Spok(SPOK) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total GAAP revenue for Q1 2019 was $41.8 million, a decrease from$43.1 million in Q1 2018 [29] - Software revenue reached $19.2 million, reflecting a nearly 2$38.3 million, down from $39.8 million in the year-earlier quarter [33] - EBITDA for the quarter was approximately$3.5 million, showing an increase both sequentially and year-over-year [37] Business Line Data and Key Metrics Changes - Software maintenance revenue renewal rates exceeded 99%, providing a stable revenue base [11][31] - Wireless revenue declined by 6.8% from the prior year, driven by solid gross additions and minimized churn [32] - Gross pager placements were 27,000, while gross disconnects decreased by nearly 15% year-over-year [15] Market Data and Key Metrics Changes - The healthcare segment comprises nearly 82% of the paging subscriber base, indicating strong performance in this market [17] - A large public hospital in Australia was added as a customer, showcasing the company's expansion into international markets [20] Company Strategy and Development Direction - The company is focused on enhancing its Cloud Native enterprise communications platform, Spok Care Connect, which is expected to be a game changer in healthcare communication technology [9][10] - The capital allocation strategy includes dividends, share repurchases, and strategic investments in product development and infrastructure [44][45] - The company is exploring select M&A opportunities but prefers building its integrated platform over acquisitions [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline for Q2 2019, indicating a strong sales outlook despite a seasonal dip in Q1 [72] - The company aims to accelerate product development and drive software revenue growth while managing wireless revenue declines [55] Other Important Information - The company ended Q1 2019 with a cash balance of $81.8 million, down approximately$5.5 million from the end of 2018 [38] - The adoption of ASC 842 resulted in a 17 million increase in noncurrent assets and corresponding liabilities [40] Q&A Session Summary Question: Is the 2.5 billion opportunity for the communication software suite based on annual subscription revenue? - The $2.5 billion to$3 billion figure is based on an on-prem license market, with about $1 billion for annual subscription revenue [62] Question: What is the outlook for bookings for the Care Connect platform? - The company expects to start selling the Care Connect platform in the second half of the year, with significant revenue anticipated in 2020 [63] Question: What products did the dozen new customers purchase? - New customers purchased a variety of products, primarily contact center and mobile solutions [65] Question: What is the outlook for operating expenses and R&D investment? - R&D expenses are expected to stabilize, with no significant increases anticipated moving forward [70] Question: What has driven the increase in accounts receivable? - The increase is attributed to slower payments in the hospital sector and larger, more complex deals that extend payment terms [76]