News Release
Spok Reports First Quarter 2023 Results
Strong improvement in net income and adjusted EBITDA
Company increases financial guidance for the full year 2023
Wireless Revenue Growth on both a Sequential and Year-Over-Year Basis
Alexandria, Va. (May 3, 2023) – Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced results for the first quarter ended March 31, 2023. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.3125 per share, payable on June 23, 2023, to stockholders of record on May 25, 2023.
Recent Highlights:
- Generated net income of $3.1 million, or $0.15 per diluted share, compared to a net loss of $7.2 million, or $0.37 per diluted share, in the prior year period
- Generated $6.9 million of adjusted EBITDA in the first quarter, compared to a loss of $2.1 million in the first quarter of 2022
- Software operations bookings totaled $5.7 million for the first quarter, compared to $5.2 million in the first quarter of 2022, a nearly 9% year-over-year increase
- First quarter 2023 software operations bookings included 15 six-figure customer contracts, including four new logo customers
- First quarter 2023 wireless average revenue per unit (ARPU) was $7.59, up on both a sequential and year-over-year basis, with units in service down less than 1% from the prior quarter
- First quarter 2023 wireless revenue of $19.0 million, up 1% from revenue of $18.8 million in the year ago period
- Capital returned to stockholders in the first quarter of 2023 totaled $6.9 million in the form of the Company’s regular quarterly dividend
- Cash and equivalents balance of $29.5 million on March 31, 2023, and no debt
“I am proud of what the Spok team has been able to accomplish in the first quarter and believe that these results position us well for the remainder of the year, as we continue to execute our focus on generating cash flow and returning capital to stockholders,” said Vincent D. Kelly, chief executive officer of Spok Holdings, Inc. “Last quarter, we made tremendous progress in several key performance areas, including wireless trends, software bookings and backlog levels, as well as expense management, as we continued to see expense declines on both a sequential and year-over-year basis. We were able to accomplish this while investing in our Spok Care Connect and Wireless solutions. I am particularly pleased with our performance in Wireless, as we grew first quarter revenue on both a sequential and year-over-year basis and further minimized unit churn. More than half of the nearly 5% annual growth in ARPU in the first quarter reflects the impacts of pricing actions taken in late 2022 and, to a lesser extent, sales of our new GenA™ pager. We look forward to continued success in the remainder of the year and believe our extensive experience operating our established communication solutions will create significant value for stockholders by maximizing revenue and cash flow generation.”
Financial Highlights:
For the three months ended March 31, | |||||
| (Dollars in thousands) | 2023 | 2022 | Change (%) | ||
| Revenue | |||||
| Wireless revenue | |||||
| Paging revenue | $ 18,525 | $ 18,313 | 1.2 % | ||
| Product and other revenue | 503 | 533 | (5.6) % | ||
| Total wireless revenue | $ 19,028 | $ 18,846 | 1.0 % | ||
| Software revenue | |||||
| License | $ 1,618 | $ 1,824 | (11.3) % | ||
| Professional services | 3,239 | 3,336 | (2.9) % | ||
| Hardware | 356 | 589 | (39.6) % | ||
| Maintenance | 8,939 | 9,230 | (3.2) % | ||
| Total software revenue | 14,152 | 14,979 | (5.5) % | ||
| Total revenue | $ 33,180 | $ 33,825 | (1.9) % | ||
For the three months ended March 31, | |||||
| (Dollars in thousands) | 2023 | 2022 | Change (%) | ||
| GAAP | |||||
| Operating expenses | $ 28,463 | $ 42,493 | (33.0) % | ||
| Net income (loss) | $ 3,117 | $ (7,214) | 143.2 % | ||
| Cash, cash equivalents, and short-term investments (as of period end) | $ 29,550 | $ 46,328 | (36.2) % | ||
| Capital returned to stockholders | $ 6,933 | $ 6,524 | 6.3 % | ||
| Non-GAAP | |||||
| Adjusted operating expenses | $ 27,217 | $ 37,064 | (26.6) % | ||
| Adjusted EBITDA | $ 6,899 | $ (2,124) | 424.8 % | ||
For the three months ended March 31, | |||||
| (Dollars in thousands, excluding units and service and ARPU) | 2023 | 2022 | Change (%) | ||
| Key Statistics | |||||
| Wireless units in service | 811 | 838 | (3.2) % | ||
| Wireless average revenue per unit (ARPU) | $ 7.59 | $ 7.24 | 4.8 % | ||
| Software operations bookings(1) | $ 5,678 | $ 5,212 | 8.9 % | ||
| Software maintenance bookings(2) | $ 11,300 | $ 9,105 | 24.1 % | ||
| Software backlog (as of period end) | $ 46,540 | $ 40,532 | 14.8 % | ||
1) Software operations bookings includes net new (i.e., new customers or incremental add-on sales to existing customers) sales of license, professional services, equipment, and first-year maintenance.
2) Software maintenance bookings includes the renewal of maintenance and term license contracts.
Financial Outlook:
The Company also increased its financial guidance and now expects the following for the full year 2023:
| (Unaudited and in millions) | Current Guidance Full Year 2023 | Prior Guidance Full Year 2023 | ||||||
From | To | From | To | |||||
| Revenue | ||||||||
| Wireless | $ 73.0 | $ 75.5 | $ 71.5 | $ 74.5 | ||||
| Software | $ 58.0 | $ 62.0 | $ 57.5 | $ 62.0 | ||||
| Total Revenue | $ 131.0 | $ 137.5 | $ 129.0 | $ 136.5 | ||||
| Adjusted EBITDA | $ 24.5 | $ 26.5 | $ 24.0 | $ 26.0 | ||||
2023 First Quarter Call:
Management will host a conference call and webcast to discuss these financial results on Thursday, May 4, 2023, at 9:30 a.m. Eastern Time. The presentation is open to all interested parties and may include forward-looking information.
Conference Call Details
| Date/Time: | Thursday, May 4, 2023, at 9:30 a.m. ET |
| Webcast: | https://www.webcast-eqs.com/register/spok_q12023_en/en |
| U.S. Toll-Free Dial In: | 877-407-0890 |
| International Dial In: | 1-201-389-0918 |
To access the call, please dial in approximately ten minutes before the start of the call. For those unable to join the live call, an OnDemand version of the webcast will be available following the call under the URL link and on the investor relations website.
Investor Day Program:
Following the First Quarter 2023 call, Spok will host an Investor Day with financial analysts and institutional investors, from 11:00 a.m. ET to 3:00 p.m. ET. Spok’s executive leadership team will present an updated view of the Company’s long-term strategy and capital allocation plans, followed by a live Q&A session.
A live webcast of the earnings conference call and Investor Day, along with the earnings release and Investor Day materials, will be available on Spok’s Investor Relations website at https://investors.spok.com/. A replay of the Investor Day presentation will also be accessible on the Company’s website.
* * * * * * * * *
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, impairment of intangible assets and severance and restructuring costs. Adjusted EBITDA represents net income/(loss) before interest income/expense, income tax benefit/expense, depreciation, amortization and accretion expense, stock-based compensation expense, impairment of intangible assets and severance and restructuring. With respect to our expectations under “Financial Guidance” above, reconciliation of adjusted EBITDA to net income (loss) is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and uncertainty with respect to certain items included in net income (loss) that are excluded from adjusted EBITDA, in particular, income tax benefit / expense, stock-based compensation expenses, impairment of intangible assets, severance and restructuring and other non-recurring expenses. These items can have unpredictable fluctuations based on unforeseen activity that is out of our control and /or cannot be reasonably predicted.
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 believe it is important to exclude these costs, given that they do not represent future operational costs under this strategic business plan. This allows us to assess the underlying performance of our core business under this new strategic business plan.
We do not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principle of these non-GAAP financial measures is that they exclude significant amounts 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 items 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.
Tables to Follow
| SPOK HOLDINGS, INC. | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (Unaudited and in thousands except share, per share amounts and ARPU) | ||||
For the three months ended | ||||
3/31/2023 | 3/31/2022 | |||
| Revenue: | ||||
| Wireless | $ 19,028 | $ 18,846 | ||
| Software | 14,152 | 14,979 | ||
| Total revenue | 33,180 | 33,825 | ||
| Operating expenses: | ||||
| Cost of revenue (exclusive of items shown separately below) | 6,536 | 7,804 | ||
| Research and development | 2,493 | 6,497 | ||
| Technology operations | 6,587 | 7,013 | ||
| Selling and marketing | 3,901 | 5,315 | ||
| General and administrative | 7,700 | 10,435 | ||
| Depreciation, amortization and accretion | 1,236 | 934 | ||
| Severance and restructuring | 10 | 4,495 | ||
| Total operating expenses | 28,463 | 42,493 | ||
| % of total revenue | 85.8 % | 125.6 % | ||
| Operating income (loss) | 4,717 | (8,668) | ||
| % of total revenue | 14.2 % | (25.6) % | ||
| Interest income | 272 | 67 | ||
| Other income (expense) | 53 | (13) | ||
| Income (loss) before income taxes | 5,042 | (8,614) | ||
| (Provision for) benefit from income taxes | (1,925) | 1,400 | ||
| Net income (loss) | $ 3,117 | $ (7,214) | ||
| Basic net income (loss) per common share | $ 0.16 | $ (0.37) | ||
| Diluted net income (loss) per common share | 0.15 | (0.37) | ||
| Basic weighted average common shares outstanding | 19,897,445 | 19,599,526 | ||
| Diluted weighted average common shares outstanding | 20,182,692 | 19,599,526 | ||
| Cash dividends declared per common share | 0.3125 | 0.3125 | ||
| SPOK HOLDINGS, INC. | ||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
| (In thousands) | ||||
3/31/2023 | 12/31/2022 | |||
| ASSETS | (Unaudited) | |||
| Current assets: | ||||
| Cash and cash equivalents | $ 29,550 | $ 35,754 | ||
| Accounts receivable, net | 22,644 | 26,861 | ||
| Prepaid expenses | 7,150 | 6,849 | ||
| Other current assets | 628 | 587 | ||
| Total current assets | 59,972 | 70,051 | ||
| Non-current assets: | ||||
| Property and equipment, net | 7,802 | 8,223 | ||
| Operating lease right-of-use assets | 13,401 | 13,876 | ||
| Goodwill | 99,175 | 99,175 | ||
| Deferred income tax assets, net | 50,706 | 52,398 | ||
| Other non-current assets | 694 | 754 | ||
| Total non-current assets | 171,778 | 174,426 | ||
| Total assets | $ 231,750 | $ 244,477 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ 4,659 | $ 5,880 | ||
| Accrued compensation and benefits | 6,063 | 11,628 | ||
| Deferred revenue | 24,629 | 26,274 | ||
| Operating lease liabilities | 4,964 | 5,096 | ||
| Other current liabilities | 4,823 | 4,573 | ||
| Total current liabilities | 45,138 | 53,451 | ||
| Non-current liabilities: | ||||
| Asset retirement obligations | 7,353 | 7,237 | ||
| Operating lease liabilities | 10,064 | 10,604 | ||
| Other non-current liabilities | 846 | 1,107 | ||
| Total non-current liabilities | 18,263 | 18,948 | ||
| Total liabilities | 63,401 | 72,399 | ||
| Commitments and contingencies | ||||
| Stockholders’ equity: | ||||
| Common stock | 2 | 2 | ||
| Additional paid-in capital | 99,599 | 99,908 | ||
| Accumulated other comprehensive loss | (1,897) | (1,909) | ||
| Retained earnings | 70,645 | 74,077 | ||
| Total stockholders’ equity | 168,349 | 172,078 | ||
| Total liabilities and stockholders’ equity | $ 231,750 | $ 244,477 | ||
| SPOK HOLDINGS, INC. | |||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
| (Unaudited and in thousands) | |||
For the three months ended | |||
3/31/2023 | 3/31/2022 | ||
| Operating activities: | |||
| Net income (loss) | $ 3,117 | $ (7,214) | |
| Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: | |||
| Depreciation, amortization and accretion | 1,236 | 934 | |
| Deferred income tax expense (benefit) | 1,886 | (1,024) | |
| Stock-based compensation | 936 | 1,115 | |
| Provisions for credit losses, service credits and other | 29 | 594 | |
| Changes in assets and liabilities: | |||
| Accounts receivable | 4,187 | 2,951 | |
| Prepaid expenses and other assets | (282) | (1,421) | |
| Net operating lease liabilities | (197) | (91) | |
| Accounts payable, accrued liabilities and other | (6,680) | 879 | |
| Deferred revenue | (1,621) | (1,602) | |
| Net cash provided by (used in) operating activities | 2,611 | (4,879) | |
| Investing activities: | |||
| Purchases of property and equipment | (649) | (679) | |
| Purchase of short-term investments | — | (14,967) | |
| Maturity of short-term investments | — | 15,000 | |
| Net cash used in investing activities | (649) | (646) | |
| Financing activities: | |||
| Cash distributions to stockholders | (6,933) | (6,524) | |
| Purchase of common stock for tax withholding on vested equity awards | (1,245) | (1,209) | |
| Net cash used in financing activities | (8,178) | (7,733) | |
| Effect of exchange rate on cash and cash equivalents | 12 | 25 | |
| Net decrease in cash and cash equivalents | (6,204) | (13,233) | |
| Cash and cash equivalents, beginning of period | 35,754 | 44,583 | |
| Cash and cash equivalents, end of period | $ 29,550 | $ 31,350 | |
| Supplemental disclosure: | |||
| Income taxes paid/(refunded) | $ (6) | $ (39) | |
| SPOK HOLDINGS, INC. | ||||||||||||||||
| UNITS IN SERVICE, MARKET SEGMENTS, | ||||||||||||||||
| AND AVERAGE REVENUE PER UNIT (ARPU) (a) | ||||||||||||||||
| (Unaudited and in thousands) | ||||||||||||||||
| For the three months ended | ||||||||||||||||
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | |||||||||
| Account size ending units in service (000’s) | ||||||||||||||||
| 1 to 100 units | 48 | 50 | 51 | 53 | 54 | 55 | 57 | 58 | ||||||||
| 101 to 1,000 units | 149 | 147 | 147 | 149 | 150 | 154 | 154 | 155 | ||||||||
| >1,000 units | 614 | 620 | 626 | 633 | 634 | 638 | 642 | 656 | ||||||||
| Total | 811 | 817 | 824 | 835 | 838 | 847 | 853 | 869 | ||||||||
| Market segment as a percent of total ending units in service | ||||||||||||||||
| Healthcare | 85.7 % | 85.4 % | 85.0 % | 85.0 % | 84.7 % | 84.7 % | 84.6 % | 84.5 % | ||||||||
| Government | 4.3 % | 4.4 % | 4.1 % | 4.2 % | 4.7 % | 4.8 % | 4.8 % | 4.9 % | ||||||||
| Large enterprise | 4.1 % | 4.0 % | 3.9 % | 4.0 % | 3.9 % | 3.9 % | 4.1 % | 4.1 % | ||||||||
| Other(b) | 5.9 % | 6.1 % | 7.0 % | 6.8 % | 6.7 % | 6.6 % | 6.4 % | 6.4 % | ||||||||
| Total | 100.0 % | 100.0 % | 100.0 % | 100.0 % | 100.0 % | 100.0 % | 100.0 % | 100.0 % | ||||||||
| Account size ARPU | ||||||||||||||||
| 1 to 100 units | $ 12.21 | $ 11.95 | $ 11.80 | $ 11.41 | $ 11.52 | $ 11.58 | $ 11.67 | $ 11.69 | ||||||||
| 101 to 1,000 units | 8.65 | 8.66 | 8.44 | 8.27 | 8.24 | 8.30 | 8.38 | 8.35 | ||||||||
| >1,000 units | 6.96 | 6.86 | 6.69 | 6.63 | 6.64 | 6.63 | 6.65 | 6.68 | ||||||||
| Total | $ 7.59 | $ 7.50 | $ 7.40 | $ 7.23 | $ 7.24 | $ 7.26 | $ 7.29 | $ 7.32 | ||||||||
| (a) Slight variations in totals are due to rounding. | ||||||||||||||||
| (b) Other includes hospitality, resort and indirect units | ||||||||||||||||
| RECONCILIATION OF ADJUSTED OPERATING EXPENSES | ||||
| (Unaudited and in thousands) | ||||
For the three months ended | ||||
3/31/2023 | 3/31/2022 | |||
| Operating expenses | $ 28,463 | $ 42,493 | ||
| Add back: | ||||
| Depreciation, amortization and accretion | (1,236) | (934) | ||
| Severance and restructuring | (10) | (4,495) | ||
| Adjusted operating expenses | $ 27,217 | $ 37,064 | ||
| RECONCILIATION OF ADJUSTED EBITDA | ||||
| (Unaudited and in thousands) | ||||
For the three months ended | ||||
3/31/2023 | 3/31/2022 | |||
| Net income (loss) | $ 3,117 | $ (7,214) | ||
| Add back: | ||||
| Provision for (benefit from) income taxes | 1,925 | (1,400) | ||
| (Other income) expense | (53) | 13 | ||
| Interest income | (272) | (67) | ||
| Depreciation, amortization and accretion | 1,236 | 934 | ||
| EBITDA | $ 5,953 | $ (7,734) | ||
| Adjustments: | ||||
| Stock-based compensation | 936 | 1,115 | ||
| Severance and restructuring | 10 | 4,495 | ||
| Adjusted EBITDA | $ 6,899 |
| $ (2,124) | |