Mary Conway - IR Ed Terino - CEO Peter Faubert - CFO

Steven Frankel - Dougherty & Company Jaeson Schmidt - Lake Street Capital Markets Hamed Khorsand - BWS Financial John Zaro - Bourgeon Capital Management

Greetings, and welcome to the SeaChange International’s Third Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to your host, Mary Conway, Investor Relations.

Thank you, Omar. Good afternoon, everyone, and thank you for joining us. SeaChange released results for the third quarter of fiscal 2018 ended October 31, 2017, today after the market closed. If you would like a copy of the release, you can access it on the IR section of our website, at schange.com/ir. With me on today's call are Ed Terino, Chief Executive Officer; and Peter Faubert, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before Ed begins, I'd like to remind you that information we're about to discuss today may include forward-looking statements, which are based on current expectations that are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. These risks are outlined in our SEC filings, including our Annual Report on Form 10-K, which was filed on April 17, 2017 and our most recent Form 10-Q, which was filed on September 07, 2017. Any forward-looking statement should be considered in light of these factors. Additionally, this presentation contains certain non-GAAP or adjusted financial measures, as defined by the SEC. We have provided a reconciliation of these measures to the most directly comparable GAAP measures in the tables attached to the press release. And with that, I'd like to turn the call over to Ed for opening remarks.

Thank you, Mary. Good afternoon, everyone and thank you for joining SeaChange's call today. Let me start by outlining what I will cover today. I will provide some insights on our strong performance in the quarter, an update of key sales wins in the quarter, the status of our revenue pipeline, recent progress on our product roadmap along with our strategic direction from a product perspective and lastly, I will share some thoughts regarding our go-to-market approach, including efforts on partnerships to improve revenue opportunities in fiscal 2019. In other ways we are positioning the company for growth. Let me start with our strong Q3 results. As you saw in the press release we issued this afternoon, we are very pleased that SeaChange delivered excellent results on the top and bottom line beating our guidance handily and setting us up well to finish out our fiscal year. Importantly, we also attained non-GAAP operating profitability this quarter, which we had targeted by the end of this fiscal year. So again, we are ahead of schedule. What drove revenues in Q3 of fiscal 2018 was an expansion of our relationship with Liberty Global, our largest customer as we announced this afternoon. After a comprehensive evaluation, Liberty Global selected SeaChange as a strategic vendor for its next-generation cloud-based video platform called One Back Office. This entails transitioning the Liberty Global subsidiaries’ video platforms to the cloud, while enabling customers access to a wider variety of key capabilities via any mobile device on a massive scale. While this expansion of business was focused on LG's EMEA affiliates, we also expect LG's Latin America properties to transition to One Back Office platform over the next several years, which would lead to additional revenues for SeaChange. We launched the LG EMEA effort this quarter and we expect it to continue over the next two fiscal years. Initially, we anticipate that this opportunity represents incremental license revenues to SeaChange of at least $30 million. Our success in selling more licenses to Liberty Global validates the strong relationship with this customer. Included in Q3 revenues were sales to several existing customers to expand their video delivery platforms by adding IPTV capability to mobile devices for their subscribers as well as continued Axiom to Adrenalin migrations. We also booked a large deal with a Tier 2 cable operator in the Americas in Q3 that is included in our Q3 ending backlog. As a result of these wins, we ended the third quarter with a backlog in the $15 million range compared to our backlog at the end of Q2 fiscal 2018 of $11 million. All of our other operating metrics improved in the quarter from gross margins, to operating expenses, to positive cash flow from performance. Peter will provide more color in his comments. Shifting to our revenue pipeline, today it holds more opportunities than it did at the end of Q2 fiscal 2018. Leading our pipeline growth are adrenaline upgrades, content management upgrades, IP linear and IP VOD expansions with existing customers, end-to-end solutions for mobile carriers in other nontraditional digital media providers around the globe, OTT opportunities particularly through partners in Latin America and APAC and legacy set-top box monetization opportunities utilizing NitroX. In addition, as I mentioned, we expect to expand the Liberty Global One Back Office project in the fourth quarter of fiscal 2018. As a result, our pipeline entering Q4 of fiscal 2018 stands at between three and four times the midpoint of our fourth quarter of fiscal 2018 revenue guidance, which driving the expansion of our pipeline as well as our approach to the market is the global shift in video consumption patterns. Near ubiquitous Internet access, the proliferation of connected devices and the explosive growth of direct-to-consumer OTT services have fundamentally altered the TV landscape. What's clear is to be successful, we must enable our customers to deliver video to the views device of choice and we must deliver these services to customers on a cloud basis. This has profound implications for SeaChange from the direction of our product roadmap as well as dictating how we go to market. As a result, we are seeing continued expansion in our pipeline with mobile operators especially in the Middle East and Asia Pacific. This reflects the impact of some of the new pocket programs we initiated and spoke about earlier this year. We continue to see interest from our competitor's customers who are concerned about our competitor's ability -- abilities to effectively serve their video delivery needs. In our pipeline are several opportunities for replacing our competitor's video platforms, including a significant opportunity in the Middle East and our expansion with LG, provides a strong endorsement for others to move to SeaChange. Because of the pace of movement to cloud-based deliverables, many opportunities in our pipeline are being offered on both a perpetual license and subscription pricing model, but more customers are seeking subscription-based pricing. While this creates some short-term challenges in generating revenue growth, in the long run, we expect it to provide us with more recurring revenue and thus more predictable and visible revenue growth. Now let me shift to our fiscal 2018 product roadmap. As we told you last quarter, we expanded our engineering capacity in Warsaw, Poland and empowered the operation there to lead our global engineering organization to implement agile software development methodologies. The transition is ongoing and we are making substantial progress in improving the predictability and quality of software deliverables. In terms of the product roadmap delivery dates, we expect to release an updated version of Adrenaline that will better enable IP Linear and IP VOD delivery, as well as TimeShift TV and network DVR capabilities this month. We expect to release the initial version of our content management's new content management system for a South American customer in January, followed by a general release in the Spring of 2018. Finally, we plan to release a new version of NitroX early next year to enable operators to utilize NitroX on their legacy set-top boxes, providing them with additional revenues without requiring the capital cost of replacing these set-top boxes. Lastly, I want to share an update on another key element of our strategy for revenue growth, the expanded use of channel partners and technology partners to reach more customers and prospects. This approach makes more sense now as our products today are better adapted to partner's go-to-market models. This fiscal year we have added more than 10 qualified new partners, specifically in APAC and Central America and Latin America. In APAC, we are focusing on several key countries in building out our network to capture discrete market segments. Several partners have already led us to potential customers, weather in OTT or content management. Recent new partners include Goldenduck in Thailand and Vietnam, Magna in Singapore and BVS in Argentina, which also -- and they also cover Uruguay and Paraguay. Overall, I am very pleased with our progress to date, as we evolve both our organization and our industry-leading product suite to accelerate the growth of our operations in a changing and challenging industry. We experienced a strongly positive reaction from customers and prospects at IBC in September and we have another opportunity to enhance our visibility and drive future growth at CES in Las Vegas in January. We're committed to providing innovative new products that help our customers monetize their video assets, while optimizing our operating expenses to drive profitability. With the significant progress we've made in Q3 2018, we believe we are well-positioned to achieve this objective for the remainder of fiscal 2018 and fiscal 2019. With that, I'll turn the call over to Peter to walk you through our financial results and provide our outlook for the fiscal fourth quarter and full-year fiscal 2018, Peter, please go ahead.

Thank you, Ed. Good afternoon, everyone. I'll start by reviewing our third quarter results before providing you with an outlook for the fourth quarter and our updated guidance for the full year of fiscal 2018. As Ed mentioned, we are pleased that both our third quarter revenue and non-GAAP EPS came in well above our guidance range. We entered the third quarter with $11 million in total backlog, excluding maintenance and support, we booked new business of $19.5 million during the third quarter of fiscal 2018 and ended the quarter with backlog of $15.4 million. Total revenue for the third quarter was $23.4 million, a 17% increase over the $20 million we recorded in the third quarter of last fiscal year. During our revenue performance in the third quarter, driving our revenue performance in the third quarter was stronger product revenue from software licenses, especially from Liberty Global. These software licenses led to product revenue that nearly tripled year-over-year and more than offset the decline in professional service revenue related to the completion of certain professional services for that same customer. The fall in maintenance and support revenue continues to be driven by the reduction in deployed legacy hardware products. In the first nine months of fiscal 2018, we booked two subscription deals with a combined deal value of approximately $4.5 million that is spread over multiple years with very little revenue to be recognized in fiscal 2018. There are additional similarly sized subscription deals in our pipeline that we expect to close in the fourth quarter and into fiscal 2019. The near tripling of product revenue compared to the prior year quarter was driven by an increase in software sales to Liberty Global as I previously mentioned. This increase was somewhat offset by a decrease in hardware revenue related to one; rental and sale to a new customer and two, Axiom to Adrenaline upgrades with existing customers in the prior year quarter. We have good visibility into a strong pipeline of product deals related to Adrenaline software license sales. In addition, as we continue to deliver against the projects in backlog, we will generate additional product revenue this fiscal year, including more software license revenue from Liberty Global. Total product revenue was $11.1 million in the third quarter or 47% of total revenue compared to $3.7 million in the year ago quarter or 19% of total revenue. Video platform software revenue was $10.4 million and accounted for 93% of the total product revenue compared to $1.8 million or 48% of the total product revenue in the third quarter of last year. The remaining product revenue of $0.7 million includes revenue from user experience software, hardware and advertising. Total service revenue in the third quarter was $12.3 million or 53% of total revenue compared to $16.2 million or 81% of total revenue in the third quarter of last year. The decrease in services revenue was driven primarily by the completion of certain products at Liberty Global. In addition, maintenance revenue decreased due to the continued decline in revenue related to legacy hardware. Video platform professional service revenue totaled $3.4 million down from $5.2 million in the same quarter of last year. Maintenance revenue totaled $8.1 million or 35% of total revenue and 66% of total service revenue compared to $8.8 million or 44% of total revenue and 54% of total service revenue in the third quarter of last year. The decline in maintenance revenue was driven by the decrease in legacy video streamer support. The remaining service revenues of $0.8 million includes SaaS and user experience revenue. Revenue from international customers of $17.3 million in the third quarter accounted for 74% of total revenue compared to $13.1 million or 65% of total revenue in the prior year quarter. We had one customer account for more than 10% of total revenue in the third quarter with Liberty Global and its affiliates contributing 53%. Our blended GAAP gross profit margin increased to 70% in the third quarter compared to 52% in the prior year quarter, due to product mix and efficiencies generated from our restructuring program. Excluding the non-GAAP charges in the third quarter of fiscal 2018, our blended non-GAAP gross profit margin was 71% in the third quarter compared to 53% in the prior year quarter. The improvement reflects continued effects of our restructuring program and a larger contribution to total revenue from higher margin software license revenue than in prior year in the prior year quarter. Our non-GAAP products gross margins in the third quarter was 89% compared to 51% in the prior year quarter due primarily to product mix, which included more software license sales compared to the same quarter of last year. Non-GAAP service gross margins in the third quarter was 54%, same as in the prior year. Non-GAAP operating expenses declined 10% year-over-year to $13.4 million in the third quarter of this fiscal year from $15 million in the third quarter of last year, but higher than the run rate expectation of about $12 million per quarter that we shared with you at the end of fiscal 2017. Operating expenses for the current quarter included approximately $0.4 million in one-time investments in projects to improve infrastructure and business process. These investments will continue through the end of the current fiscal year. In addition, we incurred approximately $2 million in incremental bonus and commission expense, resulting from our strong quarter. We continue to see the benefit from lower labor cost as we leverage our Poland operation to drive engineering efforts worldwide. Our non-GAAP operating income of $0.09 per fully diluted share came in well above our guidance range, largely due to the benefits from the restructuring initiatives and improved topline performance and compares to non-GAAP operating loss of $0.13 per basic share in the third quarter of last fiscal year. This strong performance also allows us to continue to reinvest more aggressively in our operating and product development initiatives. Turning to our balance sheet, we ended the third quarter with cash and cash equivalents of approximately $37 million and no debt. In the third quarter, cash increased by approximately $1 million, mainly due to operating income generated during the quarter, partially offset by changes in working capital, primarily related to the timing of invoicing our customers. As of today, we have completed most of our restructuring activities worldwide. As a result, we expect to incur additional cash restructuring charges in the fourth quarter of this fiscal year, which we do not believe will be significant. Given the timing of expected cash collections from strong sales generated this quarter, we anticipate positive cash flow as we close out this fiscal year. Deferred revenue of $15.6 million, increased from $13.6 million in the prior fiscal year's third quarter and from $14.9 million as of January 31, 2017, reflecting growth of both our subscription business deals as well as annual service contract billings in the current quarter compared to the third quarter of the prior fiscal year. Day sales outstanding, excluding unbilled receivables totaled 111 days at the end of the third quarter of this fiscal year compared to 113 days in the third quarter of last fiscal year, primarily reflecting the timing of delivery and invoicing of certain product deals. Including unbilled receivables, day sales outstanding totaled 125 days in the third quarter, compared to 148 days in the third quarter of last fiscal year. Our unbilled receivables were $3.6 million in the third quarter of this fiscal year, a marked improvement from $6.6 million in the third quarter of last fiscal year. The decrease reflects invoicing against service contracts, for one of our largest customers for which we received purchase orders during the quarter. The timing of these invoices also contributed to the lower day sales outstanding for the quarter compared to the prior year. As I just noted, we have now completed most of the cost reduction program that we announced last year. We have achieved our goal of extracting approximately $38 million in annual run rate savings in total and have realized approximately $18 million in annual run rate savings this fiscal year. This progress, in addition to our topline performance enabled us to be profitable on an operating basis this quarter. In fiscal 2018, we now expect that product revenue will contribute between 30% and 32% of total revenue for the year, higher than what we saw in fiscal 2017. We expect maintenance revenue to decrease from 44% of total revenue in fiscal 2017 to approximately 40% of total revenue in fiscal 2018. We expect professional service revenue to contribute approximately 28% of total revenue in fiscal 2018, which is down from fiscal 2017 due to the reasons that we previously discussed. Over the course of fiscal 2018, as customer shift to cloud-based deployment models, we expect our revenue mix to continue to transition from perpetual licenses to monthly recurring revenue. We've already seen this start to impact our topline performance in prior quarters. As we continue through this transition, we will increase recurring revenue, thus improving visibility and predictability of our revenue going forward. With this in mind, we anticipate that revenue for the fourth quarter of fiscal 2018 will be in the range of $20 million to $24 million and that non-GAAP operating income will be in the range of $0.02 to $0.10 per fully diluted share. For the full year, we are raising expectations for revenue to be in the range of $77 million to $81 million. We expect revenue growth in the remainder of the year to be driven primarily by software license sales and delivery of products currently in backlog. We expect that product revenue mix and the achieved cost cutting initiatives will allow us to maintain gross margins in the 60% range. Given the outperformance in Q3 of fiscal 2018, we are also favorably adjusting our guidance for non-GAAP income per share to a range of $0.04 to $0.12 per fully diluted share for the full year of fiscal 2018. With that, I'll hand the call back to Mary. Thank you very much.

Thank you, Peter. Omar, could you please provide instructions for the Q&A session.

At this time, we'll be conducting a question-and-answer session. [Operator instructions] Our first question is from Steven Frankel, Doherty. Please proceed with your question.

Good afternoon and congratulations. Ed, maybe if we can spend a couple more minutes digging on this Liberty contract in terms of its hail from here on the European piece, is that more product revenue, is it a mix of product and service and then, when do you anticipate seeing the Latin American pieces coming on? Does that begin in Q4 and what's the size of that relative to what we saw in Q3?

So, the revenue opportunity includes license revenue, services revenue and maintenance and support revenue. The number that I referenced in my portion of the script in the $30 million range of incremental licenses is purely licenses. So, there is certainly that opportunity and all those numbers are pretty much based on EMEA. There is an opportunity in Latin America with the properties that Liberty Global owns there and we would expect that to be something that could happen in the latter half of calendar year 2018 and into calendar year 2019.

Okay. And would you size what that opportunity might be relative to the EMEA?

No, I'm not going to really do that. As you know Liberty has been fairly acquisitive in Latin America and South America. So, to really size it would be difficult for us to do.

Okay. And so, let's spend a couple minutes talking about your end-to-end opportunities, how that pipeline is building and when do you think you start to convert that pipeline to sign deals and then at what those start to hit the revenue line?

So as Peter indicated in his comments, we have several deals in our pipeline that are of similar size to some of the deals that we've already closed. We would expect to see some of those deals start to close in Q4, but I think our guidance doesn't include any revenues from that, but it is really difficult Steve to predict closure rates on these deals as you know customers spent a lot of time evaluating what they want to do and coming up with the architecture of the end-to-end solution that they want to implement.

Okay. And skipping back to the cloud-based back office initiative that obviously Liberty is a high-quality win that will get you a lot of attention, what do you think the opportunity is to sell that kind of solution to other people in your customer base?

I think the opportunity is excellent. I think that it is something that you know focusing mainly on Tier 2 and Tier 3 customers. It takes them some time to evaluate their transition from sort of an on premises traditional video platform to a cloud-based platform. Most of the Tier 1 operators, not most, but a lot of Tier 1 operators were looking to move to the cloud have given strong consideration to Comcast X1 and I think we've seen indications that several of them have selected Comcast X1 such as Rogers, Cox, Shaw and I think recently Videotron.

Okay. And in terms of product development, this was a big year with some major releases especially in between now and the end of the year, what is fiscal '19 look like in terms of new product?

So, I think a lot of our go-forward financial projections are based on selling what we have in the development queue now. So, the two things that we mentioned, one is Adrenaline upgrades, the next version of Adrenaline that we're looking to release this month will have some added features that we believe will be compelling to our Adrenaline customers to upgrade to. So, we have a number of customers who we expect will upgrade to that version that version of Adrenaline next year. And then our content management solution, which we expect to release in the first quarter, the main target for that solution will be our existing install base of asset flow customers. We have one customer who is pretty close to committing to the upgrade and we think that we can convert the rest of the customers throughout 2018 and into 2019. So those two roadmap deliverables are real principal drivers of our revenue expectations for fiscal 2019.

Okay. And do you feel like now you've got this company positioned for sustainable growth or other things have to happen before you're comfortable that you've turned the corner and you can grow and remain profitable from here?

I would -- I think we have the company positioned for sustainable growth. I think that our focus as a senior leadership team has shifted quite a bit from looking at day-to-day type challenges to really looking out one, two, three quarters into the future. So, I think encouraging development is that we're now focusing on how we're going to drive revenue growth not in Q4, but in Q1, Q2 of next year and I think that will drive sustainable revenue growth.

That's a nice change from where the company's been over the last couple years. Thank you all. I'll pass the time to somebody else.

Thanks Steve.

Our next question is from Jaeson Schmidt, Lake Street Capital Markets. Please proceed with your question.

Hey guys. Thanks for taking my questions. I just want to follow up on your previous comments. Is it fair to say that you believe your visibility has improved? I know one of the challenges in the past has been that you have good visibility to the pipeline, but when these launches actually hit the P&L, it can be a bit challenging to forecast? Can you talk a little bit about your current visibility and confidence of that going forward?

Yeah, I do think our visibility has improved, but I believe the visibility has improve because I think we're being more proactive about how we go to market with sales initiatives. So, for example when I first joined SeaChange, there wasn't any real initiative that you could identify for how we were going to convert let's say any part of our existing customer base to an upgraded version of a product that they had implemented. Now we have much better data on who those customers are, what the market opportunity is, how we want to obviously approach them. We are working towards developing materials to help our salespeople go after those opportunities. So, we're taking a much more proactive approach to going to market. So that's creating that data for us and better visibility into what it will take to close those opportunities.

Okay. That makes sense and then looking at OpEx, how should we think about that going forward? Assumed given your mix guidance that OpEx will be down in January, but more so in Calendar 18, how should we think about that traffic?

So, Jason, this is Peter. I think there's a couple things around OpEx. One, as we gain traction with our cost-cutting initiatives throughout the year, I had indicated that we were going to reinvest in some improved business processes internally to create more efficiency long-term. Some of that is happening. So, we are spending some money around redesign of business process to allow us to get to more efficient operations next fiscal year. That's why I indicated that we'll continue to make those investments through the end of this fiscal year. I think once those one-time projects end as we enter next fiscal year, I think we will return to the OpEx targets that we talked about at the end of the last fiscal year. So, I think right now our steady state run rate target is still that $11 million to $12 million OpEx range, but I am indicating that we are investing in some business process reengineering to create more efficiencies long term.

I would also add that when we have the full effect of our engineering improvements, we expect to see cost efficiencies there and we're going to obviously use some of those efficiencies to put back into sales and marketing spending. So, Peter is right on with the estimate of the total OpEx, quarterly OpEx number, but we are going to realize some additional savings in engineering from shifting to Wausau and we'll put some of that money back into sales and marketing.

Okay. That's helpful. Thanks a lot guys.

Thank you, Jason.

Our next question is from Hamed Khorsand, BWS Financial. Please proceed with your question.

Hi, just first off on this Liberty Global, you mentioned that there was $30 million in licensing revenue. Now, is that -- is there going be a linear aspect to it? Can you just describe what to expect from over the next two years?

So, Liberty today has this program focused on 17 affiliates based in Europe and there is a total number of subscribers that are about 24 or so million subscribers. The progress of that rollout is dependent on how they are able to get each of the local affiliates to adopt that platform and that's something that no one can really predict. I think they would like to move this out to their affiliates as quickly as possible. The good news is they’ve started that rollout and that was what led to the purchase of those licenses that we reported this quarter. But as far as their progress and how they're going to roll out all the affiliates it's really unpredictable because it's going to depend on the progress they make as they go through each affiliate. Realize that each affiliate they speak different languages, they have different customs, they have different requirements. So, it's not like the United States where Comcast rolls out X1 across 24 states, in every state, it's pretty much the same language, the same solution. They really have to adapt their solution to every single affiliate. So that creates a lot of unpredictability about when they will get it completely rolled out.

Okay. And then last quarter, you have been referencing the sales pipeline of two or three times revenue midpoint guidance. This quarter, you're talking about three to four times sales pipeline guidance. So, I guess you have a bigger pipeline, you seem like you have more coverage. So what's the outline as far as either beating the numbers or having it more drop into Q1? I am just trying to figure out -- it sounds like you're doing a better job this quarter and last quarter, but you're not really guiding significantly better than Q3?

Correct, I think that there is a lot of variables that go into decision-making. We mentioned one significant one on the call, which is whether they want to take the purchase in terms of a perpetual license or a recurring revenue approach. We offer both options and then they may choose one or the other. So that obviously impacts the predictability of revenue. There are also deals that you see our bookings number growing and there are deals that have dependencies. Dependencies that may relate to the customer. Dependencies that may relate to third parties. So that also impacts our ability to know when we'll realize the revenue. So, I would say the good news for SeaChange is the pipeline is growing and I think we have more solid opportunities in the pipeline around the areas I mentioned. I think the market is still a bit unpredictable about closure on these opportunities.

Okay. And then lastly just going into Calendar '18 what's the callous to draw more of these Tier 2 service providers and I think you're almost drawn out update now for Mac. So, what's going to draw more of these Tier 2 service providers to come on board?

So, I would say, Linear -- IP Linear and IP VOD requirements, I think that's one. And what we mean by that is their traditional platform is mainly servicing through their cable plant and through a set-top box and they really need to implement an IP capability for mobile devices offer multiple devices that they're trying to reach. And I think that's the main driver for what they will buy from us. I do think the other opportunities around trying to monetize legacy set-top boxes. So, they have thousands to hundreds of thousands of set-top boxes in their environment that they don't want to really have to replace them, but they want to provide capabilities that drive more revenue from that subscriber. So those are two. A third one is there's a need for content management capability because as they go from a traditional cable delivery to having multiple devices, it becomes more challenging for them to manage content to those different devices in different forms. So that requires them to put in place a content management capability. So, I think those three opportunities where our Tier 2 customers will be looking to buy more technology from us.

Okay. I guess just a quick follow-up here, I know you said from those earlier and what I am trying to ask is I am assuming that you're already having these discussions with the customers. So, what I am trying to get to is what's going to push them to the edge tax you deploy this, that's what I am trying to get.

Well, I would just say that if I knew the answer to that, I think I would be able to win the lottery. No, it's very, very unpredictable. Its budget availability. It's very, very different. There's no clear indicators of what drives a purchase decision. Some decisions get delayed a year. Some happen right away. I would say if there is one factor I've seen it's the availability of funding. If they have the funding and they want to spend the money, they will make the decision. But generally speaking, there is no -- I can't point to any factors that really influence the timing of a decision.

Thank you.

Thanks, Hamed.

Our next question is from John Zaro, BCM. Please proceed with your question.

Hey guys, congratulations.

Hi John. Thank you.

Lots of hard work. On these new rollouts and particularly going to the cloud and things like that, as you know the company has historically had issues when they roll out these various new products, before your time, the most part, but rolling out these new products partly because in the case of somebody like Liberty as you point out, they have so many different affiliates that speak different languages and everything else. When you rollout these new products over the next couple of years, are they -- because they're going to the cloud or using the cloud in some situations, is it easier to roll them out than it would have been?

Yes, it is.

We don't have as many technical issues.

It absolutely -- there are still technical issues, right. And we still have to be better disciplined as a company in how we go about this. So, we are putting a lot of emphasis on improving our quality assurance and our testing and integration before we release products to customers. More importantly in situations where we have an on premises installation, we really need the customers to have lab environments where they can actually test software in their environment before closing the production, but with cloud-based deployments, it is easier to implement them and fast implement them than it would be in an on premises situation. And the reason for that is in the on premises situation, they have all these other aspects to the platform. The network, the CDN, certainly other pieces of the ecosystem that really go beyond SeaChange's solution. When you're in the cloud, a lot of that is already defined as part of the cloud solution and that's one of the reasons why you're able to roll it out quicker and more reliably.

Okay. Great. Thank you. Congratulations again.

Thanks John.

Ladies and gentlemen, we have reached the end of the question-and-answer session and I would like to turn the call back to CEO, Ed Terino for closing remarks.

As you can see from these very strong quarterly results, SeaChange is working very hard to respond to its customers and increase revenues, meet its product roadmap delivery schedule, expand its revenue pipeline and improve its operational capabilities while improving gross margins and reducing operating expenses. All of these elements were critical and enabling us to achieve non-GAAP profitability in the third quarter of fiscal 2018 and return the company to revenue growth. We're confident that we can contribute -- continue to deliver strong results in the fourth quarter of this year as well. Thanks to everyone for joining us today and for your continued support and interest in SeaChange. If you have any questions, please feel free to reach out to us. In addition, if you plan to attend the CES Show in January in Las Vegas, we would like to meet -- and you would like to meet with us there, we would be happy to schedule some time. Lastly, we will be presenting at the Noble Conference in late January in Fort Lauderdale and would welcome an opportunity to meet with investors then. Have a great evening. Good night.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. `