USA: Spok Reports 2017 First Quarter Operating Results;

The following excerpt is from the company's SEC filing.

Software Bookings and Backlog Increase, Wireless Trends Improve

Board Declares Regular Quarterly Dividend, Authorizes $10 Million Stock Repurchase Program

SPRINGFIELD, Va. (April 26, 2017)

Spok Holdings, Inc.

(NASDAQ: SPOK), a

global leader in healthcare communications,

today announced operating results for the first quarter ended March 31, 2017. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on June 23, 2017 to stockholders of record on May 23, 2017.

2017 First-Quarter Results

In the 2017 first quarter, consolidated revenue was $41.4 million, compared to $45.4 million in the first quarter of 2016 and $44.2 million in the fourth quarter of 2016. Software revenue was $15.6 million in the first quarter of 2017, compared to $17.2 million in the first quarter of 2016. Wireless revenue totaled $25.8 million in the first quarter, compared to $26.5 million in the prior quarter and $28.2 million in the prior-year quarter.

Net income for the first quarter of 2017 was $0.9 million, or $0.04 per share, compared to $3.4 million, or $0.17 per share, in the first quarter of 2016.

First quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $4.6 million, or 11.1 percent of revenue, down from $7.9 million, or 17.8 percent of revenue, in the prior quarter, and $9.1 million, or 20.1 percent of revenue, in the first quarter of 2016.

Spok.com

Other key results and highlights for the first quarter of 2017 included:

Software bookings of $19.8 million, compared to $15.1 million in the prior year quarter. First quarter 2017 bookings included $9.5 million of operations bookings and $10.3 million of maintenance renewals, compared to $5.6 million of operations bookings and $9.5 million of maintenance renewals in the first quarter of 2016.

Software backlog totaled $40.6 million at March 31, 2017, compared to $38.3 million at December 31, 2016, and $36.8 million in the year earlier period.

Of the $15.6 million in software revenue for the first quarter, $6.0 million was operations revenue and $9.6 million was maintenance revenue, compared to $8.1 million and $9.1 million, respectively, of the $17.2 million in software revenue in the first quarter of 2016.

The renewal rate for software maintenance in the first quarter of 2017 was greater than 99 percent.

The quarterly rate of paging unit erosion was 1.8 percent in the first quarter of 2017, compared to 1.7 percent in the year-earlier quarter. Net paging unit losses were 20,000 in the first quarter of 2017, consistent with net paging losses in the first quarter of 2016. Paging units in service at March 31, 2017 totaled 1,091,000, compared to 1,153,000 at the end of the prior year period.

The quarterly rate of wireless revenue erosion was 2.5 percent in the first quarter of 2017 versus 1.9 percent in the year-earlier quarter.

Total paging ARPU (average revenue per unit) was $7.56 in the first quarter of 2017, compared to $7.59 in the prior quarter and $7.77 in the year-earlier quarter.

Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $36.8 million in the first quarter of 2017, compared to $36.3 million in the year-earlier quarter, and $36.3 million in the prior quarter.

Capital expenses were $2.9 million in the first quarter of 2017, compared to $1.4 million in the year-earlier quarter.

The number of full-time equivalent employees at March 31, 2017 totaled 599, compared to 587 at year-end 2016 and 595 at March 31, 2016.

Capital returned to stockholders in the first quarter of 2017 totaled $7.7 million, in the form of $2.6 million from the regular quarterly dividend and $5.1 million from the special dividend that was declared in December 2016 and paid in January 2017.

The Company’s cash balance at March 31, 2017 was $118.9 million, compared to $111.9 million at March 31, 2016, and $125.8 million at the prior year-end.

Management Commentary:

“We are encouraged with our performance in the first quarter of 2017 and believe that it provides a solid base for the remainder of the year,” said Vincent D. Kelly, chief executive officer. “We posted the largest first quarter software bookings result in our history and saw strong year-over-year performance in a number of other key operating measures, including average deal size, number of new logo deals, backlog levels, as well as wireless subscriber retention. We achieved these results, 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. As we have previously outlined, while these investments will lower our margins over the next several years, 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, by continuing to make key strategic investments in our business while returning cash to our stockholders during the quarter in the form of dividends.”

Commenting on software results, Kelly said: “We were particularly pleased with the strong software bookings levels, as we posted the largest first quarter results in our company’s history.” Kelly also attributed a more than 99 percent renewal rate on software maintenance contracts as a key driver of

software revenue levels. Similar to Spok’s wireless revenue stream, software maintenance revenue is a largely recurring revenue stream that provides the Company with a more stable revenue base.

Kelly said first quarter bookings of $19.8 million included record highs for both operations and maintenance, while the software backlog of $40.6 million at March 31

was up more than 10 percent from the prior year quarter.   “We will continue to focus on generating activity through the remainder of the year and are encouraged as bookings included sales to both new and current customers, with existing customers adding products and applications to expand their portfolio of communications solutions.  Customer demand remained strongest for upgrades to call center solutions, healthcare applications to increase patient safety, and improved nursing workflows.”  Kelly added: “We continue to see growing demand for our software solutions for smartphone communications, secure texting, emergency management, and clinical alerting.”

Kelly noted that in addition to the Company’s quarterly financial performance, 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, and is generating sales momentum at the conferences we attend,” commented Kelly. “During the quarter, we generated tremendous activity from tradeshows and positioned Spok as a thought-leader in our industry. At the American Organization of Nurse Executives (AONE) conference, our chief nursing officer hosted a focus group to discuss nursing challenges in the current healthcare environment. We also continue to benefit from the leads generated at the 2017 HIMSS Annual Conference that we attended in late February. Our sales teams intend to carry the momentum generated at these conferences and tradeshows throughout 2017. The combination of Spok’s strong team, solid financial base and industry-leading products and services, positions us to capture the opportunity in our chosen markets and stimulate sustainable growth.”

The Company posted solid results for its wireless products and services in the first quarter. Gross pager placements of 28,000 and gross disconnects of 48,000 were in-line with the year-earlier quarter. “As a

result, annual net pager losses declined to an historical low of 5.4 percent, on a twelve-month trailing basis, and were 1.8 percent in the first quarter, in-line with the prior-year quarter,” continued Kelly. “Overall, wireless sales efforts continued to focus primarily on our core market segments of Healthcare, Government and Large Enterprise, which represented approximately 92.3 percent of our subscriber base and 90.5 percent of our paging revenue at quarter end. Healthcare comprised 79.7 percent of our subscriber base, and continued to be our best performing market segment with the highest rate of gross placements and lowest rate of unit disconnects.”

Spok returned capital to stockholders, totaling $7.7 million, in the first quarter of 2017. During the period, the Company paid $2.6 million in regular quarterly dividends and $5.1 million in the special dividend that was declared in December 2016 and paid in January 2017. Kelly added, “Throughout 2017, we will remain focused on returning value to our shareholders through our capital allocation strategy, which includes dividends and key strategic investments in our products and business that will create sustainable growth. We continue to evaluate our capital allocation strategy on a quarterly basis and will communicate our plans to you with respect to dividends, potential share repurchases and other uses of capital.”

Stock Repurchase Authorization

The Company also announced that its Board of Directors has authorized the repurchase of up to $10 million of the Company’s common stock through 2017 on the open market or in privately negotiated transactions. “Spok’s management team and Board of Directors firmly believe in our long-term growth prospects,” said Kelly. “We intend to utilize our healthy balance sheet and the ability to generate operating cash flow to fund the new repurchase program, which we believe will create further value for our stockholders.”

The timing and the amount of any repurchases of common stock will be determined by Spok’s board based on its evaluation of market conditions and other factors. Repurchases of common stock will be

made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time. Any repurchased common stock will be available for use in connection with the Company's stock plans and for other corporate purposes.

Chief Financial Officer (CFO) Transition

Late in the first quarter, Spok announced that Michael W. Wallace had joined the Company as its new CFO. He succeeded Shawn E. Endsley in that position, who has continued with the company in the role of Chief Accounting Officer. Wallace brings with him a proven ability to manage the finance function in a rapidly growing and changing environment and implementing strategies for improving revenue and profitability. “I am excited to welcome Mike to Spok’s management team, where he has already had an immediate impact as we continue our transition from a telecom-based wireless company to a software provider that delivers industry-leading unified healthcare communications solutions,” said Kelly. “We are particularly impressed with Mike’s deep experience in medical diagnostic services, software development, digital/interactive marketing and regulatory compliance.”

Business Outlook

Commenting on the Company’s previously provided financial guidance for 2017, Wallace noted: “We are pleased that quarterly results were consistent with our expectations and we are maintaining the 2017 guidance range that we provided last quarter.” With regard to financial guidance for 2017, Wallace reiterated that the Company expects total revenue to range from $161 million to $177 million, operating expenses (excluding depreciation, amortization and accretion) to range from $153 million to $159 million, and capital expenditures to range from $8 million to $12 million.

2017 First-Quarter Call and Replay:

The Company plans to host a conference call for investors to discuss its 2017 first quarter results at 10:00 a.m. ET on Thursday, April 27, 2017. Dial-in numbers for the call are 719-325-2126 or 800-210-9006. The pass code for the call is 6321677. A replay of the call will be available from 1:00 p.m. ET on April 27, 2017 until 1:00 p.m. ET on Thursday, May 11, 2017. To listen to the replay, please register at

http://tinyurl.com/spokQ1earningsreplay

. 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.

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

3/31/2017

3/31/2016

Revenue:

25,860

28,172

15,584

17,216

Total revenue

41,444

45,388

Operating expenses:

Cost of revenue

Research and development

Service, rental and maintenance

Selling and marketing

General and administrative

11,710

10,506

Depreciation, amortization and accretion

Total operating expenses

40,062

39,588

% of total revenue

Operating income

Interest income

Other income

Income before income tax expense

Income tax benefit (expense)

(2,659

Basic and diluted net income per common share

Basic weighted average common shares outstanding

20,530,739

20,706,082

Diluted weighted average common shares outstanding

20,585,542

Key statistics:

Units in service

Average revenue per unit (ARPU)

19,788

15,106

40,555

36,766

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

12/31/2016

9/30/2016

6/30/2016

12/31/2015

9/30/2015

6/30/2015

26,535

27,024

27,859

28,727

29,375

30,222

17,649

18,331

16,776

18,612

16,806

17,747

44,184

45,355

44,635

47,339

46,181

47,969

10,593

10,439

10,510

10,276

10,410

10,472

Severance

39,481

39,326

39,014

40,789

39,522

42,349

Interest income (expense), net

Other income, net

(1,876

(2,123

(2,334

62,098

(3,222

(2,512

68,732

20,529,958

20,541,275

20,568,058

20,949,484

21,324,068

21,700,566

20,025

18,659

20,063

18,511

16,746

21,027

38,295

38,812

39,475

38,650

41,639

43,524

CONDENSED CONSOLIDATED BALANCE SHEETS (a)

(In thousands)

(Unaudited)

Assets

Current assets:

Cash and cash equivalents

118,947

125,816

Accounts receivable, net

24,079

23,666

Prepaid expenses and other

Inventory

Total current assets

149,517

155,862

Non-current assets:

Property and equipment, net

13,600

12,818

Goodwill

133,031

Intangible assets, net

10,803

Deferred income tax assets, net

72,802

73,068

Other non-current assets

Total non-current assets

231,748

232,225

Total assets

381,265

388,087

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

Accrued compensation and benefits

11,080

13,268

Accrued dividends payable

Accrued taxes

Deferred revenue

30,663

29,145

Other current liabilities

Total current liabilities

50,337

56,327

Non-current liabilities:

Other long-term liabilities

Total non-current liabilities

Total liabilities

59,860

66,000

Commitments and contingencies

Stockholders' equity:

Preferred stock

Common stock

Additional paid-in capital

105,766

104,810

Retained earnings

215,637

217,275

Total stockholders' equity

321,405

322,087

Total liabilities and stockholders' equity

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a)

(Unaudited and in thousands)

Cash flows provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Deferred income tax expense

Stock based compensation

Provision for doubtful accounts, service credits and other

Adjustment of non-cash transaction taxes

Changes in assets and liabilities:

Prepaid expenses and other assets

Accounts payable, accrued liabilities and other

(2,473

(2,653

Net cash provided by operating activities

Cash flows used in investing activities:

Purchase of property and equipment, net of proceeds from disposals of property and equipment

(2,851

(1,445

Net cash used in investing activities

Cash flows used in financing activities:

Cash distributions to stockholders

(7,694

(2,580

Purchase of common stock (including commissions), net of proceeds from issuance of common stock

(4,905

Net cash used in financing activities

(7,690

(7,485

Net decrease in cash and cash equivalents

(6,869

Cash and cash equivalents, beginning of period

111,332

Cash and cash equivalents, end of period

111,921

Supplemental disclosure:

Income taxes paid

CONSOLIDATED REVENUE

SUPPLEMENTAL INFORMATION (a)

24,972

25,441

25,944

26,564

27,101

27,637

28,196

28,782

Non-paging

Total wireless revenue

Subscription

License

Services

Equipment

Operations revenue

Maintenance revenue

Total software revenue

CONSOLIDATED OPERATING EXPENSES

Payroll and related

Cost of sales

Total cost of revenue

Outside services

Total research and development

Site rent

Telecommunications

Total service, rental and maintenance

Commissions

Total selling and marketing

Facility rent

Taxes, licenses and permits

Total general and administrative

Capital expenditures

UNITS IN SERVICE ACTIVITY, MARKET SEGMENT, CHURN

AND AVERAGE REVENUE PER UNIT (ARPU) (a)

Beginning units in service (000's)

Gross placements

Gross disconnects

Net change

Ending units in service

End of period units in service % of total (b)

Large enterprise

Other(b)

Account size ending units in service (000's)

1 to 100 units

101 to 1,000 units

>1,000 units

Account size net loss rate(c)

Account size ARPU

(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.

RECONCILIATION FROM NET INCOME TO EBITDA (a)

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

Plus (less): Income tax expense (benefit)

(62,098

Less: Other income

Plus (less): Interest expense (income)

Plus: depreciation, amortization and accretion

EBITDA (as defined by the Company)

10,072

Less: Purchases of property and equipment

(1,878

(1,396

(1,537

(2,024

(1,318

(1,992

Plus: Severance

Adjusted OCF (as defined by the Company)

(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.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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