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Spok Reports 2018 Third Quarter Operating Results; Software Revenue and Bookings Up on Both a Year-Over-Year and Sequential Basis

Board Declares Regular Quarterly Dividend

SPRINGFIELD, Va. –(BUSINESS WIRE)–October 24, 2018 — Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced operating results for the third quarter and year-to-date period ended September 30, 2018. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on December 10, 2018 to stockholders of record on November 16, 2018.

2018 Third-Quarter Results:

Consolidated revenue for the third quarter of 2018 under Generally Accepted Accounting Principles (“GAAP”) was $42.5 million compared to $43.6 million in the third 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 third quarter of 2018 was $41.0 million compared to the $43.6 million in the third quarter of 2017.

Three months ended
(Dollars in thousands)September 30, 2018September 30, 2018 (1)September 30, 2017Change (2) (%)
Wireless revenue
Paging revenue$22,442$22,442$24,128(7.0%)
Product and other revenue817817982(16.8%)
Total wireless revenue$23,259$23,259$25,110(7.4%)
Software revenue
Operations revenue$9,026$7,852$8,863(11.4)%
Maintenance revenue10,1919,9249,6632.7%
Total software revenue19,21717,77618,526(4.0)%
Total revenue$42,476$41,035$43,636(6.0%

 

(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 third quarter of 2018 was $0.5 million, or $0.02 per diluted share, compared to net income of $3.7 million, or $0.19 per diluted share, in the third quarter of 2017. In the third quarter of 2018, the Company generated $1.6 million of EBITDA (earnings before interest, taxes, depreciation and amortization), compared to EBITDA of $6.1 million in the prior year quarter.

Three months ended
(Dollars in thousands)September 30, 2018September 30, 2018 (1)September 30, 2017
Net (loss) income$(481)$2,142$3,727
Diluted net (loss) income per share$(0.02)$0.11$0.19
EBITDA$1,584$77$6,100

(1) Adjusted to exclude the adoption of ASC 606.

 

Other key results and highlights for the third quarter included:

  • Net paging unit losses were approximately 25,000 in the third quarter of 2018, consistent with third quarter 2017 levels.
  • The quarterly rate of wireless revenue erosion was 1.7 percent in the third quarter of 2018 down from 2.1 percent in the third quarter of 2017.
  • Total paging ARPU (average revenue per unit) was $7.40 in the third quarter of 2018, compared to $7.41 in the second quarter of 2018.
  • Software bookings for the 2018 third quarter were $21.6 million, an increase of 16.7 percent and 17.7 percent, respectively, from the second quarter of 2018 and prior year quarter. Third quarter bookings included $10.8 million of operations bookings and $10.8 million of maintenance renewals.
  • Software backlog totaled $36.4 million at September 30, 2018, compared to $36.3 million at June 30, 2018.
  • The revenue renewal rate for software maintenance in the third quarter of 2018 continued at greater than 99 percent.
  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $40.9 million in the third quarter of 2018, up slightly from $40.1 million in the second quarter of 2018.
  • Capital expenses were $1.6 million in the third quarter of 2018, compared to $2.3 million in the second quarter of 2018.
  • The number of full-time equivalent employees at September 30, 2018 totaled 603, compared to 599 at September 30, 2017.
  • Capital returned to stockholders in the third quarter of 2018 totaled $3.1 million, in the form of $2.5 million from dividends and $0.6 million from share repurchases.
  • The Company’s cash balance at September 30, 2018 was $95.2 million, down from $107.2 million at December 31, 2017.

 

2018 Year-To-Date Results:

Consolidated revenue for the first nine months of 2018 was $126.2 million compared to $127.4 million in the first nine 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 nine months of 2018 was $125.3 million compared to the $127.4 million in the first nine months of 2017.

 

For the nine months ended
(Dollars in thousands)September 30, 2018September 30, 2018 (1)September 30, 2017Change (2) (%)
Wireless revenue
Paging revenue$68,574$68,574$73,672(6.9)%
Product and other revenue1,7951,7951,955(11.1)%
Total wireless revenue$71,186$71,186$76,609(7.1%)
Software revenue
Operations revenue$25,961$24,063$21,9459.7%
Maintenance revenue29,07130,03728,8514.1%
Total software revenue55,03254,10050,7966.5%
Total revenue$126,218$125,286$127,405(1.7)%

(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 nine months of 2018 was $0.9 million, or $0.05 per diluted share, compared to net income of $6.1 million, or $0.30 per diluted share, in the first nine months of 2017. In the first nine months of 2018, the Company generated $5.7 million of EBITDA (earnings before interest, taxes, depreciation and amortization), compared to EBITDA of $16.0 million in the prior year period.

For the nine months ended
(Dollars in thousands)September 30, 2018September 30, 2018(1)September 30, 2017
Net (loss) income$(946)$(1,768)$6,078
Diluted net (loss) income per share$(0.05)$0.09$0.30
EBITDA$5,568$4,761$15,967

(1) Adjusted to exclude the adoption of ASC 606.

 

Management Commentary:

“We are pleased with our performance in the third quarter of 2018 and believe that it provides Spok with momentum as we complete 2018 and position ourselves for next year” said Vincent D. Kelly, president and chief executive officer. “Software bookings and revenue levels grew by double-digits on a sequential basis. Coupled with continued strong maintenance renewals and low levels of wireless revenue attrition, total revenue grew by nearly 5 percent from the second quarter of 2018.  Third quarter revenue performance and sustained expense management allowed us to return $3.1 million of capital to our stockholders in the form of dividends and share repurchases, while we continued to 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. “Earlier in October, we were excited to welcome more than 150 attendees to Connect 18, Spok’s annual conference for healthcare professionals. There, we brought together some of the industry’s leading innovators who are pushing the boundaries to advance and improve healthcare communications. We were particularly pleased to showcase what we believe is a game-changer in healthcare communication technology; the next generation of the Spok Care Connect platform. Our collaboration with hospital leaders at these conferences—and throughout the year—has helped us create an enterprise platform that positions healthcare providers for success today and supports them with faster, smarter clinical communications for the next decade.”

Business Outlook:

Michael W. Wallace, chief financial officer, said: “In 2018, continued expense management and strong financial discipline have allowed us to invest in our business for long-term growth and we are seeing the benefits from those investments. Based on our ability to align Spok’s expense base with the market demand we are seeing, we are maintaining the 2018 guidance ranges that we outlined at the beginning of the year.”  For the full-year 2018, adjusted for the adoption of ASC 606, the Company still expects 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.

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2018 Third-Quarter Call and Replay:

Spok plans to host a conference call for investors to discuss its 2018 third quarter results at 10:00 a.m. ET on Thursday, October 25, 2018.  Dial-in numbers for the call are 323-994-2093 or 888-254-3590.  The pass code for the call is 1552099.  A replay of the call will be available from 1:00 p.m. ET on October 25, 2018 until 1:00 p.m. ET on Thursday, November 8, 2018.  To listen to the replay, please register at http://tinyurl.com/Spok2018Q3earningsreplay. Please cut and paste this address into your browser, enter the registration information, and you will be given access to the replay.

View Financial Statements.

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About Spok
Spok Holdings, Inc. (NASDAQ: SPOK), headquartered in Springfield, Va., is proud to be the 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, support administrative compliance, and provide a better experience for patients. Our customers send over 100 million messages each month through their Spok® solutions. When seconds count, count on Spok. For more information, visit spok.com or follow @spoktweets on Twitter.

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

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 Spok’s 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 Spok’s 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, declining demand for paging products and services, continued demand for our software products and services, our ability to develop additional software solutions for our customers and manage our development as a global organization, the ability to manage operating expenses, future capital needs, competitive pricing pressures, competition from both traditional paging services and other wireless communications services, competition from other software providers, government regulation, reliance upon third-party providers for certain equipment and services, 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.

Media Inquiries

Al Galgano
+1 (952) 567-0295
al.galgano@spok.com