Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I'd like to welcome everyone to the SeaChange International Fourth Quarter and Full Fiscal Year Earnings Conference call. [Operator Instructions] Ms. Schaefer, you may begin your conference.

Thanks, Jennifer. Good morning, everyone, and thank you for joining us. SeaChange released results for the fourth quarter and fiscal year 2012 ended January 31, 2012, today prior to the market opened. Attached to the press release, you will find our prepared remarks regarding financials. If you do not have this material, please go to schange.com/ir to download the document. These prepared remarks will not be read on our call today. Raghu Rau, CEO; and Mike Bornak, CFO, join me here today. Raghu has a short introduction and some comments, and we provided slides on our website to accompany these comments. Following Raghu's discussion, we'll happy to take your questions. This call is being webcast and will be archived on our website in the Investor Relations section. Before Raghu begins, I'd like to remind you that the information we're about to discuss today may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our 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 April 14, 2011. Any forward-looking statements should be considered in light of these factors. Additionally, this presentation contains certain non-GAAP or adjusted financial measures as defined by the SEC. Per SEC requirements, we have provided a reconciliation of those measures to the most direct comparable GAAP measures in tables attached to the press release. Any redistribution, retransmission or rebroadcast of this presentation in any form, without the express written consent of SeaChange International is prohibited. And with that, I'd like to turn the call over to Raghu.

Thank you, Martha. Good morning, and welcome to all of you to our fourth quarter earnings call. At my first earnings call as the Chief Executive Officer of SeaChange, I told you that I would be driven by the mantra of vision, focus and execution. I'm pleased to announce that, notwithstanding the transition in leadership with intense focus on execution and teamwork, we ended fiscal 2012 with our strongest quarterly operating performance of the year. In my last earnings call, I also made a commitment to you that SeaChange will communicate a clear and compelling vision that our shareholders and customers understand, and most importantly, value. SeaChange is in the midst of a transformation. I presented the transformation strategy at the ROTH Conference in Laguna Niguel earlier this month. We have also communicated this strategy to our customers, who have welcomed our focus on next-generation software solutions that they know will give them competitive advantage in monetizing the growing popularity of multiscreen video. I will briefly walk you through this strategy. If you turn to Page 6 of the presentation, you will see that SeaChange is essentially a conglomerate of 3 businesses: that's Servers and Storage business, which is primarily hardware; our Software business; and the Media Services business. Each with different margin profile. While all of these businesses are great in their own right, an important element of our strategy has been to transform SeaChange to become a pure play software company. Towards this end, we have announced the signing of a definitive agreement to divest the broadcast server and storage business to XOR Media while retaining the video streamer software and related hardware business. We are also actively engaged in the potential divestiture of our Media Services business, a new media distribution business with exciting growth prospects, but not core to our future strategy. If you turn to Page 8, you will see that the second element of our transformation strategy is to focus on core service provider customers. Number 3 is to deliver next-generation software solutions, including the video back office, the soft box and advanced advertising to multiple screens. Number 4 is to grow future revenues through upgrades, adjacent products and markets. The fifth element of our transformation strategy is to reduce our overall cost structure. If you turn to Page 9, you will see the actions we have taken to reduce our overall cost structure. Number 1, earlier this year, we announced that we had taken actions that would result in an annualized savings in OpEx of $5 million in FY '13. In addition, we expect a further $8 million reduction in OpEx savings in FY '13 from the divestiture of the broadcast and servers business. We are announcing today that we will, in addition through product and market rationalization, that is exiting on profitable products and markets and G&A reductions, achieve a further $2 million in OpEx reductions in FY '13. These actions are already underway in Q1 and will be completed in Q2. This brings the total OpEx reductions we expect to achieve in FY '13 to greater than $15 million. If you turn to Page 10, you will see our outlook for fiscal 2013. We are providing greater transparency than customary, including a breakdown of the Software and Media Services business at the non-GAAP operating earnings level. We expect to have completed the transformation of SeaChange to a pure play software company with software revenues alone of $150 million to $160 million with double-digit margin non-GAAP operating earnings in the range of $17 million to $20 million. And overall revenues from continuing operations in the range of $188 million to $200 million with double-digit margin non-GAAP operating earnings in the range of $19.5 million to $23.5 million. We also expect significant cash generation in FY '13 with divestitures and operating cash flow. A question I'm always asked during my numerous meetings with our investors across the country is what will you do with the cash? My response has tended to be that we have not made a decision on what we will do. However, we have decided what we will not do, and that is we will not do some big acquisitions. At best, it will be a small string of pearls acquisition strategy to build our intellectual capital and complement our significant R&D investments in innovative software. Today, I can inform you that the board has authorized a share buyback program for FY '13 that reaffirms our belief in the value of SeaChange. With that, I thank you for your interest in SeaChange and will now turn it over to Martha.

Thanks, Raghu. Jennifer, can you call for questions and give us some directions?

[Operator Instructions] Your first question comes from Christopher Ferris with Noble Financial.

Question just around the software revenue guidance that you provided in the press release of $150 million to $160 million. Just to understand, is that against the $165 million that you reported for the 12 months ended January 31, '12?

Yes, that is correct.

So, I mean, I guess that's a little bit lower, a little bit weaker than most people would have anticipated. Can you talk about why you expect the software revenue to be down year-over-year? And what sort of a dynamic is there?

Sure. The most significant decline is in the video streamer business. Recall that we pulled that in from the Servers and Storage business and retained it and have now placed it in the Software business segment, so the most significant decline happens there. In addition, as I mentioned earlier, we have a strategy decided to exert unprofitable products in markets, and that is also impacting the overall revenue line. However, in terms of new products, I mean the percentage of new products increases significantly in the FY '13 numbers. And obviously, the operating margins has significantly increased and will increase.

And can you -- along those lines, can you talk about some of the progress you're seeing with Adrenalin and some of your other products. And I know some newer versions of the products would be available in the coming quarters? Can you talk about how that might help drive growth? And how that's factored into your estimates?

Yes. We expect new product growth to double compared to last year and new generation products, Adrenalin, our Nucleus Soft Box and advanced advertising solutions. If you look at Adrenalin, we've already announced that we have 13 design wins already. We're in the process of launching an implementation of those design wins in multiple geographies across the world. It will pick up significantly in the third and fourth quarter. As far as our Nucleus Soft Box is concerned, we have already got design wins with a major U.S.-based customer, and we expect very shortly to win the endorsement of another major customer in Western Europe. And as they seek to further standardize on the software in these boxes, we expect much greater wins in -- for our Nucleus Soft Box. In terms of our advanced advertising solutions, again, this is generating a lot of excitement because now you can really micro target ad placement and with the growing popularity of multiscreen video, you can have really targeted ads based on gender, age demographic using our advanced advertising platform. So really excited about the launch of all of these 3 solutions. And as I said, it will be an increasing part of our overall revenue.

Just another question on the guidance, if I can. So you're guiding to, on the operating income side, on non-GAAP for $19.5 million to $23.5 million. Just so I know, that's against the $18.4 million on a non-GAAP basis for 2012, is that right?

Yes.

And so if you're taking so much cost out of the business, I would've thought that, that number might be -- you would've guided to a little bit higher number there? Is there something else going on or is -- are you just being conservative in terms of those numbers that you're putting out?

We have been very conservative at the numbers that we're putting out. What we're doing to ensure that whatever we commit to do, we do achieve.

And can you -- just to double -- to clarify, what was the number of OpEx? What was the number that you said you was -- of cost that was being taken out of the business?

About $15 million.

$15 million. Okay. One final question ...

Remember, we are going from a $210 million business to $150 million business and are going to be generating higher operating income. So in terms of percentage, the margin -- I mean that's an excess of 11% at the low end.

Okay. And then one final question, if I could. Was Cisco planning to acquire NDS? Can you talk about, one, what that means for multiscreen video space in general, you think? And then secondly, can you talk about how it affects the competitive landscape, particularly, internationally?

Yes. I mean it's a significant acquisition that Cisco has made. I think what it does show is traditional hardware vendors are looking at software companies, who really add value because the value has been hollowed out of the hardware. And I think it sort of validates and endorses SeaChange's strategy of focusing on the software space.

Your next question comes from John Zaro with Bourgeon Capital.

Great progress. I have a couple of questions on the Server business that you guys exited. And maybe I misinterpreted this or I misunderstood this. I thought there -- you guys were going to give some more details on whether cash was going to get generated. And I'm assuming that, at the very least, we didn't pay them to get rid of it. And then, also to just -- I know that you're looking at other things, potentially in Europe, as far as exiting certain businesses. And I'm just -- if there was any update on where that is? And then just any color that you can give us on -- I know it's been 4 months since we've had some pretty dramatic changes in management. If you could just sort of give us some feedback on what you're hearing from customers and if they've calmed down a little bit, et cetera?

Sure. Let me start with your first question. Yes, we did give business away. I mean it's a very valuable business, and the new investors plan to invest significantly in growing this business and developing in a more cutting edge product, which SeaChange will still have access to as a potential reseller and to be able to provide end-to-end solutions. The figure, I'm not able to disclose, but I can say it's in the high-single digits. The second question was about exiting certain products in markets. Yes, we have, and we will take a short-term hit in revenue, particularly in the first 2 quarters, but it will help improve our profitability in the longer term. And it's a very conscious strategy. We believe it's really important to invest in our next-generation solutions and win market share and establish ourselves as the preeminent force in those 3 areas that I talked about. The third question was about customers, what are customers saying. A really good example I'll give you is what happened during the recent visit to Europe. I was there about a couple of weeks ago, and I met with one of our major customers and a very significant player in Europe. And they shared with me the architecture of the next-generation architecture. And what was really interesting was that SeaChange was designed in, in multiple parts of the architecture. And what also struck me was that some of the more common names that we all know were very conspicuous by their absence. So I think that sort of says it all in terms of what our customer reaction is, to what we are building and the direction in which we're going.

[Operator Instructions] Your next question comes from Blair King with Avondale Partners.

[indiscernible] in for Blair King. I just have 2 quick questions mostly on the modeling side. Most of my questions have been answered. How do you guys see those OpEx savings that you referred to in fiscal year '13 turning out through, on a quarterly basis? I think the -- expect most of it to come fairly quickly or is it kind of a linear approach through the year? If you could just walk me through that as much as you can, I appreciate it.

Sure. Most of this comes very quickly. Probably within the second quarter, we'll have achieved a lot of these savings on an annualized basis.

Okay. So is it -- I mean, is there kind of a drag in the first quarter or is it, call it, 50% in the first quarter, 50% in the second quarter and then you don't have much left over afterwards? Or is it a slightly different break? I'm just thinking from a near term kind of modeling standpoint.

Sure, as far as the $5 million that we announced on an annualized basis, you can take that to the bank. As far as the $8 million in OpEx savings as related to the divestiture of the broadcast server and storage business, that will happen once the regulatory approvals happen, which is another 4 to 5 weeks. The further $2 million that we've announced today will happen beginning Q3.

Q3, got you. Okay, that's helpful. Appreciate it. And then I just have one more question. I don't -- I didn't hear if you mentioned the size of this approved share buyback or if you're going to disclose that? But just wondering if I could get a little color on it?

It's a $25 million program.

[Operator Instructions] You do have a follow-up question from John Zaro.

On Adrenalin, you've won these 13 customers and obviously, it takes time to roll throughout to these guys. And then you talked about another potential very large win. I think you said Europe, but I'm not particularly sure. Are there other people out on the sort of horizon for that? Or at this point, just getting these 13 and potentially 14 up and running is more than enough to take care of business for a while?

Well, we do have -- we're still looking for more opportunities. There are others that we can still win. In terms of the back-office market share, our market share is less than -- it's higher than the rest of our competitors combined.

Okay. And then -- and on this Cisco-NDS merger, is there anything that comes out of that, that potentially creates some competition for you? I mean I know NDS is sort of a, kind of a quirky company, but is there something in there that sort of potentially creates more -- you were doing business with Cisco or as related to that, but potentially put some pressure on you or not?

Not necessarily. We have been competing separately with Cisco as separately with NDS. We've also partnered with Cisco. We have partnered with NDS, so not really. I mean I think what we need to do is really focus on execution of our strategy. And I think the Cisco-NDS merger validates our strategy of the coming of pure-play software company because we see some significant value. Now the lesson of the Cisco-NDS merger is the price, which Cisco paid, which was almost 5x in our revenues. And as you know, traditionally, we have been valued at about half x in revenues. And I think we clearly have an opportunity, based on how we execute, to get similar multiples in the future, and that's what our goal is.

At this time, there are no further questions. I'd now like to turn the call over to Raghu for final remarks.

Okay, thank you, Jennifer. And thank you for -- everyone on the call today. This is an exciting time for SeaChange. As I said, we're in the midst of a transformation. And all of us are really keen to go out and execute and -- well. Thank you. Bye-bye.

This does conclude today's conference call. You may now disconnect.