities	$	(5,546	)	$	(8,038	)
Net cash provided by (used in) investing activities		2,274			(3,221	)
Net cash provided by (used in) financing activities		2,470			(133	)
Effect of exchange rate changes on cash, cash equivalents    and restricted cash		(840	)		277
Net decrease in cash, cash equivalents and restricted cash	$	(1,642	)	$	(11,115	)

Historically, we have financed our operations and capital expenditures primarily with our cash and investments. Our cash, cash equivalents, and restricted cash and marketable securities totaled $9.8 million at July 31, 2020.

In fiscal 2020, we closed our Ireland and Netherlands service organizations in the continued streamlining of our operations resulting in annualized cost savings of approximately $6.0 million. In the first and second quarters of fiscal 2021, we reduced our headcount across all departments in response to the COVID-19 pandemic, which will result in approximately $7.6 million of annualized cost savings.  Additionally, in the second quarter of fiscal 2021 we transferred our technical support services to our Poland location.

We believe that existing cash and investments and cash expected to be provided by future operating activities, augmented by the plans highlighted above, are adequate to satisfy our working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months.

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. 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.

26

On June 4, 2019, the Board authorized a share repurchase program, which expired on June 4, 2020, of up to $5.0 million of then outstanding shares of the Company. Under the share repurchase program, the Company is authorized to repurchase outstanding shares of common stock in accordance with applicable laws both on the open market, including under trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, and in privately negotiated transactions. There was no stock repurchase activity in the first quarter of fiscal 2021.

Net cash used in operating activities

Net cash used in operating activities was $5.5 million for the six months ended July 31, 2020. Net cash used in operating activities was primarily the result of our net loss of $12.3 million, a $1.6 million non-cash foreign currency transaction loss, and changes in working capital, which includes a $6.3 million decrease in accounts receivable and a $2.3 million decrease in unbilled receivables, a $1.3 million decrease in accounts payable, a $2.8 million decrease in accrued expenses and other liabilities, and a $1.1 million decrease in deferred revenue.

Net cash used in operating activities was $8.0 million for the six months ended July 31, 2019. Net cash used in operating activities was primarily the result of our net loss of $11.0 million, a $1.3 million non-cash foreign currency transaction loss, and changes in working capital, which includes a $8.5 million decrease in accounts receivable, $2.5 million decrease in accrued expenses and other liabilities, and a $1.6 million decrease in deferred revenue partially offset by a $6.6 million increase in unbilled receivables and a $1.4 million increase in accounts payable.

Net cash provided by (used in) investing activities

Net cash provided by investing activities was $2.3 million for the six months ended July 31, 2020 and was primarily due to the proceeds from the sales and maturities of marketable securities partially offset by purchases of property and equipment. Net cash used in investing activities was $3.2 million for the six months ended July 31, 2019 and was primarily due to cash paid for the acquisition of Xstream A/S in February 2019 partially offset by the net proceeds from the sales and maturities of marketable securities.

Net cash provided by (used in) financing activities

Net cash provided by financing activities was $2.5 million for the six months ended July 31, 2020 due to the $2.4 million in proceeds from the Paycheck Protection Program (“PPP”) and $0.1 million from the issuance of common stock related to option exercises and purchases through the Employee Stock Purchase Plan partially offset by $0.1 million in payments to the taxing authorities in connection with shares directly withheld from employees. Net cash used in financing activities was $0.1 million for the six months ended July 31, 2019 due to the $9 thousand in proceeds from the issuance of common stock offset by $0.1 million for the repurchases of common stock.

Impact of COVID-19 Pandemic

In the first quarter of fiscal 2021, concerns related to the spread of COVID-19 began to create global business disruptions as well as disruptions in our operations and to create potential negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on factors including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Due to our business model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications. These decisions may delay or reduce sales and harm productivity and collaboration. We have observed other companies and governments making similar alterations to their normal business operations, and in general, the markets are experiencing a significant level of uncertainty at the current time. Virtualization of our team’s sales activities could foreclose future business opportunities, particularly as our customers limit spending, which could negatively impact the willingness of our customers to enter into or renew contracts with us.  The pandemic has impacted our ability to complete certain implementations, negatively impacting our ability to recognize revenue, and could also negatively impact the payment of accounts receivable and collections. We may take further actions that alter our business operations as the situation evolves. As a result, the ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES) Act”).  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified

27

improvement property. We continue to examine the impact that the CARES Act may have on our business, including the extent of our PPP loan forgiveness eligibility.

The Paycheck Protection Program

On May 5, 2020, the Company entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured loan in an aggregate principal amount of $2,412,890 pursuant to the PPP under the CARES Act administered by the U.S. Small Business Administration (“SBA”).

Interest accrues on the Note at a fixed rate of one percent (1%) per annum, with the payment of the first six months of interest and principal deferred. The Note has an initial term of two years, is unsecured and is guaranteed by the SBA. The Company may apply to the Lender for forgiveness of the Note, with the amount which may be forgiven equal to the sum of qualifying expenses, including payroll costs, covered rent obligations, and covered utility payments incurred by the Company during the twenty-four week period beginning on May 7, 2020, calculated in accordance with the terms of the CARES Act.

Subject to any forgiveness under the PPP, the Note will mature on May 5, 2022. Beginning on the seven-month anniversary of the date of the Note, the Company is required to make 18 monthly payments of principal and interest. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default including, among others, those relating to breaches of the Company’s obligations under the Note, including a failure to make payments, any bankruptcy or similar proceedings involving the Company, and certain material effects on the Company’s ability to repay the Note. The Note may be accelerated upon the occurrence of an event of default.

Critical Accounting Policies and Significant Judgments and Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management.

There have been no material changes to our critical accounting policies and estimates from those disclosed in our financial statements and the related notes and other financial information included in our Form 10-K on file with the Securities and Exchange Commission (the “SEC”).

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.

ITEM 4. Controls and Procedures

Evaluation of disclosure controls and procedures. We maintain “disclosure controls and procedures,” as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and chief financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of July 31, 2020, our chief executive officer and chief financial officer concluded that, as of that date, our disclosure controls and procedures were effective.

28

Changes in internal control over financial reporting. There were no changes in our internal controls over financial reporting during the three months ended July 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact of their design and operating effectiveness.

29

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 our historical 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 (see Note 6).

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, 2020, 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. There have been no material changes in our risk factors from those disclosed in the Form 10-K.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

(a) Exhibits

The following list of exhibits includes exhibits submitted with this Form 10-Q as filed with the SEC and those incorporated by reference to other filings.

30

Index to Exhibits

No.	Description
10.1*	Offer letter, dated as of December 10, 2018, by and between SeaChange International, Inc. and Marek Kielczewski.
10.2*	Offer letter, dated as of August 28, 2019, by and between SeaChange International, Inc. and Chad Hassler.
10.3*	Change-in-Control Severance Agreement, dated as of August 29, 2019, by and between SeaChange International, Inc. and Chad Hassler.
10.4	Note, dated May 5, 2020, between SeaChange International, Inc. and Silicon Valley Bank (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 11, 2020 with the Commission and incorporated herein by reference).
10.5	Letter of Intent, dated July 2, 2020, between SeaChange International, Inc. and CCUR Holdings, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 8, 2020 with the Commission 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.
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.
32.1*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 filed herewith).

   *Filed herewith

31

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 9, 2020

SEACHANGE INTERNATIONAL, INC.
by:	/s/ YOSSI ALONI
	Yossi Aloni
	Chief Executive Officer

by:	/s/ MICHAEL PRINN
	Michael Prinn
	Chief Financial Officer, Senior Vice President and Treasurer

32

EX-10.1

Exhibit 10.1

December 10, 2018

Marek Kielczewski

357 Caterina Heights

Concord, MA 01742

Dear Marek,

This offer letter confirms the terms and conditions of your employment at SeaChange International, Inc. (the "Company") as the Chief Technology Officer reporting to Edward Terino, Chief Executive Officer, based in our office at 50 Nagog Park, Acton, MA 01720. The terms of this offer letter shall become effective on December 10, 2018 (the "Effective Date"). Your base annual salary shall continue at $250,000 (less, of course, all required payroll taxes, deductions and withholdings), which will be paid bi-weekly at the rate of $9,615.38. The Company shall also recognize your prior service with DCC Labs and SeaChange Polska as service with the Company. We expect that you will perform any and all duties and responsibilities typically associated with your position, and any other duties assigned to you, in a satisfactory manner and to the best of your abilities at all times. As you progress with the Company, your position, location and assignments are, of course, subject to change.

With respect to fiscal year 2019, you will be eligible to receive a discretionary bonus of up to fifty percent (50%) of your annual base salary, based on both the attainment of predefined written objectives as defined by you and Edward Terino and the Company's attainment of its financial performance goals. Starting on February 1, 2019 (FY2020) you will be eligible to receive each fiscal year a discretionary bonus up to sixty percent (60%) of your annual base salary, based on both the attainment of predefined written objectives as defined by you and Edward Terino and the Company's attainment of its financial performance goals. You also must be employed by the Company on the date such bonus payments are made in order to be eligible to receive such payment.

You have also been granted a one-time option to purchase 100,000 shares of the Company's common stock. The exercise price of such option was the fair market value of the stock, as determined by the closing sales price for our stock (or the closing bid, if no sales were reported) on the Nasdaq Stock Market on November 29, 2018. Option shares will vest annually in equal tranches over a three (3) year period.

You will also continue to be eligible each year for a Long-Term Equity Award (the "LTIAward"), based upon the achievement of certain to-be-determined long-term goals.

The grant, vesting and exercise of any option, restricted stock unit or any other equity vehicle shall at all times be subject to and governed by the Company's Second Amended and Restated 2011 Compensation and Incentive Plan.

The foregoing equity awards are subject to Board approval, and the Company reviews them annually and reserves the right to modify the programs, including goals and targets, at its sole discretion at any time.

You will be eligible, on your Effective Date, on the same basis as other employees of the Company, to participate in and to receive benefits under a 401 (k) Plan and any Company group medical, dental, life, disability or other group insurance plan(s). Your eligibility to participate in and receive any particular benefit is subject to, and governed solely by, the applicable plan document. The Company will also provide you with paid time off (currently twenty (20) days per calendar year), to be accrued and used in accordance with its policies as in effect from time to time, plus those holidays observed by the Company. The Company reserves the right to modify, change or terminate its benefits and benefit plans from time to time in its sole discretion.

With respect to your 16-month assignment and relocation to Massachusetts, these additional terms and conditions shall apply:

Home Expenses: During your assignment with the Company, the Company will reimburse you for (i) the rent of your local housing (approximately $105,600 for 16 months), (ii) the realtor commission in connection therewith (approximately $6,600), (iii) additional utility and housing costs to be incurred (approximately $17,374), and (iv) furniture (up to $10,000). The foregoing payments will be "grossed up" for all applicable taxes born by you, including with respect to the gross-up payment.

Shipping of Personal Belongings: At the end of your assignment with the Company, the Company shall pay reasonable and customary fees for the shipment of your personal belongings back to the Poland.

Home Leave: The Company will provide you and your immediate family (spouse and children) with up to four home leave trips (coach class) to Warsaw, Poland (approximately $16,000) during the course of your assignment.

Tax Preparation and Consulting: The Company will provide you with Polish and U.S. tax return preparation services from a designated tax service provider for each year or portion thereof that you are on this assignment. It is important that you contact our tax advisors to discuss any relevant tax implications of this assignment.

Termination of Employment: If you voluntarily resign, other than for Good Reason as defined in your Change in Control Severance Agreement, during this assignment, you shall cease to be entitled to any compensation described in this offer letter with respect to all periods commencing on the day following the last day of your employment. In addition, the Company will not be obligated to transport you, your immediate family and your personal effects to the Poland (orelsewhere).

Monies Owed: In the event that you owe the Company any monies in connection with this assignment including but not limited to taxes, expenses, overpayment of compensation or allowances you agree to pay such amounts due, plus any costs and attorney fees, incurred by the Company in seeking repayment. You also authorize the Company to deduct any amounts owed by you from any compensation or other monies owed to you by either the Company.

As a condition of your employment with the Company, you must sign and return the enclosed Employee Noncompetition, Nondisclosure and Developments Agreement prior to your Effective Date.

Neither this offer letter nor its terms constitute a contract of employment or a guarantee of employment for a specific period of time. Your employment will be at-will, and both you and the Company will have the right to terminate the employment relationship at any time, with or without reason or notice.

This offer letter, in conjunction with your Indemnification Agreement dated July 1, 2017 and your Change In Control Severance Agreement dated October 12, 2018, constitutes the complete agreement between you and the Company, contains all of the terms of your employment with the Company and supersedes any prior agreements, representations or understandings (whether written, oral or implied) between you and the Company, including your Employment Agreement dated May 5, 2016, as amended on October 1, 2017. No variations, modifications or amendments to this offer shall be deemed valid unless reduced to writing and signed by the Company and you, provided that your employment will remain at-will unless otherwise set forth in a writing signed by the Company's Chief Executive Officer.

If you have any questions or require clarification, please contact me. To indicate acceptance of these terms, please sign and return a copy of this letter (via fax, pdf or regular mail).

We look forward to your continued contributions to the SeaChange Team in your new role!

Sincerely,

Silvia DeMelo

Global Human Resources Director

Enclosures:

Employee Noncompetition, Nondisclosure and Developments Agreement)

List of 1-9 Acceptable Documents

Response requested by December 21, 2018:

I accept the above employment offer and agree to its terms and conditions. By accepting this offer of employment, I acknowledge that no prior employment obligations or other contractual restrictions exist which preclude my employment with SeaChange International. I represent that I am not relying on any representations made to me by anyone other than as set forth above. I also hereby waive my right to the payment of any Polish statutory payments with the termination of my prior employment agreement with SeaChange Polska on December 9, 2018.

Accepted:
	Date:	Dec 10, 2018
Marek Kielczewski

EX-10.2

Exhibit 10.2

SeaChange International

50 Nagog Park

Acton, MA 01720, USA

+1. 978.897.0100

www.seachange.com

August 28, 2019

Chad Hassler
255 Brewer Road
Saxonburg, PA 16056

Dear Chad,

Congratulations! I am pleased to confirm our offer to you with Sea Change International, Inc. (the "Company) as Chief Commercial Officer reporting to Yossi Aloni, President & Chief Executive Officer effective on August 29, 2019. The starting salary for this position is $300,000 (less, of course, all required payroll taxes, deductions and withholdings), which will be paid bi-weekly at the rate of $11,538.46. We expect that you will perform any and all duties and responsibilities typically associated with your position, and any other duties assigned to you, in a satisfactory manner and to the best of your abilities at all times. As you progress with the Company, your position, location and assignments are, of course, subject to change.

You will continue to be eligible to participate in the Company's Sales Incentive Compensation Plan ("Incentive Plan"). Such compensation will be based on your achievement of certain defined personal goals and/or sales and business targets. The targeted payout under the Incentive Plan is approximately $300,000 at 100% of your annual Sales Quota.

In addition, the Compensation Committee has approved a one-time grant of 75,000 stock options (the "Option Award") exercisable at the price of the Common Stock on September 4, 2019, with 25,000 shares to vest on September 4, 2020, 2021 and 2022.

You will also be eligible each year for a Long-Term Equity Award (the "L Tl Award"), based upon the achievement of certain to-be-determined long-term goals.

The grant, vesting and exercise of any option or any other equity vehicle shall at all times be subject to and governed by the Company's Amended and Restated 2011 Compensation and Incentive Plan.

All equity awards are subject to Board approval, and the Company reviews them annually and reserves the right to modify the programs, including goals and targets, at its sole discretion at any time.

You will continue to eligible on the same basis as other employees of the Company, to participate in and to receive benefits under a 401 (k) Plan and any Company group medical, dental, life, disability or other group insurance plan(s). Your eligibility to participate in and receive any particular benefit is subject to, and governed solely by, the applicable plan document The Company will also provide you with paid time off (currently fifteen (15) days per calendar year), to be accrued and used in accordance with its policies as in effect from time to time, plus those holidays observed by the Company. The Company reserves the right to modify, change or terminate its benefits and benefit plans from time to time in its sole discretion.

In addition the Company will enter into a Change in Control Agreement with you. If your employment with Sea Change is terminated by Sea Change without Cause (other than on account of death or Disability) and you are not entitled to payment pursuant to your Change in Control Agreement in connection therewith, subject to your execution of a general release and satisfaction agreement, in form and substance acceptable to the Sea Change, which shall include, without limitation, a noncompete provision of one year, you will be entitled to (i) a one-time payment in an amount equal to the sum of 12 months of Base Salary, payable over 12 months in equal monthly instalments, subject to applicable withholding, and (ii) an amount of your Annual Commission determined based on performance targets pro rated to the date of termination and based on actual performance through date of termination (with the RSU portion of the Annual Award to be subject to vesting on the last day of the following fiscal year). Capitalized terms used in this paragraph not otherwise defined in this letter shall have the meanings assigned to such terms in the Change in Control Agreement.

With the exception of the matters outlined in the attached Change in Control Agreement, please be advised that neither this letter nor its terms, constitutes a contract of employment, or a guarantee of employment for a specific period of time.

This offer constitutes the complete agreement between you and the Company, contains all of the terms of your proposed employment with the Company and supersedes any prior agreements, representations or understandings (whether written, oral or implied) between you and the Company. No variations, modifications or amendments to this offer shall be deemed valid unless reduced to writing and signed by the Company and you, provided that your employment will remain at-will unless otherwise set forth in a writing signed by the Company's Chief Executive Officer.

If you have any questions or require clarification, please contact me. To indicate acceptance of these terms, please sign and return a copy of this letter (via fax, pdf or regular mail).

We look forward to your acceptance.

Sincerely,

Mark Bonney

Executive Chair, SeaChange International, Inc.

ACKNOWLEDGED AND AGREED:
Chad Hassler	Date:	August 28, 2019

EX-10.3

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

Exhibit 10.3

CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this “Agreement”), dated as of August 29, 2019, by and between SeaChange International, Inc., with its principal place of business at 50 Nagog Park, Acton, MA 01720 (the “Company”), and Chad Hassler (the “Executive”).

WHEREAS, the Executive is employed as the Company’s Chief Commercial Officer;  

WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel, and recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the distraction or departure of management personnel to the detriment of the Company and its stockholders; and

WHEREAS, the Board of Directors of the Company has determined that appropriate steps should be taken to reinforce and encourage the Executive’s continued attention and dedication to the Executive’s assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company, although no such change is presently known to be contemplated.

NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1

DEFINITIONS

Except as may otherwise be specified or as the context may otherwise require, the following terms shall have the respective meanings set forth below whenever used herein:

“Annual Bonus” shall mean the Executive’s target annual bonus (excluding any annual target long-term incentive compensation opportunity) for the Company’s fiscal year in which the Covered Termination occurs.

“Base Salary” shall mean the annual base rate of regular compensation of the Executive immediately before a Covered Termination, or if greater, the highest annual rate at any time during the 12-month period immediately preceding the Covered Termination.

“Board” shall mean the Board of Directors of the Company.

“Cause” shall mean (i) the Executive’s engaging in willful and repeated gross negligence or gross misconduct, (ii) the Executive’s breaching of a material fiduciary duty to the Employer, or (iii) the Executive’s being convicted of a felony, in either case, to the demonstrable and material injury to the Employer. For purposes hereof, no act, or failure to act, on the Executive’s part, shall

7939299v3

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that any act or omission was in the best interest of the Employer.

“Change in Control” shall mean the first to occur, after the date hereof, of any of the following:

(i)the members of the Board at the beginning of any consecutive 12-calendar-month period (the “Incumbent Directors”) cease for any reason other than due to death to constitute at least a majority of the members of the Board; provided that any director whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the members of the Board then still in office who were members of the Board at the beginning of such 12-calendar-month period, shall be deemed to be an Incumbent Director;

(ii)any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, shares of Stock representing in the aggregate 50% or more of the combined voting power of the securities of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any);

(iii)there shall occur (A) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportion as their ownership of the Company immediately prior to such sale or (B) the approval by stockholders of the Company of any plan or proposal for the liquidation or dissolution of the Company; or

(iv)any corporation or other legal person, pursuant to a tender offer, exchange offer, purchase of stock (whether in a market transaction or otherwise) or other transaction or event acquires securities representing 40% or more of the combined voting power of the voting securities of the Company, or there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the U.S. Securities Exchange Act, disclosing that any “person” (as such term is used in Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act) has become the “beneficial owner” (as such term is used in Rule 13d-3 under the Securities Exchange Act) of securities representing 40% or more of the combined voting power of the voting securities of the Company.

Notwithstanding the foregoing, none of the foregoing event(s) shall constitute a Change in Control unless such event(s) constitutes a “change in the ownership or effective control” or a change “in the ownership of a substantial portion of the assets,” in each case within the meaning of Section 409A(a)(2)(A)(v) of the Code and any regulations and other guidance in effect from time-to-time thereunder.

Upon the occurrence of a Change in Control as provided above, no subsequent event or condition shall constitute a Change in Control for purposes of this Agreement, with the result that there can be no more than one Change in Control hereunder.

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Company” shall mean, subject to Section 6.1(a), SeaChange International, Inc., a Delaware corporation.

“Covered Termination” shall mean if, within the two (2) year period immediately following a Change in Control, the Executive (i) is terminated by the Employer without Cause (other than on account of death or Disability), or (ii) terminates the Executive’s employment with the Employer for Good Reason.  The Executive shall not be deemed to have been terminated for purposes of this Agreement merely because the Executive ceases to be employed by the Employer and becomes employed by a new employer involved in the Change in Control; provided that such new employer shall be bound by this Agreement as if it were the Employer hereunder with respect to the Executive. It is expressly understood that no Covered Termination shall be deemed to have occurred merely because, upon the occurrence of a Change in Control, the Executive ceases to be employed by the Employer and does not become employed by a successor to the Employer after the Change in Control if the successor makes an offer to employ the Executive on terms and conditions which, if imposed by the Employer, would not give the Executive a basis on which to terminate employment for Good Reason.

“Date of Termination” shall mean (i) if the Executive’s employment is terminated by the Company for Cause, the date of receipt of the Notice of Termination for Cause or any later date specified therein (which date shall be not more than thirty (30) days after giving such notice), as the case may be; (ii) if the Executive’s employment is terminated by the Executive for Good Reason, the 30th day following receipt by the Company of the Notice of Termination for Good Reason; (iii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies the Executive of such termination, (iv) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the date on which it is determined that the Executive has a Disability, as the case may be, and (v) if the Executive’s employment is terminated by the Executive without Good Reason (and not due to Disability), the date of receipt of the Notice of Termination (which date shall be not more than thirty (30) days after giving such notice).  Notwithstanding the foregoing, in no event shall the Date of Termination with respect to a Covered Termination occur until the Executive experiences a separation from service within the meaning of Section 409A of the Code, and the date on which such separation from service takes place shall be the Date of Termination.

“Disability” shall mean the occurrence after a Change in Control of the incapacity of the Executive due to physical or mental illness, whereby the Executive shall have been absent from the full-time performance of the Executive’s duties with the Employer for six (6) consecutive months or, in any one (1) year period, for an aggregate of six (6) months.

“Employer” shall mean the Company (if and for so long as the Executive is employed thereby) and each Subsidiary which may now or hereafter employ the Executive or, where the context so requires, the Company and such Subsidiaries collectively. A subsidiary which ceases to be, directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with the Company prior to a Change in Control (other than in connection with and as an integral part of a series of transactions resulting in a Change in Control) shall, automatically and without any further action, cease to be (or be part of) the Employer for purposes hereof.

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

“Good Reason” shall mean, without the express written consent of the Executive, the occurrence after a Change in Control of any of the following circumstances:

(i)the material reduction of the Executive’s title, authority, duties or responsibilities, or the assignment to the Executive of any duties inconsistent with Executive’s position, authority, duties or responsibilities from those in effect immediately prior to the Change in Control;

(ii)a requirement that the Executive report to anyone other than the Board and/or the chief executive officer of the acquiring entity and/or the chief business officer of the applicable business unit of the acquiring company;

(iii)a material reduction in the budget over which the Executive retains authority from that which exists as of immediately prior to the Change in Control;

(iv)a reduction in the Executive’s Base Salary as in effect immediately before the Change in Control;

(v)a material reduction in the Executive’s annual bonus opportunity or annual target long-term incentive compensation opportunity (whether payable in cash, shares of Stock or a combination thereof) as in effect on the Change in Control; provided, that for the avoidance of doubt, a material reduction of such annual target long-term incentive compensation opportunity shall not be deemed to occur if such opportunity becomes payable solely in cash;

(vi)the Company’s requiring the Executive to be based at any other geographic location more than 50 miles from that location at which the Executive primarily performed Executive’s services immediately prior to the occurrence of a Change in Control, except for required travel on the Company’s business to an extent substantially consistent with Executive’s business travel obligations immediately prior to such Change in Control;

(vii)the failure of the Company to obtain a reasonable agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6.1(a);

(viii)the failure of the Company to pay the Executive any amounts due hereunder; or

(ix)any material breach by the Company of this Agreement, including but not limited to a breach of the obligation under Section 2 of this Agreement.

For avoidance of doubt, whether there has been a reduction of an annual bonus opportunity or an annual target long-term incentive compensation opportunity under clause (v) above shall take into account, without limitation, any target, minimum and maximum amounts payable and the attainability and otherwise the reasonableness of any performance hurdles, goals and other measures, each considered relative to the corresponding element with respect to the Executive in the period prior to the Change in Control.  

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

Notwithstanding anything to the contrary contained herein, the Executive’s termination of employment will not be treated as for Good Reason as the result of the occurrence of any event specified in the foregoing clauses (i) through (ix) unless, within ninety (90) days following the occurrence of such event, the Executive provides written notice to the Company of the occurrence of such event, which notice sets forth the nature of the event and the Executive terminates employment on the 30^th day following receipt by the Company of such notice.

“Notice of Termination” shall mean a notice given by the Employer or Executive, as applicable, which shall indicate the date of termination and the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provisions so indicated.

“Person” shall have the meaning ascribed thereto by Section 3(a)(9) of the Securities Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof (except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company, or (v) such Executive or any “group” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act) which includes the Executive).  

“Securities Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Stock” shall mean the common stock, $.01 par value, of the Company.

“Subsidiary” shall mean any entity, directly or indirectly, through one or more intermediaries, controlled by the Company.

Section 2

CHANGE IN CONTROL SEVERANCE BENEFITS

2.1 Cash Severance.  If a Covered Termination occurs, then, subject to the provisions of Section 2.3(b) and Section 4 below, the Company shall pay to the Executive an amount equal to the sum of: (a) one (1) times the Executive’s Base Salary, (b) 150% of the Annual Bonus, plus (c) $62,000.

2.2 Accelerated Vesting for Equity Awards.  The vesting of the Executive’s Equity Awards shall be governed by this Section 2.2.  The term “Equity Award” shall mean stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares or any other form of award that is measured with reference to the Stock.

(a)If an Executive’s Equity Award (other than a Performance-Vested Equity Award, as defined below) is continued, assumed or substituted and at any time on and after the Change in Control and the Executive suffers a Covered Termination, then the vesting and exercisability of all such unvested Equity Awards held by the Executive shall be accelerated in full and any reacquisition rights held by the Company with respect to any such Equity Award shall lapse in full, in each case, upon such termination.  A “Performance-Vested Equity Award” means any Equity Award that provides for vesting upon achieving a goal based on business criteria (including but not limited to

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

stock price) that applies to the Executive, a business unit, division, Subsidiary, affiliate, the Company or any combination of the foregoing.  Any accelerated vesting of a Performance-Vested Equity Award in connection with a Change in Control shall be determined under the terms of the underlying award agreement and the plan under which the Executive received such award.

(b)For avoidance of doubt, no change shall be made to any Equity Award (including, without limitation, any substitution or assumption of an Equity Award) that adversely affects the Executive unless it is consented to in writing by the Executive or is permitted under the terms of the plan under which the Equity Award was granted by the Company to the Executive.

2.3 (a)  The payments and benefits provided for in Section 2.1 and Section 2.2 shall (except as otherwise expressly provided therein or as provided in Section 2.3(b) or Section 2.4(b), or as otherwise expressly provided hereunder) be made on the business day coinciding with or next following the 10th day following the Date of Termination with respect to a Covered Termination (the “Payment Date”).

Notwithstanding any other provision of this Agreement, if the Executive is a “specified employee” as defined in Section 409A of the Code, any payment under this Agreement that would constitute deferred compensation for purposes of Section 409A of the Code that is payable on account of the Executive’s separation from service shall be made in accordance with Section 2.4(b) hereof.

(b)Notwithstanding any other provision of this Agreement to the contrary, no payment or benefit otherwise provided for under or by virtue of the foregoing provisions of this Agreement shall be paid or otherwise made available unless, on or before the Payment Date, the Executive has executed and not revoked a valid, binding and irrevocable general release of claims in favor of the Employer, in form and substance reasonably acceptable to the Employer. Failure by the Executive to timely deliver (and not revoke) a valid and binding release shall result in the forfeiture of all payments and benefits under this Agreement.

2.4 The Company and the Executive acknowledge and agree that the payments and benefits described in Section 2.1, Section 2.2 and Section 3.1 of this Agreement (the “Deferred Compensation”) may constitute a “nonqualified deferred compensation plan” that is subject to Section 409A of the Code. The Company and the Executive intend to administer the Deferred Compensation in a manner that at all times is either exempt from or complies in form and operation with the applicable limitations and standards of Section 409A of the Code. Therefore, notwithstanding anything else contained herein, the following limitations are expressly imposed with respect to the Deferred Compensation.

(a)The Executive’s entitlement to receive or begin receiving payment of the Deferred Compensation is conditioned upon the Executive’s separation from service. For this purpose, the Executive shall have separated from service if and only if his level of services to the Company and its affiliates decreases and is expected to remain at a level equal to twenty percent (20%) or less of the average level of services performed by the Executive during the immediately preceding 36-month period.

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

(b)If the Executive is a “specified employee” as defined in Section 409A of the Code with respect to the Company upon his separation from service, then any payment required hereunder, to the extent such payment would constitute deferred compensation for purposes of Section 409A of the Code that is payable on account of the Executive’s separation from service, shall be deferred and shall not be paid to the Executive until the date that is the later of (1) the date such payment is due under the terms of this Agreement, or (2) 6 months and 1 day following the date of the Executive’s separation from service.

(c)It is intended that each installment, if any of the payments and benefits constituting Deferred Compensation shall be treated as a separate “payment” for purposes of Section 409A of the Code. Neither the Company nor the Executive shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A of the Code.

Section 3

PARACHUTE TAX PROVISIONS

3.1 If all, or any portion, of the payments and benefits provided under this Agreement, if any, either alone or together with other payments and benefits which the Executive otherwise receives or is entitled to receive from the Company or its affiliates (collectively, the “Total Payments”) would constitute an excess “parachute payment” within the meaning of Section 280G of the Code (whether or not under an existing plan, arrangement or other agreement) and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code (the “Excise Tax”), then the Executive shall be paid or provided, as the case may be, the Total Payments unless the after-tax amount that would be retained by the Executive (after taking into account any and all applicable federal, state and local excise, income or other taxes payable by the Executive, including the Excise Tax) is less than the after-tax amount that would be retained by the Executive (after taking into account any and all applicable federal, state and local excise, income or other taxes payable by the Executive, other than the Excise Tax) if the Executive were instead to be paid or provided, as the case may be, the maximum amount of the Total Payments that the Executive could receive without being subject to the Excise Tax (the “Reduced Payments”), in which case the Executive shall be entitled only to the Reduced Payments.  After-tax amounts under this Section 3.1 shall be calculated at the highest marginal individual income tax rate as set forth in the Code as in effect at the time of employment termination, subject to any adjustment that the 280G Firm (as defined in Section 3.2 below) deems appropriate to reflect the phase out of any deductions, exclusions or exemptions with respect to compensation payable to the Executive by the Company.

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

3.2 The amount or amounts (if any) payable under this Section 3 shall be determined, at the sole cost of the Company, by the 280G Firm, whose determination or determinations shall be final and binding on all parties.  The “280G Firm” for purposes of this Section 3 shall be an accounting firm or law firm of national reputation that is selected for this purpose by the Company’s Chief Executive Officer prior to a Change in Control.  In order to assess whether payments under this Agreement or otherwise qualify as reasonable compensation that is exempt from being a parachute payment under Section 280G of the Code, the 280G Firm may retain the services of an independent valuation expert.  The Company will direct the 280G Firm to submit any determination it makes under Section 3 and provide detailed supporting calculations and any valuation report, if applicable, to both the Executive and the Company as soon as reasonably practicable.

3.3 If the 280G Firm determines that one or more reductions are required under Section 3, the 280G Firm shall also determine which of the Total Payments shall be reduced to the extent necessary so that no portion thereof shall be subject to the excise tax imposed by Section 4999 of the Code, and the Company shall pay only the Reduced Payments to the Executive. The 280G Firm shall make reductions required under Section 3 of this Agreement in a manner that maximizes the net after-tax amount payable to the Executive as follows:  first, by reducing or eliminating the portion of the Total Payments that are payable in cash; second, by reducing or eliminating the portion of the Total Payments that are not payable in cash (other than Total Payments as to which Treasury Regulations Section 1.280G-1 Q/A 24(c) (or any successor provision thereto) applies (“Q&A-24(c) Payments”)); and, third, by reducing or eliminating Q/A-24(c) Payments.  In the event that any Q&A-24(c) Payment or acceleration is to be reduced, such Q/A-24(c) Payment shall be reduced or cancelled in the reverse order of the date of grant of the awards.

3.4 As a result of the uncertainty in the application of Section 280G at the time that the 280G Firm makes its determinations under this Section 3, it is possible that amounts will have been paid or distributed to the Executive that should not have been paid or distributed (collectively, the “Overpayments”), or that additional amounts should be paid or distributed to the Executive (collectively, the “Underpayments”). If the 280G Firm determines, based on either the assertion of a deficiency by the Internal Revenue Service against the Company or the Executive which assertion the 280G Firm believes has a high probability of success or controlling precedent or substantial authority, that an Overpayment has been made, the Executive must repay the Overpayment to the Company, without interest.  If the 280G Firm determines, based upon controlling precedent or substantial authority, that an Underpayment has occurred, the 280G Firm will notify the Executive and the Company of that determination and the amount of that Underpayment will be paid promptly by the Company to the Executive.

3.5 The Executive will provide the 280G Firm access to, and copies of, any books, records, and documents in the Executive’s possession as reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Section 3.  Cooperation may include, among other things, being interviewed in order for the 280G Firm to assess whether any payments may be exempt from being parachute payments by virtue of qualifying as reasonable compensation for purposes of Section 280G of the Code.

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

Section 4

RESTRICTIVE COVENANTS

4.1 The Executive shall remain subject to the restrictive covenants set forth in the Employee Noncompetition, Nondisclosure and Developments Agreement (“Noncompete Agreement”) following a Change in Control or any termination of employment thereafter.  The Executive acknowledges that the covenants contained in the Noncompete Agreement are reasonable and necessary to protect the legitimate interests of the Company and its affiliates, that the Company would not have entered into this Agreement in the absence of such restrictions under the Noncompete Agreement, and that any violation of any provision of the Noncompete Agreement will result in irreparable injury to the Company.  The Executive further represents and acknowledges that: (i) the Executive has been advised by the Company to consult Executive’s own legal counsel in respect of this Agreement and the Noncompete Agreement, and (ii) the Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement and the Noncompete Agreement with Executive’s counsel.

Section 5

TERM OF AGREEMENT

5.1 The Agreement shall terminate on December 31, 2019, provided, however, that the term of this Agreement shall be automatically extended thereafter for successive four (4)) year periods unless, at least ninety (90) days prior to the termination date of the then current succeeding four-year extended term of this Agreement, either party has notified the other party that the term hereunder shall expire at the end of the then-current term.  Notwithstanding the foregoing, if a Change in Control occurs before the expiration of the term of this Agreement as described above, the term of this Agreement shall automatically be extended until the second anniversary of such Change in Control.  

5.2 The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after its expiration shall survive any such expiration.

5.3 This Agreement shall not affect any rights of the Company or the Executive prior to a Change in Control or any rights of the Executive granted in any other agreement, plan or arrangements. The rights, duties and benefits provided hereunder shall only become effective upon a Change in Control. If the employment of the Executive by the Company is terminated for any reason prior to a Change in Control, this Agreement shall thereafter be of no further force and effect.

Section 6

MISCELLANEOUS

6.1(a)          The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform under the terms of this Agreement in the same manner and to the same extent that the Company and its affiliates would be required to perform it if no such succession had taken place (provided that such a requirement to perform which arises by operation of law shall be deemed to satisfy the requirements for such an express assumption and

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

agreement), and in such event the Company (as constituted prior to such succession) shall have no further obligation under or with respect to this Agreement. Failure of the Company to obtain such assumption and agreement with respect to the Executive prior to the effectiveness of any such succession shall be a breach of the terms of this Agreement with respect to the Executive and shall entitle the Executive to compensation from the Employer (as constituted prior to such succession) in the same amount and on the same terms as the Executive would be entitled to hereunder were the Executive’s employment terminated for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid which assumes and agrees (or is otherwise required) to perform this Agreement. Nothing in this Section 6.1(a) shall be deemed to cause any event or condition which would otherwise constitute a Change in Control not to constitute a Change in Control.

(b)Notwithstanding Section 6.1(a), the Company shall remain liable to the Executive upon a Covered Termination after a Change in Control if the Executive is not offered continuing employment by a successor to the Employer on a basis which would not constitute a termination for Good Reason.

(c)This Agreement, and the Executive’s and the Company’s rights and obligations hereunder, may not be assigned by the Executive or, except as provided in Section 6.1(a), the Company, respectively; any purported assignment by the Executive or the Company in violation hereof shall be null and void.

(d)The terms of this Agreement shall inure to the benefit of and be enforceable by the personal or legal representatives, executors, administrators, permitted successors, heirs, distributees, devisees and legatees of the Executive. If the Executive shall die while an amount would still be payable to the Executive hereunder if they had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee or other designee or, if there is no such designee, the Executive’s estate.

6.2The Executive shall not be required to mitigate damages or the amount of any payment or benefit provided for under this Agreement by seeking other employment or otherwise, nor will any payments or benefits hereunder be subject to offset in the event the Executive does mitigate.

6.3The Employer shall pay all reasonable legal fees and expenses incurred in a legal proceeding, including any arbitration pursuant to Section 6.10 or otherwise, by the Executive in seeking to obtain or enforce any right or benefit provided by this Agreement. Such payments are to be made within twenty (20) days after the Executive’s request for payment accompanied with such evidence of fees and expenses incurred as the Employer reasonably may require; provided that if the Executive institutes a proceeding and the judge or other decision-maker presiding over the proceeding affirmatively finds that the Executive has failed to prevail substantially, the Executive shall pay Executive’s own costs and expenses (and, if applicable, return any amounts theretofore paid on the Executive’s behalf under this Section 6.3).

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

6.4For the purposes of this Agreement, notice and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when hand delivered or mailed by United States certified or registered express mail, return receipt requested, postage prepaid, if to the Executive, addressed to the Executive at his or her respective address on file with the Company; if to the Company, addressed to SeaChange International, Inc., 50 Nagog Park, Acton, MA 01720, and directed to the attention of its Chief Financial Officer; if to the Board, addressed to the Board of Directors, c/o 50 Nagog Park, Acton, MA 01720, and directed to the Company’s Chief Financial Officer; or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

6.5Unless otherwise determined by the Employer in an applicable plan or arrangement, no amounts payable hereunder upon a Covered Termination shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of the Employer for the benefit of its employees.

6.6Other than as set forth in a Performance-Vested Equity Award(s) to which the Executive is party with the Company, this Agreement is the exclusive arrangement with the Executive applicable to payments and benefits in connection with a change in control of the Company (whether or not a Change in Control), and supersedes any prior arrangements involving the Company or its predecessors or affiliates relating to any change in control (whether or not a Change in Control).  This Agreement shall not limit any right of the Executive to receive any payments or benefits under an employee benefit or executive compensation plan of the Employer, initially adopted as of or after the date hereof, which are expressly contingent thereunder upon the occurrence of a change in control (including, but not limited to, the acceleration of any rights or benefits thereunder); provided that in no event shall the Executive be entitled to any payment or benefit under this Agreement which duplicates a payment or benefit received or receivable by the Executive under any severance or similar plan or policy of the Employer, and in any such case the Executive shall only be entitled to receive the greater of the two payments.

6.7Any payments hereunder shall be made out of the general assets of the Employer. The Executive shall have the status of general unsecured creditor of the Employer.

6.8Nothing in this Agreement shall confer on the Executive any right to continue in the employ of the Employer or interfere in any way (other than by virtue of requiring payments or benefits as may expressly be provided herein) with the right of the Employer to terminate the Executive’s employment at any time.

6.9The Employer shall be entitled to withhold from any payments or deemed payments any amount of tax withholding required by law.

6.10The Executive may elect to have any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement (other than with respect to an alleged breach of a restrictive covenant under Section 4 above) that is not resolved by the Employer submitted to binding arbitration under the Federal Arbitration Act in Boston, Massachusetts, administered by the American Arbitration Association under its Employment Dispute Resolution Rules, subject to any additional terms and conditions as may be agreed to by the Executive and the Employer.  The determination of the arbitrator(s) shall be conclusive and binding on the Employer and Executive and judgment may be entered on the arbitrator(s)’ award in any court having jurisdiction.  The

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

arbitration provisions hereof shall, with respect to such controversy or dispute, survive the termination of this Agreement. This Section 6.10 shall be administered in accordance with the disputed payment provisions of Treasury Regulation Section 1.409A-3(g).  

6.11This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.

6.12The Executive agrees that he will be subject to any compensation clawback or recoupment policies that may be applicable to him as an executive officer of the Company, as in effect from time to time and as approved by the Board or a duly authorized committee thereof, whether or not approved before or after the effective date of this Agreement.

6.13The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall remain in full force and effect.

6.14The use of captions in this Agreement is for convenience. The captions are not intended to and do not provide substantive rights.

6.15THIS AGREEMENT SHALL BE CONSTRUED, ADMINISTERED AND ENFORCED ACCORDING TO THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL LAW.

[The remainder of this page is left intentionally blank.]

DocuSign Envelope ID: B2F5B02B-D7C4-42D6-8E43-22B8E482A20A

IN WITNESS WHEREOF, the parties hereto have signed their names, effective as of the date first above written.

SEACHANGE INTERNATIONAL, INC.

By:
Name:	Yossi Aloni
Title:	President and Chief Executive Officer

EXECUTIVE:

By:
Name:	Chad Hassler

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Yossi Aloni, 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.

Date: September 9, 2020	By:	/s/ YOSSI ALONI
		Yossi Aloni
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Michael D. Prinn, 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.

Date: September 9, 2020	By:	/s/ MICHAEL D. PRINN
		Michael D. Prinn
		Chief Financial Officer, Senior Vice President 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, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yossi Aloni, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 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, as amended; and

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

Date: September 9, 2020	/s/ YOSSI ALONI
	Yossi Aloni
	Chief Executive Officer
	(Principal Executive Officer)

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, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael D. Prinn, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 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, as amended; and

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

Date: September 9, 2020	/s/ MICHAEL D. PRINN
	Michael D. Prinn
	Chief Financial Officer, Senior Vice President and Treasurer
	(Principal Financial and Accounting Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jul. 31, 2020	Aug. 31, 2020
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 31, 2020
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Entity Registrant Name	SEACHANGE INTERNATIONAL INC
Entity Central Index Key	0001019671
Current Fiscal Year End Date	--01-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		37,556,067
Entity File Number	001-38828
Entity Tax Identification Number	04-3197974
Entity Address, Address Line One	500 Totten Pond Road
Entity Address, City or Town	Waltham
Entity Address, State or Province	MA
Entity Incorporation, State or Country Code	DE
Entity Address, Postal Zip Code	02451
City Area Code	(978)
Local Phone Number	897-0100
Document Quarterly Report	true
Document Transition Report	false
Common Stock [Member]
Document Information [Line Items]
Trading Symbol	SEAC
Title of 12(b) Security	Common Stock, $0.01 Par Value
Security Exchange Name	NASDAQ
Series A Preferred Stock [Member]
Document Information [Line Items]
Trading Symbol	SEAC
Title of 12(b) Security	Series A Participating Preferred Stock Purchase Rights
Security Exchange Name	NASDAQ

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Current assets:
Cash, cash equivalents and restricted cash	$ 7,655	$ 9,297
Marketable securities	2,141	3,835
Accounts receivable, net of allowance for doubtful accounts of $904 and $947 at July 31, 2020 and January 31, 2020, respectively	6,011	12,127
Unbilled receivables	11,932	14,279
Prepaid expenses and other current assets	4,928	5,112
Total current assets	32,667	44,650
Property and equipment, net	636	554
Operating lease right-of-use assets	5,505	4,860
Marketable securities, long-term		782
Intangible assets, net	1,868	2,300
Goodwill	10,441	9,775
Unbilled receivables, long-term	9,033	9,031
Other assets	831	938
Total assets	60,981	72,890
Current liabilities:
Accounts payable	2,717	4,007
Accrued expenses	5,656	7,986
Deferred revenue	4,674	5,041
Promissory note	1,072
Total current liabilities	14,119	17,034
Deferred revenue, long-term	423	1,140
Operating lease liabilities, long-term	4,607	4,348
Taxes payable, long-term	338	436
Promissory note, long-term	1,341
Deferred tax liabilities, long-term	186
Total liabilities	21,014	22,958
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, $0.01 par value; 100,000,000 shares authorized at July 31, 2020 and January 31, 2020; 37,727,987 shares issued and 37,556,067 shares outstanding at July 31, 2020; 37,303,952 shares issued and 37,163,462 outstanding at January 31, 2020	377	373
Additional paid-in capital	245,817	245,067
Treasury stock, at cost; 171,920 shares at July 31, 2020 and 140,490 shares at January 31, 2020	(227)	(147)
Accumulated other comprehensive loss	(500)	(2,137)
Accumulated deficit	(205,500)	(193,224)
Total stockholders' equity	39,967	49,932
Total liabilities and stockholders' equity	$ 60,981	$ 72,890

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 904	$ 947
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	37,727,987	37,303,952
Common stock, shares outstanding	37,556,067	37,163,462
Treasury stock, common shares	171,920	140,490

XML

Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Revenue:
Total revenue	$ 4,995	$ 18,812	$ 11,910	$ 27,297
Cost of revenue:
Total cost of revenue	3,181	7,924	7,587	13,501
Gross profit	1,814	10,888	4,323	13,796
Operating expenses:
Research and development	3,360	3,775	7,526	8,027
Selling and marketing	1,728	2,963	3,854	5,815
General and administrative	2,367	4,150	4,421	8,399
Severance and restructuring costs	543	659	1,029	870
Total operating expenses	7,998	11,547	16,830	23,111
Loss from operations	(6,184)	(659)	(12,507)	(9,315)
Other income (expense), net	373	(78)	165	(1,869)
Loss before income taxes	(5,811)	(737)	(12,342)	(11,184)
Income tax benefit	45	563	66	161
Net loss	$ (5,766)	$ (174)	$ (12,276)	$ (11,023)
Net loss per share, basic	$ (0.15)		$ (0.33)	$ (0.30)
Net loss per share, diluted	$ (0.15)		$ (0.33)	$ (0.30)
Weighted average common shares outstanding, basic	37,527	36,602	37,376	36,532
Weighted average common shares outstanding, diluted	37,527	36,602	37,376	36,532
Comprehensive loss:
Net loss	$ (5,766)	$ (174)	$ (12,276)	$ (11,023)
Other comprehensive income, net of tax:
Foreign currency translation adjustment	1,665	133	1,641	1,340
Unrealized (losses) gains on marketable securities	(13)	25	(4)	60
Total other comprehensive income	1,652	158	1,637	1,400
Comprehensive loss	(4,114)	(16)	(10,639)	(9,623)
Product [Member]
Revenue:
Total revenue	1,066	11,968	4,164	13,147
Cost of revenue:
Cost of revenue	788	3,039	2,368	3,948
Service [Member]
Revenue:
Total revenue	3,929	6,844	7,746	14,150
Cost of revenue:
Cost of revenue	$ 2,393	$ 4,885	$ 5,219	$ 9,553

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Loss [Member]	Accumulated Deficit [Member]
Beginning balance at Jan. 31, 2019	$ 55,100	$ 359	$ 242,442	$ (5)	$ (3,393)	$ (184,303)
Beginning balance, Shares at Jan. 31, 2019		35,946,100
Issuance of common stock pursuant to acquisition of Xstream	874	$ 5	869
Issuance of common stock pursuant to acquisition of Xstreme, Shares		541,738
Issuance of common stock pursuant to vesting of restricted stock units		$ 3	(3)
Issuance of common stock pursuant to vesting of restricted stock units, Shares		315,404
Issuance of common stock pursuant to ESPP purchases	9		9
Issuance of common stock pursuant to ESPP purchases, Shares		7,819
Stock-based compensation expense	197		197
Repurchases of common stock	(142)			(142)
Unrealized gains (losses) on marketable securities	60				60
Foreign currency translation adjustment	1,340				1,340
Net loss	(11,023)					(11,023)
Ending balance at Jul. 31, 2019	46,415	$ 367	243,514	(147)	(1,993)	(195,326)
Ending balance, Shares at Jul. 31, 2019		36,811,061
Beginning balance at Apr. 30, 2019	45,942	$ 365	242,885	(5)	(2,151)	(195,152)
Beginning balance, Shares at Apr. 30, 2019		36,553,025
Issuance of common stock pursuant to vesting of restricted stock units		$ 2	(2)
Issuance of common stock pursuant to vesting of restricted stock units, Shares		258,036
Stock-based compensation expense	631		631
Repurchases of common stock	(142)			(142)
Unrealized gains (losses) on marketable securities	25				25
Foreign currency translation adjustment	133				133
Net loss	(174)					(174)
Ending balance at Jul. 31, 2019	46,415	$ 367	243,514	(147)	(1,993)	(195,326)
Ending balance, Shares at Jul. 31, 2019		36,811,061
Beginning balance at Jan. 31, 2020	49,932	$ 373	245,067	(147)	(2,137)	(193,224)
Beginning balance, Shares at Jan. 31, 2020		37,303,952
Issuance of common stock pursuant to vesting of restricted stock units		$ 4	(4)
Issuance of common stock pursuant to vesting of restricted stock units, Shares		379,063
Issuance of common stock pursuant to exercise of stock options	119		119
Issuance of common stock pursuant to exercise of stock options, shares		39,270
Issuance of common stock pursuant to ESPP purchases	18		18
Issuance of common stock pursuant to ESPP purchases, Shares		5,702
Stock-based compensation expense	617		617
Repurchases of common stock	(80)			(80)
Unrealized gains (losses) on marketable securities	(4)				(4)
Foreign currency translation adjustment	1,641				1,641
Net loss	(12,276)					(12,276)
Ending balance at Jul. 31, 2020	39,967	$ 377	245,817	(227)	(500)	(205,500)
Ending balance, Shares at Jul. 31, 2020		37,727,987
Beginning balance at Apr. 30, 2020	43,901	$ 376	245,558	(147)	(2,152)	(199,734)
Beginning balance, Shares at Apr. 30, 2020		37,661,641
Issuance of common stock pursuant to vesting of restricted stock units		$ 1	(1)
Issuance of common stock pursuant to vesting of restricted stock units, Shares		66,346
Stock-based compensation expense	260		260
Repurchases of common stock	(80)			(80)
Unrealized gains (losses) on marketable securities	(13)				(13)
Foreign currency translation adjustment	1,665				1,665
Net loss	(5,766)					(5,766)
Ending balance at Jul. 31, 2020	$ 39,967	$ 377	$ 245,817	$ (227)	$ (500)	$ (205,500)
Ending balance, Shares at Jul. 31, 2020		37,727,987

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019
Cash flows from operating activities:
Net loss	$ (12,276)	$ (11,023)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	725	1,093
(Recovery of) provision for bad debts	(216)	388
Stock-based compensation expense	617	197
Deferred income taxes	186	(203)
Realized and unrealized foreign currency transaction loss	1,641	1,340
Other	(3)	67
Changes in operating assets and liabilities:
Accounts receivable	6,332	8,482
Unbilled receivables	2,345	(6,598)
Inventory		726
Prepaid expenses and other current assets and other assets	291	196
Accounts payable	(1,290)	1,350
Accrued expenses and other liabilities	(2,814)	(2,463)
Deferred revenue	(1,084)	(1,590)
Net cash used in operating activities	(5,546)	(8,038)
Cash flows from investing activities:
Purchases of property and equipment	(202)	(153)
Cash paid for acquisitions, net		(3,838)
Purchases of marketable securities		(823)
Proceeds from sales and maturities of marketable securities	2,476	1,593
Net cash provided by (used in) investing activities	2,274	(3,221)
Cash flows from financing activities:
Proceeds from issuance of common stock	137	9
Repurchases of common stock	(80)	(142)
Proceeds from Paycheck Protection Program	2,413
Net cash provided by (used in) financing activities	2,470	(133)
Effect of exchange rate on cash and cash equivalents	(840)	277
Net decrease in cash, cash equivalents and restricted cash	(1,642)	(11,115)
Cash, cash equivalents and restricted cash at beginning of period	9,297	20,317
Cash, cash equivalents and restricted cash at end of period	7,655	9,202
Supplemental disclosure of cash flow information
Income taxes paid	92	76
Non-cash activities:
Purchases of property and equipment included in accounts payable		58
Right-of-use assets obtained in exchange for lease obligations	$ 987	2,048
Fair value of common stock issued in acquisition		$ 874

XML

Nature of Business and Basis of Presentation

6 Months Ended

Jul. 31, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Nature of Business and Basis of Presentation

1. Nature of Business and Basis of Presentation

SeaChange International, Inc. (“we” or the “Company”), a Delaware corporation, was founded on July 9, 1993. We are an industry leader in the delivery of multiscreen, advertising and premium over-the-top (“OTT”) video management solutions.  Our software products and services are designed to empower video providers to create, manage and monetize the increasingly personalized, highly engaging experiences that viewers demand.

Liquidity

We continue to realize the savings related to our restructuring activities. In fiscal 2020, we continued to streamline our operations and closed our service organizations in Ireland and the Netherlands. These measures are important steps in restoring us to profitability and positive cash flow. We believe that existing cash and investments and cash expected to be provided by future operating results are adequate to satisfy our working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months.

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. 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.

Impact of COVID-19 Pandemic

In the first quarter of fiscal 2021, concerns related to the spread of COVID-19 began to create global business disruptions as well as disruptions in our operations and to create potential negative impacts on our revenues and other financial results. COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020. The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on factors including the impact on our customers, partners, and vendors and on the operation of the global markets in general. Due to our business model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

We are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications. These decisions may delay or reduce sales and harm productivity and collaboration. We have observed other companies and governments making similar alterations to their normal business operations, and in general, the markets are experiencing a significant level of uncertainty at the current time. Virtualization of our team’s sales activities could foreclose future business opportunities, particularly as our customers limit spending, which could negatively impact the willingness of our customers to enter into or renew contracts with us.  The pandemic has impacted our ability to complete certain implementations, negatively impacting our ability to recognize revenue, and could also negatively impact the payment of accounts receivable and collections. We may take further actions that alter our business operations as the situation evolves. As a result, the ultimate impact of the COVID-19 pandemic and the effects of the operational alterations we have made in response on our business, financial condition, liquidity, and financial results cannot be predicted at this time.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (the “CARES) Act”).  The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.  We continue to examine the impact that the CARES Act may have on our business, including the extent of our Paycheck Protection Program (the “PPP”) loan forgiveness eligibility.

The Paycheck Protection Program

On May 5, 2020, the Company entered into a promissory note (the “Note”) with Silicon Valley Bank (the “Lender”) evidencing an unsecured loan in an aggregate principal amount of $2,412,890 pursuant to the PPP under the CARES Act administered by the U.S. Small Business Administration (“SBA”). The Note is included in our consolidated balance sheets.

Interest accrues on the Note at a fixed rate of one percent (1%) per annum, with the payment of the first six months of interest and principal deferred and is included in accrued expenses in our consolidated balance sheets. The Note has an initial term of two years, is unsecured and is guaranteed by the SBA. The Company may apply to the Lender for forgiveness of the Note, with the amount which may be forgiven equal to the sum of qualifying expenses, including payroll costs, covered rent obligations, and covered utility payments incurred by the Company during the twenty-four week period beginning on May 7, 2020, calculated in accordance with the terms of the CARES Act.

Subject to any forgiveness under the PPP, the Note will mature on May 5, 2022. Beginning on the seven-month anniversary of the date of the Note, the Company is required to make 18 monthly payments of principal and interest. The Note may be prepaid at any time prior to maturity with no prepayment penalties. The Note provides for customary events of default including, among others, those relating to breaches of the Company’s obligations under the Note, including a failure to make payments, any bankruptcy or similar proceedings involving the Company, and certain material effects on the Company’s ability to repay the Note. The Note may be accelerated upon the occurrence of an event of default.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for a fair presentation have been included. The year-end consolidated balance sheet data as of January 31, 2020 was derived from our audited consolidated financial statements and may not include all disclosures required by U.S. GAAP. The results of operations for the three and six months ended July 31, 2020 are not necessarily indicative of the results to be expected for the entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the SEC on April 20, 2020.

XML

Significant Accounting Policies

6 Months Ended

Jul. 31, 2020

Accounting Policies [Abstract]

Significant Accounting Policies

2. Significant Accounting Policies

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, those related to revenue recognition, allowance for doubtful accounts, goodwill and intangible assets, right-of-use operating leases, impairment of long-lived assets, accounting for income taxes, the valuation of stock-based awards, and ongoing legal matters.  We base our estimates on historical experience, known trends and other market-specific or relevant factors that are believed to be reasonable under the circumstances.  On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known.  Actual results may differ from those estimates or assumptions.

Business Combinations

We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations. We allocate the purchase price of the acquisition to the tangible assets acquired, liabilities assumed, and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred. During the measurement period, we record adjustments to provisional amounts recorded for assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could be up to one year after the transaction date, subsequent adjustments are recorded to the Company’s consolidated statements of operations.

Cash, cash equivalents and restricted cash

Cash and cash equivalents include cash on hand and on deposit and 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 the date of purchase of 90 days or less. All cash equivalents are carried at cost, which approximates fair value. Restricted cash represents cash that is restricted as to withdrawal or usage and consists primarily of cash held as collateral in relation to obligations set forth by the landlord of our Poland facility.

The following table provides a summary of cash, cash equivalents and restricted cash that constitutes the total amounts shown in the consolidated statements of cash flows as of July 31, 2020 and 2019:

	As of July 31,
	2020		2019
	(Amounts in thousands)
Cash and cash equivalents	$	7,427	$	9,202
Restricted cash		228		—
Total cash, cash equivalents and restricted cash	$	7,655	$	9,202

Concentration of Credit Risk and of Significant Customers

Financial instruments which potentially expose us to concentrations of credit risk include cash, cash equivalents and restricted cash, marketable securities and accounts receivable. We have cash investment policies which, among other things, limit investments to investment-grade securities. We restrict our cash equivalents and marketable securities to repurchase agreements with major banks and U.S. government and corporate securities which are subject to minimal credit and market risk. We perform ongoing credit evaluations of our customers.

We sell our software products and services worldwide primarily to service providers consisting of operators, telecommunications companies, satellite operators and broadcasters. Two customers accounted for 22% and 11% of total revenue in the second quarter of fiscal 2021 and two customers accounted for 20% and 10% of total revenue in the second quarter of fiscal 2020. One customer accounted for 18% of total revenue in the first six months of fiscal 2021 and one customer accounted for 14% of total revenue in the first six months of fiscal 2020. Two customers accounted for 29% and 17% of the accounts receivable balance as of July 31, 2020. Two customers accounted for 16% and 10% of the accounts receivable balance as of January 31, 2020.

Marketable Securities

Our investments in debt securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other expense, net in the consolidated statements of operations and comprehensive loss.

We evaluate our investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, we consider such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, our ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that we consider to be “other than temporary,” we reduce the investment to fair value through a charge to the consolidated statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Our cash equivalents and marketable securities are carried at fair value determined according to the fair value hierarchy described above. The carrying values of our accounts and other receivables, unbilled receivables, accounts payable, accrued expenses, and the Note approximate their fair values due to the short-term nature of these assets and liabilities.

Goodwill and Acquired Intangible Assets

We record goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but that are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.  Goodwill is not amortized, but rather is tested for impairment annually on August 1^st of each year, or more frequently if facts and circumstances warrant a review, such as the ones mentioned in impairments of long-lived assets below. We have determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment. We assess both the existence of potential impairment and the amount of impairment loss by comparing the fair value of the reporting unit with its carrying amount, including goodwill. The Company tested for goodwill impairment as of July 31, 2020 in consideration of the COVID-19 pandemic and determined there was no impairment. Through July 31, 2020, we have recorded accumulated goodwill impairment charges of $54.8 million.

Intangible assets are recorded at their estimated fair values at the date of acquisition. We amortize acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Impairment of Long-Lived Assets

Long-lived assets primarily consist of property, plant and equipment and intangible assets with finite lives. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future undiscounted cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. Determining the fair value of long-lived assets includes significant judgment by management and different judgments could yield different results.

We assess the useful lives and possible impairment of existing recognized long-lived assets whenever events or changes in circumstances occur that indicate that it is more likely than not that an impairment has occurred. We test long-lived assets for impairment by comparing the carrying amount to the sum of the net undiscounted cash flows expected to be generated by the asset whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds its net undiscounted cash flows, then an impairment loss is recognized for the amount by which the carrying amount exceeds its fair value. We use a discounted cash flow approach or other methods, if appropriate, to assess fair value. Factors considered important which could trigger a review include:

• significant underperformance relative to historical or projected future operating results;

• significant changes in the manner of use of the acquired assets or the strategy for our overall business;

• identification of other impaired assets within a reporting unit;

• significant negative industry or economic trends;

• a significant decline in our stock price for a sustained period; and

• a decline in our market capitalization relative to net book value.

Determining whether a triggering event has occurred involves significant judgment. (see Note 5).

Revenue Recognition

Our revenue is derived from sales of software licenses and associated hardware and support services, including professional services and maintenance fees related to our software licenses.

Our contracts, including contracts for our end-to-end software delivery platform solution (the “Framework”), often contain multiple performance obligations. For contracts with multiple performance obligations, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis when available or expected cost plus margin or residual approach. If the transaction price contains discounts or we expect to provide future price concessions, these elements are considered when determining the transaction price prior to allocation. Variable fees within the transaction price are estimated and recognized as revenue when we satisfy our performance obligations to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. If the contract grants the client the option to acquire additional products or services, we assess whether or not any discount on the products and services is in excess of levels normally available to similar clients and, if so, we account for that discount as an additional performance obligation.

Framework

We have concluded that the Framework has multiple performance obligations. The selling price of the Framework is highly variable as a result of our value-based engagement where pricing for our customers is based on the operating expense savings that we enable using the Framework engagement.

Framework Software Licenses

We have concluded that a Framework software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support. As a result of the highly variable selling price, revenue recognition and consideration related to the Framework software license is allocated under the residual method.

Framework Hardware

We have concluded that Framework hardware, when included in a Framework contract, is a distinct performance obligation as the client can benefit from the product. Framework hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Framework Support Services

We have concluded that Framework support services is a distinct performance obligation. Framework support services is included in services revenue in our consolidated statements of operations and comprehensive loss.  Support services includes software upgrades on a when-and-if available basis, support, bug fixes or patches and general maintenance support.  Framework support services is not sold on a standalone basis. The standalone selling price is determined using a cost-plus approach, and revenue is recognized ratably over the passage of the contractual term.

Legacy Software Licenses

We have concluded that a software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support.

Legacy Hardware

We have concluded that hardware is a distinct performance obligation as the client can benefit from the product on its own. Hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Legacy Maintenance

Historically, maintenance revenue, which is included in services revenue in our consolidated statements of operations and comprehensive loss, includes revenue from client support and related professional services. Client support includes software upgrades on a when-and-if available basis, telephone support, bug fixes or patches and general hardware maintenance support. Maintenance is priced as a percentage of the list price of the related software license and hardware. Historically, we determined the standalone selling price of maintenance based on this pricing relationship and observable data from standalone sales of maintenance.

We have identified three separate distinct performance obligations of maintenance:

• Software upgrades and updates;

• Technical support; and

• Hardware support.

These performance obligations are distinct within the contract and, although they are not sold separately, the components are not essential to the functionality of the other components. Each of the performance obligations included in maintenance revenue is a stand ready obligation that is recognized ratably over the passage of the contractual term for products sold on a standalone basis.  

Legacy Services

Historically, our services revenue, excluding maintenance revenue, is comprised of software license implementation services, engineering services, training and reimbursable expenses. We have concluded that services are distinct performance obligations, with the exception of engineering services. Engineering services may be provided on a standalone basis or bundled with a license when we are providing custom development.

The standalone selling price for services in time and materials contracts is determined by observable prices in standalone services arrangements and recognized as revenue as the services are performed based on an input measure of hours incurred to total estimated hours.

We estimate the standalone selling price for fixed price services based on estimated hours adjusted for historical experience at time and material rates charged in standalone services arrangements. Revenue for fixed price services is recognized over time as the services are provided based on an input measure of hours incurred to total estimated hours.

Contract Modifications

We occasionally enter into amendments to previously executed contracts that constitute contract modifications. We assess each of these contract modifications to determine:

• If the additional products and services are distinct from the product and services in the original arrangement; and

• If the amount of consideration expected for the added products and services reflects the standalone selling price of those products and services.

A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract or a cumulative catch-up basis.

Significant Judgments

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in the contract based on a relative standalone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price, taking into account available information such as market conditions, and internally approved pricing guidelines related to the performance obligations. In instances where stand-alone selling price is not directly observable, such as when we do not sell the product or service separately, we determine the stand-alone selling price based on a cost-plus model as market and other observable inputs are seldom present based on the proprietary nature of our products and services.

Our contracts do not generally include a variable component to the transaction price. With certain statements of work, we explicitly state that we are to be reimbursed for reasonable travel and entertainment expenses incurred as part of the delivery of professional services. In the cases when we are entitled to collect all travel and entertainment expenses incurred, an estimate of the fulfillment costs is made at the onset of the contract in order to determine the transaction price. The revenue associated with travel and entertainment expenses is then recognized over time along with the professional services.

Some of our contracts have payment terms that differ from the timing of revenue recognition, which requires us to assess whether the transaction price for those contracts include a significant financing component. We have elected the practical expedient that permits an entity to not adjust for the effects of a significant financing component if we expect that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service, will be one year or less. For those contracts in which the period exceeds the one-year threshold, this assessment, as well as the quantitative estimate of the financing component and its relative significance, requires judgment. We estimate the significant financing component provided to our customers with extended payment terms by determining the present value of the future payments by applying a discount rate that reflects the customer’s creditworthiness.

Contract Balances

Contract assets consist of unbilled revenue, which is recognized as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones.  Unbilled receivables expected to be billed and collected within one year are classified as current assets or long-term assets if expected to be billed and collected after one year. Contract liabilities consist of deferred revenue and customer deposits that arise when amounts are billed to or collected from customers in advance of revenue recognition.

Costs to Obtain and Fulfill a Contract

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that commissions and special incentive payments (“Spiffs”) for hardware and software maintenance and support and professional services paid under our sales incentive programs meet the requirements to be capitalized under Accounting Standards Codification (“ASC”) 340-40. Costs to obtain a contract are amortized as selling and marketing expense over the expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period. The commissions and Spiffs related to professional services are amortized over time as work is completed. The commissions and Spiffs for hardware and software maintenance are amortized over the life of the contract. These costs are periodically reviewed for impairment. We determined that no impairment of these assets existed as of July 31, 2020 or January 31, 2020. We have elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Total deferred capitalized commission costs were $862 thousand as of July 31, 2020 compared to $958 thousand as of January 31, 2020. Current deferred capitalized commission costs are included in prepaid expense and other current assets in our consolidated balance sheets and non-current deferred capitalized commission costs are included in other assets in our consolidated balance sheets. Capitalized commissions expensed during the six months ended July 31, 2020 and 2019 included in the consolidated statement of operations and comprehensive loss were $218 thousand and $59 thousand, respectively.

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs include direct labor for support services, software enhancements, reimbursable expenses and professional services for customized software development costs. The revenue associated with the support services, software enhancements and reimbursable expenses is recognized ratably over time; therefore, the associated costs are expensed as incurred. The professional services associated with the customized software are not recognized until completion. As such, the professional services costs are capitalized and recognized upon completion of the services.

Leases

We account for our leases in accordance with ASC 842, Leases. A contract is accounted for as a lease when we have the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, we determine the initial classification and measurement of our right-of-use operating lease asset and corresponding liability at the lease commencement date. We determine the classification and measurement of a modified lease at the date it is modified. The lease term includes only renewal options that are reasonably assured to exercise. The present value of lease payments is typically determined by using the Company’s estimated secured incremental borrowing rate for the associated lease term as interest rates implicit in the leases are not normally readily determinable. Management’s policy is to utilize the practical expedient to not record leases with an original term of twelve months or less on our consolidated balance sheets. Lease payments are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Our existing leases are for facilities and equipment. None of our leases are with related parties. In addition to rent, office leases may require us to pay additional amounts for taxes, insurance, maintenance and other expenses, which are generally referred to as non-lease components. As a practical expedient, we account for the non-lease components together with the lease components as a single lease component for all of our leases. Only the fixed costs for leases are accounted for as a single lease component and recognized as part of a right-of-use asset and liability.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of unrestricted common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of unrestricted common shares outstanding during the period and the weighted average number of potential common shares from the assumed exercise of stock options and the vesting of shares of restricted and deferred common stock units using the “treasury stock” method when the effect is not anti-dilutive. In periods in which we report a net loss, diluted net loss per share is the same as basic net loss per share.

The number of common shares used in the computation of diluted net loss per share for the periods presented does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2020		2019		2020		2019
	(Amounts in thousands)
Stock options		2,314		2,596		967		2,764
Restricted stock units		65		128		58		219
Deferred stock units		82		254		82		229
Performance stock units		—		120		—		111
		2,461		3,098		1,107		3,323

Recently Issued Accounting Pronouncement

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326) (“ASU 2016-13”), which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities and accounts receivable. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. ASU 2016-13 is effective in the first quarter of our fiscal 2024. We are currently evaluating if this guidance will have a material effect to our consolidated financial statements.

XML

Fair Value Measurements

6 Months Ended

Jul. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The following tables set forth our financial assets that were accounted for at fair value on a recurring basis. There were no fair value measurements of our financial assets using level 3 inputs for the periods presented:

			Fair Value at July 31, 2020 Using
	Total		Level 1		Level 2
	(Amounts in thousands)
Assets:
Cash equivalents	$	1,432	$	—	$	1,432
Marketable securities:
U.S. Treasury Notes and bonds		1,887		1,887		—
Corporate bonds		254		—		254
Total	$	3,573	$	1,887	$	1,686

			Fair Value at January 31, 2020 Using
	Total		Level 1		Level 2
	(Amounts in thousands)
Assets:
Cash equivalents	$	1,408	$	1,408	$	—
Marketable securities:
U.S. Treasury Notes and bonds		3,360		3,360		—
Corporate bonds		1,257		—		1,257
Total	$	6,025	$	4,768	$	1,257

Cash equivalents include money market funds and U.S. treasury bills.

Marketable securities by security type consisted of the following:

	As of July 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Amounts in thousands)
U.S. Treasury Notes and bonds	$	1,841	$	46	$	—	$	1,887
Corporate bonds		251		3		—		254
	$	2,092	$	49	$	—	$	2,141

	As of January 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Amounts in thousands)
U.S. Treasury Notes and bonds	$	3,310	$	50	$	—	$	3,360
Corporate Bonds		1,254		3		—		1,257
	$	4,564	$	53	$	—	$	4,617

As of July 31, 2020, marketable securities consisted of investments that mature within one year.

XML

Consolidated Balance Sheet Detail

6 Months Ended

Jul. 31, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Consolidated Balance Sheet Detail

4. Consolidated Balance Sheet Detail

Property and equipment, net

Property and equipment, net consists of the following:

	As of
	July 31, 2020			January 31, 2020
	(Amounts in thousands)
Computer equipment, software and demonstration equipment	$	9,748		$	9,695
Service and spare components		—			1,158
Office furniture and equipment		307			170
Leasehold improvements		206			154
		10,261			11,177
Less:  Accumulated depreciation and amortization		(9,625	)		(10,623	)
Total property and equipment, net	$	636		$	554

Accrued expenses

Accrued expenses consist of the following:

	As of
	July 31, 2020		January 31, 2020
	(Amounts in thousands)
Accrued employee compensation and benefits	$	2,634	$	3,236
Accrued professional fees		328		928
Sales tax and VAT payable		438		317
Accrued restructuring		4		744
Current obligation - right of use operating leases		1,295		722
Accrued third party hardware costs		—		1,169
Accrued other		957		870
Total accrued expenses	$	5,656	$	7,986

XML

Goodwill and Intangible Assets

6 Months Ended

Jul. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

5. Goodwill and Intangible Assets

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 if we identify certain events or circumstances that would more likely than not reduce the estimated fair value of the goodwill below its carrying amount. The following table represents the changes in goodwill since January 31, 2020:

	Goodwill
	(Amounts in thousands)
Balance as of January 31, 2020	$	9,775
Translation adjustment		666
Balance as of July 31, 2020	$	10,441

Intangible assets, net, consisted of the following at July 31, 2020:

	As of July 31, 2020
	Gross		Accumulated Amortization		Cumulative Translation Adjustment		Net
	(Amounts in thousands)
Finite-lived intangible assets:
Acquired customer contracts	$	2,205	$	1,084	$	32	$	1,153
Acquired existing technology		1,364		672		23		715
Total finite-lived intangible assets	$	3,569	$	1,756	$	55	$	1,868

We recognized amortization expense of intangible assets in operating expense categories on the consolidated statement of operations and comprehensive loss as follows:

	For the Three Months Ended July 31,					For the Six Months Ended July 31,
	2020			2019		2020		2019
	(Amounts in thousands)					(Amounts in thousands)
Selling and marketing	$	366		$	185	$	366	$	370
Research and development		(67	)		115		217		228
	$	299		$	300	$	583	$	598

Future estimated amortization expense of acquired intangibles as of July 31, 2020 is as follows:

For the Fiscal Years Ended January 31,	Estimated Amortization Expense
	(Amounts in thousands)
2021	$	623
2022		1,245
Total	$	1,868

XML

Commitments and Contingencies

6 Months Ended

Jul. 31, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

6. Commitments and Contingencies

Litigation

Certain conditions may exist as of the date the consolidated financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us, or unasserted claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our consolidated financial statements. If our assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed.

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 our historical 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 receive revenue for extended warranties beyond the standard duration, it is deferred and recognized on a straight-line basis over the contract period. Related costs are expensed as incurred.

XML

Operating Leases

6 Months Ended

Jul. 31, 2020

Leases [Abstract]

Operating Leases

7. Operating Leases

The Company has noncancelable operating leases for facilities and equipment expiring at various dates through 2025 and thereafter.  

The components of lease expense are as follows:

	Three Months Ended July 31, 2020		Six Months Ended July 31, 2020
	(Amounts in thousands)
Operating lease cost	$	306	$	628
Short term lease cost		9		40
Total lease cost	$	315	$	668

Supplemental cash flow information related to the Company’s operating leases was as follows:

	Three Months Ended July 31, 2020		Six Months Ended July 31, 2020
	(Amounts in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	244	$	566

Supplemental balance sheet information related to the Company's operating leases was as follows:

	July 31, 2020			January 31, 2020
	(Amounts in thousands)
Operating lease right-of-use assets	$	5,505		$	4,860
Current portion, operating lease liabilities		1,295			722
Operating lease liabilities, long term		4,607			4,348
Total operating lease liabilities	$	5,902		$	5,070
Weighted average remaining lease term (years)		4.5
Weighted average incremental borrowing rate		5.0	%

The current portion, operating lease liabilities is included in the balance of accrued expenses at July 31, 2020. Rent payments for continuing operations were approximately $0.3 million for the three months ended July 31, 2020 and $0.7 million for the six months ended July 31, 2020. Future minimum lease payments for operating leases, with initial or remaining terms in excess of one year at July 31, 2020, are as follows:

	Payments for Operating Leases
For the fiscal years ended January 31,	(Amounts in thousands)
2021	$	552
2022		1,213
2023		1,337
2024		1,373
2025		1,413
Thereafter		59
Total lease payments		5,947
Less interest		45
Total operating lease liabilities	$	5,902

XML

Severance and Restructuring Costs

6 Months Ended

Jul. 31, 2020

Restructuring And Related Activities [Abstract]

Severance and Restructuring Costs

8. Severance and Restructuring Costs

During the three and six months ended July 31, 2020, we incurred severance and restructuring costs of $0.5 million and $1 million, respectively, primarily for employee-related termination benefits driven by the COVID-19 pandemic and the transfer of our technical support operations to our Poland location. In fiscal 2020, we continued to streamline our operations and closed our service organizations in Ireland and the Netherlands.

The following table shows the change in accrued restructuring balances since January 31, 2020 primarily related to our fiscal 2020 restructuring efforts, reported as a component of accrued expenses on the consolidated balance sheets:

	Employee- Related Benefits
	(Amounts in thousands)
Accrued balance as of January 31, 2020	$	744
Restructuring charges incurred		6
Cash payments		(737	)
Other charges		(9	)
Accrued balance as of July 31, 2020		4

XML

Stock-Based Compensation Expense

6 Months Ended

Jul. 31, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation Expense

9. Stock-Based Compensation Expense

Equity Plans

2011 Compensation and Incentive Plan

Our 2011 Compensation and Incentive 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”), performance stock units (“PSUs”) and other equity based non-stock option awards as determined by the plan administrator to our officers, employees, consultants and directors. 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. The number of shares authorized for issuance under the 2011 Plan is 9,300,000. Additionally, outstanding awards under the 2005 Equity Compensation and Incentive Plan that, since adoption of the 2011 Plan, expire, terminate, or are surrendered or canceled without having been fully exercised are available for issuance under the 2011 Plan. As of July 31, 2020, there were 2,188,287 shares available for future grant.      

Nonemployee members of the Board of Directors may elect to receive DSUs or stock options in lieu of RSUs. 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.

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. Option awards granted under the 2011 Plan generally vest over a period of one to three years and expire ten years from the date of the grant.

We have a Long-Term Incentive Program, adopted in fiscal 2016, under which the named executive officers and other of our key employees may receive long-term equity-based incentive awards, which are intended to align the interests of our named executive officers and other key employees 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 PSUs subject to vesting based in part on the extent to which employment continues. 

2015 Employee Stock Purchase Plan

Under our 2015 Employee Stock Purchase Plan (the “ESPP), six-month offering periods begin on October 1 and April 1 of each year during which eligible employees may elect to purchase shares of our common stock according to the terms of the offering.  On each purchase date, eligible employees can 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 authorized for sale under the ESPP is 1,150,000 shares, of which 1,075,024 remain available under the ESPP as of July 31, 2020. Under the ESPP, 5,702 and 7,819 shares were purchased during the first three months of fiscal 2021 and fiscal 2020, respectively. The Company has suspended the ESPP as of April 1, 2020 and is still evaluating when suspension will be lifted, if at all.

Award Activity

There were no awards in the first quarter of fiscal 2021. In the second quarter of fiscal 2021, we granted 300,998 option awards, which include PSU options, and 607,807 RSU awards, which include DSUs and PSUs, with a combined fair value totaling $1.5 million. In the first quarter of fiscal 2021, we canceled 114,260 option awards and 98,841 RSU awards. In the second quarter of fiscal 2021, we canceled 184,999 option awards and 49,998 RSU awards.

Stock-Based Compensation

We recognized stock-based compensation expense within the accompanying consolidated statements of operations and comprehensive loss as follows:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2020		2019		2020			2019
	(Amounts in thousands)				(Amounts in thousands)
Cost of revenue	$	—	$	22	$	(8	)	$	19
Research and development		68		82		135			150
Sales and marketing		55		77		95			(9	)
General and administrative		137		450		395			37
	$	260	$	631	$	617		$	197

As of July 31, 2020, unrecognized stock-based compensation expense related to unvested stock options was approximately $1.4 million, which is expected to be recognized over a weighted average period of 1.8 years. As of July 31, 2020, unrecognized stock-based compensation expense related to unvested RSUs and DSUs was $1.2 million, which is expected to be recognized over a weighted average amortization period of 1.5 years. Additionally, as of July 31, 2020, unrecognized stock-based compensation expenses related to unvested PSUs was approximately $0.2 million, which is expected to be recognized over a weighted average amortization period of 1.6 years.

XML

Revenues from Contracts with Customers

6 Months Ended

Jul. 31, 2020

Revenue From Contract With Customer [Abstract]

Revenues from Contracts with Customers

10. Revenues from Contracts with Customers

Disaggregated Revenue

The following table shows our revenue disaggregated by revenue stream for the three months ended July 30, 2020 and 2019:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2020		2019		2020		2019
	(Amounts in thousands)				(Amounts in thousands)
Product	$	1,066	$	11,968	$	4,164	$	13,147
Professional services		360		1,845		624		3,926
Maintenance		3,569		4,999		7,122		10,224
Total revenue	$	4,995	$	18,812	$	11,910	$	27,297

Transaction Price Allocated to Future Performance Obligations

The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as of July 31, 2020 is $26.7 million. This amount includes amounts billed for undelivered services that are included in deferred revenue.

XML

Segment Information and Geographic Information

6 Months Ended

Jul. 31, 2020

Segment Reporting [Abstract]

Segment Information and Geographic Information

11. Segment Information and Geographic Information

We have determined that we operate in one segment.

Geographic Information

The following summarizes revenue by customers’ geographic locations:

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2020		%	2019		%	2020		%	2019		%
	(Amounts in thousands, except percentages)						(Amounts in thousands, except percentages)
Revenue by customers' geographic locations:
North America (1)	$	2,318	46%	$	11,567	62%	$	5,896	50%	$	15,656	57%
Europe and Middle East		2,150	43%		2,724	14%		4,132	35%		5,694	21%
Latin America		343	7%		4,132	22%		1,476	12%		5,179	19%
Asia Pacific		184	4%		389	2%		406	3%		768	3%
Total revenue	$	4,995		$	18,812		$	11,910		$	27,297

(1) Includes total revenue for the United States for the periods shown as follows: 

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2020			2019			2020			2019
	(Amounts in thousands, except percentages)						(Amounts in thousands, except percentages)
US Revenue	$	1,662		$	9,666		$	4,005		$	13,064
% of total revenue		33	%		51	%		34	%		48	%

The following summarizes long-lived assets by geographic locations:

	As of July 31, 2020		%	As of January 31, 2020		%
	(Amounts in thousands, except percentages)
Long-lived assets by geographic locations (1):
North America	$	12,549	70%	$	13,293	75%
Europe and Middle East		5,293	30%		4,359	25%
Asia Pacific		31	0%		31	0%
Total long-lived assets by geographic location	$	17,873		$	17,683

(1) Excludes long-term marketable securities and goodwill.

XML

Income Taxes

6 Months Ended

Jul. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

Each interim period is considered an integral part of the annual period and, accordingly, we measure our income tax expense using an estimated annual effective tax rate.  A company is required, at the end of each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period.

We recorded an income tax benefit of less than $0.1 million and $0.6 million for the three months ended July 31, 2020 and July 31, 2019, respectively. We recorded an income tax benefit of $0.1 million and $0.2 million for the six months ended July 31, 2020 and July 31, 2019, respectively. The tax provision for the six months ended July 31, 2020 includes a $0.2 million tax benefit related to the reversal of tax reserves for uncertain tax positions due to the expiration of the Polish statute of limitations. Our effective tax rate in fiscal 2021 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.

We review 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, 2020, due to the uncertainty related to the ultimate use of certain deferred income tax assets, we have recorded a valuation allowance on certain 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 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.

On March 4, 2019, our Board of Directors approved and adopted a Tax Benefits Preservation Plan to potentially limit our ability to use net operating loss carryforwards and certain other tax attributes (“NOLs”) to reduce our potential future federal income tax obligations.  In connection with the Tax Benefits Preservation Plan, we declared a dividend of one preferred share purchase right for each share of our common stock issued and outstanding as of March 15, 2019 to our stockholders of record on that date. The Tax Benefits Preservation Plan expires no later than March 4, 2022, and was approved by our stockholders at our 2019 annual meeting of stockholders on July 11, 2019.

In response to the COVID-19 pandemic, the CARES Act was signed into law in March 2020. The CARES Act includes several provisions that provide economic relief for individuals and businesses. The Company does not expect the CARES Act to result in a material impact on our income taxes. 

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jul. 31, 2020

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). We consolidate the financial statements of our wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a normal recurring nature which were considered necessary for a fair presentation have been included. The year-end consolidated balance sheet data as of January 31, 2020 was derived from our audited consolidated financial statements and may not include all disclosures required by U.S. GAAP. The results of operations for the three and six months ended July 31, 2020 are not necessarily indicative of the results to be expected for the entire year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the SEC on April 20, 2020.

Use of Estimates

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.  Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, those related to revenue recognition, allowance for doubtful accounts, goodwill and intangible assets, right-of-use operating leases, impairment of long-lived assets, accounting for income taxes, the valuation of stock-based awards, and ongoing legal matters.  We base our estimates on historical experience, known trends and other market-specific or relevant factors that are believed to be reasonable under the circumstances.  On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known.  Actual results may differ from those estimates or assumptions.

Business Combinations

Business Combinations

We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations. We allocate the purchase price of the acquisition to the tangible assets acquired, liabilities assumed, and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition-related expenses and restructuring costs are expensed as incurred. During the measurement period, we record adjustments to provisional amounts recorded for assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could be up to one year after the transaction date, subsequent adjustments are recorded to the Company’s consolidated statements of operations.

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents and restricted cash

Cash and cash equivalents include cash on hand and on deposit and 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 the date of purchase of 90 days or less. All cash equivalents are carried at cost, which approximates fair value. Restricted cash represents cash that is restricted as to withdrawal or usage and consists primarily of cash held as collateral in relation to obligations set forth by the landlord of our Poland facility.

The following table provides a summary of cash, cash equivalents and restricted cash that constitutes the total amounts shown in the consolidated statements of cash flows as of July 31, 2020 and 2019:

	As of July 31,
	2020		2019
	(Amounts in thousands)
Cash and cash equivalents	$	7,427	$	9,202
Restricted cash		228		—
Total cash, cash equivalents and restricted cash	$	7,655	$	9,202

Concentration of Credit Risk and of Significant Customers

Concentration of Credit Risk and of Significant Customers

Financial instruments which potentially expose us to concentrations of credit risk include cash, cash equivalents and restricted cash, marketable securities and accounts receivable. We have cash investment policies which, among other things, limit investments to investment-grade securities. We restrict our cash equivalents and marketable securities to repurchase agreements with major banks and U.S. government and corporate securities which are subject to minimal credit and market risk. We perform ongoing credit evaluations of our customers.

We sell our software products and services worldwide primarily to service providers consisting of operators, telecommunications companies, satellite operators and broadcasters. Two customers accounted for 22% and 11% of total revenue in the second quarter of fiscal 2021 and two customers accounted for 20% and 10% of total revenue in the second quarter of fiscal 2020. One customer accounted for 18% of total revenue in the first six months of fiscal 2021 and one customer accounted for 14% of total revenue in the first six months of fiscal 2020. Two customers accounted for 29% and 17% of the accounts receivable balance as of July 31, 2020. Two customers accounted for 16% and 10% of the accounts receivable balance as of January 31, 2020.

Marketable Securities

Marketable Securities

Our investments in debt securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of other expense, net in the consolidated statements of operations and comprehensive loss.

We evaluate our investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, we consider such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, our ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that we consider to be “other than temporary,” we reduce the investment to fair value through a charge to the consolidated statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Fair Value Measurements

Fair Value Measurements

Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Our cash equivalents and marketable securities are carried at fair value determined according to the fair value hierarchy described above. The carrying values of our accounts and other receivables, unbilled receivables, accounts payable, accrued expenses, and the Note approximate their fair values due to the short-term nature of these assets and liabilities.

Goodwill and Acquired Intangible Assets

Goodwill and Acquired Intangible Assets

We record goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. Our estimates of fair value are based upon assumptions believed to be reasonable at that time but that are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results.  Goodwill is not amortized, but rather is tested for impairment annually on August 1^st of each year, or more frequently if facts and circumstances warrant a review, such as the ones mentioned in impairments of long-lived assets below. We have determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment. We assess both the existence of potential impairment and the amount of impairment loss by comparing the fair value of the reporting unit with its carrying amount, including goodwill. The Company tested for goodwill impairment as of July 31, 2020 in consideration of the COVID-19 pandemic and determined there was no impairment. Through July 31, 2020, we have recorded accumulated goodwill impairment charges of $54.8 million.

Intangible assets are recorded at their estimated fair values at the date of acquisition. We amortize acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets primarily consist of property, plant and equipment and intangible assets with finite lives. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount to the estimated future undiscounted cash flows. If estimated future undiscounted net cash flows are less than the carrying amount, the asset is considered impaired and expense is recorded at an amount required to reduce the carrying amount to fair value. Determining the fair value of long-lived assets includes significant judgment by management and different judgments could yield different results.

We assess the useful lives and possible impairment of existing recognized long-lived assets whenever events or changes in circumstances occur that indicate that it is more likely than not that an impairment has occurred. We test long-lived assets for impairment by comparing the carrying amount to the sum of the net undiscounted cash flows expected to be generated by the asset whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds its net undiscounted cash flows, then an impairment loss is recognized for the amount by which the carrying amount exceeds its fair value. We use a discounted cash flow approach or other methods, if appropriate, to assess fair value. Factors considered important which could trigger a review include:

• significant underperformance relative to historical or projected future operating results;

• significant changes in the manner of use of the acquired assets or the strategy for our overall business;

• identification of other impaired assets within a reporting unit;

• significant negative industry or economic trends;

• a significant decline in our stock price for a sustained period; and

• a decline in our market capitalization relative to net book value.

Determining whether a triggering event has occurred involves significant judgment. (see Note 5).

Revenue Recognition

Revenue Recognition

Our revenue is derived from sales of software licenses and associated hardware and support services, including professional services and maintenance fees related to our software licenses.

Our contracts, including contracts for our end-to-end software delivery platform solution (the “Framework”), often contain multiple performance obligations. For contracts with multiple performance obligations, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis when available or expected cost plus margin or residual approach. If the transaction price contains discounts or we expect to provide future price concessions, these elements are considered when determining the transaction price prior to allocation. Variable fees within the transaction price are estimated and recognized as revenue when we satisfy our performance obligations to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. If the contract grants the client the option to acquire additional products or services, we assess whether or not any discount on the products and services is in excess of levels normally available to similar clients and, if so, we account for that discount as an additional performance obligation.

Framework

We have concluded that the Framework has multiple performance obligations. The selling price of the Framework is highly variable as a result of our value-based engagement where pricing for our customers is based on the operating expense savings that we enable using the Framework engagement.

Framework Software Licenses

We have concluded that a Framework software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support. As a result of the highly variable selling price, revenue recognition and consideration related to the Framework software license is allocated under the residual method.

Framework Hardware

We have concluded that Framework hardware, when included in a Framework contract, is a distinct performance obligation as the client can benefit from the product. Framework hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Framework Support Services

We have concluded that Framework support services is a distinct performance obligation. Framework support services is included in services revenue in our consolidated statements of operations and comprehensive loss.  Support services includes software upgrades on a when-and-if available basis, support, bug fixes or patches and general maintenance support.  Framework support services is not sold on a standalone basis. The standalone selling price is determined using a cost-plus approach, and revenue is recognized ratably over the passage of the contractual term.

Legacy Software Licenses

We have concluded that a software license is a distinct performance obligation as the client can benefit from the software on its own. Software license revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the client, which is defined as the point in time when the client can use and benefit from the license. The software license is delivered before related services are provided and is functional without services, updates, and technical support.

Legacy Hardware

We have concluded that hardware is a distinct performance obligation as the client can benefit from the product on its own. Hardware revenue is included in product revenue in our consolidated statement of operations and comprehensive loss and is typically recognized when control is transferred to the customer, which is defined as the point in time when the client can use and benefit from the hardware. In situations where the hardware is distinct and it is delivered before services are provided and is functional without services, control is transferred upon delivery or acceptance by the customer.

Legacy Maintenance

Historically, maintenance revenue, which is included in services revenue in our consolidated statements of operations and comprehensive loss, includes revenue from client support and related professional services. Client support includes software upgrades on a when-and-if available basis, telephone support, bug fixes or patches and general hardware maintenance support. Maintenance is priced as a percentage of the list price of the related software license and hardware. Historically, we determined the standalone selling price of maintenance based on this pricing relationship and observable data from standalone sales of maintenance.

We have identified three separate distinct performance obligations of maintenance:

• Software upgrades and updates;

• Technical support; and

• Hardware support.

These performance obligations are distinct within the contract and, although they are not sold separately, the components are not essential to the functionality of the other components. Each of the performance obligations included in maintenance revenue is a stand ready obligation that is recognized ratably over the passage of the contractual term for products sold on a standalone basis.  

Legacy Services

Historically, our services revenue, excluding maintenance revenue, is comprised of software license implementation services, engineering services, training and reimbursable expenses. We have concluded that services are distinct performance obligations, with the exception of engineering services. Engineering services may be provided on a standalone basis or bundled with a license when we are providing custom development.

The standalone selling price for services in time and materials contracts is determined by observable prices in standalone services arrangements and recognized as revenue as the services are performed based on an input measure of hours incurred to total estimated hours.

We estimate the standalone selling price for fixed price services based on estimated hours adjusted for historical experience at time and material rates charged in standalone services arrangements. Revenue for fixed price services is recognized over time as the services are provided based on an input measure of hours incurred to total estimated hours.

Contract Modifications

We occasionally enter into amendments to previously executed contracts that constitute contract modifications. We assess each of these contract modifications to determine:

• If the additional products and services are distinct from the product and services in the original arrangement; and

• If the amount of consideration expected for the added products and services reflects the standalone selling price of those products and services.

A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract or a cumulative catch-up basis.

Significant Judgments

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, we determine the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in the contract based on a relative standalone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

Judgment is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price, taking into account available information such as market conditions, and internally approved pricing guidelines related to the performance obligations. In instances where stand-alone selling price is not directly observable, such as when we do not sell the product or service separately, we determine the stand-alone selling price based on a cost-plus model as market and other observable inputs are seldom present based on the proprietary nature of our products and services.

Our contracts do not generally include a variable component to the transaction price. With certain statements of work, we explicitly state that we are to be reimbursed for reasonable travel and entertainment expenses incurred as part of the delivery of professional services. In the cases when we are entitled to collect all travel and entertainment expenses incurred, an estimate of the fulfillment costs is made at the onset of the contract in order to determine the transaction price. The revenue associated with travel and entertainment expenses is then recognized over time along with the professional services.

Some of our contracts have payment terms that differ from the timing of revenue recognition, which requires us to assess whether the transaction price for those contracts include a significant financing component. We have elected the practical expedient that permits an entity to not adjust for the effects of a significant financing component if we expect that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service, will be one year or less. For those contracts in which the period exceeds the one-year threshold, this assessment, as well as the quantitative estimate of the financing component and its relative significance, requires judgment. We estimate the significant financing component provided to our customers with extended payment terms by determining the present value of the future payments by applying a discount rate that reflects the customer’s creditworthiness.

Contract Balances

Contract assets consist of unbilled revenue, which is recognized as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones.  Unbilled receivables expected to be billed and collected within one year are classified as current assets or long-term assets if expected to be billed and collected after one year. Contract liabilities consist of deferred revenue and customer deposits that arise when amounts are billed to or collected from customers in advance of revenue recognition.

Costs to Obtain and Fulfill a Contract

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that commissions and special incentive payments (“Spiffs”) for hardware and software maintenance and support and professional services paid under our sales incentive programs meet the requirements to be capitalized under Accounting Standards Codification (“ASC”) 340-40. Costs to obtain a contract are amortized as selling and marketing expense over the expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period. The commissions and Spiffs related to professional services are amortized over time as work is completed. The commissions and Spiffs for hardware and software maintenance are amortized over the life of the contract. These costs are periodically reviewed for impairment. We determined that no impairment of these assets existed as of July 31, 2020 or January 31, 2020. We have elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. Total deferred capitalized commission costs were $862 thousand as of July 31, 2020 compared to $958 thousand as of January 31, 2020. Current deferred capitalized commission costs are included in prepaid expense and other current assets in our consolidated balance sheets and non-current deferred capitalized commission costs are included in other assets in our consolidated balance sheets. Capitalized commissions expensed during the six months ended July 31, 2020 and 2019 included in the consolidated statement of operations and comprehensive loss were $218 thousand and $59 thousand, respectively.

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs include direct labor for support services, software enhancements, reimbursable expenses and professional services for customized software development costs. The revenue associated with the support services, software enhancements and reimbursable expenses is recognized ratably over time; therefore, the associated costs are expensed as incurred. The professional services associated with the customized software are not recognized until completion. As such, the professional services costs are capitalized and recognized upon completion of the services.

Leases

Leases

We account for our leases in accordance with ASC 842, Leases. A contract is accounted for as a lease when we have the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, we determine the initial classification and measurement of our right-of-use operating lease asset and corresponding liability at the lease commencement date. We determine the classification and measurement of a modified lease at the date it is modified. The lease term includes only renewal options that are reasonably assured to exercise. The present value of lease payments is typically determined by using the Company’s estimated secured incremental borrowing rate for the associated lease term as interest rates implicit in the leases are not normally readily determinable. Management’s policy is to utilize the practical expedient to not record leases with an original term of twelve months or less on our consolidated balance sheets. Lease payments are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.

Our existing leases are for facilities and equipment. None of our leases are with related parties. In addition to rent, office leases may require us to pay additional amounts for taxes, insurance, maintenance and other expenses, which are generally referred to as non-lease components. As a practical expedient, we account for the non-lease components together with the lease components as a single lease component for all of our leases. Only the fixed costs for leases are accounted for as a single lease component and recognized as part of a right-of-use asset and liability.

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of unrestricted common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of unrestricted common shares outstanding during the period and the weighted average number of potential common shares from the assumed exercise of stock options and the vesting of shares of restricted and deferred common stock units using the “treasury stock” method when the effect is not anti-dilutive. In periods in which we report a net loss, diluted net loss per share is the same as basic net loss per share.

The number of common shares used in the computation of diluted net loss per share for the periods presented does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2020		2019		2020		2019
	(Amounts in thousands)
Stock options		2,314		2,596		967		2,764
Restricted stock units		65		128		58		219
Deferred stock units		82		254		82		229
Performance stock units		—		120		—		111
		2,461		3,098		1,107		3,323

Recently Issued Accounting Pronouncement

Recently Issued Accounting Pronouncement

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326) (“ASU 2016-13”), which introduces a new methodology for accounting for credit losses on financial instruments, including available-for-sale debt securities and accounts receivable. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. ASU 2016-13 is effective in the first quarter of our fiscal 2024. We are currently evaluating if this guidance will have a material effect to our consolidated financial statements.

XML

Significant Accounting Policies (Tables)

6 Months Ended

Jul. 31, 2020

Accounting Policies [Abstract]

Summary of Cash, Cash Equivalents, and Restricted Cash

The following table provides a summary of cash, cash equivalents and restricted cash that constitutes the total amounts shown in the consolidated statements of cash flows as of July 31, 2020 and 2019:

	As of July 31,
	2020		2019
	(Amounts in thousands)
Cash and cash equivalents	$	7,427	$	9,202
Restricted cash		228		—
Total cash, cash equivalents and restricted cash	$	7,655	$	9,202

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

The number of common shares used in the computation of diluted net loss per share for the periods presented does not include the effect of the following potentially outstanding common shares because the effect would have been anti-dilutive:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2020		2019		2020		2019
	(Amounts in thousands)
Stock options		2,314		2,596		967		2,764
Restricted stock units		65		128		58		219
Deferred stock units		82		254		82		229
Performance stock units		—		120		—		111
		2,461		3,098		1,107		3,323

XML

Fair Value Measurements (Tables)

6 Months Ended

Jul. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets Measured on Recurring Basis

The following tables set forth our financial assets that were accounted for at fair value on a recurring basis. There were no fair value measurements of our financial assets using level 3 inputs for the periods presented:

			Fair Value at July 31, 2020 Using
	Total		Level 1		Level 2
	(Amounts in thousands)
Assets:
Cash equivalents	$	1,432	$	—	$	1,432
Marketable securities:
U.S. Treasury Notes and bonds		1,887		1,887		—
Corporate bonds		254		—		254
Total	$	3,573	$	1,887	$	1,686

			Fair Value at January 31, 2020 Using
	Total		Level 1		Level 2
	(Amounts in thousands)
Assets:
Cash equivalents	$	1,408	$	1,408	$	—
Marketable securities:
U.S. Treasury Notes and bonds		3,360		3,360		—
Corporate bonds		1,257		—		1,257
Total	$	6,025	$	4,768	$	1,257

Summary of Marketable Securities by Security Type

Marketable securities by security type consisted of the following:

	As of July 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Amounts in thousands)
U.S. Treasury Notes and bonds	$	1,841	$	46	$	—	$	1,887
Corporate bonds		251		3		—		254
	$	2,092	$	49	$	—	$	2,141

	As of January 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Amounts in thousands)
U.S. Treasury Notes and bonds	$	3,310	$	50	$	—	$	3,360
Corporate Bonds		1,254		3		—		1,257
	$	4,564	$	53	$	—	$	4,617

XML

Consolidated Balance Sheet Detail (Tables)

6 Months Ended

Jul. 31, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Property and Equipment, Net

Property and equipment, net consists of the following:

	As of
	July 31, 2020			January 31, 2020
	(Amounts in thousands)
Computer equipment, software and demonstration equipment	$	9,748		$	9,695
Service and spare components		—			1,158
Office furniture and equipment		307			170
Leasehold improvements		206			154
		10,261			11,177
Less:  Accumulated depreciation and amortization		(9,625	)		(10,623	)
Total property and equipment, net	$	636		$	554

Accrued Expenses

Accrued expenses consist of the following:

	As of
	July 31, 2020		January 31, 2020
	(Amounts in thousands)
Accrued employee compensation and benefits	$	2,634	$	3,236
Accrued professional fees		328		928
Sales tax and VAT payable		438		317
Accrued restructuring		4		744
Current obligation - right of use operating leases		1,295		722
Accrued third party hardware costs		—		1,169
Accrued other		957		870
Total accrued expenses	$	5,656	$	7,986

XML

Goodwill and Intangible Assets (Tables)

6 Months Ended

Jul. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Change in Carrying Amount of Goodwill

The following table represents the changes in goodwill since January 31, 2020:

	Goodwill
	(Amounts in thousands)
Balance as of January 31, 2020	$	9,775
Translation adjustment		666
Balance as of July 31, 2020	$	10,441

Schedule of Intangible Assets

Intangible assets, net, consisted of the following at July 31, 2020:

	As of July 31, 2020
	Gross		Accumulated Amortization		Cumulative Translation Adjustment		Net
	(Amounts in thousands)
Finite-lived intangible assets:
Acquired customer contracts	$	2,205	$	1,084	$	32	$	1,153
Acquired existing technology		1,364		672		23		715
Total finite-lived intangible assets	$	3,569	$	1,756	$	55	$	1,868

Schedule of Finite-Life Intangible Assets, Amortization Expense

We recognized amortization expense of intangible assets in operating expense categories on the consolidated statement of operations and comprehensive loss as follows:

	For the Three Months Ended July 31,					For the Six Months Ended July 31,
	2020			2019		2020		2019
	(Amounts in thousands)					(Amounts in thousands)
Selling and marketing	$	366		$	185	$	366	$	370
Research and development		(67	)		115		217		228
	$	299		$	300	$	583	$	598

Schedule of Future Estimated Amortization Expense of Acquired Intangibles

Future estimated amortization expense of acquired intangibles as of July 31, 2020 is as follows:

For the Fiscal Years Ended January 31,	Estimated Amortization Expense
	(Amounts in thousands)
2021	$	623
2022		1,245
Total	$	1,868

XML

Operating Leases (Tables)

6 Months Ended

Jul. 31, 2020

Leases [Abstract]

Schedule of Components of Lease Expense

The components of lease expense are as follows:

	Three Months Ended July 31, 2020		Six Months Ended July 31, 2020
	(Amounts in thousands)
Operating lease cost	$	306	$	628
Short term lease cost		9		40
Total lease cost	$	315	$	668

Schedule of Supplemental Cash Flow Information Related to Operating Leases

Supplemental cash flow information related to the Company’s operating leases was as follows:

	Three Months Ended July 31, 2020		Six Months Ended July 31, 2020
	(Amounts in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	244	$	566

Schedule of Supplemental Balance Sheet Information Related to Operating Leases

Supplemental balance sheet information related to the Company's operating leases was as follows:

	July 31, 2020			January 31, 2020
	(Amounts in thousands)
Operating lease right-of-use assets	$	5,505		$	4,860
Current portion, operating lease liabilities		1,295			722
Operating lease liabilities, long term		4,607			4,348
Total operating lease liabilities	$	5,902		$	5,070
Weighted average remaining lease term (years)		4.5
Weighted average incremental borrowing rate		5.0	%

Schedule of Future Minimum Lease Payments for Operating Leases

Future minimum lease payments for operating leases, with initial or remaining terms in excess of one year at July 31, 2020, are as follows:

	Payments for Operating Leases
For the fiscal years ended January 31,	(Amounts in thousands)
2021	$	552
2022		1,213
2023		1,337
2024		1,373
2025		1,413
Thereafter		59
Total lease payments		5,947
Less interest		45
Total operating lease liabilities	$	5,902

XML

Severance and Restructuring Costs (Tables)

6 Months Ended

Jul. 31, 2020

Restructuring And Related Activities [Abstract]

Activity in Accrued Restructuring Liability

The following table shows the change in accrued restructuring balances since January 31, 2020 primarily related to our fiscal 2020 restructuring efforts, reported as a component of accrued expenses on the consolidated balance sheets:

	Employee- Related Benefits
	(Amounts in thousands)
Accrued balance as of January 31, 2020	$	744
Restructuring charges incurred		6
Cash payments		(737	)
Other charges		(9	)
Accrued balance as of July 31, 2020		4

XML

Stock-Based Compensation Expense (Tables)

6 Months Ended

Jul. 31, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Based Compensation Expense Recognized

We recognized stock-based compensation expense within the accompanying consolidated statements of operations and comprehensive loss as follows:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2020		2019		2020			2019
	(Amounts in thousands)				(Amounts in thousands)
Cost of revenue	$	—	$	22	$	(8	)	$	19
Research and development		68		82		135			150
Sales and marketing		55		77		95			(9	)
General and administrative		137		450		395			37
	$	260	$	631	$	617		$	197

XML

Revenues from Contracts with Customers (Tables)

6 Months Ended

Jul. 31, 2020

Revenue From Contract With Customer [Abstract]

Schedule of Revenue Disaggregated by Revenue Stream

The following table shows our revenue disaggregated by revenue stream for the three months ended July 30, 2020 and 2019:

	For the Three Months Ended July 31,				For the Six Months Ended July 31,
	2020		2019		2020		2019
	(Amounts in thousands)				(Amounts in thousands)
Product	$	1,066	$	11,968	$	4,164	$	13,147
Professional services		360		1,845		624		3,926
Maintenance		3,569		4,999		7,122		10,224
Total revenue	$	4,995	$	18,812	$	11,910	$	27,297

XML

Segment Information and Geographic Information (Tables)

6 Months Ended

Jul. 31, 2020

Segment Reporting [Abstract]

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

The following summarizes revenue by customers’ geographic locations:

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2020		%	2019		%	2020		%	2019		%
	(Amounts in thousands, except percentages)						(Amounts in thousands, except percentages)
Revenue by customers' geographic locations:
North America (1)	$	2,318	46%	$	11,567	62%	$	5,896	50%	$	15,656	57%
Europe and Middle East		2,150	43%		2,724	14%		4,132	35%		5,694	21%
Latin America		343	7%		4,132	22%		1,476	12%		5,179	19%
Asia Pacific		184	4%		389	2%		406	3%		768	3%
Total revenue	$	4,995		$	18,812		$	11,910		$	27,297

(1) Includes total revenue for the United States for the periods shown as follows: 

	For the Three Months Ended July 31,						For the Six Months Ended July 31,
	2020			2019			2020			2019
	(Amounts in thousands, except percentages)						(Amounts in thousands, except percentages)
US Revenue	$	1,662		$	9,666		$	4,005		$	13,064
% of total revenue		33	%		51	%		34	%		48	%

Long-Lived Assets by Geographic Locations

The following summarizes long-lived assets by geographic locations:

	As of July 31, 2020		%	As of January 31, 2020		%
	(Amounts in thousands, except percentages)
Long-lived assets by geographic locations (1):
North America	$	12,549	70%	$	13,293	75%
Europe and Middle East		5,293	30%		4,359	25%
Asia Pacific		31	0%		31	0%
Total long-lived assets by geographic location	$	17,873		$	17,683

(1) Excludes long-term marketable securities and goodwill.

XML

Nature of Business and Basis of Presentation - Additional Information (Detail) - Promissory Note with Silicon Valley Bank [Member] - PPP [Member] - COVID-19 [Member]	May 05, 2020 USD ($)
Significant Accounting Policies [Line Items]
Aggregate princial amout of unsecured loan	$ 2,412,890
Fixed interest rate	1.00%
Initial term	2 years
Maturity date	May 05, 2022
Payment terms, Description	Beginning on the seven-month anniversary of the date of the Note, the Company is required to make 18 monthly payments of principal and interest.
Periodic payment	18 monthly
Prepayment penalties	$ 0

XML

Significant Accounting Policies - Summary of Cash, Cash Equivalents, and Restricted Cash (Detail) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020	Jul. 31, 2019	Jan. 31, 2019
Accounting Policies [Abstract]
Cash and cash equivalents	$ 7,427		$ 9,202
Restricted cash	228
Total cash, cash equivalents and restricted cash	$ 7,655	$ 9,297	$ 9,202	$ 20,317

XML

Significant Accounting Policies - Additional Information (Detail)	3 Months Ended		6 Months Ended			12 Months Ended
	Jul. 31, 2020 USD ($) Customer	Jul. 31, 2019 Customer	Jul. 31, 2021 USD ($)	Jul. 31, 2020 USD ($) Customer	Jul. 31, 2019 USD ($) Customer	Jan. 31, 2020 USD ($) Customer
Significant Accounting Policies [Line Items]
Accumulated goodwill impairment charges			$ 54,800,000
Impairment costs				$ 0		$ 0
Deferred capitalized commission costs	$ 862,000			862,000		$ 958,000
Amortization expense				$ 218,000	$ 59,000
Maximum [Member]
Significant Accounting Policies [Line Items]
Contractual customer payment terms for goods or service.				1 year
COVID-19 [Member]
Significant Accounting Policies [Line Items]
Goodwill impairment			$ 0
Customer Concentration Risk [Member] | Total Revenue [Member]
Significant Accounting Policies [Line Items]
Number of customers accounted | Customer	2	2		1	1
Customer Concentration Risk [Member] | Total Revenue [Member] | Customer One [Member]
Significant Accounting Policies [Line Items]
Concentration risk percentage	22.00%	20.00%		18.00%	14.00%
Customer Concentration Risk [Member] | Total Revenue [Member] | Customer Two [Member]
Significant Accounting Policies [Line Items]
Concentration risk percentage	11.00%	10.00%
Credit Concentration Risk [Member] | Accounts Receivable [Member]
Significant Accounting Policies [Line Items]
Number of customers accounted | Customer				2		2
Credit Concentration Risk [Member] | Accounts Receivable [Member] | Customer One [Member]
Significant Accounting Policies [Line Items]
Concentration risk percentage				29.00%		16.00%
Credit Concentration Risk [Member] | Accounts Receivable [Member] | Customer Two [Member]
Significant Accounting Policies [Line Items]
Concentration risk percentage				17.00%		10.00%

XML

Significant Accounting Policies - Schedule of Anti-dilutive Securities Excluded from Computation of Loss Per Share (Detail) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive potentially outstanding common shares	2,461	3,098	1,107	3,323
Stock Options [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive potentially outstanding common shares	2,314	2,596	967	2,764
Restricted Stock Units [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive potentially outstanding common shares	65	128	58	219
Deferred Stock Units [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive potentially outstanding common shares	82	254	82	229
Performance Stock Units (PSUs) [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive potentially outstanding common shares		120		111

XML

Fair Value Measurements - Additional Information (Detail)	Jul. 31, 2020 USD ($)
Fair Value, Inputs, Level 3 [Member]
Fair Value Measurements Disclosure [Line Items]
Fair value measurements of our financial assets	$ 0

XML

Fair Value Measurements - Fair Value of Financial Assets Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Marketable securities:
Marketable securities	$ 2,141	$ 4,617
U.S. Treasury Notes and Bonds [Member]
Marketable securities:
Marketable securities	1,887	3,360
Corporate Bonds [Member]
Marketable securities:
Marketable securities	254	1,257
Fair Value, Measurements, Recurring [Member]
Assets:
Cash equivalents	1,432	1,408
Marketable securities:
Total	3,573	6,025
Fair Value, Measurements, Recurring [Member] | U.S. Treasury Notes and Bonds [Member]
Marketable securities:
Marketable securities	1,887	3,360
Fair Value, Measurements, Recurring [Member] | Corporate Bonds [Member]
Marketable securities:
Marketable securities	254	1,257
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Cash equivalents		1,408
Marketable securities:
Total	1,887	4,768
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | U.S. Treasury Notes and Bonds [Member]
Marketable securities:
Marketable securities	1,887	3,360
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Cash equivalents	1,432
Marketable securities:
Total	1,686	1,257
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Bonds [Member]
Marketable securities:
Marketable securities	$ 254	$ 1,257

XML

Fair Value Measurements - Summary of Marketable Securities by Security Type (Detail) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	$ 2,092	$ 4,564
Gross Unrealized Gains	49	53
Fair Value	2,141	4,617
U.S. Treasury Notes and Bonds [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	1,841	3,310
Gross Unrealized Gains	46	50
Fair Value	1,887	3,360
Corporate Bonds [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	251	1,254
Gross Unrealized Gains	3	3
Fair Value	$ 254	$ 1,257

XML

Consolidated Balance Sheet Detail - Property and Equipment, Net (Detail) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Property Plant And Equipment [Line Items]
Property and Equipment, Gross	$ 10,261	$ 11,177
Less: Accumulated depreciation and amortization	(9,625)	(10,623)
Total property and equipment, net	636	554
Computer Equipment, Software and Demonstration Equipment [Member]
Property Plant And Equipment [Line Items]
Property and Equipment, Gross	9,748	9,695
Service and Spare Components [Member]
Property Plant And Equipment [Line Items]
Property and Equipment, Gross		1,158
Office Furniture and Equipment [Member]
Property Plant And Equipment [Line Items]
Property and Equipment, Gross	307	170
Leasehold Improvements [Member]
Property Plant And Equipment [Line Items]
Property and Equipment, Gross	$ 206	$ 154

XML

Consolidated Balance Sheet Detail - Accrued Expenses (Detail) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Balance Sheet Related Disclosures [Abstract]
Accrued employee compensation and benefits	$ 2,634	$ 3,236
Accrued professional fees	328	928
Sales tax and VAT payable	438	317
Accrued restructuring	4	744
Current obligation - right of use operating leases	1,295	722
Accrued third party hardware costs		1,169
Accrued other	957	870
Total accrued expenses	$ 5,656	$ 7,986

XML

Goodwill and Intangible Assets - Schedule of Change in Carrying Amount of Goodwill (Detail) $ in Thousands	6 Months Ended
	Jul. 31, 2020 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
Goodwill, beginning balance	$ 9,775
Translation adjustment	666
Goodwill, ending balance	$ 10,441

XML

Goodwill and Intangible Assets - Schedule of Intangible Assets (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2020	Jan. 31, 2020
Finite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, Gross	$ 3,569
Accumulated Amortization	1,756
Cumulative Translation Adjustment	55
Intangible assets, net	1,868	$ 2,300
Acquired customer contracts
Finite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, Gross	2,205
Accumulated Amortization	1,084
Cumulative Translation Adjustment	32
Intangible assets, net	1,153
Acquired existing technology
Finite Lived Intangible Assets [Line Items]
Finite-lived intangible assets, Gross	1,364
Accumulated Amortization	672
Cumulative Translation Adjustment	23
Intangible assets, net	$ 715

XML

Goodwill and Intangible Assets - Schedule of Finite-Life Intangible Assets, Amortization Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Goodwill And Intangible Assets [Line Items]
Amortization expense	$ 299	$ 300	$ 583	$ 598
Selling and Marketing [Member]
Goodwill And Intangible Assets [Line Items]
Amortization expense	366	185	366	370
Research and Development [Member]
Goodwill And Intangible Assets [Line Items]
Amortization expense	$ (67)	$ 115	$ 217	$ 228

XML

Goodwill and Intangible Assets - Schedule of Future Estimated Amortization Expense of Acquired Intangibles (Detail) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Goodwill And Intangible Assets Disclosure [Abstract]
2021	$ 623
2022	1,245
Total	$ 1,868	$ 2,300

XML

Operating Leases - Schedule of Components of Lease Expense (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jul. 31, 2020	Jul. 31, 2020
Leases [Abstract]
Operating lease cost	$ 306	$ 628
Short term lease cost	9	40
Total lease cost	$ 315	$ 668

XML

Operating Leases - Schedule of Supplemental Cash Flow Information Related to Operating Leases (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jul. 31, 2020	Jul. 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 244	$ 566

XML

Operating Leases - Schedule of Supplemental Balance Sheet Information Related to Operating Leases (Detail) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Leases [Abstract]
Operating lease right-of-use assets	$ 5,505	$ 4,860
Current portion, operating lease liabilities	1,295	722
Operating lease liabilities, long-term	4,607	4,348
Total operating lease liabilities	$ 5,902	$ 5,070
Weighted average remaining lease term (years)	4 years 6 months
Weighted average incremental borrowing rate	5.00%

XML

Operating Leases - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jul. 31, 2020	Jul. 31, 2020
Leases [Abstract]
Rent payments	$ 0.3	$ 0.7

XML

Operating Leases - Schedule of Future Minimum Lease Payments for Operating Leases (Detail) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Leases [Abstract]
2021	$ 552
2022	1,213
2023	1,337
2024	1,373
2025	1,413
Thereafter	59
Total lease payments	5,947
Less interest	45
Total operating lease liabilities	$ 5,902	$ 5,070

XML

Severance and Restructuring Costs - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Restructuring And Related Activities [Abstract]
Severance and restructuring costs	$ 543	$ 659	$ 1,029	$ 870

XML

Severance and Restructuring Costs - Activity in Accrued Restructuring Liability (Detail) - Employee-Related Benefits [Member] $ in Thousands	6 Months Ended
	Jul. 31, 2020 USD ($)
Restructuring Cost and Reserve [Line Items]
Accrual balance at the beginning of the period	$ 744
Restructuring charges incurred	6
Cash payments	(737)
Other charges	(9)
Accrual balance at the ending of the period	$ 4

XML

Stock-Based Compensation Expense - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Apr. 30, 2020	Jul. 31, 2020	Jul. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted		0
Share-based awards fair value			$ 1.5
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted			300,998
Cancelled option awards	184,999	114,260
Employee service share-based compensation, nonvested awards, total compensation cost not yet recognized	$ 1.4		$ 1.4
Share based compensation arrangement by share based payment award expected weighted average recognition period			1 year 9 months 18 days
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted			607,807
Stock options and restricted stock units cancelled	49,998	98,841
Restricted Stock Units and Deferred Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee service share-based compensation, nonvested awards, total compensation cost not yet recognized	$ 1.2		$ 1.2
Share based compensation arrangement by share based payment award expected weighted average recognition period			1 year 6 months
Performance Stock Unit [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee service share-based compensation, nonvested awards, total compensation cost not yet recognized	$ 0.2		$ 0.2
Share based compensation arrangement by share based payment award expected weighted average recognition period			1 year 7 months 6 days
2011 Compensation and Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
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, Purchase Price of Common Stock, Percent			100.00%
Share-based compensation arrangement by share based payment award, Option award expiration period			10 years
2011 Compensation and Incentive Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by Share-based payment award, vesting period			1 year
2011 Compensation and Incentive Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by Share-based payment award, vesting period			3 years
2011 Compensation and Incentive Plan [Member] | Stock Compensation Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, number of shares authorized	9,300,000		9,300,000
Share-based compensation arrangement by share-based payment award, number of shares available for grant	2,188,287		2,188,287
2011 Compensation and Incentive Plan [Member] | Deferred Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by Share-based payment award, vesting period			1 year
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, number of shares available for grant	1,075,024		1,075,024
Share-based compensation arrangement by share-based payment award, Description			On each purchase date, eligible employees can 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.
Discount percentage from market price of stock			85.00%
Shares purchased under ESPP			5,702	7,819
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		1,150,000

XML

Stock-Based Compensation Expense - Summary of Stock Based Compensation Expense Recognized (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 260	$ 631	$ 617	$ 197
Cost of Revenue [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense		22	(8)	19
Research and Development [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	68	82	135	150
Sales and Marketing [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	55	77	95	(9)
General and Administrative [Member]
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 137	$ 450	$ 395	$ 37

XML

Revenues from Contracts with Customers - Schedule of Revenue Disaggregated by Revenue Stream (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Disaggregation Of Revenue [Line Items]
Total revenue	$ 4,995	$ 18,812	$ 11,910	$ 27,297
Product [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	1,066	11,968	4,164	13,147
Professional Services [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	360	1,845	624	3,926
Maintenance [Member]
Disaggregation Of Revenue [Line Items]
Total revenue	$ 3,569	$ 4,999	$ 7,122	$ 10,224

XML

Revenues from Contracts with Customers - Additional Information (Detail) $ in Millions	Jul. 31, 2020 USD ($)
Revenue From Contract With Customer [Abstract]
Transaction price allocated to performance obligations	$ 26.7

XML

Segment Information and Geographic Information - Additional Information (Detail)	6 Months Ended
	Jul. 31, 2020 Segment
Segment Reporting [Abstract]
Number of operating segments	1

XML

Segment Information 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, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Segment Reporting Information [Line Items]
Total revenue	$ 4,995	$ 18,812	$ 11,910	$ 27,297
North America [Member]
Segment Reporting Information [Line Items]
Total revenue	2,318	11,567	5,896	15,656
Europe and Middle East [Member]
Segment Reporting Information [Line Items]
Total revenue	2,150	2,724	4,132	5,694
Latin America [Member]
Segment Reporting Information [Line Items]
Total revenue	343	4,132	1,476	5,179
Asia Pacific [Member]
Segment Reporting Information [Line Items]
Total revenue	$ 184	$ 389	$ 406	$ 768
Customer Concentration Risk [Member] | Total Revenue [Member] | North America [Member]
Segment Reporting Information [Line Items]
% of total revenues	46.00%	62.00%	50.00%	57.00%
Customer Concentration Risk [Member] | Total Revenue [Member] | Europe and Middle East [Member]
Segment Reporting Information [Line Items]
% of total revenues	43.00%	14.00%	35.00%	21.00%
Customer Concentration Risk [Member] | Total Revenue [Member] | Latin America [Member]
Segment Reporting Information [Line Items]
% of total revenues	7.00%	22.00%	12.00%	19.00%
Customer Concentration Risk [Member] | Total Revenue [Member] | Asia Pacific [Member]
Segment Reporting Information [Line Items]
% of total revenues	4.00%	2.00%	3.00%	3.00%

XML

Segment Information 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, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Segment Reporting Information [Line Items]
Total revenues	$ 4,995	$ 18,812	$ 11,910	$ 27,297
United States Revenue [Member]
Segment Reporting Information [Line Items]
Total revenues	$ 1,662	$ 9,666	$ 4,005	$ 13,064
Total Revenue [Member] | Customer Concentration Risk [Member] | United States Revenue [Member]
Segment Reporting Information [Line Items]
% of total revenue	33.00%	51.00%	34.00%	48.00%

XML

Segment Information and Geographic Information - Long-Lived Assets by Geographic Locations (Detail) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets by geographic location	$ 17,873	$ 17,683
North America [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets by geographic location	$ 12,549	$ 13,293
Long-lived assets, Percentage	70.00%	75.00%
Europe and Middle East [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets by geographic location	$ 5,293	$ 4,359
Long-lived assets, Percentage	30.00%	25.00%
Asia Pacific [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total long-lived assets by geographic location	$ 31	$ 31
Long-lived assets, Percentage	0.00%	0.00%

XML

Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Mar. 04, 2019	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Income Taxes Disclosure [Line Items]
Income tax benefit		$ 45	$ 563	$ 66	$ 161
Income tax benefit due to reversal of tax reserves				$ 200
Preferred shares purchase rights, declared date as dividend	Mar. 04, 2019
Preferred shares purchase rights for each common stock	1
Preferred shares purchase rights, record date as dividend	Mar. 15, 2019
Tax benefits preservation plan expiration date				Mar. 04, 2022
Maximum [Member]
Income Taxes Disclosure [Line Items]
Income tax benefit		$ 100