Spok Holdings, Inc. (NASDAQ:SPOK) Q2 2023 Earnings Conference Call July 27, 2023 9:00 AM ET Company Participants Al Galgano - Investor Relations Vince Kelly - President & Chief Executive Officer Calvin Rice - Chief Financial Officer Mike Wallace - President Conference Call Participants Eric Martinuzzi - Lake Street Capital Operator Good morning, and welcome to the Spok Holdings Second Quarter 2023 Earnings Call. At this time, all participants are in listen-only mode. [Operator Instructions]. As a reminder, ...

Spok Holdings, Inc. (NASDAQ:SPOK) Q1 2023 Earnings Conference Call May 4, 2023 9:30 AM ET Company Participants Al Galgano - Investor Relations Vince Kelly - Chief Executive Officer Calvin Rice - Chief Financial Officer Conference Call Participants Al Galgano Hello, everyone, and welcome to Spok Holdings First Quarter 2023 Earnings Call. I am joined by Vince Kelly, Chief Executive Officer; Mike Wallace, President of Spok Inc. and Chief Operating Officer; and Calvin Rice, Chief Financial Officer. Please be ad ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2023 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number: 001-32358 SPOK HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 16-1694797 (State or other jurisdictio ...

(1) 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, effects of capitalized software development costs, capital expenditures, and severance and restructuring costs. 8 Fourth Quarter Earnings| 02.23.23 05.04.23 Statements contained in this presentation which are not historical fact, such as statements regarding Spok's future operating and ...

Financial Data and Key Metrics Changes - In Q4 2022, GAAP net income was $24.2 million, or $1.21 per diluted share, compared to a net loss of $16.7 million, or $0.86 per diluted share in Q4 2021, largely due to a $21.9 million noncash gain related to tax credits [34][35] - Total GAAP revenue for Q4 2022 was $33.3 million, down from $34.5 million in Q4 2021, with wireless revenue at $19 million and software revenue at $14.3 million, reflecting declines of less than 1% and 7.2% respectively [36] - Adjusted EBITDA for Q4 2022 was $5.6 million, compared to a negative $3.8 million in Q4 2021, indicating significant progress in the strategic pivot [40] Business Line Data and Key Metrics Changes - Wireless revenue for the full year 2022 declined by 4.1%, with monthly paging revenue down only 3.3% year-over-year, showing a slowing rate of erosion [36] - Software operations bookings increased nearly 17% year-over-year in Q4 2022, with a software backlog of $44 million at year-end [28] - Professional services revenue decreased to $3.1 million in Q4 2022 from $3.8 million in Q4 2021, reflecting a planned reduction in personnel [37] Market Data and Key Metrics Changes - The company has over 2,200 healthcare facilities as customers, including 18 of the top 20 adult hospitals, indicating strong market presence [26] - Approximately 83% of the company's revenue is recurring, providing financial stability [26] Company Strategy and Development Direction - The company has shifted its focus to maximizing cash flow and returning capital to shareholders, having returned $25 million in cumulative capital since the strategic pivot [26][32] - Future investments will focus on enhancing the Spok Care Connect software solutions and wireless products, with R&D spending expected to increase to approximately $11.3 million in 2023 [27][42] - The company aims to stabilize software revenue and position it for growth in future years following the discontinuation of Spok Go [42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating adjusted EBITDA in the range of $24 million to $26 million for 2023, based on cautious optimism and performance in 2022 [42] - The company anticipates moderate growth in software operations bookings while minimizing unit churn and maximizing average revenue per unit in wireless products [32] Other Important Information - The company plans to host an Investor Day on May 4, 2023, in Dallas, providing an opportunity for investors to engage with management [17] Q&A Session Summary Question: What is the expectation for wireless revenue in 2023? - Management expects unit churn to remain consistent with 2022, with an uptick in ARPU due to pricing actions and new GenA pagers [10] Question: What is the outlook for license revenue? - Management indicated that the decline in license revenue is a function of mix and expects overall bookings to grow, leading to an increase in license revenue over time [11] Question: How is the morale within the company? - Morale is reported to be high, with a significant reduction in regrettable turnover to less than 1% [5] Question: What is the company's dividend commitment? - The company is committed to paying an annual dividend of $1.25 in 2023, with sufficient cash generation expected to support this [7] Question: Are there opportunities outside of healthcare for the communications console? - Management views opportunities in other market segments as a longer-term priority, with current focus on generating adjusted EBITDA [8]

Part I [Business](index=7&type=section&id=Item%201.%20Business) Spok Holdings, Inc. is a global leader in healthcare communications, focusing on its core Spok Care Connect and wireless services after a strategic shift in February 2022 - In February 2022, the company announced a new strategic business plan to discontinue the Spok Go platform, rightsize the organization, and focus on generating cash flow from its core Spok Care Connect and Wireless business lines[20](index=20&type=chunk) - The company's primary market is the U.S. healthcare industry, facing rising costs and a shift to value-based purchasing, increasing demand for efficient clinical communication tools[19](index=19&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) Revenue Contribution by Business Line (2020-2022) | Business Line | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Wireless Products & Services | 56% | 55% | 56% | | Professional Services | 9% | 12% | 12% | | Maintenance (Software Support) | 27% | 27% | 26% | - The company faces intense competition in its wireless segment from major mobile telephone companies and in software from specialized firms and large EMR companies[68](index=68&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - As part of its 2022 restructuring, the company reduced **FTE employees from 563 to 376**, eliminating **176 positions** primarily in R&D and support functions[75](index=75&type=chunk)[77](index=77&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from declining wireless revenue, healthcare industry reliance, cybersecurity threats, and data privacy regulations - The ongoing decline in wireless subscribers and revenue is a primary risk, with profitability dependent on reducing operating expenses in line with this erosion[115](index=115&type=chunk)[118](index=118&type=chunk) - A significant portion of revenue (over **75%**) comes from the U.S. healthcare industry, making the company vulnerable to economic pressures, regulatory changes, and events like the COVID-19 pandemic[121](index=121&type=chunk)[113](index=113&type=chunk) - The company is subject to complex data privacy regulations, including HIPAA, HITECH, and GDPR, with non-compliance potentially leading to significant liability and harm to marketability[142](index=142&type=chunk)[143](index=143&type=chunk)[146](index=146&type=chunk) - The ability to realize significant deferred income tax assets is dependent on achieving sufficient future taxable income, with failure materially affecting the company's financial condition[138](index=138&type=chunk) - Cybersecurity threats, including unauthorized intrusions and data breaches, pose a material risk, potentially leading to reputational damage, litigation, and financial liabilities[135](index=135&type=chunk)[137](index=137&type=chunk) [Unresolved Staff Comments](index=37&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved comments from the SEC staff as of February 23, 2023 - As of February 23, 2023, Spok had no unresolved SEC staff comments[158](index=158&type=chunk) [Properties](index=37&type=section&id=Item%202.%20Properties) Spok's corporate headquarters is in Alexandria, Virginia, with numerous leased facilities and 2,738 wireless transmitter sites - The corporate headquarters is in Alexandria, Virginia, in a leased space of approximately **26,000 square feet** with a lease expiring on September 30, 2026[159](index=159&type=chunk) - As of December 31, 2022, the company leased **2,738 transmitter sites** and operated **3,325 active transmitters** for its wireless services[161](index=161&type=chunk) [Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings are disclosed in Note 11, with no expected material adverse impact from current lawsuits - The company refers to Note 11 for information on legal proceedings, stating that potential outcomes from current lawsuits are not expected to have a material adverse impact[162](index=162&type=chunk)[437](index=437&type=chunk) [Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[163](index=163&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Spok's common stock trades on NASDAQ, with dividends, a share repurchase program, and transfer restrictions for deferred tax assets Dividends Declared per Share | Year | Dividend per Share | | :--- | :--- | | 2022 | $1.250 | | 2021 | $0.500 | | 2020 | $0.500 | - In February 2022, the Board of Directors authorized a share repurchase program for up to **$10 million** of the company's common stock, though no shares were repurchased under this program in 2022[170](index=170&type=chunk)[169](index=169&type=chunk) - The company's Certificate of Incorporation includes transfer restrictions for **5% stockholders** to prevent an ownership change that could limit the use of its deferred income tax assets under IRC Section 382[171](index=171&type=chunk)[172](index=172&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, revenue decreased, but significant operating expense reductions from restructuring led to net income and solid liquidity - The February 2022 strategic plan involved discontinuing Spok Go, eliminating associated costs, and restructuring the business, leading to the elimination of **176 positions** and allowing for an increased quarterly dividend[177](index=177&type=chunk) Key Financial Results (2022 vs. 2021) | Metric (in thousands) | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $134,534 | $142,153 | ($7,619) | (5.4)% | | Total Operating Expenses | $134,296 | $169,871 | ($35,575) | (20.9)% | | Operating Income (Loss) | $238 | ($27,718) | $27,956 | 100.9% | | Net Income (Loss) | $21,856 | ($22,180) | $44,036 | 198.5% | - The significant decrease in operating expenses was driven by business restructuring, including lower R&D costs, reduced personnel expenses, and the non-recurrence of a **$15.7 million** software impairment charge from 2021, partially offset by **$7.3 million** in one-time restructuring charges in 2022[183](index=183&type=chunk)[226](index=226&type=chunk) - The company recorded a **$20.9 million** benefit from income taxes in 2022, primarily due to a **$21.9 million** reduction in the valuation allowance against its deferred tax assets, reflecting improved future profitability projections post-restructuring[184](index=184&type=chunk)[232](index=232&type=chunk)[235](index=235&type=chunk) - Net cash provided by operating activities was **$6.5 million** in 2022, with **$26.2 million** used in financing activities, mainly for **$25.0 million** in cash dividends to stockholders[243](index=243&type=chunk)[245](index=245&type=chunk)[248](index=248&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports minimal market risk due to no outstanding debt and immaterial foreign currency exposure - The company has no outstanding borrowings as of December 31, 2022, and therefore has no associated interest rate risk[269](index=269&type=chunk) - Exposure to foreign currency exchange rate risk is immaterial as the company conducts limited business outside the U.S[270](index=270&type=chunk) [Financial Statements and Supplementary Data](index=58&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides an index to the company's consolidated financial statements and supplementary data, starting on page F-1 - This item contains the index to the audited consolidated financial statements, which are included from page F-1 onwards[272](index=272&type=chunk)[273](index=273&type=chunk) [Controls and Procedures](index=59&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and auditors concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[275](index=275&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2022, a conclusion audited and affirmed by Grant Thornton LLP[278](index=278&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=61&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement[283](index=283&type=chunk) [Executive Compensation](index=61&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the 2023 Proxy Statement - Information regarding executive compensation is incorporated by reference from the 2023 Proxy Statement[284](index=284&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=61&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership by beneficial owners and management is incorporated by reference from the 2023 Proxy Statement - Information regarding security ownership is incorporated by reference from the 2023 Proxy Statement[284](index=284&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=61&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2023 Proxy Statement - Information regarding related transactions and director independence is incorporated by reference from the 2023 Proxy Statement[285](index=285&type=chunk) [Principal Accountant Fees and Services](index=61&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement[286](index=286&type=chunk) Part IV [Exhibit and Financial Statement Schedules](index=62&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists all financial statements and exhibits filed as part of the Form 10-K - This item lists all financial statements and exhibits filed with the Form 10-K[288](index=288&type=chunk) Financial Statements and Notes [Reports of Independent Registered Public Accounting Firm](index=65&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Grant Thornton LLP issued unqualified opinions on financial statements and internal controls, with deferred tax asset realizability as a critical audit matter - The auditor, Grant Thornton LLP, issued an unqualified (clean) opinion on the company's financial statements and its internal control over financial reporting as of December 31, 2022[297](index=297&type=chunk)[310](index=310&type=chunk) - The audit identified the 'Realizability of Deferred Tax Assets and Valuation Allowance Assessment' as a critical audit matter, highlighting the complexity and significant judgment required by management in this area[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) [Consolidated Financial Statements](index=69&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show a net income of $21.9 million in 2022, driven by reduced expenses and a tax benefit Consolidated Balance Sheet Highlights (As of Dec 31) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $35,754 | $44,583 | | Total Current Assets | $70,051 | $94,053 | | Goodwill | $99,175 | $99,175 | | Deferred income tax assets, net | $52,398 | $31,653 | | Total Assets | $244,477 | $248,154 | | Total Liabilities | $72,399 | $74,463 | | Total Stockholders' Equity | $172,078 | $173,691 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Revenue | $134,534 | $142,153 | $148,180 | | Operating Income (Loss) | $238 | ($27,718) | ($22,665) | | Net Income (Loss) | $21,856 | ($22,180) | ($44,225) | | Diluted EPS | $1.09 | ($1.14) | ($2.32) | [Notes to Consolidated Financial Statements](index=74&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the February 2022 restructuring, revenue recognition, deferred tax asset valuation allowance reduction, goodwill, and dividends - The February 2022 restructuring resulted in **$7.3 million** in total costs, comprising **$6.0 million** in severance and **$1.3 million** in contractual terminations[382](index=382&type=chunk) - As of December 31, 2022, the company had **$44.0 million** in remaining performance obligations, with **$33.1 million** expected to be recognized as revenue in the next 12 months[388](index=388&type=chunk) - Based on improved profitability projections following its restructuring, the company reduced the valuation allowance on its deferred tax assets by **$21.9 million** as of December 31, 2022[365](index=365&type=chunk)[431](index=431&type=chunk) - The company had goodwill of **$99.2 million** as of December 31, 2022, with no impairment recognized in 2022 or 2021, following a **$25.0 million** impairment in 2020[398](index=398&type=chunk)[353](index=353&type=chunk) - The Board declared dividends of **$1.25 per share** in 2022, a significant increase from **$0.50 per share** in 2021 and 2020[406](index=406&type=chunk)

Financial Data and Key Metrics Changes - For Q3 2022, total GAAP revenue was $33.7 million, down from $35.9 million in Q3 2021, with wireless revenue at $19.1 million (down 3%) and software revenue at $14.7 million (down 9.4%) [39] - Year-to-date total GAAP revenue was $101.3 million, compared to $107.6 million in 2021, with wireless revenue at $56.6 million (down 5.1%) and software revenue at $44.7 million (down 6.9%) [44] - Adjusted EBITDA for Q3 2022 was $4.7 million, compared to a negative $2.5 million in Q3 2021, and year-to-date adjusted EBITDA was $1.1 million, compared to a negative $4.5 million in 2021 [46] Business Line Data and Key Metrics Changes - Wireless revenue for Q3 2022 was $19.1 million, down from $19.6 million, with a net pager decline of 3.4% year-over-year [39] - Software maintenance revenue was $9.2 million, down 4.8% from $9.6 million in the same period last year, while professional services revenue decreased by 33.3% to $2.8 million [41] - License and hardware revenue increased to $2.7 million from $2.4 million year-over-year [44] Market Data and Key Metrics Changes - Over 80% of the company's revenue is recurring, primarily from legacy wireless offerings and software maintenance contracts [28] - The company serves over 2,200 hospital locations, with 50% of customers using wireless-only services, 29% using software-only, and 21% using both [14] Company Strategy and Development Direction - The company has pivoted to maximize free cash flow and return capital to shareholders, with a focus on the Care Connect Suite and wireless services [9][10] - The strategic business plan aims to stabilize revenue and generate significant cash flow, with a commitment to return $20 million in adjusted EBITDA for the full year [30][49] - The company plans to continue investing in its legacy products while transitioning to a cash flow-focused model [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the $20 million adjusted EBITDA target for the year, despite some anticipated fluctuations in quarterly performance [30][49] - The company expects to see continued growth in software operations bookings, with a year-to-date increase of 18% year-over-year [32] - Management highlighted the importance of maintaining strong customer relationships and adapting to market needs, particularly in the healthcare sector [12][13] Other Important Information - The company has returned $18.8 million in cumulative capital to shareholders since the strategic pivot in February 2022 [33] - The company has a strong cash position and no debt, providing flexibility for future investments and shareholder returns [11] Q&A Session Summary Question: Can you discuss the dynamics influencing ARPU? - Management identified three factors: the Universal Service Fund, traction from the GenA product, and recent price increases affecting a third of the customer base [55][56] Question: What key levers are being focused on to drive margins? - Management emphasized cost reduction and top-line growth, particularly in wireless revenue, as key levers for margin expansion [60][61] Question: What are the expectations for additional restructuring costs? - Management indicated that most restructuring costs will be wrapped up after Q4, with only minor costs expected moving forward [63][64] Question: Can you provide details on the six-figure deals? - Management shared examples of significant deals, including a $700,000 contract with a large hospital system and a $300,000 deal in Hawaii, highlighting successful cross-selling efforts [66][68] Question: How is the launch of the GenA pager going? - Management reported positive feedback and increased units in service, with plans to evaluate pricing and address supply chain challenges [72][74]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2022 5911 Kingstowne Village Pkwy, 6th Floor Alexandria, Virginia 22315 (Address of principal executive offices) (Zip Code) (800) 611-8488 (Registrant's telephone number, including area code) N/A or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of ...

Spok Holdings, Inc. (NASDAQ:SPOK) Q2 2022 Earnings Conference Call July 28, 2022 8:30 AM ET Company Participants Lisa Fortuna - Managing Director, Alpha IR Group Vince Kelly - President & Chief Executive Officer Mike Wallace - Chief Financial Officer & Chief Operating Officer Conference Call Participants Operator Greetings, and welcome to Spok Holdings Second Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Li ...

S m a r t e r, fa s t e r c l i n i c a l c o m m u n i c a t i o n S e c o n d Q u a r t e r E a r n i n g s | 0 7 . 2 8 . 2 2 Safe harbor statement Statements contained in this presentation which are not historical fact, such as statements regarding Spok's future operating and financial performance, future dividend payments and the outcome of the Company's strategic alternatives review, are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform ...