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Spok Reports 2018 First Quarter Operating Results; Software Revenue and Wireless Trends Improve

Board Declares Regular Quarterly Dividend

SPRINGFIELD, Va.--(BUSINESS WIRE)--Apr. 25, 2018-- Spok Holdings, Inc. (NASDAQ: SPOK), the global leader in healthcare communications, today announced operating results for the first quarter ended March 31, 2018. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on June 22, 2018 to stockholders of record on May 25, 2018.

2018 First Quarter Results:

Consolidated revenue for the first quarter of 2018 under Generally Accepted Accounting Principles (“GAAP”) was $43.1 million compared to $41.4 million in the first quarter of 2017. On January 1, 2018, Spok adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Unless otherwise stated, results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted, and continue to be reported in accordance with the Company’s historic accounting under ASC 605.

 
Three months ended
(Dollars in thousands)

March 31,
2018

 

March 31,
2018(1)

 

March 31,
2017

 

Change(2)
(%)

Wireless revenue

 

Paging revenue $ 23,308 $ 23,308 $ 24,972 (6.7

)%

Product and other revenue   961     961     888 8.2 %
Total wireless revenue $ 24,269   $ 24,269   $ 25,860 (6.2

)%

 
Software revenue
Operations revenue $ 9,471 $ 8,189 $ 6,041 35.6 %
Maintenance revenue   9,374     9,999     9,543 4.8 %
Total software revenue   18,845     18,188     15,584 16.7 %
Total revenue $ 43,114   $ 42,457   $ 41,444 2.4 %
 

(1) Adjusted to exclude the adoption of ASC 606.
(2) As compared against results adjusted to exclude the adoption of ASC 606.

 

GAAP net income for the first quarter of 2018 was $0.5 million, or $0.03 per share, compared to $0.9 million, or $0.04 per share, in the first quarter of 2017.

 
Three months ended
(Dollars in thousands)

March 31,
2018

 

March 31,
2018(1)

 

March 31,
2017

Net income $ 511 $ 309 $ 854
Net income per share $ 0.03 $ 0.02 $ 0.04
EBITDA $ 3,463 $ 3,250 $ 4,605
 

(1) Adjusted to exclude the adoption of ASC 606.

 

Other key results and highlights for the first quarter of 2018 included:

  • Software bookings of $18.1 million, compared to $19.8 million in the prior year quarter. First quarter 2018 bookings included $7.1 million of operations bookings and $11.0 million of maintenance renewals, compared to $9.5 million of operations bookings and $10.3 million of maintenance renewals in the first quarter of 2017.
  • Software backlog totaled $35.9 million at March 31, 2018, or $42.7 million adjusted to exclude the adoption of ASC 606, compared to $40.6 million in the year earlier period. As a result of the adoption of ASC 606 approximately $5.3 million of backlog, that could have been recognized in 2018 under prior accounting rules, was re-cast to retained earnings as part of the beginning balance as of January 1, 2018.
  • The revenue renewal rate for software maintenance in the first quarter of 2018 was greater than 99 percent.
  • Paging units in service at March 31, 2018 totaled 1,030,000, compared to 1,091,000 at the end of the prior year period.
  • The quarterly rate of wireless revenue erosion was 1.3 percent in the first quarter of 2018 versus 2.5 percent in the year-earlier quarter.
  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $39.7 million in the first quarter of 2018, compared to $36.8 million in the year-earlier quarter.
  • Capital returned to stockholders in the first quarter of 2018 totaled $4.7 million, in the form of $2.8 million from the regular quarterly dividend and $1.9 million of share repurchases.
  • The Company’s cash balance at March 31, 2018 was $101.3 million, compared to $118.9 million at March 31, 2017, and $107.2 million at December 31, 2017.

Management Commentary:

“We are encouraged with our performance in the first quarter of 2018 and believe that it provides a solid base for the remainder of the year,” said Vincent D. Kelly, chief executive officer. “First quarter results were in line with our seasonal expectations, and we saw strong year-over-year performance in a number of key operating measures, including revenue levels and average deal size, as well as wireless subscriber retention. We accomplished this as we increased our investment in our business by enhancing and upgrading our product development team and tools as well as our sales infrastructure and management. We believe this effort will yield significant future benefits in the form of our improved, integrated communication platform, Spok Care Connect®, as well as higher future bookings levels, and ultimately margins, supported by our enhanced and upgraded sales team. Overall, we continued to operate profitably, enhance our product offerings, and operate as a debt-free company. We also executed against our capital allocation strategy.” Kelly added, “Throughout 2018, we will remain focused on returning value to our shareholders through our capital allocation strategy, which includes dividends, share repurchases and key strategic investments in our products and business to create sustainable growth.”

Business Outlook:

For the full-year 2018, adjusted to exclude the adoption of ASC 606, the Company continues to expect total revenue to range from $161 million to $177 million, operating expenses (excluding depreciation, amortization and accretion) to range from $158 million to $165 million, and capital expenditures to range from $4 million to $8 million.

2018 First Quarter Call and Replay:

The Company plans to host a conference call for investors to discuss its 2018 first quarter results at 10:00 a.m. ET on Thursday, April 26, 2018. Dial-in numbers for the call are 334-323-0522 or 877-260-1479. The pass code for the call is 9101087. A replay of the call will be available from 1:00 p.m. ET on April 26, 2018 until 1:00 p.m. ET on Thursday, May 10, 2018. To listen to the replay, please register at http://tinyurl.com/Spok2018Q1earningsreplay. Please cut and paste this address into your browser, enter the registration information, and you will be given access to the replay.

About Spok
Spok Holdings, Inc. (NASDAQ: SPOK), headquartered in Springfield, Va., is proud to be the global leader in healthcare communications. We deliver clinical information to care teams when and where it matters most to improve patient outcomes. Top hospitals rely on the Spok Care Connect® platform to enhance workflows for clinicians, support administrative compliance, and provide a better experience for patients. Our customers send over 100 million messages each month through their Spok® solutions. When seconds count, count on Spok. For more information, visit spok.com or follow @spoktweets on Twitter.

Spok is a trademark of Spok Holdings, Inc. Spok Care Connect and Spok Mobile are trademarks of Spok, 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, unauthorized breaches or failures in cybersecurity measures adopted by us and/or included in our products 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.

 
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (a)
(Unaudited and in thousands except share, per share amounts and ARPU)
   
For the three months ended

3/31/2018

3/31/2017

Revenue:
Wireless $ 24,269 $ 25,860
Software   18,845     15,584  
Total revenue   43,114     41,444  
Operating expenses:
Cost of revenue 7,712 7,036
Research and development 5,735 4,105
Service, rental and maintenance 7,750 8,066
Selling and marketing 6,490 5,922
General and administrative 11,964 11,710
Depreciation, amortization and accretion   2,713     3,223  
Total operating expenses   42,364     40,062  
% of total revenue 98.3 % 96.7 %
Operating income 750 1,382
% of total revenue 0 3.3 %
Interest income 283 122
Other expense   (47 )   (30 )
Income before income tax expense 986 1,474
Income tax expense   (475 )   (620 )
Net income $ 511   $ 854  
Basic and diluted net income per common share $ 0.03 $ 0.04
Basic and diluted weighted average common shares outstanding 20,027,800 20,530,739
Diluted weighted average common shares outstanding 20,153,291 20,585,452
Key statistics:
Units in service 1,030 1,091
Average revenue per unit (ARPU) $ 7.47 $ 7.56
Bookings $ 18,124 $ 19,788
Backlog $ 35,930 $ 40,555
 
(a) Slight variations in totals are due to rounding.
 
 
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (a)
(Unaudited and in thousands except share, per share amounts and ARPU)
               
For the three months ended

3/31/2018

12/31/2017

9/30/2017

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

Revenue:
Wireless $ 24,269 $ 24,579 $ 25,110 $ 25,639 $ 25,860 $ 26,535 $ 27,024 $ 27,859
Software   18,845     19,191     18,526     16,686     15,584     17,649     18,331     16,776  
Total revenue   43,114     43,770     43,636     42,325     41,444     44,184     45,355     44,635  
Operating expenses:
Cost of revenue 7,712 7,122 7,069 7,190 7,036 7,482 7,639 7,513
Research and development 5,735 4,934 5,001 4,662 4,105 3,702 3,645 3,211
Service, rental and maintenance 7,750 7,617 7,875 7,944 8,066 7,989 8,253 8,188
Selling and marketing 6,490 6,039 5,533 5,329 5,922 5,855 5,955 6,429
General and administrative 11,964 11,695 12,058 11,939 11,710 11,277 10,605 10,439
Depreciation, amortization and accretion   2,713     2,774     2,775     2,851     3,223     3,176     3,229     3,235  
Total operating expenses   42,364     40,181     40,311     39,915     40,062     39,481     39,326     39,015  
% of total revenue 98.3 % 91.8 % 92.4 % 94.3 % 96.7 % 89.4 % 86.7 % 87.4 %
Operating income 750 3,589 3,325 2,410 1,382 4,703 6,029 5,620
% of total revenue 1.7 % 8.2 % 7.6 % 5.7 % 3.3 % 10.6 % 13.3 % 12.6 %
Interest income, net 283 229 214 154 122 99 67 61
Other expense, net   (47 )   (282 )   359     89     (30 )   100     85     104  
Income before income tax expense 986 3,536 3,898 2,653 1,474 4,902 6,181 5,785
Income tax expense   (475 )   (24,920 )   (171 )   (1,155 )   (620 )   (1,876 )   (2,123 )   (2,334 )
Net income (loss) $ 511   $ (21,384 ) $ 3,727   $ 1,498   $ 854   $ 3,026   $ 4,058   $ 3,451  
Basic and diluted net income (loss) per common share $ 0.03   $ (1.07 ) $ 0.19   $ 0.07   $ 0.04   $ 0.15   $ 0.20   $ 0.17  
Basic weighted average common shares outstanding   20,027,800     19,987,763     19,977,263     20,353,801     20,530,739     20,529,958     20,541,275     20,568,058  
Diluted weighted average common shares outstanding   20,153,291     20,008,321     20,366,102     20,585,542     20,529,958     20,541,275     20,568,058     20,706,082  
Key statistics:
Units in service 1,030 1,049 1,063 1,086 1,091 1,111 1,124 1,144
Average revenue per unit (ARPU) $ 7.47 $ 7.46 $ 7.48 $ 7.52 $ 7.56 $ 7.59 $ 7.63 $ 7.71
Bookings $ 18,124 $ 19,190 $ 18,327 $ 20,405 $ 19,788 $ 20,025 $ 18,659 $ 20,063
Backlog $ 35,930 $ 42,305 $ 46,900 $ 43,455 $ 40,555 $ 38,295 $ 38,812 $ 39,475
 
(a) Slight variations in totals are due to rounding.
 
 
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (a)
(In thousands)
   

3/31/2018

12/31/2017

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 101,302 $ 107,157
Accounts receivable, net 37,068 32,279
Prepaid expenses and other 7,789 5,752
Inventory   1,649     1,672  
Total current assets 147,808 146,860
Non-current assets:
Property and equipment, net 12,622 13,399
Goodwill 133,031 133,031
Intangible assets, net 7,292 7,917
Deferred income tax assets 45,593 47,679
Other non-current assets   1,522     1,675  
Total non-current assets   200,060     203,701  
Total assets $ 347,868   $ 350,561  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,049 $ 1,305
Accrued compensation and benefits 9,177 11,018
Accrued taxes 2,097 2,547
Deferred revenue 30,590 31,414
Other current liabilities   4,455     4,610  
Total current liabilities 47,368 50,894
Non-current liabilities:
Deferred revenue 964 1,063
Other long-term liabilities   8,282     8,075  
Total non-current liabilities   9,246     9,138  
Total liabilities   56,614     60,032  
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 2 2
Additional paid-in capital 98,233 99,819
Accumulated other comprehensive loss (1,508 ) (1,088 )
Retained earnings   194,527     191,796  
Total stockholders' equity   291,254     290,529  
Total liabilities and stockholders' equity $ 347,868   $ 350,561  
 
(a) Slight variations in totals are due to rounding.
 
   
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a)
(Unaudited and in thousands)
 
Three months ended

3/31/2018

3/31/2017

Cash flows provided by operating activities:
Net income $ 511 $ 854
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 2,713 3,223
Deferred income tax expense 475 279
Stock based compensation 1,234 955
Provisions for doubtful accounts, service credits and other 628 223
 
Adjustments of non-cash transaction taxes (53 ) (122 )
Changes in assets and liabilities:
Accounts receivable (4,106 ) (636 )
Prepaid expenses, intangible assets and other assets (1,202 ) (146 )
Accounts payable, accrued liabilities and other

(2,412

) (2,477 )
Deferred revenue   3,336     1,515  
Net cash provided by operating activities  

1,124

    3,668  
Cash flows from investing activities:
Purchases of property and equipment, net of proceeds from disposals of property and equipment (1,164 ) (2,851 )
Net cash used in investing activities   (1,164 )   (2,851 )
Cash flows from financing activities:
Cash distributions to stockholders (2,740 ) (7,694 )
Purchase of common stock for tax withholding on vested equity awards (892 )
Purchase of common stock (including commissions), net of proceeds from issuance of common stock   (1,927 )   4  
Net cash used in financing activities   (5,559 )   (7,690 )
Effect of exchange rate on cash   (256 )   4  
Net decrease in cash and cash equivalents

(5,855

) (6,869 )
Cash and cash equivalents, beginning of period  

107,157

    125,816  
Cash and cash equivalents, end of period $ 101,302   $ 118,947  
Supplemental disclosure:
Income taxes paid $ 50   $ 180  
 
(a) Slight variations in totals are due to rounding.
 
               
SPOK HOLDINGS, INC.
CONSOLIDATED REVENUE
SUPPLEMENTAL INFORMATION (a)
(Unaudited and in thousands)
 
For the three months ended

3/31/2018

12/31/2017

9/30/2017

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

Revenue
Paging $ 23,308 $ 23,624 $ 24,128 $ 24,572 $ 24,972 $ 25,441 $ 25,944 $ 26,564
Non-paging   961   955   982   1,067   888   1,094   1,080   1,295
Total wireless revenue $ 24,269 $ 24,579 $ 25,110 $ 25,639 $ 25,860 $ 26,535 $ 27,024 $ 27,859
 
Subscription 420 559 577 623 543 551 560 503
License 3,956 2,431 1,995 1,641 1,171 1,594 1,842 1,691
Services 4,071 5,437 5,189 3,650 3,354 4,500 5,578 4,202
Equipment   1,024   945   1,102   1,127   973   1,402   1,091   1,250
Operations revenue $ 9,471 $ 9,372 $ 8,863 $ 7,041 $ 6,041 $ 8,047 $ 9,071 $ 7,646
 
Maintenance revenue $ 9,374 $ 9,819 $ 9,663 $ 9,645 $ 9,543 $ 9,602 $ 9,260 $ 9,130
Total software revenue $ 18,845 $ 19,191 $ 18,526 $ 16,686 $ 15,584 $ 17,649 $ 18,331 $ 16,776
 
Total revenue $ 43,114 $ 43,770 $ 43,636 $ 42,325 $ 41,444 $ 44,184 $ 45,355 $ 44,635
 

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

 
               
SPOK HOLDINGS, INC.
CONSOLIDATED OPERATING EXPENSES
SUPPLEMENTAL INFORMATION (a)
(Unaudited and in thousands)
 
For the three months ended

3/31/2018

12/31/2017

9/30/2017

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

Cost of revenue
Payroll and related $ 4,874 $ 4,374 $ 4,330 $ 4,613 $ 4,490 $ 4,611 $ 4,469 $ 4,404
Cost of sales 2,309 1,990 2,228 1,904 1,995 2,415 2,587 2,323
Stock based compensation 55 58 4 60 58 (108 ) 57 58
Other   474   700     507   613  

493

  564     526   728
Total cost of revenue   7,712   7,122     7,069   7,190   7,036   7,482     7,639   7,513
Research and development
Payroll and related 4,002 3,521 4,005 3,807 3,405 3,195 2,939 2,505
Outside services 1,513 1,361 849 659 516 511 569 580
Stock based compensation 71 (71 ) 43 65 55 (82 ) 46 48
Other   149   123     104   131   129   78     91   78
Total research and development   5,735   4,934     5,001   4,662   4,105   3,702     3,645   3,211
Service, rental and maintenance
Payroll and related 2,693 2,413 2,582 2,607 2,665 2,687 2,638 2,644
Site rent 3,496 3,471 3,534 3,604 3,620 3,618 3,626 3,668
Telecommunications 898 979 1,060 1,001 1,081 1,096 1,162 1,127
Stock based compensation 24 20 20 20 20 (29 ) 15 15
Other   639   734     679   712   680   617     812   734
Total service, rental and maintenance   7,750   7,617     7,875   7,944   8,066   7,989     8,253   8,188
Selling and marketing
Payroll and related 3,294 2,573 3,113 3,039 3,071 3,556 3,467 3,489
Commissions 1,774 1,634 1,234 1,121 1,202 1,248 1,317 1,559
Stock based compensation 135 93 84 99 101 (131 ) 75 75
Other   1,287   1,739     1,102   1,070   1,548   1,182     1,096   1,306
Total selling and marketing   6,490   6,039     5,533   5,329   5,922   5,855     5,955   6,429
General and administrative
Payroll and related 4,416 3,649 4,569 4,420 4,439 4,426 4,076 4,249
Stock based compensation 949 774 711 755 722 (863 ) 507 534
Bad debt 528 143 184 107 94 137 97 104
Facility rent and costs 1,941 1,865 2,013 1,995 1,838 1,694 1,673 1,609
Outside services 2,122 2,924 2,351 2,507 2,627 2,430 2,247 2,067
Taxes, licenses and permits 1,080 1,120 1,077 1,034 989 976 1,164 1,060
Other   928   1,220     1,153   1,121   1,001   2,477     841   816
Total general and administrative   11,964   11,695     12,058   11,939   11,710   11,277     10,605   10,439
Depreciation, amortization and accretion   2,713   2,774     2,775   2,851   3,223   3,176     3,229   3,235
Operating expenses $ 42,364 $ 40,181   $ 40,311 $ 39,915 $ 40,062 $ 39,481   $ 39,326 $ 39,015
Capital expenditures $ 1,164 $ 2,179 $ 1,816 $ 2,353 $ 2,851 $ 1,878 $ 1,396 $ 1,537
 
(a) Slight variations in totals are due to rounding.
 
               
SPOK 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

3/31/2018

12/31/2017

9/30/2017

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

Paging units in service

 
Beginning units in service (000's) 1,049 1,063 1,086 1,091 1,111 1,124 1,144 1,153
Gross placements 25 26 30 42 28 36 34 39
Gross disconnects   (44 )   (40 )   (53 )   (47 )   (48 )   (49 )   (54 )   (48 )
Net change   (19 )   (14 )   (23 )   (5 )   (20 )   (13 )   (20 )   (9 )
Ending units in service   1,030     1,049     1,063     1,086     1,091     1,111     1,124     1,144  
End of period units in service % of total (b)
Healthcare 81.1 % 80.7 % 80.4 % 80.4 % 79.7 % 79.3 % 78.6 % 78.2 %
Government 5.9 % 6.0 % 6.1 % 6.3 % 6.4 % 6.5 % 6.7 % 6.8 %
Large enterprise 6.0 % 6.0 % 6.0 % 6.1 % 6.1 % 6.2 % 6.5 % 6.6 %
Other(b)   7.0 %   7.2 %   7.4 %   7.3 %   7.7 %   8.0 %   8.2 %   8.3 %
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 88 92 95 98 102 106 110 114
101 to 1,000 units 198 198 201 204 214 217 222 228
>1,000 units   744     759     767     784     775     788     792     802  
Total   1,030     1,049     1,063     1,086     1,091     1,111     1,124     1,144  
Account size net loss rate(c)
1 to 100 units (4.7 )% (3.6 )% (2.8 )% (3.7 )% (3.4 )% (3.9 )% (3.5 )% (4.0 )%
101 to 1,000 units (10.0 )% (1.1 )% (1.8 )% (4.5 )% (1.3 )% (2.3 )% (2.6 )% (4.0 )%
>1,000 units   (1.9 )%   (1.1 )%   (2.2 )%   1.1 %   (1.7 )%   (0.5 )%   (1.2 )%   0.6 %
Total   (1.8 )%   (1.3 )%   (2.2 )%   (0.4 )%   (1.8 )%   (1.2 )%   (1.7 )%   (0.8 )%
Account size ARPU
1 to 100 units $ 12.13 $ 12.11 $ 12.23 $ 12.16 $ 12.22 $ 12.25 $ 12.34 $ 12.48
101 to 1,000 units 8.47 8.58 8.62 8.61 8.66 8.63 8.64 8.65
>1,000 units   6.65     6.59     6.59     6.64     6.64     6.67     6.68     6.75  
Total $ 7.47   $ 7.46   $ 7.48   $ 7.52   $ 7.56   $ 7.59   $ 7.63   $ 7.71  
 
(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.
 
               
SPOK HOLDINGS, INC.
RECONCILIATION FROM NET INCOME TO EBITDA (a)
(Unaudited and in thousands)
 
For the three months ended

3/31/2018

12/31/2017

9/30/2017

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

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

 

Net (loss) income $ 511 $ (21,384 ) $ 3,727 $ 1,498 $ 854 $ 3,026 $ 4,058 $ 3,451
Plus (less): Income tax expense 475 24,920 171 1,155 620 1,876 2,123 2,334
Plus (less): Other expense (income) 47 282 (359 ) (89 ) 30 (100 ) (85 ) (104 )
Less: Interest income   (283 )   (229 )   (214 )   (154 )   (122 )   (99 )   (67 )   (61 )
Operating income 750 3,589 3,325 2,410 1,382 4,703 6,029 5,620
Plus: depreciation, amortization and accretion   2,713     2,774     2,775     2,851     3,223     3,176     3,229     3,235  
EBITDA (as defined by the Company)   3,463     6,363     6,100     5,261     4,605     7,879     9,258     8,855  
Less: Purchases of property and equipment (1,164 ) (2,179 ) (1,816 ) (2,353 ) (2,851 ) (1,878 ) (1,396 ) (1,537 )
Plus: Severance   (243 )   53     51             1,438     12      
Adjusted OCF (as defined by the Company)

$

2,056   $ 4,237   $ 4,335   $ 2,908   $ 1,754   $ 7,439   $ 7,874   $ 7,318  
 
 

For the three
months ended

Reconciliation of EBITDA to EBITDA adjusted to exclude the adoption of ASC 606:
EBITDA (as defined by the Company)

$

3,463
Less: Software revenue (657 )
Less: Cost of revenue (17 )
Plus: Selling and marketing   461  
Adjusted EBITDA(d)

$

3,250  
 
(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. We define OCF as EBITDA less purchases of tangible assets and severance expense in determining whether management has achieved certain performance objectives for the year as set by our Board of Directors in awarding annual and long term incentive compensation to senior executives.
(d) Adjusted EBITDA represents EBITDA adjusted to exclude the adoption of ASC 606. Adjusted EBITDA is used by the Company for purposes of comparison to prior period results during its year of transition (2018) under the modified retrospective approach.
 

Source: Spok Holdings, Inc.

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