Greetings, and welcome to the Spok Holdings, Inc. Q4 2025 Earnings Results Conference Call. Please note, this conference is being recorded. I will now turn the conference over to your host, Al Galgano. Please go ahead.

Hello, everyone, and welcome. I am joined today by Vince Kelly, Chief Executive Officer; Michael Wallace, Chief Operating Officer; and Calvin Rice, Chief Financial Officer. After a brief presentation by management, we will open up the call to your questions. I want to remind everyone that today's conference call may include forward-looking statements that are subject to risks and uncertainties relating to Spok's future financial and business performance. Such statements may include estimates of revenue, expenses and income as well as other predictive statements or plans, which are dependent upon future events or conditions. These statements represent the company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results. Spok's actual results could differ materially from those anticipated in these forward-looking statements. Although these statements are based upon assumptions that the company believes to be reasonable, they are subject to risks and uncertainties. Please review the Risk Factors section relating to our operations and the business environment, which are contained in our 2025 Form 10-K and related documents, which will be filed with the Securities and Exchange Commission. Please note that Spok assumes no obligation to update any forward-looking statements from past or present filings and conference calls. With that, I'll turn the call over to Vince.

Good afternoon. Thank you for joining us for our fourth quarter 2025 earnings call. Let me preface my comments by saying how proud I continue to be of our Spok team and our ability to end the year strong and regain the positive momentum we saw in the first half of 2025. We accomplished this while staying true to our mission, and I'm very excited by our prospects and outlook. Since the strategic pivot we announced about 4 years ago now, our focus has not changed. That is to grow our software revenue, generate cash and return capital to our stockholders. In 2025, for the fourth consecutive year, we achieved that goal. We returned $27.3 million of cash to our stockholders while generating $29 million of adjusted EBITDA. We were also successful in our stated goal of growing software revenue and managing anticipated wireless declines. Coupled with the continued focus on expense management, Spok generated $15.9 million or $0.75 per diluted share of net income for the full year of 2025, and we accomplished this while responsibly investing in our product and service offerings. This focus struck an excellent balance between making the necessary investments to fuel future growth while continuing to generate cash flow and returning capital to our stockholders. Today, we'll share with you an update on how our strategic business plan is progressing in support of our goals as well as our financial results for the fourth quarter and full year. I'll start by reviewing the agenda for today's call. The order will be as follows: First, we will review our strategic focus and goals. Next, Mike Wallace, our COO, will provide a review of our sales performance. Then Calvin Rice, our CFO, will review our fourth quarter and full year 2025 financial highlights as well as a more detailed look at our financial expectations for 2026, and I'll then conclude our prepared remarks with a brief wrap-up. Finally, we'll open the call up to your questions. In 2025, our team achieved significant accomplishments regarding software revenue growth, particularly in our professional services business and specifically as it relates to our managed services offering, managing wireless net churn and related revenue declines, maintaining solid profitability levels, continued expense management, maximizing cash flow generation, progress on our road map and development efforts, augmenting our sales team, generating 6- and 7-figure customer contracts and multiyear engagements, GenA pager placements, maintenance contract bookings and retention and enhancing our industry reputation with continued leadership recognition. In the fourth quarter of 2025, Spok was able to generate a 14% year-over-year and 83% sequential increase in software operations bookings. As I mentioned previously, I'm very proud of our ability to regain momentum we saw in the first half of 2025. We are very happy with our ability to reverse the headwinds that we saw in Q3 bookings and believe that we will grow total bookings in 2026 from prior year levels with this year's focus on accelerating our license sales and maintaining growth in professional services. Switching to operating expenses. While driving our top line, we also continued our focus on expense management as operating expense levels for the year increased at a slower pace than year-over-year revenue growth. However, our focus on expense management is one of the key drivers to generate increased cash flow does not come at the expense of our product platform as we continue to make the necessary investments in product development, sales and marketing, customer support and professional services to support the growth of our Spok Care Connect and wireless solutions. In 2025, Spok invested more than $12 million in product research and development, a nearly 5% increase from 2024. Investments such as these are critical to creating a best-of-breed product platform and maintaining our solid industry reputation. In 2025, Spok continued to build upon our premier industry reputation. We started the year with our participation in both the ViVE 25 and HIMSS 25 conferences, where we showcased our top-rated clinical communications platform, Spok Care Connect. At both events, Spok experts demonstrated how more efficient communication across contact centers, care teams and IT teams help health care organizations improve productivity and patient outcomes. Our presence at these industry-leading conferences was a true success, both in terms of the excitement level generated by Spok's products and the number of new sales leads we were able to add to our pipeline. We are excited to have a presence again at ViVE 26 this week and look forward to attending HIMSS 26 in March. But don't just take my word on how Spok continues to improve its reputation. In 2025, I believe that there were 2 key proof points that underscore our premier market position as evidenced by: number one, earning top honors for the eighth consecutive year in a survey of health care industry clients by Black Book Market Research on top-rated secure messaging and clinical communication solutions. For the second time, Spok was also recognized as the leading performer of enterprise messaging and critical alert management solutions. And as you may have seen earlier this month, Spok received top honors for the ninth consecutive year in this survey. And number two, also in the 2025 U.S. News & World Report Best Hospitals Honor roll, 18 of the 20 adult hospitals and 9 of the 10 children's hospitals named to the list are Spok customers. Accolades such as these do not come if you don't have a best-in-class product offering and solid reputation with your customers. Spok has an amazing blue-chip customer base, and many of those customers have been with us for decades and continue to buy from us. In short, we executed at a high level in 2025, and we are encouraged about the future as we start 2026. Based on our performance in 2025 and the momentum generated in the fourth quarter, we provided guidance estimates for revenue and adjusted EBITDA generation in 2026. Calvin will go into more detail regarding expectations later in the call. Before I turn the call over to Mike to review our sales performance, let me briefly summarize the goals that support our critical and important mission. Our strategic goal is simple, run the business profitably, generate cash flow and return that capital to stockholders. Spok has a proud legacy of creating stockholder value through free cash flow generation, and we intend to continue this track record. Since the beginning of our strategic pivot, which started almost 4 years ago, Spok has returned approximately $104.3 million or $5 per share to our stockholders in the form of our regular quarterly dividend. In fact, since we created this company in 2004, Spok has returned nearly $730 million to our stockholders either through our regular quarterly dividend, special dividends or share repurchases. In the fourth quarter of 2025, our history of returning cash to our stockholders continued as we returned $6.4 million in dividends. This continues our legacy of returning capital to shareholders since becoming a public company. Again, we expect to pay dividends in excess of $27 million in 2026. Spok remains committed to our dividend policy and returning capital to our stockholders. When you take into consideration our current cash balance, distribution to stockholders, share repurchases, debt repayments and acquisitions, Spok has now generated nearly $1.1 billion of free cash flow since our creation in 2004. Our focus on maximizing cash over the long term supports the 4 major tenets of our strategy: number one, continued investment in our wireless and software solutions; number two, growing our revenue base; number three, disciplined expense management; and number four, a stockholder-friendly capital allocation plan. Going forward, we believe our extensive experience operating our established communication solutions and world-class customer base will continue to create significant value for stockholders. Now I'll turn the call over to our President and Chief Operating Officer, Michael Wallace, who will talk about our operational accomplishments. Michael?

Thanks, Vince, and good afternoon. Thank you all for joining us for what we believe was a solid quarter and full year of results from Spok. We are pleased to report that we have continued to execute on our business plan. And in 2025, as Vince noted, we generated GAAP net income of $15.9 million or $0.75 per diluted share, up from the prior year results. Importantly, we achieved this bottom line performance while continuing to generate operations bookings levels in excess of $30 million for the third consecutive year as well as maintaining our professional services and maintenance backlog levels, which totaled more than $58 million. Amidst all the progress in continuing to create the solid financial platform and stockholder-friendly capital allocation strategy, we remain true to our mission of being a global leader in health care communications. Simply put, we deliver clinical information to care teams when and where it matters most to improve patient outcomes as Spok enables smarter, faster clinical communications for our customers. And importantly, we continue to maintain our reputation as a thought leader in the health care communications space as we continue to see customer satisfaction ratings at very high levels. 2025 was a frustrating year with regards to our software operations bookings as we saw solid momentum in the first half of the year, offset by headwinds that we ran into in the third quarter. However, we regained that momentum in the fourth quarter, seeing 14% year-over-year and 83% sequential growth in bookings. In 2025, we were able to execute 73 6- and 7-figure customer contracts. And in the fourth quarter, we saw a more than 50% year-over-year growth in the average customer contract size. Additionally, in 2025, we saw a 47% increase in license bookings related to multiyear engagements with customers. We believe this performance gives you a good indication of the momentum that our sales team is generating in the marketplace and the confidence we have as we work our way through 2026 with a growing sales pipeline, both in terms of size and quality. Supporting our achievements in the fourth quarter were 14 6- and 7-figure contracts that we were able to close. Our achievements in the fourth quarter are clearly represented by 3 of those customer contracts. The first being a private not-for-profit health care organization located in the Southeast; the second being a new partnership with a leading academic health system in the Northeast and the final contract with a large integrated nonprofit health care enterprise in the Mid-Atlantic serving patients across the United States. Our first outstanding contract from last quarter is a customer in the Southeast who has been with Spok for almost 25 years. This customer is experiencing sustained growth driven by strategic acquisitions, new facility expansions and continued investments in its health care initiatives. To support this growth, we deployed Spok Smart Suite across 5 additional hospitals and executed a 3-year managed services agreement, providing recurring revenue and long-term engagement. This includes unlimited software upgrades, enterprise reporting, Spok Academy, our 24/7 on-demand self-paced learning platform, Spok Messenger, Communication dashboards and several of our value-added services. These types of contracts where Spok is leveraging its footprint inside an existing premier customer that is growing through consolidation is critical as Spok maintains an over 50% market share of large hospitals, identified as those with more than 600 beds and are responsible for most of the industry's consolidation. Spok also secured a new partnership with a well-known hospital that also serves as the only Level 1 trauma center in their geographic area. They are a 650-bed academic facility serving over 2 million patients annually and growing, resulting in their transformation into a regional health care system providing excellent patient care. As part of this engagement, they will implement Spok Smart Suite console and web, Spok Messenger for Code Blue automation, Spok Care Connect reporting and dashboards and several of our value-added services. This health system is also the newest partner of our premium support services team. Through this new partnership, Spok software will support critical patient care communications in areas such as reducing the number of applications being utilized by various stakeholders, automating processes and functionality, along with comprehensive data reporting and analytics. Lastly, we secured another outstanding contract with a Spok customer we have done business with for decades. This Mid-Atlantic-based health care provider with an international footprint employs over 100,000 people and delivers care across more than 40 academic, community and specialty hospitals. They facilitate over 3.2 million pages and messages annually utilizing Spok Smart Suite from a centralized hybrid call center. This multiyear engagement consisting of Spok Smart Suite and web upgrades support this organization's interoperability needs that are key to system-wide standardization, all in parallel with the rollout of our new Spok Care Connect reporting and dashboards, Spok Academy and Consulting as a Service offering. This contract also includes a 5-year managed services commitment that will extend our existing partnership and continue to drive value in critical communication services that are core to this customer's mission and growth. Finally, an additional site acquired through M&A will be integrated into their premium support service, further expanding the value and support that our customers expect. Looking ahead, expansion of their Spok Smart Suite consoles to additional sites is already under consideration. Overall, fourth quarter deal activity underscores steady execution and reinforces our focus on opportunities that align with our strategic and financial objectives. With that said, I'd like to turn the call over to our Chief Financial Officer, Calvin Rice. Calvin?

Thanks, Mike, and good afternoon, everyone. I would now like to take a few minutes and provide a recap of our fourth quarter and full year 2025 financial performance, which we reported earlier today. As always, I encourage you to review our 10-K when filed as it includes significantly more information about our business operations and financial performance than we will cover on this call. Turning to our income statement. In 2025, GAAP net income totaled $15.9 million or $0.75 per diluted share, up from net income of $15 million or $0.73 per diluted share in 2024. In 2025, total GAAP revenue was $139.7 million, up from revenue of $137.7 million in 2024. Wireless revenue of $72.5 million for the year was down from revenue of $73.5 million in the prior year. However, this was more than offset by growth in software revenue to $67.2 million in 2025. Year-over-year growth in software revenue was driven by a nearly 24% increase in professional services revenue and the continued success of our managed services offering. With respect to wireless revenue, the deceleration of revenue decline was primarily driven by pricing actions taken on unreturned pager equipment earlier in 2025. While net unit loss was relatively flat from 2024, product sales, of which unreturned pager equipment fees comprised more than 80% of the related revenue increased by $1.4 million or 54%. Average revenue per unit, or ARPU, which saw growth of $0.23 on a year-over-year basis, continues to be our primary tool in combating revenue decline from unit loss. Much of this increase was driven by previous pricing actions and to a lesser extent, incremental pass-through taxes and fees. Net unit churn in the fourth quarter improved 12 basis points to 1.3% from the prior quarter, and we believe that we can continue to manage net unit churn to the mid-single-digit range in 2026. While we expect demand for our wireless services will continue to decline on a secular basis, as reflected in declining pager units in service, we remain focused on pricing and other initiatives like the GenA pager with over 72,000 units or roughly 11% of total units in service at the end of 2025 to further offset revenue lost through pager unit decline. This is further reflected in our updated financial guidance, which I will walk through shortly. Turning to software revenue in 2025. License and hardware revenue of $8.6 million was down from $9 million in 2024. Maintenance and subscription revenue totaled $36.4 million, down 2.1% from the prior year. As we have discussed in previous quarterly calls, we expect our product development efforts will lead to further growth of our operations bookings and increased software license sales in the coming years and maintenance revenue along with it. As previously mentioned, growth in professional services revenue was a key driver in the annual growth of software revenue in 2025. Professional services revenue of $22.1 million in 2025 was up 23.7% from revenue of $17.9 million in 2024. We continue to see sustained improvement in resource utilization, delivering on our internal initiatives to better align total resources with our backlog and drive a higher rate of margin and net cash flow. At present, we believe we have largely reached our optimal operating efficiency in professional services relative to our current product state. We will continue to align total resources with our backlog, and we should continue to see benefit from managed services. However, bookings growth will be the primary factor underlying continued growth of our services revenue. As we work towards developing and delivering a modernized solution, we anticipate a reduction in the complexity of our implementations, which is likely to create additional efficiencies in the future. Managed services revenue totaled $6.6 million or nearly 30% of professional services revenue in 2025. This is up from $3.3 million or 18% of professional services revenue in 2024. We remain optimistic by the prospects of this service offering and are thrilled by the success of this service offering thus far. Before getting into operating expenses, I want to take a minute to highlight a reclassification exercise that we undertook at the end of 2025. Historically, we have included certain IT software and personnel costs within general and administrative that we now feel are better reflected in their functional groups. All prior period financials have been restated to conform to current period presentation and additional information regarding these costs are included within the footnotes of the 2025 Form 10-K once filed. Full year 2025 adjusted operating expenses, which excludes depreciation, amortization and accretion and severance and restructuring costs totaled $116.1 million, up 2.4% from the prior year. Cost of revenue increased primarily due to the aforementioned increase in professional services revenue and the related hiring to support those services. Increases in research and development reflected our continued investment in our product and services platform with reductions in technology operations driven by our normal practice of cost reduction in relationship to declining wireless revenues. Selling and marketing costs increased 9.1% from the prior year, primarily driven by higher commissions on higher revenue, with 2024 expenses having also benefited from a one-time item of approximately $0.9 million when we began to amortize a subset of our commission expense that had historically been expensed as incurred. General and administrative costs increased 2%, largely stemming from legal costs incurred in non-core business activities. Excluding these costs, general and administrative costs were generally in line with 2024. Adjusted EBITDA was $29 million in 2025, in line with 2024. Spok continues to generate healthy levels of adjusted EBITDA at a nearly 21% margin in 2025. We continue to operate a highly profitable business, funding a strong dividend and delivering on our promises made in 2022 to shift our primary focus towards profitability. Finally, we ended 2025 with $25.3 million in cash and cash equivalents, which grew from $21.4 million at the end of the third quarter. Moving on to guidance for 2026. We have provided estimates for revenue and adjusted EBITDA. As a reminder, the figures I'm going to discuss today are included in our guidance table in the earnings release. In 2026, we expect total revenue to range from $136 million to $143 million. The midpoint of our guidance reflects consolidated revenue generally in line with 2025 results, but with a higher mix of software revenue, while the high end of our guidance reflects a nearly 2.3% annual growth. We expect wireless revenue to range from $68 million to $71 million and software revenue to range from $68 million to $72 million in 2026. The midpoint of software revenue guidance implying growth of more than 4% and more than 7% at the high end of the guidance range. Additionally, the midpoint for each revenue type would indicate the first time in the company's history whereby software revenue would be greater than wireless revenue. Lastly, our adjusted EBITDA guidance for 2026 is $27.5 million to $32.5 million. The midpoint reflects improvement over 2025, while the high end represents over 12% growth, largely expected to be driven by a greater mix of higher-margin software license bookings. With that said, I will now turn the call back over to Vince.

Thank you, Calvin. Before we open up the call to your questions, let me say again how proud I am of our entire Spok team in regaining the momentum that we saw in the first half of 2025. It's their efforts and dedication, which provides confidence in our outlook for 2026. We are focused on the opportunity in front of us in clinical communications. From a business configuration and strategy perspective, we believe we are strongly positioned to grow our franchise while returning capital to stockholders. We have a long-term organic growth engine in Spok Care Connect. We maintain a strong source of recurring revenue in our wireless service line. We run the largest paging offering in the world integrated with our software operations. We have enhanced our paging platform and user devices to serve our core health care customer base. We believe these 2 assets going for us, our best financial results are ahead of us and Spok's future is bright. I'd like to take this opportunity to thank our stockholders for their continued support and want to assure you that our primary focus remains on generating cash and increasing stockholder value. We are committed to our current dividend and capital allocation policy. I believe that today, we've provided you an appreciation for some of the great things that are happening at Spok and the market opportunities that lay ahead of us. While we've shared our initial guidance with you for 2026, we will work to exceed those expectations and update you each quarter. We started the year off strong, and we very much look forward to speaking with you again in 2 months when we report our Q1 results in late April. That concludes our prepared remarks. So at this point, I'll ask the operator to open the call up for your questions. We'd ask you to limit your initial questions to one and a follow-up. And after that, we'll take additional questions as time allows. Operator?

And our first question will come from Anderson Schock with B. Riley Securities.

So first, on software backlog, so it declined 6.8% year-over-year, but excluded from this are the cancelable contracts, which nearly tripled year-over-year to around $16 million. Can you explain what's driving the shift in the cancelable portion?

Anderson, this is Calvin. I'll get going. Yes, from a cancelable perspective, I think we've alluded to in the past from a bookings perspective that our deal size is growing. We're leveraging up to 7-figure contract deals. And with that is going to come terms that may be slightly unfavorable to the company. Obviously, we'd love to lock those in. But with some of these customers, we have to negotiate those terms. And I think that's primarily what's driving that, again, relative to the historical growth in the backlog and the bookings. And we really view that inclusive of those cancelable portions. We fully expect to collect all of that. We have a history, while not as large in the past, we've never really had any customers reneg on those cancelable portions. And so we fully expect to realize the full value of those backlog numbers.

Okay. Got it. And then so on fourth quarter software operations bookings, so it recovered to roughly around the first quarter level. So I guess, how should we think about this going forward? Was the second quarter of 2025 an outlier? Or should we expect to return to this level at some point in 2026?

I think with respect to that we just issued, that obviously incorporates our bookings expectations in there in terms of what's going to flow through to revenue and push that forward. We think we're going to grow our operations bookings in 2026 over the level of 2025. It's very hard to say on a quarterly basis because these contracts sometimes, especially the larger ones that Calvin alluded to, they're very lumpy. We've got a really large one right now. We're waiting to get signed, and we're hoping it comes in the first quarter, may come in the second quarter. Those large contracts really can push a quarter much higher. What really matters is what happens over the course of the 4 quarters, and we're optimistic this year from everything we see in the marketplace that our total bookings will grow this year over 2025 levels.

We'll go next to David Wright with Henry Investment Trust.

A question. How does AI — how do you look at AI with your business, particularly Spok Console in terms of opportunities or threats?

Yes. I think there's two things to look at right now. One is AI with respect to our own internal functioning and our R&D efforts in terms of our coding efficiency, etc., and just making us spend less and get more. And that's something we're well down the path on with our internal teams, getting the training, evaluating how we do business and all those things that you read about on a daily basis in the financial press. With respect to our customers, our primary functionality where we have the majority of large hospitals in the United States as customers, many of them for decades, our primary functionality is the operator console where they're often taking inbound calls that sometimes are life and death type situations, code calls, etc. We're working with several partners right now to incorporate AI into that functionality, and we believe we'll do so this year. But we want to be very careful with respect to the feedback we're getting from our customers because they're not going to take — you have a large health care system and they have one or two operators on call in the middle of the night and there's emergencies being called in. They're not at a point where they feel comfortable turning that type of functionality over to an AI operator. So I think what you'll see more likely is some type of helper for those operators to make them more efficient and more automated. And I think one place that will really help them is with respect to training up new staff because it can often take one of these hospitals up to three months to train staff where they really feel like they could leave them in a situation where they can handle those types of life and death calls. So I think there's great opportunity there. And what we've seen is the same thing you're seeing every three months that seems to be an order of magnitude leap in terms of what this stuff can do. So we're looking very closely at these. We've contracted with a couple of the AI companies that are household names right now in terms of utilizing their software and our road map process. And there's going to be more to come on that. But it's something we want to be very careful as we go to implement because sometimes these large language models can make a mistake, and we're in a business of saving time, connecting the right people to the right device at the right time and saving lives.

Yes. I meant to say Spok Console, by the way, not Spok Connect.

Yes. I thought that's what you meant.

Okay. And then to follow up, Vince, you talk somewhat frequently about making investments to grow the revenue base and fuel future growth. And what does that look like? You've done a really good job of keeping things stable over the last several years since you made the switch. But growth has been on the top line about 1.5% a year — what does — in an ideal world, what does your vision look like?

The world for 2026 in terms of our vision matches the guidance we just gave. We are running a tightrope balance — we're a public company that has a free cash flow stated strategy. So we're generating that cash flow on a quarterly basis so we can fund that dividend and have a little bit left over. Last year, we invested about $12 million in our R&D process. And a big portion of that was going toward new platform, new capability, new functionality, including this AI area. And then a big portion was going to support the legacy software solutions that we offer. Going forward, we're shifting that investment more toward what's coming new and less on the legacy. And so what you would expect to see in 2027 and beyond is higher growth than was implied in our 2026 guidance with additional investment. But again, like in a perfect world, if we were, say, a private company, not a public company, we might be a lot more aggressive in terms of how we made those investments in the new platform because we wouldn't have to focus on paying the dividend. But we think it's important in this software transition to reward the shareholders along the way as we go. And that's kind of why our strategy is balanced the way it is.

This now concludes our question-and-answer session. I would like to turn the floor back over to Vince Kelly for closing comments.

Okay. Thank you very much for your participation and your support. It does conclude today's teleconference. Have a wonderful day, and we look forward to speaking with you again at the end of April when we report our first quarter results. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.