Spok(SPOK) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Spok Holdings, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS This section presents Spok Holdings, Inc.'s unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, revenue recognition, leases, and other financial components for the periods ended June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets This section presents Spok Holdings, Inc.'s unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024 | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Cash and cash equivalents | $20,242 | $29,145 | | Accounts receivable, net | $25,819 | $21,950 | | Total current assets | $56,475 | $61,297 | | Total assets | $208,670 | $217,103 | | Total current liabilities | $45,444 | $48,774 | | Total liabilities | $57,734 | $62,357 | | Total stockholders' equity | $150,936 | $154,746 | - Total assets decreased by $8.43 million from December 31, 2024, to June 30, 2025[9] - Total liabilities decreased by $4.62 million from December 31, 2024, to June 30, 2025[9] Condensed Consolidated Statements of Operations This section presents Spok Holdings, Inc.'s unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :-------------------- | :----------------------------- | :----------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Total Revenue | $35,686 | $33,982 | 5.0% | $71,980 | $68,891 | 4.5% | | Operating Income | $5,392 | $4,474 | 20.5% | $11,410 | $9,365 | 21.8% | | Net Income | $4,552 | $3,425 | 32.9% | $9,748 | $7,661 | 27.2% | | Basic net income per common share | $0.22 | $0.17 | 29.4% | $0.48 | $0.38 | 26.3% | | Diluted net income per common share | $0.22 | $0.17 | 29.4% | $0.47 | $0.37 | 27.0% | | Cash dividends declared per common share | $0.3125 | $0.3125 | 0.0% | $0.6250 | $0.6250 | 0.0% | Condensed Consolidated Statements of Comprehensive Income This section presents Spok Holdings, Inc.'s unaudited condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2025 and 2024 | (Unaudited and in thousands) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net income | $4,552 | $3,425 | $9,748 | $7,661 | | Foreign currency translation adjustments | $12 | $(48) | $22 | $(6) | | Comprehensive income | $4,564 | $3,377 | $9,770 | $7,655 | Condensed Consolidated Statements of Stockholders' Equity This section presents Spok Holdings, Inc.'s unaudited condensed consolidated statements of stockholders' equity for the six months ended June 30, 2025 - Total stockholders' equity decreased from $154.75 million at January 1, 2025, to $150.94 million at June 30, 2025[15] - Net income contributed $5.20 million and $4.55 million for the first and second quarters of 2025, respectively[15] - Cash dividends declared totaled $13.37 million for the six months ended June 30, 2025[15] Condensed Consolidated Statements of Cash Flows This section presents Spok Holdings, Inc.'s unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 | (Unaudited and in thousands) | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------------- | :------------------------------------- | | Net cash provided by operating activities | $9,290 | $9,420 | | Net cash used in investing activities | $(1,090) | $(1,516) | | Net cash used in financing activities | $(17,125) | $(16,012) | | Net decrease in cash and cash equivalents | $(8,903) | $(8,114) | | Cash and cash equivalents, end of period | $20,242 | $23,875 | - Investing activities in 2025 included $0.70 million in proceeds from the sale of a domain name[18] Unaudited Notes to Condensed Consolidated Financial Statements This section provides detailed notes to Spok Holdings, Inc.'s unaudited condensed consolidated financial statements, explaining significant accounting policies and financial components NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES This note outlines Spok's business as a healthcare communications leader and its significant accounting policies for financial statement preparation - Spok is a global leader in healthcare communications, providing wireless messaging services and enterprise-wide clinical communication solutions[21][22][23] - The financial statements are prepared in accordance with GAAP and SEC rules, with all significant intercompany accounts and transactions eliminated[24] NOTE 2 - RISKS AND OTHER IMPORTANT FACTORS This note refers to the detailed discussion of key operational and industry risks found in the company's Quarterly and Annual Reports - Key risks associated with operations and industry are detailed in 'Item 1A. Risk Factors' of this Quarterly Report and the 2024 Annual Report[30] NOTE 3 - RECENT ACCOUNTING STANDARDS This note discusses the expected adoption dates and potential impacts of recent accounting standards updates on the company's financial reporting - ASU 2023-09 (Income Taxes) is effective for fiscal years beginning after December 15, 2024, and Spok expects to adopt it for the year ending December 31, 2025[31] - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for fiscal years beginning after December 15, 2026, and Spok is evaluating its impact[32] NOTE 4 - SIGNIFICANT ACCOUNTING POLICIES This note refers to the comprehensive details of the company's significant accounting policies as presented in its 2024 Annual Report - Significant accounting policies are detailed in Note 1, 'Organization and Significant Accounting Policies' of the 2024 Annual Report[33] NOTE 5 - REVENUE, DEFERRED REVENUE AND PREPAID COMMISSIONS This note provides a breakdown of revenue by type, details deferred revenue balances, and outlines remaining performance obligations | Revenue Type (Dollars in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Wireless revenue | $18,440 | $18,297 | $36,914 | $36,892 | | Software revenue | $17,246 | $15,685 | $35,066 | $31,999 | | Total revenue | $35,686 | $33,982 | $71,980 | $68,891 | - Deferred revenue balance at June 30, 2025, was $29.46 million, with $18.9 million recognized from the December 31, 2024, balance[43] - Remaining performance obligations at June 30, 2025, totaled $65.2 million, with approximately $38.1 million expected to be recognized in the next 12 months[45] NOTE 6 - LEASES This note details the company's lease costs, weighted average lease terms, discount rates, and future lease payment obligations | Lease Cost (Dollars in thousands) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Operating lease cost | $738 | $1,015 | $1,502 | $2,050 | | Short-term lease cost | $1,918 | $2,449 | $3,933 | $4,901 | | Total lease cost | $2,656 | $3,464 | $5,435 | $6,951 | - Weighted average remaining lease term for operating leases was 4.00 years at June 30, 2025, with a weighted average discount rate of 6.67%[49] - Total future lease payments are $8.85 million, with $1.45 million due in the remaining six months of 2025[49] NOTE 7 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS' COMPONENTS This note provides a breakdown of specific components within the condensed consolidated financial statements, including depreciation, accretion, and other income | (Dollars in thousands) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Total depreciation | $831 | $892 | $1,668 | $1,786 | | Accretion | $23 | $175 | $45 | $349 | | Total depreciation and accretion expense | $854 | $1,067 | $1,713 | $2,135 | - Other income (expense) for the six months ended June 30, 2025, was $0.76 million, primarily due to a $0.7 million gain from the sale of a domain name[51] - Accounts receivable, net, was $25.82 million at June 30, 2025, including $6.6 million of unbilled receivables[52] NOTE 8 - GOODWILL This note discusses the qualitative assessment of goodwill for impairment and confirms no triggering events occurred during the period - A qualitative assessment of goodwill during the three months ended June 30, 2025, determined that no triggering event for impairment had occurred[55] NOTE 9 - ASSET RETIREMENT OBLIGATIONS This note details the company's asset retirement obligation liability, its changes, and future accretion estimates based on network activities - The total asset retirement obligation liability was $6.33 million at June 30, 2025, a decrease from $6.49 million at December 31, 2024[56] - The total estimated liability is expected to accrete to $12.6 million based on ongoing network rationalization activities and lease renewals[57] NOTE 10 - STOCKHOLDERS' EQUITY This note provides details on common stock outstanding, cash dividends declared, and stock-based compensation expenses for the period - As of June 30, 2025, there were 20,583,854 shares of common stock outstanding[58] - Cash dividends declared for the six months ended June 30, 2025, totaled $13.37 million, with quarterly dividends of $0.3125 per share[60] | Stock-Based Compensation Expense (Dollars in thousands) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :------------------------------------------------------ | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Performance-based RSUs | $457 | $458 | $946 | $919 | | Time-based RSUs, DSUs and restricted stock | $742 | $679 | $1,498 | $1,346 | | ESPP | $24 | $22 | $49 | $42 | | Total stock-based compensation | $1,223 | $1,159 | $2,493 | $2,307 | NOTE 11 - INCOME TAXES This note details changes in net deferred income tax assets, valuation allowances, and the company's evaluation of recent tax legislation - Net deferred income tax assets decreased to $39.1 million at June 30, 2025, from $41.7 million at December 31, 2024, with a valuation allowance of $1.8 million[82] - The company is evaluating the impact of the One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, on its financial statement disclosures[85] NOTE 12 - COMMITMENTS AND CONTINGENCIES This note confirms no material changes to the company's commitments and contingencies since the previous annual report - No material changes to commitments and contingencies were reported during the six months ended June 30, 2025, compared to the 2024 Annual Report[86] NOTE 13 - RELATED PARTIES This note discloses revenue and outstanding receivables from transactions with an entity where a Board member holds an executive position - Revenue from a related party (an entity where a Board member serves as EVP and CIO) was $1.2 million for the six months ended June 30, 2025, up from $0.8 million in 2024[87] - Outstanding receivables of $0.5 million from this related party at June 30, 2025, were settled in July 2025[87] NOTE 14 - SEGMENT INFORMATION This note clarifies that Spok operates as a single segment, with performance evaluated based on consolidated net income by the Chief Executive Officer - Spok operates as a single operating segment: clinical communications and collaboration solutions, encompassing wireless and software solutions[90] - The Chief Executive Officer, as the Chief Operating Decision Maker (CODM), evaluates segment performance based on consolidated net income[91] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on Spok's financial performance and condition, highlighting revenue growth driven by software solutions, changes in operating expenses, and the company's liquidity and capital resources. It also discusses forward-looking statements and critical accounting policies Overview This section provides an overview of Spok's business, focusing on its clinical communication and collaboration solutions for healthcare - Spok delivers smart, reliable clinical communication and collaboration solutions primarily to the U.S. healthcare industry[98] - Solutions include call center applications, clinical alerting, secure messaging, paging services, mobile communications, and public safety response[98][101] Business This section refers to other reports for further details on Spok's business operations and strategic focus - Further details on Spok's business are available in Note 1 of this Quarterly Report and Item 1 of the 2024 Annual Report[99] Results of Operations This section analyzes Spok's financial performance, including revenue trends, operating expenses, other income, and income taxes | (Dollars in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :--------------------- | :----------------------------- | :----------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Total revenue | $35,686 | $33,982 | 5.0% | $71,980 | $68,891 | 4.5% | | Operating income | $5,392 | $4,474 | 20.5% | $11,410 | $9,365 | 21.8% | | Net income | $4,552 | $3,425 | 32.9% | $9,748 | $7,661 | 27.2% | | FTE Employees | 419 | 398 | 5.3% | | | | | Active transmitters | 2,925 | 3,101 | (5.7)% | | | | Revenue This section details revenue performance by type, including wireless and software, and discusses key metrics like units in service and ARPU | Revenue Type (Dollars in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :---------------------------------- | :----------------------------- | :----------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Wireless revenue | $18,440 | $18,297 | 0.8% | $36,914 | $36,892 | 0.1% | | Software revenue | $17,246 | $15,685 | 10.0% | $35,066 | $31,999 | 9.6% | | Total revenue | $35,686 | $33,982 | 5.0% | $71,980 | $68,891 | 4.5% | - Wireless units in service decreased from 747 thousand units at June 30, 2024, to 694 thousand units at June 30, 2025[109] - Average Revenue Per User (ARPU) increased to $8.20 for Q2 2025 (from $7.84 in Q2 2024) and $8.21 for H1 2025 (from $7.85 in H1 2024) due to price increases[109] Operating Expenses This section analyzes changes in technology operations, selling and marketing, and general and administrative expenses - Technology operations expenses decreased by 4.6% (three months) and 5.9% (six months) due to a 5.7% reduction in active transmitters from network rationalization efforts[117] - Selling and marketing expenses increased by 21.7% (three months) and 19.0% (six months) due to additional headcount, higher advertising/events, and commissions[118] - General and administrative expenses increased by 10.4% (three months) and 7.8% (six months) due to technology costs, bad debt, compensation, and compliance-related costs[119] Other income (expense) This section explains the components of other income and expense, highlighting significant non-operating gains or losses - Other income was $0.7 million (three months) and $0.8 million (six months) for 2025, primarily from a $0.7 million gain on the sale of a domain name[120] Income taxes This section discusses the provision for income taxes, including factors influencing changes in the effective tax rate - Provision for income taxes increased by 28.3% (three months) and 24.0% (six months) in 2025, driven by changes in the anticipated annual effective tax rate, permanent tax differences, and estimated R&D tax credits[121] Liquidity and Capital Resources This section examines Spok's cash position, sources and uses of cash, and its ability to meet short-term and long-term financial obligations - Cash and cash equivalents totaled $20.2 million as of June 30, 2025[123] - Net cash provided by operating activities was $9.3 million for the six months ended June 30, 2025, a slight decrease from $9.4 million in 2024[131] - The company anticipates that current operating cash flows and available cash will be adequate to meet both short-term and long-term cash requirements[128] Cash and Cash Equivalents This section details the company's cash and cash equivalents balance and discusses associated risks related to uninsured deposits - Cash and cash equivalents were $20.2 million as of June 30, 2025[123] - A majority of deposits at financial institutions exceed insured limits, posing a risk in the event of institutional failure[123] Cash Sources This section identifies the primary sources of liquidity, including operating cash flows and existing cash balances - Primary sources of liquidity are cash flows generated from operations and existing cash and cash equivalents[124] - The company aims to maintain $5.0 million to $10.0 million in operating accounts[124] Cash Uses This section outlines the intended uses of cash, such as working capital, investments, dividends, and share repurchases - Cash is intended for working capital, operations, business investments, and returning value to stockholders through dividends and share repurchases[125] - A share repurchase program for up to $10 million of common stock was authorized in February 2022[126] Cash Flows Overview This section provides a summary of the company's cash flow adequacy for current and future requirements and potential mitigation strategies - Net cash provided by operating activities and available cash are anticipated to be adequate for short-term and long-term cash requirements[128] - Potential shortfalls may require reducing capital expenses, dividends, or share repurchases, or seeking additional financing[127] Operating Activities This section analyzes net cash provided by operating activities, detailing the primary drivers of changes in cash from operations - Net cash provided by operating activities was $9.3 million for the six months ended June 30, 2025, a slight decrease from $9.4 million in 2024[131] - This was primarily due to increased cash received from customers, offset by cash payments for cost of revenues and operating expenses[131] Investing Activities This section discusses net cash used in investing activities, including capital expenditures and proceeds from asset sales - Net cash used in investing activities decreased to $1.1 million for the six months ended June 30, 2025, from $1.5 million in 2024[132] - The decrease was due to proceeds from the sale of a domain name in 2025, partially offsetting purchases of property and equipment[132] Financing Activities This section details net cash used in financing activities, primarily focusing on cash distributions to stockholders and equity award-related transactions - Net cash used in financing activities increased to $17.1 million for the six months ended June 30, 2025, from $16.0 million in 2024[133] - This was primarily due to cash distributions to stockholders and common stock purchases for tax withholding on vested equity awards[133] - A regular quarterly cash dividend of $0.3125 per share ($6.4 million) was declared on July 30, 2025[134] Commitments and Contingencies This section presents a table of contractual obligations and discusses the company's approach to evaluating and provisioning for contingencies | (Dollars in thousands) | Total | 1 year or less | 1 to 3 years | 3 to 5 years | More than 5 years | | :--------------------- | :---- | :------------- | :----------- | :----------- | :---------------- | | Operating lease obligations | $9,386 | $3,269 | $3,906 | $1,400 | $811 | | Unconditional purchase obligations | $4,142 | $2,173 | $1,962 | $7 | — | | Total contractual obligations | $13,528 | $5,442 | $5,868 | $1,407 | $811 | - The company evaluates contingencies and establishes loss provisions for probable and estimable losses[139] Related Party Transactions This section refers to specific notes for detailed disclosures regarding transactions with related parties - Refer to Note 13, 'Related Parties,' in the Notes to Condensed Consolidated Financial Statements for a discussion regarding related party transactions[141] Critical Accounting Policies and Estimates This section highlights the critical accounting policies and estimates that require significant management judgment in financial statement preparation - The preparation of financial statements requires management to make estimates and judgments, including those related to asset impairment, revenue recognition, and income taxes[142] - No material changes to critical accounting policies were reported since the 2024 Annual Report[143] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section addresses Spok's exposure to market risks, specifically interest rate risk and foreign currency exchange rate risk, concluding that the company has no material exposure to either as of June 30, 2025 Interest Rate Risk This section assesses Spok's exposure to interest rate fluctuations, concluding no material risk due to the absence of outstanding debt - As of June 30, 2025, Spok had no outstanding debt or revolving credit facility, resulting in no material exposure to interest rate risk[144] Foreign Currency Exchange Rate Risk This section evaluates Spok's exposure to foreign currency exchange rate fluctuations, determining it to be immaterial due to limited international business - Spok conducts a limited amount of business outside the United States, and the financial impact of foreign currency transactions is immaterial[145] - Consequently, the company does not have any material exposure to the risk of foreign currency exchange rate fluctuations[145] ITEM 4. CONTROLS AND PROCEDURES This section confirms the effectiveness of Spok's disclosure controls and procedures as of June 30, 2025, and reports no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures This section confirms management's conclusion on the effectiveness of Spok's disclosure controls and procedures as of the reporting date - Management concluded that Spok's disclosure controls and procedures were effective as of June 30, 2025[146] Changes in Internal Control over Financial Reporting This section reports on any material changes to the company's internal control over financial reporting during the most recent fiscal quarter - There were no material changes to the company's internal control over financial reporting during the three months ended June 30, 2025[147] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and controls ITEM 1. LEGAL PROCEEDINGS This section refers to Note 12, 'Commitments and Contingencies,' in the Notes to Condensed Consolidated Financial Statements for information regarding legal proceedings - Information regarding legal proceedings is provided in Note 12, 'Commitments and Contingencies,' of the Condensed Consolidated Financial Statements[148] ITEM 1A. RISK FACTORS This section states that the risk factors previously disclosed in the 2024 Annual Report have not materially changed during the six months ended June 30, 2025 - The risk factors included in 'Item 1A. Risk Factors' of Part I of the 2024 Annual Report have not materially changed during the six months ended June 30, 2025[149] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section reports that the company did not repurchase any shares of its common stock during the three months ended June 30, 2025 - The Company did not repurchase any shares of its common stock during the three months ended June 30, 2025[150] ITEM 5. OTHER INFORMATION This section provides other information, specifically noting that no directors or executive officers adopted or terminated securities trading plans during the quarter Securities Trading Plans of Directors and Executive Officers This section reports on the adoption or termination of securities trading plans by directors and executive officers during the reporting period - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2025[151] ITEM 6. EXHIBITS This section lists the exhibits filed or incorporated by reference as part of the report, including various certifications and Inline XBRL documents, noting that the financial information in XBRL documents is unaudited - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[154] - The financial information contained in the XBRL documents is unaudited[154] SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the report - The report was signed on July 31, 2025, by Calvin C. Rice, Chief Financial Officer of Spok Holdings, Inc[158]