SPOK - Earnings call transcript Q2 2018

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Operator

Good morning, and welcome to Spok's Second Quarter Investor Call. Today's call is being recorded. On line today, we have Vince Kelly, President and Chief Executive Officer; Mike Wallace, Chief Financial Officer; and Hemant Goel, President of Spok's Operating Company. At this time, for opening comments, I will turn the call over to Mr. Wallace. ahead. go please Sir,

Michael Wallace

you update. us Thank quarter our XXXX investor for morning. for joining second Good

discuss operating forward-looking the as and Company's plans, are conditions. anticipated represent results we or those to statements any in from today's statements are subject These of actual Before may date actual our future dependent not predictive risks to differ results. well Spok's future conference everyone give and only or to events to estimates of these business this which call as that upon future remind include to assurance call financial other forward-looking may the performance. uncertainties as estimates income materially include could Spok's and statements and on statements conference intended are statements. results, that relating I Such want expenses revenue,

on that ASC after presented XXX. results for January contracts January modified beginning calls. statements relating retrospective environment Codification, be subject they stated, are are these and XXXX. not Xst, no Standards believes on the in obligation and XXXX applied Unless XXXX which Commission. in documents Company contained to completed Factors Although quarter and our using review update revenue to based filed present adopted were second and periods and are that otherwise the expect XX-Q, from under business the Also, later with please reasonable, customers, our XXXX which Please Accounting conference operations Risk Form X, we with remember, past Securities XX-K, compete our risks assumptions to any note to of which those the to related filings ASC XXXX Please forward-looking statements file from we Xst, uncertainties. methods Spok Spok to reporting or contracts section January XXX, Form as assumes today; Exchange

accordance yesterday's release the in per will EBITDA adjusted Vince. historic and I under and With with net to in earnings not revenue, to ASC call results accounting reported obtain continue refer While XXX. to both over press turn be amounts been to have that, formats. and under XXX provided Please XXX ASC the prior share period income, Company's tables the

Vincent Kelly

Mike, and Thanks, good morning.

to enter you believe regarding operating the pleased with are as today we start second results, we of quarter half We a speak our second what good is and XXXX.

year. expectations. we in stockholders capital million second bookings, in management. Spok the performance performance the seasonal half continue communications our key quarter of the and integrated investments provide of was our nearly backlog solid with sales and repurchases, our Our half first Overall, the to positive to and share returned form of Care XX we we base through continued our on number XXXX platform, We as our in operating year-to-date well second position in year us subscriber product and Connect. We offerings retention, the EBITDA. of dividends in levels, enter generate operating enhanced through of strong a improvements results sequential the and line a believe of expense saw our measures We

our the deliver substantial will to continue a communication cloud-based our platform We market. critical in and to are healthcare development that decades of technologies our the bring leveraging in experience investment data in communication team latest

communication in these we well believe enhanced the by improved, of teams. outlined, upgraded and as levels supported previously as higher yield benefits investments platform will our future sales integrated As our significant bookings form future

by revenue with prior from basis goals year. to our meet XX% particularly target the to up GAAP on to each In pleased year-over-year half teams were the development remain grow on for year, the first software year. of Our the we see quarter a

to revenue renewal stream, our base stable revenue our rate nature. continue largely more the a we is software see a revenue a with first XXXX, contracts. recurring base. maintenance than XX% the XX% provides stream Similar wireless revenue Company recurring to our that of revenue in maintenance Through more Additionally, six on over is of software months

turn and Hemant financial on for operating second quarter, before Mike to second call key in some I to our over quarter. Now provide the to details want review I briefly the activity and additional the performance results

was software and nearly up million First prior our on at quarter, related June revenue was up a GAAP from software X% the year from prior the XXth basis, XX XX.X X% million, backlog quarter. of

team laser to year. on be continue remainder the Our the sales will throughout of focused generating activity

results exceed continued our XX,XXX to wireless placements solid products subscriber of pager Gross revenue and the from and were the second posted sharply prior wireless up quarter. Spok expectations. for Second, quarter. trends in services approximately

net a quarter, result, totaled approximately second losses from quarter. units X,XXX in pager down was XX% the As which the prior

subscriber especially We trends, stable see of are paging pleased continuation healthcare to our these base. segment the XX% in more our which performing comprises approximately of top

in to progress other areas product made strategy, partnership Finally, key performance, development, several financial product in our was and agreements. addition strategic including

family. the quarter, build we the Spok customers dozen a than During an added industry-leading to Spoke continues reputation. new more to

professionals, We that month, position Respondents conferences strengthened have made establishing strong customers. at as earnings enhanced proposition our with Also are as eighth leader, Zebra attended reputation facilitated in I consecutive and sales release these the and survey, Last little in lead of survey the brings to survey Hemant of in tremendous Bernoulli the healthcare health findings are of proud groups. Spok from that more and of system industry Financial In the and our the a financial whom regarding a of additional validate C-Suite on our XXX mobile presentations the second some we the quarter where key outlined hospitals first and we Wallace that results than for around Goel, will country. industry comments our quarter organization more detail make will after and such XX% of our clinicians Technologies, President believe value thought our Mike? Officer also include focus we they healthcare. business marketing you the will we created of and to minutes, executives ones quarter, our the give our an partnerships release. terms review with but for Health shortly, few other I it activities. sales. our in strong that Hemant comment partnerships will the outlook were last highlights generation we Chief are the on Mike strategies

Michael Wallace

Thanks Vince.

the you more far we will file expect second second a as on performance financial quarter Let that cover to as encourage little about I which as XXXX me to quarter. today ASC information it this specific call, more our review we on and later ASC give contains business you XX-Q, comparisons financial again would and Form well in between our detail revenue XXX. operations performance XXX our

performance were drivers churn during operations rates the the we to performance Vince our of As software wireless take revenue pleased advantage quarter in Key with in year-over-year units. revenue, positions half paging noted, of increased exceed the quarter continued the our operating overall year-to-date renewal performance in maintenance were financial improvements year. of of stable which software second sustained us in activity believe that XX% to and levels our typically and continue second the

Lastly, research our impacts in expenses continued investments to absorb operating of has planned allowed positive the product development while disciplined also expense EBITDA. and us management generating

certain financial will a three, our sheet. second second of quarter revenue. impacting of items key and selective performance. They which influence the expenses; drove I areas minutes, few next review quarter brief one, review include; review the quarter second factors Two, Over a balance which

guidance our Finally, XXXX. I review for financial will

our the revenue XXXX. of to a about year-over-year to continue XXXX, the the address up adjusted coupled XX.X wireless quarter XXX million specific a Q&A these results, have to million. million contributing As by erosion adjusted outpaced software our usual, morning’s second totaled of when a and the XXX from as our revenue total software were generate our in million the XXX of units a half of first software This the We of revenue. XX.X X.X% ASC for in software With XX.X exclude software churn. months ASC related items to or XXX XXXX, in the questions of XXXX second revenue maintenance to first of respect compared XXXX, adoption ability adjusted million, during adoption the you growth Through we totaled of revenue reflects again of to them the with of prior totaled exclude to from revenue year-over-year the first of XX.X software quarter was performance months in was Again, performance increase revenue specifically if ASC year XX.X% XX.X GAAP where increase million the our of adoption first level increase enhance month million of financial six Also million quarterly the revenue, any stable from be of pager Through half Adjusted revenue of quarter XX.X again increase total first driven six revenue. XXXX. six increase ASC solutions. XX.X% a revenue X.X% to with in the of year-over-year GAAP will pleased operations XX.X period. revenue processes the of the portion second to exclude adoption implementation an quarter to with refine happy this exclude XX.X when or the call. I to

only declining the result, the solid driven for performance the from churn a As of revenue combination first prior X.X% stable addition, maintaining and This by half business different minimization remain of our with continued solid customers in pricing. unit wireless is being wireless year. gross

expenses. operating Turning to

focus expense creating planned some increases our to We product the on our continue in and efficiencies our category. offset development research to of order maintain in in space

excludes year million accretion research of from from Spok development was continued reported period costs, our higher in the consolidated quarter. anticipated XX.X driven reflecting by and depreciation, increase million the million up earlier year expenses quarter $X and Care of Connect operating in our platform. second ago the the During which amortization of Nearly investment XX.X XXXX half

increase those as from second the portion believe Sequentially, sales reduction We should our was we presence quarter. research XXXX, increase XX.X% continue and overall steady shows year-over-year and nearly XXXX, at past our expense XXXX. costs the will driven increase first development the sequential that initial the the this and we sales trade investments and increase million. from development development In and in level. period, organization This marketing XX.X% sharp quarter, by expenses approach we were saw and quarter from are the XXX,XXX up state our trend and $XXX,XXX research prior now first more a of the over the research a of saw Additionally, in represents the a X.X conferences. of totaled our quarter down from XXX,XXX in quarter second costs of increase reflecting investments in the

software quarter six Our capital second months Through customers, XXXX, guidance million. range for significant any and we wireless are capital requirements of expect not balance year. line the to the provided. as the of infrastructure expenses to primarily infrastructure expenses changes our the in capital expenses of the the to network support million as first support and business. approximately were be for our Capital within have We are for expense do the to with expect of incurred level well guidance in necessary XXXX X.X our X.X purchase pagers, the totaled the

quarter hand And exclude sheet of to of or expenses capital and ASC Spok used amortization. from quarterly $X.X six other first cash share X.X months X.X this million approximately earnings approximately million. with of and Through a December financial before Turning dividends balance of EBITDA XXXX. balance fund XX, XX.X the depreciation to to adoption generated the of well with when as million We the was of XX.X items. X.X along down XXX million interest, the cash ended of as year on and repurchases for million taxes, million adjusted the the

expenses Finally, XXX financial sales expenditures on revenue turn provided in I to range capital million total are President, to the for million. XXXX. to operating call activities. XXX amortization six to to update depreciation our first guidance range Hemant? on would respect previously our consolidated Consolidated million of million and X with change. which Based XXXX, accretion those to of the XXX million. quarter will trends from performance and our our and projects excluding trends remind Hemant With months we and million guidance we the based you will subject on I that maintaining to from you projections marketing always are the are over who that current that, to Goel X second XXX our and

Hemant Goel

Thank good Michael, you, morning. and

have teams totaling maintenance our software quarter sales heard million. you As XXXX second delivered of bookings and in the $XX.X

our a in performance States the seasonal key quarter line of expectations. period growth quarter. up remains focus our XX% second in with the primary Second part the making X% and Healthcare of United bookings prior from up overall was for

the In solutions. and total healthcare deals During we software XX Those six with we XX before. nine adults best with completed customers honored including the us current U.S. the that healthcare on have customers customers XXXX to never more Spok quarter, than children who figure all use by three healthcare worked organizations hospitals include hospitals added

News & Report. World

clinical of Coast users. application seven-figure to quarter, nearly our for year from initiative an the customer The licenses Academic communications. During second to deal West Medical we Center. its five organizations a deal the Spok chose important The improve closed part double mobile will XXXX as with its XXXX large going the

hospitals first do But that communications to what health found there limitations its many are today look the to EHR. record vendor they can customer they for electronic with As the solutions. with

One platform. downfalls deliver EHR and of EHRs communication these and systems team to the range the to can care. clinical this will and together leverage clinical message, person, Care Connect device, on right at patient collaboration is right the We right collaboration not on better to and complement the our full the delivery Spok we EHR solid investments of partnership a endorsement relying main hospitals for the that major allowing that need the a the right that through see help as communicate the healthcare for the clinicians and their communication can the perfect of work time. only is through to

existing The in One Nurses' solution organization monitoring will and will customer integrate standard recognition with quarter six and in-house that the since patient the of natural level new nursing This highest a hospitals the bill in center the solutions have system. webpage was that the regional Center deal Spok Midwest. that hospital alerts in has includes use American of Credentialing designated paging our routing the the customers its assignments the figure second at been industry. nurse XXX cloud for hospital The magnet systems also medical indicates XXXX. staff the by replacing

was XXXX exceeding solid sales, quarter a quarter sector, second the The also revenue in defined for all goals wireless and retention.

was strongest quarter quarter paging for this no exception. is second our and year The traditionally

in communication are remains on pagers than As integral hospitals this May them of influx indication the period. That's rather our our April, us during they take plus medical an interns some and strong issuing healthcare customers. clinical that June for the for technology wireless part

and stable Our as as both a solution. paging our secure to in smartphones biz seen continues growing interest have paging well encrypted remain mobile our network and we

on deliver Our professional focus experience have consistent and operations services resources efficiency to continues customers. and group to streamlining more a our to sales

XXX large installation there that During potentially were switches, data the re-architecting government completed the time Instead could for our that made situation could a of was system safety quarter, entire so set-up Spok unique have professional agency major batch services data XXX and a frame several our campuses. The issues. communication with and alerting second a transmission switches on to XXX change of a created application smaller specified. completed be data within slowed a

solutions Vince that for our development Spok based Care year. cloud meet to with As goals existing the will on the Including team Connect software. software include noted, our is target evolution integrate of our development

the survey over filings I some a In June, on on sales our Xth brief healthcare. to Vince, we and our help marketing activities released Before prior designed in the turning leads recent of things annual strategies update mobile brand, pipeline. establish back us to provide to want of

the with than having place. current. half those reported strategy teams mobile clinical in comes of more a respondents survey strategy owners the consecutive organizations between there For is when loop global policies keeping policy the to feedback a third it strong With improvement and year continues

in clinical of included One an has is this This in workflows. in nine updating continued a clinicians as of XXXs cited strategy publication. number change of see but decision survey in leader part mobility The growth line been generated important in of leads and policy experience the popular most we has process our the making thought the reasons with annual with solutions. our healthcare address for is was to customers as area, does in position not survey marketing only industry our a us it choosing the for

We to also gain leading by strategy events. healthcare our continue recognition reputation C-Suite with and presenting at

Annual and facilitated Nurse presented of Meeting AONE our our healthcare the the at three Nursing computer solve events, institute such group During Spok IT President face Officer communication hospitals connect and on this Vice At representatives Care an Executives at a symposium. challenges Strategy Organization how quarter of Chief spoke solution as communication at focus Spok Products many the enterprise can all the platform the Connect today. American end, focused of

to Our platform. communication believe customers potential customers and strategy healthcare deliver in our an enterprise

and is market brand traction expect our to Our bookings will gaining continue grow. the in we place,

and Looking for anticipate communication demand and clinical a I collaboration back healthcare. platform that, it market Vince. we to pass will over With continued forward

Vincent Kelly

Thank Hemant. you,

Before to on questions, of I your comment briefly would we for call like open a the items. couple

long-term I review goal capital sustainable, and current I allocation overall on focus. of to of the First, current key remainder to business area strategy update while profitable a end, To our XXXX. primary capital second, allocation to With remains our stockholder want that business capital outlook want is our maximizing the respect goals achieve strategy, value. growth, allocation to for our you and

share allocation and include augmenting multifaceted development platform strategic product our repurchases key includes that and and investments operating infrastructure. strategy capital dividends as Our as well

are that accretive in also strategy to for potential earnings. acquisitions and the both includes Our are that strategic nature

long delivering platform focused to the the chosen success platform, that of believe communications we and our of believe flexibility our and in our company financial software be We game Spok our next is over market. are term will in integrated a on cloud-based important generation strategy. laser the the is a and changer fully transition

As advantage report at of what start development with I that and the efforts taking our opportunity we said to look call, for plan technology. a rollout and happy to of I’m believe market this are we this on-track is large forward

Our our capital per debt-free. stock quarter our of share in along investments We remain business. recurring repurchases includes dividends capital with and per policy allocation occasional $X.XXX

report to in capital We when we will communicate earnings. our plans each strategy our evaluate and quarter continue allocation our

key for to resources a our most ask allows. Finally, software aligning needed, unchanged. revenue goals will successful your order business development to declines. infrastructure, for time operator questions. will They We a your services, stronger take we to the investments XXXX. with products our our large regard in the questions remain building In and positioned point, of half the year wireless to us growth focusing questions be have in our the half opportunity revenue we activities driving additional one chosen outlook, this first call follow-up believe take that a managing At after and open while advantage accelerating second business in then initial markets, include as and and goals limit our Operator. of to and I ask where you to would and of

Operator

Management. first [indiscernible] Scott you. come Yes Instructions] Williams will [Operator sir, Capital thank from question Our with

Unidentified Analyst

[indiscernible]. Hey guys is thanks Ryan my this for taking question,

We three cycle. the years five-year are into investment

the items fully contributing sort see Now, of and what when the out, trajectory with? the the revenue off, then what building sort how years, software of revenue pleased do line in the you Thanks. the couple next would of specific be half do you is in What to of first year? you growth back for built X.X and see software growth,

Vincent Kelly

we the that. beginning fine has respect are Well the gave of with morning think reiterated first that half been that with to year, in of just this the no There the back of we guidance the year. we all I at change

a bookings that’s deals will get results posted have than guidance. just the of other back that have the done, within We the much have usually our the because way a quarter better in We usually stronger typically half year so we fourth experience quarters.

us the start government about good a quarter pretty period. that then booking recognize bring Typically, depending recognizing months about revenue third deals the you in. too Sometime, a nine before you on -month after we Ryanit ratably two is and over takes

if in to we the But fourth So the today. year generate the the following reiterated year, this not it with so XXXX impact and what you see that year very that you we strong more in of quarter, for later impacts just the you we have we year, guidance going gave feel really XXXX. the the that’s at comfortable range guys a bookings, of terms that beginning really and

out into the looking of future, give current don’t terms year. and past In guidance we the

going big think never obviously if and a have past this to and we are in We doing opportunity. doing collaboration is for critical that see addressable now, platform not start but the type wouldn’t the there out this market done be total billion. market of we that we didn't $X We communications over

the going that, be the think and that that we We are game many cloud-based transformative. respects we that that same things it and having delivering changer, to be the is Now against other and engine have into and we to going said aspects building other are be some we to workflow is think competing market, platform are targeted in so there’s going others. people a

are excited what have partners, very are they so very right they with development are now They far. our with on working seen happy We this. with us

we expect roll in to the and it out to introducing of year. begin Connect demoing by be conceptually it in and expect We October, to conference XX, user and beta this the our end at

to for this and see expect platform in it XXXX, contribution XXXX. We sales of you more have much in will some

if didn't it this very our and I give wouldn’t to be be important you we think numbers. we our going future. to forecast So, was have Obviously, can't specific we got own doing

Unidentified Analyst

much you very Thank Okay. for color. the

Vincent Kelly

you. Thank

Operator

are currently queue further Instructions] this the no questions time. gentlemen, [Operator you at in Alright, Thank there

Vincent Kelly

Everyone third speaking for we Okay. forward quarter with again day. have a October. you and investors joining you Thank thank in you shareholders operator us to look our this release great after results and We morning.

Operator

you and today's Thank and disconnect. you gentlemen, may now concludes teleconference this ladies

Spok (SPOK) 26 Jul 182018 Q2 Earnings call transcript