News Release
Spok Reports 2018 Second Quarter Operating Results; First Half Software Revenue Up 11 Percent from Prior Year, Company Maintains Full Year Guidance Levels
Board Declares Regular Quarterly Dividend
SPRINGFIELD, Va. (July 25, 2018) – Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced operating results for the second quarter and year-to-date period ended June 30, 2018. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on September 10, 2018 to stockholders of record on August 17, 2018.
2018 Second-Quarter Results:
Consolidated revenue for the second quarter of 2018 under Generally Accepted Accounting Principles (“GAAP”) was $40.6 million compared to $42.3 million in the second quarter of 2017. On January 1, 2018, Spok adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Unless otherwise stated, results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted, and continue to be reported in accordance with the Company’s historic accounting under ASC 605. As such, adjusted to exclude the adoption of ASC 606, consolidated revenue for the second quarter of 2018 was $41.8 million compared to the $42.3 million in the second quarter of 2017.
| Three months ended |
| (Dollars in thousands) | June 30, 2018 | June 30, 2018 (1) | June 30, 2017 | Change (2) (%) |
| Wireless revenue | ||||
| Paging revenue | $22,824 | $22,824 | $24,572 | (7.1%) |
| Product and other revenue | 834 | 834 | 1,067 | (21.8%) |
| Total wireless revenue | $23,658 | $23,658 | $25,639 | (7.7%) |
| Software revenue | ||||
| Operations revenue | $7,463 | $8,021 | $7,041 | 13.9% |
| Maintenance revenue | 9,507 | 10,115 | 9,645 | 4.9% |
| Total software revenue | 19,970 | 18,136 | 16,686 | 8.7% |
| Total revenue | $40,628 | $41,794 | $42,325 | (1.3%) |
(1) Adjusted to exclude the adoption of ASC 606.
(2) As compared against results adjusted to exclude the adoption of ASC 606.
GAAP net loss for the second quarter of 2018 was $1.0 million, or $0.05 per share, compared to net income of $1.5 million, or $0.07 per share, in the second quarter of 2017.
| Three months ended |
| (Dollars in thousands) | June 30, 2018 | June 30, 2018 (1) | June 30, 2017 |
| Net (loss) income | $(976) | $36 | $1,498 |
| Diluted net (loss) income per share | $(0.05) | $0.00 | $0.07 |
| EBITDA | $519 | $1,559 | $5,261 |
(1) Adjusted to exclude the adoption of ASC 606.
Other key results and highlights for the second quarter included:
- Net paging unit losses were approximately 6,000 in the second quarter of 2018, down from approximately 19,000 in the first quarter of 2018 and consistent with second quarter 2017 levels.
- The quarterly rate of wireless revenue erosion was 2.5 percent in the second quarter of 2018 versus 1.3 percent in the first quarter of 2018.
- Total paging ARPU (average revenue per unit) was $7.41 in the second quarter of 2018, compared to $7.47 in the first quarter of 2018.
- Software bookings for the 2018 second quarter were $18.5 million, an increase of 2.0 percent from the first quarter of 2018. Second quarter bookings included $9.4 million of operations bookings and $9.1 million of maintenance renewals.
- Software backlog totaled $36.3 million at June 30, 2018, compared to $35.9 million in the first quarter of 2018.
- The revenue renewal rate for software maintenance in the second quarter of 2018 continued at greater than 99 percent.
- Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $40.1 million in the second quarter of 2018, up slightly from $39.7 million in the first quarter of 2018.
- Capital expenses were $2.3 million in the second quarter of 2018, compared to $1.2 million in the first quarter of 2018.
- The number of full-time equivalent employees at June 30, 2018 totaled 607, compared to 604 at June 30, 2017.
- Capital returned to stockholders in the second quarter of 2018 totaled $10.0 million, in the form of $2.5 million from dividends and $7.5 million from share repurchases.
- ·The Company’s cash balance at June 30, 2018 was $94.1 million, down from $107.2 million at December 31, 2017.
2018 Year-To-Date Results:
Consolidated revenue for the first six months of 2018 was $83.7 million compared to $83.8 million in the first six months of 2017. As discussed above, unless otherwise stated, results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted, and continue to be reported in accordance with the Company’s historic accounting under ASC 605. As such, adjusted to exclude the adoption of ASC 606, consolidated revenue for the first six months of 2018 was $84.3 million compared to the $83.8 million in the first six months of 2017.
| Six months ended |
| (Dollars in thousands) | June 30, 2018 | June 30, 2018 (1) | June 30, 2017 | Change (2) (%) |
| Wireless revenue | ||||
| Paging revenue | $46,132 | $46,132 | $49,544 | (6.9)% |
| Product and other revenue | 1,795 | 1,795 | 1,955 | (8.2)% |
| Total wireless revenue | $47,927 | $47,927 | $81,499 | (6.9%) |
| Software revenue | ||||
| Operations revenue | $16,934 | $16,210 | $13,082 | 23.9% |
| Maintenance revenue | 18,881 | 20,114 | 19,188 | 4.8% |
| Total software revenue | 35,815 | 36,324 | 32,270 | 12.6% |
| Total revenue | $83,742 | $84,251 | $83,769 | 0.6% |
(1) Adjusted to exclude the adoption of ASC 606.
(2) As compared against results adjusted to exclude the adoption of ASC 606.
GAAP net loss for the first six months of 2018 was $0.5 million, or $0.02 per share, compared to net income of $2.4 million, or $0.11 per share, in the first six months of 2017.
| Six months ended |
| (Dollars in thousands) | June 30, 2018 | June 30, 2018(1) | June 30, 2017 |
| Net (loss) income | $(465) | $368 | $2,352 |
| Diluted net (loss) income per share | $(0.02) | $0.02 | $0.11 |
| EBITDA | $3,983 | $4,831 | $9,866 |
(1) Adjusted to exclude the adoption of ASC 606.
Management Commentary:
“Our performance in the second quarter of 2018 was in line with our seasonal expectations. We believe our year-to-date results provide a solid base as we enter the typically more robust second half of the year” said Vincent D. Kelly, president and chief executive officer. “We saw strong performance in a number of key operating measures and sequential improvements in subscriber retention, sales bookings, backlog levels, and operating expense management. These improvements allowed us to return $10.0 million of capital to our stockholders in the form of dividends and share repurchases and enhance our product offerings through our continued investments in our integrated communication platform, Spok Care Connect®.”
Kelly also noted that in addition to the Company’s quarterly financial performance, Spok made progress in several other areas, including product development, sales strategy and key strategic partnership agreements. “During the quarter, we announced partnerships with industry-leading organizations, including Bernoulli® Health, to enhance our clinical alarm management offering, and our participation in Zebra Technologies’ PartnerConnect channel partner program, to offer Zebra’s enterprise-class mobile devices to hospitals and health systems throughout North America. Last month, we strengthened our position as an industry thought leader with the release of the results of our eighth consecutive survey of mobile strategies in healthcare. Also, during the quarter we started working with 13 new customers. Finally, we continue to make significant progress in enhancing our Care Connect platform offering, adding experienced product and development leadership, staff and consulting resources.”
Michael W. Wallace, chief financial officer, said: “Continued expense management and strong financial discipline have allowed us to invest in our business for long-term growth. Our ability to align our expense base with the market demand we are seeing helped Spok to partially offset the additional expenses related to our investments in our sales and product platforms.”
Business Outlook:
For the full-year 2018, adjusted to exclude the adoption of ASC 606, the Company continues to expect total revenue to range from $161 million to $177 million, operating expenses (excluding depreciation, amortization and accretion) to range from $158 million to $165 million, and capital expenditures to range from $4 million to $8 million.
* * * * * * * * *
2018 Second-Quarter Call and Replay:
Spok plans to host a conference call for investors to discuss its 2018 second quarter results at 10:00 a.m. ET on Thursday, July 26, 2018. Dial-in numbers for the call are 334-323-0522 or 877-260-1479. The pass code for the call is 8594119. A replay of the call will be available from 1:00 p.m. ET on July 26, 2018 until 1:00 p.m. ET on Thursday, August 9, 2018. To listen to the replay, please register at http://tinyurl.com/Spok2018Q2earningsreplay. Please cut and paste this address into your browser, enter the registration information, and you will be given access to the replay.