Spok Reports Second Quarter 2023 Results

Rhea-AI Summary

Spok Holdings, Inc. (NASDAQ: SPOK) announced a strong improvement in net income and adjusted EBITDA, a record level of software operations bookings, and growth in software and wireless revenue. The company also increased its full year 2023 financial guidance. Key highlights include a net income of $4.7 million, adjusted EBITDA of $8.5 million, and software operations bookings of $14.0 million. The company's wireless revenue and software revenue both showed significant growth on a year-over-year basis. Spok Holdings, Inc. also declared a regular quarterly dividend of $0.3125 per share.

Positive

• Strong improvement in net income and adjusted EBITDA
• Record level of software operations bookings
• Software and Wireless Revenue Growth on a Year-Over-Year Basis
• Company increases full year 2023 financial guidance

Negative

• None.

Strong improvement in net income and adjusted EBITDA

Record level of software operations bookings

Software and Wireless Revenue Growth on a Year-Over-Year Basis

Company increases full year 2023 financial guidance

ALEXANDRIA, Va.--(BUSINESS WIRE)-- Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced results for the second quarter ended June 30, 2023. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.3125 per share, payable on September 8, 2023, to stockholders of record on August 17, 2023.

Recent Highlights:

• Generated net income of $4.7 million, or $0.23 per diluted share, compared to net income of $1.9 million, or $0.10 per diluted share, in the prior year period
• Generated $8.5 million of adjusted EBITDA in the second quarter, compared to $4.7 million in the second quarter of 2022
• Software operations bookings totaled $14.0 million for the second quarter, compared to $7.4 million in the second quarter of 2022, a 90% year-over-year increase
• Second quarter 2023 software operations bookings included 23 six-figure and 3 seven-figure customer contracts
• Second quarter 2023 software revenue totaled $17.6 million, up more than 24% from the prior quarter and more than 17% from the prior year period
• Second quarter 2023 wireless average revenue per unit (ARPU) was $7.53, up on a year-over-year basis, with units in service down less than 1% from the prior quarter and 3.5% on a trailing-twelve-month basis
• Second quarter 2023 wireless revenue of $18.9 million, up 1% from revenue of $18.7 million in the same period in 2022
• Capital returned to stockholders in the second quarter of 2023 totaled $6.2 million in the form of the Company’s regular quarterly dividend
• Cash and equivalents balance increased from the prior quarter to $30.9 million on June 30, 2023, and no debt

"I am very proud of the record performance that our team was able to deliver in the second quarter and believe that these results position us well for the second half of the year, as we continue to execute our plan focused on growing revenue, generating cash flow and returning capital to stockholders,” said Vincent D. Kelly, chief executive officer of Spok Holdings, Inc. “Last quarter, our team was able to grow revenue, both in total and within each of our two service lines, on a year-over-year basis, reversing historical trends. We made tremendous progress in several key performance areas, including wireless trends, software bookings and backlog levels. Software operations bookings were up 90% on a year-over-year basis and included a record 23 new six-figure and 3 new seven-figure customer contracts. We continued our focus on expense management, as we drove expense reductions on a year-over-year basis, while making the necessary investments in product development and sales and marketing to support the growth of our Spok Care Connect and Wireless solutions. I am also very pleased with our performance in Wireless, as we drove sequential and trailing-twelve-month unit churn down to 0.6% and 3.5%, respectively.

"In short, we are firing on all cylinders," continued Kelly. "Based on our performance in the second quarter we are, once again, increasing our full year 2023 guidance estimates for revenue and adjusted EBITDA generation. We believe we are on track to grow consolidated revenue for 2023, on a year-over-year basis, for the first time in the Company's history and the low point of our revenue guidance reflects that. We look forward to continued success in the second half 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 June 30,									For the six months ended June 30,
(Dollars in thousands)		2023			2022		Change (%)				2023			2022			Change (%)
Revenue
Wireless revenue
Paging revenue	$	18,271		$	18,141		0.7	%		$	36,796		$	36,454			0.9	%
Product and other revenue		606			559		8.4	%			1,109			1,093			1.5	%
Total wireless revenue	$	18,877		$	18,700		0.9	%		$	37,905		$	37,547			1.0	%
Software revenue
License	$	3,692		$	1,962		88.2	%		$	5,310		$	3,786			40.3	%
Professional services		3,837			3,331		15.2	%			7,076			6,667			6.1	%
Hardware		933			507		84.0	%			1,289			1,096			17.6	%
Maintenance		9,124			9,210		(0.9	)%			18,063			18,439			(2.0	)%
Total software revenue		17,586			15,010		17.2	%			31,738			29,988			5.8	%
Total revenue	$	36,463		$	33,710		8.2	%		$	69,643		$	67,535			3.1	%

	For the three months ended June 30,									For the six months ended June 30,
(Dollars in thousands)		2023			2022		Change (%)				2023			2022			Change (%)
GAAP
Operating expenses	$	30,248		$	31,298		(3.4	)%		$	58,711		$	73,791			(20.4	)%
Net income (loss)	$	4,733		$	1,924		146.0	%		$	7,850		$	(5,290	)		248.4	%
Cash, cash equivalents, and short-term investments (as of period end)	$	30,866		$	38,432		(19.7	)%		$	30,866		$	38,432			(19.7	)%
Capital returned to stockholders	$	6,230		$	6,155		1.2	%		$	13,163		$	12,679			3.8	%
Non-GAAP
Adjusted operating expenses	$	28,875		$	29,977		(3.7	)%		$	56,092		$	67,041			(16.3	)%
Adjusted EBITDA	$	8,511		$	4,694		81.3	%		$	15,410		$	2,570			499.6	%

	For the three months ended June 30,									For the six months ended June 30,
(Dollars in thousands, excluding units and service and ARPU)		2023			2022		Change (%)				2023			2022			Change (%)
Key Statistics
Wireless units in service		806			835		(3.5	)%			806			835			(3.5	)%
Wireless average revenue per unit (ARPU)	$	7.53		$	7.23		4.1	%		$	7.56		$	7.22			4.7	%
Software operations bookings(1)	$	14,010		$	7,374		90.0	%		$	19,688		$	12,586			56.4	%
Software backlog (as of period end)	$	56,980		$	44,488		28.1	%		$	56,980		$	44,488			28.1	%

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.

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		$	74.5		$	75.5		$	73.0		$	75.5
Software		$	60.0		$	62.0		$	58.0		$	62.0
Total Revenue		$	134.5		$	137.5		$	131.0		$	137.5
Adjusted EBITDA		$	25.0		$	28.0		$	24.5		$	26.5

2023 Second Quarter Call:

Management will host a conference call and webcast to discuss these financial results on Thursday, July 27, 2023, at 9:00 a.m. Eastern Time. The presentation is open to all interested parties and may include forward-looking information.

Conference Call Details

Date/Time:	Thursday, July 27, 2023, at 9:00 a.m. ET
Webcast:	https://www.webcast-eqs.com/register/spok_q22023_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.

About Spok

Spok, Inc., a wholly owned subsidiary of Spok Holdings, Inc. (NASDAQ: SPOK), headquartered in Alexandria, Virginia, 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 100 million messages each month through their Spok® solutions. Spok enables smarter, faster clinical communication. For more information, visit spok.com or follow @spoktweets on Twitter.

Spok is a trademark of Spok Holdings, Inc. Spok Care Connect and Spok Mobile are trademarks of Spok, Inc.

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 expense, 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.

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, consummate and successfully integrate such acquisitions, and achieve the expected benefits of such acquisitions; risks related to global health epidemics; economic conditions such as recessionary economic cycles, higher interest rates, inflation and higher levels of unemployment; 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 U.S. healthcare industry; the sales cycle of our software solutions and services can run from six to eighteen months, making it difficult to plan for and meet our sales objectives and bookings on a steady basis quarter-to-quarter and year-to-year; 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; the reliability of our networks and servers and our ability to prevent cyber-attacks and other security issues and disruptions; unauthorized breaches or failures in cybersecurity measures adopted by us and/or included in our products and services; our ability to realize the benefits associated with our deferred income tax assets; future impairments of our long-lived assets, amortizable intangible 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.

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
		6/30/2023				6/30/2022				6/30/2023				6/30/2022
Revenue:
Wireless		$	18,877			$	18,700			$	37,905			$	37,547
Software			17,586				15,010				31,738				29,988
Total revenue			36,463				33,710				69,643				67,535
Operating expenses:
Cost of revenue (exclusive of items shown separately below)			6,727				6,980				13,263				14,784
Research and development			2,853				2,624				5,346				9,121
Technology operations			6,452				6,880				13,039				13,893
Selling and marketing			4,354				3,874				8,255				9,189
General and administrative			8,489				9,619				16,189				20,054
Depreciation, amortization and accretion			1,265				871				2,501				1,805
Severance and restructuring			108				450				118				4,945
Total operating expenses			30,248				31,298				58,711				73,791
% of total revenue			83.0	%			92.8	%			84.3	%			109.3	%
Operating income (loss)			6,215				2,412				10,932				(6,256	)
% of total revenue			17.0	%			7.2	%			15.7	%			(9.3	)%
Interest income			354				170				626				237
Other (expense) income			(138	)			25				(85	)			12
Income (loss) before income taxes			6,431				2,607				11,473				(6,007	)
(Provision for) benefit from income taxes			(1,698	)			(683	)			(3,623	)			717
Net income (loss)		$	4,733			$	1,924			$	7,850			$	(5,290	)
Basic net income (loss) per common share		$	0.24			$	0.10			$	0.39			$	(0.27	)
Diluted net income (loss) per common share			0.23				0.10				0.39				(0.27	)
Basic weighted average common shares outstanding			19,957,786				19,693,659				19,927,782				19,645,680
Diluted weighted average common shares outstanding			20,255,248				19,807,430				20,266,914				19,645,680
Cash dividends declared per common share			0.3125				0.3125				0.6250				0.6250

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
		6/30/2023				12/31/2022
ASSETS		(Unaudited)
Current assets:
Cash and cash equivalents		$	30,866			$	35,754
Accounts receivable, net			25,467				26,861
Prepaid expenses			7,371				6,849
Other current assets			841				587
Total current assets			64,545				70,051
Non-current assets:
Property and equipment, net			7,869				8,223
Operating lease right-of-use assets			12,713				13,876
Goodwill			99,175				99,175
Deferred income tax assets, net			48,992				52,398
Other non-current assets			630				754
Total non-current assets			169,379				174,426
Total assets		$	233,924			$	244,477
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	6,768			$	5,880
Accrued compensation and benefits			8,528				11,628
Deferred revenue			23,984				27,255
Operating lease liabilities			4,693				5,096
Other current liabilities			5,352				4,573
Total current liabilities			49,325				54,432
Non-current liabilities:
Asset retirement obligations			7,455				7,237
Operating lease liabilities			9,520				10,604
Other non-current liabilities			1,013				1,107
Total non-current liabilities			17,988				18,948
Total liabilities			67,313				73,380
Commitments and contingencies
Stockholders' equity:
Common stock			2				2
Additional paid-in capital			100,612				99,908
Accumulated other comprehensive loss			(1,862	)			(1,909	)
Retained earnings			67,859				73,096
Total stockholders' equity			166,611				171,097
Total liabilities and stockholders' equity		$	233,924			$	244,477

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
		For the six months ended
		6/30/2023				6/30/2022
Operating activities:
Net income (loss)		$	7,850			$	(5,290	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and accretion			2,501				1,805
Deferred income tax expense (benefit)			3,602				(495	)
Stock-based compensation			1,859				2,076
Provisions for credit losses, service credits and other			222				861
Changes in assets and liabilities:
Accounts receivable			1,168				(576	)
Prepaid expenses and other assets			(653	)			(416	)
Net operating lease liabilities			(324	)			(109	)
Accounts payable, accrued liabilities and other			(1,745	)			(3,582	)
Deferred revenue			(3,282	)			(169	)
Net cash provided by (used in) operating activities			11,198				(5,895	)
Investing activities:
Purchases of property and equipment			(1,815	)			(1,192	)
Purchase of short-term investments			—				(14,967	)
Maturity of short-term investments			—				15,000
Net cash used in investing activities			(1,815	)			(1,159	)
Financing activities:
Cash distributions to stockholders			(13,163	)			(12,679	)
Proceeds from issuance of common stock under the Employee Stock Purchase Plan			90				—
Purchase of common stock for tax withholding on vested equity awards			(1,245	)			(1,209	)
Net cash used in financing activities			(14,318	)			(13,888	)
Effect of exchange rate on cash and cash equivalents			47				(204	)
Net decrease in cash and cash equivalents			(4,888	)			(21,146	)
Cash and cash equivalents, beginning of period			35,754				44,583
Cash and cash equivalents, end of period		$	30,866			$	23,437
Supplemental disclosure:
Income taxes paid/(refunded)		$	253			$	185

SPOK HOLDINGS, INC.
UNITS IN SERVICE, MARKET SEGMENTS,
AND AVERAGE REVENUE PER UNIT (ARPU) (a)
(Unaudited and in thousands)
		For the three months ended
		6/30/2023				3/31/2023				12/31/2022				9/30/2022				6/30/2022				3/31/2022				12/31/2021				9/30/2021
Account size ending units in service (000's)
1 to 100 units			48				48				50				51				53				54				55				57
101 to 1,000 units			144				149				147				147				149				150				154				154
>1,000 units			614				614				620				626				633				634				638				642
Total			806				811				817				824				835				838				847				853
Market segment as a percent of total ending units in service
Healthcare			86.1	%			85.7	%			85.4	%			85.0	%			85.0	%			84.7	%			84.7	%			84.6	%
Government			4.2	%			4.3	%			4.4	%			4.1	%			4.2	%			4.7	%			4.8	%			4.8	%
Large enterprise			4.0	%			4.1	%			4.0	%			3.9	%			4.0	%			3.9	%			3.9	%			4.1	%
Other(b)			5.7	%			5.9	%			6.1	%			7.0	%			6.8	%			6.7	%			6.6	%			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		$	11.91			$	12.03			$	11.95			$	11.80			$	11.41			$	11.52			$	11.58			$	11.67
101 to 1,000 units			8.56				8.75				8.66				8.44				8.27				8.24				8.30				8.38
>1,000 units			6.94				6.95				6.86				6.69				6.63				6.64				6.63				6.65
Total		$	7.53			$	7.59			$	7.50			$	7.40			$	7.23			$	7.24			$	7.26			$	7.29
(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
		6/30/2023				6/30/2022				6/30/2023				6/30/2022
Operating expenses		$	30,248			$	31,298			$	58,711			$	73,791
Add back:
Depreciation, amortization and accretion			(1,265	)			(871	)			(2,501	)			(1,805	)
Severance and restructuring			(108	)			(450	)			(118	)			(4,945	)
Adjusted operating expenses		$	28,875			$	29,977			$	56,092			$	67,041

RECONCILIATION OF ADJUSTED EBITDA
(Unaudited and in thousands)
		For the three months ended								For the six months ended
		6/30/2023				6/30/2022				6/30/2023				6/30/2022
Net income (loss)		$	4,733			$	1,924			$	7,850			$	(5,290	)
Add back:
Provision for (benefit from) income taxes			1,698				683				3,623				(717	)
Other expense (income)			138				(25	)			85				(12	)
Interest income			(354	)			(170	)			(626	)			(237	)
Depreciation, amortization and accretion			1,265				871				2,501				1,805
EBITDA		$	7,480			$	3,283			$	13,433			$	(4,451	)
Adjustments:
Stock-based compensation			923				961				1,859				2,076
Severance and restructuring			108				450				118				4,945
Adjusted EBITDA		$	8,511			$	4,694			$	15,410			$	2,570

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230726764799/en/

Al Galgano

952-224-6096

al.galgano@spok.com

Source: Spok Holdings, Inc.

FAQ

What is the ticker symbol of Spok Holdings, Inc.?

The ticker symbol of Spok Holdings, Inc. is SPOK.

What were the second quarter 2023 software operations bookings?

The second quarter 2023 software operations bookings totaled $14.0 million, a 90% year-over-year increase, and included 23 six-figure and 3 seven-figure customer contracts.

What was the wireless average revenue per unit in the second quarter of 2023?

The wireless average revenue per unit (ARPU) in the second quarter of 2023 was $7.53, up on a year-over-year basis.

What is the financial guidance for the full year 2023?

The company expects wireless revenue of $74.5-$75.5 million, software revenue of $60.0-$62.0 million, and total revenue of $134.5-$137.5 million for the full year 2023. The adjusted EBITDA is expected to be $25.0-$28.0 million.