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Spok Reports Second Quarter Operating Results

Software Revenues Increase, Bookings Up 10.9%;
Wireless Trends Show Strong Improvement;
Board Declares Regular Quarterly Dividend


SPRINGFIELD, Va. (July 28, 2015) – Spok Holdings, Inc. (NASDAQ:  SPOK), a global leader in critical communications, today announced operating results for the second quarter ended June 30, 2015.  In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on September 10, 2015 to stockholders of record on August 19, 2015.

Software revenue increased 13.9 percent to $17.7 million in the second quarter from $15.6 million in the year-earlier quarter, while wireless revenue was $30.2 million versus $33.5 million in the second quarter of 2014.  Consolidated revenue for the second quarter was $48.0 million, compared to $49.1 million in the second quarter of 2014.

Second quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $9.1 million, or 18.9 percent of revenue, compared to $11.7 million, or 23.9 percent of revenue, in the year-earlier quarter, and $10.0 million, or 20.8 percent of revenue, in the first quarter of 2015.

Net income for the second quarter was $3.4 million, or $0.16 per fully diluted share, compared to $4.3 million, or $0.19 per fully diluted share, in the second quarter of 2014.

Other key results and highlights for the second quarter included:

  • Software bookings increased 10.9 percent to $21.0 million from $19.0 million in the year-earlier quarter.  Second quarter bookings included $10.5 million of operations bookings and $10.5 million of maintenance renewals.
  • Software backlog increased to $43.5 million at June 30, 2015, compared to $40.2 million a year earlier.
  • Of the $17.7 million in software revenue for the second quarter, $9.3 million was operations revenue and $8.4 million was maintenance revenue, compared to $8.1 million and $7.5 million, respectively, of the $15.6 million in software revenue for the second quarter of 2014.
  • The renewal rate for software maintenance in the second quarter was 99.8 percent.
  • The quarterly rate of paging unit erosion improved to 1.6 percent from 2.1 percent in the year-earlier quarter, while the annual rate of unit erosion improved to 6.8 percent from 10.1 percent in the year-earlier quarter.   Both the quarterly and annual rates of unit erosion were the Company’s lowest in more than a decade.  Net paging unit losses total 19,000 versus 28,000 in the second quarter of 2014.  Paging units in service at June 30, 2015 totaled 1,211,000, compared to 1,299,000 a year earlier.
  • The quarterly rate of wireless revenue erosion improved to 1.5 percent from 2.4 percent in the year-earlier quarter, reaching its lowest level in four years, while the annual rate of wireless revenue erosion improved to 9.8 percent versus 11.3 percent in the second quarter of 2014, falling below 10 percent for the first time in more than 10 years.
  • Total paging ARPU (average revenue per unit) was $7.86, compared to $7.98 in the year-earlier quarter and $7.91 in the first quarter of 2015.
  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $38.9 million in the second quarter, compared to $37.4 million in the year-earlier quarter.
  • Capital expenses were $2.0 million, compared to $2.4 million in the year-earlier quarter.
  • Capital returned to stockholders in the form of dividends and share repurchases in the second quarter totaled $2.7 million and $3.0 million, respectively.
  • The Company’s cash balance at June 30, 2015 was $117.1 million.
  • The number of full-time equivalent employees at June 30, 2015 totaled 608, compared to 604 at March 31, 2015.

“We continued to make excellent progress in the second quarter,” said Vincent D. Kelly, president and chief executive officer.  “Software revenue and bookings increased from the prior and year-earlier quarters and our backlog and pipeline remained strong.  Wireless results also reflected solid improvement as the rates of paging unit and revenue erosion reached their best levels in many years. In addition, we met or exceeded our expectations on virtually all other key operating metrics for the quarter, including revenue, cash flow, and average revenue per unit (ARPU).  Overall, we continued to operate profitably, enhance our product offerings, expand our global market reach, and generate sufficient cash flow to again return capital to stockholders in the form of cash dividends and share repurchases.”

Commenting on software results, Kelly said:   “Software revenue totaled $17.7 million, a record high for the second quarter and third highest quarterly software revenue result in the Company’s history.  During the quarter we continued to see growing demand from long-term customers for upgrades to existing applications as well as for new communications products and solutions, all of which contributed to an increase in software licenses, hardware and professional services among Spok’s expanding worldwide customer base.  “In addition,” Kelly noted, “both operations and maintenance revenue rose from the second quarter of 2014, with the higher maintenance revenue reflecting our continued success in achieving maintenance renewals rates in excess of 99 percent.”

Kelly said second quarter bookings of $21.0 million included $10.5 million of operations bookings and $10.5 million in maintenance bookings, up 10.9 percent from the year-earlier quarter, while the software backlog of $43.5 million at June 30 neared its record high of $43.8 million.   “Customer demand, especially among our healthcare customers, remained strongest for secure texting, upgrades to call center solutions, applications to increase patient safety, and improved clinical workflows.”  Kelly added:  “We also experienced an uptick in demand for such software solutions as critical smartphone communications, emergency management, and delivery of critical test results.   Overall, we added more than 50 new customers during the quarter.”

Kelly said the Company continued to expand software sales outside the United States during the quarter.  “While demand remained strongest in North America, we continued to grow our customer base in Europe, the Middle East, and the Asia-Pacific region.  In addition, we extended our sales focus to Latin America for the first time, attending a major healthcare tradeshow in Brazil that created an opportunity for our sale team to build partnerships and learn more about the needs of Latin American hospitals.   As a result of these and other sales and marketing initiatives, we continued to build a solid pipeline of new business leads throughout targeted markets worldwide.”

The Company also recorded solid results for its wireless products and services in the quarter.  “Gross pager placements totaled 40,000 versus 29,000 in the prior quarter, while gross disconnects of 59,000 improved from 79,000 a year ago,” Kelly said.  “As a result, the rate of quarterly and annual net pager losses for the second quarter improved to 1.6 percent and 6.8 percent, respectively, the best levels in many years.  In addition, the annual rate of wireless revenue erosion fell to 9.8 percent for the quarter, reaching its lowest level in more than a decade.  Wireless sales continued to focus primarily on Spok’s core market segments of Healthcare, Government and Large Enterprise.  Healthcare continued to be our best performing market segment with the highest rate of gross placements and lowest rate of unit disconnects, and comprised 78.9 percent of our direct units-in-service and 73.9 percent of direct paging revenue at June 30.”

Kelly also noted:  “Once again all 15 Adult and 12 Children’s Hospitals named to U.S. News & World Report’s recently released 2015-2016 Honor Roll of Best Hospitals are among our current customers and rely on Spok solutions to help them provide the highest quality care for their patients.”

Kelly added that Spok again returned capital to stockholders during the second quarter, distributing cash dividends totaling $2.7 million and repurchasing 177,330 shares of common stock for $3,009,471, or $16.97 per share, under its stock buy-back program.

Shawn E. Endsley, chief financial officer, said:   “Strong revenue from both software and wireless, along with focused expense management companywide, resulted in solid operating cash flow for the quarter as we continued to invest in opportunities for long-term growth.  Operating expenses were impacted by $2.5 million of one-time charges during the quarter.  Absent these charges, consolidated expenses would have declined and EBITDA margin improved as compared to the first quarter.  Our balance sheet also remained strong at June 30 with no debt and a cash balance of $117.1 million.”

Endsley said the Company is maintaining previously provided financial guidance for 2015, which projects total revenue to range from $183 million to $201 million, operating expenses (excluding depreciation, amortization and accretion) to range from $145 million to $154 million, and capital expenses to range from $5.5 million to $7.5 million.

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Spok plans to host a conference call for investors on its second quarter operating results at 10:00 a.m. Eastern Time on Thursday, July 30, 2015.  Dial-in numbers for the call are 785-424-1666 or 877-876-9177.  The passcode for the call is 9775155.  A replay of the call will be available from 1:00 p.m. ET on July 30 until 1:00 p.m. on Thursday, August 13.  Replay numbers are 719-457-0820 or 888-203-1112.  The passcode for the replay is 9775155.

Spok’s Annual Meeting of Stockholders will be held on Wednesday, July 29, in Washington, D.C.

Also, Spok has scheduled its annual “Analyst Day” Investor Meeting for financial analysts for November 3, 2015 in New York City.  For further details and to RSVP, please contact Stacy Sloan at stacy.sloan@spok.com or call 703-269-6950, or send email to investor.relations@spok.com.

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About Spok

Spok, Inc., a wholly owned subsidiary of 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 Go® and Spok Care Connect® platforms to enhance workflows for clinicians and support administrative compliance. Our customers send over 100 million messages each month through their Spok® solutions. When seconds count and patients’ lives are at stake, Spok enables smarter, faster clinical communication. For more information, visit spok.com or follow @spoktweets on Twitter.

Spok is a trademark of Spok Holdings, Inc. Spok Go and Spok Care Connect 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, particularly third party consulting services and research and development costs, future capital needs, competitive pricing pressures, competition from traditional paging services, other wireless communications services and other software providers, many of which are substantially larger and have much greater financial and human capital resources, changes in customer purchasing priorities or capital expenditures, government regulation of our products and services and the healthcare and health insurance industries, reliance upon third-party providers for certain equipment and services, unauthorized breaches or failures in cybersecurity measures adopted by us and/or included in our products and services, the effects of changes in accounting policies or practices, adverse economic, political or market conditions in the U.S. and international markets and other factors such as natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as coronavirus disease 2019 (COVID-19), 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.

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