SPOK - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to the Spok Holdings Q2 2024 Earnings Results Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Al Galgano, Investor Relations. Thank you, Al.

You may begin.

Al Galgano

to Second welcome Call. XXXX and everyone, Spok Quarter Holdings Earnings Hello, am Chief Inc. of Kelly, by Officer; I Vince President Executive joined Mike Wallace, Spok Chief Officer. Chief Calvin Officer; and Financial Operating and Rice,

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

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

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

Vincent Kelly

XXXX second second team afternoon, call. for was full Good software our the deliver successful generate XXXX. to year, us proud quarter solid to key in bookings made quarter. operating progress the growth that earnings will you of year everyone, and performance believe able relative thank to I'm of for half We the several our our in tremendous leading second a areas and platform joining

we third release, the As off strong. press started quarter very in our I mentioned

lumpy, sales the to XX trajectory right. is to always going over our Software up are but be months and

be worth $X tough going as the many quarter, in contract of we XXXX included year-over-year records, the we performance almost the comparable quarter million. knew sales ended second to was As single particular,

and sit quarter Number the our health amazing lot third positive from nation care number the to indispensable space. to relationships center respects, regular we with comfortable of the with year we many we guidance. where However, our with purchase have our takeaways three, on requesting. a have care systems platforms Number one, are continue enhance number as moving viewed consistent a in contact competition invest two, utility. we full very are we're to customers our in core don't into health four, basis. an Number include: five, continue And what in top in we

our take this front solidly to remains responsibly over to term also cash me while Let and That generate shareholders right return mission everyone capital to long growing that is the in investing unchanged. and up business. remind opportunity our our

dividend As ago, on sustainable performance lot our capital is and believe through we annual a is and in to focus. primary an X legacy current cash our we've level cover in, into grow pivot to we our since our That on that we executing strategy good Returning historically. to full had our about is success feel basis. and a with path strategic than doing and we've flow path on a we that a demonstrated so believe our are more years shareholders of

strategic on plan of business Today, support progressing share quarter. our for financial with in well goal as you how an results the our is we'll update this as

call for Mike Operating and then and will agenda today's for over review the Chief turn President I'll the our Wallace, be of to start a as call, by the reviewing the by begin follows: performance Officer, we'll I'll order providing company our will highlights, quarter and open review then some guidance call and quarterly review financial our the and for up your Calvin XXXX. it highlights and operational for back I'll Rice, our And wrap of Chief come second Officer, up sales to questions. our financial Financial quarter.

As Spok positioned been has we the to and for a in quarter we accomplish second are of set team second thought able what a up half. the front, strong

Second we XX% our in the low pipeline and will which in year. in increase our the adjusted bookings network. impressive include point strong dividend cash first highlights to operations believe capital continued balances, growth confidence first quarterly continue levels from build quarter the its second quarter remainder software providing resulting which a the levels than of more production continued of the requirements, in The quarter in hit through expenditure and EBITDA, growth quarter, covered

levels software quarter. second prior bolsters in second in dropped continued net as the software revenue down and below services maintenance growth Improved significantly in X% that the our the churn Healthy quarter. of trends quarter unit from wireless business

expense compliant in per growth. alphanumeric necessary continued Continued still in the and our and Gene in expenses product a fuel further pager research and while revenue prior as expansion of to discipline actions year-over-year unit reflecting average our of sales the wireless management decline making our investments impact overall pricing accomplished PIFA future operating encrypted was of development

and of were adjusted that EBITDA our solid springboard second are our In the the and half. our year optimism short, pleased quarter very for performance guidance maintain with in year, believe our the reiterating results we revenue the we first for estimates provide for in XXXX. in second the We half a and

of the adjusted XXXX, covered In EBITDA, $X more returned over stockholders. which generated quarter to million than we million of we our $X.X second the

fuel future approximately maximizing $X.X revenue in for and development believe development million cash on However, selling in our on our create increased software XX.X% track at we're to stockholders experience will believe significant quarter that and operating investment and research solutions by will We extensive communications this established XXXX. product our flow year-over-year growth revenue of $XX.X and we expenses a value generation. investment and research invest million basis time, the same or and our by second

cash we intend legacy I stockholder through Spok a to As free generation, track and this continue proud has mentioned, value record. flow of creating

In our repurchases. special through our of since regular our the share has to $XXX returned When distributions cash or stockholders, has a you consideration acquisitions repurchases, dividends, fact, share of last million nearly our into take years, repayments generated than and stockholders Spok debt billion inception, quarterly over either balance, XX Spok total cash free current to dividends $X more flow.

our long number management; are: four, number Our on number the software Those cash base; focus two, and a investment over our solutions; grow plan. wireless stockholder-friendly capital maximizing strategy. our major tenets one, X and disciplined supports of term in expense number continued revenue continued three, the allocation

and operating significant create communications through cash expense experience base solutions growth, extensive for will our disciplined established management world-class and customer our believe we flow forward, Going value stockholders further revenue selling and generation. solid

Mike, our the me take what think of to renaming organization to over is call passed the Spok. month, turn the I a we a noteworthy had the milestone announced I this review Earlier let moment XX-year team. that for Before of our to anniversary company

count XXXX, and critical our integration are As to you Software and the lives AMCOM predecessor cohesive we patient systems at that in outcomes of support creating legacy business the Spok stake. and single our solve health acquisition companies know, seconds help communications and hospitals Spok strong challenges of a of safety expanded Warn. when completed public improve on with

paging in Over software communication of talented impact paging combine the Spok's the to decades, industry. past with a industry has and power and groundbreaking our the several make experienced team consolidated

to in to and continue enhancing We platforms, invest our products solutions delivering our our communications exceptional customers.

with more a best-in-class generated has flow of significant in as leader cash largest strategic communications offering. X,XXX creation to than intellectual Spok a and our shareholder base created care large maintains paging investments, as has a property pioneer investors value communications, returning the via United Today, product care capital and blue-chip in R&D portfolio a customer through States, health as the network of in health hospitals a

in Spok the are industry-leading the an years. integrated for top communications X years our the past we the we as industry XX Under over built platform clinical We've fully of banner, reputation company. since our recognized

by The years position their health partner in communication, the consecutive communication enhances the for our our health Spok of safety. patient clinical technology unwavering securing top hospital care which place We ultimately clients delivering trust underscores critical to enhances and are communications. X achievement that care and as commitment go-to for system honored

our claim hospital announcement recent nearly this named that for is every a over a decade, U.S. supporting Further

Report's hospital honor World relies solutions. & on News best Spok

of For care facilitate care. the announce XX XXXX hospitals industry-leading and XX that XXXX support the to on secure list exceptional to use Spok's on honor, were we solutions pleased care collaboration health patient and

XX participation a when honor of Last few also the we anticipate published pleased on the Spok is weeks. list solutions, similar XXXX role that to children's out and announce we XXXX hospitals in year, and X were use

recent the you our unaffected Mike, worldwide Finally, I before related in solutions outage. turning that Spok want with were by it to share CrowdStrike over to

help many was and call their of Mike. internal are the our over customers the systems to turn support throughout in them With outage. Spok While to impacted that, I'll available

Michael Wallace

Vince, you, Thanks, joining us everyone, this and thank afternoon. for

As tremendous was very out, performance number quarter, in strong and Vince made areas. we progress pointed a it of key a

information communications care capital our continuing true a It deliver as solid to progress most health Spok we for remember, matters when smarter, to We missed and strategy. all global to the a in and platform have build allocation We financial leader shareholder-friendly being mission remain customers. faster care patient is our clinical where to improve clinical to it important enables teams outcomes communications. and of

who health care of customers were in facilities the we United the noted, X,XXX As hospitals Vince representing who's have States. as over

our with have the We flexibility. and relationships. valuable revenue is debt that years and company long-standing in of coupled no is than This which many our reoccurring financial with over are provides a nature, strength significant solution built we XX% have customer more

In our XX was second X- size customer in and multiyear And the quarter. contracts X-figure Most saw operations X-figure included the XX prior momentum software year. X-figure bookings sustaining operations had $X.X contract impressively, an XX% last bookings that average we engagements. those software that the million included and second nearly up quarter X contracts, quarter, of

extremely are first the XXXX. pleased of X we with So months

minutes few in a take a couple to quarter. me customer let second engagements Now the we signed of the that highlight

United a located The of X-year X,XXX-bed X-hospital, agreement the first health system a in part Southwestern is with the States.

organization Epic this as modules plans to organization, Epic use forward As as possible. many an

the and team their strategy improving system. health provider platform However, noticed their a patient identified Spok safety on CEO to and that immediately and focused communications communications that strong, simplify and its offers unified organization will the environment unified across their unified in a tasks CIO standardize satisfaction, gaps stable vendor as

will operator services, Connect, multiple the call opted value-added this as professional monitoring this also on-call scheduling, support. organization nurse health notifications care and and code benefit Care for managed in annual integrated safety and services, procedures, code our messaging and well coming used directory, medical web multiyear secure communication Spok services fully as maintenance platform and enterprise-wide be paging. Through patient from

on enotify leverage hospital Care hospital only customer engagement British in Spok X,XXX XXXX, second managed enterprise-wide Mobile the and support. Ocean. XX,XXX Connect a The features critical is I'd was web like directory, safety employees, This to operator highlight annual for of the and secure value-added partner Atlantic with been the hospital's products. services, XXX-bed since their medical Spok and previously North scheduling, overseas the they visitors incident multiyear on-call agreement and annually. Spok to approximately communication Connect full Care services suite code over management for territory with the and Similar this maintenance has Spok professional serves and code multiple also services, included used messaging. contract for discussed, Spok

into their higher storm like an north winds ability the July X, give our where final of and came to moving weakened. gusts. team of note, mitigate quickly storm onshore the was Hurricane headed action a much it the Beryl. recent hour and I'd On jump The recognition to to impact morning Luckily, XX-mile quickly to the with wireless

down, flooding, tech there less of a action. was were mobilized team transmitters into of While quickly and our our isolated number

experienced back we day Our creating able and to as customer for the franchise. our to for It and is their I'd customer that our and Spok. no business an reputation responsiveness escalations. those has quickly makes wireless Spok incredible like demonstrates customer support that team team thank transmitters to was industry-leading get our online every that about Vince strong gained efforts spoke loyalty the and dedication team

briefly now review will to the quarter Officer, over second to Calvin? turn call Calvin financial performance. our I Rice, the Chief Financial

Calvin Rice

XX-Q provide information good minutes XXXX more to would and performance, a financial take it and our Mike, our includes about I performance quarter filed of to everyone. reported today. encourage recap we will our Thanks, few which afternoon, now we operations like this cover second as you review on financial and a business call. than I significantly

in $X.X the $XX second million income share per or net total wireless $X.XX second income Revenue of $XX.X XXXX, In respectively. XXXX, and was of In and $XX.X quarter $XX.X revenue compared our year. the per $X.XX statement. million quarter the totaled $X.X net share revenue revenue in or million prior total diluted revenue for million quarter to GAAP year, income compared of million million in GAAP of Turning compared to $XX.X XXXX. million to the of of software to million diluted consisted of the prior $XX.X

our Gen ARPU wireless and by we respect undertaken significant unit primarily in continued second new in a revenue, saw X.X% With and extent, improvement $X.XX prior pager. lesser net for pricing row from to increased a the or the quarterly at in continued late of the down to A quarter driven prior quarter. X.X%, churn XXXX from in X.X% year, sales actions

our secular are for A continue in in pager service, further revenue focus our reflected continue decline. that pager hopeful lost wireless will as will other declining Gen the initiatives and like demand on we While through unit basis decline services to on pricing pager we a the to units believe offset

quarter same period and second the in to of to million XXXX. second totaled the $X quarter software million compared of revenue. Hardware $X.X in Turning revenue XXXX License

of touched revenue largest fallen million, would worth XXXX, the in in Vince bottom almost million, license As the line. of of which $X.X contract quarter previously including nearly on sold history second the to Spok's we majority $X single have the

leading sales to a this, quarter. and XXXX. from timing our highly same to expect In to success quarters a quarterly did XXXX, We sales we given number able just not quarterly fourth successful to in pull addition replicate this the third year, expectations the were of for forward of the

license to Vince basis, point expectation full in growth revenues the like translate we would half second I comparable terms year a on that also to expect and stronger hardware to that basis. and However, of on bookings out mentioned a of a

half. million quarter this Professional services nearly year the million driven $X.X XX% in first by revenue an be was over second versus of for personnel in Much the last prior from XX% up over $X.X XX to XXXX, months. the a increase and healthy period the of continued

has also well. This an performed but professional on is to useful continue touched grown, sales calls, like believe and operations maintenance expect managed ongoing services briefly in I personnel a to service and the previous sold we've as that this expand. have in with mentioned additional we our to earnings pace the discussion services our within As service as backlog in growth may professional renewal. some past, we bookings need of is match typically details increase of software be service a bundled services This something to We've seen offering and our very investors. is

necessary the multiyear X This in made any available, budget. have fiscal implementation they product customer when accounted services offering for not service avoid typically past they for over were over and with the This years. customers provides we provides all upgrades a customers' their sales but and own in with which Spok faced known is that delays the training software cost term were term,

bid customers, engagements. cost to services has our managed excited to margins is more being our the term given in our fixed are evenly are prohibitive While amortized likely that we higher traditional experience relation over be limited opportunity and to the in predictable, seen about smaller revenue

investors expect with next regular the on Over to details provide regards more several services basis. begin a additional we'll quarters, I managed to to

excludes of in second We to period. and million approximately for and selling Adjusted costs incurred prior $X.X the the a operating onetime $XX.X quarter compared restructuring expenses, and in marketing. benefit $XX.X accretion which depreciation, million totaled severance million year

been have the would with period. generally year expenses in line operating adjusted benefit, prior onetime this Excluding

expense of a expensed under historically indirect to proportion been been experience. we the component the practical small revenue, has related commissions amortized While have majority our there as in ASC XXX an always has incurred that

has With the multiyear to also relating significant of grown. growth XX-month extending period the beyond commissions engagements, revenue

our have costs to material our currently expensed majority the the be revenue not forward, commissions statements, are related going same been. alignment counterpart with our of in manner amounts these as While will financial these in

aforementioned manage These which primarily offset our increased were to cost our lower in relation revenues by revenue of research to to the in and due as costs, costs and continue in investment cost and generally ongoing benefited of technology from and to as we from our services, Year-over-year, support in development wireless the bad costs Virginia platform. lease. operations administrative debt hiring decline did general favorable the product cancellation

Adjusted actual second totaled million from This to the an which at start related the lease Virginia in to continue the is the strong of more end prior $X.X XXXX, through and will that September, we'll of reminder, in to significant bookings a costs. savings. cash stemming second as highly seeing expenses successful license point As quarter EBITDA impact our to year the severance million compared quarter restructuring had dynamic reflection $X led period. we a revenue. in

second we generally line the guidance has half with positioned a financial minute. our second robust believe results Our strong in us year, in and our for in a expectations XXXX quarter are pipeline on for

We second the anticipate which and $XX.X the Based XXXX quarter in to of the $XX $XX.X annual balances million range our $XX between with in to from million exit current first ended free million the million with and we in $XX flow grew cash million. million quarter. on outlook, cash, cash expect $XX

software on note, and and $XX to $XXX million from XXXX. are for million ranging This from revenue ranging $XX the million $XXX already $XX.X in of million adjusted to range today's financial to revenue million $XX.X you EBITDA million, $XX to final to with million $XX first we wireless in range million. guidance we to year, performance seen year, between between half revenue probably a our have On release, based as total press expect the our reiterating

that turn With will back over the I Vince. to said, call now

Vincent Kelly

strong Thank believe deliver our able returning you, to us strongly how again in our I the the to point the results stockholders. again, Calvin. team the positioned year. remainder of value out are I'd proud capital with to these was well we like and quarter to while believe for am performance grow franchise We second position

engine our We source Connect, integrated wireless software maintain . We the recurring and the Spok strong offering have revenue our in world, of solutions our service line. paging with with growth won organic our we a a in in long-term enhanced serve we've largest and Care X results operations ahead that going customer best devices bright. software Spok's platform care financial We us, are believe these base. assets core future to health user our paging and and of for is us our

I to your them for shareholders Before thank our participation thank up for to pivot. their open call our our also I'd meeting support annual during their I'd questions, to yesterday. the like like in

XX, reported, the business, which our as of we Board the number the one, X items of accounting the two, year our ratification public Directors; all overwhelming nominees of LLP majority. for As the XXXX included: passed and nonbinding Pay, Thornton Grant of approve registered appointment advisory of an number number named of compensation independent to executive each firm with vote Say on three, or ending a officer to XXXX; election December

Form review SEC. voting of please with the full in quarterly report on our a disclosures results, XX-Q For see our the filed final

the you up we to October. updating next We may appreciate look Spok, your quarter to when in questions. we everyone Operator, results call report open again in quarter third interest now forward and

Operator

question first Our Instructions] Street. Lake from Eric with is [Operator Martinuzzi

Eric Martinuzzi

quarter here. solid Congrats on a

over of as deals XXX,XXX the had about, as ask consistent QX, on side, over far actually line X April. ] quarter? and -- XX in had having over I that to you looked going like about it XXX,XXX expectations recall, pretty phenomenal XX XXX,XXX in talked [ the all, XX first and with [ software the wanted the Just performance you Because your a as was over XXX,XXX into ],

out Just in played wondering and how June. things May

Vincent Kelly

one some line, in into of It third that had in in higher licensed the lumpy, large of the and very to license was Yes. line QX we it slip quarter, there. but had very component in has of But we first second in part a had the shortfall more think with deals quarter little software deal almost was our We where bit then in the general, week offsetting expectations have been them there. license a the going of and we close than the pipeline the QX July. we're a be

Eric Martinuzzi

kind had full a the least underline QX bookings of point operations Yes. because point, at at big ago. year growth I we down that a software XXXX in at looking back you the software Are that double-digit win we're XX% just to wanted to continuing And you bookings? XX%. made just year on we're the for operations -- X-month obviously,

Vincent Kelly

Absolutely.

Eric Martinuzzi

did churn this well that creeping over behavior? XXXX. we expectation first in we X.X%. year All The the Okay. see you are wireless side. right. the to a half looking about churn are more at down. -- basically on least as I customer of the to back the quarter-on-quarter, was terrific. up then see as back for full the was And going On based What's for Or Is QX basis, shifting X.X%? That's half? we're be like X%, what

Calvin Rice

better. Yes. would would really expect is couple we quarters, phenomenal it'd take number. the it. tough what X%, that been end we've we that's with full to X.X%, mean quarter. get number But last I that expecting in if be to line full still range, definitely year pleased it will say I with I maybe saying Yes, in X% year this continue X.X%. slightly the be probably Calvin. second I about could Eric, the of were a over

Eric Martinuzzi

we we've looks the down $X.XX -- Okay. a the like but step a the I it on given sequential huge had to strange, It wasn't which the -- behind just was on down, rolling gen next and unit Gen per step notice QX. did had we've then pagers A ARPU I wireless thought And What's step we QX about down, out. price a then increase ARPU, got that? got

Calvin Rice

Yes, sure.

in X of chunks. kind at perspective, standard we ARPU from component. So that One of that kind is look an

is don't kind we X because But believe on And going still. generally, The going small impact to larger quarter variable based from that the component. it's or a And next, a coming it move albeit to of be see overcharges variable there's typically, third it's pass-through other offsets. part, from is component. pretty on, like ARPU the piece. things the a to And scale really, part that's not,

So through nothing to We've increases to year the about worry similar from in got that price middle going here, third again expectation. quarter. the last of

that And to benefiting the us here start so we in expect next couple of months.

Vincent Kelly

We very have and will large quarter A pager third here the the a quarter, Gen of for and on as teeing couple have fourth impact up that positive sale deals ARPU too, well. a

Eric Martinuzzi

Okay.

year? sequentially expectation the higher sequential remainder is the the So of through the --

Calvin Rice

that's Yes, right.

Eric Martinuzzi

then All me. here right. QX up QX. cash nicely was And question The for versus last

finished year million. correct? $XX million at Is to we out $XX the said You that

Calvin Rice

correct. is That

Operator

are closing There further Kelly would time. Vincent questions any I floor at Instructions] like [Operator no comments. the this over to to for hand back

Vincent Kelly

to great of much forward end in for you We October great quarter very support. a report Everyone, third updating quarter look Thank Okay, our and a again at have again your next day you shareholders. we here results. the evening. when

Operator

This concludes today's conference.

disconnect your your you this time. at You Thank participation. for may lines

Spok (SPOK) 24 Jul 242024 Q2 Earnings call transcript