News Release
Spok Reports Second Quarter 2023 Results
Strong improvement in net income and adjusted EBITDA
Record level of software operations bookings
Software and Wireless Revenue Growth on a Year-Over-Year Basis
Company increases full year 2023 financial guidance
Alexandria, Va. (July 26, 2023) – Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced results for the second quarter ended June 30, 2023. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.3125 per share, payable on September 8, 2023, to stockholders of record on August 17, 2023.
Recent Highlights:
- Generated net income of $4.7 million, or $0.23 per diluted share, compared to net income of $1.9 million, or $0.10 per diluted share, in the prior year period
- Generated $8.5 million of adjusted EBITDA in the second quarter, compared to $4.7 million in the second quarter of 2022
- Software operations bookings totaled $14.0 million for the second quarter, compared to $7.4 million in the second quarter of 2022, a 90% year-over-year increase
- Second quarter 2023 software operations bookings included 23 six-figure and 3 seven-figure customer contracts
- Second quarter 2023 software revenue totaled $17.6 million, up more than 24% from the prior quarter and more than 17% from the prior year period
- Second quarter 2023 wireless average revenue per unit (ARPU) was $7.53, up on a year-over-year basis, with units in service down less than 1% from the prior quarter and 3.5% on a trailing-twelve-month basis
- Second quarter 2023 wireless revenue of $18.9 million, up 1% from revenue of $18.7 million in the same period in 2022
- Capital returned to stockholders in the second quarter of 2023 totaled $6.2 million in the form of the Company’s regular quarterly dividend
- Cash and equivalents balance increased from the prior quarter to $30.9 million on June 30, 2023, and no debt
“I am very proud of the record performance that our team was able to deliver in the second quarter and believe that these results position us well for the second half of the year, as we continue to execute our plan focused on growing revenue, generating cash flow and returning capital to stockholders,” said Vincent D. Kelly, chief executive officer of Spok Holdings, Inc. “Last quarter, our team was able to grow revenue, both in total and within each of our two service lines, on a year-over-year basis, reversing historical trends. We made tremendous progress in several key performance areas, including wireless trends, software bookings and backlog levels. Software operations bookings were up 90% on a year-over-year basis and included a record 23 new six-figure and 3 new seven-figure customer contracts. We continued our focus on expense management, as we drove expense reductions on a year-over-year basis, while making the necessary investments in product development and sales and marketing to support the growth of our Spok Care Connect and Wireless solutions. I am also very pleased with our performance in Wireless, as we drove sequential and trailing-twelve-month unit churn down to 0.6% and 3.5%, respectively.
“In short, we are firing on all cylinders,” continued Kelly. “Based on our performance in the second quarter we are, once again, increasing our full year 2023 guidance estimates for revenue and adjusted EBITDA generation. We believe we are on track to grow consolidated revenue for 2023, on a year-over-year basis, for the first time in the Company’s history and the low point of our revenue guidance reflects that. We look forward to continued success in the second half of the year and believe our extensive experience operating our established communication solutions will create significant value for stockholders by maximizing revenue and cash flow generation.”
Financial Highlights:
For the three months ended June 30, | For the six months ended June 30, | ||||||||||
(Dollars in thousands) | 2023 | 2022 | Change (%) | 2023 | 2022 | Change (%) | |||||
Revenue | |||||||||||
Wireless revenue |
| ||||||||||
Paging revenue | $ 18,271 | $ 18,141 | 0.7 % | $ 36,796 | $ 36,454 | 0.9 % | |||||
Product and other revenue | 606 | 559 | 8.4 % | 1,109 | 1,093 | 1.5 % | |||||
Total wireless revenue | $ 18,877 | $ 18,700 | 0.9 % | $ 37,905 | $ 37,547 | 1.0 % | |||||
Software revenue | |||||||||||
License | $ 3,692 | $ 1,962 | 88.2 % | $ 5,310 | $ 3,786 | 40.3 % | |||||
Professional services | 3,837 | 3,331 | 15.2 % | 7,076 | 6,667 | 6.1 % | |||||
Hardware | 933 | 507 | 84.0 % | 1,289 | 1,096 | 17.6 % | |||||
Maintenance | 9,124 | 9,210 | (0.9) % | 18,063 | 18,439 | (2.0) % | |||||
Total software revenue | 17,586 | 15,010 | 17.2 % | 31,738 | 29,988 | 5.8 % | |||||
Total revenue | $ 36,463 | $ 33,710 | 8.2 % | $ 69,643 | $ 67,535 | 3.1 % | |||||
For the three months ended June 30, | For the six months ended June 30, | ||||||||||
(Dollars in thousands) | 2023 | 2022 | Change (%) | 2023 | 2022 | Change (%) | |||||
GAAP | |||||||||||
Operating expenses | $ 30,248 | $ 31,298 | (3.4) % | $ 58,711 | $ 73,791 | (20.4) % | |||||
Net income (loss) | $ 4,733 | $ 1,924 | 146.0 % | $ 7,850 | $ (5,290) | 248.4 % | |||||
Cash, cash equivalents, and short-term investments (as of period end) | $ 30,866 | $ 38,432 | (19.7) % | $ 30,866 | $ 38,432 | (19.7) % | |||||
Capital returned to stockholders | $ 6,230 | $ 6,155 | 1.2 % | $ 13,163 | $ 12,679 | 3.8 % | |||||
Non-GAAP | |||||||||||
Adjusted operating expenses | $ 28,875 | $ 29,977 | (3.7) % | $ 56,092 | $ 67,041 | (16.3) % | |||||
Adjusted EBITDA | $ 8,511 | $ 4,694 | 81.3 % | $ 15,410 | $ 2,570 | 499.6 % | |||||
For the three months ended June 30, | For the six months ended June 30, | ||||||||||
(Dollars in thousands, excluding units and service and ARPU) | 2023 | 2022 | Change (%) | 2023 | 2022 | Change (%) | |||||
Key Statistics | |||||||||||
Wireless units in service | 806 | 835 | (3.5) % | 806 | 835 | (3.5) % | |||||
Wireless average revenue per unit (ARPU) | $ 7.53 | $ 7.23 | 4.1 % | $ 7.56 | $ 7.22 | 4.7 % | |||||
Software operations bookings(1) | $ 14,010 | $ 7,374 | 90.0 % | $ 19,688 | $ 12,586 | 56.4 % | |||||
Software backlog (as of period end) | $ 56,980 | $ 44,488 | 28.1 % | $ 56,980 | $ 44,488 | 28.1 % | |||||
1) Software operations bookings includes net new (i.e., new customers or incremental add-on sales to existing customers) sales of license, professional services, equipment, and first-year maintenance.
Financial Outlook:
The Company also increased its financial guidance and now expects the following for the full year 2023:
(Unaudited and in millions) | Current Guidance Full Year 2023 | Prior Guidance Full Year 2023 | ||||||
From | To | From | To | |||||
Revenue | ||||||||
Wireless | $ 74.5 | $ 75.5 | $ 73.0 | $ 75.5 | ||||
Software | $ 60.0 | $ 62.0 | $ 58.0 | $ 62.0 | ||||
Total Revenue | $ 134.5 | $ 137.5 | $ 131.0 | $ 137.5 | ||||
Adjusted EBITDA | $ 25.0 | $ 28.0 | $ 24.5 | $ 26.5 | ||||
2023 Second Quarter Call:
Management will host a conference call and webcast to discuss these financial results on Thursday, July 27, 2023, at 9:00 a.m. Eastern Time. The presentation is open to all interested parties and may include forward-looking information.
Conference Call Details
Date/Time: | Thursday, July 27, 2023, at 9:00 a.m. ET |
Webcast: | |
U.S. Toll-Free Dial In: | 877-407-0890 |
International Dial In: | 1-201-389-0918 |
To access the call, please dial in approximately ten minutes before the start of the call. For those unable to join the live call, an OnDemand version of the webcast will be available following the call under the URL link and on the investor relations website
* * * * * * * *
Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: adjusted operating expenses and adjusted EBITDA. Adjusted operating expenses excludes depreciation, amortization and accretion expense, impairment of intangible assets and severance and restructuring costs. Adjusted EBITDA represents net income/(loss) before interest income/expense, income tax benefit/expense, depreciation, amortization and accretion expense, stock-based compensation expense, impairment of intangible assets and severance and restructuring. With respect to our expectations under “Financial Guidance” above, reconciliation of adjusted EBITDA to net income (loss) is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and uncertainty with respect to certain items included in net income (loss) that are excluded from adjusted EBITDA, in particular, income tax benefit / expense, stock-based compensation expenses, impairment of intangible assets, severance and restructuring and other non-recurring expenses. These items can have unpredictable fluctuations based on unforeseen activity that is out of our control and /or cannot be reasonably predicted.
We believe that these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to Spok’s financial condition and results of operations. We use these non-GAAP measures for financial, operational, and budgetary decision-making purposes, to understand and evaluate our core operating performance and trends, and to generate future operating plans. We believe that these non-GAAP financial measures permit us to more thoroughly analyze key financial metrics used to make operational decisions and allow us to assess our core operating results. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other software companies who present similar non-GAAP financial measures. We adjust for certain items because we do not regard these costs as reflective of normal costs related to the ongoing operation of the business in the ordinary course. In general, these items possess one or more of the following characteristics: non-cash expenses, factors outside of our control, items that are non-operational in nature, and unusual items not expected to occur in the normal course of business. We believe it is important to exclude these costs, given that they do not represent future operational costs under this strategic business plan. This allows us to assess the underlying performance of our core business under this new strategic business plan.
We do not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principle of these non-GAAP financial measures is that they exclude significant amounts that are required by GAAP to be recorded in the Company’s financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. We urge investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures, which are included in this press release, and not to rely on any single financial measure to evaluate our business.
Tables to Follow
SPOK HOLDINGS, INC. | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(Unaudited and in thousands except share, per share amounts and ARPU) | ||||||||
For the three months ended | For the six months ended | |||||||
6/30/2023 | 6/30/2022 | 6/30/2023 | 6/30/2022 | |||||
Revenue: | ||||||||
Wireless | $ 18,877 | $ 18,700 | $ 37,905 | $ 37,547 | ||||
Software | 17,586 | 15,010 | 31,738 | 29,988 | ||||
Total revenue | 36,463 | 33,710 | 69,643 | 67,535 | ||||
Operating expenses: | ||||||||
Cost of revenue (exclusive of items shown separately below) | 6,727 | 6,980 | 13,263 | 14,784 | ||||
Research and development | 2,853 | 2,624 | 5,346 | 9,121 | ||||
Technology operations | 6,452 | 6,880 | 13,039 | 13,893 | ||||
Selling and marketing | 4,354 | 3,874 | 8,255 | 9,189 | ||||
General and administrative | 8,489 | 9,619 | 16,189 | 20,054 | ||||
Depreciation, amortization and accretion | 1,265 | 871 | 2,501 | 1,805 | ||||
Severance and restructuring | 108 | 450 | 118 | 4,945 | ||||
Total operating expenses | 30,248 | 31,298 | 58,711 | 73,791 | ||||
% of total revenue | 83.0 % | 92.8 % | 84.3 % | 109.3 % | ||||
Operating income (loss) | 6,215 | 2,412 | 10,932 | (6,256) | ||||
% of total revenue | 17.0 % | 7.2 % | 15.7 % | (9.3) % | ||||
Interest income | 354 | 170 | 626 | 237 | ||||
Other (expense) income | (138) | 25 | (85) | 12 | ||||
Income (loss) before income taxes | 6,431 | 2,607 | 11,473 | (6,007) | ||||
(Provision for) benefit from income taxes | (1,698) | (683) | (3,623) | 717 | ||||
Net income (loss) | $ 4,733 | $ 1,924 | $ 7,850 | $ (5,290) | ||||
Basic net income (loss) per common share | $ 0.24 | $ 0.10 | $ 0.39 | $ (0.27) | ||||
Diluted net income (loss) per common share | 0.23 | 0.10 | 0.39 | (0.27) | ||||
Basic weighted average common shares outstanding | 19,957,786 | 19,693,659 | 19,927,782 | 19,645,680 | ||||
Diluted weighted average common shares outstanding | 20,255,248 | 19,807,430 | 20,266,914 | 19,645,680 | ||||
Cash dividends declared per common share | 0.3125 | 0.3125 | 0.6250 | 0.6250 | ||||
SPOK HOLDINGS, INC. | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
(In thousands) | ||||
6/30/2023 | 12/31/2022 | |||
ASSETS | (Unaudited) |
| ||
Current assets: | ||||
Cash and cash equivalents | $ 30,866 | $ 35,754 | ||
Accounts receivable, net | 25,467 | 26,861 | ||
Prepaid expenses | 7,371 | 6,849 | ||
Other current assets | 841 | 587 | ||
Total current assets | 64,545 | 70,051 | ||
Non-current assets: | ||||
Property and equipment, net | 7,869 | 8,223 | ||
Operating lease right-of-use assets | 12,713 | 13,876 | ||
Goodwill | 99,175 | 99,175 | ||
Deferred income tax assets, net | 48,992 | 52,398 | ||
Other non-current assets | 630 | 754 | ||
Total non-current assets | 169,379 | 174,426 | ||
Total assets | $ 233,924 | $ 244,477 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
Current liabilities: | ||||
Accounts payable | $ 6,768 | $ 5,880 | ||
Accrued compensation and benefits | 8,528 | 11,628 | ||
Deferred revenue | 23,984 | 27,255 | ||
Operating lease liabilities | 4,693 | 5,096 | ||
Other current liabilities | 5,352 | 4,573 | ||
Total current liabilities | 49,325 | 54,432 | ||
Non-current liabilities: | ||||
Asset retirement obligations | 7,455 | 7,237 | ||
Operating lease liabilities | 9,520 | 10,604 | ||
Other non-current liabilities | 1,013 | 1,107 | ||
Total non-current liabilities | 17,988 | 18,948 | ||
Total liabilities | 67,313 | 73,380 | ||
Commitments and contingencies | ||||
Stockholders’ equity: | ||||
Common stock | 2 | 2 | ||
Additional paid-in capital | 100,612 | 99,908 | ||
Accumulated other comprehensive loss | (1,862) | (1,909) | ||
Retained earnings | 67,859 | 73,096 | ||
Total stockholders’ equity | 166,611 | 171,097 | ||
Total liabilities and stockholders’ equity | $ 233,924 | $ 244,477 | ||
SPOK HOLDINGS, INC. | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(Unaudited and in thousands) | |||
| For the six months ended | ||
6/30/2023 | 6/30/2022 | ||
Operating activities: | |||
Net income (loss) | $ 7,850 | $ (5,290) | |
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | |||
Depreciation and accretion | 2,501 | 1,805 | |
Deferred income tax expense (benefit) | 3,602 | (495) | |
Stock-based compensation | 1,859 | 2,076 | |
Provisions for credit losses, service credits and other | 222 | 861 | |
Changes in assets and liabilities: | |||
Accounts receivable | 1,168 | (576) | |
Prepaid expenses and other assets | (653) | (416) | |
Net operating lease liabilities | (324) | (109) | |
Accounts payable, accrued liabilities and other | (1,745) | (3,582) | |
Deferred revenue | (3,282) | (169) | |
Net cash provided by (used in) operating activities | 11,198 | (5,895) | |
Investing activities: | |||
Purchases of property and equipment | (1,815) | (1,192) | |
Purchase of short-term investments | — | (14,967) | |
Maturity of short-term investments | — | 15,000 | |
Net cash used in investing activities | (1,815) | (1,159) | |
Financing activities: | |||
Cash distributions to stockholders | (13,163) | (12,679) | |
Proceeds from issuance of common stock under the Employee Stock Purchase Plan | 90 | — | |
Purchase of common stock for tax withholding on vested equity awards | (1,245) | (1,209) | |
Net cash used in financing activities | (14,318) | (13,888) | |
Effect of exchange rate on cash and cash equivalents | 47 | (204) | |
Net decrease in cash and cash equivalents | (4,888) | (21,146) | |
Cash and cash equivalents, beginning of period | 35,754 | 44,583 | |
Cash and cash equivalents, end of period | $ 30,866 | $ 23,437 | |
Supplemental disclosure: | |||
Income taxes paid/(refunded) | $ 253 | $ 185 | |
SPOK HOLDINGS, INC. | ||||||||||||||||
UNITS IN SERVICE, MARKET SEGMENTS, | ||||||||||||||||
AND AVERAGE REVENUE PER UNIT (ARPU) (a) | ||||||||||||||||
(Unaudited and in thousands) | ||||||||||||||||
For the three months ended | ||||||||||||||||
6/30/2023 | 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | |||||||||
Account size ending units in service (000’s) | ||||||||||||||||
1 to 100 units | 48 | 48 | 50 | 51 | 53 | 54 | 55 | 57 | ||||||||
101 to 1,000 units | 144 | 149 | 147 | 147 | 149 | 150 | 154 | 154 | ||||||||
>1,000 units | 614 | 614 | 620 | 626 | 633 | 634 | 638 | 642 | ||||||||
Total | 806 | 811 | 817 | 824 | 835 | 838 | 847 | 853 | ||||||||
Market segment as a percent of total ending units in service | ||||||||||||||||
Healthcare | 86.1 % | 85.7 % | 85.4 % | 85.0 % | 85.0 % | 84.7 % | 84.7 % | 84.6 % | ||||||||
Government | 4.2 % | 4.3 % | 4.4 % | 4.1 % | 4.2 % | 4.7 % | 4.8 % | 4.8 % | ||||||||
Large enterprise | 4.0 % | 4.1 % | 4.0 % | 3.9 % | 4.0 % | 3.9 % | 3.9 % | 4.1 % | ||||||||
Other(b) | 5.7 % | 5.9 % | 6.1 % | 7.0 % | 6.8 % | 6.7 % | 6.6 % | 6.4 % | ||||||||
Total | 1R | |||||||||||||||
Account size ARPU | ||||||||||||||||
1 to 100 units | $ 11.91 | $ 12.03 | $ 11.95 | $ 11.80 | $ 11.41 | $ 11.52 | $ 11.58 | $ 11.67 | ||||||||
101 to 1,000 units |
| 8.56 | 8.75 | 8.66 | 8.44 | 8.27 | 8.24 | 8.30 | 8.38 | |||||||
>1,000 units | 6.94 | 6.95 | 6.86 | 6.69 | 6.63 | 6.64 | 6.63 | 6.65 | ||||||||
Total | $ 7.53 | $ 7.59 | $ 7.50 | $ 7.40 | $ 7.23 | $ 7.24 | $ 7.26 | $ 7.29 | ||||||||
(a) Slight variations in totals are due to rounding. | ||||||||||||||||
(b) Other includes hospitality, resort and indirect units | ||||||||||||||||
RECONCILIATION OF ADJUSTED OPERATING EXPENSES | ||||||||
(Unaudited and in thousands) | ||||||||
For the three months ended | For the six months ended | |||||||
6/30/2023 | 6/30/2022 | 6/30/2023 | 6/30/2022 | |||||
Operating expenses | $ 30,248 | $ 31,298 | $ 58,711 | $ 73,791 | ||||
Add back: | ||||||||
Depreciation, amortization and accretion | (1,265) | (871) | (2,501) | (1,805) | ||||
Severance and restructuring | (108) | (450) | (118) | (4,945) | ||||
Adjusted operating expenses | $ 28,875 | $ 29,977 | $ 56,092 | $ 67,041 | ||||
RECONCILIATION OF ADJUSTED EBITDA | ||||||||
(Unaudited and in thousands) | ||||||||
For the three months ended | For the six months ended | |||||||
6/30/2023 | 6/30/2022 | 6/30/2023 | 6/30/2022 | |||||
Net income (loss) | $ 4,733 | $ 1,924 | $ 7,850 | $ (5,290) | ||||
Add back: | ||||||||
Provision for (benefit from) income taxes | 1,698 | 683 | 3,623 | (717) | ||||
Other expense (income) | 138 | (25) | 85 | (12) | ||||
Interest income | (354) | (170) | (626) | (237) | ||||
Depreciation, amortization and accretion | 1,265 | 871 | 2,501 | 1,805 | ||||
EBITDA | $ 7,480 | $ 3,283 | $ 13,433 | $ (4,451) | ||||
Adjustments: | ||||||||
Stock-based compensation | 923 | 961 | 1,859 | 2,076 | ||||
Severance and restructuring | 108 | 450 | 118 | 4,945 | ||||
Adjusted EBITDA | $ 8,511 | $ 4,694 | $ 15,410 | $ 2,570 | ||||