SEAC - Earnings call transcript Q3 2019 | SeaChange International, Inc.

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Operator

Greetings, and welcome to SeaChange Corporation's Third Quarter 2019 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 would now like to turn the conference over to your host, Mary Conway, Investor Relations. proceed. Please

Mary Conway

today Good results thank of for ended XX, Devin. us for fiscal everyone. closed. October released market SeaChange the XXXX afternoon, you, you And joining XXXX Thank the after third quarter

call If Financial you the can at being of on it Executive is access Ed investors.seachange.com. section and copy Officer. With the Faubert, Relations today's Web Officer site. release, Terino, section will call Investor are you and on our be like Investor would the a This of of site Chief me Web Peter our webcast on Chief archived Relations

expectations filings, XX-K, Before statements XX, I a number factors. Annual are our filed risks begins, outlined considered may risks our that discuss XX-Q, which forward-looking XX, Report materially subject and remind our on April you of of today light cause in may on expectations. uncertainties differ be including filed was September Form information current we SEC XXXX. include to forward-looking on Ed are XXXX, actual that like recent was Form Any about These from which results to would in should most to are are these statements, that to on and which based

non-GAAP Additionally, as defined this financial adjusted certain presentation by contains measures or the SEC.

And comparable We remarks. over have release. provided I'd turn in that, measures GAAP directly tables Ed to of the to to these most a opening the press with reconciliation like the for attached the measures call to

Ed Terino

afternoon Mary, and good you, Thank everyone.

could join our We this call you are afternoon. glad

I today's what outlining in start call. Let me cover by will

this you QX share to deals additional that wins past and quarter update delayed. want on I were insights on First, key

in strong, to XXXX. that on revenue the The key us sequential good is fiscal for our our position well news about remained achieve you including us growth bookings we growth sequential believe we remainder our are opportunities update XXXX. and in confident the of will in growth and pipeline for QX for enable I'll QX Second, opportunities that bookings XXXX, pipeline fiscal

you we to I'll bookings as developments recent our with contribute soon opportunities will QX. roadmap, as which Third, near-term update on product believe

cable with start revenues customer highlights nearly our generated $XX.X would approximately quarter, bookings, QX the in we were linked X we based the with Tier Video above potentially million wins, guidance. including a tell will about Russia. some Tier and line Eastern in new solution million you customers. of We Total results. for in won its $XX of 'XX and Video, Video quarter million is Top and I customers. cable for TV $XX reach midpoint Total In new me amount or our Let was Russian our double seven-figure some the IPTV from QX Europe. X QX. like to Cable platform deal customer, BXB suited Russia a Association recorded closely some with AKTR, best the Total the operators in

European channel QX partners Tier of includes a delayed X that a to America X of and some won won in a deals deal the We QX in closed two in customers, support was will South from provider provider. last short that the in set-top in provide were We closed was in from deal that a Both we in a American including platform. and We signed closed Asia-Pac and delivered America North delivery to North to one which North video the with upgrade sub-million seven-figure Asia-Pac deals cable addition service operators in This we provider, with seven-figure Total one several American these Asia-Pac. that cAds list American also expected SeaChange we close dollar one In also their upgrade of deal was the Latin our that content one its We QX. SeaBridge but service were IPTV through seeking in up existing platform, another close multi-year seven-figure and with deal deal new Several The delayed American to we to customers, successful deals companies in added of Tier closure. the leading XX and boxes early closing with deals OTT to for QX, seven-figure service our and the long commitments months. were And anticipated delay Video pipeline. also QX, resulted remained upgrade video and in a Latin customers. IPTV QX offering seven-figure a QX. maintenance.

discuss to to remainder pipeline see like of the opportunities solid XXXX. continued we list would I Now, our fiscal of where for

cAds than of and Most order. enter As our pipeline are SeaContent with that strong be at level in was service it QX. we PanoramiC, the SeaBridge, The opportunities our slightly of providers. QX, continues at to pipeline a consists mainly of opportunities higher end

However, we our content increase for and wireless opportunities with broadcasters. owners an carriers, pipeline are seeing in PanoramiC

bookings expect in a strong to quarter QX. We have

$XX for bookings are we QX our million forecasting plus in While pipeline for QX represents million close in the range. to deals, $XX

revenue structure we revenues XXXX in and large guidance the However, these midpoint will we transactions achieve as in timing be of due of that with $XX are backlog and again, new not both near-term fiscal to backlog, in enter and in the and a entered approximately seven-figure Using several that our customers. QX XXXX million. million we the deals. in recognized our QX of of QX, bookings portion QX pipeline fiscal $XX target existing million revenues bookings including our be delivered will to and instead need we revenue in estimate of the as included order Once QX of booked $X be to QX will additional in to

One purchase from Liberty is license in critical transactions Global. QX of the a

by Liberty purchase in While licenses with at QX. Liberty of expect we are still in we the time, discussions this seven-figure

a like America existing where partners and South other basis customers, platforms. in pipeline of Some we’ve opportunities of are geographies more are having expansion upgrade and video majority direct of dollar been the in the our lately. opportunities But customers sales with on through pipeline especially for success Asia-Pac deals near-term for our new

added with are our towards dedicating cAds upgrades, product closing continue solutions. SeaContent these success several as SeaBridge several as upgrades, and effort well We

that also overall not We prior in the have for we QX of slipped several quarters, still PanoramiC opportunities least to and at repeat but includes I the XXXX, we will of fiscal lost deals. from close these. pipeline that hope these deals have have pipeline one

like video on roadmap. their Now, product to innovation let our that solution several and are solutions. improve SeaChange innovate and providers There update trends video you are me driving

viewing anytime, accelerate in anywhere, changes continue on for pull First, any as habits such to versus video. anyplace push, device

the driving new new as as management models platforms. need Second, for are well business solutions in delivery and flux,

platforms last, cloud’s to private Third, cloud, reinvent take native. the video com moving many solution to is require XG transforming migration have networks, to Video current public networks. must IP to advantage and platforms are yet solutions and solution video network in cloud of both to enable from And networks support IP to be their and to XG-based video reinvent providers moved usage to scalability. cases, video the platforms flexibility already providers their

four focus product fiscal our As areas we in we have roadmap. XXXX, of enter

these leverage back hybrid opportunities leverage which set-top and believe also offer our delivery augmentation; a year, for to for only enhance middle standards video viewer evolving investments mata built online boxes. deploy day platform a continuing SeaBridge micro-services to features; OTT full and and that solution our data our or cloud one public but platform automated and and video industry into not a next Platform AI to includes on expanding to and in our industry's operates content CAAS improve content offering back platforms of configuration customers’ dynamic by management office to solution media supports automated platforms. the only fully managed SeaChange content SeaContent expand our of platform deployment. video and that and multi-tenancy cloud’s continuing SeaContent We that to service have solution, and data offer management advertising a all we asset enhancing will First, management, the By to office to in spot their video interface while a provides fully the third-party a plans benefits capabilities management OTT enrichment processing provide deployed independent customization; workflow cloud, continue will that services operator virtualized based be cloud monitoring solution; XXxX video enhancing architecture,

on the focus turn to Peter, our profitability of in fiscal first over I regaining XXXX. underscore the Before operating I call to want quarter

shareholders, customers Peter. portfolio growth hand strategy benefits new growth transition accelerated employees. we taking the that, to we the With remain the is and over our long-term like, to to of longer new customers all of our While call for than confident in our product would drive I’ll and with

Peter Faubert

quarter with third book backlog, and Thank We new you with during business million maintenance million reviewing support. Good of for $X.X quarter of fiscal fiscal $X.X our quarter providing start I'll our an entered XXXX of quarter updating in for afternoon and before We the the quarter million. with outlook excluding year you, third guidance the and Ed. total the $XX everyone. XXXX. a fourth by results ended backlog third

of revenue cannot XXXX Total QX in that was recognize compared importantly, our continue we third quarter As XXXX. opportunities better fiscal the above -- achieve them us the recognize in will of guidance confidence of with of the QX midpoint provides million that revenue year, in all our us timing pipeline of revenue of the in have the fiscal year close Ed to the this million quarter strong them positions prior in fiscal and $XX.X to in can for to and third That more for fourth quarter fiscal year. the we deals. we if those growth $XX.X revenue significant stated, targets nature on with updated we even due all

primarily was compared product to to customer compared revenue to lower last sales to product less year, prior due largest year. the our Our

of before fiscal in the should We subscription see opportunities rather close this continue pipeline end of term than that deals licenses to our year.

ago for revenue. XX% product XX% deals at compared result to forward. and revenue million $X.X predictable total the in in advertizing quarter going much year to $X.X was increase product $X.X million XXXX of in the in quarter in Total year. a revenue top the $XX.X in million or As the revenue product the compared these million quarter revenue revenue was compared negligible for quarter note amount but million million last substantially backlog $XX.X year's I'll our third software and contribute the to last was third or line we this product of the this stream fiscal will XX% and year, services or third total last accounted the compared fiscal reminder, higher will as quarter third year that recurring fiscal of Video year. or XX% XX% will in million were revenue not total more $XX.X this revenue of total exit to of revenues platform total a year's to in third revenue of quarter. Total or quarter XX% fiscal of $XX.X revenue total of third in

Four maintenance closed of revenue $X.X of platforms XX% video of million total this in XX% total revenue quarter the do fiscal these to to As XX% opportunities in than the service the time, when our advertising this of from customers Video more million the $XX.X more customers of continue represented last of compared totaled year. as of year platforms. our customer the million fiscal quarter based benefit off compared upgrade most to year of or the as compared of XX% million our service see service year and total in decommissioning of we further hardware Maintenance recent third XX% revenue quarter more legacy from revenue $XX.X revenue the decline professional last of third of same year. subscribers comprised advertising migration as legacy third our quarter. third the continued transactions million was next-generation to more in million to legacy one $X.X types Revenue total XX%. in compared total than of axiom by prior advertising of quarter. the XX% $X.X $X.X or expected, total of each well to year in quarter of last the fiscal revenue of of revenue quarter and of third hardware, revenue to virtualized comprised platform same to from driven software At revenue international of in the total revenue XX% or customers quarter,

The compared a Excluding margin gross in margin compared year's non-GAAP prior quarter our XXXX, of product third year period. quarter. margins to non-GAAP charges quarter more the of this XX% of prior XX% QX result third in in profit fiscal fiscal to was the sales was in gross XXXX hardware year's lower lower

Our gross the XX% prior The the was mix, that in announced year in year driven of this from expenses XX% the lower we in as third for higher expenses million, our largest guidance. operating quarter by in customer. product adoption and quarter. sold quarter of decline licenses $XX.X the non-GAAP Non-GAAP September, in margin the the gross the to in of XX% compared in service third in of than third $XX cost prior product to year new was quarter costs year initiatives to targeted year to compared we which margin the consulting was software Non-GAAP ongoing reduction XX% $XX.X to same prior quarter. Contributing down managing. million lower revenue fiscal the were the operating were recognition we prior by the XXXX offset the quarter million margin were

remainder year. return initiatives cash quarterly savings operating of of normal and in quarter implemented and designed continued the invest in year we positive compared fiscal quarter revenues million profitability basis. this should over sales marketing and to same expected initiatives quarter we to savings us the that non-GAAP The resources a XXXX operating In quarter $XX of marketing position year. and rate these in to fiscal per below the and for to same cost fiscal next The were on of our this the expenses quarter fiscal our cost third the run to additional year to combination decrease into first initiatives addition, overall last flow of

was income of the EPS of in of in operating diluted last of $X.XX quarter third which midpoint to per per fully $X.XX the Our non-GAAP loss compares basic share, guidance our non-GAAP operating a year. fiscal share

quarter, balance fiscal and at savings capital cash in July to initiatives, Turning from quarter of of quarter year. of by fiscal days XX maintenance unbilled XXX quarter as post our quarter. the quarter days to agreements third of last warranty improving with debt, the XX, cash during $XX.X quarter ended compared the $X.X We our receivables, for as of this million used and $XX during approximately unbilled to cash of sales at sheet. compared the to third decrease excluding during driven of million of primarily in quarter. success outstanding funds year. of operations third The million $X.X fiscal well shows and the revenue and we $XX.X of by as the quarter this year working days Day quarter. support second timing the equivalents our the XXXX payments revenue continued year. no XXX end quarter sales the renewal in the recognized was approximately the fell year This third in the was quarter driven to related compared Including last receivables the end of XX million days and and fiscal last fluctuations totaled cost collections last Deferred third as discussed of days this million in in outstanding year's third the third cash

this quarter invoiced three the year of the receivables million as shipments were were not unbilled XXXX. fiscal quarter end increase a quarter $X.X of last $X.X product in The million XX, of is year. customers that yet third October the of of to third at in fiscal to this Our compared result

work contribute for not the and product timing the we the to professional year. which service will in In were total for XX% billed. addition, customers the reflects of revenues SaaS during including quarter the yet fiscal delivered XXXX, Overall change continue approximately revenues expect revenue

We also to of XX% expect revenues maintenance XXXX. revenues fiscal in approximately be total

products the contribute in the that They revenue opportunities, for from to bookings will services represent and timing Ed SeaChange channel recognition driven the services partners. fiscal by those These as revenues services products In backlog expect these fiscal the expect By mix subscription described. professional multi-year our of XXXX At pipeline business portion to increase Lastly, forward. a and short-term. could opportunities in the recurring of deals large the and we revenue as growing opportunities fiscal XXXX, reflect more based models. on combination significantly winning time, a between impact in XX% and be continue licenses of we total well our direct revenue XXXX. transactions approximately of in revenue as will going of we perpetual subscription same

I initiatives quarter in the provide an update that to wanted fiscal third we of XXXX. savings discuss I cost guidance, on Before the implemented

approximately As noted, areas. million reductions this the the completed complete primary expect third produce of end we will when year. completed actions savings our functions across fiscal the all and end anticipate the of this staff quarter, of was it will The be program we annualized remaining cost that before geographic year. and $X were elements of the of this At program largely

share to of revenues of share. $XX We will million Moving a fiscal in will our and million $X.XX be XXXX outlook. anticipate per loss in fourth the diluted that of the of be range to the to quarter results operating income $X.XX non-GAAP range $XX per for of basic that fully

the and range that pipeline, of the timing major the year be closing potential business upon anticipate opportunities in million now For of $XX we million. business to in number related the model full $XX of based to a will revenues

you of platform-as-a-service, or but significantly a bookings $X.XX we opportunities this our stated, remind to closed, will requires revenues which our once only year some revenue large of the updated year. share basic in We to will multiple material XXXX. for achieving fiscal loss in of SaaS to not now range license them contribute us. closing of revenue fiscal have of the today, per expectations that opportunities Ed portion available I'll full loss As pipeline the non-GAAP to contribute anticipate total a operating year full $X.XX

We hand much. expect to will Mary. you of fiscal attain to operating that, in Thank With back I the very call profitability QX XXXX.

Mary Conway

can Thank you for the instructions you, Q&A Operator, Peter. provide session? please

Operator

time, be question-and-answer conducting At Instructions]. a we this session will [Operator

of comes Our question with your Dougherty. Steven Please the from line Frankel first proceed with question.

Steven Frankel

significant the optimistic pipeline the for fairly your a that fact change coming more worth business start for is to like despite that much $XX QX out optimism could to the gotten between and SaaS, conservative guide? back the you business not $XX is million like that quarter outlook Have in of you would with in so a revenue. year. or had million miss, outlook the the Last thought close the I something the that it’s What's full you lot half. this to going now lower change of you be QX to of

Ed Terino

it's would things, Yes, of I say combination a Steve.

had while larger large obviously will a customers, it’s think out still possibility than figure license that and/or to So, that still we two would which we what And going see our have the will other would one, we fairly anticipated next seven year. slip we there we expectation fairly to either then of had expected at QX less was that to an we know earlier. be one that deals with one And while QX. sizable we there deal in be three least see is them, that

have do QX sizable addition, pipeline. sizable fairly several -- deals in fairly In we the

late won't and January in One expect December, them revenues a that deal deal in the able of SaaS to for of is we any we timeframe the be which to QX. them close take is one

that won’t than QX. QX, look we a that when it it's revenue in book of the able expect, was So lot at larger what we be the much recognize but numbers to we'll you bookings in

Steven Frankel

are your million at look do in half out back this in back bookings $XX half go about talked to had So likely you Maybe now? way? like bookings. you million $XX to What think the

Peter Faubert

million and at bookings in quarter. So QX, of QX expect stating we puts $XX that that in last million end we bookings us the in expected bookings to Steve, with low million million in $XX range XX Ed $XX that that

we're one do our difference that. in sales So I larger track to originally expected. is think than to license I still on QX of lower the And we bigger think customers

Steven Frankel

this overall had that think And license time? change a it Is to a in that they smaller in what you it their Is a round how timing? are customer your come for back change led viewing demand? Is of at products?

Ed Terino

change how a product. they're certainly It's the viewing not

want or further. at related I the in engaging them still to use on all. our to isn’t all technology any We’re discussions, with at of it But really comment it so don't

Steven Frankel

And highest margin? Is what caused which piece the less maintenance, pressure the the services on pie? is just services of that

Ed Terino

professional the on more it's Steve. No, service side,

have PS with are lower fixed third still base we quarter cost about quarter. the to cost base, to that professional the party our organization, and higher professional for We talked fixed in high pressure the a we migrate resources. and services it fact trying of that have on lot this But external this margins the certainly fairly put a revenue service

that maintenance fairly consistent. support have seen margins the have been We and

So on PS side. it's the all

Steven Frankel

percentage was Liberty as this what of revenue quarter? And a

Ed Terino

XX%.

Peter Faubert

the year Just a that year ago. last XX% was to quarter compare it in

Steven Frankel

continues really Or new does into these opportunity And 'XX the Company do beyond? and products after success that you this new believe fiscal shifts quarter the them with customers? to driving to your extend next into now

Ed Terino

do to both, expect into continue It's but to Global. Liberty sell we licenses

that their about represent roughly they subscribers base about would growing million additional million So, and been have subscribers $XX by a with enhanced year, subscriber $X.X year. XX% a

types new a taking those they sizable put Now, opportunities, we have some of of obviously we are to revenues. We of in and new we there a also annual both. continue to our Liberty expect a going numbers, contribute have are combination are after markets those but it's but dent products divestitures and portion that may

Steven Frankel

impacts of anything in shipment to in Does that invoice you that tie? that the what on terms totally stack do with product deliver your the quarter. side have didn't didn’t or ledger get And of the to something where

Ed Terino

deals obviously quarter. the of shipping was the end So, then of a the timing product the it towards closing of and lot

deals Some issued of more a these in much -- getting order arduous some customers. say, America around of would I is Central and were from purchase there a these process

it's So, our side that product… work delivery more the of than invoicing right on our prevented us paper away from really or customer

Peter Faubert

execution… Our

Ed Terino

Acceptance, right…

Peter Faubert

closed And of quarter the we one a ship seven-figure day the last other the on able and literally that weren’t was deal to it…

Ed Terino

shipped we licenses… software But those

Steven Frankel

And [audio these Central American in in quarter? of far deals any those closed that gap] so you this

Ed Terino

we Yes, of them a it’s received so, have first three process have the -- and the we PO with three-part POs.

So, and we couple will be to able to weeks. here orders other purchase issued shortly the invoice a coming portion two be of up in the of expect that we next

Operator

question Our Khorsand line next your comes Please of from with Financial. BWS the proceed Hamed question. with

Hamed Khorsand

subscription how off, was much driven? first revenue the of So QX

Peter Faubert

amount Really quarter. a negligible the third in

Hamed Khorsand

What expecting be are that QX? in you to

Peter Faubert

Again, in that expecting line contribution this don't fiscal from QX, any book year. are or expect to those we SaaS subscription deals for deal we top

So, again negligible amount this year.

Hamed Khorsand

revenue you instead year? about yet go I'm for into So, the like know we coming revenue just next licensing, going through I negligible? next as is more to of what more I mean, what trying you’re going to it to be be impactful talking is and but understand subscription of Or mean looks don't it impact is year.

Peter Faubert

impactful that operational. So, going to to you but think certainly, have it's get be I platform

and did would We revenues materializing. -- delivering to we QX start then to a subscribers we months expect, subscribe deal to roughly deal, the and having get somewhere let's Israel to in it less then were XXX,XXX. subscriber a So would to and six years if taken in up us which a and it's up and couple between running three Partner the subscription it's XXX,XXX. to six similar the count this get it, to and in say that platform than year-and-a-half take with platform up ago But was running they Communications build them about months. taken zero count subscriber from of built them -- a But

the a than SaaS do do So, slower deals. license deals perpetual they come revenues at with -- license with pace

Hamed Khorsand

think going -- so that how you about mix But you are that we to -- that’s the down are of impact, be talking much? much

Peter Faubert

next significant we’re I really than less actual perpetual up think XXXX that haven't revenues. would of think mean, expecting revenues our I be into dug going will don't a and percentage, We be a year. XX% it’ll revenues. of the We than obviously, revenues big grow be still fiscal of our XX%. to to be certainly SaaS will less say We make that maybe revenues portion even

Hamed Khorsand

restructuring the to then next for positive just that for phrase be this cash Or able requirement into free are And you you flow and went that fiscal through, flow given cash -- me year? cash QX positive? let

Peter Faubert

QX positive So working changes turn obviously that do are to QX flow but tracking return and flow managing cash breakeven positive, to and regularly. be And to on we’re cash to profitability in depends we cash factors, fiscal capital flow it other -- but we in expect of XXXX.

Hamed Khorsand

cash flow? Could you just or clarify if cash just it’s free

Peter Faubert

free It's cash flow.

Operator

Dougherty. with the Please your from comes question of line with question. Frankel proceed Steven next Our

Steven Frankel

on go you? that customer named, revenue, with to that you Is have talked generate offer you revenue deal to out you deals follow-up is a for that they the Just ultimate Russian about. see entity that strike to customers material the

Ed Terino

So, it's both.

or And beyond then million revenue different from to have But all subscribers they operators. there cable generation and the pay a the be certain operators, us money and go have seven-figure a additional of they where the out an that. deliver platform. it's but amount of the build then to money and out the of it's XX really small list a -- will so various we So, platform deal amount seven It's that, figures. a do very then

Operator

Ed for are would closing Terino, in to there left I CEO, remarks. further the Since Mr. like no call questions queue, to over turn back the

Ed Terino

Well, this Okay. for again thanks joining evening. us

progress with revenue diligently pretty pipeline. so am an team solutions new year. products heard, a working portfolio much accomplishments. these are and members operating with truly identity significant And response targets to you've the the for and market. brand our to exciting our we in have solutions and growing launching contributed innovative made We've who and I this hope grateful to we're I As to our new achieve revised encouraged And from profitability

in important partners we're We place, go performance approach confident today now benefit in joining your have with are mutually for a and these to into geographies interest us. With continued and adapted and as for we're all revenues our generating night. evening. products world, line us achieve bottom sales support financial XXXX. top productive that our that we new relationships line creating elements Good to everyone Have improved great in can and around Thanks the in marketing and for fiscal markets relationships SeaChange. we partner

Operator

This concludes today's conference.

your time. for You Thank at you may disconnect lines participation. this your

SeaChange International (SEAC) 10 Dec 182019 Q3 Earnings call transcript