SeaChange International, Inc.

Good afternoon and welcome to SeeChange's fiscal fourth quarter and full year 2023 conference call for the period ended January 31, 2023. My name is Diego and I will be your operator this afternoon. Joining us from the company is Chairman and Chief Executive Officer Peter D. Aquino, President Chris Klimmer, and Chief Financial Officer Mark Shinkoski. After the market closed today, C-Change issued its financial results for the fiscal fourth quarter and full year in a press release, a copy of which is available in the investor's section of the company's website at www.cchange.com. Before we begin today's call, I would like everyone to please take note of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in the forward-looking statements that management will be making today. As indicated, forward-looking statements are based on management's current expectations and are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. These risks and uncertainties are also outlined in the company's SEC filings, including its annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements should be considered in light of these factors. Additionally, this call contains certain non-GAAP financial measures, as that term is defined by the SEC and Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. C-Change has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures in the company's earnings release issued today. I would like to remind everyone that this call is being recorded and I will be made available for replay via a link available in the investor relations section of C-Change's website. Now, I would like to turn the call over to C-Change's Chairman and Chief Executive Officer, Peter D. Aquino. Sir, please proceed.

Thank you, operator. Good afternoon, everyone. This is Peter Aquino, Chairman and CEO of C-Change International. Welcome to our fourth quarter and fiscal 2023 end of year call. So going back to January 2022, the beginning of our fiscal year, the leadership team at C-Chain set out to achieve three specific goals by fiscal year-end. The key categories were, first, improved financial performance, second, service excellence, and third, executing on a large Development Plus project that we were planning on with VIDA. I'm happy to report that we exceeded expectations in all three categories. And now I'll just briefly highlight the fiscal 23 accomplishments. First, we set meaningful financial performance goals. We strive to grow top-line revenue and exit the year free cash flow positive by the fourth quarter. The numbers truly tell the story of our fiscal 23 accomplishments. The revenue for the year was $32.5 million, and that's up from $27.3 in fiscal 22. That's 19% up year over year. EBITDA was set beyond breakeven on a cumulative basis for the year. And that's versus negative 4.5 million in fiscal 22. With a record 1.7 million in adjusted EBITDA in the fourth quarter, that's over a 12-quarter period. We're now EBITDA positive not only for the fourth quarter, but for the entire year. EBITDA swung a positive $5 million year-over-year. And this is due in part to strong sales in fiscal 23 and continued cost control. Our management team right now is firing on all cylinders, so we're very proud of the accomplishments on the financial side. Second, we aim for operations improvement and encourage client software upgrades that ultimately leads to better end user experience. Our customer support team goes beyond the call of duty and looks for ways to collaborate with the leading MSOs, mobile and wireline broadband operators and satellite providers to target trouble areas and minimize disruptions. Sometimes this requires software upgrades and implementation investments on both sides that none of us can no longer put off. We view these investments as joint contributions, and we also invest in talent and expertise to make these upgrades as seamless as possible. Throughout fiscal 23, we managed to upgrade nearly a dozen software platforms for the who's who of leading video and advertising providers around the world. Customer service improvements also lead to lower costs and minimizes churn. Our customer churn rate is close to zero, and that says something very positive about our core software products and our support team. And finally, we set out to execute a potentially transforming Development Plus deal with Vita and Hisense in fiscal 23. It was a significant test of our software engineering skills in our 100-plus for a team in Warsaw, and they passed with flying colors. VITA required C-Change to hire, manage, and execute on a roadmap directed by VITA that required an entire software development joint effort carved out of our existing polling team. And we did this in about nine months. By the spring of 2022, we began to hire new experienced software engineers along with our talent pool in Poland to develop Vita's future streaming platform for their connected TV operating system, now hitting the market in a phased approach globally with millions of devices to follow. If you visit nearly any Walmart, Best Buy, or Costco in the United States, you will see a Vita free TV marketing on Hisense Smart TV inventory on display. Your takeaway should be that C-Change is inside. With our Development Plus contract that features a long-term engagement between our companies, C-Change leaps into a new chapter. We're not just work for hire. We are partners with our clients. Their success is our success over the next years. It's a real step forward as C-Change is a value-added partner. And in summary, if you look at C-Change's evolution in just 12 quarters, we created a growing, profitable platform that is poised for the next step up to gain scale. We expect to be a net contributor and accretive in any combination that focuses on the tailwinds of video streaming, ad tech, and fast channel development over connected TVs for the foreseeable future. Our mantra is to continue to improve our recurring and SAS revenues with our existing and new logo operators and content publishers alike. And we want to remain in the best position to be opportunistic as we explore strategic alternatives. So at this point, let me turn the call over to our president, Chris Clemmer. Chris?

Thanks, Pete, and good afternoon, everyone. Thank you for joining us today. As Pete has already laid forth, we did end fiscal 23 on a high note, and I'm happy to report that we generated substantial growth across all of our main KPIs. Our financial performance reflects our company's transition to a more sustainable level of growth and profitability. It also shows that our core value proposition, that is focused on helping our customers to distribute and monetize their content portfolio continues to gain traction in the exciting, dynamic and rapidly growing TV, streaming and video advertising markets. Instrumental to our successful operational performance in fiscal 23 and our positive outlook into fiscal 24 are our three drivers for success. First, our team. More than 100 in-house video software developers in our R&D hub in Warsaw and 50 field engineers globally continue to develop innovative TV streaming and advertising solutions to add significant value to new and existing customers, both by increasing operational efficiency in fairly complex TV and streaming ecosystems and by introducing services that generate new and incremental video revenues, such as our ad insertion solutions. Second, our portfolio of state-of-the-art video software products. These products are built to deliver premium multi-screen and streaming experiences across all device platforms, content types, and business models, leveraging vast monetization capabilities, especially through smart and targeted ad insertion. They are continuously iterated using the latest back-end and front-end technology stacks and are designed to capture the opportunities that arise along shifting consumer trends. Third, our customer base. We are privileged to call the who is who of global MSOs, cable companies, and mobile operators our customers. For most of them, we have been providing our solutions for many years now. Our engagement models with them are based on continuity, stability, and continued optimizations and upgrades of the deployed C-Change software. With frequent upgrades and extensions, we ensure that our customers remain on the up-to-date technology and continue to receive value-add services to their ecosystem, which they can roll out for their subscribers. I would now like to take a closer look at the fourth quarter of fiscal 23. As Pete had mentioned before, we executed on our strategic growth plan centered around three core pillars. First, and in line with my previous remarks, Concentrating on renewing and fortifying relationships with our long-standing TV operator customers, which has successfully led to multiple engagement renewals and upgrades. Second, bolstering our recurring revenue stream by securing higher margin SaaS deals. And third, by innovating with new and expanded products and services that can help our customers optimize returns across all TV and streaming channels, as well as enhancing end-user retention and engagement. To start, I'd like to highlight two key announcements we made in the past quarter, including the launch of Xtreme, our cloud-based content monetization platform designed to maximize ad revenue on connected TVs, as well as the launch of VidaFree, Vida's streaming hub of free advertising-supported video leveraging the same Xtreme technology. The launch of Xtreme signifies C-Change's commitment to capitalize on the consumer evolution to content consumption on connected TVs and provides new products and services that help our customers to maximize returns across all TV and streaming channels. As consumer preference shifts away from linear and pay TV to streaming and from subscription services to advertising-funded television and content offerings, we've seen an explosion of consumer demand for comprehensive content aggregation and discovery on connected TVs. With the launch of Xtreme, we are able to address this trend in consumer demand, enabling access to a wide selection of content independent of a cable subscription or setup box. while providing a premium streaming experience for the end user and benefits to content owners and advertisers. Xtreme provides significant value add to content owners by providing them with a new distribution channel and revenue stream to maximize return on content cost. On the other hand, the platform provides advertisers with intelligent tracking and targeting through big data to help improve conversion rates with fast advertising. The Xtreme platform, in addition to being another innovative offering we have released, will also help C-Change expand its SaaS offering to customers and generate recurring, higher margin revenue. Leveraging the same Xtreme technology, we also were able to jointly develop the VitaFree solution, which was rolled out on millions of Vita-powered smart TVs from Hisense and other TV brands this past January. With SeaChange Extreme technology, VIDA will now be able to provide a superior streaming and advertising insertion solution to accelerate the expansion of free ad-supported content globally on smart TVs powered by VIDA, in addition to enabling full control of video content and the ability to seamlessly manage, curate, publish, and monetize this content. As more content becomes available under advertising business models, smart TV operating systems like VIDA are becoming the primary gateway to publisher partnerships. The launch with Vida validates the consumer shift we've seen away from cable and subscription models for advertising content, while allowing us to further expand our strategic partnership with Vida, as well as participate in their continued success. This increased partnership with Vida has been the result of continued innovation from C-Change and will play a meaningful role in our growth going forward. Speaking more to our developments with existing customers, the company closed on multiple renewals during the quarter with Tier 1 and Tier 2 operators in all three of our main geographic markets, including North America, EMEA and Latin America. These renewals further demonstrate our ability to deliver on our strategy of fortifying relationships with our long-standing TV operator customers. Continued execution on this strategy remains a top priority for SeaChange, as we improve our existing products, deliver increased value at professional services, as well as secure system upgrades for existing customers. Continuing with other recent developments in the quarter, we launched Source Digital onto our Streamlit platform. Source is a true innovation driver in the connected TV and advertising space, who, along with their partner Sanser, enable a unique metaverse experience that can be streamed on LG devices. In September last year, we partnered with Source Digital to jointly develop the Source platform with Sanser. The platform now combines Source Digital's activated moments, a Web3 alternative that creates immersive and personalized user engagement across any video or digital metaverse experience, with Sansa's Metaverse platform to showcase live so-called meta-events, such as concerts or sports events, and C-Change's StreamIt platform, through which these events get streamed and monetized. Through the source platform, users can immerse into a digital experience, interact with other users, experience concerts, and purchase merchandise with the optionality of switching back and forth between a live event streamed on an LG TV and the 3D metaverse. In addition to adding more high-margin recurring revenue through our SaaS-based platform, The launch of Source gives us a pre-packaged solution for the metaverse that C-Change, together with Source Digital, can co-sell to a variety of content owners globally. In addition to co-launching the Source product, we are also finalizing a Streamlit launch with a major media company in EMEA, which we expect to go live in the coming weeks. This is yet another company that sees tremendous value in our SaaS-based platform. which provides our customers with flexible billing and payment handling, including in-app purchases, vouchers, and refunds, advanced analytics to track key service metrics and make data-driven decisions to optimize the business performance, support for all content types, including VOD, LiveLinear, and TimeShift, with the option to add fast channels to the platform, and a seamless onboarding flow for new subscribers and users. Taking a step back, we're seeing two major growth catalysts play out that are driving demand for C-Changes solutions. First, we're seeing growth in the connected TV market, which has largely been a result of consumer behavior trends shifting towards streaming on connected devices, particularly on larger screens. In this changing landscape, the company is well positioned as a technology vendor to help content owners realize their connected strategies and optimize monetization opportunities. Our long-standing relationships with many Tier 1 operators, as well as our growing international presence coupled with positive reference cases from content owners and publishers, make us an ideal partner for players in the connected TV space. We are confident that our existing technology solutions and services, along with continued delivery of innovative solutions, will allow us to capitalize on this growing demand. The second growth catalyst involves the consumer shift towards free ad-supported content and away from subscription-based business models. At SeaChange, we believe our differentiated technology can help operators and content owners protect and build incremental revenue streams, placing us in an excellent position to grow our market share in this rapidly expanding sector of the industry. By extending our product and service portfolio for our existing customer base and adding new customers that adopt these ad-based business models, we can harness this opportunity to expand our market share and maximize our opportunity in this new growth sector driven by changes in consumer preferences. Our ad insertion solutions incorporate more and more data-driven intelligence to personalize the ad load with relevant ads and to optimize addressability across all distribution channels, from broadcast via streaming and connected TVs. That concludes my prepared remarks. I'll now turn the call over to our CFO, Mark Sienkowski, to cover the financials. Mark?