Exhibit 99.1 | ||
NEWS RELEASE |  | |
CONTACT:
Al Galgano
952-567-0295
Spok Reports 2020 Second Quarter Operating Results;
Continued Strong Wireless Trends and Operating Expense Improvements Contribute to Second Quarter Strong Net Income and EBITDA
Board Declares Regular Quarterly Dividend
SPRINGFIELD, Va. (July 29, 2020) - Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced operating results for the second quarter ended June 30, 2020. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on September 10, 2020, to stockholders of record on August 17, 2020.
Key Second Quarter Operating Highlights:
• | Second quarter software revenue was $14.7 million. Included in second quarter software revenue was $5.2 million of operations revenue and $9.5 million in maintenance revenue, compared to $7.4 million in operations revenue and $10.0 million in maintenance revenue in the second quarter of 2019. |
• | Software bookings in the second quarter totaled $15.4 million. Second quarter bookings included $5.8 million of operations bookings and $9.6 million of maintenance renewals. At June 30, 2020 the software revenue backlog totaled $48.4 million, up from the backlog of $39.7 million at June 30, 2019. |
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• | The quarterly rate of paging unit erosion was 1.2 percent in the second quarter of 2020. This compares to paging unit erosion of 1.3 percent in the prior quarter and 0.5 percent in the year-earlier period. Net paging unit losses were 11,000 in the second quarter of 2020, compared to 12,000 in the prior quarter and 5,000 in the second quarter of 2019. Paging units in service at June 30, 2020, totaled 915,000, compared to 977,000 at June 30, 2019. |
• | The rate of wireless revenue erosion was 1.4 percent, down from 2.1 percent erosion in the second quarter of 2019. |
• | Total paging ARPU (average revenue per unit) was $7.24 in the second quarter of 2020, compared to $7.31 in the prior quarter and $7.26 in the year-earlier quarter. |
• | Operating expenses in the second quarter of 2020 totaled $32.6 million, down from $41.5 million in the prior year quarter. Adjusted operating expenses (excludes depreciation, amortization and accretion and includes capitalized software costs) totaled $34.1 million in the second quarter of 2020, compared to $39.2 million in the prior year quarter. Benefiting operating expenses for the second quarter of 2020, the Company received $0.8 million in CARES Act credits, as well as approximately $2 million in cost savings from the previously discussed employee furloughs. |
• | Capital expenses were $846,000 in the second quarter of 2020, compared to $1.5 million in the year-earlier quarter. |
• | The number of full-time equivalent employees at June 30, 2020 totaled 610, compared to 600 in the prior year quarter. |
• | Capital paid to stockholders in the second quarter of 2020 totaled $2.4 million. This came in the form of the Company's regular quarterly dividend. |
• | The Company’s cash, cash equivalents and short-term investments balance at June 30, 2020, was $70.9 million. |
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2020 Second Quarter and Year-To-Date Results:
Consolidated revenue for the second quarter of 2020 under Generally Accepted Accounting Principles (“GAAP”) was $35.7 million compared to $39.5 million in the second quarter of 2019. For the first six months of 2020, consolidated revenue totaled $73.0 million, compared to $81.3 million in the first six months of 2019.
For the three months ended | For the six months ended | ||||||||||||||||
(Dollars in thousands) | June 30, 2020 | June 30, 2019 | Change (%) | June 30, 2020 | June 30, 2019 | Change (%) | |||||||||||
Wireless revenue | |||||||||||||||||
Paging revenue | $ | 19,990 | $ | 21,342 | (6.3 | )% | $ | 40,441 | $ | 43,029 | (6.0 | )% | |||||
Product and other revenue | 1,088 | 785 | 38.6 | % | 2,024 | 1,708 | 18.5 | % | |||||||||
Total wireless revenue | $ | 21,078 | $ | 22,127 | (4.7 | )% | $ | 42,465 | $ | 44,737 | (5.1 | )% | |||||
Software revenue | |||||||||||||||||
Operations revenue | $ | 5,162 | $ | 7,353 | (29.8 | )% | $ | 11,390 | $ | 16,361 | (30.4 | )% | |||||
Maintenance revenue | 9,499 | 10,045 | (5.4 | )% | 19,151 | 20,190 | (5.1 | )% | |||||||||
Total software revenue | 14,661 | 17,398 | (15.7 | )% | 30,541 | 36,551 | (16.4 | )% | |||||||||
Total revenue | $ | 35,739 | $ | 39,525 | (9.6 | )% | $ | 73,006 | $ | 81,288 | (10.2 | )% | |||||
GAAP net income for the second quarter of 2020 was $3.8 million, or $0.20 per diluted share, compared to a net loss of $0.7 million, or $0.03 per diluted share, in the second quarter of 2019. GAAP net loss for the first half of 2020 was $0.8 million, or $0.04 per diluted share, compared to net income of $0.1 million, in the first half of 2019.
In the second quarter of 2020, the Company generated $5.2 million of EBITDA (earnings before interest, taxes, depreciation and amortization), compared to EBITDA of $0.3 million in the prior year quarter. In the first half of 2020, the Company generated $3.3 million of EBITDA, compared to EBITDA of $3.8 million in the prior year period.
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For the three months ended | For the six months ended | ||||||||||||
(Dollars in thousands) | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||
Net income (loss) | $ | 3,759 | $ | (670 | ) | $ | (780 | ) | $ | 72 | |||
Basic and diluted net income (loss) per share | $ | 0.20 | $ | (0.03 | ) | $ | (0.04 | ) | $ | — | |||
EBITDA | $ | 5,231 | $ | 343 | $ | 3,270 | $ | 3,816 | |||||
Management Commentary:
“We are in the throes of a 100-year pandemic that has negatively impacted the finances of our healthcare customer base. As such, software product sales were slow in the second quarter, as this was the first full quarter impacted by the pandemic. The majority of our healthcare customer base continued to struggle with the challenges presented by COVID-19,” said Vincent D. Kelly, president and chief executive officer. "However, on a positive note, while hospitals are focusing their efforts on the current crisis, surveys are showing that by the end of the second quarter hospitals were back to more than a third of their pre-COVID-19 elective volumes and by the end of the year hospitals expect to be back to more than three-quarters of those volumes, with full recovery sometime in 2021," continued Kelly. "While we did not lose a lot of deals, many were pushed back due to the pandemic, including our first significant Spok Go® deal, which was booked in July. The same was true with the installation of our backlog from prior bookings. As hospitals begin to open back up, we expect to see these trends improve. In the meantime, Spok continues to demonstrate a stable revenue base, as nearly 86 percent of our revenues in the second quarter were recurring in nature, coming from either our legacy wireless business or software maintenance contracts. This, combined with disciplined expense control, has allowed us to post profitable results. And, we did this while continue to invest in and develop our cloud native platform, Spok Go. Spok provides a critical function, which we believe will become even more important in this environment. Spok's clinical communications platform provides hospitals with a system of action, not just of record, delivering reliable
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communications and clinical information, including clinical test results, to care teams when and where it matters most to improve patient outcomes.”
In the second quarter of 2020, Spok returned $2.4 million in capital to stockholders, in the form of its regular quarterly dividend. “During the quarter, we took immediate steps to position our operations to a positive free cash flow basis through a combination of furlough and other cost savings initiatives. As a result, we were able to generate increased levels of net income and EBITDA. We are focused on running positive EBITDA and Spok remains committed to paying our regular quarterly dividend. We believe we will be able to achieve this while continuing to support our Spok Care Connect® platform and in the near term, investing in the evolution of our cloud-native and integrated communication platform, Spok Go.
Business Outlook:
Michael W. Wallace, chief operating officer and chief financial officer, said: “Expense management and strong financial discipline have always been critical in balancing the short and long-term components of our business and that was especially so in the second quarter, given the impacts of COVID-19. In the second quarter, GAAP operating expenses were down nearly 22% from prior year levels, with improvements in all expense categories driven by furloughs, the CARES Act credits, and including a $3.6 million benefit versus 2019 due to capitalization of software costs required in 2020. Spok’s balance sheet remains strong, with a cash, cash equivalents and short-term investment balance of $70.9 million at June 30, 2020.”
Commenting on the Company’s previously provided financial guidance for 2020, Wallace noted: “Spok has been focused on continuing to understand the impact of the pandemic on our business, particularly given the impact
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of COVID-19 on the roll-out of our Spok Go software business. Because of the fluid nature of the situation, we, like many of our peer public companies, believe that it is most prudent to continue to suspend our practice of providing annual guidance for revenues and expenses at this time. We look forward to returning to our normal guidance format after the crisis is over.”
2020 Annual Meeting Results:
At its annual meeting of stockholders yesterday, the Company announced that each of the 10 nominees to the company’s board of directors were elected for one-year terms. The board members are:
Royce Yudkoff | Matthew Oristano | |||
N. Blair Butterfield | Todd Stein | |||
Stacia A. Hylton | Dr. Bobbie Byrne | |||
Vincent D. Kelly | Christine M. Cournoyer | |||
Brian O'Reilly | Brett Shockley | |||
Additionally, Spok Holdings, Inc. stockholders voted to approve the following items proposed by the board of directors:
• | The appointment of Grant Thornton LLP as the company’s independent auditor |
• | In an advisory vote, the compensation of Spok’s named executive officers, as described in the 2020 proxy statement. |
• | The Company's 2020 Equity Incentive Award Plan. |
Additionally, the shareholder proposal regarding Board of Director Independence and Refreshment was defeated.
When final voting results are available, they will be filed with the SEC.
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* * * * * * * * *
2020 Second-Quarter Call and Replay:
Spok plans to host a conference call for investors to discuss its 2020 second quarter results at 10:00 a.m. ET on Thursday, July 30, 2020. Dial-in numbers for the call are 334-323-0501 or 800-353-6461. The pass code for the call is 4509240. A replay of the call will be available from 1:00 p.m. ET on July 30, 2020 until 1:00 p.m. ET on Thursday, August 13, 2020. To listen to the replay, please register at http://tinyurl.com/Spok2020Q2earningsreplay. Please cut and paste this address into your browser, enter the registration information, and you will be given access to the replay.
* * * * * * * * *
About Spok
Spok, Inc., a wholly owned subsidiary of Spok Holdings, Inc. (NASDAQ: SPOK), headquartered in Springfield, Virginia, is proud to be a global leader in healthcare communications. We deliver clinical information to care teams when and where it matters most to improve patient outcomes. Top hospitals rely on the Spok Care Connect® and Spok Go® platforms to enhance workflows for clinicians, support administrative compliance, and provide a better experience for patients. Our customers send over 100 million messages each month through their Spok® solutions. Spok is making care collaboration easier. For more information, visit spok.com or follow @spoktweets on Twitter.
Spok is a trademark of Spok Holdings, Inc. Spok Care Connect and Spok Go are trademarks of Spok, Inc.
Safe Harbor Statement under the Private Securities Litigation Reform Act: Statements contained herein or in prior press releases which are not historical fact, such as statements regarding Spok’s future operating and financial performance and statements relating to the unsolicited takeover bid from B. Riley Financial, Inc., are
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forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may cause Spok’s actual results to be materially different from the future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expectations include, but are not limited to, declining demand for paging products and services, continued demand for our software products and services, our ability to develop additional software solutions for our customers and manage our development as a global organization, the ability to manage operating expenses, particularly third party consulting services and research and development costs, future capital needs, competitive pricing pressures, competition from traditional paging services, other wireless communications services and other software providers, many of which are substantially larger and have much greater financial and human capital resources, changes in customer purchasing priorities or capital expenditures, government regulation of our products and services and the healthcare and health insurance industries, reliance upon third-party providers for certain equipment and services, unauthorized breaches or failures in cybersecurity measures adopted by us and/or included in our products and services, the effects of changes in accounting policies or practices, adverse economic, political or market conditions in the U.S. and international markets and other factors such as natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as coronavirus disease 2019 (COVID-19), as well as other risks described from time to time in our periodic reports and other filings with the Securities and Exchange Commission. Although Spok believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Spok disclaims any intent or obligation to update any forward-looking statements.
Tables to Follow
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SPOK HOLDINGS, INC. | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (a) | |||||||||||||||||
(Unaudited and in thousands except share, per share amounts and ARPU) | |||||||||||||||||
For the three months ended | For the six months ended | ||||||||||||||||
6/30/2020 | 6/30/2019 | 6/30/2020 | 6/30/2019 | ||||||||||||||
Revenue: | |||||||||||||||||
Wireless | $ | 21,078 | $ | 22,127 | $ | 42,465 | $ | 44,737 | |||||||||
Software | 14,661 | 17,398 | 30,541 | 36,551 | |||||||||||||
Total revenue | 35,739 | 39,525 | 73,006 | 81,288 | |||||||||||||
Operating expenses: | |||||||||||||||||
Cost of revenue | 5,901 | 7,239 | 14,165 | 14,831 | |||||||||||||
Research and development | 2,754 | 6,807 | 8,203 | 12,974 | |||||||||||||
Technology operations | 7,212 | 7,866 | 15,115 | 15,540 | |||||||||||||
Selling and marketing | 3,831 | 5,574 | 10,192 | 11,684 | |||||||||||||
General and administrative | 10,810 | 11,696 | 22,061 | 22,443 | |||||||||||||
Depreciation, amortization and accretion | 2,072 | 2,335 | 4,218 | 4,694 | |||||||||||||
Total operating expenses | 32,580 | 41,517 | 73,954 | 82,166 | |||||||||||||
% of total revenue | 91.2 | % | 105.0 | % | 101.3 | % | 101.1 | % | |||||||||
Operating income (loss) | 3,159 | (1,992 | ) | (948 | ) | (878 | ) | ||||||||||
% of total revenue | 8.8 | % | (5.0 | )% | (1.3 | )% | (1.1 | )% | |||||||||
Interest income | 146 | 452 | 509 | 901 | |||||||||||||
Other income (expense) | 101 | 602 | (37 | ) | 367 | ||||||||||||
Income (loss) before income taxes | 3,406 | (938 | ) | (476 | ) | 390 | |||||||||||
Benefit from (provision for) income taxes | 353 | 268 | (304 | ) | (318 | ) | |||||||||||
Net income (loss) | $ | 3,759 | $ | (670 | ) | $ | (780 | ) | $ | 72 | |||||||
Basic and diluted net (loss) income per common share | $ | 0.20 | $ | (0.03 | ) | $ | (0.04 | ) | $ | — | |||||||
Basic weighted average common shares outstanding | 19,016,853 | 19,217,866 | 18,987,469 | 19,207,476 | |||||||||||||
Diluted weighted average common shares outstanding | 19,115,148 | 19,217,866 | 18,987,469 | 19,375,599 | |||||||||||||
Cash dividends declared per common share | 0.125 | 0.125 | 0.25 | 0.25 | |||||||||||||
Key statistics: | |||||||||||||||||
Units in service | 915 | 977 | 915 | 977 | |||||||||||||
Average revenue per unit (ARPU) | $ | 7.24 | $ | 7.26 | $ | 7.27 | $ | 7.28 | |||||||||
Bookings | $ | 15,411 | $ | 21,334 | $ | 31,050 | $ | 35,989 | |||||||||
Backlog | $ | 48,441 | $ | 39,718 | $ | 48,441 | $ | 39,718 | |||||||||
(a) Slight variations in totals are due to rounding. | |||||||||||||||||
SPOK HOLDINGS, INC. | ||||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (a) | ||||||||||||||||||||||||||||||||
(Unaudited and in thousands except share, per share amounts and ARPU) | ||||||||||||||||||||||||||||||||
For the three months ended | ||||||||||||||||||||||||||||||||
6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | 9/30/2018 | |||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||||
Wireless | $ | 21,078 | $ | 21,386 | $ | 21,615 | $ | 21,814 | $ | 22,127 | $ | 22,610 | $ | 23,091 | $ | 23,259 | ||||||||||||||||
Software | 14,661 | 15,881 | 17,933 | 17,639 | 17,398 | 19,154 | 20,165 | 19,217 | ||||||||||||||||||||||||
Total revenue | 35,739 | 37,267 | 39,548 | 39,453 | 39,525 | 41,764 | 43,256 | 42,476 | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Cost of revenue (b) | 5,901 | 8,264 | 8,051 | 7,190 | 7,239 | 7,592 | 8,772 | 8,141 | ||||||||||||||||||||||||
Research and development | 2,754 | 5,449 | 7,132 | 7,437 | 6,807 | 6,167 | 6,618 | 5,934 | ||||||||||||||||||||||||
Technology operations | 7,212 | 7,904 | 8,083 | 7,805 | 7,866 | 7,674 | 8,120 | 7,787 | ||||||||||||||||||||||||
Selling and marketing | 3,831 | 6,361 | 5,891 | 5,595 | 5,574 | 6,110 | 6,275 | 5,716 | ||||||||||||||||||||||||
General and administrative | 10,810 | 11,251 | 11,531 | 11,813 | 11,696 | 10,747 | 10,721 | 13,673 | ||||||||||||||||||||||||
Depreciation, amortization and accretion | 2,072 | 2,146 | 2,250 | 2,305 | 2,335 | 2,359 | 2,601 | 2,785 | ||||||||||||||||||||||||
Goodwill impairment | — | — | 8,849 | — | — | — | — | — | ||||||||||||||||||||||||
Total operating expenses | 32,580 | 41,375 | 51,787 | 42,145 | 41,517 | 40,649 | 43,107 | 44,036 | ||||||||||||||||||||||||
% of total revenue | 91.2 | % | 111.0 | % | 130.9 | % | 106.8 | % | 105.0 | % | 97.3 | % | 99.7 | % | 103.7 | % | ||||||||||||||||
Operating (loss) income | 3,159 | (4,108 | ) | (12,239 | ) | (2,692 | ) | (1,992 | ) | 1,115 | 149 | (1,560 | ) | |||||||||||||||||||
% of total revenue | 8.8 | % | (11.0 | )% | (30.9 | )% | (6.8 | )% | (5.0 | )% | 2.7 | % | 0.3 | % | (3.7 | )% | ||||||||||||||||
Interest income | 146 | 363 | 350 | 399 | 452 | 449 | 628 | 384 | ||||||||||||||||||||||||
Other income (expense) | 101 | (137 | ) | 206 | 163 | 602 | (236 | ) | (593 | ) | (110 | ) | ||||||||||||||||||||
(Loss) income before income taxes | 3,406 | (3,882 | ) | (11,683 | ) | (2,130 | ) | (938 | ) | 1,328 | 184 | (1,286 | ) | |||||||||||||||||||
Benefit from (provision for) income taxes | 353 | (657 | ) | 2,172 | 804 | 268 | (586 | ) | 5 | 446 | ||||||||||||||||||||||
Net income (loss) | $ | 3,759 | $ | (4,539 | ) | $ | (9,511 | ) | $ | (1,326 | ) | $ | (670 | ) | $ | 742 | $ | 189 | $ | (840 | ) | |||||||||||
Basic and diluted net (loss) income per common share | $ | 0.20 | $ | (0.24 | ) | $ | (0.50 | ) | $ | (0.07 | ) | $ | (0.03 | ) | $ | 0.04 | $ | 0.01 | $ | (0.04 | ) | |||||||||||
Basic weighted average common shares outstanding | 19,016,853 | 18,958,716 | 18,860,020 | 19,086,811 | 19,217,866 | 19,196,970 | 19,445,401 | 19,456,149 | ||||||||||||||||||||||||
Diluted weighted average common shares outstanding | 19,115,148 | 18,958,716 | 18,860,020 | 19,086,811 | 19,217,866 | 19,356,712 | 19,445,401 | 19,456,149 | ||||||||||||||||||||||||
Key statistics: | ||||||||||||||||||||||||||||||||
Units in service | 915 | 926 | 938 | 955 | 977 | 982 | 992 | 999 | ||||||||||||||||||||||||
Average revenue per unit (ARPU) | $ | 7.24 | $ | 7.31 | $ | 7.33 | $ | 7.32 | $ | 7.26 | $ | 7.32 | $ | 7.36 | $ | 7.40 | ||||||||||||||||
Bookings | $ | 15,411 | $ | 15,639 | $ | 21,932 | $ | 20,421 | $ | 21,334 | $ | 14,654 | $ | 23,076 | $ | 21,580 | ||||||||||||||||
Backlog | $ | 48,441 | $ | 49,052 | $ | 50,553 | $ | 42,604 | $ | 39,718 | $ | 37,392 | $ | 40,422 | $ | 36,366 | ||||||||||||||||
(a) Slight variations in totals are due to rounding. | ||||||||||||||||||||||||||||||||
(b) An adjustment of $771 to cost of revenue, identified in the fourth quarter of 2018, has been reflected in this table as an increase to cost of revenue of $166, $196 and $359 in the first, second and third quarters of 2018, respectively. Total operating expenses, operating income (loss), income (loss) before income taxes, Net (loss) income and net (loss) income per share have been adjusted accordingly to reflect these changes. | ||||||||||||||||||||||||||||||||
SPOK HOLDINGS, INC. | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (a) | ||||||||
(In thousands) | ||||||||
6/30/2020 | 12/31/2019 | |||||||
Unaudited | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 40,886 | $ | 47,361 | ||||
Short term investments | 29,974 | 29,899 | ||||||
Accounts receivable, net | 29,595 | 30,174 | ||||||
Prepaid expenses | 7,921 | 7,517 | ||||||
Other current assets | 2,997 | 2,714 | ||||||
Total current assets | 111,373 | 117,665 | ||||||
Non-current assets: | ||||||||
Property and equipment, net | 7,169 | 8,000 | ||||||
Operating lease right-of-use assets | 14,795 | 16,317 | ||||||
Capitalized software development | 5,300 | — | ||||||
Goodwill | 124,182 | 124,182 | ||||||
Intangible assets, net | 1,667 | 2,917 | ||||||
Deferred income tax assets, net | 48,022 | 48,983 | ||||||
Other non-current assets | 1,187 | 1,808 | ||||||
Total non-current assets | 202,322 | 202,207 | ||||||
Total assets | $ | 313,695 | $ | 319,872 | ||||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 5,717 | $ | 3,615 | ||||
Accrued compensation and benefits | 10,576 | 11,680 | ||||||
Accrued taxes | 1,487 | 1,529 | ||||||
Deferred revenue | 24,688 | 25,944 | ||||||
Operating lease liabilities | 5,267 | 5,437 | ||||||
Other current liabilities | 3,165 | 2,978 | ||||||
Total current liabilities | 50,900 | 51,183 | ||||||
Non-current liabilities: | ||||||||
Asset retirement obligations | 6,146 | 6,061 | ||||||
Operating lease liabilities | 10,162 | 11,575 | ||||||
Other non-current liabilities | 806 | 959 | ||||||
Total non-current liabilities | 17,114 | 18,595 | ||||||
Total liabilities | 68,014 | 69,778 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity: | ||||||||
Preferred stock | $ | — | $ | — | ||||
Common stock | 2 | 2 | ||||||
Additional paid-in capital | 88,681 | 86,874 | ||||||
Accumulated other comprehensive loss | (1,718 | ) | (1,601 | ) | ||||
Retained earnings | 158,716 | 164,819 | ||||||
Total stockholders' equity | 245,681 | 250,094 | ||||||
Total liabilities and stockholders' equity | $ | 313,695 | $ | 319,872 | ||||
(a) Slight variations in totals are due to rounding. | ||||||||
SPOK HOLDINGS, INC. | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a) | ||||||||
(Unaudited and in thousands) | ||||||||
For the six months ended | ||||||||
6/30/2020 | 6/30/2019 | |||||||
Operating activities: | ||||||||
Net (loss) income | $ | (780 | ) | $ | 72 | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation, amortization and accretion | 4,218 | 4,694 | ||||||
Deferred income tax expense | 290 | 208 | ||||||
Stock based compensation | 2,544 | 1,557 | ||||||
Provisions for doubtful accounts, service credits, and other | 673 | 272 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (670 | ) | (6,682 | ) | ||||
Prepaid expenses, inventory and other assets | 1,997 | 2,075 | ||||||
Accounts payable, accrued liabilities and other | (440 | ) | (3,161 | ) | ||||
Deferred revenue | (1,373 | ) | 1,734 | |||||
Net cash provided by operating activities | 6,459 | 769 | ||||||
Investing activities: | ||||||||
Purchases of property and equipment | (1,895 | ) | (2,783 | ) | ||||
Capitalized software development | (5,300 | ) | — | |||||
Purchase of short-term investments | (29,877 | ) | (29,650 | ) | ||||
Maturity of short-term investments | 30,000 | 4,000 | ||||||
Net cash used in investing activities | (7,072 | ) | (28,433 | ) | ||||
Financing activities: | ||||||||
Cash distributions to stockholders | (5,008 | ) | (5,049 | ) | ||||
Purchase of common stock (including commissions) | — | (1,810 | ) | |||||
Proceeds from issuance of common stock under the Employee Stock Purchase Plan | 166 | 119 | ||||||
Purchase of common stock for tax withholding on vested equity awards | (903 | ) | (1,017 | ) | ||||
Net cash used in financing activities | (5,745 | ) | (7,757 | ) | ||||
Effect of exchange rate on cash | (117 | ) | (93 | ) | ||||
Net decrease in cash and cash equivalents | (6,475 | ) | (35,514 | ) | ||||
Cash and cash equivalents, beginning of period | 47,361 | 83,343 | ||||||
Cash and cash equivalents, end of period | $ | 40,886 | $ | 47,829 | ||||
Supplemental disclosure: | ||||||||
Income taxes paid | $ | 148 | $ | 683 | ||||
(a) Slight variations in totals are due to rounding. | ||||||||
SPOK HOLDINGS, INC. | |||||||||||||||||||||||||||||||||
CONSOLIDATED REVENUE | |||||||||||||||||||||||||||||||||
SUPPLEMENTAL INFORMATION (a) | |||||||||||||||||||||||||||||||||
(Unaudited and in thousands) | |||||||||||||||||||||||||||||||||
For the three months ended | |||||||||||||||||||||||||||||||||
6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | 9/30/2018 | ||||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||||
Paging | $ | 19,990 | $ | 20,451 | $ | 20,826 | $ | 21,212 | $ | 21,342 | $ | 21,687 | $ | 21,997 | $ | 22,442 | |||||||||||||||||
Non-paging | 1,088 | 935 | 789 | 602 | 785 | 923 | 1,094 | 817 | |||||||||||||||||||||||||
Total wireless revenue | $ | 21,078 | $ | 21,386 | $ | 21,615 | $ | 21,814 | $ | 22,127 | $ | 22,610 | $ | 23,091 | $ | 23,259 | |||||||||||||||||
License | 749 | 955 | 1,711 | 2,723 | 1,676 | 2,840 | 3,496 | 3,175 | |||||||||||||||||||||||||
Services | 3,812 | 4,549 | 4,947 | 4,202 | 4,835 | 5,206 | 5,103 | 4,555 | |||||||||||||||||||||||||
Equipment | 601 | 725 | 1,125 | 689 | 842 | 963 | 1,568 | 1,296 | |||||||||||||||||||||||||
Operations revenue | $ | 5,162 | $ | 6,229 | $ | 7,783 | $ | 7,614 | $ | 7,353 | $ | 9,009 | $ | 10,167 | $ | 9,026 | |||||||||||||||||
Maintenance revenue | $ | 9,499 | $ | 9,652 | $ | 10,150 | $ | 10,025 | $ | 10,045 | $ | 10,145 | $ | 9,998 | $ | 10,191 | |||||||||||||||||
Total software revenue | $ | 14,661 | $ | 15,881 | $ | 17,933 | $ | 17,639 | $ | 17,398 | $ | 19,154 | $ | 20,165 | $ | 19,217 | |||||||||||||||||
Total revenue | $ | 35,739 | $ | 37,267 | $ | 39,548 | $ | 39,453 | $ | 39,525 | $ | 41,764 | $ | 43,256 | $ | 42,476 | |||||||||||||||||
(a) Slight variations in totals are due to rounding. | |||||||||||||||||||||||||||||||||
SPOK HOLDINGS, INC. | ||||||||||||||||||||||||||||||||
CONSOLIDATED OPERATING EXPENSES | ||||||||||||||||||||||||||||||||
SUPPLEMENTAL INFORMATION (a) | ||||||||||||||||||||||||||||||||
(Unaudited and in thousands) | ||||||||||||||||||||||||||||||||
For the three months ended | ||||||||||||||||||||||||||||||||
6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | 9/30/2018 | |||||||||||||||||||||||||
Cost of revenue | ||||||||||||||||||||||||||||||||
Payroll and related | $ | 4,350 | $ | 5,785 | $ | 5,222 | $ | 5,099 | $ | 4,749 | $ | 4,931 | $ | 4,868 | $ | 4,923 | ||||||||||||||||
Cost of sales | 1,098 | 1,940 | 2,278 | 1,567 | 1,900 | 2,080 | 3,349 | 2,623 | ||||||||||||||||||||||||
Stock-based compensation | 134 | 119 | 42 | 21 | 97 | 107 | 44 | 75 | ||||||||||||||||||||||||
Other | 319 | 420 | 509 | 503 | 493 | 474 | 511 | 520 | ||||||||||||||||||||||||
Total cost of revenue (b) | 5,901 | 8,264 | 8,051 | 7,190 | 7,239 | 7,592 | 8,772 | 8,141 | ||||||||||||||||||||||||
Research and development | ||||||||||||||||||||||||||||||||
Payroll and related | 4,115 | 4,761 | 5,056 | 5,083 | 4,639 | 4,263 | 4,350 | 4,709 | ||||||||||||||||||||||||
Outside services | 1,803 | 1,584 | 1,742 | 2,027 | 1,912 | 1,745 | 2,115 | 1,040 | ||||||||||||||||||||||||
Capitalized software development | (3,596 | ) | (1,705 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
Stock-based compensation | 243 | 236 | 113 | 102 | 84 | 11 | 5 | 71 | ||||||||||||||||||||||||
Other | 189 | 573 | 221 | 225 | 172 | 148 | 148 | 114 | ||||||||||||||||||||||||
Total research and development | 2,754 | 5,449 | 7,132 | 7,437 | 6,807 | 6,167 | 6,618 | 5,934 | ||||||||||||||||||||||||
Technology operations | ||||||||||||||||||||||||||||||||
Payroll and related | 2,213 | 2,712 | 2,656 | 2,823 | 2,662 | 2,647 | 2,616 | 2,866 | ||||||||||||||||||||||||
Site rent | 3,399 | 3,398 | 3,669 | 3,269 | 3,480 | 3,296 | 3,432 | 3,482 | ||||||||||||||||||||||||
Telecommunications | 961 | 1,001 | 1,026 | 1,016 | 1,019 | 996 | 1,021 | 950 | ||||||||||||||||||||||||
Stock-based compensation | 47 | 43 | 32 | 30 | 30 | 30 | 24 | 24 | ||||||||||||||||||||||||
Other | 592 | 750 | 700 | 667 | 675 | 705 | 1,027 | 465 | ||||||||||||||||||||||||
Total technology operations | 7,212 | 7,904 | 8,083 | 7,805 | 7,866 | 7,674 | 8,120 | 7,787 | ||||||||||||||||||||||||
Selling and marketing | ||||||||||||||||||||||||||||||||
Payroll and related | 2,538 | 3,583 | 3,382 | 3,524 | 3,329 | 3,273 | 3,047 | 3,401 | ||||||||||||||||||||||||
Commissions | 852 | 1,212 | 1,158 | 1,114 | 1,298 | 1,424 | 1,759 | 1,225 | ||||||||||||||||||||||||
Stock-based compensation | 194 | 172 | 164 | 137 | 128 | 161 | 99 | 135 | ||||||||||||||||||||||||
Advertising and events | 160 | 784 | 1,034 | 703 | 656 | 933 | 1,236 | 857 | ||||||||||||||||||||||||
Other | 87 | 610 | 153 | 117 | 163 | 319 | 134 | 98 | ||||||||||||||||||||||||
Total selling and marketing | 3,831 | 6,361 | 5,891 | 5,595 | 5,574 | 6,110 | 6,275 | 5,716 | ||||||||||||||||||||||||
General and administrative | ||||||||||||||||||||||||||||||||
Payroll and related | 3,355 | 4,134 | 3,974 | 4,220 | 4,136 | 4,041 | 4,087 | 4,834 | ||||||||||||||||||||||||
Stock-based compensation | 744 | 612 | 770 | 674 | 690 | 219 | 860 | 1,118 | ||||||||||||||||||||||||
Bad debt | 628 | 43 | 56 | 402 | (96 | ) | 308 | 303 | 513 | |||||||||||||||||||||||
Facility rent, office, and technology costs | 2,276 | 2,068 | 1,952 | 2,369 | 2,485 | 2,294 | 2,072 | 2,925 | ||||||||||||||||||||||||
Outside services | 2,043 | 2,036 | 2,350 | 2,004 | 2,306 | 1,776 | 2,062 | 1,864 | ||||||||||||||||||||||||
Taxes, licenses and permits | 804 | 859 | 1,000 | 888 | 863 | 921 | 111 | 1,081 | ||||||||||||||||||||||||
Other | 960 | 1,499 | 1,429 | 1,256 | 1,312 | 1,188 | 1,226 | 1,338 | ||||||||||||||||||||||||
Total general and administrative | 10,810 | 11,251 | 11,531 | 11,813 | 11,696 | 10,747 | 10,721 | 13,673 | ||||||||||||||||||||||||
Depreciation, amortization and accretion | 2,072 | 2,146 | 2,250 | 2,305 | 2,335 | 2,359 | 2,601 | 2,785 | ||||||||||||||||||||||||
Goodwill impairment | — | — | 8,849 | — | — | — | — | — | ||||||||||||||||||||||||
Operating expenses | $ | 32,580 | $ | 41,375 | $ | 51,787 | $ | 42,145 | $ | 41,517 | $ | 40,649 | $ | 43,107 | $ | 44,036 | ||||||||||||||||
Capital expenditures | $ | 846 | $ | 1,063 | $ | 679 | $ | 1,378 | $ | 1,495 | $ | 1,287 | $ | 830 | $ | 1,630 | ||||||||||||||||
(a) Slight variations in totals are due to rounding. | ||||||||||||||||||||||||||||||||
(b) An adjustment of $771 to cost of sales, identified in the fourth quarter of 2018, has been reflected in this table as an increase to cost of sales of $166, $196 and $359 in the first, second and third quarters of 2018, respectively. Total cost of revenue and operating expenses have been adjusted accordingly to reflect these changes. | ||||||||||||||||||||||||||||||||
SPOK HOLDINGS, INC. | ||||||||||||||||||||||||||||||||
UNITS IN SERVICE ACTIVITY, MARKET SEGMENT, CHURN | ||||||||||||||||||||||||||||||||
AND AVERAGE REVENUE PER UNIT (ARPU) (a) | ||||||||||||||||||||||||||||||||
(Unaudited and in thousands) | ||||||||||||||||||||||||||||||||
For the three months ended | ||||||||||||||||||||||||||||||||
6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | 9/30/2018 | |||||||||||||||||||||||||
Paging units in service | ||||||||||||||||||||||||||||||||
Beginning units in service (000's) | 926 | 938 | 955 | 977 | 982 | 992 | 999 | 1,024 | ||||||||||||||||||||||||
Gross placements | 35 | 24 | 22 | 28 | 35 | 27 | 30 | 31 | ||||||||||||||||||||||||
Gross disconnects | (46 | ) | (36 | ) | (39 | ) | (50 | ) | (40 | ) | (37 | ) | (37 | ) | (56 | ) | ||||||||||||||||
Net change | (11 | ) | (12 | ) | (17 | ) | (22 | ) | (5 | ) | (10 | ) | (7 | ) | (25 | ) | ||||||||||||||||
Ending units in service | 915 | 926 | 938 | 955 | 977 | 982 | 992 | 999 | ||||||||||||||||||||||||
End of period units in service % of total (b) | ||||||||||||||||||||||||||||||||
Healthcare | 83.6 | % | 82.6 | % | 82.4 | % | 81.7 | % | 81.7 | % | 81.6 | % | 81.4 | % | 81.7 | % | ||||||||||||||||
Government | 5.5 | % | 5.4 | % | 5.4 | % | 5.5 | % | 5.6 | % | 5.8 | % | 5.8 | % | 5.8 | % | ||||||||||||||||
Large enterprise | 4.4 | % | 5.5 | % | 5.5 | % | 6.1 | % | 5.9 | % | 5.9 | % | 5.9 | % | 6.0 | % | ||||||||||||||||
Other(b) | 6.6 | % | 6.5 | % | 6.6 | % | 6.7 | % | 6.8 | % | 6.7 | % | 6.9 | % | 6.5 | % | ||||||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||
Account size ending units in service (000's) | ||||||||||||||||||||||||||||||||
1 to 100 units | 65 | 67 | 69 | 72 | 74 | 77 | 78 | 81 | ||||||||||||||||||||||||
101 to 1,000 units | 165 | 171 | 173 | 175 | 179 | 186 | 190 | 192 | ||||||||||||||||||||||||
>1,000 units | 685 | 688 | 696 | 708 | 724 | 719 | 724 | 726 | ||||||||||||||||||||||||
Total | 915 | 926 | 938 | 955 | 977 | 982 | 992 | 999 | ||||||||||||||||||||||||
Account size net loss rate(c) | ||||||||||||||||||||||||||||||||
1 to 100 units | (3.1 | )% | (3.0 | )% | (3.8 | )% | (2.1 | )% | (3.2 | )% | (2.3 | )% | (1.7 | )% | (4.3 | )% | ||||||||||||||||
101 to 1,000 units | (4.2 | )% | (1.0 | )% | (1.0 | )% | (2.4 | )% | (3.9 | )% | (2.3 | )% | — | % | (2.7 | )% | ||||||||||||||||
>1,000 units | (0.4 | )% | (1.2 | )% | (1.8 | )% | (2.2 | )% | 0.7 | % | (1.1 | )% | (0.1 | )% | (2.2 | )% | ||||||||||||||||
Total | (1.3 | )% | (1.3 | )% | (1.8 | )% | (2.2 | )% | (0.5 | )% | (1.1 | )% | (0.2 | )% | (2.5 | )% | ||||||||||||||||
Account size ARPU | ||||||||||||||||||||||||||||||||
1 to 100 units | $ | 11.65 | $ | 12.01 | $ | 11.99 | $ | 11.84 | $ | 12.00 | $ | 11.90 | $ | 11.61 | $ | 11.33 | ||||||||||||||||
101 to 1,000 units | 8.24 | 8.34 | 8.31 | 8.41 | 8.47 | 8.35 | 8.28 | 8.19 | ||||||||||||||||||||||||
>1,000 units | 6.57 | 6.59 | 6.62 | 6.59 | 6.47 | 6.57 | 6.69 | 6.74 | ||||||||||||||||||||||||
Total | $ | 7.24 | $ | 7.31 | $ | 7.33 | $ | 7.32 | $ | 7.26 | $ | 7.32 | $ | 7.36 | $ | 7.40 | ||||||||||||||||
(a) Slight variations in totals are due to rounding. | ||||||||||||||||||||||||||||||||
(b) Other includes hospitality, resort and indirect units | ||||||||||||||||||||||||||||||||
(c) Net loss rate is net current period placements and disconnected units in service divided by prior period ending units in service. | ||||||||||||||||||||||||||||||||
SPOK HOLDINGS, INC. | |||||||||||||||||||||||||||||||||
RECONCILIATION FROM NET (LOSS) INCOME TO EBITDA (a) | |||||||||||||||||||||||||||||||||
(Unaudited and in thousands) | |||||||||||||||||||||||||||||||||
For the three months ended | |||||||||||||||||||||||||||||||||
6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | 9/30/2018 | ||||||||||||||||||||||||||
Reconciliation of net (loss) income to EBITDA (b): | |||||||||||||||||||||||||||||||||
Net income (loss) (c) | $ | 3,759 | $ | (4,539 | ) | $ | (9,511 | ) | $ | (1,326 | ) | $ | (670 | ) | $ | 742 | $ | 189 | $ | (840 | ) | ||||||||||||
Plus (less): benefit from (provision for) income taxes | (353 | ) | 657 | (2,172 | ) | (804 | ) | (268 | ) | 586 | (5 | ) | (446 | ) | |||||||||||||||||||
Plus (less): Other expense (income) | (101 | ) | 137 | (206 | ) | (163 | ) | (602 | ) | 236 | 593 | 110 | |||||||||||||||||||||
Less: Interest income | (146 | ) | (363 | ) | (350 | ) | (399 | ) | (452 | ) | (449 | ) | (628 | ) | (384 | ) | |||||||||||||||||
Operating income (loss) | 3,159 | (4,108 | ) | (12,239 | ) | (2,692 | ) | (1,992 | ) | 1,115 | 149 | (1,560 | ) | ||||||||||||||||||||
Plus: depreciation, amortization and accretion | 2,072 | 2,146 | 2,250 | 2,305 | 2,335 | 2,359 | 2,601 | 2,785 | |||||||||||||||||||||||||
EBITDA (as defined by the Company) | $ | 5,231 | $ | (1,962 | ) | $ | (9,989 | ) | $ | (387 | ) | $ | 343 | $ | 3,474 | $ | 2,750 | $ | 1,225 | ||||||||||||||
For the six months ended | |||||||||||||||||||||||||||||||||
6/30/2020 | 6/30/2019 | ||||||||||||||||||||||||||||||||
Reconciliation of net income (loss) to EBITDA (b): | |||||||||||||||||||||||||||||||||
Net (loss) income | $ | (780 | ) | $ | 72 | ||||||||||||||||||||||||||||
(Less) plus: Benefit from (provision for) income taxes | 304 | 318 | |||||||||||||||||||||||||||||||
Plus (less): Other (expense) income | 37 | (367 | ) | ||||||||||||||||||||||||||||||
Less: Interest income | (509 | ) | (901 | ) | |||||||||||||||||||||||||||||
Operating loss | (948 | ) | (878 | ) | |||||||||||||||||||||||||||||
Plus: depreciation, amortization and accretion | 4,218 | 4,694 | |||||||||||||||||||||||||||||||
EBITDA (as defined by the Company) | $ | 3,270 | $ | 3,816 | |||||||||||||||||||||||||||||
RECONCILIATION FROM OPERATING EXPENSES TO ADJUSTED OPERATING EXPENSES (a)(d) | |||||||||||||||||||||||||||||||||
For the three months ended | |||||||||||||||||||||||||||||||||
6/30/2020 | 3/31/2020 | 12/31/2019 | 9/30/2019 | 6/30/2019 | 3/31/2019 | 12/31/2018 | 9/30/2018 | ||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||
Operating expenses | $ | 32,580 | $ | 41,375 | $ | 51,787 | $ | 42,145 | $ | 41,517 | $ | 40,649 | $ | 43,107 | $ | 44,036 | |||||||||||||||||
Less: depreciation, amortization and accretion | 2,072 | 2,146 | 2,250 | 2,305 | 2,335 | 2,359 | 2,601 | 2,785 | |||||||||||||||||||||||||
Less: goodwill impairment | $ | — | $ | — | $ | 8,849 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
Add: capitalized software costs | $ | 3,596 | $ | 1,705 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
Adjusted operating expenses | $ | 34,104 | $ | 40,934 | $ | 40,688 | $ | 39,840 | $ | 39,182 | $ | 38,290 | $ | 40,506 | $ | 41,251 | |||||||||||||||||
(a) Slight variations in totals are due to rounding. | |||||||||||||||||||||||||||||||||
(b) EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only. Management and the Board of Directors rely on EBITDA for purposes of determining the Company’s capital allocation policies. EBITDA is also the starting point for the calculation of operating cash flow for purposes of determining whether management has achieved certain performance objectives in the Company’s short-term and long-term incentive plans. | |||||||||||||||||||||||||||||||||
(c) An adjustment to cost of revenue identified in the fourth quarter of 2018 of $771 has been reflected in this table as a reduction of Net (loss) income of $166, $196, $359, and $771 in the first, second, third, and fourth quarters respectively. | |||||||||||||||||||||||||||||||||
(d) Adjusted operating expenses is a non-GAAP measure and is presented for analytical purposes only. Management and the Board of Directors rely on adjusted operating expenses for purposes of assessing our core operating results based on expenses incurred within a period that directly drive operating income in that period. Management adjusts for certain items because we do not regard these costs as reflective of normal costs related to the ongoing operation of the business in the ordinary course. In general, these items possess one or more of the following characteristics; non-cash expenses, factors outside of our control, items that are non-operational in nature, and unusual items not expected to occur in the normal course of business. | |||||||||||||||||||||||||||||||||