Wireless Trends Continue to Improve; Record Level Software Revenue Backlog and Continued Strong Expense Management
Board Declares Regular Quarterly Dividend
SPRINGFIELD, Va. (October 23, 2019) – Spok Holdings, Inc. (NASDAQ: SPOK), the global leader in healthcare communications, today announced operating results for the third quarter and year-to-date period ended September 30, 2019. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on December 10, 2019 to stockholders of record on November 15, 2019.
Key Third Quarter Operating Highlights:
- Software bookings for the 2019 third quarter were $20.4 million. Software operations bookings of $9.8 million represented the highest quarterly bookings levels so far this year and Spok continues to see increasing demand for its solutions going into the fourth quarter. Third quarter maintenance renewal bookings were $10.6 million.
- Software revenue backlog totaled $42.6 million at September 30, 2019, up from $36.4 million at September 30, 2018 and $39.7 million at the end of the prior quarter.
- The revenue renewal rate for software maintenance in the third quarter of 2019 continued at greater than 99 percent.
- Net paging unit losses were approximately 22,000 in the third quarter of 2019, down from third quarter 2018 losses of 25,000.
- The quarterly rate of wireless revenue erosion was 1.4 percent in the third quarter of 2019, down from 1.7 percent in the third quarter of 2018. Based on twelve-month trailing revenue, the annual rate of wireless revenue erosion was 6.4 percent in the third quarter of 2019, down from 7.2 percent in the third quarter of 2018.
- Total paging ARPU (average revenue per unit) was $7.32 in the third quarter of 2019, down from $7.40 in the third quarter of 2018.
- Operating expenses in the third quarter of 2019 totaled $42.1 million, compared to $44.0 million in the prior year quarter. Adjusted operating expenses (excludes depreciation, amortization and accretion) totaled $39.8 million in the third quarter of 2019, compared to $41.3 in the year-earlier quarter.
- Capital expenses were $1.4 million in the third quarter of 2019, compared to $1.5 million in the second quarter of 2019 and $1.6 million in the prior year quarter.
- The number of full-time equivalent employees at September 30, 2019 totaled 617, compared to 603 at September 30, 2018.
- Capital returned to stockholders in the third quarter of 2019 totaled $7.2 million, in the form of $2.4 million from dividends and $4.8 million from share repurchases.
- The Company’s cash, cash equivalents and short-term investments balance at September 30, 2019 was $79.2 million, down from $87.3 million at December 31, 2018 and up from $77.7 million at June 30, 2019.
2019 Third Quarter and Year-To-Date Results:
Consolidated revenue for the third quarter of 2019 under Generally Accepted Accounting Principles (“GAAP”) was $39.5 million compared to $42.5 million in the third quarter of 2018. For the nine months of 2019, consolidated revenue totaled $120.7 million, compared to $126.2 million in the first nine months of 2018.
|For the three months ended||For the nine months ended|
|(Dollars in thousands)||September 30, 2019||September 30, 2018||Change
|September 30, 2019||September 30, 2018||Change
|Product and other revenue||602||817||(26.3||)%||2,311||2,612||(11.5||)%|
|Total wireless revenue||$||21,814||$||23,259||(6.2||)%||$||66,552||$||71,186||(6.5||)%|
|Total software revenue||17,639||19,217||(8.2||)%||54,189||55,032||(1.5||)%|
GAAP net loss for the third quarter of 2019 was $1.3 million, or $0.07 per diluted share, compared to a net loss of $0.8 million, or $0.04 per diluted share, in the third quarter of 2018. GAAP net loss for the first nine months of 2019 was $1.3 million, or $0.07 per diluted share, compared to a net loss of $1.7 million, or $0.09 per diluted share, in the first nine months of 2018.
In the third quarter of 2019, the EBITDA (earnings before interest, taxes, depreciation and amortization) loss totaled $0.4 million. This compares to EBITDA of $1.2 million in the prior year quarter. In the first nine months of 2019, the Company generated $3.4 million of EBITDA, compared to EBITDA of $4.8 million in the prior year period.
|(Dollars in thousands)||September 30, 2019||September 30, 2018||September 30, 2019||September 30, 2018|
|Basic and diluted net loss per share||$||(0.07||)||$||(0.04||)||$||(0.07||)||$||(0.09||)|
“We believe our performance in the third quarter of 2019 has positioned us well as we prepare to demonstrate our improved cloud-native and integrated communication platform to our customer base next week at our annual user conference, Connect 19,” said Vincent D. Kelly, president and chief executive officer. “In the third quarter, we continued to see improvements in both wireless unit and revenue trends, as well as a record level for our software revenue backlog. Third quarter performance was supported by continued strong software maintenance renewals and improved operating expense levels. This allowed us to return $7.2 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 the quarter, we were excited to announce that for the seventh consecutive year all 21 adult hospitals named to U.S. News & World Report’s 2019-20 Best Hospitals Honor Roll use Spok clinical communication solutions to facilitate care collaboration and support exceptional patient care. We believe this recognition enhances our industry-leading reputation and provides momentum as we welcome customers next week to Connect 19, Spok’s annual conference for healthcare professionals. There, we will bring together some of the industry’s leading innovators who are pushing the boundaries to advance and improve healthcare communications. This year, we are particularly pleased to demonstrate 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.”
Michael W. Wallace, chief financial officer, said, “Expense management and strong financial discipline have allowed us to continue to invest in our business for long-term growth. In the third quarter, operating expenses were down more than 4 percent on a year-over-year basis. Our balance sheet remains strong, as the cash, cash equivalents and short-term investments balance rose slightly from the prior quarter to $79.2 million at September 30, 2019, and we continue to have no debt.”
Commenting on the Company’s previously provided financial guidance for 2019, Wallace noted: “We are pleased that the third quarter results are in line with the full year 2019 guidance we had provided last quarter and we are reiterating those expectations.” Regarding financial guidance for 2019, Wallace said the Company expects total revenue to range from $156 million to $174 million. Included in that total, the Company expects software revenue to comprise $75 million to $85 million. Also, Spok expects adjusted operating expenses (excludes depreciation, amortization and accretion) to range from $155 million to $165 million, and capital expenses to range from $3 million to $7 million.
2019 Third-Quarter Call and Replay:
Spok plans to host a conference call for investors to discuss its 2019 third quarter results at 10:00 a.m. ET on Thursday, October 24, 2019. Dial-in numbers for the call are 334-323-0501 or 800-353-6461. The pass code for the call is 6600007. A replay of the call will be available from 1:00 p.m. ET on October 24, 2019 until 1:00 p.m. ET on Thursday, November 7, 2019. To listen to the replay, please register at http://tinyurl.com/Spok2019Q3earningsreplay. Please enter the registration information, and you will be given access to the replay.