Spok(SPOK) - 2022 Q3 - Earnings Call Transcript

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]