News Release

Spok Reports 2020 Fourth Quarter and Full Year Operating Results

Improved Software Revenue Levels, Continued Strong Wireless Trends, and Expense Management Contribute to Operating Performance

Board Declares Regular Quarterly Dividend

Springfield Va. (February 17, 2021) – Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced operating results for the fourth quarter ended December 31, 2020. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on March 30, 2021, to stockholders of record on March 16, 2021.

 Key Fourth Quarter and Full Year Operating Highlights:

  • Fourth quarter 2020 software revenue of $17.2 million included $9.9 million of maintenance revenue and $7.3 million of operations revenue. This compares to third quarter software revenue of $16.9 million, which included $9.5 million of maintenance revenue and $7.4 million of operations revenue.
  • Software bookings in the fourth quarter totaled $16.5 million, compared to $21.4 million in the prior quarter and $21.9 million in the fourth quarter of 2019. Fourth quarter bookings included Spok Go® deals with an aggregate total contract value of $255,000. Fourth quarter software bookings included $7.2 million of operations bookings and $9.3 million of maintenance renewals. At December 31, 2020, the software revenue backlog totaled $50.5 million, compared to the backlog of $50.6 million at December 31, 2019.
  • The quarterly rate of paging unit erosion was 1.4% in the fourth quarter of 2020, down from paging unit erosion of 1.9% in the prior quarter. Gross disconnects were down on both a sequential and year-over-year basis.
  • The rate of wireless revenue erosion in the fourth quarter was 2.5%, compared to a revenue erosion rate of 1.2% in the prior quarter. For the full year 2020, the wireless revenue erosion rate was 5.2%, down 130 basis points from the revenue erosion rate of 6.5% in 2019.
  • Total paging ARPU (average revenue per unit) in 2020 totaled $7.30, down slightly from ARPU of $7.34 in 2019.
  • Operating expenses in 2020 totaled $170.8 million, down from $176.1 million in 2019. Adjusted operating expenses (which excludes goodwill impairment, depreciation, amortization and accretion charges, and includes capitalized software development costs) totaled $148.0 million in 2020, down more than 6% from adjusted operating expenses of $158.0 million in 2019.
  • Capital expenses were $3.5 million in 2020, compared to $4.8 million 2019.
  • The number of full-time equivalent employees at December 31, 2020 totaled 602, compared to 638 at December 31, 2019.
  • Capital paid to stockholders in 2020 aggregated $9.8 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 December 31, 2020, was $78.7 million, up from $77.3 million at December 31, 2019.

 2020 Fourth Quarter and Full Year Results:

Consolidated revenue for the fourth quarter of 2020 under Generally Accepted Accounting Principles (“GAAP”) was $37.5 million compared to $39.5 million in the fourth quarter of 2019. For the year ended December 31, 2020, consolidated revenue totaled $148.2 million, compared to $160.3 million in the prior year.

For the three months endedFor the year ended
(Dollars in thousands)December 31, 2020December 31, 2019Change

(%)

December 31, 2020December 31, 2019Change
(%)
Wireless revenue
Paging revenue$19,513$20,826(6.3)%$79,916$85,067(6.1)%
Product and other revenue787789(0.3)%3,6773,10018.6%
Total wireless revenue$20,300$21,615(6.1)%$83,593$88,167(5.2)%
Software revenue
Operations revenue$7,268$7,783(6.6)%$25,996$31,757(18.1)%
Maintenance revenue9,91310,150(2.3)%38,59140,365(4.4)%
Total software revenue17,18117,933(4.2)%64,58772,122(10.4)%
Total revenue$37,481$39,548(5.2)%$148,180$160,289(7.6)%

GAAP net loss for the fourth quarter of 2020 was $46.6 million, or a loss of $2.44 per basic share, compared to a net loss of $9.5 million, or a loss of $0.50 per basic share, in the fourth quarter of 2019. Based on the Company’s annual assessment of goodwill, largely driven by the Company’s stock price in October when the assessment was completed, the 2020 fourth quarter net loss included a non-cash goodwill impairment charge of $25.0 million, which increased the fourth quarter net loss per basic share by $1.31. Additionally, in the fourth quarter, the Company completed a review to assess the recoverability of its deferred income tax assets, which represent tax benefits of future tax deductions. Based on uncertainty created by COVID-19 to project future profitability and growth and the cumulative loss incurred by the Company over the three-year period ended December 31, 2020, Spok recorded a $22.1 million valuation allowance to reduce net deferred income tax assets, which increased the fourth quarter net loss per basic share by $1.16.

GAAP net loss for the for the year ended December 31, 2020, was $44.2 million, or a loss of $2.32 per basic share, compared to a net loss of $10.8 million, or a loss of $0.56 per basic share, in the prior year. As discussed above, the 2020 full year net loss included a non-cash goodwill impairment charge of $25.0 million, which increased the full year net loss per basic share by $1.31, and the valuation allowance for the recoverability of the Company’s deferred income tax assets, which increased the full year net loss per basic share by an additional $1.16. The Company remains confident in the ultimate market demand for Spok Go despite the non-cash goodwill impairment charge and the valuation allowance on the recoverability of the Company’s deferred income tax assets.

In the fourth quarter of 2020, the Company generated $1.4 million of adjusted EBITDA compared to no adjusted EBITDA in the fourth quarter of 2019. For the year ended December 31, 2020, the Company generated $5.7 million of adjusted EBITDA, compared to $5.9 million in the prior year.

For the three months endedFor the year ended
(Dollars in thousands)December 31, 2020December 31, 2019December 31, 2020December 31, 2019
Net loss$(46,610)$(9,511)$(44,225)$(10,765)
Basic and diluted net loss per common share$(2.44)$(0.50)$(2.32)$(0.56)
Adjusted EBITDA$1,362$(19)$5,654$5,932

Management Commentary:

“In most respects, 2020 was the most challenging year in our history from both a management and operational perspective,” said Vincent D. Kelly, president and chief executive officer. “However, in the face of a 100-year global pandemic our team was able to accomplish a lot.  Though the spread of the virus impeded the many customer meetings we had set up early in the year to introduce Spok Go, our new cloud-native platform, our team was able to stay focused, delivering five new customer relationships for our new platform in the second half of the year, while building the pipeline into 2021. In the fourth quarter we added three of these Spok Go wins; two with existing customers and one new customer joining the Spok family. We also made significant progress in clinical innovation partner development, while adding hundreds of new features to our platform. And that progress continues into 2021.  We continue to believe Spok Go is set to meet significant need in the healthcare marketplace and will create significant value for our shareholders in the coming years.  Once again Spok Customers received Top rankings from U.S. News & World report’s annual honor roll. In August Spok solutions achieved SOC 2 Type II Compliance. In September our team completed our tenth annual survey on the State of Healthcare Communications. In October we hosted our very well attended user conference, Connect, highlighting the importance of care team communication amidst COVID-19.  And in November for the fourth consecutive year Spok was rated as the #1 Secure Healthcare Communications Platform for the fourth consecutive year by Black Book Research. I am particularly proud of our Spok team and their ability to adapt and change under challenging circumstances. We broke a five-year record on selling console licenses last year and also provided over 360 remote license seats at no charge so our customer’s operators could be reconfigured to work from home.  Our team has already begun converting these to paid seats and we expect that to continue throughout 2021.  This momentum gives us confidence as we enter the new year and an eventual resolution to the global pandemic. We expect as the year progresses that our business will continue to pick up each quarter, building momentum and ending the year on a very positive footing.

“In the second half of 2020 we saw a more than 22% increase in software bookings from the first half of the year, as well as continued solid trends in our wireless business. Sustained expense management drove a sharp reduction in full year 2020 operating expenses and adjusted operating expenses from the prior year, even after adding back capitalized software development costs. A big part of those expense savings came from the commitment, support and sacrifices of our employees, who along with the entire leadership team including me, accepted furloughs to contribute to our savings goals. Our software revenue backlog continues at record levels, and we generated nearly $5.7 million of adjusted EBITDA in 2020. We were also able to grow our cash, cash equivalents and short-term investments balance from the prior year-end level, even after capital expenditures and paying our quarterly dividend. We are focused on driving positive free cash flow for 2021, 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.

“Finally, continuing our promise to add clinical talent to our team in order to support our customers and facilitate our transition, in late November we announced the appointment of our new Chief Product Officer, Kristen Lalowski. Kristen brings over 20 years of experience in healthcare and healthcare IT, specifically in the areas of nursing, product management and marketing, operations, sales and client services. We believe that Spok provides a critical function that has become even more important in this environment, and the addition of leaders like Kristen to our management team is key to our success. 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 are proud to be leaders in this mission,” 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 was especially the case throughout 2020. During the year, operating expenses were down nearly 3% and adjusted operating expenses were down more than 6% from prior year levels, with improvements in all expense categories over that period.  Spok’s balance sheet remains strong, as the cash, cash equivalents and short-term investment balance grew to $78.7 million at December 31, 2020.”

Regarding financial guidance for 2021, Wallace said that the Company expects total revenue to range from $132.2 million to $147.2 million. Included in that total, Spok expects software revenue to comprise $58.2 million to $67.2 million. Also, the Company expects adjusted operating expenses to range from $142.7 million to $150.7 million, and capital expenses to range from $2.7 million to $6.7 million.

* * * * * * * * *

2020 Fourth Quarter and Full Year Call and Replay:

Spok plans to host a conference call for investors to discuss its 2020 fourth quarter and full year results at 10:00 a.m. ET on Thursday, February 18, 2021.  Dial-in numbers for the call are 1 929-477-0577 or 866-248-8441.  The confirmation code for the call is 6764724.  A replay of the call will be available from 1:00 p.m. ET on February 18, 2021 until 1:00 p.m. ET on Thursday, March 4, 2021. To listen to the replay, please register at http://tinyurl.com/Spok2020Q4earningsreplay. Please cut and paste this address into your browser, enter the registration information, and you will be given access to the replay.

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 endedFor the year ended
12/31/202012/31/201912/31/202012/31/2019
Revenue:
Wireless$20,300$21,615$83,593$88,167
Software17,18017,93364,58772,122
Total revenue37,480 39,548 148,180 160,289 
Operating expenses:
Cost of revenue7,8338,05128,54230,072
Research and development4,1667,13215,82827,543
Technology operations7,3718,08329,84331,428
Selling and marketing5,0045,89119,46723,170
General and administrative10,04611,53143,10245,787
Depreciation, amortization and accretion2,5032,2509,0569,249
Goodwill impairment25,0078,84925,0078,849
Total operating expenses61,930 51,787 170,845 176,098 
% of total revenue165.2%130.9%115.3%109.9%
Operating loss(24,450)(12,239)(22,665)(15,809)
% of total revenue(65.2)%(30.9)%(15.3)%(9.9)%
Interest income513506871,651
Other income95206208735
Loss before income taxes(24,304)(11,683)(21,770)(13,423)
(Provision for) benefit from income taxes(22,306)2,172(22,455)2,658
Net loss$(46,610)$(9,511)$(44,225)$(10,765)
Basic and diluted net loss per common share$(2.44)$(0.50)$(2.32)$(0.56)
Basic and diluted weighted average common shares outstanding19,088,32918,860,02019,028,91819,089,402
Cash dividends declared per common share0.1250.1250.500.50
Key statistics:
Units in service885938885938
Average revenue per unit (ARPU)$7.30$7.33$7.30$7.34
Bookings$16,528$21,932$68,994$78,341
Backlog$50,504$50,553$50,504$50,553
(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
12/31/20209/30/20206/30/20203/31/202012/31/20199/30/20196/30/20193/31/2019
Revenue:
Wireless$20,300$20,828$21,078$21,386$21,615$21,814$22,127$22,610
Software17,18016,86514,66115,88117,93317,63917,39819,154
Total revenue37,480 37,693 35,739 37,267 39,548 39,453 39,525 41,764 
Operating expenses:
Cost of revenue7,8336,5445,9018,2648,0517,1907,2397,592
Research and development4,1663,4592,7545,4497,1327,4376,8076,167
Technology operations7,3717,3577,2127,9048,0837,8057,8667,674
Selling and marketing5,0044,2723,8316,3615,8915,5955,5746,110
General and administrative10,04610,99410,81011,25111,53111,81311,69610,747
Depreciation, amortization and accretion2,5032,3352,0722,1462,2502,3052,3352,359
Goodwill impairment25,0078,849
Total operating expenses61,930 34,961 32,580 41,375 51,787 42,145 41,517 40,649 
% of total revenue165.2%92.8%91.2%111.0%130.9%106.8%105.0%97.3%
Operating (loss) income(24,450)2,732 3,159 (4,108)(12,239)(2,692)(1,992)1,115 
% of total revenue(65.2)%7.2%8.8%(11.0)%(30.9)%(6.8)%(5.0)%2.7%
Interest income51127146363350399452449
Other income (expense)95151101(137)206163602(236)
(Loss) income before income taxes(24,304)3,010 3,406 (3,882)(11,683)(2,130)(938)1,328 
(Provision for) benefit from income taxes(22,306)155353(657)2,172804268(586)
Net (loss) income$(46,610)$3,165 $3,759 $(4,539)$(9,511)$(1,326)$(670)$742 
Basic net (loss) income per common share$(2.44)$0.17$0.20$(0.24)$(0.50)$(0.07)$(0.03)$0.04
Diluted net (loss) income per common share(2.44)0.160.20(0.24)(0.50)(0.07)(0.03)0.04
Basic weighted average common shares outstanding19,088,32919,051,50219,016,85318,958,71618,860,02019,086,81119,217,86619,196,970
Diluted weighted average common shares outstanding19,088,32919,208,45219,115,14818,958,71618,860,02019,086,81119,217,86619,356,712
Key statistics:
Units in service885898915926938955977982
Average revenue per unit (ARPU)$7.30$7.34$7.24$7.31$7.33$7.32$7.26$7.32
Bookings$16,528$21,414$15,411$15,639$21,932$20,421$21,334$14,654
Backlog$50,504$51,708$48,441$49,052$50,553$42,604$39,718$37,392
(a) Slight variations in totals are due to rounding.
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (a)
(In thousands)
12/31/202012/31/2019
ASSETS
Current assets:
Cash and cash equivalents$48,729$47,361
Short term investments29,99529,899
Accounts receivable, net29,93430,174
Prepaid expenses8,9587,517
Other current assets1,2692,714
Total current assets118,885 117,665 
Non-current assets:
Property and equipment, net7,8158,000
Operating lease right-of-use assets14,01616,317
Capitalized software development, net10,179
Goodwill99,175124,182
Intangible assets, net4172,917
Deferred income tax assets, net25,82648,983
Other non-current assets9781,808
Total non-current assets158,406 202,207 
Total assets$277,291 $319,872 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$6,685$3,615
Accrued compensation and benefits14,10311,680
Deferred revenue27,68625,944
Operating lease liabilities5,2645,437
Other current liabilities3,7024,507
Total current liabilities57,44051,183
Non-current liabilities:
Asset retirement obligations7,2896,061
Operating lease liabilities9,45611,575
Other non-current liabilities2,493959
Total non-current liabilities19,23818,595
Total liabilities76,678 69,778 
Commitments and contingencies
Stockholders’ equity:
Preferred stock$$
Common stock22
Additional paid-in capital91,78086,874
Accumulated other comprehensive loss(1,452)(1,601)
Retained earnings110,283164,819
Total stockholders’ equity200,613 250,094 
Total liabilities and stockholders’ equity$277,291 $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 year ended
12/31/202012/31/2019
Operating activities:
Net loss$(44,225)$(10,765)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and accretion9,0569,249
Goodwill impairment25,0078,849
Valuation allowance22,108
Deferred income tax expense (benefit)438(3,253)
Stock based compensation5,5083,643
Provisions for doubtful accounts, service credits, and other1,212694
Changes in assets and liabilities:
Accounts receivable(1,588)964
Prepaid expenses, inventory and other assets1,4452,913
Accounts payable, accrued liabilities and other liabilities4,027(643)
Deferred revenue3,17542
Net cash provided by operating activities26,163 11,693 
Investing activities:
Purchases of property and equipment(3,455)(4,837)
Capitalized software development(11,252)
Purchase of short-term investments(59,864)(59,385)
Maturity of short-term investments60,00034,000
Net cash used in investing activities(14,571)(30,222)
Financing activities:
Cash distributions to stockholders(9,771)(9,819)
Purchase of common stock (including commissions)(6,575)
Proceeds from issuance of common stock under the Employee Stock Purchase Plan301258
Purchase of common stock for tax withholding on vested equity awards(903)(1,017)
Net cash used in financing activities(10,373)(17,153)
Effect of exchange rate on cash149(300)
Net increase (decrease) in cash and cash equivalents1,368(35,982)
Cash and cash equivalents, beginning of period47,36183,343
Cash and cash equivalents, end of period$48,729 $47,361 
Supplemental disclosure:
Income taxes paid$1$901
(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
12/31/20209/30/20206/30/20203/31/202012/31/20199/30/20196/30/20193/31/2019
Revenue
Paging$19,513$19,961$19,990$20,451$20,826$21,212$21,342$21,687
Non-paging787$867$1,088$935$789$602$785$923
Total wireless revenue$20,300 $20,828 $21,078 $21,386 $21,615 $21,814 $22,127 $22,610 
License$        1,486$1,988$749$955$1,711$2,723$1,676$2,840
Services$        4,778$4,772$3,812$4,549$4,947$4,202$4,835$5,206
Equipment$           961$554$601$725$1,125$689$842$963
Subscription$             42$24$$$$$$
Operations revenue$7,267 $7,338 $5,162 $6,229 $7,783 $7,614 $7,353 $9,009 
Maintenance revenue$9,913 $9,527 $9,499 $9,652 $10,150 $10,025 $10,045 $10,145 
Total software revenue$17,180 $16,865 $14,661 $15,881 $17,933 $17,639 $17,398 $19,154 
Total revenue$37,480 $37,693 $35,739 $37,267 $39,548 $39,453 $39,525 $41,764 
(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
12/31/20209/30/20206/30/20203/31/202012/31/20199/30/20196/30/20193/31/2019
Cost of revenue
Payroll and related$5,447$4,941$4,350$5,785$5,222$5,099$4,749$4,931
Cost of sales1,7401,0641,0981,9402,2781,5671,9002,080
Stock-based compensation136148134119422197107
Other510391319420509503493474
Total cost of revenue7,833 6,544 5,901 8,264 8,051 7,190 7,239 7,592 
Research and development
Payroll and related4,3584,1474,1154,7615,0565,0834,6394,263
Outside services2,3582,1131,8031,5841,7422,0271,9121,745
Capitalized software development(3,046)(2,906)(3,596)(1,705)
Stock-based compensation2462402432361131028411
Other250(135)189573221225172148
Total research and development4,166 3,459 2,754 5,449 7,132 7,437 6,807 6,167 
Technology operations
Payroll and related2,4672,2462,2132,7122,6562,8232,6622,647
Site rent3,3133,4673,3993,3983,6693,2693,4803,296
Telecommunications8579499611,0011,0261,0161,019996
Stock-based compensation4852474332303030
Other686643592750700667675705
Total technology operations7,371 7,357 7,212 7,904 8,083 7,805 7,866 7,674 
Selling and marketing
Payroll and related2,9122,7732,5383,5833,3823,5243,3293,273
Commissions1,1781,0598521,2121,1581,1141,2981,424
Stock-based compensation192208194172164137128161
Advertising and events5391511607841,034703656933
Other1838187610153117163319
Total selling and marketing5,004 4,272 3,831 6,361 5,891 5,595 5,574 6,110 
General and administrative
Payroll and related3,3733,4763,3554,1343,9744,2204,1364,041
Stock-based compensation726968744612770674690219
Facility rent, office, and technology costs2,4121786284356402(96)308
Outside services1,5842,2592,2762,0681,9522,3692,4852,294
Taxes, licenses and permits4842,1482,0432,0362,3502,0042,3061,776
Bad debt2029948048591,000888863921
Other1,2659719601,4991,4291,2561,3121,188
Total general and administrative10,046 10,994 10,810 11,251 11,531 11,813 11,696 10,747 
Depreciation, amortization and accretion2,5032,3352,0722,1462,2502,3052,3352,359
Goodwill impairment25,0078,849
Operating expenses$61,930 $34,961 $32,580 $41,375 $51,787 $42,145 $41,517 $40,649 
Capital expenditures$638 $934 $846 $1,063 $679 $1,378 $1,495 $1,287 
(a) Slight variations in totals are due to rounding.
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
12/31/20209/30/20206/30/20203/31/202012/31/20199/30/20196/30/20193/31/2019
Paging units in service
Beginning units in service (000’s)898 915 926 938 955 977 982 992 
Gross placements2025352422283527
Gross disconnects(33)(42)(46)(36)(39)(50)(40)(37)
Net change(13)(17)(11)(12)(17)(22)(5)(10)
Ending units in service885 898 915 926 938 955 977 982 
End of period units in service % of total (b)
Healthcare83.6%83.7%83.6%82.6%82.4%81.7%81.7%81.6%
Government5.3%5.3%5.5%5.4%5.4%5.5%5.6%5.8%
Large enterprise4.3%4.3%4.4%5.5%5.5%6.1%5.9%5.9%
Other(b)6.8%6.6%6.6%6.5%6.6%6.7%6.8%6.7%
Total100.0 %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 units6163656769727477
101 to 1,000 units167167165171173175179186
>1,000 units657668685688696708724719
Total885 898 915 926 938 955 977 982 
Account size net loss rate(c)
1 to 100 units(3.2)%(2.9)%(3.1)%(3.0)%(3.8)%(2.1)%(3.2)%(2.3)%
101 to 1,000 units%1.5%(4.2)%(1.0)%(1.0)%(2.4)%(3.9)%(2.3)%
>1,000 units(1.6)%(2.5)%(0.4)%(1.2)%(1.8)%(2.2)%0.7%(1.1)%
Total(1.4)%(1.9)%(1.3)%(1.3)%(1.8)%(2.2)%(0.5)%(1.1)%
Account size ARPU
1 to 100 units$11.62$11.80$11.65$12.01$11.99$11.84$12.00$11.90
101 to 1,000 units8.358.378.248.348.318.418.478.35
>1,000 units6.626.676.576.596.626.596.476.57
Total$7.30 $7.34 $7.24 $7.31 $7.33 $7.32 $7.26 $7.32 
(a) Slight variations in totals are due to rounding.
(b) Other includes hospitality, resort and indirect units
(c) Net loss rate is net current period placements and disconnected units in service divided by prior period ending units in service.
SPOK HOLDINGS, INC.
RECONCILIATION OF NET (LOSS) INCOME TO EBITDA (a)
(Unaudited and in thousands)
For the three months ended
12/31/20209/30/20206/30/20203/31/202012/31/20199/30/20196/30/20193/31/2019
Reconciliation of net (loss) income to EBITDA:
Net (loss) income$(46,610)$3,165 $3,759 $(4,539)$(9,511)$(1,326)$(670)$742 
Add back:
(Benefit from) provision for income taxes22,306(155)(353)657(2,172)(804)(268)586
Other expenses (income)(95)(151)(101)137(206)(163)(602)236
Interest (income) expenses(51)(127)(146)(363)(350)(399)(452)(449)
Operating (loss) income(24,450)2,732 3,159 (4,108)(12,239)(2,692)(1,992)1,115 
Depreciation, amortization and accretion2,5032,3352,0722,1462,2502,3052,3352,359
EBITDA$(21,947)$5,067 $5,231 $(1,962)$(9,989)$(387)$343 $3,474 
Capitalized software development costs(3,046)(2,906)(3,596)(1,705)
Stock-based compensation1,3481,6161,3621,1821,1219641,029528
Goodwill impairment25,0078,849
Adjusted EBITDA$1,362 $3,777 $2,997 $(2,485)$(19)$577 $1,372 $4,002 
For the year ended
Reconciliation of net loss to EBITDA:12/31/202012/31/2019
Net loss$(44,225)$(10,765)
Add back:
Provision for (benefit from) income taxes22,455(2,658)
Other income(208)(735)
Interest income(687)(1,651)
Operating loss(22,665)(15,809)
Depreciation, amortization and accretion9,0569,249
EBITDA$(13,609)$(6,560)
Capitalized software development costs(11,252)
Stock-based compensation5,5083,643
Goodwill impairment25,0078,849
Adjusted EBITDA$5,654 $5,932 
(a) Slight variations in totals are due to rounding.
SPOK HOLDINGS, INC.
RECONCILIATION OF OPERATING EXPENSES TO ADJUSTED OPERATING EXPENSES (a)
(Unaudited and in thousands)
For the three months ended
12/31/20209/30/20206/30/20203/31/202012/31/20199/30/20196/30/20193/31/2019
(Dollars in thousands)
Operating expenses$61,930 $34,961 $32,580 $41,375 $51,787 $42,145 $41,517 $40,649 
Add back:
Depreciation, amortization and accretion(2,503)(2,335)(2,072)(2,146)(2,250)(2,305)(2,335)(2,359)
Goodwill impairment(25,007)(8,849)— — — 
Capitalized software development costs3,0462,9063,5961,705— — — — 
Adjusted operating expenses$37,466 $35,532 $34,104 $40,934 $40,688 $39,840 $39,182 $38,290 
For the year ended
12/31/202012/31/2019
Operating expenses$170,845 $176,098 
Add back:
Depreciation, amortization and accretion(9,056)(9,249)
Goodwill impairment(25,007)(8,849)
Capitalized software development costs11,252
Adjusted operating expenses$148,034 $158,000 
(a) Slight variations in totals are due to rounding.
SPOK HOLDINGS, INC.
2021 FINANCIAL GUIDANCE
(Unaudited and in millions)
Guidance Range
FromTo
Revenues
Wireless$74.0$80.0
Software58.267.2
Total Revenues$132.2 $147.2 
Adjusted Operating Expenses (a)$142.7 $150.7 
Capital Expenditures$2.7 $6.7 
RECONCILIATION OF OPERATING EXPENSES TO ADJUSTED OPERATING EXPENSES (a)
(Unaudited and in millions)
Guidance Range
FromTo
Operating expenses$141.4 $149.4 
Add back:
Depreciation, amortization and accretion(10.2)(10.2)
Goodwill impairment
Capitalized software development costs11.511.5
Adjusted operating expenses$142.7 $150.7 
(a) Adjusted operating expenses exclude depreciation, amortization and accretion, goodwill impairment and capitalized software development costs.

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, goodwill impairment, 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.