News Release

Spok Reports Second Quarter 2024 Results

Software Operations Bookings Up 10.3% From Prior Quarter

Year-Over-Year Software Revenue Performance Driven by Growth in Maintenance and Services

Alexandria, Va. (July 24, 2024) – Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced results for the second quarter ended June 30, 2024. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.3125 per share, payable on September 9, 2024, to stockholders of record on August 19, 2024.

Recent Highlights:

  • Software operations bookings totaled $8.7 million in the second quarter, up 10.3% from the first quarter of 2024
  • Second quarter software operations bookings included 18 six-figure customer contracts and one seven-figure customer contract
  • Software backlog totaled $55.0 million at June 30, 2024, up nearly 4% from the prior year
  • Second quarter 2024 Wireless average revenue per unit (ARPU) was $7.84, up on a year-over-year basis
  • Improvement in quarterly net unit churn at 8% in the second quarter, down from 1.6% in the prior quarter
  • Capital returned to stockholders in the second quarter of 2024 totaled $6.3 million
  • Research and development costs total $6.1 million in the first six months of 2024, supporting Spok’s investment in the Company’s industry-leading solutions to fuel future growth

“Our goal has been and continues to be to reliably and consistently forecast and generate cash flow in order to return capital to our loyal stockholders over the long-term. We are achieving that goal,” said Vincent D. Kelly, chief executive officer of Spok Holdings, Inc. “I am proud of the performance our team was able to deliver in the second quarter as we continue to serve our customers at a high level, while returning capital to stockholders. I am particularly pleased with our performance in generating software operations bookings of $8.7 million in the second quarter, which was up more than 10% from our team’s impressive performance in the first quarter of 2024. While we did not match the largest single customer contract in Spok’s history from the second quarter of 2023, our second quarter 2024 results were driven by a healthy mix of large deals and our average contract size continues to grow.  Software sales are always going to be lumpy.  However, we are encouraged as our third quarter sales are off to a very strong start.

 

“I believe Spok is doing an excellent job of balancing the necessary investments in our products and infrastructure in order to fuel future growth and continuing to return capital to our stockholders,” continued Kelly. “Through the first six months of this year, Spok has generated nearly $7.7 million of net income and $14.6 million of adjusted EBITDA. Adjusted EBITDA in the second quarter was more than enough to cover our quarterly dividend payment, as well as our capital expenditure requirements. This resulted in a slight increase in our cash and cash equivalents balance, which we believe will continue to build through the remainder of the year.

 

“We were very pleased with our performance in the second quarter and believe that our results in the first half of the year provide a solid springboard for the second half of 2024. As a result, we are reiterating our guidance estimates for revenue and adjusted EBITDA generation for this year. At the midpoint of that guidance range, we believe we are on track to again grow consolidated revenue in 2024, on a year-over-year basis, with slight declines in wireless revenue being more than offset by continued growth in software revenue. We also anticipate that the midpoint of our adjusted EBITDA guidance will be consistent with 2023, with additional growth potential at the high-end of the guidance range. Of course, we will continue to update you on our outlook each quarter when we report our results,” concluded Kelly.

 

Financial Highlights:

 

For the three months ended June 30,

 

For the six months ended June 30,

(Dollars in thousands)

2024

 

2023

 

Change (%)

 

2024

 

2023

 

Change (%)

Revenue

           

Wireless revenue

           

Paging revenue

$           17,633 

 

$           18,271 

 

(3.5) %

 

$         35,603 

 

$         36,796 

 

(3.2) %

Product and other revenue

                  664 

 

                  606 

 

9.6  %

 

             1,289 

 

             1,109 

 

16.2  %

Total wireless revenue

$           18,297 

 

$           18,877 

 

(3.1) %

 

$         36,892 

 

$         37,905 

 

(2.7) %

            

Software revenue

           

License

$             1,697 

 

$             3,692 

 

(54.0) %

 

$           4,323 

 

$           5,310 

 

(18.6) %

Professional services

               4,286 

 

               3,837 

 

11.7  %

 

             8,311 

 

             7,076 

 

17.5  %

Hardware

                  334 

 

                  933 

 

(64.2) %

 

                 718 

 

             1,289 

 

(44.3) %

Maintenance

               9,368 

 

               9,124 

 

2.7  %

 

           18,647 

 

           18,063 

 

3.2  %

Total software revenue

             15,685 

 

             17,586 

 

(10.8) %

 

           31,999 

 

           31,738 

 

0.8  %

Total revenue

$           33,982 

 

$           36,463 

 

(6.8) %

 

$         68,891 

 

$         69,643 

 

(1.1) %

 

For the three months ended June 30,

 

For the six months ended June 30,

(Dollars in thousands)

2024

 

2023

 

Change (%)

 

2024

 

2023

 

Change (%)

GAAP

           

Operating expenses

$          29,508 

 

$          30,248 

 

(2.4) %

 

$          59,526 

 

$          58,711 

 

1.4  %

Net income

$             3,425 

 

$             4,733 

 

(27.6) %

 

$            7,661 

 

$            7,850 

 

(2.4) %

Cash and cash equivalents (as of period end)

$          23,875 

 

$          30,866 

 

(22.6) %

 

$          23,875 

 

$          30,866 

 

(22.6) %

Capital returned to stockholders

$             6,329 

 

$             6,230 

 

1.6  %

 

$          13,715 

 

$          13,163 

 

4.2  %

            

Non-GAAP

           

Adjusted operating expenses

$          28,093 

 

$          28,875 

 

(2.7) %

 

$          56,615 

 

$          56,092 

 

0.9  %

Adjusted EBITDA

$             7,048 

 

$             8,511 

 

(17.2) %

 

$          14,583 

 

$          15,410 

 

(5.4) %

            
            
            
            

 

 

For the three months ended June 30,

 

For the six months ended June 30,

(Dollars in thousands, excluding units in service and ARPU)

2024

 

2023

 

Change (%)

 

2024

 

2023

 

Change (%)

Key Statistics

           

Wireless units in service (000’s)

                  747 

 

                  806 

 

(7.3) %

 

                 747 

 

                 806 

 

(7.3) %

Wireless average revenue per unit (ARPU)

$               7.84 

 

$               7.53 

 

4.1  %

 

$              7.85 

 

$              7.56 

 

3.8  %

Software operations bookings(1)

$             8,695 

 

$          14,010 

 

(37.9) %

 

$         16,580 

 

$         19,688 

 

(15.8) %

Software backlog (as of period end)(2)

$          55,006 

 

$          53,075 

 

3.6  %

 

$         55,006 

 

$         53,075 

 

3.6  %

(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.

(2) Software backlog excludes $6.0 million and $3.9 million of contractual obligations that are deemed cancellable by the customer without significant penalty as of June 30, 2024 and 2023 respectively.

Financial Outlook:

Regarding financial guidance, the Company reiterated the following expectations for the full year 2024:

(Unaudited and in millions)

 

Current Guidance

Full Year 2024

  

From

 

To

Revenue

    

Wireless

 

$                              72.0 

 

$                              75.0 

Software

 

$                              64.0 

 

$                              69.0 

Total Revenue

 

$                            136.0 

 

$                            144.0 

     

Adjusted EBITDA

 

$                              27.5 

 

$                              32.5


2024 Second Quarter Call:

Management will host a conference call and webcast to discuss these financial results on Wednesday, July 24, 2024, at 5:00 p.m. Eastern Time. The presentation is open to all interested parties and may include forward-looking information.

Conference Call Details

Date/Time:

Wednesday, July 24, 2024, at 5:00 p.m. ET

Webcast:

Q2 2024 Earnings Results (webcast-eqs.com)

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 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 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 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 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

  

6/30/2024

 

6/30/2023

 

6/30/2024

 

6/30/2023

Revenue:

        

Wireless

 

$          18,297    

 

$          18,877    

 

$          36,892    

 

$          37,905    

Software

 

            15,685    

 

            17,586    

 

            31,999    

 

            31,738    

Total revenue

 

            33,982    

 

            36,463    

 

            68,891    

 

            69,643    

Operating expenses:

        

Cost of revenue (exclusive of items shown separately below)

 

              7,163   

 

              6,727   

 

            14,302    

 

            13,263    

Research and development

 

              3,176   

 

              2,853   

 

              6,127   

 

              5,346   

Technology operations

 

              6,181   

 

              6,452   

 

            12,480    

 

            13,039    

Selling and marketing

 

              3,506   

 

              4,354   

 

              7,655   

 

              8,255   

General and administrative

 

              8,067   

 

              8,489   

 

            16,051    

 

            16,189    

Depreciation and accretion

 

              1,067   

 

              1,265   

 

              2,135   

 

              2,501   

Severance and restructuring

 

                348   

 

                108   

 

                776   

 

                118    

Total operating expenses

 

            29,508    

 

            30,248    

 

            59,526    

 

            58,711    

% of total revenue

 

86.8  %

 

83.0  %

 

86.4  %

 

84.3  %

Operating income

 

              4,474   

 

              6,215   

 

              9,365   

 

            10,932    

% of total revenue

 

13.2  %

 

17.0  %

 

13.6  %

 

15.7  %

Interest income

 

                391   

 

                354   

 

                645   

 

                626   

Other expense

 

                 (14)   

 

               (138)   

 

                 (16)   

 

                 (85)   

Income before income taxes

 

              4,851   

 

              6,431   

 

              9,994   

 

            11,473    

Provision for income taxes

 

            (1,426)   

 

            (1,698)   

 

            (2,333)   

 

            (3,623)   

Net income

 

$            3,425   

 

$            4,733   

 

$            7,661   

 

$            7,850   

Basic net income per common share

 

$              0.17   

 

$              0.24   

 

$              0.38   

 

$              0.39   

Diluted net income per common share

 

$              0.17   

 

$              0.23   

 

$              0.37   

 

$              0.39   

Basic weighted average common shares outstanding

 

     20,252,452    

 

     19,957,786    

 

     20,211,500    

 

     19,927,782    

Diluted weighted average common shares outstanding

 

     20,473,751    

 

     20,255,248    

 

     20,500,335    

 

     20,266,914    

Cash dividends declared per common share

 

            0.3125    

 

            0.3125    

 

            0.6250    

 

            0.6250    

 

 

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

     
  

6/30/2024

 

12/31/2023

     

ASSETS

 

(Unaudited)

 

 

     

Current assets:

    

Cash and cash equivalents

 

$                           23,875 

 

$                           31,989 

Accounts receivable, net

 

                            22,824 

 

                            23,314 

Prepaid expenses

 

                              8,590

 

                              7,885

Other current assets

 

                                 858

 

                                 704

Total current assets

 

                            56,147 

 

                            63,892 

Non-current assets:

    

Property and equipment, net

 

                              7,056

 

                              7,321

Operating lease right-of-use assets

 

                              9,177

 

                            10,526 

Goodwill

 

                            99,175 

 

                            99,175 

Deferred income tax assets, net

 

                            43,939 

 

                            46,260 

Other non-current assets

 

                                 883

 

                                 510

Total non-current assets

 

                           160,230 

 

                           163,792 

Total assets

 

$                         216,377 

 

$                         227,684 

     

LIABILITIES AND STOCKHOLDERS’ EQUITY

    
     

Current liabilities:

    

Accounts payable

 

$                             5,418

 

$                             5,969

Accrued compensation and benefits

 

                              4,922

 

                              7,284

Deferred revenue

 

                            25,239 

 

                            26,298 

Operating lease liabilities

 

                              3,352

 

                              4,184

Other current liabilities

 

                              4,425

 

                              4,273

Total current liabilities

 

                            43,356 

 

                            48,008 

Non-current liabilities:

    

Asset retirement obligations

 

                              7,197

 

                              7,191

Operating lease liabilities

 

                              6,374

 

                              6,902

Other non-current liabilities

 

                              1,238

 

                              1,812

Total non-current liabilities

 

                            14,809 

 

                            15,905 

Total liabilities

 

                            58,165 

 

                            63,913 

Commitments and contingencies

    

Stockholders’ equity:

    

Preferred stock

 

$                                  —

 

$                                  —

Common stock

 

                                     2

 

                                     2

Additional paid-in capital

 

                           102,946 

 

                           102,936 

Accumulated other comprehensive loss

 

                             (1,770)

 

                             (1,764)

Retained earnings

 

                            57,034 

 

                            62,597 

Total stockholders’ equity

 

                           158,212 

 

                           163,771 

Total liabilities and stockholders’ equity

 

$                         216,377 

 

$                         227,684 

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

    
 

For the six months ended

 

6/30/2024

 

6/30/2023

Operating activities:

   

Net income

$                             7,661

 

$                             7,850

Adjustments to reconcile net income to net cash provided by operating activities:

   

Depreciation and accretion

                              2,135

 

                              2,501

Deferred income tax expense

                              2,313

 

                              3,602

Stock-based compensation

                              2,307

 

                              1,859

Provisions for credit losses, service credits and other

                                 262

 

                                 222

Changes in assets and liabilities:

   

Accounts receivable

                                 223

 

                              1,168

Prepaid expenses and other assets

                             (1,232)

 

                                (653)

Net operating lease liabilities

                                 (11)

 

                                (324)

Accounts payable, accrued liabilities and other

                             (3,046)

 

                             (1,745)

Deferred revenue

                             (1,192)

 

                             (3,282)

Net cash provided by operating activities

                              9,420

 

                            11,198 

Investing activities:

   

Purchases of property and equipment

                             (1,516)

 

                             (1,815)

Net cash used in investing activities

                             (1,516)

 

                             (1,815)

Financing activities:

   

Cash distributions to stockholders

                           (13,715)

 

                           (13,163)

Proceeds from issuance of common stock under the Employee Stock Purchase Plan

                                 131

 

                                   90

Purchase of common stock for tax withholding on vested equity awards

                             (2,428)

 

                             (1,245)

Net cash used in financing activities

                           (16,012)

 

                           (14,318)

Effect of exchange rate on cash and cash equivalents

                                   (6)

 

                                   47

Net decrease in cash and cash equivalents

                             (8,114)

 

                             (4,888)

Cash and cash equivalents, beginning of period

                            31,989 

 

                            35,754 

Cash and cash equivalents, end of period

$                           23,875 

 

$                           30,866 

Supplemental disclosure:

   

Income taxes paid

$                               241

 

$                               253

SPOK HOLDINGS, INC.

UNITS IN SERVICE, MARKET SEGMENTS,

AND AVERAGE REVENUE PER UNIT (ARPU)

(Unaudited and in thousands)

                 
  

For the three months ended

  

6/30/2024

 

3/31/2024

 

12/31/2023

 

9/30/2023

 

6/30/2023

 

3/31/2023

 

12/31/2022

 

9/30/2022

Account size ending units in service (000’s)

                

1 to 100 units

 

           42   

 

           43   

 

           44   

 

           46   

 

           48   

 

           48   

 

           50   

 

           51   

101 to 1,000 units

 

         128   

 

         135   

 

         142   

 

         143   

 

         144   

 

         149   

 

         147   

 

         147   

>1,000 units

 

         577   

 

         575   

 

         579   

 

         596   

 

         614   

 

         614   

 

         620   

 

         626   

Total

 

         747   

 

         753   

 

         765   

 

         785   

 

         806   

 

         811   

 

         817   

 

         824   

                 

Market segment as a percent of total ending units in service

                

Healthcare

 

85.8  %

 

86.1  %

 

85.9  %

 

86.0  %

 

86.1  %

 

85.7  %

 

85.4  %

 

85.0  %

Government

 

4.4 %

 

4.1 %

 

4.2 %

 

4.2 %

 

4.2 %

 

4.3 %

 

4.4 %

 

4.1 %

Large enterprise

 

4.0 %

 

3.9 %

 

4.1 %

 

4.1 %

 

4.0 %

 

4.1 %

 

4.0 %

 

3.9 %

Other(1)

 

5.8 %

 

5.9 %

 

5.8 %

 

5.7 %

 

5.7 %

 

5.9 %

 

6.2 %

 

7.0 %

Total

 

100.0  %

 

100.0  %

 

100.0  %

 

100.0  %

 

100.0  %

 

100.0  %

 

100.0  %

 

100.0  %

                 

Account size ARPU

                

1 to 100 units

 

$    12.51   

 

$    12.66   

 

$    12.57   

 

$    12.02   

 

$    11.91    

 

$    12.03   

 

$    11.95    

 

$    11.80    

101 to 1,000 units

 

        9.06   

 

        9.14   

 

        9.16   

 

        8.75   

 

        8.56   

 

        8.75   

 

        8.66   

 

        8.44   

>1,000 units

 

        7.21   

 

        7.23   

 

        7.15   

 

        6.97   

 

        6.94   

 

        6.95   

 

        6.86   

 

        6.69   

Total

 

$      7.84   

 

$      7.89   

 

$      7.84   

 

$      7.59   

 

$      7.53   

 

$      7.59   

 

$      7.50   

 

$      7.40   

                 

(1) 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

  

6/30/2024

 

6/30/2023

 

6/30/2024

 

6/30/2023

Operating expenses

 

$                  29,508 

 

$                  30,248 

 

$                  59,526 

 

$                  58,711 

Add back:

        

Depreciation and accretion

 

                    (1,067)

 

                    (1,265)

 

                    (2,135)

 

                    (2,501)

Severance and restructuring

 

                       (348)

 

                       (108)

 

                       (776)

 

                       (118)

Adjusted operating expenses

 

$                  28,093 

 

$                  28,875 

 

$                  56,615 

 

$                  56,092 

 

RECONCILIATION OF ADJUSTED EBITDA

(Unaudited and in thousands)

         
  

For the three months ended

 

For the six months ended

  

6/30/2024

 

6/30/2023

 

6/30/2024

 

6/30/2023

Net income

 

$                    3,425

 

$                   4,733

 

$                    7,661

 

$                    7,850

Add back:

        

Provision for income taxes

 

                      1,426

 

                      1,698

 

                      2,333

 

                      3,623

Other expense

 

                          14

 

                        138

 

                          16

 

                          85

Interest income

 

                       (391)

 

                       (354)

 

                       (645)

 

                       (626)

Depreciation and accretion

 

                      1,067

 

                      1,265

 

                      2,135

 

                      2,501

EBITDA

 

$                    5,541

 

$                   7,480

 

$                  11,500 

 

$                  13,433 

Adjustments:

        

Stock-based compensation

 

                      1,159

 

                        923

 

                      2,307

 

                      1,859

Severance and restructuring

 

                        348

 

                        108

 

                        776

 

                        118 

Adjusted EBITDA

 

$                    7,048

 

$                   8,511

 

$                  14,583 

 

$                  15,410