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Spok Reports 2017 Second Quarter Operating Results; Wireless Trends Continue to Improve, Software Revenue and Bookings Increase

Board Declares Regular Quarterly Dividend

SPRINGFIELD, Va. (July 26, 2017) – Spok Holdings, Inc. (NASDAQ: SPOK), the global leader in healthcare communications, today announced operating results for the second quarter ended June 30, 2017. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on September 8, 2017 to stockholders of record on August 18, 2017.

2017 Second-Quarter Results:

In the 2017 second quarter, consolidated revenue was $42.3 million, up from $41.4 million in the first quarter. Software revenue was $16.7 million in the second quarter of 2017, up from $15.6 million in the prior quarter. Wireless revenue totaled $25.6 million in the second quarter, compared to $25.8 million in the prior quarter.

Net income for the second quarter of 2017 was $1.5 million, or $0.07 per diluted share, up from $0.9 million, or $0.04 per diluted share, in the prior quarter.

Second quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $5.3 million, or 12.4 percent of revenue, up from EBITDA of $4.6 million, or 11.1 percent of revenue, in the first quarter.

Other key results and highlights for the second quarter included:

  • The quarterly rate of paging unit erosion slowed to a record low of 0.4 percent in the second quarter of 2017, compared to 1.8 percent in the prior quarter. Net paging unit losses were 5,000 in the second quarter of 2017, down from 20,000 in the first quarter of 2017. Paging units in service at June 30, 2017 totaled 1,086,000, compared to 1,091,000 at the end of the prior quarter.
  • The quarterly rate of wireless revenue erosion slowed to 0.9 percent in the second quarter of 2017 versus 2.5 percent in the prior quarter.
  • Total paging ARPU (average revenue per unit) was $7.52 in the second quarter of 2017, compared to $7.56 in the prior quarter.
  • Software bookings for the 2017 second quarter were $20.4 million, an increase of more than 3 percent from the previous quarter. Second quarter bookings included $9.9 million of operations bookings and $10.5 million of maintenance renewals.
  • Software backlog totaled $43.5 million at June 30, 2017, up more than 7 percent, or nearly $3 million, from $40.6 million in the prior quarter.
  • Of the $16.7 million in software revenue for the second quarter, $7.0 million was operations revenue and $9.7 million was maintenance revenue, compared to $6.0 million and $9.6 million, respectively, of the $15.6 million in software revenue in the first quarter of 2017.
  • The renewal rate for software maintenance in the second quarter of 2017 continued at greater than 99 percent.
  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $37.1 million in the second quarter of 2017, up slightly from $36.8 million in the prior quarter.
  • Capital expenses were $2.4 million in the second quarter of 2017, compared to $2.9 million in the prior quarter.
  • The number of full-time equivalent employees at June 30, 2017 totaled 604, compared to 599 at March 31, 2017.
  • Capital returned to stockholders in the second quarter of 2017 totaled $12.5 million, in the form of $2.5 million from dividends and $10 million from share repurchases.
  • The Company’s cash balance at June 30, 2017 was $107.2 million, down from $118.9 million at March 31, 2017.

Management Commentary:

“We are pleased with our performance in the second quarter of 2017 and with the continuing benefits from our investments to enhance and upgrade our product development team and tools, as well as our sales infrastructure and management,” said Vincent D. Kelly, chief executive officer. “We saw strong performance in a number of key operating measures and solid year-over-year and sequential improvements in subscriber retention, sales bookings and backlog levels, and operating expense management. We believe continued investments will yield significant future benefits in the form of our improved, integrated communication platform, Spok Care Connect®, and continued momentum in bookings levels. Overall, we continued to operate profitably, enhance our product offerings, and maintain our strong balance sheet. Our ability to generate healthy cash flows allowed us to execute against our capital allocation strategy, returning capital to shareholders in the form of dividends and stock repurchases.”

The Company posted solid results for its wireless products and services in the second quarter. Gross pager placements of 42,000 were a sharp increase from the prior and year-earlier quarters, and the highest level in the past two years, while gross disconnects of 47,000 improved slightly from 48,000 in the prior quarter and second quarter of 2016. “As a result, annual net pager losses declined to an historical low of 5.1 percent from the prior year’s second quarter, and were 0.4 percent in the second quarter, down 40 basis points from 0.8 percent in the prior-year quarter,” continued Kelly. “Overall, wireless sales efforts continued to focus primarily on our core market segments of Healthcare, Government and Large Enterprise, which represented approximately 92.7 percent of our subscriber base and 90.8 percent of our paging revenue at quarter end. Healthcare comprised 80.4 percent of our subscriber base, and continued to be our best performing market segment with the highest rate of gross placements and lowest rate of unit disconnects.”

Commenting on software results, Kelly said: “As a result of the investments we are making in our sales and product platforms, software revenues were up more than 7 percent from the first quarter and were in-line with prior year levels. We believe we are well positioned for the second half of the year, when software sales tend to be more robust.”   Kelly primarily attributed the ability to generate sequential growth in software revenue levels to a more than 99 percent renewal rate on maintenance contracts.  Similar to Spok’s wireless revenue stream, software maintenance revenue is a largely recurring revenue stream that provides the Company with a more stable revenue and margin base.  “More than 84 percent of our revenue streams are recurring in nature, when you consider our solid wireless base and software maintenance contracts’” added Kelly. “This provides us with the ability to make key investments in our business while executing on our capital allocation strategy to enhance stockholder value.”

Kelly said second quarter bookings of $20.4 million were up from $19.8 million in the prior quarter, and included $10.5 million of maintenance renewals bookings, a record high for the second quarter. Additionally, software backlog of $43.5 million at June 30th was up more than 7 percent and 10 percent, respectively, from the prior quarter and year levels.   “We will continue to build on the solid momentum we saw in the second quarter.  We are encouraged as bookings included sales to both new and current customers, with existing customers adding products and applications to expand their portfolio of communications solutions.  Customer demand remained strongest for upgrades to call center solutions, healthcare applications to increase patient safety, and improved nursing workflows.”  Kelly added: “We continue to see growing demand for our software solutions for critical smartphone communications, secure texting, and emergency management, as well as clinical alerting, and we are proud to be working with more than 1,900 hospitals world-wide, including all of the best adult and children’s hospitals as defined by U.S. News & World Report.”

Kelly also noted that in addition to the Company’s quarterly financial performance, progress was made in several other areas, including product development, sales strategy and key strategic partnership agreements. “Spok continues to generate activity and sales momentum at the conferences we attend,” commented Kelly. “In April, we attended the Becker’s Hospital Review 8th Annual Meeting in Chicago, where our Chief Medical Officer, Dr. Andrew Mellin, presented ‘The Healthcare CIO Perspective on Supporting Clinical Workflows’. In May, we also announced that several of our key executives would be participating at upcoming ‘C-Suite’ conferences throughout 2017 to discuss industry communication challenges with hospital leaders from across the country. And in early May, Spok released the second part of the Company’s annual mobility in healthcare survey. Spok has been conducting this survey since 2011 to assess mobile workflow enablement trends in hospitals across the country. More than 300 U.S. healthcare professionals responded to this year’s questions about mobile strategy development, bring your own device (BYOD) policies, communications infrastructure, and opportunities to improve mobile communications.  Spok will continue to leverage the attention that we are receiving as a thought leader within our industry.”

Spok returned capital to stockholders, totaling $12.5 million, in the second quarter of 2017. During the period, the Company paid $2.5 million in dividends and repurchased 572,550 shares of common stock, totaling $10 million, under its stock buy-back program. Kelly added, “Throughout 2017, we will remain focused on returning value to our shareholders through our multi-faceted capital allocation strategy, which, for the balance of 2017, includes dividends, and key strategic investments in our products and business designed to create sustainable growth.”

Michael W. Wallace, chief financial officer, said: “Continued expense management and strong financial discipline have allowed us to invest in our business for long-term growth. Our ability to align our expense base with the market demand we are seeing and drive high renewal rates in our recurring revenue categories, helped Spok to mitigate the additional expenses related to our investments in our sales and product platforms.  Spok’s balance sheet remains strong, with a cash balance of $107.2 million at June 30, 2017, and we continue to operate as a debt-free company.”

Business Outlook:

Commenting on the Company’s previously provided financial guidance for 2017, Wallace noted: “As a result of the solid performance we saw in the second quarter, we are maintaining the 2017 guidance range that we provided last quarter.” With regard to financial guidance for 2017, Wallace reiterated that the Company expects total revenue to range from $161 million to $177 million, operating expenses (excluding depreciation, amortization and accretion) to range from $153 million to $159 million, and capital expenditures to range from $8 million to $12 million.

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2017 Second-Quarter Call and Replay:

Spok plans to host a conference call for investors to discuss its 2017 second quarter results at 10:00 a.m. ET on Thursday, July 27, 2017.  Dial-in numbers for the call are 719-785-1753 or 888-857-6932.  The pass code for the call is 7139572.  A replay of the call will be available from 1:00 p.m. ET on July 27, 2017 until 1:00 p.m. ET on Thursday, August 10, 2017.  To listen to the replay, please register at http://tinyurl.com/spok2017Q2earningsreplay. Please 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