News Release

Spok Reports 2020 Third Quarter Operating Results

Improvement in Software Bookings and Continued Strong Wireless Trends Contribute to Third Quarter Operating Performance 

Board Declares Regular Quarterly Dividend

SPRINGFIELD, Va. (October 28, 2020) – Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced operating results for the third quarter ended September 30, 2020. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on December 10, 2020, to stockholders of record on November 16, 2020.

Key Third Quarter Operating Highlights:

  • Software bookings in the third quarter totaled $21.4 million, up nearly 39% and nearly 5% on a sequential and year-over-year basis, respectively. Third quarter bookings included the Company’s first two Spok Go® deals with an aggregate total contract value of $812,000. Third quarter software bookings included $9.4 million of operations bookings and $12.0 million of maintenance renewals. At September 30, 2020 the software revenue backlog totaled $51.7 million, up almost 7% from the backlog of $48.4 million at June 30, 2020.
  • Third quarter 2020 software revenue totaled $16.9 million, up more than 15% from the prior quarter. Software revenue in the third quarter included $7.4 million of operations revenue and $9.5 million of maintenance revenue. This compares to operations revenue of $5.2 million and maintenance revenue of $9.5 million in the prior quarter.
  • The quarterly rate of paging unit erosion was 1.9% in the third quarter of 2020, down from paging unit erosion of 2.3% in the year-earlier period. Gross disconnects were down on both a sequential and year-over-year basis.
  • The rate of wireless revenue erosion in the third quarter was 1.2%, down 20 basis points from the revenue erosion rate in both the prior quarter and the third quarter of 2019.
  • Total paging ARPU (average revenue per unit) was $7.34 in the third quarter of 2020, compared to $7.24 in the prior quarter and $7.32 in the year-earlier quarter.
  • Operating expenses in the third quarter of 2020 totaled $35.0 million, up from $32.6 million in the prior quarter and down from $42.1 million in the third quarter of 2019. Adjusted operating expenses totaled $35.5 million in the third quarter of 2020, compared to $34.1 million in the prior quarter and $39.8 million in the third quarter of 2019. Benefiting operating expenses in the third quarter of 2020, the Company received $0.4 million in CARES Act tax credits, as well as approximately $2.2 million in cost savings from the previously discussed employee furloughs.
  • Capital expenses were $0.9 million in the third quarter of 2020, compared to $1.4 million in the year-earlier quarter.
  • The number of full-time equivalent employees at September 30, 2020 totaled 613, compared to 617 in the prior year quarter.
  • Capital paid to stockholders in the third quarter of 2020 totaled $2.4 million. This came in the form of the Company’s regular quarterly dividend.
  • The Company’s cash, cash equivalents and short-term investments balance at September 30, 2020, was $79.2 million, up from $77.3 million at December 31, 2019.

2020 Third Quarter and Year-To-Date Results:

Consolidated revenue for the third quarter of 2020 under Generally Accepted Accounting Principles (“GAAP”) was $37.7 million compared to $39.5 million in the third quarter of 2019. For the first nine months of 2020, consolidated revenue totaled $110.7 million, compared to $120.7 million in the first nine months of 2019.

For the three months ended For the nine months ended
(Dollars in thousands) September 30, 2020 September 30, 2019 Change

(%)

September 30, 2020 September 30, 2019 Change
(%)
Wireless revenue
Paging revenue $ 19,961 $ 21,212 (5.9) % $ 60,403 $ 64,241 (6.0) %
Product and other revenue 867 602 44.0 % 2,890 2,311 25.1 %
Total wireless revenue $ 20,828 $ 21,814 (4.5) % $ 63,293 $ 66,552 (4.9) %
Software revenue
Operations revenue $ 7,338 $ 7,614 (3.6) % $ 18,728 $ 23,974 (21.9) %
Maintenance revenue 9,527 10,025 (5.0) % 28,678 30,215 (5.1) %
Total software revenue 16,865 17,639 (4.4) % 47,406 54,189 (12.5) %
Total revenue $ 37,693 $ 39,453 (4.5) % $ 110,699 $ 120,741 (8.3) %

GAAP net income for the third quarter of 2020 was $3.2 million, or $0.16 per diluted share, compared to a net loss of $1.3 million, or $0.07 per diluted share, in the third quarter of 2019.  GAAP net income for the first nine months of 2020 was $2.4 million, or $0.12 per diluted share, compared to a net loss of $1.3 million, or $0.07 per diluted share, in the first nine months of 2019.

In the third quarter of 2020, the Company generated $3.8 million of adjusted EBITDA, compared to adjusted EBITDA of $3.0 million in the prior quarter and $0.6 million in the third quarter of 2019. In the first nine months of 2020, the Company generated $4.3 million of adjusted EBITDA, compared to adjusted EBITDA of $6.0 million in the prior year period.

For the three months ended For the nine months ended
(Dollars in thousands) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Net income (loss) $ 3,165 $ (1,326) $ 2,384 $ (1,255)
Basic net income (loss) per share $ 0.17 $ (0.07) $ 0.13 $ (0.07)
Diluted net income (loss) per share $ 0.16 $ (0.07) $ 0.12 $ (0.07)
Adjusted EBITDA $ 3,777 $ 577 $ 4,291 $ 5,951

Management Commentary:

“While we are still operating under the impact and uncertainty of the pandemic and many of our customers continue to struggle with the challenges presented by COVID-19, our outlook is improving as we saw many positive developments during the third quarter,” said Vincent D. Kelly, president and chief executive officer. “During the quarter, we saw significant increases in software operations bookings on both a sequential and year-over-year basis, as well as continued strong trends in our wireless business. Sustained expense management kept third quarter expense levels consistent with the prior quarter and down sharply from the prior year, even after adding back capitalized software development costs. Our software revenue backlog is at record levels and we generated nearly $4 million of adjusted EBITDA in the quarter. After capital expenditures and paying the quarterly dividend, Spok was able to grow our cash, cash equivalents and short-term investment balances from the prior quarter and prior year-end levels. We are focused on driving positive free cash flow for 2020 and Spok remains committed to paying our regular quarterly dividend. We believe we will be able to achieve this while continuing to support our Spok Care Connect® platform and in the near term, investing in innovation and the evolution of our cloud-native and integrated communication platform, Spok Go®.

“As we pointed out last quarter, many of our new software deals were pushed back due to the pandemic. I am pleased to report that several of those deals were closed during the third quarter, including our first two significant Spok Go deals. And, we expect to report more deals in the fourth quarter as well. During the third quarter our credibility in healthcare continued to grow, as we announced that all 20 adult hospitals and all 10 children’s hospitals named to U.S. News & World Report’s 2020-21 Best Hospitals Honor Roll use Spok clinical communication solutions to facilitate care collaboration and support exceptional patient care. For eight consecutive years Spok has partnered with all of the adult ‘Best Hospitals’. And, we did this while continuing to invest in and develop our software-as-a service, cloud-native platform, Spok Go.  In the third quarter we were pleased to announce that this platform, along with Spok paging solutions, has earned System and Organization Controls (SOC) 2 Type II Compliance. This designation follows an audit performed by a Big 4 auditor and confirms that Spok’s information security practices, policies, procedures, and operations meet the SOC 2 Type II standards for managing customer data based on three trust service principles: security, availability and confidentiality.

“Finally, earlier this month Spok welcomed more than 600 attendees to Connect 20 Virtual, our annual conference for healthcare professionals. The virtual event gave healthcare clinicians, IT experts, and C-suite executives a chance to learn about Spok Go and to share information with each other about the future of care team communication, while sharing insights about how the COVID-19 pandemic has changed how they use health IT. Spok has received excellent feedback from our conference and based on requests that we have received, this year we will be providing access to selected presentations to the investment community on November 10th. We believe that Spok provides a critical function, that will become even more important in this environment. Spok’s clinical communications platform provides hospitals with a system of action, delivering reliable communications and clinical information, including clinical test results, to care teams when and where it matters most to improve patient outcomes. We look forward to having our investors see this first hand.” concluded Kelly.

Business Outlook:

Michael W. Wallace, chief operating officer and chief financial officer, said: “Expense management and strong financial discipline have always been critical in aligning our expense levels with anticipated near and long-term demand for our products, and that continued to be the case in the third quarter. In the period, operating expenses were down nearly 17% and adjusted operating expenses were down nearly 11% from prior year levels, with improvements in all expense categories over that period driven by furloughs, the CARES Act tax credits, and other reductions.  Spok’s balance sheet remains strong, with a cash, cash equivalents and short-term investment balance of $79.2 million at September 30, 2020.”

Commenting on the Company’s previously provided financial guidance for 2020, Wallace noted, “Spok has been focused on continuing to understand the impact of the pandemic on our business and the potential for another spike, particularly given the impact of COVID-19 on the installation of our premise-based solutions and the roll-out of our new, cloud-native, SaaS based, Spok Go software solution. Because of the fluid nature of the situation, we, like many of our peer public companies, believe that it is most prudent to continue to suspend our practice of providing annual guidance for revenues and expenses at this time. We look forward to returning to our normal guidance format for 2021, when we report our financial results for the fourth quarter of 2020.”

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2020 Third Quarter Call and Replay:

Spok plans to host a conference call for investors to discuss its 2020 third quarter results at 10:00 a.m. ET on Thursday, October 29, 2020.  Dial-in numbers for the call are 334-777-6978 or 800-367-2403.  The pass code for the call is 1468983.  A replay of the call will be available from 1:00 p.m. ET on October 29, 2020 until 1:00 p.m. ET on Thursday, November 12, 2020. To listen to the replay, please register at http://tinyurl.com/Spok2020Q3earningsreplay. Please cut and paste this address into your browser, enter the registration information, and you will be given access to the replay.

*********

Investor Update:

Spok will be providing access to selected presentations from the October Spok Connect 20 user conference. Presentations from that conference will be made available to investors starting at 10:00 a.m. on November 10, 2020. Information on registering for virtual attendance, as well as an agenda of the presentations, will be provided shortly. An archive of the webcast presentations, including audio, video and presentation slides, will be accessible in the investor section of Spok’s 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, goodwill impairment and capitalized software development costs. Adjusted EBITDA represents net income/(loss) before interest income/expense, income tax expense/benefit, depreciation, amortization and accretion expense, stock based compensation expense, and capitalized software development costs.

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 do not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal of these non-GAAP financial measures is that they exclude significant expenses and income 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 expenses and income 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 (a)
(Unaudited and in thousands except share, per share amounts and ARPU)
For the three months ended For the nine months ended
9/30/2020 9/30/2019 9/30/2020 9/30/2019
Revenue:
Wireless $ 20,828 $ 21,814 $ 63,293 $ 66,552
Software 16,865 17,639 47,406 54,189
Total revenue 37,693  39,453  110,699  120,741 
Operating expenses:
Cost of revenue 6,544 7,190 20,709 22,021
Research and development 3,459 7,437 11,662 20,411
Technology operations 7,357 7,805 22,472 23,345
Selling and marketing 4,272 5,595 14,463 17,279
General and administrative 10,994 11,813 33,056 34,255
Depreciation, amortization and accretion 2,335 2,305 6,553 6,999
Total operating expenses 34,961  42,145  108,915  124,310 
% of total revenue 92.8 % 106.8 % 98.4 % 103.0 %
Operating income (loss) 2,732  (2,692) 1,784  (3,569)
% of total revenue 7.2 % (6.8) % 1.6 % (3.0) %
Interest income 127 399 636 1,300
Other income 151 163 113 528
Income (loss) before income taxes 3,010  (2,130) 2,533  (1,741)
Benefit from (provision for) income taxes 155 804 (149) 486
Net income (loss) $ 3,165  $ (1,326) $ 2,384  $ (1,255)
Basic net income (loss) per common share $ 0.17 $ (0.07) $ 0.13 $ (0.07)
Diluted net income (loss)  per common share 0.16 (0.07) 0.12 (0.07)
Basic weighted average common shares outstanding 19,051,502 19,086,811 19,008,969 19,166,812
Diluted weighted average common shares outstanding 19,208,452 19,086,811 19,273,243 19,166,812
Cash dividends declared per common share 0.125 0.125 0.375 0.375
Key statistics:
Units in service 898 955 898 955
Average revenue per unit (ARPU) $ 7.34 $ 7.32 $ 7.31 $ 7.33
Bookings $ 21,414 $ 20,421 $ 52,465 $ 56,410
Backlog $ 51,708 $ 42,604 $ 51,708 $ 42,604
(a) Slight variations in totals are due to rounding.
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (a)
(Unaudited and in thousands except share, per share amounts and ARPU)
For the three months ended
9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018
Revenue:
Wireless $ 20,828 $ 21,078 $ 21,386 $ 21,615 $ 21,814 $ 22,127 $ 22,610 $ 23,091
Software 16,865 14,661 15,881 17,933 17,639 17,398 19,154 20,165
Total revenue 37,693  35,739  37,267  39,548  39,453  39,525  41,764  43,256 
Operating expenses:
Cost of revenue (b) 6,544 5,901 8,264 8,051 7,190 7,239 7,592 8,772
Research and development 3,459 2,754 5,449 7,132 7,437 6,807 6,167 6,618
Technology operations 7,357 7,212 7,904 8,083 7,805 7,866 7,674 8,120
Selling and marketing 4,272 3,831 6,361 5,891 5,595 5,574 6,110 6,275
General and administrative 10,994 10,810 11,251 11,531 11,813 11,696 10,747 10,721
Depreciation, amortization and accretion 2,335 2,072 2,146 2,250 2,305 2,335 2,359 2,601
Goodwill impairment 8,849
Total operating expenses 34,961  32,580  41,375  51,787  42,145  41,517  40,649  43,107 
% of total revenue 92.8 % 91.2 % 111.0 % 130.9 % 106.8 % 105.0 % 97.3 % 99.7 %
Operating income (loss) 2,732  3,159  (4,108) (12,239) (2,692) (1,992) 1,115  149 
% of total revenue 7.2 % 8.8 % (11.0) % (30.9) % (6.8) % (5.0) % 2.7 % 0.3 %
Interest income 127 146 363 350 399 452 449 628
Other income (expense) 151 101 (137) 206 163 602 (236) (593)
Income (loss)  before income taxes 3,010  3,406  (3,882) (11,683) (2,130) (938) 1,328  184 
Benefit from (provision for) income taxes 155 353 (657) 2,172 804 268 (586) 5
Net income (loss) $ 3,165  $ 3,759  $ (4,539) $ (9,511) $ (1,326) $ (670) $ 742  $ 189 
Basic net income (loss) per common share $ 0.17 $ 0.20 $ (0.24) $ (0.50) $ (0.07) $ (0.03) $ 0.04 $ 0.01
Diluted net income (loss)\ per common share 0.16 0.20 (0.24) (0.50) (0.07) (0.03) 0.04 0.01
Basic weighted average common shares outstanding 19,051,502 19,016,853 18,958,716 18,860,020 19,086,811 19,217,866 19,196,970 19,445,401
Diluted weighted average common shares outstanding 19,208,452 19,115,148 18,958,716 18,860,020 19,086,811 19,217,866 19,356,712 19,445,401
Key statistics:
Units in service 898 915 926 938 955 977 982 992
Average revenue per unit (ARPU) $ 7.34 $ 7.24 $ 7.31 $ 7.33 $ 7.32 $ 7.26 $ 7.32 $ 7.36
Bookings $ 21,414 $ 15,411 $ 15,639 $ 21,932 $ 20,421 $ 21,334 $ 14,654 $ 23,076
Backlog $ 51,708 $ 48,441 $ 49,052 $ 50,553 $ 42,604 $ 39,718 $ 37,392 $ 40,422
(a) Slight variations in totals are due to rounding.
(b) An adjustment of $771 to cost of revenue, identified in the fourth quarter of 2018, has been reflected in this table as an increase to cost of revenue of $166, $196 and $359 in the first, second and third quarters of 2018, respectively. Total operating expenses, operating income (loss), income (loss) before income taxes, Net (loss) income and net (loss) income per share have been adjusted accordingly to reflect these changes.
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (a)
(In thousands)
9/30/2020 12/31/2019
Unaudited
Assets
Current assets:
Cash and cash equivalents $ 49,235 $ 47,361
Short term investments 29,994 29,899
Accounts receivable, net 29,671 30,174
Prepaid expenses 8,056 7,517
Other current assets 1,645 2,714
Total current assets 118,601  117,665 
Non-current assets:
Property and equipment, net 6,933 8,000
Operating lease right-of-use assets 14,342 16,317
Capitalized software development, net 7,784
Goodwill 124,182 124,182
Intangible assets, net 1,042 2,917
Deferred income tax assets, net 48,308 48,983
Other non-current assets 1,081 1,808
Total non-current assets 203,672  202,207 
Total assets $ 322,273  $ 319,872 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 5,112 $ 3,615
Accrued compensation and benefits 13,845 11,680
Deferred revenue 27,174 25,944
Operating lease liabilities 5,220 5,437
Other current liabilities 4,565 4,507
Total current liabilities 55,916 51,183
Non-current liabilities:
Asset retirement obligations 6,123 6,061
Operating lease liabilities 9,766 11,575
Other non-current liabilities 2,446 959
Total non-current liabilities 18,335 18,595
Total liabilities 74,251  69,778 
Commitments and contingencies
Stockholders’ equity:
Preferred stock $ $
Common stock 2 2
Additional paid-in capital 90,297 86,874
Accumulated other comprehensive loss (1,656) (1,601)
Retained earnings 159,379 164,819
Total stockholders’ equity 248,022  250,094 
Total liabilities and stockholders’ equity $ 322,273  $ 319,872 
(a) Slight variations in totals are due to rounding.
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a)
(Unaudited and in thousands)
For the nine months ended
9/30/2020 9/30/2019
Operating activities:
Net income (loss) $ 2,384  $ (1,255)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and accretion 6,553 6,999
Deferred income tax expense 15 (569)
Stock based compensation 4,160 2,521
Provisions for doubtful accounts, service credits, and other 914 652
Changes in assets and liabilities:
Accounts receivable (1,019) 252
Prepaid expenses, inventory and other assets 3,701 2,131
Accounts payable, accrued liabilities and other liabilities 1,566 (1,366)
Deferred revenue 2,680 1,383
Net cash provided by operating activities 20,954  10,748 
Investing activities:
Purchases of property and equipment (2,824) (4,162)
Capitalized software development (8,206)
Purchase of short-term investments (44,870) (44,499)
Maturity of short-term investments 45,000 19,000
Net cash used in investing activities (10,900) (29,661)
Financing activities:
Cash distributions to stockholders (7,388) (7,440)
Purchase of common stock (including commissions) (6,575)
Proceeds from issuance of common stock under the Employee Stock Purchase Plan 166 119
Purchase of common stock for tax withholding on vested equity awards (903) (1,017)
Net cash used in financing activities (8,125) (14,913)
Effect of exchange rate on cash (55) (198)
Net increase (decrease) in cash and cash equivalents 1,874 (34,024)
Cash and cash equivalents, beginning of period 47,361 83,343
Cash and cash equivalents, end of period $ 49,235  $ 49,319 
Supplemental disclosure:
Income taxes paid $ 148 $ 927
(a) Slight variations in totals are due to rounding.
SPOK HOLDINGS, INC.
CONSOLIDATED REVENUE
SUPPLEMENTAL INFORMATION (a)
(Unaudited and in thousands)
For the three months ended
9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018
Revenue
Paging $ 19,961 $ 19,990 $ 20,451 $ 20,826 $ 21,212 $ 21,342 $ 21,687 $ 21,997
Non-paging 867 1,088 935 789 602 785 923 1,094
Total wireless revenue $ 20,828  $ 21,078  $ 21,386  $ 21,615  $ 21,814  $ 22,127  $ 22,610  $ 23,091 
License 1,988 749 955 1,711 2,723 1,676 2,840 3,496
Services 4,772 3,812 4,549 4,947 4,202 4,835 5,206 5,103
Equipment 554 601 725 1,125 689 842 963 1,568
Subscription 24
Operations revenue $ 7,338  $ 5,162  $ 6,229  $ 7,783  $ 7,614  $ 7,353  $ 9,009  $ 10,167 
Maintenance revenue $ 9,527  $ 9,499  $ 9,652  $ 10,150  $ 10,025  $ 10,045  $ 10,145  $ 9,998 
Total software revenue $ 16,865  $ 14,661  $ 15,881  $ 17,933  $ 17,639  $ 17,398  $ 19,154  $ 20,165 
Total revenue $ 37,693  $ 35,739  $ 37,267  $ 39,548  $ 39,453  $ 39,525  $ 41,764  $ 43,256 
(a) Slight variations in totals are due to rounding.
SPOK HOLDINGS, INC.
CONSOLIDATED OPERATING EXPENSES
SUPPLEMENTAL INFORMATION (a)
(Unaudited and in thousands)
For the three months ended
9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018
Cost of revenue
Payroll and related $ 4,941 $ 4,350 $ 5,785 $ 5,222 $ 5,099 $ 4,749 $ 4,931 $ 4,868
Cost of sales 1,064 1,098 1,940 2,278 1,567 1,900 2,080 3,349
Stock-based compensation 148 134 119 42 21 97 107 44
Other 391 319 420 509 503 493 474 511
Total cost of revenue (b) 6,544  5,901  8,264  8,051  7,190  7,239  7,592  8,772 
Research and development
Payroll and related 4,147 4,115 4,761 5,056 5,083 4,639 4,263 4,350
Outside services 2,113 1,803 1,584 1,742 2,027 1,912 1,745 2,115
Capitalized software development (2,906) (3,596) (1,705)
Stock-based compensation 240 243 236 113 102 84 11 5
Other (135) 189 573 221 225 172 148 148
Total research and development 3,459  2,754  5,449  7,132  7,437  6,807  6,167  6,618 
Technology operations
Payroll and related 2,246 2,213 2,712 2,656 2,823 2,662 2,647 2,616
Site rent 3,467 3,399 3,398 3,669 3,269 3,480 3,296 3,432
Telecommunications 949 961 1,001 1,026 1,016 1,019 996 1,021
Stock-based compensation 52 47 43 32 30 30 30 24
Other 643 592 750 700 667 675 705 1,027
Total technology operations 7,357  7,212  7,904  8,083  7,805  7,866  7,674  8,120 
Selling and marketing
Payroll and related 2,773 2,538 3,583 3,382 3,524 3,329 3,273 3,047
Commissions 1,059 852 1,212 1,158 1,114 1,298 1,424 1,759
Stock-based compensation 208 194 172 164 137 128 161 99
Advertising and events 151 160 784 1,034 703 656 933 1,236
Other 81 87 610 153 117 163 319 134
Total selling and marketing 4,272  3,831  6,361  5,891  5,595  5,574  6,110  6,275 
General and administrative
Payroll and related 3,476 3,355 4,134 3,974 4,220 4,136 4,041 4,087
Stock-based compensation 968 744 612 770 674 690 219 860
Bad debt 178 628 43 56 402 (96) 308 303
Facility rent, office, and technology costs 2,259 2,276 2,068 1,952 2,369 2,485 2,294 2,072
Outside services 2,148 2,043 2,036 2,350 2,004 2,306 1,776 2,062
Taxes, licenses and permits 994 804 859 1,000 888 863 921 111
Other 971 960 1,499 1,429 1,256 1,312 1,188 1,226
Total general and administrative 10,994  10,810  11,251  11,531  11,813  11,696  10,747  10,721 
Depreciation, amortization and accretion 2,335 2,072 2,146 2,250 2,305 2,335 2,359 2,601
Goodwill impairment 8,849
Operating expenses $ 34,961  $ 32,580  $ 41,375  $ 51,787  $ 42,145  $ 41,517  $ 40,649  $ 43,107 
Capital expenditures $ 934  $ 846  $ 1,063  $ 679  $ 1,378  $ 1,495  $ 1,287  $ 830 
(a) Slight variations in totals are due to rounding.
(b) An adjustment of $771 to cost of sales, identified in the fourth quarter of 2018, has been reflected in this table as an increase to cost of sales of $166, $196 and $359 in the first, second and third quarters of 2018, respectively. Total cost of revenue and operating expenses have been adjusted accordingly to reflect these changes.
SPOK HOLDINGS, INC.
UNITS IN SERVICE ACTIVITY, MARKET SEGMENT, CHURN
AND AVERAGE REVENUE PER UNIT (ARPU) (a)
(Unaudited and in thousands)
For the three months ended
9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018
Paging units in service
Beginning units in service (000’s) 915  926  938  955  977  982  992  999 
Gross placements 25 35 24 22 28 35 27 30
Gross disconnects (42) (46) (36) (39) (50) (40) (37) (37)
Net change (17) (11) (12) (17) (22) (5) (10) (7)
Ending units in service 898  915  926  938  955  977  982  992 
End of period units in service % of total (b)
Healthcare 83.7 % 83.6 % 82.6 % 82.4 % 81.7 % 81.7 % 81.6 % 81.4 %
Government 5.3 % 5.5 % 5.4 % 5.4 % 5.5 % 5.6 % 5.8 % 5.8 %
Large enterprise 4.3 % 4.4 % 5.5 % 5.5 % 6.1 % 5.9 % 5.9 % 5.9 %
Other(b) 6.6 % 6.6 % 6.5 % 6.6 % 6.7 % 6.8 % 6.7 % 6.9 %
Total 100.0  % 100.0  % 100.0  % 100.0  % 100.0  % 100.0  % 100.0  % 100.0  %
Account size ending units in service (000’s)
1 to 100 units 63 65 67 69 72 74 77 78
101 to 1,000 units 167 165 171 173 175 179 186 190
>1,000 units 668 685 688 696 708 724 719 724
Total 898  915  926  938  955  977  982  992 
Account size net loss rate(c)
1 to 100 units (2.9) % (3.1) % (3.0) % (3.8) % (2.1) % (3.2) % (2.3) % (1.7) %
101 to 1,000 units 1.5 % (4.2) % (1.0) % (1.0) % (2.4) % (3.9) % (2.3) % %
>1,000 units (2.5) % (0.4) % (1.2) % (1.8) % (2.2) % 0.7 % (1.1) % (0.1) %
Total (1.8) % (1.3) % (1.3) % (1.8) % (2.2) % (0.5) % (1.1) % (0.2) %
Account size ARPU
1 to 100 units $ 11.80 $ 11.65 $ 12.01 $ 11.99 $ 11.84 $ 12.00 $ 11.90 $ 11.61
101 to 1,000 units 8.37 8.24 8.34 8.31 8.41 8.47 8.35 8.28
>1,000 units 6.67 6.57 6.59 6.62 6.59 6.47 6.57 6.69
Total $ 7.34  $ 7.24  $ 7.31  $ 7.33  $ 7.32  $ 7.26  $ 7.32  $ 7.36 
(a) Slight variations in totals are due to rounding.
(b) Other includes hospitality, resort and indirect units
(c) Net loss rate is net current period placements and disconnected units in service divided by prior period ending units in service.
SPOK HOLDINGS, INC.
RECONCILIATION FROM NET (LOSS) INCOME TO EBITDA (a)
(Unaudited and in thousands)
For the three months ended
9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018
Reconciliation of net (loss) income to EBITDA:
Net income (loss) (b) $ 3,165  $ 3,759  $ (4,539) $ (9,511) $ (1,326) $ (670) $ 742  $ 189 
(Less) plus: benefit from (provision for)  income taxes (155) (353) 657 (2,172) (804) (268) 586 (5)
(Less) plus: Other expense (income) (151) (101) 137 (206) (163) (602) 236 593
Less: Interest income (127) (146) (363) (350) (399) (452) (449) (628)
Operating income (loss) 2,732  3,159  (4,108) (12,239) (2,692) (1,992) 1,115  149 
Plus: depreciation, amortization and accretion 2,335 2,072 2,146 2,250 2,305 2,335 2,359 2,601
EBITDA $ 5,067  $ 5,231  $ (1,962) $ (9,989) $ (387) $ 343  $ 3,474  $ 2,750 
Less: capitalized software development costs (2,906) (3,596) (1,705)
Plus: stock-based compensation 1,616 1,362 1,182 1,121 964 1,029 528 1,032
Plus: goodwill impairment 8,849
Adjusted EBITDA $ 3,777  $ 2,997  $ (2,485) $ (19) $ 577  $ 1,372  $ 4,002  $ 3,782 
For the nine months ended
9/30/2020 9/30/2019
Reconciliation of net income (loss) to EBITDA:
Net (loss) income $ 2,384  $ (1,255)
Plus (less): Benefit from (provision for) income taxes 149 (486)
Less: Other (expense) income (113) (528)
Less: Interest income (636) (1,300)
Operating loss 1,784  (3,569)
Plus: depreciation, amortization and accretion 6,553 6,999
EBITDA $ 8,337  $ 3,430 
Less: capitalized software development costs (8,206)
Plus: stock-based compensation 4,160 2,521
Adjusted EBITDA $ 4,291  $ 5,951 
RECONCILIATION FROM OPERATING EXPENSES TO ADJUSTED OPERATING EXPENSES (a)
For the three months ended
9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018
(Dollars in thousands)
Operating expenses $ 34,961  $ 32,580  $ 41,375  $ 51,787  $ 42,145  $ 41,517  $ 40,649  $ 43,107 
Less: depreciation, amortization and accretion 2,335 2,072 2,146 2,250 2,305 2,335 2,359 2,601
Less: goodwill impairment 8,849 —  —  —  — 
Add: capitalized software development costs 2,906 3,596 1,705 —  —  —  — 
Adjusted operating expenses $ 35,532  $ 34,104  $ 40,934  $ 40,688  $ 39,840  $ 39,182  $ 38,290  $ 40,506 
(a) Slight variations in totals are due to rounding.
(b) An adjustment to cost of revenue identified in the fourth quarter of 2018 of $771 has been reflected in this table as a reduction of Net (loss) income of $166, $196, $359, and $771 in the first, second, third, and fourth quarters respectively.