SPOK - Earnings call transcript Q1 2019

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Operator

Good morning, and welcome to Spok's First 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. At this time, for opening comments, I will turn the call over to Mr. Wallace. sir. ahead, go Please

Michael Wallace

thank investor joining update. and first 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

we later related filed Commission. from based Although relating in that, business be turn past today, the subject which contained and they calls. our are to to these XXXX XX-Q, that the we first XX-K, filings environment documents statements conference XXXX obligation Exchange expect Factors the Spok quarter With believes and review Vince. are Please the and our company I'll Securities any and and compete assumes the that forward-looking to statements reasonable, our Form with note call Please no operations which update file to Risk risks on to in or assumptions Form uncertainties. to over present section

Vincent Kelly

morning. Mike, good and Thanks,

a from operating regarding today XXXX. our what We quarter are pleased you for with we is believe start to results good speak first

in and as subscriber in enhancing were year-over-year with key sales We development we invest team saw our wireless achieved results and including results well and as and software our tools performance expectations our retention. our continued business quarter we to upgrading infrastructure seasonal management. number line product measures, operating of these as strong revenue in a as First by

against significant its previously we a of future Cloud outlined, care Connect. believe we Spok provide solution will strategic continued yield as hospitals depth we while that investments what the investments game We result to We the in enhancing of of debt-free in industry-leading by of will software efforts our our our communication to capital particularly communications enterprise future make continuing business an technology, while is the evolution key the and executed in during benefits revenue. Care returning Cloud As and changer for strategy stockholders health platform, were in form share first we dividends of of believe Native a repurchases. record our high cash with services. In next first agility, our company to the pleased quarter, profitably our these our allocation and offerings. security, We level the operate form Native kind real-time will product quarter breadth believe most

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

performance, key first turn to our I results briefly I quarter. for provide want before the additional on some to financial Now the details call to over Mike review

to in on we deal March out over it best note the April, last higher materially X% the rather that high million as results, In week had quarter related of closed near included $XX.X of record end. large efforts up more it's looking number our at prior counting March of QX level seven-figure revenue, important the than a of than in from this revenue line and it backlog a been our quarter. would year XX was get software bookings at despite turned First, have software maintenance our were to the

and However, of existing solutions. we’re expand encouraged products with as their to bookings included sales applications communication to current and both portfolio adding customers new customers

prior the average the revenue decline continued to down quarter low posted In half to prior Second, we per averaged losses year quarter. services of from first continued continuation quarter. in base. gross X.X%, more wireless year decline Wireless comprises see products improve first stable while were subscriber especially positive contributing the these were year Healthcare down quarter, and revenue slightly Gross segment, net of a the first of placements a pager top-performing trends We the unit. X% prior which disconnects Levels. XX% our to year-earlier nearly pleased remained the $X.XX, revenue for strong. quarter. the our from results solid up wireless were XX,XXX pager in subscriber with of in Spok was quarter, nearly the in paging were wireless revenue and or ARPU result, of XX,XXX first the nearly as And the XX% quarter, from trends

demonstrate moments. sequential year-over-year to basis, management. in with that the report down will I'm in most provide first quarter, But amortization and improvements accretion, in and to were Mike on which categories. both details disciplined depreciation, operating expense pleased continued we Third, exclude adjusted more expense a a expenses, few

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

and deal totaled the quarter, XX one closed $X.X six-figure that deals million. During we

Spok a more the added than family. to also new customers We dozen

was through million of deal women's large services, solution was in region. for With time children's site is management development for be Australia. the results outpatient will we pathology. our messenger, mobile, in test hospital pediatrics services, an hospital five day acute hospital services, million Asia-Pacific maintenance. including While enterprise first test this saw $X.X This public this new and environments, the inpatient it more critical also console, in and range provides The and and showcase years contracted and to customer Australia, services, people care X.X a a than

Due and the research in a momentum the hospital solutions one reputation strong and quarter continues quarter. important relationship Wallace, an its Financial in during attend. conferences growth. our as team, care alignment Chief solid us. Officer, its the presented in products a the XXXX, is Nat’e paging to the financial At financial a end the our March. Spok's comments to positioned we Mobile, competitors thought with help to Mike with the on business will but our Delivery. our customer the Chief outlook Thus and organization units build Spok. we X,XXX base XX-year Technology this to and organization review session the referral highlights stimulate and the believe our for entitled Western with our Mike? an and of Organization closed Prioritize combination Dr. existing us chose Officer, Nurse for major earlier Leverage industry. additional broad depth center side, We from United of in at and was generating tremendous teaching deal The system On deployed that health the the in sales capture in make Spok our keep and serving Guyton, system minutes, facet for Spok-encrypted major few shows communication some with to adding States far as is with relationship a leader first, the Nursing leaders generated Conference and activity a month, we states. I'll sustainable Executives, is positions industry-leading American nurse alphanumeric for region to to Spok and strong trade Spok surrounding pickup its sector of the heath of Care opportunity sunrise pagers This services AONE, wireless How a

Michael Wallace

Vince. Thanks,

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

performance with churn. software of during revenue than we Key levels of revenue, to in strong software noted, revenue Vince the quarter wireless paging first exceed performance were levels the units of our were churn overall which quarter. maintenance continue rates, and lower operating drivers services the XX%, our and in renewal financial As anticipated pleased

management off areas to are continue investments two, the the guidance balance our research a absorb They brief to of in product, for our operating first sheet; first include: our first factors three, believe impacts items start we which of also on expense XXXX. update financial revenue; in selected planned and I quarter to we influenced has which additional Overall, quarter certain finally, good allowed a will key of quarter an financial review one, expenses; impacting review us and Continued X XXXX. development expenses. review drove performance.

as and prior more be quarter the by our first questions million $XX.X as quarter respectively, results, year software for maintenance to you morning's them of will the revenue the continue than nearly if with We our well respect ability we to these X% quarterly refine reflected the of revenue specifically of first of of call. revenue growing as our usual, enhance our in revenue this As to Total from with million the have or of X%, happy compared software solutions. processes wireless first to and continued $XX.X record specific our million particularly total items XXXX the generate slower revenue in during erosion about financial levels first With and address of to were first related XX% was implementation any the revenue XXXX, to quarter quarter pleased increase software quarter software Q&A portion quarter XXXX. $XX.X high from a GAAP of services business. I

of maintenance declining the revenue unit first maintaining continued to Wireless wireless remained business of solid, providing in Additionally, customers by is and revenue a for cash solid rates revenue reliable performance and with quarter. quarter only XX% maintenance and and our from driven being combination earlier, revenue the as the This additions, in churn reflecting existing prior increase minimization the reoccurring stable the pricing. year our continues gross renewal excess flow X.X% of noted stream.

product expenses; maintain our in to continue expense creating in category. base our development offset our operating to focus efficiencies order to and research on of Turning planned we some increases the in

in research the we revenue, quarter, quarter. prior administrative $XX.X lower The excludes operating from first depreciation, decline by higher and year-earlier down quarter million cost amortization $XX.X from marketing costs. driven down expenses, million of the development and During slightly the accretion, offset in was and of selling and and and year-over-year adjusted general by largely $XX.X and million, which reported expenses

million. Specifically XXXX and $X.X of in the development, regarding research costs first quarter totaled

fluctuations continue quarter the down we nearly overall research Care Connect we as the From to was costs level discussed the moderating spend rate as first to development growth up XXXX But to continue build from X% previously, While and quarter-to-quarter, approximately an X% approximately quarter. move development out as research spending see we in of the $XXX,XXX, from or platform. prior in forward. and expect

Our expenses conference business. for call. customers pagers software do capital the of in we’re our we the quarter range for as expenses the capital and expense as the approximately well changes our level provided support to significant to expect in to XXXX be of during for guidance year-end for incurred the of were $X.X with our year. XXXX our necessary balance the and not any expect to requirements support infrastructure guidance the infrastructure the within million wireless purchase We first and line Capital primarily network are

generated million of quarter the quarterly dividend company taxes, fund to During both from December $X.X million repurchases expenses of cash ended earnings We hand, the was $XX.X the XXXX. used This, of million, on approximately year-over-year noted on capital depreciation a cash $X.X $X.X before $X.X the along $X.X XX, of EBITDA, sequential basis. balance quarter, and down amortization, previously interest, million. and the up a million, and with approximately share or million in with

liabilities amounts balance as increase this review of XXXX. to the with Before quarter. assets a using sheet continue are adjustment effect for well we XXX. are operating balance increase XXX, ASC after valuation while our financial retrospective from approach the XXXX XXX as reported and Results ASC X, January This January cumulative under the to leases out balance and On the current in adopted our gross-up million guidance, earnings XXX. presented I in accordance ASC represents of reporting as adjusted opening $XX our the period X, perspective, I'd retained period point a sheet our noncurrent related January X, our corresponding to beginning right-of-use noncurrent approximately like ASC under with to of be historical XXXX, in XXXX, accounting of not prior modified will

the XX-Q, later refer our details, today. we file in additional Form to Notes please expect which section For to

million; our on the capital update to we to $X million; range will and always with that which maintaining XXXX, Vince? consolidated are and the the of million based to on Finally, you to depreciation, that, trends million $XXX over turn to With trends, will $XXX expenses, million. on business current call $XX quarter, of XXXX. million you for $X guidance revenue who in $XX to software respect for those from are performance $XXX range goals remind I'll our change. revenue are we financial expenditures projections first based and subject including our total to to accretion, our from operating I Vince provided, $XXX excluding adjusted guidance projects previously amortization million to million,

Vincent Kelly

Mike. Thanks,

the your like questions, call I'd several comment items. Before we to to on open briefly

update First, strategy. to capital allocation current you I our on want

Second, additions. allocation sustainable recent profitable I some for review key our key finally, to growth overall stockholder I XXXX. strategy, is our to about And maximizing value. to business goal to want talk briefly goals management current while With capital long-term achieve our respect want

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

and M&A Our we have and as operating conduct includes discussed includes capital to potential Even opportunities share have for the satisfied not augmenting include business as select platform as multifaceted infrastructure. acquisitions, we now, we'll the also investments dividends most have and for expectations of allocation reviewed, that due continue with in It as product our well key development, the we strategic strategy explore appropriate. diligence past. targets been valuation repurchases

longer, integrated will future platform Native believe to the the industry-leading that for an for due far now, and bit result collaboration. build we we communications Cloud is for However, an have state-of-the-art the concluded create while path, bypath our superior ability a to taking clinical that architecture in to

we've to company plans quarterly continue striking our success to review Additionally, and to company per and and $X.XXX team we of as respect interest a share the and potential to our balance as our make important and to paying continue financial create other we’ve our remain believes of invest comfortable and previously stated, of repurchases our capital With you communicate we future term share allocation we to the dividends, to additional very that repurchases to with the earnings. year important board quarterly long-term remain this share the a report We'll and in value. committed appropriate. in evaluate benefit of uses is long a transition, that management strategy upgraded capital posture our We're our flexibility We in stockholder over serving when our dividend basis on management, reasonable capital two longer-term are each regard allocation stakeholders. recently additions. We'll quarter strategy.

with an tragically $X.X integrated medical integrated platform doing Tim saw a best and no Care happens both that, him. center billion year the Information a Chief delighted Tim replace System, was new lost wireless one Saine, with First, building fully he an blood Harris were it have in to integrated on we but Tom in to has he winning in clinical doing better we He gratification what a who IT experience August. through Tim to years made industry long-term at academic comes of a health us a and system we state-of-the-art veins. thought care Health also Connect that team. CIO, M&A else XX Cloud our former us, strategy is Native accident our airplane Spok Native a be us our company. Tim instant after CIO, already customer path the platform, Cloud also to our fully deep and brought to resonated Officer, Tindle, He system has We're last not entrepreneur's an of while architecture, software. communications. with flowing his on When for the endgame offering approach, the told

technology, Dave manner. organization development collective our to in years’ already experience contributed our contributing technology, devices professional players too market executives has have XX added with radiology and Cath our organized Lab We're industry-leading with [Indiscernible] future. care medical vast and enhancing with to in pleased Class X including years a Class enterprise of information nine Dave experience our product endorses we've enhancing and both approach Second, health years to has and team. strategy and and and device lead product collaborative, software. five board Dave to team experienced these X on

evolution investments for our platform, believe growth the in facilitate our growth all Spok the declines. potential key revenue accelerating simple quarter for Care do to and to with resources a our to business we of and and there long-term order of our and services large highest have XXXX. take where and believe our this while business the first outlook, further are markets, well In infrastructure, driving our successful goals revenue commitments. of value goals is focusing They year the positioned aligning and goal regard strengthening our and stockholder straightforward. with of wireless chosen activities Finally, include are for ultimate connect spare us We advantage fulfilling a creating of managing we opportunity development products software

plans and providing Spok remains committed to future results of our up, our believe We So solutions putting reflect values that the and past wrapping values these beliefs. core matter, innovation customer accountability. first, and

hosting everyone company our product from demo again, on a we'll our up to a we'll be the and platform. will by open Day presentation and session. our in I'd followed plans management, After be a respect question-and-answer on Investor expand strategy providing Connect remind call with program Care May York questions, New that I XX, your for further Before like that an to

the operator take to I'll open questions up you're in Investor Al one ask can after us. as If event, in call please is initial follow-up join this At than for allows. Galgano And and to we’ll contact hope website. you the we your details. Relations additional interested section your We��d attending His to time limit you contact our Operator? ask point, the questions. a of question information this

Operator

Instructions]. [Operator

Our first difficulty]. [technical question comes from Ryan

Unidentified Analyst

for I had on questions. Thanks you my taking Sorry, mute.

Michael Wallace

Sure.

Unidentified Analyst

revenue about talked do for that communication the for we this software billion think opportunity about annual quarter, a Last Is $X.X you collaboration and suite. opportunity? whole subscription having an

Michael Wallace

Hey, on you look billion $X.X of billion from Ryan, you type it on if at The on-prem about is basis. a roughly look It's it's to it billion at annual subscription -- market. Wallace. $X if Mike an license $X an

an what sort So on can to end multiple $X on-prem of the you you revenue, think of back subscription get based is. market-size market the you size to standpoint from billion license into But we what billion perpetual on model. of business the that low that annual on $X.X type the a depending is use

Unidentified Analyst

Great.

on is XXXX Connect no platform? bookings month? so this for still expectation your And bookings Or expecting Care are the you the

Vincent Kelly

selling the going Connect year. be half Care the in to this second We're of platform

from mid-July. seeing our bookings. But July, summer Ryan. it for prepping coming the conference conference all revenue sales will don't that revenue revenue, We big in XXXX year. We're in have in for at that the in start of XXXX be of significant some sales expect get selling expecting we'll terms that, We'll reps I But in I'm middle that. that who

Unidentified Analyst

progress examples And in the you of made each product double prepared strategy? on you've in sales remarks, some Great. your click development and then could

Vincent Kelly

Investor of actually up that a a think And that. May at saw our lot Day. I you're XX I Yes. going detail quite and that give to for demo of signed We're

are weeks, we'll to just guys three you we'll where think that. So that we with after I show and defer probably about

Unidentified Analyst

new then what did the And customers to they products purchase? the Spok Okay. dozen family,

Vincent Kelly

They of mean do has buy our But purchased messenger. I mobile historically them a center is Many that the variety well solution, also our which our our products. as product they primary solutions contact sold of suite. we've learning been as whole solutions.

primarily but center So of those contact it's mobile. a and combination

Unidentified Analyst

Right. luck. Thank you much. Good very

Operator

with Our Lake. from comes question next Ben Natter Kent

Ben Natter

expense of the marketing or kind move wanted just investment for R&D through sales looks this of what the year. as ask about like outlook or to I further Hi. and rest operating you

Michael Wallace

We're on was outsourcing actually now we're And to staff the I mean to In very bit stable bring going R&D. only Yes, area relatively in it's million. that going past. like that, on up year growing of some I imagine, $XX.X can that thing growing of about efficient on it's we as up in a or went the our And the forward. quite so Yes. -- now $XX We've with think forward. on. a years. level the a XXXX, like in that the XXXX, opportunities. we've couple over that. taken some words, confirmed be it I $XX not we had up we doing million. you And some past. foresee our where over leadership few We're right a a not outsourcing We're at technology now other more going been is good ourselves in ago, side we're comfortable think and We to million in last worked R&D and pretty it reputation expense, have making consolidating spending has be got over going do years needed increases to brought

So stay the we it Connect Care is where will cloud-based platform. you're going about to stabilize, see that it as and infrastructure line complete item

Ben Natter

Okay.

it seems -- like just of you're… So sort it your your base, annualize you or I like if expense mean, seems operating your

Michael Wallace

I think you're spot on.

Ben Natter

to softest saying I years. platform? Connect? new wait that the for impacted want -- or customers of the to what quarters so you I had being in I number of sales degree you've about What know related at perhaps Care billings to had look, cycles mean, Is all customers a by one

Vincent Kelly

We seven-figure really a to quarter quarter. actually tends nice be happen might prepared quarter the fourth good I it's from first my pipeline second got for had landed very and deal very a referenced given for people little light. sales not. us seasonal the large have of a that What comments, is the a year. quarter. seven-figure a quarter big and bit deal solid just We No, for the that the of just large have rest to balance in We've pipeline another very the tends in perspective a the

this affect cloud-based going don't the platform in I Connect things to is and now the for half to CCS place as that year. People that much. some not of the aren't platform are out upgrades selling to you'll start because X.X prospective right take no over the The we're of now. in we're saying think of So order necessary Care second and see rollout technology that selling cloud move there it's really going to our the version until our time,

it's don't us going hurt to I So at all. think

of matter fact, even a might help us. As that

Ben Natter

it. Got

So be platforms second to pause just in continue both or so selling -- or just... there's anything. It's pure the no you'll half

Vincent Kelly

absolutely. Oh, No, he I like think comfortable Mike yes. reiterated Oh, Yes. We're said, our our guidance. guidance. with

Ben Natter

years. -- your you just driven in over primarily receivable sort that? of question. the has last increases mean And few some other had what one driven accounts I What's the Okay.

Michael Wallace

Yes. I days. hospital the mean certainly slowing is a part down their is sector payments That's these one. in of it

are good to of in of, selling deals ago. out terms historically more that number larger we cases, stretch been a is the seeing set that some a Second, a years we have tends thing, complex which payment and

years. -- and things of pace certainly would all those bookings have been increasing increasing we over not we the the like at So them but

of a function a AR into play bit. all increasing they So

Vincent Kelly

pulled some to and out we quarter? intended did When the up it we where of me. credits too to first and AR I know point, a reclass we did up AP. excuse tended Was Mike, AR, up -- in bump that pump AR bump at and

Michael Wallace

Yes.

accounts of in that $X So about credits there first reclassed into was quarter, million the we payable.

actually sheet, you'll $X balance that about million. at accounts see if So our increased look payable you

So…

Ben Natter

one-thing… a That’s

Michael Wallace

a That's up one-time that thing, $X AR million. so pushed about

Ben Natter

great. you. Okay. Well, Thank

Vincent Kelly

you, From Ben. Manhattan. May CFO, XX to Thank

Ben Natter

Francisco. San in I’m

You’re right? webcast going guys to are there,

Vincent Kelly

download. can You

Ben Natter

Okay.

Operator

[Operator Instructions].

Vincent Kelly

I calls see Operator, in any don't more queue. the

May our great joining second and go forward Thanks and I up. July. again wrap again with at make a can us thank this joining look you just Investor results, and, speaking day. to everyone Day release of we'll in us after if have our we for in ahead it want So course, to and for morning, we quarter you everyone,

Operator

concludes you, This Thank everyone. today's teleconference.

You may now disconnect.

Spok (SPOK) 28 Apr 192019 Q1 Earnings call transcript