Greetings, and welcome to the SeaChange Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mary Conway. Thank you. You may begin.

Thank you, operator. Good afternoon, everyone, and thank you for joining us. SeaChange released results for the third quarter of fiscal 2020 ended October 31, 2019, 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 investors.seachange.com. In addition to accompany today's call, we will be using a presentation that is also posted on our website at the same location and we'll remain there afterwards. We encourage you to view it along with our remarks. With me on today's call are Yossi Aloni, Chief Executive Officer; Chad Hassler, Chief Commercial Officer; Marek Kielczewski, Chief Technology Officer; and Michael Prinn, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before Yossi begins, I'd like to remind you that the information we are 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 12, 2019, and our most recent Form 10-Q, which was filed on August 30, 2019. Any forward-looking statements should be considered in light of those 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 Yossi. Yossi?

Thanks, Mary, and welcome, everyone. Starting with the financial headlines. We had a solid quarter with a record new Framework bookings, $20.5 million in revenue and backlog of $22.2 million, an increase of $6 million from the end of our second quarter. Gross margin was 76%, and non-GAAP income from operation was $5.2 million. We closed eight significant Framework deals during the quarter. This is on top of the seven deals we shared at the second quarter call. Our new wins represent a wide range of content and service providers across the globe. Since the end of the quarter, we have secured further business with customers in the Americas and Europe. We have a large and growing pipeline of opportunities that we expect to convert into signed contracts in Q4 and beyond as we continue executing on our strategic plan. It is important to note that we have accomplished this in a very short period of time. I joined the company in January, and together with the leadership team, immediately began to rebuild our organization and go-to-market strategy. Clearly, our team has done an excellent job, launching the Framework product, building a pipeline of opportunities based on our new go-to-market strategy and converting them into signed contracts. In addition to our focus on revenue generation, we are also reducing our operating expenses. We continue to streamline our operation in a way that better aligns our company with our new go-to-market strategy. We have identified additional expense savings and we are actively engaged in realizing those savings. For example, as opposed to operating several engineering teams in multiple geographies, we now have a single engineering team in one single location. This provides many tangible efficiencies and cost-saving opportunities. Another example is our headquarters building. In November, we have announced that we have entered into the sales agreement of our office in Acton. We expect to save about $1 million per year in operating cost as a result of the sale. And this is net of direct expenses that we will incur in our new space. Mike, our new CFO, is working to both realize the cost savings we have previously identified and well as to identify additional opportunities that may exist. The only financial metric that was disappointing in the quarter was our cash balance of $13.8 million at the quarter end. The good news is that we believe our cash position is stabilized and the actions we are taking now to right size the cost structure of the company, combined with our strong sales momentum should set us up to be cash flow positive going forward. The real story today is that the transformation of SeaChange is well underway and taking hold. We are seeing further evidence that our strategic growth initiatives are winning in the marketplace, positioning SeaChange for clear market leadership and long-term profitable growth. The Framework offering and our unique value-based engagement has been well received. Our new wins in the quarter provide additional confirmation that we have a superior product, which enable our customers in turn to offer an exceptional viewer experience to their customers. Our ability to articulate the value that the Framework brings to our customers in terms of both OpEx savings and new revenue generation potential in clear and simple terms, enable us to achieve quick closing cycles. We are also making progress with the positioning of SeaChange as a software provider. We believe that we will maintain the 70% plus gross margins and the 10% to 13% non-GAAP operating margins will be attainable in FY2021. We have long-term agreements and predictable recurring revenue. We partner with our customers to provide our critical infrastructure under multiyear contracts that extend for three to five years, which provide long-term predictable revenue stream for us, and make us an important strategic partner for our customers. I want to reiterate that with the exception of our year-end cash balance target, we continue to remain confident in our ability to meet this year's financial target. With that, let me turn it over to Chad, who will share details on some of our third quarter wins. Chad and I worked together before joining SeaChange, and I'm thrilled that Chad recently took over the leadership of our global sales team. Chad?

Thank you, Yossi. I am pleased to join you today in my new role as the Chief Commercial Officer. As Yossi mentioned earlier, we added eight new significant Framework wins during the third quarter. These wins validate the support in the market for SeaChange's value-based solution with both current and new customers. Our existing customer base is signing up to do more in their current platforms with access to Framework solution, providing SeaChange with increased revenue and cash predictability through multiyear engagements. New customer wins demonstrate that we are replacing multi-vendor solutions, creating a better user experience and higher quality of service as well as gaining the increased revenue and cash predictability from the multiyear engagements. As traction continues to pick up for Framework in the market, we see further alignment and overall contributions from all three supporting geographic regions and sales. Framework wins are currently more evenly distributed compared to our past quarter and the increasing sales pipeline indicates that this will be the norm moving forward. Our customer base as well as the market continues to see that Framework is not only a unique value-based solution, but also provides so much more. One of our more significant wins in the third quarter was further influenced by the addition of the predictive analytics module for the Framework platform. With recent release of our industry leading predictive analytics capability, customers now can understand and better monetize the information in their video platforms. I will turn it over to our CTO, Marek to further discuss these innovative achievements and advancements in our technology.

Thanks, Chad, and good afternoon, everyone. I am excited to share with you an innovation update on the Framework. Last quarter, we announced the availability of Version 7 of our cloud-native Backoffice with enhanced analytics capabilities and a modern and versatile orchestration layer. Analytics helps our customers increase their revenue by making better data-driven decisions. In Q3, we extended the feature set of the analytics component to now include automated solutions for generating incremental revenue and reducing subscriber churn. In particular, the Framework now offers better targeting of promotional campaigns through the use of artificial intelligence and advanced behavioral segmentation. Thanks to this innovative approach. We can now identify and provide tailored content offers to subscribers who are likely to churn with even better accuracy than before. We are also leveraging this innovation to provide better ad targeting, both in-app using the Framework client app as well as using server-side ad insertion. Analytics also provides advanced revenue prediction, which allows our customers even better insights into individual, future customer value as well as extensive content sales trend analysis. This past quarter, we successfully completed the integration of the Xstream product and software engineering team with the rest of the Poland-based R&D team. The entire R&D organization is now focused on building out new Framework roadmap increments. We've adopted a lean agile process that spans all Framework components, which gives us the advantage of being able to add new functionality simultaneously across the entire platform. This means that new innovative features are brought to market faster than before and are not constrained by internal or external integration impediments. We expect to continue increasing the efficiency of our R&D organization by consolidating teams, focusing on our core functionality and eliminating redundant legacy product features. With that, let me turn the call over to Mike, our CFO.

Thanks, Marek. Good afternoon, everyone. Let me say at the outset, I'm delighted to be here today. Working with a high caliber team and mapping out an exciting growth trajectory is what attracted me to SeaChange. I look forward to collaborating with my colleagues to achieve SeaChange’s full potential. Now I'll review our third quarter results. We entered the third quarter of fiscal 2020 with $16.3 million in total backlog, excluding legacy maintenance. We booked new business of $20.6 million during the quarter and ended the quarter with a backlog of $22.2 million. So far this fiscal year, we've closed 15 significant Framework deals with total value of more than $39 million. This includes the seven deals valued at more than $20 million in total revenue that we told you about in late August. Given that Framework engagements contribute revenue over multiple years, we expect that our backlog will continue to grow as we close additional Framework deals in the remainder of this fiscal year, and our recurring revenue from this backlog will increase and become more predictable. Total revenue in the third quarter was $20.5 million, a 10% increase compared to $18.6 million in the third quarter of the prior fiscal year. The increase in revenue was driven by Framework engagements that were delivered during the quarter. Total product revenue was higher in the third quarter of this year at $13.5 million or 66% of total revenue compared to $8.3 million in the year ago quarter or 44% of total revenue. The increase in product revenue was driven primarily by software licenses delivered to customers related to Framework arrangements. Total services revenue in the third quarter was $7 million or 34% of total revenue compared to $10.3 million or 56% of total revenue in the third quarter of last fiscal year. As expected, we continue to see declines at both professional services and support revenue from customers related to legacy products. This quarter, we have seen successful transitions of some legacy customers to new Framework arrangements. In addition, we've continued to transition our professional services organization to our customer engineering organization as we complete legacy professional services projects. This transition is expected to be completed in our fourth quarter this year. Of the total services revenue in the quarter, maintenance and support was $6.2 million and professional services was $0.8 million compared to $7.5 million and $2.7 million in the prior year quarter, respectively. Revenue from international customers was $10.1 million in the third quarter this year and represented 49% of total revenue compared to $10.5 million or 56% of total revenue in the prior year quarter. Two customers comprised more than 10% each of our total revenue in the third quarter of this fiscal year, whereas in the same quarter last year, three customers each comprised more than 10% of our total revenue. Third quarter fiscal 2020 gross margin was 76% compared to 62% in the prior year quarter. This significant increase was driven by the increase in product revenue this quarter compared to the same quarter in the last fiscal year. Product gross margin in the third quarter was 97% compared to 79% in the prior year. Service gross margin in the third quarter this year was 38% compared to 48% in the prior year quarter, primarily resulting from the decline in overall service revenue with fixed costs that as I have mentioned earlier, we are in the process of reducing. At this point, legacy professional service engagements are substantially complete. As a result, we’ve reduced fixed costs in both professional services and support functions and expect these actions to be completed by the end of this fiscal year. Non-GAAP operating expenses in the third quarter of fiscal 2020 were approximately $10.5 million compared to $11.8 million in the same quarter of the prior year. The decline reflects the continued cost savings initiatives related to the reduction of third-party costs and elimination of nonessential internal costs throughout the organization. In fact, our excellent progress on this front enabled us to be more efficient and to achieve non-GAAP operating profitability. You'll recall that we have been carrying resources this fiscal year to complete legacy professional service and support arrangements. We will continue to reduce costs related to these legacy projects once they are completed by the end of this fiscal year. All of our cost reductions that we have done this year translate into over $12 million of savings, so we're pleased with our efforts to date. For the quarter, we generated $5.2 million in non-GAAP operating income, which translates to non-GAAP operating income of $0.14 per fully diluted share. This compares to non-GAAP net loss of $0.3 million or $0.01 per basic share in the third quarter of fiscal 2019. We also generated net income for the quarter of $2.1 million or $0.06 per basic and diluted share compared to a net loss of $3.8 million in the third quarter of fiscal 2019. Turning to our balance sheet. We ended the third quarter of fiscal 2020 with cash and cash equivalents of approximately $13.8 million and no debt. Cash decrease in the third quarter reflects funds used for operations of $4.9 million, primarily the result of changes in accounts receivable and unbilled revenue as a result of timing of billings related to our Framework deals executed during the period. As Yossi noted, we believe that we are now beginning to rebuild our cash with our expectations for ending the fiscal year higher than where we were at the end of the third quarter. And while we are not providing fiscal 2021 guidance today, we fully expect that we'll accelerate the growth of our cash balance during that period. Deferred revenue of $7.8 million decreased from $10.7 million as of January 31, 2019 driven primarily by the timing of revenue recognized and renewal of post warranty maintenance and support agreements during the quarter. DSO excluding unbilled receivables was 59 days at the end of the third quarter of this fiscal year, a continued improvement compared to 71 days in the third quarter of last fiscal year. Our unbilled receivables were $16.6 million in the third quarter this fiscal year compared to $7.9 million in the third quarter of last fiscal year. The increase is the result of timing of billings from our Framework deals due to the payment terms in those deals. We are very pleased with our customer wins leading to increase backlog and product revenue in the third quarter. As Yossi mentioned, we expect this trend to continue leading to an increase in Framework transactions in the remainder of this fiscal year. Positive momentum with our Framework go-to-market strategy with new and existing customers provides us added confidence in our revenue projections. We are today reiterating our total annual revenue guidance of $70 million to $80 million, and that we expect to sustain operating profitability on a non-GAAP basis and reach positive cash flow in the second half of this fiscal year. With that, let me turn it back to Yossi for closing comments. Thank you.

Thanks, Mike. We want to wrap it up by summarizing our strategic priorities. With the winning team, we have built a team of business leaders designed to increase our market share and to accelerate our product innovation and execution, maintain our product and go-to-market leadership, continue to strengthen our customer relationships by providing outstanding service with onsite engineering support. Corporate efficiency, sales and marketing and R&D are on track to achieve the target efficiency by the end of the fiscal year. Mike is working to streamline our G&A organization, become cash flow positive. This allows us to rebuild our cash position, which will enable us to avail ourselves of opportunities that may arise for SeaChange. We are confident that these strategic priorities will deliver long-term revenue growth, attractive margins, profitability and enhance our shareholder value. We want to close by thanking our customers, the SeaChange team, and all of you that has stayed by our side, while we invested significant time and energy to transform our company. We believe that we are on the right path and while we have accomplished a lot in a very short period of time, there is still much to do. With that, let's open the call up for questions.

Thank you. Ladies and gentlemen, at this time, we will begin our question-and-answer session. [Operator Instructions] Our first question comes from Steven Frankel with Dougherty. Please state your question.

Good afternoon, Yossi and congratulations to you and your team. I want to focus in for a minute on the cash issue. Was there something materially different in the terms of these deals versus Q2? They got you significantly less cash upfront? And kind of describe what a Framework deal looks like today?

Thanks, Steve. So no, it wasn't different than any of the previous deals that we've had. It's mainly timing. Many of these agreements were signed in the last part of the quarter, and therefore, using standard payment terms, the cash is shifting into Q4. So there's nothing major there. In regards to the cash with Framework deals, in most cases, customers will pay more or less an equal sum during the duration of the engagement, meaning, let's assume for the sake of discussion that there is an agreement for $5 million over a duration of five years, we will pay $1 million right after the engagement, once we deliver the software, and will pay additional $1 million per year throughout the duration of the engagement. Mike, is there anything else you would like to add?

Yes. Steve, so really, it's timing. This is Mike Prinn. From a cash perspective, it would be spread out evenly over a deal, but when we look at it from revenue recognition, we've got a software license and so from revenue perspective, it's more front-end loaded.

Okay. And then in terms of the gross margin improvement on the product side, is that a sustainable level or there was something unusual this quarter and you didn't have any pass-through hardware and in future quarters you might have some of that?

It differs. This is the gross margin – yes, the short answer is, yes. This is sustainable. We are targeting much better margin. And keep in mind, once we remove the component of professional services, which was somewhat less profitable, it will enable us to do much more and also improve the gross margin. And if you are thinking about future SeaChange, you need to think about software company and most software companies are today in the mid-80s, when it comes to gross margin.

Okay. And could you go back over those customer concentration numbers, again, you dropped out? How many customers did you have above 10%?

Three.

And how would you characterize the Framework deals signed in the quarter of new customers versus legacy installed base? How does that split out?

So we don't share this information. I can tell you that most of our wins this year and it's likely to be the situation going forward. Most of them are new customers. I can also share with you that in terms of the geographical balance, we are getting to a point where the three geographies where we operate; North America, Latin America and Europe, in terms of revenue contribution and gross margin, they are more or less equal, and that's positive. It will continue and be the case going forward.

Okay. And lastly, it looks like you've been stretching out payables, will those have to come in over the next couple of quarters and what's the path to positive cash flow?

Sure. So I think at this point, we're kind of projecting the end of the year will be in a better cash position than we are now. On our next earnings call, we will obviously share a little more detail on fiscal 2021. And from a payables perspective, I think that will eventually come down a little bit over the next couple of quarters. As we talked about, we made a lot of changes in terms of efficiencies and cost reductions. And I think as we realize those, you will see the AP balance come down a little bit.

Okay. But my specific question was what does it take for this company to generate cash from operations? Is it a scale issue? Is it – when can you generate cash?

We expect to generate cash this year, Steve.

Okay. So you expect positive cash flow from operations in Q4?

The fourth quarter, correct.

Yes. That’s correct.

Great. Thank you.

Thank you, Steve.

Thank you. Our next question comes from Jaeson Schmidt with Lake Street. Please state your question.

Hey, guys. Thanks for taking my questions. Just looking at the Framework deals, now that you've had another quarter under your belt, are the size of these Framework deals in line with previous expectations? Or are they tracking bigger, smaller than what you had initially thought?

Hey, Jaeson. So they are in line with our plan. So the number that we have announced is a significant win. In addition to that, we have additional wins, which are not significant at this stage. They will be significant in the near future.

Okay. And from a competitive landscape, I know you're displacing some multi-vendor solutions, but have you seen any significant change from a competitive standpoint and relatedly, how has the competition responded from a pricing standpoint with your success offering these Framework deals?

So our pricing is based on value. We do not have prices. We are focused on SeaChange and SeaChange execution. Therefore, we are not discussing the competition.

Okay. And last one for me. Just to confirm, the backlog has now been completely scrubbed of any legacy deals, correct?

Yes. So the backlog numbers that we are reporting are Framework backlog. And that's intentional because we're obviously going to demonstrate that's going to continue to grow. So it's Framework only.

Okay, perfect. Thanks a lot guys.

Thank you.

Thank you.

Thank you. This concludes the Q&A session. I'll now turn it back to Yossi Aloni for closing remarks. Thank you.

Thanks again everyone for joining us today. We will be attending the Needham Growth Conference in New York in January of 2020, and we welcome the opportunity to meet you there. Thanks again, and have a good evening.

Thank you. This concludes today's conference. All parties may disconnect. Have a great evening.