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Spok Reports Fourth Quarter and 2014 Operating Results; Consolidated Quarterly Revenue Increases

Software Revenue and Bookings Reach All-Time Highs;
Wireless Trends Continue to Improve; Balance Sheet Remains Strong

SPRINGFIELD, Va.--(BUSINESS WIRE)--Mar. 4, 2015-- Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in critical communications, today announced operating results for the fourth quarter and year ended December 31, 2014. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on March 30, 2015 to stockholders of record on March 18, 2015.

For the fourth quarter, consolidated revenue was $51.3 million, compared to $54.7 million in the fourth quarter of 2013 and $49.8 million in the third quarter of 2014 and represented Spok’s second consecutive quarter of consolidated revenue growth. Software revenue increased to a record high $19.6 million in the fourth quarter, compared to $18.9 million in the fourth quarter of 2013 and $16.9 million in the third quarter of 2014. Wireless revenue totaled $31.7 million in the fourth quarter, compared to $35.8 million in the year-earlier quarter and $32.9 million in the prior quarter.

Fourth quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $8.7 million, or 16.9 percent of revenue, compared to $16.0 million, or 29.2 percent of revenue, in the year-earlier quarter, and $12.3 million, or 24.7 percent of revenue, in the third quarter of 2014.

Net income for the fourth quarter was $6.9 million, or $0.31 per fully diluted share, compared to $8.0 million, or $0.36 per fully diluted share, in the fourth quarter of 2013.

For the full-year 2014, consolidated revenue was $200.3 million, compared to $209.8 million in 2013. Of the total, wireless revenue was $132.4 million and software revenue was $67.9 million, compared to $149.5 million and $60.3 million, respectively, for 2013. Software revenue increased 12.5 percent from 2013.

EBITDA for 2014 was $44.8 million, or 22.4 percent of revenue, compared to $60.7 million, or 28.9 percent of revenue, for 2013.

Net income for 2014 was $20.7 million, or $0.94 per fully diluted share, compared to net income of $27.5 million, or $1.25 per fully diluted share, for the previous year.

Other key results and highlights for the fourth quarter and 2014 included:

  • Software bookings for the fourth quarter increased to $22.3 million from $16.3 million in the year-earlier quarter, and reached an all-time high for the third consecutive quarter. Fourth quarter bookings included $13.0 million of operations bookings and $9.3 million of maintenance renewals. For 2014, bookings increased 23.7 percent to a record high $78.5 million from $63.5 million in 2013. Operations bookings for 2014 also reached an all-time high of $45.1 million.
  • Software backlog totaled $42.4 million at December 31, 2014, compared to $42.1 million at September 30, 2014, and $40.2 million at year-end 2013.
  • Of the $19.6 million in software revenue for the fourth quarter, $11.6 million was operations revenue and $8.0 million was maintenance revenue, compared to $11.8 million and $7.1 million, respectively, of the $18.9 million in software revenue for the fourth quarter of 2013.
  • The renewal rate for software maintenance in the fourth quarter was 99.5 percent.
  • The quarterly rate of paging unit erosion improved to 1.4 percent in the fourth quarter, compared to 2.2 percent in the year-earlier quarter, and was the Company’s lowest net unit loss rate in more than a decade. The annual rate of unit erosion improved to 8.7 percent in the quarter versus 9.2 percent in the year-earlier quarter. Net paging unit losses were 18,000 in the fourth quarter versus 32,000 in the fourth quarter of 2013. Paging units in service at December 31, 2014 totaled 1,256,000, compared to 1,376,000 a year earlier.
  • The quarterly rate of wireless revenue erosion was 3.6 percent in the fourth quarter versus 3.3 percent in the year-earlier quarter, while the annual rate of wireless revenue erosion was 11.6 percent versus 10.2 percent in the fourth quarter of 2013.
  • Total paging ARPU (average revenue per unit) was $7.92 in the fourth quarter, compared to $8.15 in the year-earlier quarter and $7.97 in the prior quarter. For the year, ARPU totaled $7.93, compared to $8.20 in 2013.
  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $42.6 million in the fourth quarter, compared to $38.7 million in the year-earlier quarter. For 2014, operating expenses were $155.4 million, compared to $149.1 million in 2013.
  • Capital expenses were $1.4 million in the fourth quarter, compared to $2.6 million in the year-earlier quarter. For 2014, capital expenses totaled $7.7 million, compared to $10.4 million in 2013.
  • The number of full-time equivalent employees at December 31, 2014 totaled 587, compared to 631 at year-end 2013.
  • Capital returned to stockholders in 2014 in the form of dividends and share repurchases totaled $10.8 million and $4.3 million, respectively.
  • The Company’s cash balance at December 31, 2014 was $107.9 million, compared to $89.1 million a year earlier.

“We ended the fourth quarter and full-year 2014 on a very positive note,” said Vincent D. Kelly, president and chief executive officer, “meeting or exceeding our expectations on virtually all key operating measures, including revenue, cash flow, software bookings and subscriber churn. Consolidated revenue increased for the second consecutive quarter, software revenue and bookings reached record highs, our backlog and pipeline remained strong, and paging unit churn improved to its best level in many years. Overall, we continued to operate profitably, enhance our product offerings, expand our global market reach, strengthen our balance sheet, and generate sufficient cash flow to again return capital to stockholders in the form of cash dividends and share repurchases.”

Commenting on software results, Kelly said: “Total software revenue increased 15.7 percent in the fourth quarter from the prior quarter -- the second consecutive quarter of revenue growth – and grew 12.5 percent in 2014 to $67.9 million from $60.3 million in 2013.” Kelly attributed higher fourth quarter software revenue primarily to increased deliveries of software, hardware and professional services to the Company’s expanding worldwide customer base. He also noted that higher software revenue was due in part to the completion of numerous projects with larger contract values than in previous quarters. “Overall, both operations and maintenance revenue remained strong throughout the year,” he added, “with the 10.6 percent increase in maintenance revenue reflecting our continued success in achieving maintenance renewals rates in excess of 99 percent.”

Kelly said record high bookings of $22.3 million for the quarter included $13.0 million of operations bookings, which reached an all-time high for the third straight quarter. For the year, bookings increased 23.7 percent to a record high $78.5 million. “Bookings included sales to both new and existing customers, with many existing customers upgrading applications as well as adding products to expand their portfolio of communications solutions. Demand remained strong for upgrades and installations of call center solutions, along with healthcare applications to increase patient safety, improve nursing workflows and enhance organizational efficiencies.” Kelly added: “Customer demand also remained strong for such software solutions as critical smartphone communications, secure texting, emergency management, and clinical alerting. Our public safety sector also grew substantially during the quarter as our software sales team added 13 new accounts.”

Kelly said software sales continued to increase throughout both North American and international markets. “We continued to make significant inroads in Europe, the Middle East and the Asia-Pacific region where our healthcare solutions continue to attract significant interest. At the same time, we continued to build a solid pipeline of new business leads throughout targeted markets worldwide.” Kelly added that Spok’s sales team pursued numerous combined software and wireless sales initiatives during the quarter, resulting in 30 new accounts that represented more than $1.8 million in software bookings.

The Company also posted solid results for its wireless products and services in the fourth quarter. “Gross pager placements totaled 35,000 versus 36,000 in the year-earlier quarter, while gross disconnects of 53,000 improved from 68,000 in the fourth quarter of 2013,” Kelly said. “As a result, quarterly net pager losses declined to historically low levels. Overall, wireless sales efforts continued to focus primarily on our core market segments of Healthcare, Government and Large Enterprise, which represented approximately 93.5 percent of our direct subscriber base and 90.2 percent of our direct paging revenue at year end. Healthcare comprised 77.4 percent of our direct subscriber base, and continued to be our best performing market segment with the highest rate of gross placements and lowest rate of unit disconnects.”

Kelly noted the Company successfully completed several other major initiatives in 2014, including the integration of its two operating subsidiaries and its name change to Spok. “We believe the consolidation our of software and wireless businesses in January 2014 not only created major operating efficiencies but allowed us to better serve all of our customers as a single source provider of their critical communications needs. Similarly,” Kelly added, “changing our corporate name to Spok in July was very well received by customers along with others both inside and outside the Company. As part of a global rebranding initiative, we believe the name change better reflects our identity as a leader in critical communications and has already resulted in new business opportunities for us in various geographic and vertical markets worldwide.”

The Company’s business transition and global expansion in 2014 also resulted in several key additions to senior management during the year. Among them, Hemant Goel joined Spok as Chief Operating Officer, Donna Scott was named Senior Vice President of Marketing, Kyle Gunderson was appointed Vice President Development and Chief Technology Officer, and Danielle Brogan joined the Company as Controller and Chief Accounting Officer. “We believe the addition of these experienced business executives is another important step as we continue to grow our business over time,” said Kelly.

Kelly also noted that Spok returned capital to stockholders in the fourth quarter in the form of quarterly cash dividends totaling $2.8 million and repurchased 263,772 shares of common stock totaling $4.3 million, or $16.36 per share, under its stock buy-back program. “Over the past 10 years,” he added, “we have generated $913.5 million in free cash flow, paid $428.4 million to our stockholders in cash dividends, and repurchased $64.1 million of our common stock.”

Shawn E. Endsley, chief financial officer, said: “Strong revenue from both software and wireless, combined with focused expense management, helped us maintain solid operating cash flow, EBITDA and operating margins for the quarter even as we continued to invest in resources and opportunities for long-term growth. We also strengthened our balance sheet, recording a cash balance of $107.9 million at December 31, and continued to operate as a debt-free company at year end.”

Commenting on the Company’s previously provided financial guidance for 2014, Endsley noted: “We are pleased that 2014 results were largely consistent with our guidance. For the year, total revenue of $200.3 million was within our guidance range of $183 million to $201 million, operating expenses of $155.4 million were within our guidance range of $147 million to $156 million, and capital expenses of $7.7 million were within our guidance range of $7 million to $9 million.” With regard to financial guidance for 2015, Endsley said the Company expects total revenue to range from $183 million to $201 million, operating expenses (excluding depreciation, amortization and accretion) to range from $145 million to $154 million, and capital expenses to range from $5.5 million to $7.5 million.

* * * * * * * * *

Spok plans to host a conference call for investors on its fourth quarter and 2014 operating results at 10:00 a.m. Eastern Time on Thursday, March 5, 2015. Dial-in numbers for the call are 785-830-7992 or 800-768-6569. The pass code for the call is 7872653. A replay of the call will be available from 1:00 p.m. ET on March 5 until 1:00 p.m. on Thursday, March 19. Replay numbers are 719-457-0820 or 888-203-1112. The pass code for the replay is 7872653.

* * * * * * * * *

About Spok

Spok Holdings, Inc., headquartered in Springfield, Va., is proud to be a 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. More than 125,000 organizations worldwide rely on Spok for workflow improvement, secure texting, paging services, contact center optimization, and public safety response. When communications matter, Spok delivers. Visit us at spok.com or find us on Twitter @Spoktweets.

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.

Tables to Follow

 
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   For the twelve months ended

12/31/2014

12/31/2013

12/31/2014

12/31/2013

Revenue:
Wireless $ 31,678 $ 35,831 $ 132,402 $ 149,448
Software   19,591     18,854     67,871     60,304  
Total revenue   51,269     54,685     200,273     209,752  
Operating expenses:
Cost of revenue 10,571 7,500 32,556 27,915
Service, rental and maintenance 11,285 11,442 45,485 47,471
Selling and marketing 7,915 7,297 30,013 26,617
General and administrative 11,905 11,470 45,896 46,105
Severance and restructuring 926 981 1,495 983
Depreciation, amortization and accretion   4,049     3,680     16,677     15,167  
Total operating expenses   46,651     42,370     172,122     164,258  
% of total revenue 91.0 % 77.5 % 85.9 % 78.3 %
Operating income 4,618 12,315 28,151 45,494
% of total revenue 9.0 % 22.5 % 14.1 % 21.7 %
Interest expense, net (262 ) (64 ) (456 ) (260 )
Other (expense) income, net   (188 )   15     (368 )   105  
Income before income tax expense 4,168 12,266 27,327 45,339
Income tax benefit (expense)   2,744     (4,251 )   (6,582 )   (17,809 )
Net income $ 6,912   $ 8,015   $ 20,745   $ 27,530  
Basic net income per common share $ 0.32   $ 0.37   $ 0.96   $ 1.27  
Diluted net income per common share $ 0.31   $ 0.36   $ 0.94   $ 1.25  
Basic weighted average common shares outstanding   21,554,746     21,633,706     21,621,466     21,648,654  
Diluted weighted average common shares outstanding   22,101,600     21,969,756     22,090,770     22,010,523  
Reconciliation of operating income to EBITDA (b):
Operating income $ 4,618 $ 12,315 $ 28,151 $ 45,494
Add back: depreciation, amortization and accretion   4,049     3,680     16,677     15,167  
EBITDA $ 8,667   $ 15,995   $ 44,828   $ 60,661  
% of total revenue 16.9 % 29.2 % 22.4 % 28.9 %
Key statistics:
Units in service 1,256 1,376 1,256 1,376
Average revenue per unit (ARPU) $ 7.92 $ 8.15 $ 7.93 $ 8.20
Bookings $ 22,272 $ 16,271 $ 78,514 $ 63,452
Backlog $ 42,391 $ 40,211 $ 42,391 $ 40,211
 
(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.
 
 
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

12/31/2014

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

6/30/2013

3/31/2013

Revenue:
Wireless $ 31,678 $ 32,855 $ 33,518 $ 34,351 $ 35,831 $ 37,067 $ 37,771 $ 38,779
Software   19,591     16,936     15,576     15,768     18,854     12,602     14,497     14,351  
Total revenue   51,269     49,791     49,094     50,119     54,685     49,669     52,268     53,130  
Operating expenses:
Cost of revenue 10,571 8,000 7,180 6,805 7,500 6,787 6,961 6,667
Service, rental and maintenance 11,285 10,988 11,420 11,792 11,442 11,820 12,018 12,191
Selling and marketing 7,915 7,072 7,780 7,246 7,297 6,388 6,538 6,394
General and administrative 11,905 10,866 10,990 12,135 11,470 11,282 11,022 12,331
Severance and restructuring 926 545 4 20 981 2
Depreciation, amortization and accretion   4,049     4,247     4,352     4,029     3,680     3,858     3,822     3,807  
Total operating expenses   46,651     41,718     41,726     42,027     42,370     40,135     40,363     41,390  
% of total revenue 91.0 % 83.8 % 85.0 % 83.9 % 77.5 % 80.8 % 77.2 % 77.9 %
Operating income 4,618 8,073 7,368 8,092 12,315 9,534 11,905 11,740
% of total revenue 9.0 % 16.2 % 15.0 % 16.1 % 22.5 % 19.2 % 22.8 % 22.1 %
Interest expense, net (262 ) (63 ) (64 ) (67 ) (64 ) (68 ) (64 ) (64 )
Other (expense) income, net   (188 )   (2 )   (194 )   16     15     84     (75 )   81  
Income before income tax expense 4,168 8,008 7,110 8,041 12,266 9,550 11,766 11,757
Income tax benefit (expense)   2,744     (3,356 )   (2,819 )   (3,151 )   (4,251 )   (3,788 )   (4,938 )   (4,832 )
Net income $ 6,912   $ 4,652   $ 4,291   $ 4,890   $ 8,015   $ 5,762   $ 6,828   $ 6,925  
Basic net income per common share $ 0.32   $ 0.21   $ 0.20   $ 0.23   $ 0.37   $ 0.27   $ 0.32   $ 0.32  
Diluted net income per common share $ 0.31   $ 0.21   $ 0.19   $ 0.22   $ 0.36   $ 0.26   $ 0.31   $ 0.32  
Basic weighted average common shares outstanding   21,554,746     21,651,347     21,642,163     21,638,198     21,633,706     21,629,289     21,644,281     21,688,153  
Diluted weighted average common shares outstanding   22,101,600     22,135,554     22,099,791     22,037,796     21,969,756     21,919,238     21,827,149     21,904,862  
Reconciliation of operating income to EBITDA (b):
Operating income $ 4,618 $ 8,073 $ 7,368 $ 8,092 $ 12,315 $ 9,534 $ 11,905 $ 11,740
Add back: depreciation, amortization and accretion   4,049     4,247     4,352     4,029     3,680     3,858     3,822     3,807  
EBITDA $ 8,667   $ 12,320   $ 11,720   $ 12,121   $ 15,995   $ 13,392   $ 15,727   $ 15,547  
% of total revenue 16.9 % 24.7 % 23.9 % 24.2 % 29.2 % 27. % 30.1 % 29.3 %
Key statistics:
Units in service 1,256 1,274 1,299 1,327 1,376 1,408 1,445 1,480
Average revenue per unit (ARPU) $ 7.92 $ 7.97 $ 7.98 $ 8.11 $ 8.15 $ 8.22 $ 8.22 $ 8.25
Bookings $ 22,272 $ 20,362 $ 18,959 $ 16,921 $ 16,271 $ 17,302 $ 15,626 $ 14,253
Backlog $ 42,391 $ 42,117 $ 40,182 $ 41,396 $ 40,211 $ 43,831 $ 39,576 $ 40,183
 
(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.
 
 
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (a)
(In thousands)
               

12/31/2014

12/31/2013

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 107,869 $ 89,075
Accounts receivable, net 24,969 18,084
Prepaid expenses and other 7,250 7,399
Inventory 2,673 2,221
Deferred income tax assets, net   2,194   3,389
Total current assets 144,955 120,168
Property and equipment, net 17,395 21,122
Goodwill 133,031 133,031
Other intangible assets, net 19,698 25,368
Deferred income tax assets, net 21,949 25,494
Other assets   862   1,715
Total assets $ 337,890 $ 326,898
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 11,688 $ 9,885
Accrued compensation and benefits 14,041 13,919
Deferred revenue   24,034   23,023
Total current liabilities 49,763 46,827
Deferred revenue 937 862
Other long-term liabilities   8,131   9,259
Total liabilities   58,831   56,948
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 2 2
Additional paid-in capital 126,678 127,264
Retained earnings   152,379   142,684
Total stockholders' equity   279,059   269,950
Total liabilities and stockholders' equity $ 337,890 $ 326,898
 
(a) Slight variations in totals are due to rounding.
 
                 
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a)
(Unaudited and in thousands)
 
For the twelve months ended

12/31/2014

12/31/2013

Cash flows from operating activities:
Net income $ 20,745 $ 27,530
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 16,677 15,167
Amortization of deferred financing costs 456 258
Deferred income tax expense 4,740 16,276
Stock based compensation 3,838 3,045
Provisions for doubtful accounts, service credits and other 1,128 1,955
Adjustments of non-cash transaction taxes (310 ) (474 )
Loss on disposals of property and equipment 3 21
Changes in assets and liabilities:
Accounts receivable (8,013 ) 1,542
Prepaid expenses and other assets 17 (1,215 )
Accounts payable, accrued liabilities and accrued compensation and benefits 1,192 (6,855 )
Customer deposits and deferred revenue   1,086     (6,794 )
Net cash provided by operating activities   41,559     50,456  
Cash flows from investing activities:
Purchases of property and equipment (7,679 ) (10,408 )
Proceeds from disposals of property and equipment   65     293  
Net cash used in investing activities   (7,614 )   (10,115 )
Cash flows from financing activities:
Cash dividends to stockholders (10,826 ) (12,312 )
Purchase of common stock (including commissions)   (4,325 )    
Net cash used in financing activities   (15,151 )   (12,312 )
Net increase in cash and cash equivalents 18,794 28,029
Cash and cash equivalents, beginning of period   89,075     61,046  
Cash and cash equivalents, end of period $ 107,869   $ 89,075  
Supplemental disclosure:
Interest paid $ 8   $ 10  
Income taxes paid $ 1,448   $ 1,474  
 
(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

12/31/2014

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

6/30/2013

3/31/2013

Revenue
Paging $ 30,071 $ 30,776 $ 31,458 $ 32,896 $ 34,015 $ 35,141 $ 36,064 $ 37,051
Non-paging   1,607   2,079   2,060   1,455   1,816   1,926   1,707   1,728
Wireless   31,678   32,855   33,518   34,351   35,831   37,067   37,771   38,779
Subscription 365 458 377 283 248 220 178 175
License 3,474 2,374 2,497 2,929 4,138 2,000 2,458 2,640
Services 5,579 4,305 3,558 3,930 5,493 2,080 3,327 2,780
Equipment   2,145   1,930   1,614   1,250   1,875   1,251   1,589   1,994
Operations revenue 11,563 9,067 8,046 8,392 11,754 5,551 7,552 7,589
Maintenance revenue   8,028   7,869   7,530   7,376   7,100   7,051   6,945   6,762
Software   19,591   16,936   15,576   15,768   18,854   12,602   14,497   14,351
Total revenue $ 51,269 $ 49,791 $ 49,094 $ 50,119 $ 54,685 $ 49,669 $ 52,268 $ 53,130
 
(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

12/31/2014

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

6/30/2013

3/31/2013

Cost of revenue
Payroll and related $ 4,222 $ 3,743 $ 3,827 $ 3,959 $ 3,609 $ 3,744 $ 3,743 $ 3,709
Cost of sales 5,225 3,098 2,232 1,917 2,726 1,992 2,133 1,890
Stock based compensation 81 108 81 81 74 64 49 49
Other   1,043   1,051   1,040     848   1,091     987   1,036   1,019
Total cost of revenue   10,571   8,000   7,180     6,805   7,500     6,787   6,961   6,667
Service, rental and maintenance
Site rent 3,834 3,914 3,981 4,015 3,972 4,142 4,237 4,235
Telecommunications 1,487 1,548 1,669 1,736 1,751 1,832 1,885 1,889
Payroll and related 4,533 4,106 4,434 4,594 4,296 4,577 4,589 4,698
Stock based compensation 30 56 (17 ) 39 32 59 20 20
Repairs and maintenance 467 489 436 508 482 484 480 575
Other   934   875   917     900   909     726   807   774
Total service, rental and maintenance   11,285   10,988   11,420     11,792   11,442     11,820   12,018   12,191
Selling and marketing
Payroll and related 3,945 3,859 4,099 4,098 3,717 3,917 3,919 3,840
Commissions 2,481 1,949 2,087 1,952 2,162 1,310 1,519 1,387
Stock based compensation 131 151 131 131 (24 ) 122 119 119
Other   1,358   1,113   1,463     1,065   1,442     1,039   981   1,048
Total selling and marketing   7,915   7,072   7,780     7,246   7,297     6,388   6,538   6,394
General and administrative
Payroll and related 4,737 4,217 4,440 4,796 4,802 4,696 5,074 5,414
Stock based compensation 780 791 429 835 763 701 440 438
Bad debt 127 136 134 86 262 274 265 275
Facility rent 830 863 899 922 719 883 839 844
Telecommunications 381 427 399 395 420 388 343 375
Outside services 1,786 1,698 1,719 1,762 1,811 1,927 1,606 2,560
Taxes, licenses and permits 1,283 1,225 1,383 1,064 1,358 1,106 1,166 1,233
Repairs and maintenance 506 510 421 374 314 333 278 261
Financial services 346 336 379 363 357 350 349 313
Other   1,129   663   787     1,538   664     624   662   618
Total general and administrative   11,905   10,866   10,990     12,135   11,470     11,282   11,022   12,331
Severance and restructuring 926 545 4 20 981 2
Depreciation, amortization and accretion   4,049   4,247   4,352     4,029   3,680     3,858   3,822   3,807
Operating expenses $ 46,651 $ 41,718 $ 41,726   $ 42,027 $ 42,370   $ 40,135 $ 40,363 $ 41,390
Capital expenditures $ 1,352 $ 1,291 $ 2,393 $ 2,643 $ 2,636 $ 2,504 $ 2,927 $ 2,341
 
(a) Slight variations in totals are due to rounding.
 
 
SPOK HOLDINGS, INC.
UNITS IN SERVICE ACTIVITY (a)
(Unaudited and in thousands)
                                                 
For the three months ended
12/31/2014   9/30/2014   6/30/2014   3/31/2014   12/31/2013   9/30/2013   6/30/2013   3/31/2013  

Paging units in service

Beginning units in service
Direct one-way 1,157 1,179 1,200 1,246 1,275 1,307 1,324 1,346
Direct two-way 63   64   69   69   70   73   73   75  
Total direct 1,220   1,243   1,269   1,315   1,345   1,380   1,397   1,421  
Indirect one-way 28 29 30 34 35 36 38 48
Indirect two-way 26   27   28   27   28   29   45   46  
Total indirect 54   56   58   61   63   65   83   94  
Total beginning units in service 1,274   1,299   1,327   1,376   1,408   1,445   1,480   1,515  
Gross placements
Direct one-way 31 40 48 34 32 40 49 39
Direct two-way 3   4   2   4   3   3   5   3  
Total direct 34   44   50   38   35   43   54   42  
Indirect one-way 1 1 1 1 1 1 1
Indirect two-way       1          
Total indirect 1   1   1   1   1   1   1   1  
Total gross placements 35   45   51   39   36   44   55   43  
Gross disconnects
Direct one-way (47 ) (62 ) (69 ) (80 ) (61 ) (72 ) (66 ) (61 )
Direct two-way (3 ) (5 ) (7 ) (4 ) (4 ) (6 ) (5 ) (5 )
Total direct (50 ) (67 ) (76 ) (84 ) (65 ) (78 ) (71 ) (66 )
Indirect one-way (2 ) (2 ) (2 ) (4 ) (2 ) (2 ) (3 ) (11 )
Indirect two-way (1 ) (1 ) (1 )   (1 ) (1 ) (16 ) (1 )
Total indirect (3 ) (3 ) (3 ) (4 ) (3 ) (3 ) (19 ) (12 )
Total gross disconnects (53 ) (70 ) (79 ) (88 ) (68 ) (81 ) (90 ) (78 )
Net loss
Direct one-way (16 ) (22 ) (21 ) (46 ) (29 ) (32 ) (17 ) (22 )
Direct two-way   (1 ) (5 )   (1 ) (3 )   (2 )
Total direct (16 ) (23 ) (26 ) (46 ) (30 ) (35 ) (17 ) (24 )
Indirect one-way (1 ) (1 ) (1 ) (4 ) (1 ) (1 ) (2 ) (10 )
Indirect two-way (1 ) (1 ) (1 ) 1   (1 ) (1 ) (16 ) (1 )
Total indirect (2 ) (2 ) (2 ) (3 ) (2 ) (2 ) (18 ) (11 )
Total net change (18 ) (25 ) (28 ) (49 ) (32 ) (37 ) (35 ) (35 )
Ending units in service
Direct one-way 1,141 1,157 1,179 1,200 1,246 1,275 1,307 1,324
Direct two-way 63   63   64   69   69   70   73   73  
Total direct 1,204   1,220   1,243   1,269   1,315   1,345   1,380   1,397  
Indirect one-way 27 28 29 30 34 35 36 38
Indirect two-way 25   26   27   28   27   28   29   45  
Total indirect 52   54   56   58   61   63   65   83  
Total ending units in service 1,256   1,274   1,299   1,327   1,376   1,408   1,445   1,480  
 
(a) Slight variations in totals are due to rounding.
 
 
SPOK HOLDINGS, INC.
AVERAGE REVENUE PER UNIT (ARPU) AND CHURN (a)
(Unaudited)
               
For the three months ended

12/31/2014

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

6/30/2013

3/31/2013

Paging ARPU

Direct one-way $ 7.45 $ 7.48 $ 7.48 $ 7.59 $ 7.60 $ 7.64 $ 7.67 $ 7.73
Direct two-way   17.95     18.17     18.21     18.91     19.43     19.93     19.95     20.41  
Total direct 8.00 8.05 8.06 8.19 8.23 8.29 8.33 8.40
Indirect one-way 8.13 8.24 8.18 8.22 8.68 8.90 8.97 8.22
Indirect two-way   4.06     4.31     4.45     4.32     3.97     3.97     3.89     3.76  
Total indirect 6.12 6.32 6.39 6.37 6.47 6.57 6.31 5.85
Total one-way 7.46 7.50 7.50 7.60 7.63 7.68 7.71 7.74
Total two-way   13.87     14.10     14.22     14.70     14.90     15.20     14.40     13.96  
Total paging ARPU $ 7.92   $ 7.97   $ 7.98   $ 8.11   $ 8.15   $ 8.22   $ 8.22   $ 8.25  

Gross disconnect rate (b)

Direct one-way (4.1 )% (5.5 )% (5.7 )% (6.4 )% (4.7 )% (5.6 )% (5.0 )% (4.6 )%
Direct two-way   (4.5 )%   (7.3 )%   (10.5 )%   (5.6 )%   (6.4 )%   (7.9 )%   (6.7 )%   (6.6 )%
Total direct (4.1 )% (5.4 )% (6.0 )% (6.4 )% (4.8 )% (5.7 )% (5.1 )% (4.7 )%
Indirect one-way (6.5 )% (6.4 )% (6.8 )% (8.2 )% (6.1 )% (6.3 )% (7.4 )% (23.6 )%
Indirect two-way   (2.3 )%   (1.9 )%   (2.7 )%   (2.3 )%   (5.7 )%   (4.8 )%   (34.0 )%   (1.6 )%
Total indirect (4.4 )% (4.2 )% (4.8 )% (5.5 )% (5.9 )% (5.6 )% (22.3 )% (12.5 )%
Total one-way (4.2 )% (5.3 )% (5.8 )% (6.5 )% (4.8 )% (5.6 )% (5.1 )% (5.2 )%
Total two-way   (3.9 )%   (5.7 )%   (8.3 )%   (4.7 )%   (6.2 )%   (7.0 )%   (17.3 )%   (4.7 )%
Total paging gross disconnect rate   (4.1 )%   (5.3 )%   (5.9 )%   (6.3 )%   (4.9 )%   (5.7 )%   (6.1 )%   (5.2 )%

Net loss rate (c)

Direct one-way (1.4 )% (1.8 )% (1.9 )% (3.7 )% (2.1 )% (2.5 )% (1.3 )% (1.7 )%
Direct two-way   (0.1 )%   (3.0 )%   (4.5 )%   (0.6 )%   (2.2 )%   (3.6 )%   (0.4 )%   (1.9 )%
Total direct (1.4 )% (1.9 )% (2.0 )% (3.5 )% (2.1 )% (2.5 )% (1.3 )% (1.7 )%
Indirect one-way (4.3 )% (4.1 )% (4.8 )% (6.3 )% (3.9 )% (3.3 )% (4.7 )% (21.8 )%
Indirect two-way   (2.0 )%   (1.5 )%   (2.2 )%   (1.9 )%   (4.9 )%   (4.1 )%   (33.7 )%   (1.3 )%
Total indirect (3.1 )% (2.8 )% (3.5 )% (4.2 )% (4.4 )% (3.6 )% (21.0 )% (11.5 )%
Total one-way (1.5 )% (1.9 )% (2.0 )% (3.7 )% (2.2 )% (2.5 )% (1.4 )% (2.4 )%
Total two-way   (0.6 )%   (2.5 )%   (3.8 )%   (1.0 )%   (3.0 )%   (3.8 )%   (13.3 )%   (1.6 )%
Total paging net loss rate   (1.4 )%   (1.9 )%   (2.1 )%   (3.5 )%   (2.2 )%   (2.6 )%   (2.4 )%   (2.3 )%
 
(a) Slight variations in totals are due to rounding.
(b) Gross disconnect rate is current period disconnected units divided by prior period ending units in service.
(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.
SUPPLEMENTAL INFORMATION BY MARKET SEGMENT (a)
(Unaudited)
                                                 
For the three months ended

12/31/2014

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

6/30/2013

3/31/2013

Gross placement rate (b)
Healthcare 3.0 % 3.8 % 4.5 % 3.1 % 2.9 % 3.3 % 4.5 % 3.4 %
Government 1.2 % 1.5 % 2.6 % 1.9 % 1.5 % 1.7 % 2.3 % 1.6 %
Large enterprise 2.3 % 2.7 % 2.0 % 2.9 % 3.0 % 4.3 % 2.4 % 2.1 %
Other 2.1 % 4.3 % 2.2 % 2.1 % 1.7 % 2.0 % 1.5 % 1.8 %
Total direct 2.8 % 3.5 % 4.0 % 2.9 % 2.7 % 3.1 % 3.8 % 3.0 %
Total indirect 1.3 % 1.4 % 1.3 % 1.2 % 1.5 % 1.9 % 1.4 % 1.0 %
Total 2.7 % 3.4 % 3.9 % 2.8 % 2.7 % 3.1 % 3.7 % 2.9 %
Gross disconnect rate (b)
Healthcare (3.8)% (5.1)% (5.3)% (6.5)% (4.5)% (5.2)% (4.4)% (3.9)%
Government (4.7)% (7.5)% (7.6)% (5.6)% (4.7)% (7.9)% (7.1)% (5.9)%
Large enterprise (4.7)% (4.8)% (8.9)% (5.4)% (6.4)% (6.0)% (6.7)% (7.0)%
Other (6.4)% (6.9)% (7.7)% (6.5)% (6.5)% (6.5)% (7.4)% (7.3)%
Total direct (4.1)% (5.4)% (6.0)% (6.4)% (4.8)% (5.7)% (5.1)% (4.7)%
Total indirect (4.4)% (4.2)% (4.8)% (5.5)% (5.9)% (5.6)% (22.3)% (12.5)%
Total (4.1)% (5.3)% (5.9)% (6.3)% (4.9)% (5.7)% (6.1)% (5.2)%
Net loss rate (b)
Healthcare (0.7)% (1.3)% (0.8)% (3.5)% (1.5)% (1.9)% —% (0.5)%
Government (3.5)% (6.0)% (5.0)% (3.6)% (3.2)% (6.3)% (4.6)% (4.3)%
Large enterprise (2.4)% (2.1)% (6.9)% (2.5)% (3.3)% (1.6)% (4.2)% (4.9)%
Other (4.4)% (2.5)% (5.5)% (4.4)% (4.8)% (4.5)% (5.9)% (5.5)%
Total direct (1.4)% (1.9)% (2.0)% (3.5)% (2.1)% (2.5)% (1.3)% (1.7)%
Total indirect (3.1)% (2.8)% (3.5)% (4.2)% (4.4)% (3.6)% (21.0)% (11.5)%
Total (1.4)% (1.9)% (2.1)% (3.5)% (2.2)% (2.6)% (2.4)% (2.3)%
End of period units in service % of total (b)
Healthcare 74.1 % 73.6 % 73.0 % 72.0 % 71.9 % 71.4 % 70.9 % 68.4 %
Government 7.8 % 7.9 % 8.3 % 8.6 % 8.6 % 8.8 % 9.1 % 10.1 %
Large enterprise 7.7 % 7.8 % 7.8 % 8.2 % 8.1 % 8.2 % 8.1 % 8.3 %
Other 6.2 % 6.4 % 6.6 % 6.8 % 7.0 % 7.1 % 7.3 % 7.6 %
Total direct 95.8 % 95.7 % 95.7 % 95.6 % 95.6 % 95.5 % 95.4 % 94.4 %
Total indirect 4.2 % 4.3 % 4.3 % 4.4 % 4.4 % 4.5 % 4.6 % 5.6 %
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
 
(a) Slight variations in totals are due to rounding.
(b) Changes in the classification of units in service are reflected in the quarter when such changes are identified. Such changes are
then appropriately reflected in calculating the gross placement, gross disconnect and net loss rates.
 
 
SPOK HOLDINGS, INC.
SUPPLEMENTAL INFORMATION - DIRECT PAGING UNITS IN SERVICE AND
CELLULAR ACTIVATIONS (a)
(Unaudited)
                                                 
For the three months ended

12/31/2014

9/30/2014

6/30/2014

3/31/2014

12/31/2013

9/30/2013

6/30/2013

3/31/2013

Account size ending units in service (000's)
1 to 3 units 35 37 39 41 43 45 47 49
4 to 10 units 21 22 23 24 25 26 28 29
11 to 50 units 51 53 56 57 61 64 67 71
51 to 100 units 34 36 38 41 42 43 45 47
101 to 1,000 units 262 267 275 282 287 293 305 321
>1,000 units   801     805     812     824     857     874     888     880  
Total   1,204     1,220     1,243     1,269     1,315     1,345     1,380     1,397  
End of period units in service % of total direct
1 to 3 units 2.9 % 3.0 % 3.1 % 3.2 % 3.2 % 3.3 % 3.4 % 3.5 %
4 to 10 units 1.7 % 1.8 % 1.8 % 1.9 % 1.9 % 2.0 % 2.0 % 2.1 %
11 to 50 units 4.2 % 4.3 % 4.5 % 4.5 % 4.6 % 4.8 % 4.8 % 5.1 %
51 to 100 units 2.8 % 3.0 % 3.1 % 3.2 % 3.2 % 3.2 % 3.2 % 3.4 %
101 to 1,000 units 21.8 % 21.9 % 22.1 % 22.3 % 21.9 % 21.8 % 22.1 % 23.0 %
>1,000 units   66.6 %   66.0 %   65.4 %   64.9 %   65.2 %   64.9 %   64.5 %   62.9 %
Total   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Account size net loss rate
1 to 3 units (4.4 )% (4.8 )% (4.1 )% (4.9 )% (4.4 )% (4.6 )% (5.1 )% (4.8 )%
4 to 10 units (5.5 )% (4.0 )% (5.4 )% (4.1 )% (3.8 )% (5.3 )% (5.3 )% (6.0 )%
11 to 50 units (3.8 )% (5.2 )% (3.2 )% (5.3 )% (4.4 )% (3.9 )% (6.4 )% (4.8 )%
51 to 100 units (5.4 )% (5.2 )% (8.7 )% (1.2 )% (3.5 )% (2.8 )% (5.3 )% (4.0 )%
101 to 1,000 units (2.0 )% (2.9 )% (2.5 )% (1.7 )% (1.7 )% (4.0 )% (5.0 )% (3.9 )%
>1,000 units   (0.5 )%   (1.0 )%   (1.2 )%   (4.0 )%   (1.8 )%   (1.7 )%   1.1 %   (0.2 )%
Total   (1.4 )%   (1.9 )%   (2.0 )%   (3.5 )%   (2.1 )%   (2.5 )%   (1.3 )%   (1.7 )%
Account size ARPU
1 to 3 units $ 14.53 $ 14.65 $ 14.86 $ 14.96 $ 14.98 $ 15.13 $ 15.12 $ 15.22
4 to 10 units 14.09 14.04 14.12 14.22 14.29 14.38 14.29 14.33
11 to 50 units 12.00 11.95 12.00 12.07 11.96 12.06 11.96 12.06
51 to 100 units 10.15 10.16 10.18 10.27 10.34 10.66 10.42 10.47
101 to 1,000 units 8.79 8.69 8.58 8.76 8.89 8.85 8.84 8.84
>1,000 units   6.93     6.99     7.00     7.11     7.11     7.17     7.19     7.23  
Total $ 8.00   $ 8.05   $ 8.06   $ 8.19   $ 8.23   $ 8.29   $ 8.33   $ 8.40  
Cellular:
Number of activations   264     2,198     1,679     281     690     970     799     925  
Revenue from cellular services (000's) $ 77   $ 395   $ 278   $ 108   $ 129   $ 235   $ 163   $ 195  
 
(a) Slight variations in totals are due to rounding.
 
 
SPOK HOLDINGS, INC.
2015 FINANCIAL GUIDANCE
   
(In millions)
     
Guidance Range
From To
Revenues
Wireless $ 112 $ 122
Software   71   79
$ 183 $ 201
 
Operating Expenses (a) $ 145 $ 154
   
Capital Expenses $ 5.5 $ 7.5
 
(a) Operating expenses exclude depreciation, amortization and accretion.
 

Source: Spok Holdings, Inc.

CONTACT:
Spok Holdings, Inc.
Bob Lougee, 800-611-8488
Bob.Lougee@spok.com