SPOK - Earnings call transcript Q2 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

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; and Mike Wallace, Chief Financial Officer.

At this time, for opening comments, I will turn the call over to Mr. Wallace. sir. ahead, go Please

Mike Wallace

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

include are Before want relating that may to discuss to remind statements we our and everyone today's operating Spok's future conference business and to risks subject results, financial I forward-looking uncertainties that performance. call

statements other estimates future include plans, which or as on estimates may expenses events statements results. of call statements conditions. revenue and this company's any actual and to and intended dependent predictive upon represent income the date Such are future of assurance as only to or These well the as conference are give not

results statements. actual in differ anticipated those these Spok's forward-looking materially could from

be are uncertainties. reasonable, risks and Although to they that statements these based to upon subject are assumptions believes the company

Factors to Please our contained compete relating quarter XXXX which review which related operations the Form and from past file second assumes conference to in in update statements environment forward-looking today, and our note Securities Risk any no XX-Q, section present obligation filed filings Spok expect the business we Please Commission. and XXXX calls. XX-K, Form or our and that later Exchange to and documents with we

call the that, I'll to With turn over Vince.

Vince Kelly

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

was second XXXX seasonal quarter in the in of with performance line Our expectations. our

strong retention, year-over-year expense in software subscriber increased levels, measures solid year-over-year including; strong in the bookings and backlog During levels management. operating quarter, and sequential growth saw a continued software number key performance operating of we both in improvements

to position as million XXXX a first positive from second believe generate year-earlier half the in solid enter provide continue of EBITDA year. the base results the We Overall, $X.X totaling the in us we period. year-to-date million well and half of up we our $X.X

our product enhanced stockholders platforms our of through the of continued dividends and in capital our year Spok returned through in of $X nearly to form Connect. our the half offerings the communication Care repurchases also We million integrated investments first share and

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

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

for on the remain teams Our target year. meet development goals our to

were year-over-year prior pleased As to first quarter see up revenue half our we transition, we grow the software further with each year. from

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

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

a up software second GAAP $XX.X up XXXX. related on backlog our at and X.X% X% XX First, quarter quarter year million of the was the and of was from the from revenue prior over million up than prior basis quarter June software X% $XX.X more from

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

pilot incent year our expect we program Cloud including Additionally, be a adopters. to end new early platform to Native selling by

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

the XXXX pager level units net quarter this As losses losses result, the and half matching in to approximately for historical of of the metric. pager the low net quarter declined a in prior second

trends base. top-performing specifics management. more will to demonstrate continuation these of continues in for especially disciplined our the in our subscriber few Spok paging the were Healthcare Mike see to approximately the review segment, We a expense minutes. pleased stable quarter XX% which of comprises

However, team platform year. let that Proud of platform, in the basis even make we focused infrastructure year-over-year accomplished we as continue in X% investments drop me to half we a perspective. to area point make a the on Care for our from nearly efficient marketing first to our expenses our and more has sales support this Connect cost operating the product development saw out in of evolution in this necessary remain looking and of what and opportunities the

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

we signaling customers of Pacific the quarter, continued than two added Several customers dozen in Australia our the to During and are family. more new those commitment to Asia Spok market. the growth

Spok to customers the last opportunity this joined of new couple a Let highlight that family quarter. me take

an customer multiple The help volume for deal Spok test million signed deliver results a signed of we seven-figure imaging its per and imaging districts system locations. IT a part system. all exams medical local across around collaborate year. hospitals information joint taking First, which to multiyear with sites. its recently largest of public imaging managed health solution three Australia's enterprise selected multiple chose and for This health operates The a Spok to deal

with competitors former Coast health and United we operating major with hospitals to system, West health not-for-profit switched XX secured A their the care care clinics. of system States, had In customer, the a XXX a Spok agreement disappointing solution our for one Spok all is enterprise-wide of Care center has ago to towards an working console Spok, upgrade their two consolidation four-hospital Connect results. solutions. version executed to back a came and X.X of contact The customer years

facilitated is an groups. we strengthened to and we at as thought presentations focus Spok Spok sales position generating key executives continues made and attended an leader Last the build reputation momentum. our industry-leading industry quarter, conferences where

of named to proud hospitals Also to that consecutive the for the we all adult U.S. year, are seventh report the and honored

News care. and patient XXXX clinical Roll facilitate Best World XXXX Report's & Hospitals exceptional to care Spok support solutions use to Honor communication collaboration

business additional outlook some our shortly. Officer financial make will our Financial review comments first Mike the Mike? quarter. Chief I'll the Wallace, highlights for But on

Mike Wallace

Vince. Thanks,

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

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

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

areas second I minutes XXXX. revenue; the include: performance. of Over review few They the financial two review factors review finally key quarter second next certain sheet; a balance will guidance which selected quarter quarter for drove our second influenced one items and which a will impacting of expenses; our I brief review financial

of happy you usual, specific I items or questions of be results address portion financial will our Q&A call. them any about these to during this quarterly have if morning's As the

million Through of quarter With the XXXX. revenue $XX.X revenue to second total of months second XXXX, the $XX.X quarter XXXX. half in respect to revenue to was the GAAP for $XX.X of GAAP $XX.X six the totaled in compared first million of million XXXX, compared revenue of million first

basis was revenue a periods our we pleased year-over-year ability to total in erosion. revenue minimize on for noted, wireless again with a were While down increase software the revenue slightly and year-over-year generate

$XX.X quarter million driven quarter software the by up for year-to-date increase year-to-date a was similar nearly year XXXX reflected performance prior from increase maintenance revenue of levels. a total X% second software This revenue. Specifically revenue primarily X.X% year-over-year second software of in with from performance

specifically to processes implementation to We enhance drive revenue. of the services continue our related higher solutions software and refine to our

by year-over-year a on to respect performance lower revenue of half unit With and was both driven churn level wireless basis. sequential first pager

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

Turning to operating expenses.

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

of quarter. million reported and of quarter second which in million amortization the depreciation For year-earlier XXXX, $XX.X consolidated excludes operating accretion down from $XX.X expenses the we

costs development improvement We despite organization. achieved costs increase period cut to $XXX,XXX over finding same the in and year-over-year ways by million other a the the across research $X.X

to research moderating the up increase we previous development prior from highlight rate steady-state are in as like the more level been of approach and in quarters I discussing While costs a category. that have period, year I'd

quarter quarter million, sharply the In the $X.X the in but XX.X% quarter the totaled of from research increase and representing we development XXXX. XXXX, a increase XXXX, costs saw of from second XX.X% of first second down year-over-year

the Metrics future. we in reduction development trend level and now expenses Again research a investments growth from such as in expenses the saw past million that of expense these prior XX.X% a XXXX. in XXXX, as year. more first investing year-to-date were while of up approach portion we $XX.X and from this in first year-over-year costs and perspective. X.X% half simultaneously those demonstrate We our rate steady-state a first the from up from $XX will continue to was On believe commitment increase should the R&D development approximately totaled of that management, while sharp overall half basis, half are research the million, our our this initial

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

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

year, we our performance Finally, maintaining we through our based first financial months the respect this guidance on are XXXX, with to guidance of provided. the six previously for

$XXX We excludes adjusted Also, that that our capital comprise you and expenses million revenue range million from expect expenses $XX are million. I $XXX $XXX $XXX trends projections to Included we million. and to $XX operating are depreciation, revenue again million subject current expect to from $X million trends remind to those which range from $X to on will total always to software million. in change. and would amortization accretion to million range total, based to

turn that, With some over for Vince? open for comments call we to I'll call before closing back your up the questions. the Vince

Vince Kelly

good and Mike job. Thanks

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

outlook our strategy. key First, review want want capital the current goals our remainder for allocation I of on to XXXX. you And I to business update and second,

to our sustainable business stockholder to capital respect long-term growth, maximizing goal is strategy, achieve allocation With our overall while profitable current value.

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

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

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

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

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

and the large the of investments business the take our goals for and resources wireless most Finally, our remain with infrastructure, have growth revenue goals aligning regard focusing our to key order unchanged. a software and of revenue and needed us we first while believe outlook, year our in opportunity building positioned markets, products second of be to advantage and XXXX. development They successful our driving where chosen activities business half include, stronger accelerating In half to declines. in services, managing

host we to Spok to excited in we quarter, on pleased provide New and our our the next-generation give you At an City. were York Last update a were our business, XXXX to importantly have Day Care event, that of most meet Investor Connect platform. demonstration you team

ahead us. of level For website. of our introduction the that to person the of slide team We these give you platform presentations webcast, via enhanced with our excitement those not event presentation sense that for and attend believe and opportunity or you were the the will able in has a are the our the on

in and continued make to We will we progress support. as transition our your update continue appreciate you

this [Operator Operator? operator call ask the to I'll your Instructions] At open the point, questions. for

Operator

[Operator with our take first question Vardeman Palogic. Ryan Instructions] you. And from we'll Thank

Ryan Vardeman

for my Hey, question. guys. Thanks taking

Vince Kelly

Hi, Ryan.

Ryan Vardeman

you're what bookings like are X.X Spok some end year. sales? that the those now year of on between that? start on sounds How goals intend And to platform -- selling of the track It the back and pricing this you in on the do half

Vince Kelly

program So that consultant the pricing, are working We're that on the as right pilot the now. well. in an with we're deep outside development rollout, something

might our think premise-based coming under showed I how did an a Day -- we how thank SaaS-based when solution a of you example looks model. for and you that package Mike Investor and look

in not complete it's process all and yet. that is work So

we're not to So that share today. prepared

operating new CapEx. Mike to reiterated we our to where couple that beginning the a reiterate We're our targets and not and this see gave year ago of we the platform revenue the give terms going the specific other minutes our of for booking than just year that guidance at of expenses in

We are in the process.

X. release We completed have

three the on that X. one change that'll we're going Ryan the four year Day, months. process and Obviously, working approximately the time every as to be do functionality. on releases of are release We I adding we platform. value said release have in Investor at a And it each And platform, features for a we'll

-- out if center which contact you business, our or half all in there those we've traditionally United that contact beds in about Spok hospitals customers of solution. States, Traditionally the at large our solution got hospitals hospitals have hospitals center XXX look the more our the the are with

our you And our package. about package, think was nucleus messenger contact packages it so platform of including upon that our solution the if mobile the kind center results critical or other which we package, test our sold

All of all solution sold as contact and a pivoted those that we packages kind premise-based center off of model. that

of and lot It's of You lot servers a bought professional over and services. everything. XX a software

So a that was model.

model Going forward the very looks different.

service and contact that of lines includes is the everything platform the Native our are care, platform, management, base clinical but mobile functions which that platform. medicine radiology including Our else the Cloud piece on all laboratory, those emergency any center, cardiology, facilities build

So base selling the platform. initially we're

schedule initially will engine piece a That's have it. in will That in contact an It center. that's interface gateway it. a it premise-based base on-call to have it. and will And a It mobile in workflow how will function. through it that'll all platform has a have

months the As we every other service four we'll do releases, to these platform. be lines these adding

we as lines the add the of adding if up. platform the actual goes you're actual functionality, value the the So of it -- think about value you service platform

together. So We're it on I complicated to it. of right can are working thing on now. assure it's you we very bit a a put But focused

seen we that have and it. talked out went customers The to

game it's make was It'll really Harris the nation of care our out from who the Health, new going fantastic to CIO EHR more is the does Our in be a think is Nobody from third-largest more this. It's we health their said hospital They'll doing which changer. efficient. that something future. has everything for system came get it. utilization

When at all you build out over platform. built going slowly have But first it lines it to on those you're service will it build and time. not will roll that

solution. the contact integration have base maybe the with the to going center You're and platform

don't piece. have mobile We the the on-call have piece. scheduling You'll

By when the on-call it is we way, roll we one from out. scheduling day think piece strong quite our

to which going up conference, our in in announce Connect here conference we're is So it that's our demo coming October. this customer and

out a customers on working for our of are some basis with We and September rolling a on pilot this sales contest in creating it.

And talking then about platform XXXX at more functionality. adding we'll be release of even HIMSS one on that

XXXX. quarter of that's the So first in

over a you So will SaaS more model pricing because and this get model. It attractive premise-based we'll thing to much than will continue time. a as, build refine over thinking different know, is our time on

and this time. about take to it's thing interesting again The going

they As I necessary of are We've things on costing and three at do because about and money. maintenance cost our at what's structure install Professional et premise-based people look do to top worse in company and I that every Services software go and have and look look out I upgrades at our solutions complicated XX years. us or cetera layer and got solutions

You forklift need a upgrade.

software. hardware writing engineers. XX And new full-time that code for new we've XX got got buying probably You're sales legacy equivalents software. We probably

So trust just that round inexpensive not people, XXX there number people you are me. got

come that able will down. time Over to be

software of goal I So terms be reduced see the want of that any over you of want that. I team how to XX-months you I've when because given don't in build what cloud need to a

time. to is that So quite and It dramatically happen going won't with pricing evolve the the transition. over overnight change business will

but not now. what not you that's to exactly going answer know asked, I right we're what answering asked you

that we're help about it. how you to So little color thinking I about added

Ryan Vardeman

The into paid we've we years don't this platform. clearly we well -- Yes. by. what we development targets this in put And plus this, and measure NextGen really I bookings what below trading business can consistent plus our four for that have software it. I've we're the any but been I'm for stock's the fairly -- you mean, asking of into business

is market the something. Clearly, missing

you're are -- wrong ROI so, the understand event wrong, what I investment wrong. the would made. or love truly be to the targets And market's the that in to And investment the either with able market's associated the large that we've

Vince Kelly

Yes. We we'll... that think

Ryan Vardeman

think So things help I I think. letting understand by us can you those

Vince Kelly

you. thank Ryan,

and appreciate think your the it We the wrong. understand market's very We at We number look the and we're we get our a You've paging value of get of from fully. new consistent, going and until stream and do revenue business off long-term. recurring been I those business, very nice get bookings going not actually the to we're at appreciated and to valued, software not look the platform. we questions show

So got it We within Spok, start-up no expenses. saying, around we be to going a There's sitting bookings no we've table these feedback company. how got, right you think other start-up each now, company something has going we've We a from think not shown if be but a are, essentially and think things lot significant. the changer that that's game customers, from there's actual about we've of a revenue, wonderful to. from to and

give result. actually and they the until just I see it's We work. way going sales market expect just us don't to that value for to think the that's

have so, we what to know And we do.

what We we're the stock frustrated we're not losing are price, with our enthusiasm but very for doing.

absolute things strategy to go result companies milking as time nearly our see kind streams of data as for investments right as our it the making but think upside create fruition. for we're to going your significant the back investments to opposed is can our think would revenue a those cloud cash take other to good in just do flow. strategy that to about strategies. come We long-term platform, different talks is Everybody shareholders to We don't give

able frustrated I'm team Board got We're the I And the shareholder this large attract And to on doing talented and thing. this. in company. I we're management The a very leadership. frustration. myself. right thinks to we're do attract I'm thing. think talented very very appreciate this right doing the programmers. support customers We're doing able We've

they later that saw team that Chief good that's in -- sales products, and about the seen a Our in jazzed announcing are our Officer we'll has who attracted just be We this Medical of demos high-level things loves new on it. month, us joining the were very right his track.

got don't what going to it you. us going And we're deliver. and have we've value show anybody we give things we we but I that's some to until expect -- Thank on, good me what do. to actually that's So for do

Operator

Instructions] [Operator

Vince Kelly

Operator, -- ahead coming go -- other don't other I I looks the put yeah, don't any see so yes, more. him queue, okay, It any got Ryan's on. there's back like question, and see one another in

Operator

is Okay. your And line Ryan, open.

Ryan Vardeman

Thanks.

strategy is intend the relates as into Thanks. thought XXXX? Do continue allocation you what going to capital it Board's the to dividend? So,

Vince Kelly

in anytime future is XXXX, We Yes, plan with absolutely. my what I Yes. consistent the the And with any that respect said comments. to to will The dividend. in Board's continue cut dividend. don't thought we have near

Ryan Vardeman

Thanks a Good luck. lot.

Vince Kelly

after Ryan, Thank that questions morning. in you. all day. And great this third again have I very for results in the a saw speaking was you your we everyone, that much But Operator joining thank our us everyone you October. We calls today. look the with to thanks, quarter release And forward queue. for all

Operator

And today's conference. you participation. that does for your Thank conclude

may You disconnect. now

Spok (SPOK) 2 Aug 192019 Q2 Earnings call transcript