News Release

Spok Reports 2017 First Quarter Operating Results; Software Bookings and Backlog Increase, Wireless Trends Improve

Board Declares Regular Quarterly Dividend, Authorizes $10 Million Stock Repurchase Program

SPRINGFIELD, Va. (April 26, 2017) – Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced operating results for the first quarter ended March 31, 2017. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on June 23, 2017 to stockholders of record on May 23, 2017.

2017 First-Quarter Results:

In the 2017 first quarter, consolidated revenue was $41.4 million, compared to $45.4 million in the first quarter of 2016 and $44.2 million in the fourth quarter of 2016. Software revenue was $15.6 million in the first quarter of 2017, compared to $17.2 million in the first quarter of 2016. Wireless revenue totaled $25.8 million in the first quarter, compared to $26.5 million in the prior quarter and $28.2 million in the prior-year quarter.

Net income for the first quarter of 2017 was $0.9 million, or $0.04 per share, compared to $3.4 million, or $0.17 per share, in the first quarter of 2016.

First quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $4.6 million, or 11.1 percent of revenue, down from $7.9 million, or 17.8 percent of revenue, in the prior quarter, and $9.1 million, or 20.1 percent of revenue, in the first quarter of 2016.

Other key results and highlights for the first quarter of 2017 included:

  • Software bookings of $19.8 million, compared to $15.1 million in the prior year quarter. First quarter 2017 bookings included $9.5 million of operations bookings and $10.3 million of maintenance renewals, compared to $5.6 million of operations bookings and $9.5 million of maintenance renewals in the first quarter of 2016.
  • Software backlog totaled $40.6 million at March 31, 2017, compared to $38.3 million at December 31, 2016, and $36.8 million in the year earlier period.
  • Of the $15.6 million in software revenue for the first quarter, $6.0 million was operations revenue and $9.6 million was maintenance revenue, compared to $8.1 million and $9.1 million, respectively, of the $17.2 million in software revenue in the first quarter of 2016.
  • The renewal rate for software maintenance in the first quarter of 2017 was greater than 99 percent.
  • The quarterly rate of paging unit erosion was 1.8 percent in the first quarter of 2017, compared to 1.7 percent in the year-earlier quarter. Net paging unit losses were 20,000 in the first quarter of 2017, consistent with net paging losses in the first quarter of 2016. Paging units in service at March 31, 2017 totaled 1,091,000, compared to 1,153,000 at the end of the prior year period.
  • The quarterly rate of wireless revenue erosion was 2.5 percent in the first quarter of 2017 versus 1.9 percent in the year-earlier quarter.
  • Total paging ARPU (average revenue per unit) was $7.56 in the first quarter of 2017, compared to $7.59 in the prior quarter and $7.77 in the year-earlier quarter.
  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $36.8 million in the first quarter of 2017, compared to $36.3 million in the year-earlier quarter, and $36.3 million in the prior quarter.
  • Capital expenses were $2.9 million in the first quarter of 2017, compared to $1.4 million in the year-earlier quarter.
  • The number of full-time equivalent employees at March 31, 2017 totaled 599, compared to 587 at year-end 2016 and 595 at March 31, 2016.
  • Capital returned to stockholders in the first quarter of 2017 totaled $7.7 million, in the form of $2.6 million from the regular quarterly dividend and $5.1 million from the special dividend that was declared in December 2016 and paid in January 2017.
  • The Company’s cash balance at March 31, 2017 was $118.9 million, compared to $111.9 million at March 31, 2016, and $125.8 million at the prior year-end.

Management Commentary:

“We are encouraged with our performance in the first quarter of 2017 and believe that it provides a solid base for the remainder of the year,” said Vincent D. Kelly, chief executive officer. “We posted the largest first quarter software bookings result in our history and saw strong year-over-year performance in a number of other key operating measures, including average deal size, number of new logo deals, backlog levels, as well as wireless subscriber retention. We achieved these results, as we increased our investment in our business by enhancing and upgrading our product development team and tools, as well as our sales infrastructure and management. As we have previously outlined, while these investments will lower our margins over the next several years, we believe this effort will yield significant future benefits in the form of our improved, integrated communication platform, Spok Care Connect®, as well as higher future bookings levels, and ultimately margins, supported by our enhanced and upgraded sales team. Overall, we continued to operate profitably, enhance our product offerings, and operate as a debt-free company. We also executed against our capital allocation strategy, by continuing to make key strategic investments in our business while returning cash to our stockholders during the quarter in the form of dividends.”

Commenting on software results, Kelly said: “We were particularly pleased with the strong software bookings levels, as we posted the largest first quarter results in our company’s history.” Kelly also attributed a more than 99 percent renewal rate on software maintenance contracts as a key driver of software revenue levels. 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 base.

Kelly said first quarter bookings of $19.8 million included record highs for both operations and maintenance, while the software backlog of $40.6 million at March 31st was up more than 10 percent from the prior year quarter. “We will continue to focus on generating activity through the remainder of the year and 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 smartphone communications, secure texting, emergency management, and clinical alerting.”

Kelly 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 build an industry-leading reputation, and is generating sales momentum at the conferences we attend,” commented Kelly. “During the quarter, we generated tremendous activity from tradeshows and positioned Spok as a thought-leader in our industry. At the American Organization of Nurse Executives (AONE) conference, our chief nursing officer hosted a focus group to discuss nursing challenges in the current healthcare environment. We also continue to benefit from the leads generated at the 2017 HIMSS Annual Conference that we attended in late February. Our sales teams intend to carry the momentum generated at these conferences and tradeshows throughout 2017. The combination of Spok’s strong team, solid financial base and industry-leading products and services, positions us to capture the opportunity in our chosen markets and stimulate sustainable growth.”

The Company posted solid results for its wireless products and services in the first quarter. Gross pager placements of 28,000 and gross disconnects of 48,000 were in-line with the year-earlier quarter. “As a result, annual net pager losses declined to an historical low of 5.4 percent, on a twelve-month trailing basis, and were 1.8 percent in the first quarter, in-line with 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 92.3 percent of our subscriber base and 90.5 percent of our paging revenue at quarter end. Healthcare comprised 79.7 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.”

Spok returned capital to stockholders, totaling $7.7 million, in the first quarter of 2017. During the period, the Company paid $2.6 million in regular quarterly dividends and $5.1 million in the special dividend that was declared in December 2016 and paid in January 2017. Kelly added, “Throughout 2017, we will remain focused on returning value to our shareholders through our capital allocation strategy, which includes dividends and key strategic investments in our products and business that will create sustainable growth. We continue to evaluate our capital allocation strategy on a quarterly basis and will communicate our plans to you with respect to dividends, potential share repurchases and other uses of capital.”

Stock Repurchase Authorization:

The Company also announced that its Board of Directors has authorized the repurchase of up to $10 million of the Company’s common stock through 2017 on the open market or in privately negotiated transactions. “Spok’s management team and Board of Directors firmly believe in our long-term growth prospects,” said Kelly. “We intend to utilize our healthy balance sheet and the ability to generate operating cash flow to fund the new repurchase program, which we believe will create further value for our stockholders.”

The timing and the amount of any repurchases of common stock will be determined by Spok’s board based on its evaluation of market conditions and other factors. Repurchases of common stock will be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time. Any repurchased common stock will be available for use in connection with the Company’s stock plans and for other corporate purposes.

Chief Financial Officer (CFO) Transition:

Late in the first quarter, Spok announced that Michael W. Wallace had joined the Company as its new CFO. He succeeded Shawn E. Endsley in that position, who has continued with the company in the role of Chief Accounting Officer. Wallace brings with him a proven ability to manage the finance function in a rapidly growing and changing environment and implementing strategies for improving revenue and profitability. “I am excited to welcome Mike to Spok’s management team, where he has already had an immediate impact as we continue our transition from a telecom-based wireless company to a software provider that delivers industry-leading unified healthcare communications solutions,” said Kelly. “We are particularly impressed with Mike’s deep experience in medical diagnostic services, software development, digital/interactive marketing and regulatory compliance.”

Business Outlook:

Commenting on the Company’s previously provided financial guidance for 2017, Wallace noted: “We are pleased that quarterly results were consistent with our expectations and 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.

2017 First-Quarter Call and Replay:

The Company plans to host a conference call for investors to discuss its 2017 first quarter results at 10:00 a.m. ET on Thursday, April 27, 2017. Dial-in numbers for the call are 719-325-2126 or 800-210-9006. The pass code for the call is 6321677. A replay of the call will be available from 1:00 p.m. ET on April 27, 2017 until 1:00 p.m. ET on Thursday, May 11, 2017. To listen to the replay, please register at http://tinyurl.com/spokQ1earningsreplay. 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, Inc., a wholly owned subsidiary of Spok Holdings, Inc. (NASDAQ: SPOK), headquartered in Plano, Texas, 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 Care Connect® platform to enhance workflows for clinicians and support administrative compliance. Our customers send over 70 million messages each month through their Spok® solutions. Spok enables smarter, faster clinical communication.

Spok is a trademark of Spok Holdings, Inc. Spok Mobile 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 our 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 our 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, our ability to manage wireless network rationalization to lower our costs without causing disruption of service to our customers; our ability to retain key management personnel and to attract and retain talent within the organization; the productivity of our sales organization and our ability to deliver effective customer support; our ability to identify potential acquisitions, finance, consummate and successfully integrate such acquisitions, and achieve the expected benefits of such acquisitions; economic conditions, such as recessionary economic cycles, the impact of trade disputes, tariffs and other trade protection measures,  higher interest rates, inflation and higher levels of unemployment; risks related to our overall business strategy, including maximizing revenue and cash generation from our established businesses and returning capital to stockholders through dividends and repurchases of shares of our common stock; competition for our services and products from new technologies or those offered and/or developed from firms that are substantially larger and have much greater financial and human capital resources; continuing decline in the number of paging units we have in service with customers, commensurate with a continuing decline in our wireless revenue; our ability to address changing market conditions with new or revised software solutions; undetected defects, bugs, or security vulnerabilities in our products; our dependence on the United States healthcare industry; long sales cycle of our software solutions and services; our reliance on third-party vendors to supply us with wireless paging equipment; our ability to maintain successful relationships with our channel partners; our ability to protect our rights in intellectual property that we own and develop and the potential for litigation claiming intellectual property infringement by us; our use of open source software, third-party software and other intellectual property; our reliance on data centers and other computer systems, hardware, software and satellite networks and telecommunications systems infrastructure (collectively, “IT Systems”) and technologies provided by third parties, and technology systems and electronic networks supplied and managed by third parties; cyberattacks, data breaches, system disruptions or other compromises to our or our critical third parties’ IT Systems (as defined below), data, products or services; our ability to realize the benefits associated with our deferred income tax assets; future impairments of our long-lived assets or goodwill; risks related to data privacy and protection-related laws and regulation; and our ability to manage changes related to regulation, including laws and regulations affecting hospitals and the healthcare industry generally, 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) 224-6096
al.galgano@spok.com