Mary Conway – Investor Relations Ed Terino – Chief Executive Officer Peter Faubert – Chief Financial Officer

Steven Frankel – Dougherty & Company Jaeson Schmidt – Lake Street Capital Markets Hamed Khorsand – BWS Financial

Greetings, and welcome to the SeaChange International’s Second Quarter 2018 Earnings Conference Call. At this time all participants are in a listen-only mode. An interactive 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, Ms. Mary Conway, Investor Relations. Thank you. You may begin.

Thank you, Matt. Good afternoon, everyone, and thank you for joining us. SeaChange released results for the second quarter of fiscal 2018 ended July 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 the 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 June 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 an update on key sales wins in the quarter; the status of our revenue pipeline; progress on our product roadmap, including improvements to our engineering capabilities designed to drive engineering cost even lower in fiscal 2019; progress on improvements to our professional service and technical support capabilities that have improved the effectiveness and timeliness of service to customers and pushed our gross margins into the low 60% range; and lastly, I will update you on efforts aimed at strengthening third-party partnerships to expand our go-to-market sales capability and increase revenues in fiscal 2019 as well as enable SeaChange to better support customers through third-party resources. In terms of our Q2 results, we are pleased that our second quarter revenue was within our guidance range, while our non-GAAP EPS was at the high end of our guidance range. With respect to revenues in Q2, we were successful in winning a seven-figure subscription deal that did not contribute to our current quarter revenues. On the bottom line, we showed good progress with our gross margin and operating expense performance as we are completing the restructuring actions initiated earlier this year. Further, we continue to benefit from the effective management of working capital resulting in improvements in our cash management and minimizing our cash usage for the quarter. Total revenues of $17.2 million reflect ongoing improvements in our mix of product revenues to service revenues. We continue to achieve product revenue growth year-over-year, mainly driven by license revenues from our largest customer. While service revenues declined year-over-year, our efforts to drive improved gross margin performance have been realized. Further, the expected year-over-year decline in maintenance and support revenues is less than we anticipated due to more diligent efforts we have undertaken to maximize renewals. During Q2, we closed the previously mentioned multimillion-dollar subscription deal with a new customer for an end-to-end solution that included NitroX as the user experience, integrated to our Adrenalin back office. We were successful in selling more licenses to our largest customer, and we completed a number of deals to existing customers for upgrades and for Axiom to Adrenalin migrations. As I stated last quarter, our pipeline today holds more opportunities for end-to-end solutions for mobile carriers in other nontraditional digital media providers around the globe, and we expect to close several more of these greenfield opportunities in the next six to 12 months. The new customer win for an end-to-end solution is quite exciting for us, not only because we received validation that our NitroX user experience product is achieving positive market acceptance, it also validated the market opportunity for an end-to-end solution combining SeaChange's user experience product with our content management capability in our back office. This end-to-end deal is a multimillion-dollar subscription arrangement where revenues will be realized over at least the next three years. For comparison's sake, had this customer win been a perpetual license deal, our Q2 revenues would have been at the high end of our revenue guidance. Our success in selling more licenses to our largest customer is also validation that we have dramatically improved our relationship with this customer. Further, we have significant revenue opportunity ahead of us with this customer as they rollout their cloud-based video delivery platform on a global basis. We now expect that license revenues from this project will be a significant revenue driver for us in the second half of fiscal 2018 as well as fiscal 2019 and fiscal 2020. Also includes in Q2 revenues were sales to several existing customers to expand their video delivery platforms by adding IPTV capability to mobile devices for subscribers as well as continued Axiom to Adrenalin migrations. On the migration front, in Q2, we sustained our momentum in transitioning current Axiom customers to our Adrenalin multiscreen-capable video platform. New transactions in Q2 included three customers such as Armstrong Group, the 10th largest cable operator in the U.S.; and Atlantic Telephone. While we still have about 20 potential Axiom customers, who can't convert to Adrenalin, some of these customers have less than 100,000 subscribers. We still have several sizable Axiom to Adrenalin opportunities that we are working to close in fiscal 2018. With respect to customer upgrades, we were successful in signing deals with several customers who purchased additional products and/or upgrades of content management, IP, VOD and advertising, including customers such as Verizon, Service Electric and Videotron. Moving to our pipeline, I am happy to say that our pipeline entering Q3 2018 has increased to between 2X and 3X the midpoint of our second half fiscal 2018 revenue guidance. We are excited about the growth of our global pipeline, particularly because it is growing in areas and geographies that reflect innovations and our product roadmap and expansion of our sales channels through partners and into new markets. The pipeline growth more specifically covers several product categories: end-to-end solutions, cloud deployments and content management. In addition, as I just mentioned, many existing Adrenalin as well as Axiom to Adrenalin customers come to SeaChange for solutions that will address their multidevice IPTV video platform needs, particularly IP VOD. Looking at the pipeline geographically, we have seen continued expansion with mobile operators, primarily outside of the United States, especially in the Middle East and Asia Pacific, driven by new partner programs we initiated and spoke about last quarter. One last area of pipeline growth reflects our competitor's customers who were concerned about our competitor's ability to continue to effectively serve those customer's video delivery needs. This past quarter, we added two to three opportunities to our pipeline for replacing our competitor's video platform, including a significant opportunity in the Middle East. One additional aspect about our pipeline is, as we told you previously, that many of the opportunities are being offered on both a perpetual license and subscription pricing model. The shift by customers to this subscription pricing model of implementation is continuing at about the same pace. As a result, as we expected and similar to our other companies that have made this transition, SeaChange is experiencing some short-term challenges in generating revenue growth. In the long run, however, this transition to subscription-based revenues will provide more recurring revenue to SeaChange and thus, more predictable and visible revenue growth in the future. Now let me shift to an update on our fiscal 2018 product road map. While we have made great progress with the product roadmap deliverables for NitroX as evidenced by our first win for NitroX this quarter, we have experienced some delays with our road map deliverables in other parts of the engineering organization, from our back-office platform Adrenalin to our content management product, AssetFlow. These delays are adversely impacting the timing of revenues for the second half of fiscal 2018. As a result, we have decided to consolidate the leadership of our engineering organization under Marek Kielczewski, who joined SeaChange through our acquisition of DCC Labs in May of 2016. Furthermore, moving forward, we are concentrating our global software development capabilities in Warsaw, Poland. Marek and his team in Warsaw have performed remarkably with the delivery of NitroX remediation of very difficult customer situations with Liberty Global and Quickline in transition the engineering responsibilities from Manila, Philippines and Eindhoven, Netherlands to Warsaw. I believe that this organizational change will result in improved efficiency, predictability and quality of product road map deliverables at lower cost. As a reminder, in the first half of this fiscal year, we added NitroX support for iPad, Android tablet and smart TV, Chromecast and Amazon Fire TV, with features including binge watching, restart TV, network PVR, Netflix deep linking and advanced search among many others. During the second half of fiscal 2018, our plan includes upgrading NitroX for Apple TV, Roku and popular web browsers. Our feature set will continue to expand with highlights including watch list, companion-based search and download to rent or own options. Next week, we'll be attending the International Broadcast Conference in Amsterdam. We will be showing prospective customers our cloud-based solutions, our NitroX user experience and the newest release of AssetFlow, our content management solutions. With respect to operational improvements, in Q2, we made significant progress in improving our professional service and technical support capabilities. While these improvements are less visible to investors and not always evident in our financial performance, in terms of future revenue growth and profitability, they have a big impact on our customer delivery capability and therefore customer satisfaction. When we engage with customers during our quarterly business reviews, they are telling us now that our professional service and our technical support delivery capabilities are better. This is so important because improved performance by these two parts of our organization help us to drive maintenance and support revenues and gross margin improvement, and more firmly attaches SeaChange to our customers as a preferred vendor. As I've discussed previously, one key element of our strategy is to return SeaChange to revenue growth it is to expand our use of channel partners and technology partners to reach more customers and prospects. This approach makes more sense now than ever before as our products today are better adapted to partner's go-to-market models. During Q2 2018, we also continued to expand our partners in the areas of professional service providers as well as managed service providers who enable SeaChange end-to-end video delivery platform to be run in the managed service environment. Some of these partners that we signed up in Q2 include CTC in Japan, BBS in Argentina and Divitel as a managed service provider in EMEA. Overall, I'm pleased with our progress as we evolve both our organization and our industry-leading products as part of our strategy to stabilize and then accelerate the growth of our operations in a changing and challenging industry. We are committed to leading our industry with innovative new products that help our customers monetize their video assets while optimizing our operating expenses to drive profitability. Based upon our progress so far, we continue to believe that we are well-positioned to execute on these objectives in fiscal 2018. With that, I'll turn the call over to Peter to walk you through our financial results and provide our outlook for the fiscal third quarter and fiscal full year 2018. Peter please go ahead.

Thank you Ed. Good afternoon everyone. I'll start by reviewing our second quarter results before providing you with an outlook for the third quarter and our updated guidance for the full fiscal year of 2018. As Ed mentioned, we are pleased that our second quarter revenue came in within our guidance range and that our non-GAAP EPS results were at the high end of that guidance range. We entered the second quarter with $9 million in total backlog, excluding maintenance and support. We booked new business of $10 million during the second quarter of fiscal 2018, and ended the quarter with a backlog of $11 million. Total revenue in the second quarter was $17.2 million, compared to $18.5 million in the second quarter of last fiscal year. Our revenue performance in the second quarter of this fiscal year primarily reflects the continued decline in maintenance and support revenue related to legacy hardware products, as anticipated. We also experienced a decline in professional service revenue that I will discuss in a moment. These declines in maintenance and support and professional service revenue were partially offset by increased product revenue in the current quarter compared to the prior year. In the first half 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 second half. Product revenue was nearly double what we reported in the prior year quarter, driven by an increase in software sales to our largest customer and an Adrenalin upgrade sold to a customer in Latin America. We have good visibility into the strong pipeline of product deals related to Adrenalin software license sales, NitroX sales and Axiom to Adrenalin migrations, which will continue to support higher product revenues in the back half of this fiscal year. Total product revenue was $5 million in the second quarter or 29% of total revenue, compared to $2.5 million in the year ago quarter, or 14% of total revenue. Video platform software revenue was $3.6 million and accounted for 71% of the total product revenue, compared to $1.8 million or 70% of the total product revenue in the second quarter of last year. The remaining product revenues of $1.5 million included revenues for user experience and hardware. Total service revenue in the second quarter was $12.2 million, or 71% of total revenue compared to $15.9 million or 86% of total revenue in the second quarter of last year. Services revenue decreased due to the completion of a project with one of our largest customers. However, as of today, we have closed $2.5 million of additional professional service business with this customer. Let me be clear that this is separate and in addition to the potential projects for fiscal 2018 and 2019 that Ed mentioned may result in additional professional service revenue in future quarters. We also experienced slower-than-expected delivery against certain professional service projects during the quarter. These were driven by slower product road map deliverables, primarily related to Adrenalin and content management products. Video platform professional service revenue totaled $3 million, down from $5.7 million in the same quarter of last year. Maintenance revenue totaled $8.7 million or 51% of total revenue and 72% of total service revenue, compared to $9.1 million, or 49% of total revenue and 57% of total service revenue in the second quarter of last year. The decline in maintenance revenue was driven by the decrease in legacy video streamer support. The remaining service revenues of $0.5 million included SaaS and user experience revenue. Revenue from international customers of $10.2 million in the second quarter accounted for 59% of total revenue compared to $11.8 million or 64% of total revenue in the prior year quarter. We had one customer account for more than 10% of total revenue in the second quarter with Liberty Global contributing 27%. Our blended GAAP gross profit margin increased to 66% in the second quarter compared to 44% in the prior year quarter due to the product mix and efficiencies generated from our restructuring program. Excluding the provision for lost contract and other non-GAAP charges in the second quarter of fiscal 2018, our blended non-GAAP gross profit margin was 63% in the second quarter compared to 46% in the prior year quarter. The improvement reflects continued effects of our restructuring program and larger contribution of total revenue from higher margin software license and maintenance and support revenue than in the prior year's quarter. Our GAAP products gross margin in the second quarter was 74% compared to 56% in the prior year quarter due primarily to product mix, which included more software license sales in the current quarter compared to the same quarter in the prior year. Non-GAAP service gross margin in the second quarter was 59% compared to 44% in the second quarter of last fiscal year due primarily to greater efficiencies generated by our restructuring program. Non-GAAP operating expenses declined 25% year-over-year to $11.9 million in the second quarter of this fiscal year, once again achieving the run rate expectations that we shared with you at the end of fiscal 2017, down from $16 million in the second quarter of last year. Lower labor cost primarily drove this significant reduction as we transitioned our in-home software development to DCC Labs group in Poland as well as other restructuring efforts and headcount reductions. Given that, we continue to make significant progress in stabilizing the cost structure of our business, our plan remains to invest in infrastructure to improve operations. More importantly, as we mentioned last quarter, we are investing additional resources into our research and development function to support delivery against our product roadmap despite our cost reduction efforts. These investments include scheduled releases for our Adrenalin back office products and next-generation AssetFlow content management products as well as continued investment in our NitroX product. Our primary focus continues to be to deploy products that will ensure the success of our customers. Our non-GAAP operating loss of $0.03 per basic share came in at the high end of our guidance range, largely because we're more quickly realizing the benefits from restructuring initiatives and compares to a non-GAAP operating loss of $0.21 per basic share in the second quarter of last fiscal year. This strong performance allows us to reinvest more aggressively in our operating and product development initiatives, as I just mentioned. Turning to our balance sheet, we ended the second quarter with cash and cash equivalents of approximately $36 million and no debt. In the second quarter, cash decreased by approximately $900,000 mainly associated with our operating loss for the quarter. We continue to work to improve our working capital management. We are finishing the last few elements of our restructuring plans in certain geographies with the target of completing the program by the end of this fiscal year. We do expect to incur additional cash restructuring charges in the second half of this year. However, we still expect our cash balance to fluctuate between $35 billion and $40 billion for the remainder of fiscal 2018. Deferred revenue of $14.5 million increased from $12.1 million in the prior year's second quarter due to an increase in deferred revenue related to our subscription business deals as well as annual service contract billings in the current quarter compared to the second quarter of the prior fiscal year. DSOs, excluding unbilled receivables, totaled 111 days at the end of the second quarter of this fiscal year compared to 64 days in the second quarter of last fiscal year, primarily reflecting the timing of delivery and invoicing of certain product deals. Including unbilled receivables, DSOs totaled 136 days in the second quarter of fiscal 2018 compared to 120 days in the second quarter of last fiscal year. Our unbilled receivables were $4.3 million in the second quarter of this fiscal year compared to $11.6 million in the second quarter of last fiscal year. Unbilled receivables decreased primarily due to the invoicing against service contracts for one of our largest customers, for which we received purchase orders in the second quarter. The timing of these invoices also contributed to the higher DSOs for the quarter compared to the prior year. In the second quarter, we made more progress on our cost reduction program we announced last fiscal year. Once complete, we anticipate we will – once – which we anticipate will occur by the end of this fiscal year. We continue to expect that we will extract [indiscernible] (25:06) in annual run rate costs out of the business. Despite the delays, our goal remains to be profitable on an operating basis in the second half of fiscal 2018. In fiscal 2018, we continue to expect the product revenue will contribute between 20% and 25% of total revenue for the year, which is consistent with the contribution 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 35% of total revenue in fiscal 2018, which is up from fiscal 2017. As previously mentioned, over the course of fiscal 2018, as customers shift to cloud-based deployment models, we expect our revenue mix to transition from perpetual license to monthly recurring revenue. We have already seen this start to impact our top line performance with the subscription-based deals that we have closed to date. As Ed noted, as we continue through this transition, we will continue to increase recurring revenue, thus improving our visibility and predictability of our revenue. With this in mind, we anticipate that revenue for the third quarter of fiscal 2018 will be in the range of $19 million to $21 million, and that non-GAAP operating income will be in the range of 0 to $0.03 per diluted share. For the full year, due to the anticipated increase in subscription-based businesses as well as the delays in our product road map deliverables, we now expect that revenue will be in a range of $75 million to $80 million compared to our prior guidance of $80 million to $90 million. We expect revenue growth in the second half of the year to be driven primarily by software license sales to our largest customer and NitroX and content management system upgrades as we deliver against our product road map. We expect the ongoing cost-cutting initiatives will allow us to maintain our current gross margins in the low 60% range. We have narrowed our guidance for non-GAAP income per share to now be in the range of a loss of $0.03 per basic share to income of $0.02 per 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. Operator, can you please provide instructions for the Q&A, please?

[Operator Instructions] Our first question is from Steven Frankel from Dougherty & Company. Please go ahead.

Good afternoon, Ed. So maybe you could give us a little bit of insight on this multimillion dollar SaaS deal that you won, and when does that begin to translate to revenue? And you implied in your commentary that it was worth roughly $3 million in revenue. Is it worth the same, more or less on a SaaS basis? The $3 million revenue, if it was licensed. So does it translate to SaaS as greater, the same or less revenue?

Yes, translate to SaaS is greater, because it has obviously an ongoing recurring revenue element to it. So it's a three-year arrangement at this point, and one would expect that it would continue beyond that. So on a SaaS basis, it translates into more revenue. Your first question, could you just repeat it, Steve?

Let me – not that I remember it. So maybe we could just talk about this transition to SaaS, yet in the quarter your recorded SaaS revenue was down about $1 million sequentially. Did you lose a customer? Or what caused that interruption and the growth of that line item?

Yes, we did. Peter?

Yes. So the customer that we lost was BBC canceled a contract with us. What we're going to see and what we need to break out going forward, Steve, is the SaaS – subscription-based deals that we're selling right now are really Adrenalin product deals. So what we're going to start doing is breaking out these subscription-based deals out of our Adrenalin product revenue so that you can see both perpetual license deals and subscription-based deals separately. But right now the SaaS deals in the press release purely are related to over-the-top deals with companies like BBC and Filmbank.

Steve, coming back to your point, you asked me why – what caused us to win the deal.

Yes.

And what caused us to win the deal is the fact that we had this integrated solution that provided a user experience that handled so many different devices that the customers, subscribers may want to access their video platform with. It also combined the content management capability as well as the back office, so it was a fairly well-integrated solution that they didn't see any other competitors offering.

Okay. And when would you expect this SaaS deal to start to impact revenue?

Yes. We – actually, it should impact revenue hopefully beginning in the next quarter as we provide some of the professional services to install and deliver the platform. We would expect the recurring revenues to probably start within two quarters. It'll probably take about six months to complete the implementation, but certainly we'll try and get the implementation down as quickly as we possibly can.

Alright. And just to narrow that down, when you say in a quarter, are you talking about in the current quarter or in Q4 you should start to see professional services?

It will be in Q3.

Okay. And so you should start to see the recurring revenue in Q1 of next year?

Yes. I would say conservatively, Q1 of fiscal 2019.

Okay. And these road map delays, this is kind of the second quarter you brought up that issue. What gives you confidence that this latest round of changes finally puts an end to those delays?

Yes. I think that – as I said in my comments, we have a track record with our operation in Warsaw being able to deliver. And while we're still going through the – so the planning of how we're going to deliver and when we're going to deliver these road map features, they've had a pretty clear track record of delivering over the last year, 1.5 years.

Okay. And how many of these end-to-end deals do you have in the pipeline, do you think?

I think what I said in the last call is that they were somewhere between 10 and 15 that we had quotes on. Obviously these are very competitive situations. And obviously they're very really competitive from a pricing point of view, so that's really the biggest challenge in winning these opportunities.

Okay. But you still have 10 to 15 in the pipeline today?

Correct.

Going back to the BBC go off, are Filmbank and BBC the only two of those old J error OTT deals that you have? Or is there more risk to lose some revenue from another deal or two?

No. Those are only the only two that we had, Steve. We determined that from a competitive pricing standpoint that we needed to do more work around how we were pricing that over-the-top solution. And we're working on coming back to the market with more of an end-to-end, virtualized solution that is more competitive from a pricing standpoint.

Okay. And any update on Filmbank? Have they – I know they were going to test a bunch of different types of product offerings. Have we seen any incremental progress in the last three weeks?

So I think what we know is they have been actively trialing the product and we know that the school year for the universities that they're supporting start school this month. So I think what we'll see is based on demand once school starts with this school year, they may start rolling out their solution based on the demand that they're seeing from the student body.

Okay. And would you expect DSOs to normalize next quarter? Or are we kind of stuck in over 100 for the few quarters?

I think, Steve, the funny thing is the quarters that I've been here, the quarters that we have strong product sales, we tend to ship product and invoice in the last month of the quarter. So what I'm seeing as a trend, where we don't really necessarily have collection issues, it's more of a timing issue, number one was new product sales. And then number two, as we've seen for this particular quarter, the significant decrease in the unbilled receivables also resulted in some pretty heavy invoicing activity. So I would say that overall, it's a pretty lumpy process right now in terms of invoicing and collection. That being said, going back to the subscription-based business model as we're billing on a monthly basis or collecting over time, we should see that smooth out as we continue to make the transition. I think in the meantime, if we have high product sales, you may see higher DSOs as a result of that.

And when you talked about an increase in product sales, are you talking about sequentially from this level or are you just saying they'll be up year-on-year in Q3 and Q4?

So I think we've seen it increase year-on-year for this particular quarter. I think it has to be up sequentially for the second half for us to hit our targets. So our expectation is product revenue to be up sequentially.

Okay, great. Thank you.

Thanks, Steve.

Our next question is from Jaeson Schmidt from Lake Street Capital Markets. Please go ahead.

Hey, guys. Thanks for taking my questions. Just want to clarify if I heard correctly. You expect gross margin in the low 60% range for the remaining fiscal 2018?

That’s correct.

Okay. And can you remind us what are the primary drivers to that? Is it largely just mix?

Yes. So I think it's twofold. I think for the past couple of quarters, what we've seen is improved margins in our services business related to cost-reduction efforts in both professional service and technical support. But I think largely going forward, what we’re going to see is that you’ll have more of a contribution from product mix as we sell software licenses into our largest customer. And I think we’re going to continue to improve efficiency on how we’re delivering products. So we’re going to try to maintain the margins of the services side, where they are. But I think an improvement of margins will come from the product side, based on mix.

Okay. That’s helpful. And then the reorganization on the R&D side of things, should we infer that, that could lead to additional cost savings outside the savings you guys have already outlined?

Yes.

Yes.

Okay. And then have you guys seen anything new from a competitive landscape on any of your product lines?

I would say certainly on the OTT side, there is a lot of small startup type competitors that pop-up. On the sort of back office side certainly, there really isn’t. There’s not a lot of new spending going on, there’s not a lot of new entrants into that space. I would say on the end-to-end solution side, we are seeing sort of new entrants who are coming in with an end-to-end solution, which includes a managed service environment. And they do represents and have some compelling capabilities. So there’s a lot of telco-type service providers that are now looking and getting into the video platform space and have built out end-to-end solutions to offer to content owners and other OTT players to go more direct-to-consumer.

Okay, okay. And then last one for me and I’ll jump back in the queue. Do you guys still expect cash to remain in that $35 million to $40 million range for fiscal 2018?

Yes. I mean, our cash expectation is to maintain a balance above $35 million. I will say, associated with any additional cost reductions as a result of restructuring R&D, that we don’t have a firm plan around yet. If that results in more restructuring costs, that could change. But as of right now, we’re not seeing cash dip below $35 million.

Okay. Thanks a lot guys.

Thanks, Jaeson.

Our next question is from Hamed Khorsand from BWS Financial. Please go ahead.

Hi. So you were just touching on one of the main questions I had was, you’ve gone through this whole transition the last couple of years, and you’re still making adjustments to the product offering. And then we’re talking about losing customers. I’m just trying to understand if everything you’re going through and have gone through is more reactionary versus visionary as far as with trends are happening now, especially with TV and content management.

Yes. I don’t think that we are making adjustments to our product road map. I think what we’re making adjustments to is our ability to execute more effectively. So with respect to the product road map, I think we have stated for a good period of time since I began my tenure that we really have a focus on four very distinct areas. The new area we went into was the user experience, and the reason we went into that area is, we found that many people who are looking for video platforms wanted to be able to serve multiple devices, not just serve of video through a set-top box. So we acquired a unit that have the capability of not only building out software for the set-top box, but building out capability to deliver video on many, many different devices and I’ve mentioned a lot of them on the call. So that has really been part of our strategy and road map since I assumed the leadership role in the company. We’ve integrated that to our back office, which is still a very strong part of our business. That’s the second product offering we have. We’ve always had an offering in the area of content management. What we’ve done more recently is try to break that out from our back office offering and make it a standalone product that people could buy who didn’t need a back office but wanted to do a better job of managing their content. And then last area is our advertising product, which is you could say is somewhat of a legacy product with both linear and VOD ad insertion but we’re getting good traction with that product in geographies like South America and Latin America. So I think we’ve had a pretty consistent strategy and road map. It’s just around our ability to execute our product road map deliverables, and that’s where we’ve made the changes I just talked about that will help us to improve that execution capability.

Okay. And then two more questions. First, are you seeing any pricing pressure as far as your business model goes, especially going to the SaaS model?

Of course. Yes, I mean, I think that there’s tremendous pricing pressure. And when you look at end-to-end solutions, just to give you a comparison, to acquire an end-to-end solution from X1, might cost anywhere from $35 to $40-plus per subscriber per year. TiVo offering is probably in the mid-20s. And we’re seeing some of the OTT companies coming in and doing it for $6 to $8 per sub per year. So to go from $40-plus price point per sub per year to a $6, $8 price point represents tremendous pricing pressure.

Okay. And then this contract you announced today that’s over a few years, what’s the initial percentage of subscribers to service providers assuming will convert to this model?

I don’t have the specific numbers. I know about this particular customer has several hundred thousand subscribers that they plan to offer this as a video platform. In terms of the penetration, the way the pricing is set, it’s beneficial to them that obviously, the less people who subscribe, the less it costs them. But we do have a floor on the certain number of subscribers in the contract. So that they have to pay us a minimum, so that we know we’re not losing money. But I don’t know what their expectation is at this point.

Okay. Thank you.

Thanks, Hamed.

Thank you. This concludes the question-and-answer session. I’d like to turn the floor back over to Mr. Terino for any closing comments.

Thank you. As you can see from these results, SeaChange is working very hard to meet its product road map delivery schedule, expand its revenue pipeline and improve its operational capabilities while improving gross margins and reducing operating expenses. All of these elements are critical and enabling us to achieve non-GAAP profitability in the second half of fiscal 2018 and return the company to revenue growth. 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. Have a great evening. Good night.

This concludes today’s teleconference. Thank you for your participation. You may disconnect your lines at this time.