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Spok Reports 2016 Third Quarter Operating Results; Software Revenue Improves, Stable Wireless Trends

Board Declares Regular Quarterly Dividend

SPRINGFIELD, Va.--(BUSINESS WIRE)--Oct. 26, 2016-- Spok Holdings, Inc. (NASDAQ:SPOK), a global leader in critical communications, today announced operating results for the third quarter ended September 30, 2016. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on December 9, 2016 to stockholders of record on November 18, 2016.

2016 Third-Quarter Results:

In the 2016 third quarter, consolidated revenue was $45.4 million, compared to $46.2 million in the third quarter of 2015. Software revenue was $18.4 million in the third quarter of 2016, compared to $16.8 million in the third quarter of 2015. Wireless revenue totaled $27.0 million in the third quarter, compared to $29.4 million in the prior-year quarter.

Net income for the third quarter of 2016 was $4.1 million, or $0.20 per diluted share, compared to $4.2 million, or $0.20 per diluted share, in the third quarter of 2015.

Third quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $9.3 million, or 20.4 percent of revenue, compared to EBITDA of $10.1 million, or 21.8 percent of revenue, in the third quarter of 2015.

Other key results and highlights for the third quarter included:

  • Software bookings for the 2016 third quarter were $18.7 million, up more than 11 percent from the prior year quarter. Third quarter bookings included $8.5 million of operations bookings and $10.2 million of maintenance renewals.
  • Software backlog totaled $38.8 million at September 30, 2016, generally in-line with the June 30, 2016 total of $39.5 million.
  • Of the $18.4 million in software revenue for the third quarter, $9.1 million was operations revenue and $9.3 million was maintenance revenue, compared to $7.9 million and $8.9 million, respectively, of the $16.8 million in software revenue in the third quarter of 2015.
  • The renewal rate for software maintenance in the third quarter of 2016 continued at greater than 99 percent.
  • The quarterly rate of paging unit erosion was 1.7 percent in the third quarter of 2016, compared to 1.5 percent in the year-earlier quarter. Net paging unit losses were 20,000 in the third quarter of 2016, relatively unchanged from 19,000 in the third quarter of 2015. Paging units in service at September 30, 2016 totaled 1,124,000, compared to 1,192,000 at the end of the prior year quarter.
  • The quarterly rate of wireless revenue erosion was just under 3 percent in the third quarter of 2016 versus 2.8 percent in the year-earlier quarter.
  • Total paging ARPU (average revenue per unit) was $7.63 in the third quarter of 2016, compared to $7.71 in the prior quarter and $7.82 in the year-earlier quarter.
  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $36.1 million in the third quarter of 2016, unchanged from the year-earlier quarter, and in-line with $35.8 million in the prior quarter.
  • Capital expenses were $1.4 million in the third quarter of 2016, compared to $1.3 million in the year-earlier quarter.
  • The number of full-time equivalent employees at September 30, 2016 totaled 598, compared to 600 at year-end 2015 and 605 at September 30, 2015.
  • Capital returned to stockholders in the third quarter of 2016 totaled $2.8 million, in the form of $2.6 million from dividends and $0.2 million from share repurchases.
  • The Company’s cash balance at September 30, 2016 was $122.5 million, up from $113.4 million at September 30, 2015, and $111.3 million at December 31, 2015.

2016 Year-to-Date Results:

Through the first nine months of 2016, consolidated revenue was $135.4 million, compared to $142.3 million through the first nine months of 2015. Software revenue totaled $52.3 million through the first three quarters of 2016, compared to $52 million in the prior year period. Wireless revenue totaled $83.1 million for the first nine months of 2016, compared to $90.3 million in the year-to-date 2015 period.

Net income for the nine-month period of 2016 was $11 million, or $0.53 per diluted share, compared to $11.5 million, or $0.53 per diluted share, in the 2015 year-to-date period.

Year-to-date 2016 EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $27.2 million, or 20.1 percent of revenues, compared to $29.2 million, or 20.5 percent of revenue, in the 2015 year-to-date period.

Management Commentary:

“We are pleased with our performance in the third quarter of 2016. We have attained the majority of our 2016 operating goals while making tremendous progress executing on our long-term strategy to move from offering our customers ‘point solutions’, or single-product solutions, for call center software, alarm management and secure messaging to offering them a single integrated platform called Spok Care Connect®,” said Vincent D. Kelly, chief executive officer. “Third quarter performance benefited from the investments we made to enhance and upgrade our product development team and tools, as well as our sales infrastructure and management. Throughout the remainder of 2016, and over the next several years, Spok will continue to make the necessary investments in the people, technology and marketing programs that will ensure the future success of our strategy. We will share more of these details during our third quarter review call tomorrow and over the course of the coming year.

“During the quarter, we saw strong performance in a number of key operating measures and year-over-year improvements in software revenue levels, sales bookings, and operating cash flow generation. Noteworthy in the third quarter, was a net income performance that was driven by EBITDA margins in excess of 20 percent. Overall, we continued to operate profitably, enhance our product offerings, and further strengthen our balance sheet. In the third quarter, strong cash flow generation allowed us to execute against our capital allocation strategy and add more than $5 million to our cash balances for the second quarter in a row.”

Commenting on software results, Kelly said: “We were very pleased to see the year-over-year and sequential improvements in software revenue levels in the third quarter. We believe that results such as these are validating our transition strategy as we pivot to a company that offers industry-leading software solutions.” Kelly attributed the ability to improve from prior quarter and year software revenue levels primarily to a more than 99 percent renewal rate on software maintenance contracts. Similar to Spok’s wireless revenue stream, software maintenance revenue is a largely recurring revenue stream that provides the Company with a more stable revenue and margin base.

Kelly said third quarter bookings of $18.7 million increased from $16.7 million in the prior year quarter, and included $10.2 million of maintenance renewals bookings, a record high for the third quarter. Additionally, the software backlog of $38.8 million at September 30th was in-line with the prior quarter level. “We are encouraged as bookings included sales to both new and current customers, with existing customers adding products and applications to expand their portfolio of communications solutions. Customer demand remained strongest for upgrades to call center solutions, healthcare applications to increase patient safety, and improved nursing workflows.” Kelly added: “We continue to see growing demand for our software solutions for critical smartphone communications, secure texting, and emergency management, as well as clinical alerting, and we are proud to be working with more than 1,900 hospitals.”

“During the quarter, we also initiated several new client relationships with organizations such as Union Hospital in Maryland and Medical Center Hospital of Odessa, Texas. In September, we were also very proud to announce our ongoing partnership with Progility Technologies, an Australia-based enterprise integrator of unified communications solutions. Together, Spok and Progility help solve challenges across different areas and departments of the hospital as they migrate from multiple and disjointed systems to one unified technology platform, Spok Care Connect®. Finally, we took steps to further enhance our strong management team. In early July, we announced the appointment of Dr. Nat’e Guyton as Spok’s Chief Nursing Officer, and earlier this month we announced the appointment of Dr. Andrew Mellin as our Chief Medical Officer. Together, these industry veterans form an essential clinical leadership team for Spok, focused on using communication technologies to enable more effective workflow approaches that complement a health system’s investment in electronic records.”

The Company posted solid results for its wireless products and services in the third quarter. Gross pager placements of 34,000 were in-line with the year-earlier quarter and prior quarter levels, while gross disconnects of 54,000 was slightly improved from 55,000 in the third quarter of 2015. “As a result, annual net pager losses continue to perform better than expected, and averaged 5.7 percent in the third quarter, in-line with the level of annual net pager losses we saw in the prior quarter,” continued Kelly. “Overall, wireless sales efforts continued to focus primarily on our core market segments of Healthcare, Government and Large Enterprise, which represented approximately 91.8 percent of our subscriber base and 89.6 percent of our paging revenue at quarter end. Healthcare comprised 78.6 percent of our subscriber base, and continued to be our best performing market segment with the highest rate of gross placements and lowest rate of unit disconnects.”

Spok returned capital to stockholders, totaling $2.8 million, in the third quarter of 2016. During the period, the Company paid $2.6 million in dividends and repurchased 13,884 shares of common stock, totaling $0.2 million, under its stock buy-back program. Kelly added, “In 2016 we remain committed to the promise we made, at the beginning of the year, to return $21 million to our shareholders through our multi-faceted capital allocation strategy, which includes dividends and share repurchases.”

Shawn E. Endsley, chief financial officer, said: “Continued expense management and financial discipline have allowed us to invest in our business for long-term growth. Our ability to align our expense base with the market demand we are seeing and drive high renewal rates in our recurring revenue categories, helped Spok maintain solid operating cash flow and operating margins in the quarter. We also strengthened our balance sheet, recording a cash balance of $122.5 million at September 30, 2016, and continued to operate as a debt-free company at quarter-end.”

Business Outlook:

Commenting on the Company’s previously provided financial guidance for 2016, Endsley noted: “As a result of the solid performance we saw in the third quarter, we are maintaining the 2016 guidance range that we provided last quarter and we look forward to presenting our expectations for 2017 when we release our 2016 fourth quarter results.” With regard to financial guidance for 2016, Endsley reiterated that the Company expects total revenue to range from $174 million to $192 million, operating expenses (excluding depreciation, amortization and accretion) to range from $153 million to $159 million, and capital expenditures to range from $6 million to $8 million.

2016 Third-Quarter Call and Replay:

Spok plans to host a conference call for investors to discuss its 2016 third quarter results at 10:00 a.m. ET on Thursday, October 27, 2016. Dial-in numbers for the call are 785-830-7990 or 800-768-6544. The pass code for the call is 9503905. A replay of the call will be available from 1:00 p.m. ET on October 27, 2016 until 1:00 p.m. ET on Thursday, November 10, 2016. To listen to the replay, please register at http://tinyurl.com/spokQ3earningsreplay. Please enter the registration information, and you will be given access to the replay.

About Spok
Spok, Inc., a wholly owned subsidiary of Spok Holdings, Inc. (NASDAQ: SPOK), headquartered in Springfield, Va., is proud to be the global leader in critical communications for healthcare, government, public safety, and other industries. We deliver smart, reliable solutions to help protect the health, well-being, and safety of people around the globe. Our customers send over 100 million messages each month through their Spok® solutions, and they rely on Spok for workflow improvement, secure texting, paging services, contact center optimization, and public safety response. When communications matter, Spok delivers.

Spok is a trademark of Spok Holdings, Inc.

Safe Harbor Statement under the Private Securities Litigation Reform Act: Statements contained herein or in prior press releases which are not historical fact, such as statements regarding Spok’s future operating and financial performance, are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may cause Spok’s actual results to be materially different from the future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expectations include, but are not limited to, declining demand for paging products and services, continued demand for our software products and services, our ability to develop additional software solutions for our customers and manage our development as a global organization, the ability to manage operating expenses, future capital needs, competitive pricing pressures, competition from both traditional paging services and other wireless communications services, competition from other software providers, government regulation, reliance upon third-party providers for certain equipment and services, as well as other risks described from time to time in our periodic reports and other filings with the Securities and Exchange Commission. Although Spok believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Spok disclaims any intent or obligation to update any forward-looking statements.

 

SPŌK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (a)
(Unaudited and in thousands except share, per share amounts and ARPU)
               
For the three months ended For the nine months ended
9/30/2016 9/30/2015 9/30/2016 9/30/2015
Revenue:
Wireless $ 27,024 $ 29,375 $ 83,055 $ 90,287
Software   18,331     16,806     52,322     52,002  
Total revenue   45,355     46,181     135,377     142,289  
Operating expenses:
Cost of revenue 7,639 7,871 23,167 25,816
Service, rental and maintenance 11,898 11,117 34,510 33,376
Selling and marketing 5,955 6,572 18,912 20,409
General and administrative 10,593 10,410 31,542 31,883
Severance 12 141 9 1,645
Depreciation, amortization and accretion   3,229     3,413     9,787     10,608  
Total operating expenses   39,326     39,524     117,927     123,737  
% of total revenue 86.7 % 85.6 % 87.1 % 87.0 %
Operating income 6,029 6,657 17,450 18,552
% of total revenue 13.3 % 14.4 % 12.9 % 13.0 %
Interest income 67 1 176 3
Other income   85     784     443     1,110  
Income before income tax expense 6,181 7,442 18,069 19,665
Income tax benefit (expense)   (2,123 )   (3,222 )   (7,116 )   (8,150 )
Net income $ 4,058   $ 4,220   $ 10,953   $ 11,515  
Basic net income per common share $ 0.20   $ 0.20   $ 0.53   $ 0.53  
Diluted net income per common share $ 0.20   $ 0.20   $ 0.53   $ 0.53  
Basic weighted average common shares outstanding   20,517,419     21,301,311     20,581,586     21,623,612  
Diluted weighted average common shares outstanding   20,532,345     21,315,685     20,596,050     21,638,973  
Key statistics:
Units in service 1,124 1,192 1,124 1,192
Average revenue per unit (ARPU) $ 7.63 $ 7.82 $ 7.70 $ 7.85
Bookings $ 18,659 $ 16,746 $ 53,829 $ 55,514
Backlog $ 38,812 $ 41,639 $ 38,812 $ 41,639
 

(a) Slight variations in totals are due to rounding.

 
 

SPŌK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (a)
(Unaudited and in thousands except share, per share amounts and ARPU)
                               
For the three months ended
9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014
Revenue:
Wireless $ 27,024 $ 27,859 $ 28,172 $ 28,727 $ 29,375 $ 30,222 $ 30,690 $ 31,678
Software   18,331     16,776     17,216     18,612     16,806     17,747     17,448     19,591  
Total revenue   45,355     44,635     45,388     47,339     46,181     47,969     48,138     51,269  
Operating expenses:
Cost of revenue 7,639 7,513 8,017 8,035 7,871 9,131 8,813 10,571
Service, rental and maintenance 11,898 11,399 11,213 11,024 11,117 11,003 11,256 11,285
Selling and marketing 5,955 6,429 6,529 7,036 6,572 6,790 7,048 7,915
General and administrative 10,593 10,439 10,510 10,276 10,410 10,472 11,001 11,905
Severance 12 (4 ) 1,056 141 1,504 926
Depreciation, amortization and accretion   3,229     3,235     3,323     3,362     3,413     3,448     3,747     4,049  
Total operating expenses   39,326     39,015     39,588     40,789     39,524     42,348     41,865     46,651  
% of total revenue 86.7 % 87.4 % 87.2 % 86.2 % 85.6 % 88.3 % 87.0 % 91.0 %
Operating income 6,029 5,620 5,800 6,550 6,657 5,621 6,273 4,618
% of total revenue 13.3 % 12.6 % 12.8 % 13.8 % 14.4 % 11.7 % 13.0 % 9.0 %
Interest income (expense), net 67 61 49 13 1 3 (1 ) (262 )
Other income (expense), net   85     104     254     71     784     264     60     (188 )
Income before income tax expense 6,181 5,785 6,103 6,634 7,442 5,888 6,332 4,168
Income tax benefit (expense)   (2,123 )   (2,334 )   (2,659 )   66,087     (3,222 )   (2,512 )   (2,415 )   2,744  
Net income $ 4,058   $ 3,451   $ 3,444   $ 72,721   $ 4,220   $ 3,376   $ 3,917   $ 6,912  
Basic net income per common share $ 0.20   $ 0.17   $ 0.17   $ 3.47   $ 0.20   $ 0.16   $ 0.18   $ 0.32  
Diluted net income per common share $ 0.20   $ 0.17   $ 0.17   $ 3.47   $ 0.20   $ 0.16   $ 0.18   $ 0.32  
Basic weighted average common shares outstanding   20,517,419     20,544,327     20,683,719     20,927,590     21,301,311     21,677,299     21,898,792     21,554,746  
Diluted weighted average common shares outstanding   20,532,345     20,559,018     20,697,192     20,941,360     21,315,685     21,692,976     21,914,796     21,570,522  
Key statistics:
Units in service 1,124 1,144 1,153 1,173 1,192 1,211 1,230 1,256
Average revenue per unit (ARPU) $ 7.63 $ 7.71 $ 7.77 $ 7.79 $ 7.82 $ 7.86 $ 7.91 $ 7.92
Bookings $ 18,659 $ 20,063 $ 15,106 $ 18,511 $ 16,746 $ 21,027 $ 17,740 $ 22,272
Backlog $ 38,812 $ 39,475 $ 36,766 $ 38,650 $ 41,639 $ 43,524 $ 40,551 $ 42,391
 
(a) Slight variations in totals are due to rounding.
 
 

SPŌK HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (a)
(In thousands)
       
9/30/2016 12/31/2015
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 122,461 $ 111,332
Accounts receivable, net 23,382 22,638
Prepaid expenses and other 4,293 5,352
Inventory   2,100   2,291
Total current assets 152,236 141,613
Property and equipment, net 13,672 15,386
Goodwill 133,031 133,031
Other intangible assets, net 11,810 14,964
Deferred income tax assets, net 77,795 83,983
Other assets   2,588   1,445
Total assets $ 391,132 $ 390,422
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 7,238 $ 9,247
Accrued compensation and benefits 11,471 10,864
Deferred revenue   30,183   27,045
Total current liabilities 48,892 47,156
Deferred revenue 712 741
Other long-term liabilities   9,074   8,972
Total liabilities   58,678   56,869
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 2 2
Additional paid-in capital 106,342 110,435
Retained earnings   226,110   223,116
Total stockholders' equity   332,454   333,553
Total liabilities and stockholders' equity $ 391,132 $ 390,422
 
(a) Slight variations in totals are due to rounding.
 
 

SPŌK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a)
(Unaudited and in thousands)
       
For the nine months ended
9/30/2016 9/30/2015
Cash flows from operating activities:
Net income $ 10,953 $ 11,515
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 9,787 10,608
Amortization of deferred financing costs - -
Deferred income (benefit) tax expense 6,188 6,989
Stock based compensation 2,067 1,497
Provisions for doubtful accounts, service credits and other 645 1,040
Adjustments of non-cash transaction taxes (214 ) (530 )
Loss/(Gain) on disposals of property and equipment 3 (794 )
Changes in assets and liabilities:
Accounts receivable (1,389 ) 1,896
Prepaid expenses, intangible assets and other assets 27 1,878
Accounts payable and accrued liabilities (1,402 ) (4,621 )
Customer deposits and deferred revenue 3,109 4,002
Other long-term liabilities   (336 )   45  
Net cash provided by operating activities   29,438     33,525  
Cash flows from investing activities:
Purchases of property and equipment (4,378 ) (4,450 )
Proceeds from disposals of property and equipment   1     807  
Net cash used in investing activities   (4,377 )   (3,643 )
Cash flows from financing activities:
Cash distributions to stockholders (7,718 ) (8,739 )
Purchase of common stock (including commissions) (6,214 ) (11,804 )
Employee stock based compensation tax withholding   -     (3,825 )
Net cash used in financing activities   (13,932 )   (24,368 )
Net increase in cash and cash equivalents 11,129 5,514
Cash and cash equivalents, beginning of period   111,332     107,869  
Cash and cash equivalents, end of period $ 122,461   $ 113,383  
Supplemental disclosure:
Income taxes paid $ 681   $ 1,169  
 
(a) Slight variations in totals are due to rounding.
 
 

SPŌK HOLDINGS, INC.

CONSOLIDATED REVENUE
SUPPLEMENTAL INFORMATION (a)
(Unaudited and in thousands)
                               
For the three months ended
9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014
Revenue
Paging $ 25,944 $ 26,564 $ 27,101 $ 27,637 $ 28,196 $ 28,782 $ 29,491 $ 30,071
Non-paging   1,080   1,295   1,071   1,090   1,179   1,440   1,199   1,607
Total wireless revenue $ 27,024 $ 27,859 $ 28,172 $ 28,727 $ 29,375 $ 30,222 $ 30,690 $ 31,678
 
Subscription 560 503 498 471 392 419 398 365
License 1,842 1,691 1,593 2,733 1,457 3,011 2,595 3,474
Services 5,578 4,202 4,315 4,610 4,600 4,609 5,018 5,579
Equipment   1,091   1,250   1,729   1,764   1,434   1,301   1,374   2,145
Operations revenue $ 9,071 $ 7,646 $ 8,135 $ 9,578 $ 7,883 $ 9,340 $ 9,385 $ 11,563
 
Maintenance revenue $ 9,260 $ 9,130 $ 9,081 $ 9,034 $ 8,923 $ 8,407 $ 8,063 $ 8,028
Total software revenue $ 18,331 $ 16,776 $ 17,216 $ 18,612 $ 16,806 $ 17,747 $ 17,448 $ 19,591
 
Total revenue $ 45,355 $ 44,635 $ 45,388 $ 47,339 $ 46,181 $ 47,969 $ 48,138 $ 51,269
 
(a) Slight variations in totals are due to rounding.
 
 

SPŌK HOLDINGS, INC.

CONSOLIDATED OPERATING EXPENSES
SUPPLEMENTAL INFORMATION (a)
(Unaudited and in thousands)
                               
For the three months ended
9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014
Cost of revenue
Payroll and related $ 4,468 $ 4,406 $ 4,634 $ 4,414 $ 4,277 $ 4,274 $ 4,157 $ 4,222
Cost of sales 2,480 2,227 2,673 2,902 2,549 3,801 3,620 5,225
Stock based compensation 57 58 49 33 33 34 34 81
Other   634   822   661     686     1,012   1,022   1,002   1,043
Total cost of revenue   7,639   7,513   8,017     8,035     7,871   9,131   8,813   10,571
Service, rental and maintenance
Payroll and related 5,582 5,125 5,072 4,815 4,613 4,555 4,652 4,533
Site rent 3,626 3,668 3,660 3,663 3,763 3,783 3,766 3,834
Telecommunications 1,162 1,127 1,222 1,218 1,392 1,288 1,343 1,487
Stock based compensation 61 63 52 29 29 29 29 30
Other   1,467   1,416   1,207     1,299     1,320   1,348   1,466   1,401
Total service, rental and maintenance   11,898   11,399   11,213     11,024     11,117   11,003   11,256   11,285
Selling and marketing
Payroll and related 3,502 3,510 3,666 3,780 3,664 3,732 3,916 3,945
Commissions 1,317 1,559 1,525 1,754 1,858 1,792 1,836 2,481
Stock based compensation 75 75 48 (7 ) 16 51 51 131
Other   1,061   1,285   1,290     1,509     1,034   1,215   1,245   1,358
Total selling and marketing   5,955   6,429   6,529     7,036     6,572   6,790   7,048   7,915
General and administrative
Payroll and related 4,142 4,306 4,392 4,029 4,320 4,611 4,879 4,737
Stock based compensation 507 534 488 316 316 548 329 780
Facility rent 848 810 839 856 868 841 941 830
Outside services 1,946 1,921 1,726 1,783 1,864 1,728 1,786 1,786
Taxes, licenses and permits 1,164 1,060 1,055 1,132 1,068 1,150 1,125 1,283
Other   1,986   1,808   2,010     2,160     1,974   1,594   1,941   2,489
Total general and administrative   10,593   10,439   10,510     10,276     10,410   10,472   11,001   11,905
Severance 12 (4 ) 1,056 141 1,504 926
Depreciation, amortization and accretion   3,229   3,235   3,323     3,362     3,413   3,448   3,747   4,049
Operating expenses $ 39,326 $ 39,015 $ 39,588   $ 40,789   $ 39,524 $ 42,348 $ 41,865 $ 46,651
Capital expenditures $ 1,396 $ 1,537 $ 1,445 $ 2,024 $ 1,318 $ 1,992 $ 1,040 $ 1,352
 
(a) Slight variations in totals are due to rounding.
 
 

SPŌK HOLDINGS, INC.

UNITS IN SERVICE ACTIVITY, MARKET SEGMENT, CHURN
AND AVERAGE REVENUE PER UNIT (ARPU) (a)
(Unaudited and in thousands)
                               
For the three months ended
9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014

Paging units in service

Beginning units in service (000's) 1,144 1,153 1,173 1,192 1,211 1,230 1,256 1,274
Gross placements 34 39 28 31 36 40 29 35
Gross disconnects   (54 )   (48 )   (48 )   (50 )   (55 )   (59 )   (55 )   (53 )
Net change   (20 )   (9 )   (20 )   (19 )   (19 )   (19 )   (26 )   (18 )
Ending units in service   1,124     1,144     1,153     1,173     1,192     1,211     1,230     1,256  
End of period units in service % of total (b)

 

Healthcare 78.6 % 78.2 % 77.5 % 77.0 % 76.3 % 75.9 % 74.6 % 74.1 %
Government 6.7 % 6.8 % 6.9 % 7.2 % 7.2 % 7.3 % 7.6 % 7.8 %
Large enterprise 6.5 % 6.6 % 6.9 % 6.9 % 7.1 % 7.3 % 7.6 % 7.6 %
Other(b)   8.2 %   8.3 %   8.7 %   9.0 %   9.3 %   9.5 %   10.2 %   10.4 %
Total   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Account size ending units in service (000's)
1 to 100 units 110 114 118 123 128 134 139 145
101 to 1,000 units 222 228 238 243 250 256 266 277
>1,000 units   792     802     797     807     814     821     825     834  
Total   1,124     1,144     1,153     1,173     1,192     1,211     1,230     1,256  
Account size net loss rate(c)
1 to 100 units (3.5 )% (4.0 )% (4.3 )% (3.9 )% (4.4 )% (3.4 )% (4.3 )% (4.7 )%
101 to 1,000 units (2.6 )% (4.0 )% (2.0 )% (2.9 )% (2.4 )% (3.8 )% (3.8 )% (1.9 )%
>1,000 units   (1.2 )%   0.6 %   (1.2 )%   (0.9 )%   (0.8 )%   (0.6 )%   (1.1 )%   (0.7 )%
Total   (1.7 )%   (0.8 )%   (1.7 )%   (1.6 )%   (1.5 )%   (1.6 )%   (2.1 )%   (1.4 )%
Account size ARPU
1 to 100 units $ 12.34 $ 12.48 $ 12.57 $ 12.52 $ 12.49 $ 12.57 $ 12.58 $ 12.50
101 to 1,000 units 8.64 8.65 8.70 8.65 8.69 8.72 8.74 8.76
>1,000 units   6.68     6.75     6.77     6.79     6.80     6.81     6.84     6.83  
Total $ 7.63   $ 7.71   $ 7.77   $ 7.79   $ 7.82   $ 7.86   $ 7.91   $ 7.92  
 
(a) Slight variations in totals are due to rounding.
(b) Other includes hospitality, resort and indirect units
(c) Net loss rate is net current period placements and disconnected units in service divided by prior period ending units in service.
 
 

SPŌK HOLDINGS, INC.

RECONCILIATION FROM NET INCOME TO EBITDA (a)
(Unaudited and in thousands)
                             
For the three months ended
9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014

Reconciliation of net income to EBITDA (b) (c):

Net income $ 4,058 $ 3,451 $ 3,444 $ 72,721 $ 4,220 $ 3,376 $ 3,917 $ 6,912
Plus: Income tax expense 2,123 2,334 2,659 (66,087 ) 3,222 2,512 2,415 (2,744 )
Plus (Less): Other expense (income) (85 ) (104 ) (254 ) (71 ) (784 ) (264 ) (60 ) 188
Plus (Less): Interest expense (income)   (67 )   (61 )   (49 )   (13 )   (1 )   (3 )   1     262  
Operating income 6,029 5,620 5,800 6,550 6,657 5,621 6,273 4,618
Plus: depreciation, amortization and accretion   3,229     3,235     3,323     3,362     3,413     3,448     3,747     4,049  
EBITDA $ 9,258   $ 8,855   $ 9,123   $ 9,912   $ 10,070   $ 9,069   $ 10,020   $ 8,667  
 
For the nine months ended
9/30/2016 9/30/2015
Reconciliation of net income to EBITDA (b) (c):
Net income $ 10,953 $ 11,515
Plus: Income tax expense 7,116 8,150
Plus: Other expense (443 ) (1,110 )
Plus: Interest expense   (176 )   (3 )
Operating income 17,450 18,552
Plus: depreciation, amortization and accretion   9,787     10,608  
EBITDA $ 27,237   $ 29,160  
 
(a) Slight variations in totals are due to rounding.
(b) EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only.
(c) EBITDA is the starting point for calculation of operating cash flow for purposes of the Company’s short term and long term incentive plans. Management and the Board of Directors also rely on EBITDA for purposes of determining the Company’s capital allocation policies.
 

Source: Spok Holdings, Inc.

Spok Holdings, Inc.
Al Galgano, 952-567-0295
Al.Galgano@spok.com