SPOK - Earnings call transcript Q3 2018

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Operator

Good morning. Welcome to Spok's Third Quarter Investor Call. Today's call is being recorded.

On the line today, we have Vince Kelly, Vice President and Chief Executive Officer; Mike Wallace, Chief Financial Officer; and Hemant Goel, President of Spok's operating company. At this time, for opening remarks, I'll turn the call over to Mr. Wallace. sir. ahead, go Please

Michael Wallace

thank investor joining update. and third for quarter XXXX you morning, us for our Good

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

Standards X, Unless Also, reporting related XX-Q, January formats. net based those contracts, Although the no amounts any relating in business Exchange have to yesterday's be file to modified we the as today; subject income, which the to contained filed they ASC our release otherwise on are to to accounting using these XXXX that XXX. Spok stated, the we from past Spok Codification, period adjusted third Form XX-K; tables company's after later environment statements statements continue XXXX method Factors Accounting quarter believes revenue, and to and review are ASC the the and XXX, accordance been our under both prior which and obtain of company forward-looking compete which X, periods the calls. while the press Customers, with turn are X, and reasonable, obligation our Please call January operations filings Risk Securities beginning results risks to upon to in and Commission. ASC and conference that expect completed assumptions note Form that, update Please documents assumes uncertainties. for share to be with historic XXXX, EBITDA to ASC present adopted or section in and presented I'll XXX, applied provided reported Contracts over from under with With XXX not Revenue earnings results were in per not XXXX. Please refer under January retrospective Vince. XXX XXXX,

Vincent Kelly

and Thank regarding believe pleased morning. We you and you, XXXX operating trends new the provide strong with momentum we as speak results. our We're recent to performance good Mike, head third year. sales quarter today our into and finish

color provide operating and better, and performance Operating I'll performance strong to are While more improvements. our Hemant sequential we Goel, and our operating in encouraging our President, measures Officer, strive year-over-year key with performance always on detail moments, Chief as quarter our provide our a a a do In few financial results then we of Financial on number third more Mike results. saw Wallace, will

of couple was the our family an take a Spok Tom of passing to begin, was Officer. unexpected minutes sadness mourns that Spok However, before in friend. impacted great entire of accident. about announce It entire Chief we the a recently we a let airplane that Saine me The dear He Information tragedy the talk community. our loss

to On in time. our this as we've the deepest He during Tom's entire transformation. offer greatly benefited as tenure commitment. expertise this the I'd organization dedication family and of well was from his Spok at our to and instrumental difficult contributed Spok, behalf team, to During greatly his sympathies Saine like

Okay.

growth revenue through third share quarter, returned as has dividends brief months and our growth nine first $XX.X Overall, total Spok of revenue million of EBITDA the nine quarter wireless capital our months repurchases. stockholders revenue also to in of the saw overview of and the positive Now the and form XXXX. continued generate software this of I'll in attrition. for outpaced the plan provide sequential to year in a results we

also offerings our investments Care our Spok through Connect. communication integrated We platform, enhanced continued product our in

substantial development platform communication We critical investment that to continued latest in our bring our team care in a experience technology leveraging the and are market. of will cloud-based communication health the in our decades to deliver

the receptivity generation is next the changer of on we high believe the conference the year, were game we year. user meet care particularly XX, A and revenue, excited Connect each our annual are health were Connect by were of a than the year-over-year, pleased communication care to pleased pushing GAAP couple Spok's advance team ago, welcome grow to we X% we software what Through attendees see the remains platform. quarter Our development to who and months boundaries more for showcase extremely was first we our to to the weeks very year. on from in more was with for XXX got of some target goals from brought technology, up industry's health of together We to communications. customers and nine The encouraging. customers professionals. Care basis, excitement There, health level prior the leading a care innovators than Spok the improve

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

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

revenue and year. from of XX.X% from quarter nearly million $XX.X prior on First, GAAP X.X% up the basis, was a the software up nearly prior

XXXX XX.X%, and second from increase of for XX.X% Software were $XX.X the quarter. bookings the respectively, of quarter third quarter year prior XXXX an million, the

of million September $XX.X a at our slightly related include operations and from quarter. backlog bookings, was prior software bookings record the XX million, up $XX.X quarter Third

through generating remainder year to activity team into laser-focused sales the be the Our XXXX. will on of continue and

believe However, demonstrate confident long-term results in generating are these momentum, we and we growth.

wireless revenue continue wireless Second, expectations. in posted to and results exceed third services Spok trends for quarter. the subscriber products our solid and

While was decline in units units prior the from or up quarter. the paging with net totaled revenue ARPU, XX,XXX unit, quarter, the prior and per was average stable

the base. paging was these segment, XX% approximately We top-performing a which quarterly result, continuation low quarter. Healthcare stabilizing of X.X% in prior a pleased revenue only to our were from see As comprises of the down especially wireless trends, subscriber of our record

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

best-in-class affected our supporting to and from large a regions. Hemant network During government I'd we in customers role a X-figure entity. Spok deal included a will integrations talk take care for the than moment institutions to also health Spok later, to review the this multiple new the this like detail I'm dozen reputation, about recent to more continues in support and Spok's large to in Florence health report the Hurricanes that care those pleased more a added family. and but industry-leading year, with to quarter, one resulting was build two Michael customers. providing an of another devastations,

thoughts storms. Our to anyone out prayers impacted and go by these

for on events. company make first, out our simulcast these storms network customers of Due Mike Goel, Chief business Financial and the flooding, who additional comments virtually our network, quarter. Once and high-power and Mike? reliable reached our of of were provide our the Spok's customer review resulting and sales this we held up advance mobile not communications our will teams best-in-class our that will engineering engineering rain After of a outlook and with quarter shortly, was from path While to activities. both Hemant destruction, these third well. extremely that, for during and to XXX% left team, Wallace, highlights comment operating networks. our our some nature network the on service catastrophic case the in transmitters of President I'll phone to functional. again, we the Officer operating storms but I'm the financial proud customers

Michael Wallace

Vince. Thanks,

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

historically and quarter XX%; overall performance XXXX operating were revenue; Vince third demonstrate the operations clearly believe renewal unit sustained resulted revenue ourselves in to rates, improvements wireless we revenue were exceed Key average noted, financial drivers complete stable momentum continue year-over-year software As of these quarter year. and for our rates, revenue next as the low and results ARPU with position attrition. pleased performance our during which in software per which maintenance or in we

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

items, key of which quarter drove two, our cash Over flow the impacting review three, which a and next areas They balance quarter expenses; performance. brief financial third I factors selected savings. minutes, and review a third include: few will revenue; certain review of sheet third our influenced quarter one,

remainder of will review for I Finally, guidance the our financial XXXX.

from adoption Through GAAP reflected was This the to $XX.X I XXXX, the On items of the to the when totaled the will quarter specific revenue of $XXX.X $XX ASC XXXX exclude and prior of revenue XXX. million million $XX XXXX, and our software $XXX.X With As software in happy to to X.X% of or during financial an of increase Q&A XXX. million million increase XXXX, totaled nine of compares months address $XXX.X year usual, a of million the nine questions XX.X% if be XXXX. a second quarter respect the a the GAAP this of revenue first Through revenue nine year. the GAAP compares these the portion months have year. $XX.X first in quarterly adjusted adjusted million of from results, for when them X.X% $XX.X about from to total period. of increase quarter revenue revenue adoption you call. quarter first or morning's the of million, to second prior months of the million XXXX $XX.X ASC third or third exclude a million basis, This in any prior

and of As increase to wireless This with to generate ability solid pager unit XXXX, and such, solutions. year-over-year also by driven to software year-to-date with our our modest pleased growth sequential to of implementation software revenue. software from XX% than in a our in the revenue refine operations as more revenue levels we contributing increases coupled were continue we was year-to-date maintenance From both were performance, enhance and the and specifically rates. churn processes stable ARPU related performance perspective,

declining As nine a first months the for period. result, revenue year strong, wireless from prior only X.X% remained the

to operating Turning expenses.

continue in research and our in base of We on to efficiencies our the maintain in planned product categories. and creating in to increases some offset our focus expense order development marketing sales

continued the expenses increased increase During with in $XX.X the X.X%, prior XXXX, $XX.X revenue increase and due XX% and to as million expenses, consolidated quarter $X.X the of year $X.X expenses reported sequential investment driven research bad platform; year-ago our prior of allowance in year-ago well by cost increase This the with development quarter quarter product the our a self-insured driven Connect higher the our the associated In of Care from depreciation, investment operating debt, from Spok the back-office primarily and costs the we In million quarter accounts in was as the in and of the million, year-ago quarter or associated operating by development largely from as from excludes health systems approximately of a increase XXXX. $X and as to represents driven in in of amortization $X.X million. XXXX, costs costs receivable total full totaled million comparison third change accretion, third third increased up million administrative methodology. planned and the plans. for million, research period. million; primarily of costs noncash and The operating well higher-than-expected period, our general in $X.X our which in $XX.X reflecting by

and substantially the down from the software year-over-year research believe past portion second of investments should platform, the of are from in we our nearly and this approach prior the quarter XXXX. continue trend as more we up We in XXXX will While for increase year-over-year we XX% increase in the those our a of next-generation saw level. development and is of the initial now year, steady-state saw increase expenses from rate the quarter down first XX%

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

to $XX million a ended repurchases with depreciation the million, million, capital the interest, financial year, on of capital cash approximately balance the working items. December of million. Spok XX, used million balance and of million amortization. cash EBITDA, of generated was This, earnings sheet dividends taxes, along of aforementioned before the the items, the approximately XXXX. $X.X to of and quarterly other $X.X $XX.X share from Turning quarter $XX.X months Through and expenses fund nine $X.X and We hand first with or down

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

Hemant Goel

morning. Thank you, and Mike, good

our delivered bookings XXXX, heard, software third the you've quarter of As sales, in million. maintenance totaling $XX.X teams

the showed up performance the previous in quarter a was quarter quarter. Third XX.X% year million prior from $XX.X from XX.X% increase and

growth Health our XX% at than of bookings renewal up As overall the remains more strong for third U.S. Vince software focus, remains our and the key rate in quarter. part of maintenance a care stated, primary XX%. making

care have to X,XXX added we deals, never with During including XX the hospitals that customers quarter, Spok In software health we us customers X-figure the than solutions. with use completed before. care XX worked total, who more XX health

all For the Hospitals & announce Roll. on proud the sixth and XX consecutive year, organizations Best we World are adult health to U.S News that our current Report customers include children's Honor

and also consoles During enterprise-wide They center to Spok has a a are leveraging communication They strategy. and clinicians. $X.X more in customer middleware procedures. deal as Minnesota, hospital Arizona their solutions inquiries, million calls large call switchboard alarm audit directly a The Spok already to Wisconsin, and cold integration direct uses to overall with third streamline we that quarter, messages enterprise closed are now in to Spok manage route facilities medical XX systems use the partner Florida. communication than adding patient critical nurse

had quarter, selling eight locations. third also the Administration, million that region Part into deal a the was than success Veterans a sales. During booking hospital includes major that more $X with X-figure we VA of in great

wandering. the limits. outside system and staff pervasive automates device patient solution elopement VA's a The a of notification choice patient and country: their to the problem these advise the addresses on Our of in the throughout hospitals routing when geographical clinical and from tracking goes solution Spok facility patient

solution and The to patient critical notification Code test patient facilities and actionable enhance We nurse critical teams, events tracking, on-call VA of for workflows Blue for call alarms improve automation outcomes. the improve to with are results which working care Spok all processes, three communications. additional will

and one partnership we contracting health solutions program, and our of to with deliver ensure focus by capability relevant is Communications this success relationship. keys Small Standard Our for providing Inc., care Service-Disabled was SCI meaningful new to veterans. Business SCI, or to verified the our the in can Veteran-Owned

Model Our SCI its instrumental us set standards TRM. us the and achieve software helping TRM by in Reference adheres was to Technical accreditation. or in VA the sponsoring

comparisons, continued to new results struggled. Spok live Amongst the more these the ultimately employees an number as asked it delivery provider third ability deliver wireless positive said a onto an health large them through final led network. When pages consistently customer since consistently a their health was pages, process months chose hospital have Spok's the code After Our Spok base. life-critical sales in to an wants side-by-side of of care in where critical their and X,XXX what the migrated to care previous provider. Spok extensive facilities who team adding new West to the vendor quarter, was their to than hospital the expedient They improve paging Coast-based of their manner. area decision, bidding deliver

their and of encrypted by are of all hospital to addition the The lower In kept patient they clear it pricing for reliability price our This protecting had also talking although very Spok meeting an with to vendor, value previous objective pagers workflow staffing and compliance to our the is choosing optimize them patient of if safety information that risking the on made were X,XXX software units. network, speed system. lower patient Spok now how unreliable with about teams additional they customer was little solutions.

implementation make our issues an the also and streamlining engagement criteria our customer for great business. for a Professional have group smoother techs go-live, and in Through education training further include decrease improved methodology session to ensure reduced we crosstraining required X we've Our revamped Software-as-a-Service from To processes, We've with help services systems. testing aggressive transform and a our minimal after we by their and team. realigned as Services end collaboration maintaining at with X. of success quality improvements assurance continues issues. projects Support to increase to our of to in the number

All customer these a satisfaction of us changes achieve XX% have rating. helped

Our fatigue, the team pressing that existing software improving exceed patient for to Spok to platform rates, software development cloud-based to solutions Connect lowering patient better and to ensure developing care real-time information mortality actionable care. support help in team our satisfaction, for goals helping with a provides to reduce continues From collaboration outcomes. and alarm will health concerns integrate most Care provide meet the to

Before turning activities sales update I help designed establish marketing the leads provide want recent and things back brand, to fill to us over to brief on a Vince, our pipeline. drive

As Vince customer highly conference, XX. mentioned, successful we recently held a Connect

the health quarter, survey. in ever third the from During around care on findings we released first care. of health survey U.S. also the Nearly participated XXX centers contact in our professionals the

of was of that a center a communication to One our an function. key contact as respondents half initiative the opposed consider their nearly enterprise to be findings transformation simply

play for part and contact key clinicians roles of that procedures. the and We for found are the XX% and an we contact and signal center health center important their nurses, communication are clinical agent the these contact in functions involved respondents think change that of replied strategy More that aren't strategic role confined were see strategy a policies creating in we an addition, In system's becoming serve. for organizations. and we results overall centers centers. of more, that contact organizations physicians setting leaders, plan to

our to gain in leading IT recognition Hospital Summit. presenting by C-suite Leadership the and Becker's events, Review, our at recent the with We care reputation Hospital Association's Annual also including Health participation strategy American Conference and continued health

takes of takes it in results. strategy the the care cut to traction. time has enterprise Blue. strategy XX% the an Board. from and disaster has on recent our to respond staff and Code and an seeking the event the is platform vision seen example solutions, hospitals to half in decrease platform Spok One a to notify deliver it gain time health staffers Our communication a Bermuda to Hospital's Using Customers believe continues are

staff footprint collaboration over efficiency. With and improve clinical outcomes to our that, forward pass to our to Vince. and communication the with and expanding market patient help in looking continuing health back are I'll We it platform care a customers

Vincent Kelly

Thank you, Hemant.

the a briefly for like up Before questions, your we comment to call open I'd couple items. on

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

allocation the of end, area of focus. a capital that Towards remains primary

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

of in important over that includes and earnings. the We're transition chosen fully strategy that our are game a the is are delivering the platform, financial potential acquisitions software Our Spok on be believe platform both that strategy. communications changer for our believe we in term success of nature accretive and a strategic next markets. and long our will in cloud-based that laser-focused integrated is the flexibility to our a also and generation company to

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

remainder continue our remain recurring to and debt-free, in each evaluate to share capital our per We investments plans business. we of allocation when we communicate you policy the Our strategy, for report of the will and we'll our earnings. quarterly dividend year capital quarter includes allocation our capital $X.XXX

far our XXXX. to have regard quarter the be positioned with our we goals in and and key us Finally, thus and successful business activities investments believe to outlook, fourth

growth then managing allows. unchanged. you building laying goals as and guidance to to full and We call while forward this Operator? look results to your to I'll that, remain XXXX revenue after and the our our out questions the They open most declines. questions stronger a software At and Our needed, wireless a year We'd aligning financial and ask our take resources services, additional in the ask infrastructure, driving business report for accelerating operator time initial include when we and limit the one follow-up, focusing point, we'll products development revenue where for of February. quarter up questions. for fourth year your

Vincent Kelly

people we full large look February. We Okay. results participating, to again providing XXXX year, in Well, we're don't with great forward after then. for want to guidance the to, just participating of everyone, thank for of I morning. we have questions, list you speaking any have release everybody while this so we a going the Thank strong year We'll and and quarter you. day. be a In have meantime, like a fourth our have balance

Operator

Thank conference. you. that conclude your Ladies all again, again and gentlemen, does today's participation. for Thank you

disconnect. You may now

Spok (SPOK) 25 Oct 182018 Q3 Earnings call transcript