News Release

Spok Reports Second Quarter 2022 Results

Significant improvement in net income and adjusted EBITDA

Company progressing ahead of schedule on strategic business plan

Second quarter software bookings up 51%, year-to-date software bookings up 23%

Alexandria, Va. (July 27, 2022) – Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced results for the second quarter ended June 30, 2022. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.3125 per share, payable on September 9, 2022, to stockholders of record on August 17, 2022.

Recent Highlights:

  • The tangible benefits of Spok’s strategic business plan continued to become evident in the second quarter as the Company generated $1.9 million of net income and $3.7 million of adjusted EBITDA
  • Second quarter software bookings increased 51% as momentum increased in the second quarter post the strategic pivot announcement
  • Year-to-date software bookings increased 23% with thirty-two deals worth over six figures each
  • Year-to-date capital returned to stockholders totaled $7 million in the form of the Company’s regular quarterly dividend
  • Wireless units in service of 835,000 at June 30, 2022 down only 3,000 units from March 31, 2022 as net paging churn mitigates
  • Cash, cash equivalents and short-term investments balance of $38.4 million at June 30, 2022, and no debt, with cash flow generation expected to largely cover the dividend in the second half of 2022
  • Signed a distribution agreement with inTechnology to enhance Spok’s ability to provide meaningful outcomes to its clients in the Asia Pacific region

“We are excited about the progress we have made during the second quarter on our strategic business plan, which is tracking well ahead of schedule,” said Vincent D. Kelly, president and chief executive officer of Spok Holdings, Inc. “With our renewed focus on the Care Connect Suite of solutions, we have been able to significantly increase bookings as we continue to work towards creating a more consistent revenue base. Our sales team has been extremely successful on selling our Care Connect Suite of solutions.  Our customers have been delighted with our new plans to invest into the platforms they know and love.  The pressures from the pandemic have somewhat subsided allowing for more face-to-face meetings. Our pipeline is strong and continues to grow.  Our wireless service line is performing on plan.  We have right sized our operating expenses consistent with our focus and guidance.   We are very encouraged about our prospects for the second half of 2022 and beyond, and our focus remains on creating value for our stockholders by maximizing revenue and cash flow generation.”

Financial Highlights:

 

For the Three Months Ended June 30,

 

For the six months ended June 30,

(Dollars in thousands)

2022

 

2021

 

Change (%)

 

2022

 

2021

 

Change (%)

Revenue

                     

Wireless revenue

                     

Paging revenue

$         18,141

 

$         19,135

 

(5.2) %

 

$         36,454

 

$         38,488

 

(5.3) %

Product and other revenue

                 559

 

                 724

 

(22.8) %

 

              1,093

 

              1,491

 

(26.7) %

Total wireless revenue

$         18,700

 

$         19,859

 

(5.8) %

 

$         37,547

 

$         39,979

 

(6.1) %

                       

Software revenue

                     

License

$            1,962

 

$               908

 

116.1 %

 

$            3,786

 

$            2,460

 

53.9 %

Professional services

              3,331

 

              4,865

 

(31.5) %

 

              6,667

 

              9,219

 

(27.7) %

Hardware

                 507

 

                 482

 

5.2 %

 

              1,096

 

              1,098

 

(0.2) %

Maintenance

              9,210

 

              9,609

 

(4.2) %

 

            18,439

 

            19,003

 

(3.0) %

Total software revenue

            15,010

 

            15,864

 

(5.4) %

 

            29,988

 

            31,780

 

(5.6) %

Total revenue

$         33,710

 

$         35,723

 

(5.6) %

 

$         67,535

 

$         71,759

 

(5.9) %

 

For the three months ended June 30,

 

For the six months ended June 30,

(Dollars in thousands)

2022

 

2021

 

Change (%)

 

2022

 

2021

 

Change (%)

GAAP

                     

Operating expenses

$         31,298

 

$         37,332

 

(16.2) %

 

$         73,791

 

$         75,108

 

(1.8) %

Net income (loss)

$            1,924

 

$              (719)

 

367.6 %

 

$          (5,290)

 

$          (3,016)

 

(75.4) %

Cash, cash equivalents, and short-term investments

$         38,432

 

$         68,125

 

(43.6) %

 

$         38,432

 

$         68,125

 

(43.6) %

Capital returned to stockholders

$            6,155

 

$            2,422

 

154.1 %

 

$         12,679

 

$            5,152

 

146.1 %

                       

Non-GAAP

                     

Adjusted operating expenses

$         29,977

 

$         37,399

 

(19.8) %

 

$         67,041

 

$         75,368

 

(11.0) %

Adjusted EBITDA

$            3,697

 

$        (1,549)

 

338.7 %

 

$       (3,606)

 

$        (1,970)

 

(83.0) %

 

For the three months ended June 30,

 

For the six months ended June 30,

(Dollars in thousands, excluding units and service and ARPU)

2022

 

2021

 

Change (%)

 

2022

 

2021

 

Change (%)

Key Statistics

                     

Wireless units in service

                 835

 

                 869

 

(3.9) %

 

                 835

 

                 869

 

(3.9) %

Wireless average revenue per unit (ARPU)

$              7.23

 

$              7.32

 

(1.2) %

 

$              7.22

 

$              7.31

 

(1.2) %

Software bookings

$         19,731

 

$         13,037

 

51.3 %

 

$         34,047

 

$         27,634

 

23.2 %

Software backlog (as of period end)

$         44,488

 

$         45,632

 

(2.5) %

 

$         44,488

 

$         45,632

 

(2.5) %

Financial Outlook:

Regarding financial guidance, the Company expects the following for fiscal year 2022, which is updated from the previously provided 2022 financial guidance:

(Unaudited and in millions)

 

Current Guidance

Full Year 2022

 

Prior Guidance

Full Year 2022

   

From

 

To

 

From

 

To

Revenue

               

Wireless

 

$ 73.5

 

$ 75.5

 

$ 71.6

 

$ 77.0

Software

 

$ 56.5

 

$ 60.5

 

$ 54.4

 

$ 62.2

Total Revenue

 

$ 130.0

 

$ 136.0

 

$ 126.0

 

$ 139.2

                 

Adjusted Operating Expenses

 

$ 123.3

 

$ 126.1

 

$ 118.8

 

$ 128.6

                 

Capital Expenditures

 

$ 3.2

 

$ 3.9

 

$ 3.4

 

$  4.2

 

2022 Second Quarter Call:

Management will host a conference call and webcast to discuss these financial results on Thursday, July 28, 2022, at 8:30 a.m. Eastern Daylight Time. The presentation is open to all interested parties and may include forward-looking information.

Conference Call Details

Date/Time:

Thursday, July 28, 2022, at 8:30 a.m. EDT

Webcast:

https://www.webcast-eqs.com/spok07282022_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.

* * * * * * * * *

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, severance and restructuring costs, and effects of  capitalized software development 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 effects of capitalized software development costs, and includes capital expenditures.

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 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

 

For the six months ended

   

6/30/2022

 

6/30/2021

 

6/30/2022

 

6/30/2021

Revenue:

               

Wireless

 

$          18,700   

 

$          19,859   

 

$          37,547   

 

$          39,979   

Software

 

            15,010   

 

            15,864   

 

            29,988   

 

            31,780   

Total revenue

 

            33,710   

 

            35,723   

 

            67,535   

 

            71,759   

Operating expenses:

               

Cost of revenue (exclusive of items shown separately below)

 

              6,980   

 

              7,859   

 

            14,784   

 

            15,840   

Research and development

 

              2,624   

 

              4,156   

 

              9,121   

 

              8,600   

Technology operations

 

              6,880   

 

              7,022   

 

            13,893   

 

            14,226   

Selling and marketing

 

              3,874   

 

              5,184   

 

              9,189   

 

            10,323   

General and administrative

 

              9,619   

 

            10,480   

 

            20,054   

 

            20,761   

Depreciation, amortization and accretion

 

                 871   

 

              2,457   

 

              1,805   

 

              5,184   

Severance and restructuring

 

                 450   

 

                 174   

 

              4,945   

 

                 174   

Total operating expenses

 

            31,298   

 

            37,332   

 

            73,791   

 

            75,108   

% of total revenue

 

92.8 %

 

104.5 %

 

109.3 %

 

104.7 %

Operating income (loss)

 

              2,412   

 

            (1,609)  

 

            (6,256)  

 

            (3,349)  

% of total revenue

 

7.2 %

 

(4.5) %

 

(9.3) %

 

(4.7) %

Interest income

 

                 170   

 

                   61   

 

                 237   

 

                 122   

Other income

 

                   25   

 

                   29   

 

                   12   

 

                     2   

Income (loss) before income taxes

 

              2,607   

 

            (1,519)  

 

            (6,007)  

 

            (3,225)  

(Provision for) benefit from income taxes

 

               (683)  

 

                 800   

 

                 717   

 

                 209   

Net income (loss)

 

$            1,924   

 

$             (719)  

 

$          (5,290)  

 

$          (3,016)  

Basic and diluted net income (loss) per common share

 

$              0.10   

 

$            (0.04)  

 

$            (0.27)  

 

$            (0.16)  

Basic weighted average common shares outstanding

 

     19,693,659   

 

     19,395,364   

 

     19,645,680   

 

     19,335,081   

Diluted weighted average common shares outstanding

 

     19,807,430   

 

     19,395,364   

 

     19,645,680   

 

     19,335,081   

Cash dividends declared per common share

 

            0.3125   

 

            0.1250   

 

            0.6250   

 

            0.2500   

 

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

         
   

6/30/2022

 

12/31/2021

         

ASSETS

 

(Unaudited)

   
         

Current assets:

       

Cash and cash equivalents

 

$                            23,437

 

$                            44,583

Short-term investments

 

                              14,995

 

                              14,999

Accounts receivable, net

 

                              26,583

 

                              26,908

Prepaid expenses

 

                                7,187

 

                                6,641

Other current assets

 

                                   788

 

                                   922

Total current assets

 

                              72,990

 

                              94,053

Non-current assets:

       

Property and equipment, net

 

                                6,487

 

                                6,746

Operating lease right-of-use assets

 

                              17,367

 

                              15,821

Goodwill

 

                              99,175

 

                              99,175

Deferred income tax assets, net

 

                              32,151

 

                              31,653

Other non-current assets

 

                                   706

 

                                   706

Total non-current assets

 

                            155,886

 

                            154,101

Total assets

 

$                          228,876

 

$                          248,154

         

LIABILITIES AND STOCKHOLDERS’ EQUITY

       
         

Current liabilities:

       

Accounts payable

 

$                              4,160

 

$                              5,292

Accrued compensation and benefits

 

                              11,475

 

                              13,948

Deferred revenue

 

                              25,975

 

                              25,608

Operating lease liabilities

 

                                5,150

 

                                5,405

Other current liabilities

 

                                5,091

 

                                4,745

Total current liabilities

 

                              51,851

 

                              54,998

Non-current liabilities:

       

Asset retirement obligations

 

                                6,490

 

                                6,355

Operating lease liabilities

 

                              13,575

 

                              11,883

Other non-current liabilities

 

                                   766

 

                                1,227

Total non-current liabilities

 

                              20,831

 

                              19,465

Total liabilities

 

                              72,682

 

                              74,463

Commitments and contingencies

       

Stockholders’ equity:

       

Common stock

 

                                       2

 

                                       2

Additional paid-in capital

 

                              98,158

 

                              97,291

Accumulated other comprehensive loss

 

                               (1,792)

 

                               (1,588)

Retained earnings

 

                              59,826

 

                              77,986

Total stockholders’ equity

 

                            156,194

 

                            173,691

Total liabilities and stockholders’ equity

 

$                          228,876

 

$                          248,154

 

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

       
 

For the six months ended

 

6/30/2022

 

6/30/2021

Operating activities:

     

Net loss

$                             (5,290)

 

$                             (3,016)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

     

Depreciation, amortization and accretion

                                1,805

 

                                5,184

Deferred income tax benefit

                                  (495)

 

                                  (291)

Stock-based compensation

                                2,076

 

                                4,020

Provisions for credit losses, service credits and other

                                   861

 

                                   657

Changes in assets and liabilities:

     

Accounts receivable

                                  (576)

 

                                1,775

Prepaid expenses and other assets

                                  (416)

 

                                   994

Net operating lease liabilities

                                  (109)

 

                                   563

Accounts payable, accrued liabilities and other

                               (3,582)

 

                               (3,538)

Deferred revenue

                                  (169)

 

                               (2,482)

Net cash (used in) provided by operating activities

                               (5,895)

 

                                3,866

Investing activities:

     

Purchases of property and equipment

                               (1,192)

 

                               (2,198)

Capitalized software development

                                     —

 

                               (5,618)

Purchase of short-term investments

                             (14,967)

 

                             (29,993)

Maturity of short-term investments

                              15,000

 

                              30,000

Net cash used in investing activities

                               (1,159)

 

                               (7,809)

Financing activities:

     

Cash distributions to stockholders

                             (12,679)

 

                               (5,152)

Proceeds from issuance of common stock under the Employee Stock Purchase Plan

                                     —

 

                                   132

Purchase of common stock for tax withholding on vested equity awards

                               (1,209)

 

                               (1,656)

Net cash used in financing activities

                             (13,888)

 

                               (6,676)

Effect of exchange rate on cash and cash equivalents

                                  (204)

 

                                     17

Net decrease in cash and cash equivalents

                             (21,146)

 

                             (10,602)

Cash and cash equivalents, beginning of period

                              44,583

 

                              48,729

Cash and cash equivalents, end of period

$                            23,437

 

$                            38,127

Supplemental disclosure:

     

Income taxes paid/(refunded)

$                                 185

 

$                                  (42)

 

SPOK HOLDINGS, INC.

UNITS IN SERVICE, MARKET SEGMENTS,

AND AVERAGE REVENUE PER UNIT (ARPU) (a)

(Unaudited and in thousands)

                                 
   

For the three months ended

   

6/30/2022

 

3/31/2022

 

12/31/2021

 

9/30/2021

 

6/30/2021

 

3/31/2021

 

12/31/2020

 

9/30/2020

Account size ending units in service (000’s)

                               

1 to 100 units

 

           53   

 

           54   

 

           55   

 

           57   

 

           58   

 

           59   

 

           61   

 

           63   

101 to 1,000 units

 

         149   

 

         150   

 

         154   

 

         154   

 

         155   

 

         163   

 

         167   

 

         167   

>1,000 units

 

         633   

 

         634   

 

         638   

 

         642   

 

         656   

 

         652   

 

         657   

 

         668   

Total

 

         835   

 

         838   

 

         847   

 

         853   

 

         869   

 

         874   

 

         885   

 

         898   

                                 

Market segment as a percent of total ending units in service

                               

Healthcare

 

85.0 %

 

84.7 %

 

84.7 %

 

84.6 %

 

84.5 %

 

84.1 %

 

83.6 %

 

83.7 %

Government

 

4.2 %

 

4.7 %

 

4.8 %

 

4.8 %

 

4.9 %

 

4.8 %

 

5.3 %

 

5.3 %

Large enterprise

 

4.0 %

 

3.9 %

 

3.9 %

 

4.1 %

 

4.1 %

 

4.3 %

 

4.3 %

 

4.3 %

Other(b)

 

6.8 %

 

6.7 %

 

6.6 %

 

6.4 %

 

6.4 %

 

6.8 %

 

6.8 %

 

6.6 %

Total

 

100.0 %

 

100.0 %

 

100.0 %

 

100.0 %

 

100.0 %

 

100.0 %

 

100.0 %

 

100.0 %

                                 

Account size ARPU

                               

1 to 100 units

 

$    11.41   

 

$    11.52   

 

$    11.58   

 

$    11.67   

 

$    11.69   

 

$    11.72   

 

$    11.62   

 

$    11.80   

101 to 1,000 units

 

        8.27   

 

        8.24   

 

        8.30   

 

        8.38   

 

        8.35   

 

        8.33   

 

        8.35   

 

        8.37   

>1,000 units

 

        6.63   

 

        6.64   

 

        6.63   

 

        6.65   

 

        6.68   

 

        6.68   

 

        6.62   

 

        6.67   

Total

 

$      7.23   

 

$      7.24   

 

$      7.26   

 

$      7.29   

 

$      7.32   

 

$      7.34   

 

$      7.30   

 

$      7.34   

                                 

(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

 

For the six months ended

   

6/30/2022

 

6/30/2021

 

6/30/2022

 

6/30/2021

Operating expenses

 

$           31,298

 

$           37,332

 

$           73,791

 

$           75,108

Add back:

               

Depreciation, amortization and accretion

 

                 (871)

 

              (2,457)

 

              (1,805)

 

              (5,184)

Capitalized software development costs

 

                    —

 

               2,698

 

                    —

 

               5,618

Severance and restructuring

 

                 (450)

 

                 (174)

 

              (4,945)

 

                 (174)

Adjusted operating expenses

 

$           29,977

 

$           37,399

 

$           67,041

 

$           75,368

RECONCILIATION OF ADJUSTED EBITDA

(Unaudited and in thousands)

                 
   

For the three months ended

 

For the six months ended

   

6/30/2022

 

6/30/2021

 

6/30/2022

 

6/30/2021

Net income (loss)

 

$             1,924

 

$               (719)

 

$          (5,290)

 

$         (3,016)

Add back:

               

(Provision for) benefit from income taxes

 

                  683

 

                 (800)

 

                 (717)

 

                 (209)

Other income

 

                   (25)

 

                   (29)

 

                   (12)

 

                     (2)

Interest income

 

                 (170)

 

                   (61)

 

                 (237)

 

                 (122)

Depreciation, amortization and accretion

 

                  871

 

               2,457

 

               1,805

 

               5,184

EBITDA

 

$             3,283

 

$             848

 

$         (4,451)

 

$            1,835

Adjustments:

               

Capitalized software development costs

 

                    —

 

              (2,698)

 

                    —

 

              (5,618)

Stock-based compensation

 

                  961

 

               1,781

 

               2,076

 

               4,020

Capital expenditures

 

                 (547)

 

              (1,480)

 

              (1,231)

 

              (2,207)

Adjusted EBITDA

 

$          3,697

 

$        (1,549)

 

$        (3,606)

 

$         (1,970)

RECONCILIATION OF ADJUSTED OPERATING EXPENSE FROM GUIDANCE

(Unaudited and in millions)

                 
   

Current Guidance Range

 

Prior Guidance Range

   

From

 

To

 

From

 

To

Operating expenses

 

$                          132.8

 

$                          136.1

 

$                          128.7

 

$                          142.3

Add back:

               

Depreciation, amortization and accretion

 

                               (3.5)

 

                               (3.5)

 

                               (3.5)

 

                               (3.5)

Severance and restructuring

 

$                             (6.0)

 

$                             (6.5)

 

$                             (6.4)

 

$                           (10.2)

Adjusted operating expenses

 

$                          123.3

 

$                          126.1

 

$                          118.8

 

$                          128.6