SPOK Spok Holdings Inc

Total year-over-year revenue growth exceeds 5%

Software year-over-year revenue growth over 15%

Net income and adjusted EBITDA up 35.9% and 9.2%, respectively, from the prior year period

Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced results for the first quarter ended March 31, 2024. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.3125 per share, payable on June 24, 2024, to stockholders of record on May 24, 2024.

Recent Highlights:

• Generated net income of $4.2 million, or $0.21 per diluted share, in the first quarter, compared to net income of $3.1 million, or $0.15 per diluted share, in the prior year period
• Generated $7.5 million of adjusted EBITDA in the first quarter, compared to $6.9 million in the first quarter of 2023
• Software operations bookings totaled $7.9 million in the first quarter, up 39% from the prior year period
• First quarter 2024 Software operations bookings included 19 six-figure customer contracts
• Software revenue totaled $16.3 million first quarter of 2024, up 15% from the prior year period
• First quarter 2024 Wireless average revenue per unit (ARPU) was $7.89, up on a year-over-year basis
• Improvement in quarterly net unit churn at 1.6% in the first quarter, down from 2.5% in the prior quarter, with annual net unit churn of 7.2% on a trailing-twelve-month basis
• Wireless revenue of $18.6 million in the first quarter of 2024, compared to revenue of $19.0 million in the same period in 2023
• Capital returned to stockholders in the first quarter of 2024 totaled $6.3 million in the form of the Company’s quarterly dividend
• Cash and cash equivalents balance of $23.3 million on March 31, 2024, and no debt

"I am proud of the strong performance our team was able to deliver in the first quarter and believe these results position us well for the remainder of the year, as we continue to execute on generating cash flow and returning capital to stockholders, while responsibly investing in and growing our business,” said Vincent D. Kelly, chief executive officer of Spok Holdings, Inc. “In the first quarter, we made tremendous progress in several key performance areas, including software revenue growth, wireless trends, software operations bookings and backlog levels. We were able to accomplish this while investing in our Spok Care Connect and Wireless solutions. I am particularly pleased with our performance in generating software operations bookings in the first quarter, which were up 39% on a year-over-year-basis. In fact, the $7.9 million of software operations bookings in the first quarter was the second highest first quarter performance in our history. The strong level of software operations bookings in the first quarter resulted in a more than 62% increase in software license revenue from the prior year quarter and drove total revenue growth of more than 5%.

"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. "In the first quarter, we generated over $4.2 million of net income and over $7.5 million of adjusted EBITDA, which covered the $6.3 million we returned to our stockholders. However, at the same time, we increased the first quarter research and development investment in our products by $0.5 million, or 18.4%, on a year-over-year basis, and believe we are on track to invest approximately $11.0 million in product research and development expenses in 2024. We believe that this investment will fuel future growth and that our extensive experience operating our established communication solutions will create significant value for stockholders by maximizing revenue and cash flow generation.

"We were very pleased with our performance in the first quarter and believe that it provides a solid springboard for 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 March 31,

(Dollars in thousands)

2024

 

2023

 

Change (%)

Revenue

 

 

 

 

 

Wireless revenue

 

 

 

 

 

Paging revenue

$

17,970

 

$

18,525

 

(3.0

)%

Product and other revenue

 

625

 

 

503

 

24.3

%

Total wireless revenue

$

18,595

 

$

19,028

 

(2.3

)%

 

 

 

 

 

 

Software revenue

 

 

 

 

 

License

$

2,626

 

$

1,618

 

62.3

%

Professional services

 

4,025

 

 

3,239

 

24.3

%

Hardware

 

384

 

 

356

 

7.9

%

Maintenance

 

9,279

 

 

8,939

 

3.8

%

Total software revenue

 

16,314

 

 

14,152

 

15.3

%

Total revenue

$

34,909

 

$

33,180

 

5.2

%

 

For the three months ended March 31,

(Dollars in thousands)

2024

 

2023

 

Change (%)

GAAP

 

 

 

 

 

Operating expenses

$

30,018

 

$

28,463

 

5.5

%

Net income

$

4,236

 

$

3,117

 

35.9

%

Cash, cash equivalents, and short-term investments (as of period end)

$

23,340

 

$

29,550

 

(21.0

)%

Capital returned to stockholders

$

7,386

 

$

6,933

 

6.5

%

 

 

 

 

 

 

Non-GAAP

 

 

 

 

 

Adjusted operating expenses

$

28,522

 

$

27,217

 

4.8

%

Adjusted EBITDA

$

7,535

 

$

6,899

 

9.2

%

 

For the three months ended March 31,

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

2024

 

2023

 

Change (%)

Key Statistics

 

 

 

 

 

Wireless units in service (000's)

 

753

 

 

811

 

(7.2

)%

Wireless average revenue per unit (ARPU)

$

7.89

 

$

7.59

 

4.0

%

Software operations bookings(1)

$

7,885

 

$

5,678

 

38.9

%

Software backlog (as of period end)

$

57,980

 

$

46,540

 

24.6

%

(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.

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 First Quarter Call:

Management will host a conference call and webcast to discuss these financial results on Wednesday, May 1, 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, May 1, 2024, at 5:00 p.m. ET

Webcast:

https://www.webcast-eqs.com/register/spok_q12024_en/en

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.

About Spok

Spok Holdings, Inc. (NASDAQ: SPOK), headquartered in Alexandria, Virginia, is proud to be a global leader in healthcare communications. We deliver clinical information to care teams when and where it matters most to improve patient outcomes. Top hospitals rely on the Spok Care Connect® platform to enhance workflows for clinicians and support administrative compliance. Our customers send over 70 million messages each month through their Spok® solutions. Spok enables smarter, faster clinical communication. For more information, visit spok.com.

Spok is a trademark of Spok Holdings, Inc. Spok Care Connect and Spok Mobile are trademarks of Spok, Inc.

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 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.

Safe Harbor Statement under the Private Securities Litigation Reform Act

Statements contained herein or in prior press releases which are not historical fact, such as statements regarding our future operating and financial performance, are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may cause our actual results to be materially different from the future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expectations include, but are not limited to, our ability to manage wireless network rationalization to lower our costs without causing disruption of service to our customers; our ability to retain key management personnel and to attract and retain talent within the organization; the productivity of our sales organization and our ability to deliver effective customer support; economic conditions such as recessionary economic cycles, higher interest rates, inflation and higher levels of unemployment; risks related to our overall business strategy, including maximizing revenue and cash generation from our established businesses and returning capital to stockholders through dividends and repurchases of shares of our common stock; competition for our services and products from new technologies or those offered and/or developed from firms that are substantially larger and have much greater financial and human capital resources; continuing decline in the number of paging units we have in service with customers, commensurate with a continuing decline in our wireless revenue; our ability to address changing market conditions with new or revised software solutions; undetected defects, bugs, or security vulnerabilities in our products; our dependence on the U.S. healthcare industry; the sales cycle of our software solutions and services can run from six to eighteen months, making it difficult to plan for and meet our sales objectives and bookings on a steady basis quarter-to-quarter and year-to-year; our reliance on third-party vendors to supply us with wireless paging equipment; our ability to maintain successful relationships with our channel partners; our ability to protect our rights in intellectual property that we own and develop and the potential for litigation claiming intellectual property infringement by us; our use of open source software, third-party software and other intellectual property; the reliability of our networks and servers and our ability to prevent cyberattacks and other security issues and disruptions; our reliance on data centers and other systems and technologies provided by third parties, and technology systems and electronic networks supplied and managed by third parties; cyberattacks, data breaches or other compromises to our or our critical third parties' systems, data, products or services; our ability to realize the benefits associated with our deferred income tax assets; future impairments of our long-lived assets or goodwill; risks related to data privacy and protection-related laws and regulation; and our ability to manage changes related to regulation, including laws and regulations affecting hospitals and the healthcare industry generally, as well as other risks described from time to time in our periodic reports and other filings with the Securities and Exchange Commission. Although Spok believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Spok disclaims any intent or obligation to update any forward-looking statements.

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

 

 

3/31/2024

 

3/31/2023

Revenue:

 

 

 

 

Wireless

 

$

18,595

 

 

$

19,028

 

Software

 

 

16,314

 

 

 

14,152

 

Total revenue

 

 

34,909

 

 

 

33,180

 

Operating expenses:

 

 

 

 

Cost of revenue (exclusive of items shown separately below)

 

 

7,139

 

 

 

6,536

 

Research and development

 

 

2,951

 

 

 

2,493

 

Technology operations

 

 

6,299

 

 

 

6,587

 

Selling and marketing

 

 

4,149

 

 

 

3,901

 

General and administrative

 

 

7,984

 

 

 

7,700

 

Depreciation and accretion

 

 

1,068

 

 

 

1,236

 

Severance and restructuring

 

 

428

 

 

 

10

 

Total operating expenses

 

 

30,018

 

 

 

28,463

 

% of total revenue

 

 

86.0

%

 

 

85.8

%

Operating income

 

 

4,891

 

 

 

4,717

 

% of total revenue

 

 

14.0

%

 

 

14.2

%

Interest income

 

 

254

 

 

 

272

 

Other (expense) income

 

 

(2

)

 

 

53

 

Income before income taxes

 

 

5,143

 

 

 

5,042

 

Provision for income taxes

 

 

(907

)

 

 

(1,925

)

Net income

 

$

4,236

 

 

$

3,117

 

Basic net income per common share

 

$

0.21

 

 

$

0.16

 

Diluted net income per common share

 

$

0.21

 

 

$

0.15

 

Basic weighted average common shares outstanding

 

 

20,170,548

 

 

 

19,897,445

 

Diluted weighted average common shares outstanding

 

 

20,446,587

 

 

 

20,182,692

 

Cash dividends declared per common share

 

 

0.3125

 

 

 

0.3125

 

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

 

 

 

 

3/31/2024

 

12/31/2023

 

 

 

 

 

ASSETS

 

(Unaudited)

 

 

 

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

23,340

 

 

$

31,989

 

Accounts receivable, net

 

 

21,722

 

 

 

23,314

 

Prepaid expenses

 

 

7,198

 

 

 

7,885

 

Other current assets

 

 

672

 

 

 

704

 

Total current assets

 

 

52,932

 

 

 

63,892

 

Non-current assets:

 

 

 

 

Property and equipment, net

 

 

7,306

 

 

 

7,321

 

Operating lease right-of-use assets

 

 

9,803

 

 

 

10,526

 

Goodwill

 

 

99,175

 

 

 

99,175

 

Deferred income tax assets, net

 

 

45,348

 

 

 

46,260

 

Other non-current assets

 

 

451

 

 

 

510

 

Total non-current assets

 

 

162,083

 

 

 

163,792

 

Total assets

 

$

215,015

 

 

$

227,684

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

3,809

 

 

$

5,969

 

Accrued compensation and benefits

 

 

3,419

 

 

 

7,284

 

Deferred revenue

 

 

24,998

 

 

 

26,298

 

Operating lease liabilities

 

 

3,773

 

 

 

4,184

 

Other current liabilities

 

 

3,890

 

 

 

4,273

 

Total current liabilities

 

 

39,889

 

 

 

48,008

 

Non-current liabilities:

 

 

 

 

Asset retirement obligations

 

 

7,205

 

 

 

7,191

 

Operating lease liabilities

 

 

6,630

 

 

 

6,902

 

Other non-current liabilities

 

 

1,122

 

 

 

1,812

 

Total non-current liabilities

 

 

14,957

 

 

 

15,905

 

Total liabilities

 

 

54,846

 

 

 

63,913

 

Commitments and contingencies

 

 

 

 

Stockholders' equity:

 

 

 

 

Preferred stock

 

$

—

 

 

$

—

 

Common stock

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

101,656

 

 

 

102,936

 

Accumulated other comprehensive loss

 

 

(1,722

)

 

 

(1,764

)

Retained earnings

 

 

60,233

 

 

 

62,597

 

Total stockholders' equity

 

 

160,169

 

 

 

163,771

 

Total liabilities and stockholders' equity

 

$

215,015

 

 

$

227,684

 

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

 

 

 

 

 

For the three months ended

 

3/31/2024

 

3/31/2023

Operating activities:

 

 

 

Net income

$

4,236

 

 

$

3,117

 

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

 

 

 

Depreciation and accretion

 

1,068

 

 

 

1,236

 

Deferred income tax expense

 

902

 

 

 

1,886

 

Stock-based compensation

 

1,148

 

 

 

936

 

Provisions for credit losses, service credits and other

 

272

 

 

 

29

 

Changes in assets and liabilities:

 

 

 

Accounts receivable

 

1,318

 

 

 

4,187

 

Prepaid expenses and other assets

 

779

 

 

 

(282

)

Net operating lease liabilities

 

41

 

 

 

(197

)

Accounts payable, accrued liabilities and other

 

(6,405

)

 

 

(6,680

)

Deferred revenue

 

(1,361

)

 

 

(1,621

)

Net cash provided by operating activities

 

1,998

 

 

 

2,611

 

Investing activities:

 

 

 

Purchases of property and equipment

 

(875

)

 

 

(649

)

Net cash used in investing activities

 

(875

)

 

 

(649

)

Financing activities:

 

 

 

Cash distributions to stockholders

 

(7,386

)

 

 

(6,933

)

Purchase of common stock for tax withholding on vested equity awards

 

(2,428

)

 

 

(1,245

)

Net cash used in financing activities

 

(9,814

)

 

 

(8,178

)

Effect of exchange rate on cash and cash equivalents

 

42

 

 

 

12

 

Net decrease in cash and cash equivalents

 

(8,649

)

 

 

(6,204

)

Cash and cash equivalents, beginning of period

 

31,989

 

 

 

35,754

 

Cash and cash equivalents, end of period

$

23,340

 

 

$

29,550

 

Supplemental disclosure:

 

 

 

Income taxes paid (refunded)

$

5

 

 

$

(6

)

SPOK HOLDINGS, INC.

UNITS IN SERVICE, MARKET SEGMENTS,

AND AVERAGE REVENUE PER UNIT (ARPU)

(Unaudited and in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

3/31/2024

 

12/31/2023

 

9/30/2023

 

6/30/2023

 

3/31/2023

 

12/31/2022

 

9/30/2022

 

6/30/2022

Account size ending units in service (000's)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 to 100 units

 

 

43

 

 

 

44

 

 

 

46

 

 

 

48

 

 

 

48

 

 

 

50

 

 

 

51

 

 

 

53

 

101 to 1,000 units

 

 

135

 

 

 

142

 

 

 

143

 

 

 

144

 

 

 

149

 

 

 

147

 

 

 

147

 

 

 

149

 

>1,000 units

 

 

575

 

 

 

579

 

 

 

596

 

 

 

614

 

 

 

614

 

 

 

620

 

 

 

626

 

 

 

633

 

Total

 

 

753

 

 

 

765

 

 

 

785

 

 

 

806

 

 

 

811

 

 

 

817

 

 

 

824

 

 

 

835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market segment as a percent of total ending units in service

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Healthcare

 

 

86.1

%

 

 

85.9

%

 

 

86.0

%

 

 

86.1

%

 

 

85.7

%

 

 

85.4

%

 

 

85.0

%

 

 

85.0

%

Government

 

 

4.1

%

 

 

4.2

%

 

 

4.2

%

 

 

4.2

%

 

 

4.3

%

 

 

4.4

%

 

 

4.1

%

 

 

4.2

%

Large enterprise

 

 

3.9

%

 

 

4.1

%

 

 

4.1

%

 

 

4.0

%

 

 

4.1

%

 

 

4.0

%

 

 

3.9

%

 

 

4.0

%

Other(1)

 

 

5.9

%

 

 

5.9

%

 

 

5.7

%

 

 

5.7

%

 

 

6.0

%

 

 

6.1

%

 

 

7.0

%

 

 

6.8

%

Total

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Account size ARPU

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 to 100 units

 

$

12.66

 

 

$

12.57

 

 

$

12.02

 

 

$

11.91

 

 

$

12.03

 

 

$

11.95

 

 

$

11.80

 

 

$

11.41

 

101 to 1,000 units

 

 

9.14

 

 

 

9.16

 

 

 

8.75

 

 

 

8.56

 

 

 

8.75

 

 

 

8.66

 

 

 

8.44

 

 

 

8.27

 

>1,000 units

 

 

7.23

 

 

 

7.15

 

 

 

6.97

 

 

 

6.94

 

 

 

6.95

 

 

 

6.86

 

 

 

6.69

 

 

 

6.63

 

Total

 

$

7.89

 

 

$

7.84

 

 

$

7.59

 

 

$

7.53

 

 

$

7.59

 

 

$

7.50

 

 

$

7.40

 

 

$

7.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Other includes hospitality, resort and indirect units

RECONCILIATION OF ADJUSTED OPERATING EXPENSES

(Unaudited and in thousands)

 

 

 

 

 

 

 

For the three months ended

 

 

3/31/2024

 

3/31/2023

Operating expenses

 

$

30,018

 

 

$

28,463

 

Add back:

 

 

 

 

Depreciation and accretion

 

 

(1,068

)

 

 

(1,236

)

Severance and restructuring

 

 

(428

)

 

 

(10

)

Adjusted operating expenses

 

$

28,522

 

 

$

27,217

 

RECONCILIATION OF ADJUSTED EBITDA

(Unaudited and in thousands)

 

 

 

 

 

 

 

For the three months ended

 

 

3/31/2024

 

3/31/2023

Net income

 

$

4,236

 

 

$

3,117

 

Add back:

 

 

 

 

Provision for income taxes

 

 

907

 

 

 

1,925

 

Other expense (income)

 

 

2

 

 

 

(53

)

Interest income

 

 

(254

)

 

 

(272

)

Depreciation and accretion

 

 

1,068

 

 

 

1,236

 

EBITDA

 

$

5,959

 

 

$

5,953

 

Adjustments:

 

 

 

 

Stock-based compensation

 

 

1,148

 

 

 

936

 

Severance and restructuring

 

 

428

 

 

 

10

 

Adjusted EBITDA

 

$

7,535

 

 

$

6,899

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240501988338/en/

Al Galgano 952-224-6096 al.galgano@spok.com