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Spok Reports Fourth Quarter and 2015 Operating Results; Software Revenue and Bookings Increase from Prior Quarter

Wireless Trends Continue to Improve;

Board Declares Regular Quarterly Dividend

SPRINGFIELD, Va.--(BUSINESS WIRE)--Feb. 24, 2016-- Spok Holdings, Inc. (NASDAQ:SPOK), a global leader in critical communications, today announced operating results for the fourth quarter and year ended December 31, 2015. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on March 30, 2016 to stockholders of record on March 18, 2016.

In the 2015 fourth quarter, consolidated revenue was $47.3 million, compared to $51.3 million in the fourth quarter of 2014 and $46.2 million in the third quarter of 2015. Software revenue increased 10.7 percent from the prior quarter to $18.6 million in the fourth quarter of 2015, compared to $19.6 million in the fourth quarter of 2014 and $16.8 million in the third quarter of 2015. Wireless revenue totaled $28.7 million in the fourth quarter, compared to $31.7 million in the year-earlier quarter and $29.4 million in the prior quarter.

Fourth quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $9.9 million, or 20.9 percent of revenue, compared to $8.7 million, or 16.9 percent of revenue, in the year-earlier quarter, and $10.1 million, or 21.8 percent of revenue, in the third quarter of 2015.

Net income for the fourth quarter of 2015 was $72.7 million, or $3.53 per diluted share, compared to $6.9 million, or $0.31 per diluted share, in the fourth quarter of 2014. In the fourth quarter of 2015, net income included a non-cash income tax benefit of $68.4 million. The income tax benefit resulted from the reduction of the deferred income tax asset valuation allowance reflecting the Company’s fourth quarter analysis of its future operations. In accordance with applicable accounting standards that analysis determined that more of the Company’s deferred income tax assets are recoverable in future periods and this quarter’s income tax benefit reflects that adjustment. Excluding this benefit, fourth quarter 2015 net income would have totaled $4.3 million or $0.21 per diluted share.

For the full-year 2015, consolidated revenue was $189.6 million, compared to $200.3 million in 2014. Wireless revenue was $119.0 million and software revenue was $70.6 million, compared to $132.4 million and $67.9 million, respectively, for 2014. Software revenue increased 4 percent from the prior year.

EBITDA for 2015 was $39.1 million, or 20.6 percent of revenue, compared to $44.8 million, or 22.4 percent of revenue, for 2014.

Net income for 2015 was $84.2 million, or $3.98 per diluted share, compared to net income of $20.7 million, or $0.94 per diluted share, for the previous year. In 2015, net income included a non-cash income tax benefit related to the reduction of the valuation allowance associated with the Company’s deferred income tax assets. In the fourth quarter the Company determined that more of the deferred income tax assets are recoverable in future periods and the 2015 income tax benefit reflects that adjustment. Excluding this income tax benefit, full year 2015 net income would have totaled $15.9 million, or $0.75 per diluted share.

Other key results and highlights for the fourth quarter and 2015 included:

  • Software bookings for the fourth quarter increased to $18.5 million, from $16.7 million in the prior quarter. Fourth quarter bookings included $10.0 million of operations bookings and $8.5 million of maintenance renewals. For 2015, bookings totaled $74.0 million, compared to $78.5 million in 2014. Maintenance bookings for 2015 totaled $35.4 million.
  • Software backlog totaled $38.7 million at December 31, 2015, compared to $41.6 million at September 30, 2015, and $42.4 million at year-end 2014.
  • Of the $18.6 million in software revenue for the fourth quarter, $9.6 million was operations revenue and $9.0 million was maintenance revenue, compared to $11.6 million and $8.0 million, respectively, of the $19.6 million in software revenue for the fourth quarter of 2014.
  • The renewal rate for software maintenance in the fourth quarter was 99.7 percent.
  • The quarterly rate of paging unit erosion was 1.6 percent in the fourth quarter of 2015, compared to 1.4 percent in the year-earlier quarter. The annual rate of unit erosion improved to 6.6 percent in 2015 versus 8.7 percent in the prior year. Net paging unit losses were 19,000 in the fourth quarter of 2015, versus 18,000 in the fourth quarter of 2014. Paging units in service at December 31, 2015 totaled 1,173,000, compared to 1,256,000 at the end of the prior year.
  • The quarterly rate of wireless revenue erosion slowed to 2.2 percent in the fourth quarter of 2015 versus 3.6 percent in the year-earlier quarter, while the annual rate of wireless revenue erosion slowed to 10.1 percent versus 11.6 percent in 2014.
  • Total paging ARPU (average revenue per unit) was $7.79 in the fourth quarter of 2015, compared to $7.92 in the year-earlier quarter and $7.82 in the prior quarter. For the year, ARPU totaled $7.90, compared to $7.93 in 2014.
  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $37.4 million in the fourth quarter of 2015, compared to $42.6 million in the year-earlier quarter. For 2015, operating expenses totaled $150.6 million, compared to $155.4 million in 2014.
  • Capital expenses were $2.0 million in the fourth quarter of 2015, compared to $1.4 million in the year-earlier quarter. For 2015, capital expenses totaled $6.4 million, compared to $7.7 million in 2014.
  • The number of full-time equivalent employees at December 31, 2015 totaled 600, compared to 587 at year-end 2014.
  • Capital returned to stockholders in 2015 totaled $28.3 million. This came in the form of $13.3 million from dividends and $15.0 million from share repurchases.
  • The Company’s cash balance at December 31, 2015 grew to $111.3 million, from $107.9 million at December 31, 2014.

“We are encouraged with our performance in the fourth quarter of 2015 and for the full year”, said Vincent D. Kelly, chief executive officer. “We met or exceeded our expectations on a number of key operating measures, including revenue levels, operating expense management, cash flow and subscriber retention. We achieved these results, as we continued to invest in our future, enhancing and upgrading our operating platforms and sales infrastructure. We believe that these investments in our systems and people position us well for the future. For the full year, software revenue grew, while our backlog and pipeline remained strong and wireless revenue and paging unit attrition was slower than anticipated. Overall, we continued to operate profitably, enhance our product offerings, and further strengthen our balance sheet. Our ability to generate healthy cash flow levels allowed us to execute against our capital allocation strategy, make key strategic investments and return the majority of our cash flow to our stockholders in excess of our capital allocation commitment in the form of dividends and share repurchases.”

Commenting on software results, Kelly said: “Fourth quarter 2015 total software revenue increased nearly 11 percent from the prior quarter, and for the full year increased more than 4 percent from 2014.” Kelly attributed higher fourth quarter and full year software revenue primarily to a continuing trend of a more than 99 percent renewal rate on software maintenance contracts. Maintenance revenue is a largely recurring revenue stream that provides Spok with a more stable revenue and margin base.

Fourth quarter 2015 software bookings of $18.5 million were up nearly 11 percent from the prior quarter. For the full year, bookings totaled $74.0 million, a slight decline from prior-year levels. “Demand remained strong in the domestic markets for upgrades and installations of call center solutions, along with healthcare applications to increase patient safety, improve nursing workflows and enhance organizational efficiencies,” said Kelly. “While domestic markets performed well, we saw some sluggishness in the international markets of both EMEA and APAC.”

Continued Kelly, “We are focused on investments to grow our software solutions business, while maintaining our valuable wireless revenue stream. In 2015 we took steps to strengthen our leadership team, as Hemant Goel became president of Spok’s operating company and more recently with the addition of industry veteran Don Soucy as executive vice president of global sales. We also reorganized and augmented our sales team with key additions at all levels, focused on product development, and invested in our business operations platform and infrastructure. We believe that these investments will pay dividends in 2016 and beyond as we continue on a path toward sustainable growth.”

The Company posted solid results for its wireless products and services in the fourth quarter. Gross pager placements totaled 31,000 versus 35,000 in the year-earlier quarter, while gross disconnects of 50,000 improved from 53,000 in the fourth quarter of 2014. “As a result, annual net pager losses declined to a near historical low of 6.6 percent from the prior year-end and were down 1.6 percent for the fourth quarter, in line with prior-year results,” continued Kelly. “Overall, wireless sales efforts continued to focus primarily on our core market segments of Healthcare, Government and Large Enterprise, which represented approximately 94.3 percent of our direct subscriber base and 91.1 percent of our direct paging revenue at year end. Healthcare comprised 79.7 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.”

Spok returned capital to stockholders, totaling $28.3 million, in 2015. During the year, the Company paid $13.3 million in dividends and repurchased 897,177 shares of common stock, totaling $15.0 million, under its stock buy-back program. “Over the past decade,” Kelly added, “we have generated nearly $1 billion in free cash flow, paid nearly $500 million to our stockholders in cash dividends, and repurchased nearly $80 million of our common stock. In 2016, we remain focused on returning value to our shareholders through our comprehensive capital allocation strategy.”

Kelly noted that in addition to the financial performance the Company was able to achieve in 2015, progress was made in several other areas, including product development, sales strategy and key strategic partnership agreements. “Spok continues to build an industry-leading reputation,” commented Kelly. “We are generating tremendous attention and high approval ratings at the conferences we attend. Last year’s Connect Conference was the most successful ever, with record attendance, and the RSNA Conference was a great venue to showcase our CTRM solution and secure text messaging platform. We intend to carry the momentum generated at these conferences into 2016 in order to stimulate long-term growth. We remain committed to our core values of putting the customer first, creating solutions that matter, innovation and accountability. Combined with our strong team, solid financial platform and industry-leading products and services, Spok is well positioned to meet the challenges in 2016 and generate future growth.”

Shawn E. Endsley, chief financial officer, said: “Revenue contribution from both software and wireless, combined with focused expense management, helped maintain solid operating cash flow, EBITDA and operating margins for the quarter, as we continued to invest in our business for long-term growth. We also strengthened our balance sheet, recording a cash balance of $111.3 million at December 31, 2015 and continued to operate as a debt-free company at year end.”

Commenting on the Company’s previously provided financial guidance for 2015, Endsley noted: “We are pleased that 2015 results were consistent with our guidance. For the year, total revenue of $189.6 million was within our guidance range of $183 million to $201 million, operating expenses of $150.6 million were within our guidance range of $145 million to $154 million, and capital expenses of $6.4 million were within our guidance range of $5.5 million to $7.5 million.” With regard to financial guidance for 2016, Endsley said 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 expenses to range from $6 million to $8 million.

Spok plans to host a conference call for investors on its fourth quarter and 2015 operating results at 10:00 a.m. Eastern Time on Thursday, February 25, 2016. Dial-in numbers for the call are 785-830-1924 or 800-533-7954. The pass code for the call is 974643. A replay of the call will be available from 1:00 p.m. ET on February 25, 2016 until 1:00 p.m. on Thursday, March 10, 2016. Replay numbers are 719-457-0820 or 888-203-1112. The pass code for the replay is 974643.

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. 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.

 

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

12/31/2015

12/31/2014

12/31/2015

12/31/2014

Revenue:
Wireless $ 28,727 $ 31,678 $ 119,014 $ 132,402
Software   18,612     19,591     70,614     67,871  
Total revenue   47,339     51,269     189,628     200,273  
Operating expenses:
Cost of revenue 8,035 10,571 33,851 32,556
Service, rental and maintenance 11,024 11,285 44,401 45,485
Selling and marketing 7,036 7,915 27,446 30,013
General and administrative 10,276 11,905 42,159 45,896
Severance and restructuring 1,056 926 2,701 1,495
Depreciation, amortization and accretion   3,362     4,049     13,970     16,677  
Total operating expenses   40,789     46,651     164,528     172,122  
% of total revenue 86.2 % 91.0 % 86.8 % 85.9 %
Operating income 6,550 4,618 25,100 28,151
% of total revenue 13.8 % 9.0 % 13.2 % 14.1 %
Interest income (expense), net 13 (262 ) 16 (456 )
Other income (expense), net   71     (188 )   1,182     (368 )
Income before income tax expense 6,634 4,168 26,298 27,327
Income tax benefit (expense)   66,087     2,744     57,937     (6,582 )
Net income $ 72,721   $ 6,912   $ 84,235   $ 20,745  
Basic net income per common share $ 3.54   $ 0.32   $ 3.99   $ 0.96  
Diluted net income per common share $ 3.53   $ 0.31   $ 3.98   $ 0.94  
Basic weighted average common shares outstanding   20,528,326     21,554,746     21,120,268     21,621,466  
Diluted weighted average common shares outstanding   20,628,053     22,101,600     21,186,750     22,090,770  
Reconciliation of operating income to EBITDA (b):
Operating income $ 6,550 $ 4,618 $ 25,100 $ 28,151
Add back: depreciation, amortization and accretion   3,362     4,049     13,970     16,677  
EBITDA $ 9,912   $ 8,667   $ 39,070   $ 44,828  
% of total revenue 20.9 % 16.9 % 20.6 % 22.4 %
Key statistics:
Units in service 1,173 1,256 1,173 1,256
Average revenue per unit (ARPU) $ 7.79 $ 7.92 $ 7.90 $ 7.93
Bookings $ 18,511 $ 22,272 $ 74,024 $ 78,514
Backlog $ 38,650 $ 42,391 $ 38,650 $ 42,391
 
(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
12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014
Revenue:
Wireless $ 28,727 $ 29,375 $ 30,222 $ 30,690 $ 31,678 $ 32,855 $ 33,518 $ 34,351
Software   18,612     16,806     17,747     17,448     19,591     16,936     15,576     15,768  
Total revenue   47,339     46,181     47,969     48,138     51,269     49,791     49,094     50,119  
Operating expenses:
Cost of revenue 8,036 7,871 9,131 8,813 10,571 8,000 7,180 6,805
Service, rental and maintenance 11,024 11,117 11,003 11,256 11,285 10,988 11,420 11,792
Selling and marketing 7,036 6,572 6,790 7,048 7,915 7,072 7,780 7,246
General and administrative 10,276 10,410 10,472 11,001 11,905 10,866 10,990 12,135
Severance and restructuring 1,056 141 1,504 926 545 4 20
Depreciation, amortization and accretion   3,362     3,413     3,448     3,747     4,049     4,247     4,352     4,029  
Total operating expenses   40,790     39,524     42,348     41,865     46,651     41,718     41,726     42,027  
% of total revenue 86.2 % 85.6 % 88.3 % 87.0 % 91.0 % 83.8 % 85.0 % 83.9 %
Operating income 6,549 6,657 5,621 6,273 4,618 8,073 7,368 8,092
% of total revenue 13.8 % 14.4 % 11.7 % 13.0 % 9.0 % 16.2 % 15.0 % 16.1 %
Interest income (expense), net 13 1 3 (1 ) (262 ) (63 ) (64 ) (67 )
Other income (expense), net   71     784     264     60     (188 )   (2 )   (194 )   16  
Income before income tax expense 6,633 7,442 5,888 6,332 4,168 8,008 7,110 8,041
Income tax benefit (expense)   66,087     (3,222 )   (2,512 )   (2,415 )   2,744     (3,356 )   (2,819 )   (3,151 )
Net income $ 72,720   $ 4,220   $ 3,376   $ 3,917   $ 6,912   $ 4,652   $ 4,291   $ 4,890  
Basic net income per common share $ 3.54   $ 0.20   $ 0.16   $ 0.18   $ 0.32   $ 0.21   $ 0.20   $ 0.23  
Diluted net income per common share $ 3.53   $ 0.20   $ 0.16   $ 0.18   $ 0.31   $ 0.21   $ 0.19   $ 0.22  
Basic weighted average common shares outstanding   20,528,326     21,301,311     21,677,299     21,898,792     21,554,746     21,651,347     21,642,163     21,638,198  
Diluted weighted average common shares outstanding   20,628,053     21,352,838     21,735,829     22,053,015     22,101,600     22,135,554     22,099,791     22,037,796  
Reconciliation of operating income to EBITDA (b):
Operating income $ 6,549 $ 6,657 $ 5,621 $ 6,273 $ 4,618 $ 8,073 $ 7,368 $ 8,092
Add back: depreciation, amortization and accretion   3,362     3,413     3,448     3,747     4,049     4,247     4,352     4,029  
EBITDA $ 9,911   $ 10,070   $ 9,069   $ 10,020   $ 8,667   $ 12,320   $ 11,720   $ 12,121  
% of total revenue 20.9 % 21.8 % 18.9 % 20.8 % 16.9 % 24.7 % 23.9 % 24.2 %
Key statistics:
Units in service 1,173 1,192 1,211 1,230 1,256 1,274 1,299 1,327
Average revenue per unit (ARPU) $ 7.79 $ 7.82 $ 7.86 $ 7.91 $ 7.92 $ 7.97 $ 7.98 $ 8.11
Bookings $ 18,511 $ 16,746 $ 21,027 $ 17,740 $ 22,272 $ 20,362 $ 18,959 $ 16,921
Backlog $ 38,650 $ 41,639 $ 43,524 $ 40,551 $ 42,391 $ 42,117 $ 40,182 $ 41,396
 
(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)
       

12/31/2015

12/31/2014

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 111,332 $ 107,869
Accounts receivable, net 22,638 24,969
Prepaid expenses and other 5,352 7,250
Inventory   2,291   2,673
Total current assets 141,613 142,761
Property and equipment, net 15,386 17,395
Goodwill 133,031 133,031
Other intangible assets, net 14,964 19,698
Deferred income tax assets, net 83,983 24,143
Other assets   1,445   862
Total assets $ 390,422 $ 337,890
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 9,247 $ 11,688
Accrued compensation and benefits 10,864 14,041
Deferred revenue   27,045   24,034
Total current liabilities 47,156 49,763
Deferred revenue 741 937
Other long-term liabilities   8,972   8,131
Total liabilities   56,869   58,831
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 2 2
Additional paid-in capital 110,435 126,678
Retained earnings   223,116   152,379
Total stockholders' equity   333,553   279,059
Total liabilities and stockholders' equity $ 390,422 $ 337,890
 
(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

12/31/2015

12/31/2014

Cash flows from operating activities:
Net income $ 84,235 $ 20,745
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 13,970 16,677
Amortization of deferred financing costs - 456
Deferred income (benefit) tax expense (59,007 ) 4,740
Stock based compensation 1,868 3,838
Provisions for doubtful accounts, service credits and other 1,290 1,128
Adjustments of non-cash transaction taxes (686 ) (310 )
Loss/(Gain) on disposals of property and equipment (793 ) 3
Changes in assets and liabilities:
Accounts receivable 1,041 (8,013 )
Prepaid expenses, intangible assets and other assets 658 17
Accounts payable, accrued liabilities and other (7,381 ) 1,192
Customer deposits and deferred revenue 2,817 1,086
Other long-term liabilities   -     -  
Net cash provided by operating activities   38,012     41,559  
Cash flows from investing activities:
Purchases of property and equipment (6,374 ) (7,679 )
Proceeds from disposals of property and equipment   809     65  
Net cash used in investing activities   (5,565 )   (7,614 )
Cash flows from financing activities:
Cash distributions to stockholders (13,976 ) (10,826 )
Purchase of common stock (including commissions)   (15,008 )   (4,325 )
Net cash used in financing activities   (28,984 )   (15,151 )
Net increase in cash and cash equivalents 3,463 18,794
Cash and cash equivalents, beginning of period   107,869     89,075  
Cash and cash equivalents, end of period $ 111,332   $ 107,869  
Supplemental disclosure:
Interest paid $ 3   $ 8  
Income taxes paid $ 1,521   $ 1,448  
 
(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
12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014
Revenue
Paging $ 27,637 $ 28,196 $ 28,782 $ 29,491 $ 30,071 $ 30,776 $ 31,458 $ 32,896
Non-paging   1,090   1,179   1,440   1,199   1,607   2,079   2,060   1,455
Total wireless revenue   28,727   29,375   30,222   30,690   31,678   32,855   33,518   34,351
 
Subscription 471 392 419 398 365 458 377 283
License 2,733 1,457 3,011 2,595 3,474 2,374 2,497 2,929
Services 4,610 4,600 4,609 5,018 5,579 4,305 3,558 3,930
Equipment   1,764   1,434   1,301   1,374   2,145   1,930   1,614   1,250
Operations revenue 9,578 7,883 9,340 9,385 11,563 9,067 8,046 8,392
 
Maintenance revenue   9,034   8,923   8,407   8,063   8,028   7,869   7,530   7,376
Total software revenue   18,612   16,806   17,747   17,448   19,591   16,936   15,576   15,768
 
Total revenue $ 47,339 $ 46,181 $ 47,969 $ 48,138 $ 51,269 $ 49,791 $ 49,094 $ 50,119
 
(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
12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014
Cost of revenue
Payroll and related $ 4,414 $ 4,277 $ 4,274 $ 4,157 $ 4,222 $ 3,743 $ 3,827 $ 3,959
Cost of sales 2,902 2,549 3,801 3,620 5,225 3,098 2,232 1,917
Stock based compensation 33 33 34 34 81 108 81 81
Other   686     1,012   1,022   1,002   1,043   1,051   1,040     848
Total cost of revenue   8,035     7,871   9,131   8,813   10,571   8,000   7,180     6,805
Service, rental and maintenance
Site rent 3,663 3,763 3,783 3,766 3,834 3,914 3,981 4,015
Telecommunications 1,218 1,392 1,288 1,343 1,487 1,548 1,669 1,736
Payroll and related 4,815 4,613 4,555 4,652 4,533 4,106 4,434 4,594
Stock based compensation 29 29 29 29 30 56 (17 ) 39
Repairs and maintenance 450 395 478 528 467 489 436 508
Other   849     925   870   938   934   875   917     900
Total service, rental and maintenance   11,024     11,117   11,003   11,256   11,285   10,988   11,420     11,792
Selling and marketing
Payroll and related 3,780 3,664 3,732 3,916 3,945 3,859 4,099 4,098
Commissions 1,754 1,858 1,792 1,836 2,481 1,949 2,087 1,952
Stock based compensation (7 ) 16 51 51 131 151 131 131
Other   1,509     1,034   1,215   1,245   1,358   1,113   1,463     1,065
Total selling and marketing   7,036     6,572   6,790   7,048   7,915   7,072   7,780     7,246
General and administrative
Payroll and related 4,029 4,320 4,611 4,879 4,737 4,217 4,440 4,796
Stock based compensation 316 316 548 329 780 791 429 835
Bad debt 104 113 140 160 127 136 134 86
Facility rent 856 868 841 941 830 863 899 922
Telecommunications 331 370 374 333 381 427 399 395
Outside services 1,783 1,864 1,728 1,786 1,786 1,698 1,719 1,762
Taxes, licenses and permits 1,132 1,068 1,150 1,125 1,283 1,225 1,383 1,064
Repairs and maintenance 347 389 363 406 506 510 421 374
Financial Services 378 378 367 362 346 336 379 363
Other   1,000     724   350   680   1,129   663   787     1,538
Total general and administrative   10,276     10,410   10,472   11,001   11,905   10,866   10,990     12,135
Severance and restructuring 1,056 141 1,504 926 545 4 20
Depreciation, amortization and accretion   3,362     3,413   3,448   3,747   4,049   4,247   4,352     4,029
Operating expenses $ 40,789   $ 39,524 $ 42,348 $ 41,865 $ 46,651 $ 41,718 $ 41,726   $ 42,027
Capital expenditures $ 2,024 $ 1,318 $ 1,992 $ 1,040 $ 1,352 $ 1,291 $ 2,393 $ 2,643
 
(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
12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014

Paging units in service

Beginning units in service
Direct one-way 1,086 1,103 1,116 1,140 1,157 1,179 1,200 1,246
Direct two-way 62   64   64   64   63   64   69   69  
Total direct 1,148   1,167   1,180   1,204   1,220   1,243   1,269   1,315  
Indirect one-way 24 24 25 26 28 29 30 34
Indirect two-way 20   20   25   26   26   27   28   27  
Total indirect 44   44   50   52   54   56   58   61  
Total beginning units in service 1,192   1,211   1,230   1,256   1,274   1,299   1,327   1,376  
Gross placements
Direct one-way 27 32 36 25 31 40 48 34
Direct two-way 3   3   4   3   3   4   2   4  
Total direct 30   35   40   28   34   44   50   38  
Indirect one-way 1 1 1 1 1 1
Indirect two-way               1  
Total indirect 1   1     1   1   1   1   1  
Total gross placements 31   36   40   29   35   45   51   39  
Gross disconnects
Direct one-way (42 ) (48 ) (50 ) (49 ) (47 ) (62 ) (69 ) (80 )
Direct two-way (4 ) (5 ) (3 ) (3 ) (3 ) (5 ) (7 ) (4 )
Total direct (46 ) (53 ) (53 ) (52 ) (50 ) (67 ) (76 ) (84 )
Indirect one-way (1 ) (1 ) (1 ) (2 ) (2 ) (2 ) (2 ) (4 )
Indirect two-way (3 ) (1 ) (5 ) (1 ) (1 ) (1 ) (1 )  
Total indirect (4 ) (2 ) (6 ) (3 ) (3 ) (3 ) (3 ) (4 )
Total gross disconnects (50 ) (55 ) (59 ) (55 ) (53 ) (70 ) (79 ) (88 )
Net loss
Direct one-way (14 ) (16 ) (13 ) (24 ) (16 ) (22 ) (21 ) (46 )
Direct two-way (1 ) (2 )       (1 ) (5 )  
Total direct (15 ) (18 ) (13 ) (24 ) (16 ) (23 ) (26 ) (46 )
Indirect one-way (1 ) (1 ) (1 ) (1 ) (1 ) (1 ) (4 )
Indirect two-way (3 ) (1 ) (5 ) (1 ) (1 ) (1 ) (1 ) 1  
Total indirect (4 ) (1 ) (6 ) (2 ) (2 ) (2 ) (2 ) (3 )
Total net change (19 ) (19 ) (19 ) (26 ) (18 ) (25 ) (28 ) (49 )
Ending units in service
Direct one-way 1,072 1,087 1,103 1,116 1,141 1,157 1,179 1,200
Direct two-way 61   62   64   64   63   63   64   69  
Total direct 1,133   1,149   1,167   1,180   1,204   1,220   1,243   1,269  
Indirect one-way 23 24 24 25 27 28 29 30
Indirect two-way 17   19   20   25   25   26   27   28  
Total indirect 40   43   44   50   52   54   56   58  
Total ending units in service 1,173   1,192   1,211   1,230   1,256   1,274   1,299   1,327  
 
(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
12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014

Paging ARPU

Direct one-way $ 7.36 $ 7.37 $ 7.41 $ 7.45 $ 7.45 $ 7.48 $ 7.48 $ 7.59
Direct two-way   16.35     16.84     17.16     17.69     17.95     18.17     18.21     18.91  
Total direct 7.85 7.88 7.93 7.99 8.00 8.05 8.06 8.19
Indirect one-way 7.83 8.02 8.11 8.08 8.13 8.24 8.18 8.22
Indirect two-way   4.29     4.07     4.09     3.93     4.06     4.31     4.45     4.32  
Total indirect 6.27 6.21 6.19 6.01 6.12 6.32 6.39 6.37
Total one-way 7.37 7.39 7.42 7.46 7.46 7.50 7.50 7.60
Total two-way   13.57     13.72     13.69     13.72     13.87     14.10     14.22     14.70  
Total paging ARPU $ 7.79   $ 7.82   $ 7.86   $ 7.91   $ 7.92   $ 7.97   $ 7.98   $ 8.11  

Gross disconnect rate (b)

Direct one-way (3.8 )% (4.4 )% (4.4 )% (4.3 )% (4.1 )% (5.5 )% (5.7 )% (6.4 )%
Direct two-way   (6.0 )%   (7.0 )%   (5.9 )%   (5.4 )%   (4.5 )%   (7.3 )%   (10.5 )%   (5.6 )%
Total direct (3.9 )% (4.5 )% (4.5 )% (4.4 )% (4.1 )% (5.4 )% (6.0 )% (6.4 )%
Indirect one-way (4.5 )% (4.7 )% (6.4 )% (6.7 )% (6.5 )% (6.4 )% (6.8 )% (8.2 )%
Indirect two-way   (16.2 )%   (2.2 )%   (20.0 )%   (4.4 )%   (2.3 )%   (1.9 )%   (2.7 )%   (2.3 )%
Total indirect (9.9 )% (3.6 )% (13.2 )% (5.5 )% (4.4 )% (4.2 )% (4.8 )% (5.5 )%
Total one-way (3.8 )% (4.4 )% (4.5 )% (4.4 )% (4.2 )% (5.3 )% (5.8 )% (6.5 )%
Total two-way   (8.5 )%   (5.8 )%   (9.9 )%   (5.1 )%   (3.9 )%   (5.7 )%   (8.3 )%   (4.7 )%
Total paging gross disconnect rate   (4.2 )%   (4.5 )%   (4.9 )%   (4.4 )%   (4.1 )%   (5.3 )%   (5.9 )%   (6.3 )%

Net loss rate (c)

Direct one-way (1.4 )% (1.4 )% (1.2 )% (2.1 )% (1.4 )% (1.8 )% (1.9 )% (3.7 )%
Direct two-way   (0.9 )%   (2.2 )%   (0.2 )%   (0.9 )%   (0.1 )%   (3.0 )%   (4.5 )%   (0.6 )%
Total direct (1.4 )% (1.5 )% (1.1 )% (2.0 )% (1.4 )% (1.9 )% (2.0 )% (3.5 )%
Indirect one-way (2.4 )% (2.4 )% (4.4 )% (4.0 )% (4.3 )% (4.1 )% (4.8 )% (6.3 )%
Indirect two-way   (16.0 )%   (1.7 )%   (19.4 )%   (3.6 )%   (2.0 )%   (1.5 )%   (2.2 )%   (1.9 )%
Total indirect (8.6 )% (2.1 )% (11.9 )% (3.8 )% (3.1 )% (2.8 )% (3.5 )% (4.2 )%
Total one-way (1.4 )% (1.5 )% (1.3 )% (2.1 )% (1.5 )% (1.9 )% (2.0 )% (3.7 )%
Total two-way   (4.6 )%   (2.1 )%   (5.7 )%   (1.7 )%   (0.6 )%   (2.5 )%   (3.8 )%   (1.0 )%
Total paging net loss rate   (1.6 )%   (1.5 )%   (1.6 )%   (2.1 )%   (1.4 )%   (1.9 )%   (2.1 )%   (3.5 )%
 
(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
12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014
Gross placement rate (b)
Healthcare 2.7 % 3.3 % 3.8 % 2.6 % 3.0 % 3.8 % 4.5 % 3.1 %
Government 2.1 % 1.4 % 1.9 % 1.0 % 1.2 % 1.5 % 2.6 % 1.9 %
Large enterprise 2.1 % 2.2 % 1.7 % 2.1 % 2.3 % 2.7 % 2.0 % 2.9 %
Other 2.1 % 2.4 % 1.8 % 1.6 % 2.1 % 4.3 % 2.2 % 2.1 %
Total direct 2.6 % 3.0 % 3.4 % 2.3 % 2.8 % 3.5 % 4.0 % 2.9 %
Total indirect 1.3 % 1.5 % 1.3 % 1.7 % 1.3 % 1.4 % 1.3 % 1.2 %
Total 2.5 % 3.0 % 3.3 % 2.3 % 2.7 % 3.4 % 3.9 % 2.8 %
Gross disconnect rate (b)
Healthcare (3.5 )% (4.3 )% (3.8 )% (3.9 )% (3.8 )% (5.1 )% (5.3 )% (6.5 )%
Government (4.8 )% (4.7 )% (7.0 )% (5.0 )% (4.7 )% (7.5 )% (7.6 )% (5.6 )%
Large enterprise (6.7 )% (5.0 )% (7.3 )% (5.7 )% (4.7 )% (4.8 )% (8.9 )% (5.4 )%
Other (5.3 )% (6.1 )% (7.0 )% (7.1 )% (6.4 )% (6.9 )% (7.7 )% (6.5 )%
Total direct (3.9 )% (4.5 )% (4.5 )% (4.3 )% (4.1 )% (5.4 )% (6.0 )% (6.4 )%
Total indirect (9.7 )% (3.6 )% (13.1 )% (5.5 )% (4.4 )% (4.2 )% (4.8 )% (5.5 )%
Total (4.1 )% (4.4 )% (4.9 )% (4.4 )% (4.1 )% (5.3 )% (5.9 )% (6.3 )%
Net loss rate (b)
Healthcare (0.8 )% (1.0 )% 0.1 % (1.3 )% (0.7 )% (1.3 )% (0.8 )% (3.5 )%
Government (2.7 )% (3.3 )% (5.1 )% (4.0 )% (3.5 )% (6.0 )% (5.0 )% (3.6 )%
Large enterprise (4.6 )% (2.8 )% (5.6 )% (3.6 )% (2.4 )% (2.1 )% (6.9 )% (2.5 )%
Other (3.1 )% (3.7 )% (5.1 )% (5.5 )% (4.4 )% (2.5 )% (5.5 )% (4.4 )%
Total direct (1.4 )% (1.5 )% (1.1 )% (2.0 )% (1.4 )% (1.9 )% (2.0 )% (3.5 )%
Total indirect (8.6 )% (2.1 )% (11.9 )% (3.8 )% (3.1 )% (2.8 )% (3.5 )% (4.2 )%
Total (1.6 )% (1.5 )% (1.6 )% (2.1 )% (1.4 )% (1.9 )% (2.1 )% (3.5 )%
End of period units in service % of total (b)
Healthcare 77.0 % 76.3 % 75.9 % 74.7 % 74.1 % 73.6 % 73.0 % 72.0 %
Government 7.2 % 7.2 % 7.4 % 7.7 % 7.8 % 7.9 % 8.3 % 8.6 %
Large enterprise 6.9 % 7.2 % 7.2 % 7.6 % 7.7 % 7.8 % 7.8 % 8.2 %
Other 5.5 % 5.6 % 5.7 % 6.0 % 6.2 % 6.4 % 6.6 % 6.8 %
Total direct 96.6 % 96.3 % 96.2 % 95.9 % 95.8 % 95.7 % 95.7 % 95.6 %
Total indirect 3.4 % 3.7 % 3.8 % 4.1 % 4.2 % 4.3 % 4.3 % 4.4 %
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
12/31/2015 9/30/2015 6/30/2015 3/31/2015 12/31/2014 9/30/2014 6/30/2014 3/31/2014
Account size ending units in service (000's)
1 to 3 units 30 31 32 33 35 37 39 41
4 to 10 units 16 18 19 20 21 22 23 24
11 to 50 units 43 44 47 49 51 53 56 57
51 to 100 units 30 31 33 32 34 36 38 41
101 to 1,000 units 229 238 244 252 262 267 275 282
>1,000 units   785     787     792     794     801     805     812     824  
Total   1,133     1,149     1,167     1,180     1,204     1,220     1,243     1,269  
End of period units in service % of total direct
1 to 3 units 2.6 % 2.7 % 2.8 % 2.8 % 2.9 % 3.0 % 3.1 % 3.2 %
4 to 10 units 1.5 % 1.5 % 1.6 % 1.7 % 1.7 % 1.8 % 1.8 % 1.9 %
11 to 50 units 3.8 % 3.9 % 4.0 % 4.2 % 4.2 % 4.3 % 4.5 % 4.5 %
51 to 100 units 2.6 % 2.7 % 2.8 % 2.7 % 2.8 % 3.0 % 3.1 % 3.2 %
101 to 1,000 units 20.3 % 20.7 % 20.9 % 21.4 % 21.8 % 21.9 % 22.1 % 22.3 %
>1,000 units   69.2 %   68.5 %   67.9 %   67.2 %   66.6 %   66.0 %   65.4 %   64.9 %
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 (3.9 )% (4.1 )% (2.9 )% (6.2 )% (4.4 )% (4.8 )% (4.1 )% (4.9 )%
4 to 10 units (6.0 )% (5.3 )% (5.0 )% (6.2 )% (5.5 )% (4.0 )% (5.4 )% (4.1 )%
11 to 50 units (4.1 )% (4.8 )% (4.1 )% (4.6 )% (3.8 )% (5.2 )% (3.2 )% (5.3 )%
51 to 100 units (3.7 )% (5.4 )% 0.2 % (4.1 )% (5.4 )% (5.2 )% (8.7 )% (1.2 )%
101 to 1,000 units (3.6 )% (2.5 )% (3.0 )% (3.9 )% (2.0 )% (2.9 )% (2.5 )% (1.7 )%
>1,000 units   (0.2 )%   (0.6 )%   (0.2 )%   (0.8 )%   (0.5 )%   (1.0 )%   (1.2 )%   (4.0 )%
Total   (1.4 )%   (1.5 )%   (1.1 )%   (2.0 )%   (1.4 )%   (1.9 )%   (2.0 )%   (3.5 )%
Account size ARPU
1 to 3 units $ 14.33 $ 14.34 $ 14.52 $ 14.52 $ 14.53 $ 14.65 $ 14.86 $ 14.96
4 to 10 units 14.27 14.11 14.11 14.07 14.09 14.04 14.12 14.22
11 to 50 units 12.00 12.03 12.13 12.02 12.00 11.95 12.00 12.07
51 to 100 units 10.63 10.48 10.42 10.26 10.15 10.16 10.18 10.27
101 to 1,000 units 8.76 8.79 8.78 8.81 8.79 8.69 8.58 8.76
>1,000 units   6.85     6.87     6.90     6.95     6.93     6.99     7.00     7.11  
Total $ 7.85   $ 7.88   $ 7.93   $ 7.99   $ 8.00   $ 8.05   $ 8.06   $ 8.19  
Cellular:
Number of activations   26     33     144     92     264     2,198     1,679     281  
Revenue from cellular services (000's) $ 13   $ 25   $ 39   $ 40   $ 77   $ 395   $ 278   $ 108  
 
(a) Slight variations in totals are due to rounding.
 
 
SPOK HOLDINGS, INC.
2016 FINANCIAL GUIDANCE
       
(In millions)
 
Guidance Range
From To
Revenues
Wireless $ 101 $ 111
Software   73   81
$ 174 $ 192
 
Operating Expenses (a) $ 153 $ 159
 
Capital Expenses $ 6.0 $ 8.0
 
(a) Operating expenses exclude depreciation, amortization and accretion.
 

Source: Spok Holdings, Inc.

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