Spok Reports 2017 Second Quarter Operating Results; Wireless Trends Continue to Improve, Software Revenue and Bookings Increase

Board Declares Regular Quarterly Dividend

SPRINGFIELD, Va.--()--Spok Holdings, Inc. (NASDAQ: SPOK), the global leader in healthcare communications, today announced operating results for the second quarter ended June 30, 2017. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on September 8, 2017 to stockholders of record on August 18, 2017.

2017 Second-Quarter Results:

In the 2017 second quarter, consolidated revenue was $42.3 million, up from $41.4 million in the first quarter. Software revenue was $16.7 million in the second quarter of 2017, up from $15.6 million in the prior quarter. Wireless revenue totaled $25.6 million in the second quarter, compared to $25.8 million in the prior quarter.

Net income for the second quarter of 2017 was $1.5 million, or $0.07 per diluted share, up from $0.9 million, or $0.04 per diluted share, in the prior quarter.

Second quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $5.3 million, or 12.4 percent of revenue, up from EBITDA of $4.6 million, or 11.1 percent of revenue, in the first quarter.

Other key results and highlights for the second quarter included:

  • The quarterly rate of paging unit erosion slowed to a record low of 0.4 percent in the second quarter of 2017, compared to 1.8 percent in the prior quarter. Net paging unit losses were 5,000 in the second quarter of 2017, down from 20,000 in the first quarter of 2017. Paging units in service at June 30, 2017 totaled 1,086,000, compared to 1,091,000 at the end of the prior quarter.
  • The quarterly rate of wireless revenue erosion slowed to 0.9 percent in the second quarter of 2017 versus 2.5 percent in the prior quarter.
  • Total paging ARPU (average revenue per unit) was $7.52 in the second quarter of 2017, compared to $7.56 in the prior quarter.
  • Software bookings for the 2017 second quarter were $20.4 million, an increase of more than 3 percent from the previous quarter. Second quarter bookings included $9.9 million of operations bookings and $10.5 million of maintenance renewals.
  • Software backlog totaled $43.5 million at June 30, 2017, up more than 7 percent, or nearly $3 million, from $40.6 million in the prior quarter.
  • Of the $16.7 million in software revenue for the second quarter, $7.0 million was operations revenue and $9.7 million was maintenance revenue, compared to $6.0 million and $9.6 million, respectively, of the $15.6 million in software revenue in the first quarter of 2017.
  • The renewal rate for software maintenance in the second quarter of 2017 continued at greater than 99 percent.
  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $37.1 million in the second quarter of 2017, up slightly from $36.8 million in the prior quarter.
  • Capital expenses were $2.4 million in the second quarter of 2017, compared to $2.9 million in the prior quarter.
  • The number of full-time equivalent employees at June 30, 2017 totaled 604, compared to 599 at March 31, 2017.
  • Capital returned to stockholders in the second quarter of 2017 totaled $12.5 million, in the form of $2.5 million from dividends and $10 million from share repurchases.
  • The Company’s cash balance at June 30, 2017 was $107.2 million, down from $118.9 million at March 31, 2017.

Management Commentary:

“We are pleased with our performance in the second quarter of 2017 and with the continuing benefits from our investments to enhance and upgrade our product development team and tools, as well as our sales infrastructure and management,” said Vincent D. Kelly, chief executive officer. “We saw strong performance in a number of key operating measures and solid year-over-year and sequential improvements in subscriber retention, sales bookings and backlog levels, and operating expense management. We believe continued investments will yield significant future benefits in the form of our improved, integrated communication platform, Spok Care Connect®, and continued momentum in bookings levels. Overall, we continued to operate profitably, enhance our product offerings, and maintain our strong balance sheet. Our ability to generate healthy cash flows allowed us to execute against our capital allocation strategy, returning capital to shareholders in the form of dividends and stock repurchases.”

The Company posted solid results for its wireless products and services in the second quarter. Gross pager placements of 42,000 were a sharp increase from the prior and year-earlier quarters, and the highest level in the past two years, while gross disconnects of 47,000 improved slightly from 48,000 in the prior quarter and second quarter of 2016. “As a result, annual net pager losses declined to an historical low of 5.1 percent from the prior year’s second quarter, and were 0.4 percent in the second quarter, down 40 basis points from 0.8 percent in 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 92.7 percent of our subscriber base and 90.8 percent of our paging revenue at quarter end. Healthcare comprised 80.4 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.”

Commenting on software results, Kelly said: “As a result of the investments we are making in our sales and product platforms, software revenues were up more than 7 percent from the first quarter and were in-line with prior year levels. We believe we are well positioned for the second half of the year, when software sales tend to be more robust.” Kelly primarily attributed the ability to generate sequential growth in software revenue levels to a more than 99 percent renewal rate on maintenance contracts. Similar to Spok’s wireless revenue stream, software maintenance revenue is a largely recurring revenue stream that provides the Company with a more stable revenue and margin base. “More than 84 percent of our revenue streams are recurring in nature, when you consider our solid wireless base and software maintenance contracts,” added Kelly. “This provides us with the ability to make key investments in our business while executing on our capital allocation strategy to enhance stockholder value.”

Kelly said second quarter bookings of $20.4 million were up from $19.8 million in the prior quarter, and included $10.5 million of maintenance renewals bookings, a record high for the second quarter. Additionally, software backlog of $43.5 million at June 30th was up more than 7 percent and 10 percent, respectively, from the prior quarter and year levels. “We will continue to build on the solid momentum we saw in the second quarter. We are encouraged as bookings included sales to both new and current customers, with existing customers adding products and applications to expand their portfolio of communications solutions. Customer demand remained strongest for upgrades to call center solutions, healthcare applications to increase patient safety, and improved nursing workflows.” Kelly added: “We continue to see growing demand for our software solutions for critical smartphone communications, secure texting, and emergency management, as well as clinical alerting, and we are proud to be working with more than 1,900 hospitals world-wide, including all of the best adult and children’s hospitals as defined by U.S. News & World Report.”

Kelly also 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 generate activity and sales momentum at the conferences we attend,” commented Kelly. “In April, we attended the Becker’s Hospital Review 8th Annual Meeting in Chicago, where our Chief Medical Officer, Dr. Andrew Mellin, presented ‘The Healthcare CIO Perspective on Supporting Clinical Workflows’. In May, we also announced that several of our key executives would be participating at upcoming ‘C-Suite’ conferences throughout 2017 to discuss industry communication challenges with hospital leaders from across the country. And in early May, Spok released the second part of the Company's annual mobility in healthcare survey. Spok has been conducting this survey since 2011 to assess mobile workflow enablement trends in hospitals across the country. More than 300 U.S. healthcare professionals responded to this year’s questions about mobile strategy development, bring your own device (BYOD) policies, communications infrastructure, and opportunities to improve mobile communications. Spok will continue to leverage the attention that we are receiving as a thought leader within our industry.”

Spok returned capital to stockholders, totaling $12.5 million, in the second quarter of 2017. During the period, the Company paid $2.5 million in dividends and repurchased 572,550 shares of common stock, totaling $10 million, under its stock buy-back program. Kelly added, “Throughout 2017, we will remain focused on returning value to our shareholders through our multi-faceted capital allocation strategy, which, for the balance of 2017, includes dividends, and key strategic investments in our products and business designed to create sustainable growth.”

Michael W. Wallace, chief financial officer, said: “Continued expense management and strong financial discipline have allowed us to invest in our business for long-term growth. Our ability to align our expense base with the market demand we are seeing and drive high renewal rates in our recurring revenue categories, helped Spok to mitigate the additional expenses related to our investments in our sales and product platforms. Spok’s balance sheet remains strong, with a cash balance of $107.2 million at June 30, 2017, and we continue to operate as a debt-free company.”

Business Outlook:

Commenting on the Company’s previously provided financial guidance for 2017, Wallace noted: “As a result of the solid performance we saw in the second quarter, 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 Second-Quarter Call and Replay:

Spok plans to host a conference call for investors to discuss its 2017 second quarter results at 10:00 a.m. ET on Thursday, July 27, 2017. Dial-in numbers for the call are 719-785-1753 or 888-857-6932. The pass code for the call is 7139572. A replay of the call will be available from 1:00 p.m. ET on July 27, 2017 until 1:00 p.m. ET on Thursday, August 10, 2017. To listen to the replay, please register at http://tinyurl.com/spok2017Q2earningsreplay. Please 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.

 
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 six months ended

6/30/2017

6/30/2016

6/30/2017

6/30/2016

Revenue:
Wireless $ 25,639 $ 27,859 $ 51,499 $ 56,031
Software   16,686     16,776     32,270     33,992  
Total revenue   42,325     44,635     83,769     90,023  
Operating expenses:
Cost of revenue 7,190 7,513 14,226 15,528
Research and development 4,662 3,211 8,767 6,120
Service, rental and maintenance 7,944 8,188 16,010 16,492
Selling and marketing 5,329 6,429 11,251 12,957
General and administrative 11,939 10,439 23,649 20,946
Depreciation, amortization and accretion   2,851     3,235     6,074     6,558  
Total operating expenses   39,915     39,015     79,977     78,601  
% of total revenue 94.3 % 87.4 % 95.5 % 87.3 %
Operating income 2,410 5,620 3,792 11,422
% of total revenue 5.7 % 12.6 % 4.5 % 12.7 %
Interest income 154 61 276 109
Other income   89     104     58     357  
Income before income tax expense 2,653 5,785 4,126 11,888
Income tax expense   (1,155 )   (2,334 )   (1,774 )   (4,993 )
Net income $ 1,498   $ 3,451   $ 2,352   $ 6,895  
Basic net income per common share $ 0.07 $ 0.17 $ 0.12 $ 0.33
Diluted net income per common share $ 0.07 $ 0.17 0.11 0.33
Basic weighted average common shares outstanding 20,353,801 20,568,058 20,441,781 20,637,070
Diluted weighted average common shares outstanding 20,366,102 20,568,058 20,508,473 20,637,070
Key statistics:
Units in service 1,086 1,144 1,086 1,144
Average revenue per unit (ARPU) $ 7.52 $ 7.71 $ 7.58 $ 7.72
Bookings $ 20,405 $ 20,063 $ 40,193 $ 35,170
Backlog $ 43,455 $ 39,475 $ 43,455 $ 39,475
 
(a) Slight variations in totals are due to rounding.
 
               
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (a)
(Unaudited and in thousands except share, per share amounts and ARPU)
 
For the three months ended

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

3/31/2016

12/31/2015

9/30/2015

Revenue:
Wireless $ 25,639

$

25,860

$

26,535 $ 27,024 $ 27,859 $ 28,172 $ 28,727 $ 29,375
Software   16,686     15,584     17,649     18,331     16,776     17,216     18,612     16,806  
Total revenue   42,325     41,444     44,184     45,355     44,635     45,388     47,339     46,181  
Operating expenses:
Cost of revenue 7,190 7,036 7,482 7,639 7,513 8,017 8,035 7,871
Research and development 4,662 4,105 3,702 3,645 3,211 2,908 2,608 2,525
Service, rental and maintenance 7,944 8,066 7,989 8,253 8,188 8,305 8,416 8,590
Selling and marketing 5,329 5,922 5,855 5,955 6,429 6,529 7,036 6,572
General and administrative 11,939 11,710 9,839 10,593 10,439 10,510 10,276 10,410
Severance 1,438 12 (4 ) 1,056 141
Depreciation, amortization and accretion   2,851     3,223     3,176     3,229     3,235     3,323     3,362     3,413  
Total operating expenses   39,915     40,062     39,481     39,326     39,015     39,588     40,789     39,522  
% of total revenue 94.3 % 96.7 % 89.4 % 86.7 % 87.4 % 87.2 % 86.2 % 85.6 %
Operating income 2,410 1,382 4,703 6,029 5,620 5,800 6,550 6,659
% of total revenue 5.7 % 3.3 % 10.6 % 13.3 % 12.6 % 12.8 % 13.8 % 14.4 %
Interest income, net 154 122 99 67 61 49 13 1
Other income (expense), net   89     (30 )   100     85     104     254     71     784  
Income before income tax expense 2,653 1,474 4,902 6,181 5,785 6,103 6,634 7,444
Income tax benefit (expense)   (1,155 )   (620 )   (1,876 )   (2,123 )   (2,334 )   (2,659 )   62,098     (3,222 )
Net income $ 1,498   $ 854   $ 3,026   $ 4,058   $ 3,451   $ 3,444   $ 68,732   $ 4,222  
Basic and diluted net income per common share $ 0.07   $ 0.04   $ 0.15   $ 0.20   $ 0.17   $ 0.17   $ 3.28   $

0.20

 
Basic weighted average common shares outstanding   20,353,801     20,530,739     20,529,958     20,541,275     20,568,058     20,706,082     20,949,484     21,324,068  
Diluted weighted average common shares outstanding   20,366,102     20,585,542     20,529,958     20,541,275     20,568,058     20,706,082     20,949,484     21,324,068  
Key statistics:
Units in service 1,086 1,091 1,111 1,124 1,144 1,153 1,173 1,192
Average revenue per unit (ARPU) $ 7.52 $ 7.56 $ 7.59 $ 7.63 $ 7.71 $ 7.77 $ 7.79 $ 7.82
Bookings $ 20,405 $ 19,788 $ 20,025 $ 18,659 $ 20,063 $ 15,106 $ 18,511 $ 16,746
Backlog $ 43,455 $ 40,555 $ 38,295 $ 38,812 $ 39,475 $ 36,766 $ 38,650 $ 41,639
 
(a) Slight variations in totals are due to rounding.
 
 
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (a)
(In thousands)
   

6/30/2017

12/31/2016

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 107,151 $ 125,816
Accounts receivable, net 24,452 23,666
Prepaid expenses and other 7,669 4,384
Inventory   1,642   1,996
Total current assets 140,914 155,862
Non-current assets:
Property and equipment, net 13,889 12,818
Goodwill 133,031 133,031
Intangible assets, net 9,166 10,803
Deferred income tax assets 72,018 73,068
Other non-current assets   2,204   2,505
Total non-current assets   230,308   232,225
Total assets $ 371,222 $ 388,087
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,554 $ 1,909
Accrued compensation and benefits 11,310 13,268
Accrued dividends payable 342 5,140
Accrued taxes 2,658 4,132
Deferred revenue 31,807 29,145
Other current liabilities   2,820   2,733
Total current liabilities 50,491 56,327
Non-current liabilities:
Deferred revenue 651 752
Other long-term liabilities   8,570   8,921
Total non-current liabilities   9,221   9,673
Total liabilities   59,712   66,000
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 2 2
Additional paid-in capital 96,943 104,810
Retained earnings   214,565   217,275
Total stockholders' equity   311,510   322,087
Total liabilities and stockholders' equity $ 371,222 $ 388,087
 
(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 six months ended

6/30/2017

6/30/2016

Cash flows provided by operating activities:
Net income $ 2,352 $ 6,895
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 6,074 6,558
Deferred income tax expense 1,069 4,346
Stock based compensation 1,953 1,368
Provision for doubtful accounts, service credits and other 458 321
Adjustment of non-cash transaction taxes (700 ) (169 )
Changes in assets and liabilities:
Accounts receivable (1,242 ) (1,421 )
Prepaid expenses, inventory, intangibles and other assets (2,684 ) 1,197
Accounts payable, accrued liabilities and other (3,175 ) (342 )
Deferred revenue   2,561     1,126  
Net cash provided by operating activities   6,666     19,879  
Cash flows used in investing activities:
Purchase of property and equipment, net of proceeds from disposals of property and equipment   (5,198 )   (2,981 )
Net cash used in investing activities   (5,198 )   (2,981 )
Cash flows used in financing activities:
Cash distributions to stockholders (10,239 ) (5,150 )
Purchase of common stock (including commissions), net of proceeds from issuance of common stock   (9,894 )   (5,985 )
Net cash used in financing activities   (20,133 )   (11,135 )
Net (decrease) increase in cash and cash equivalents (18,665 ) 5,763
Cash and cash equivalents, beginning of period   125,816     111,332  
Cash and cash equivalents, end of period $ 107,151   $ 117,095  
Supplemental disclosure:
Income taxes paid $ 1,964   $ 598  
 
(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

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

3/31/2016

12/31/2015

9/30/2015

Revenue

 

Paging $ 24,572 $ 24,972 $ 25,441 $ 25,944 $ 26,564 $ 27,101 $ 27,637 $ 28,196
Non-paging   1,067   888   1,094   1,080   1,295   1,071   1,090   1,179
Total wireless revenue   25,639   25,860   26,535   27,024   27,859   28,172   28,727   29,375
 
Subscription 623 543 551 560 503 498 471 392
License 1,641 1,171 1,594 1,842 1,691 1,593 2,733 1,457
Services 3,650 3,354 4,500 5,578 4,202 4,315 4,610 4,600
Equipment   1,127   973   1,402   1,091   1,250   1,729   1,764   1,434
Operations revenue 7,041 6,041 8,047 9,071 7,646 8,135 9,578 7,883
 
Maintenance revenue   9,645   9,543   9,602   9,260   9,130   9,081   9,034   8,923
Total software revenue   16,686   15,584   17,649   18,331   16,776   17,216   18,612   16,806
 
Total revenue $ 42,325 $ 41,444 $ 44,184 $ 45,355 $ 44,635 $ 45,388 $ 47,339 $ 46,181
 
(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

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

3/31/2016

12/31/2015

9/30/2015

Cost of revenue
Payroll and related $ 4,607 $ 4,489 $ 4,612 $ 4,468 $ 4,406 $ 4,634 $ 4,414 $ 4,277
Cost of sales 1,815 1,910 2,309 2,480 2,227 2,673 2,902 2,549
Stock based compensation 60 58 (108 ) 57 58 49 33 33
Other   708     579     669     634     822     661     686     1,012  
Total cost of revenue   7,190     7,036     7,482     7,639     7,513     8,017     8,035     7,871  
Research and development
Payroll and related 3,809 3,396 3,198 2,940 2,478 2,325 2,025 1,889
Outside services 659 516 511 569 580 428 480 516
Stock based compensation 65 55 (82 ) 46 48 40 21 21
Other   129     138     75     90     105     115     82     99  
Total research and development   4,662     4,105     3,702     3,645     3,211     2,908     2,608     2,525  
Service, rental and maintenance
Payroll and related 2,613 2,670 2,689 2,641 2,647 2,747 2,790 2,723
Site rent 3,604 3,620 3,618 3,626 3,668 3,660 3,664 3,763
Telecommunications 989 1,069 1,088 1,152 1,117 1,213 1,269 1,377
Stock based compensation 20 20 (29 ) 15 15 13 7 7
Other   718     687     623     819     741     672     686     720  
Total service, rental and maintenance   7,944     8,066     7,989     8,253     8,188     8,305     8,416     8,590  
Selling and marketing
Payroll and related 3,074 3,103 3,575 3,502 3,510 3,666 3,780 3,664
Commissions 1,121 1,202 1,248 1,317 1,559 1,525 1,754 1,858
Stock based compensation 99 101 (131 ) 75 75 48 (7 ) 16
Other   1,035     1,516     1,163     1,061     1,285     1,290     1,509     1,034  
Total selling and marketing   5,329     5,922     5,855     5,955     6,429     6,529     7,036     6,572  
General and administrative
Payroll and related 4,486 4,442 4,542 4,142 4,306 4,392 4,029 4,320
Stock based compensation 754 721 (863 ) 507 534 488 316 316
Facility rent 869 819 817 848 810 839 856 868
Outside services 2,224 2,287 2,277 1,946 1,921 1,726 1,783 1,864
Taxes, licenses and permits 1,034 989 976 1,164 1,060 1,055 1,132 1,068
Other   2,572     2,452     2,090     1,986     1,808     2,010     2,160     1,974  
Total general and administrative   11,939     11,710     9,839     10,593     10,439     10,510     10,276     10,410  
Severance 1,438 12 (4 ) 1,056 141
Depreciation, amortization and accretion   2,851     3,223     3,176     3,229     3,235     3,323     3,362     3,413  
Operating expenses $ 39,915   $ 40,062   $ 39,481   $ 39,326   $ 39,015   $ 39,588   $ 40,789   $ 39,522  
Capital expenditures 2,353 2,851 1,878 1,396 1,537 1,445 2,024 1,318
 
(a) Slight variations in totals are due to rounding.
 
 
SPOK HOLDINGS, INC.
UNITS IN SERVICE ACTIVITY, MARKET SEGMENT, CHURN
AND AVERAGE REVENUE PER UNIT (ARPU) (a)
(Unaudited and in thousands)
               
For the three months ended

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

3/31/2016

12/31/2015

9/30/2015

Paging units in service

Beginning units in service (000's) 1,091 1,111 1,124 1,144 1,153 1,173 1,192 1,211
Gross placements 42 28 36 34 39 28 31 36
Gross disconnects   (47 )   (48 )   (49 )   (54 )   (48 )   (48 )   (50 )   (55 )
Net change   (5 )   (20 )   (13 )   (20 )   (9 )   (20 )   (19 )   (19 )
Ending units in service   1,086     1,091     1,111     1,124     1,144     1,153     1,173     1,192  
End of period units in service % of total (b)
Healthcare 80.4 % 79.7 % 79.3 % 78.6 % 78.2 % 77.5 % 77.0 % 76.3 %
Government 6.3 % 6.4 % 6.5 % 6.7 % 6.8 % 6.9 % 7.2 % 7.2 %
Large enterprise 6.1 % 6.1 % 6.2 % 6.5 % 6.6 % 6.9 % 6.9 % 7.1 %
Other(b)   7.3 %   7.7 %   8.0 %   8.2 %   8.3 %   8.7 %   9.0 %   9.3 %
Total   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
Account size ending units in service (000's)
1 to 100 units 98 102 106 110 114 118 123 128
101 to 1,000 units 204 214 217 222 228 238 243 250
>1,000 units   784     775     788     792     802     797     807     814  
Total   1,086     1,091     1,111     1,124     1,144     1,153     1,173     1,192  
Account size net loss rate(c)
1 to 100 units (3.7 )% (3.4 )% (3.9 )% (3.5 )% (4.0 )% (4.3 )% (3.9 )% (4.4 )%
101 to 1,000 units (4.5 )% (1.3 )% (2.3 )% (2.6 )% (4.0 )% (2.0 )% (2.9 )% (2.4 )%
>1,000 units   1.1 %   (1.7 )%   (0.5 )%   (1.2 )%   0.6 %   (1.2 )%   (0.9 )%   (0.8 )%
Total   (0.4 )%   (1.8 )%   (1.2 )%   (1.7 )%   (0.8 )%   (1.7 )%   (1.6 )%   (1.5 )%
Account size ARPU
1 to 100 units $ 12.16 $ 12.22 $ 12.25 $ 12.34 $ 12.48 $ 12.57 $ 12.52 $ 12.49
101 to 1,000 units 8.61 8.66 8.63 8.64 8.65 8.70 8.65 8.69
>1,000 units   6.64     6.64     6.67     6.68     6.75     6.77     6.79     6.80  
Total $ 7.52   $ 7.56   $ 7.59   $ 7.63   $ 7.71   $ 7.77   $ 7.79   $ 7.82  
 
(a) Slight variations in totals are due to rounding.
(b) Other includes hospitality, resort and indirect units
(c) Net loss rate is net current period placements and disconnected units in service divided by prior period ending units in service.
 
               
SPOK HOLDINGS, INC.
RECONCILIATION FROM NET INCOME TO EBITDA (a)
(Unaudited and in thousands)
 
For the three months ended

6/30/2017

3/31/2017

12/31/2016

9/30/2016

6/30/2016

3/31/2016

12/31/2015

9/30/2015

Reconciliation of net income to EBITDA (b) (c):
Net income $ 1,498 $ 854 $ 3,026 $ 4,058 $ 3,451 $ 3,444 $ 68,732 $ 4,222
Plus (less): Income tax expense (benefit) 1,155 620 1,876 2,123 2,334 2,659 (62,098 ) 3,222
Plus (less): Other expense (income) (89 ) 30 (100 ) (85 ) (104 ) (254 ) (71 ) (784 )
Less: Interest income   (154 )   (122 )   (99 )   (67 )   (61 )   (49 )   (13 )   (1 )
Operating income 2,410 1,382 4,703 6,029 5,620 5,800 6,550 6,659
Plus: depreciation, amortization and accretion   2,851     3,223     3,176     3,229     3,235     3,323     3,362     3,413  
 
EBITDA (as defined by the Company)   5,261     4,605     7,879     9,258     8,855     9,123     9,912     10,072  
Less: Purchases of property and equipment (2,353 ) (2,851 ) (1,878 ) (1,396 ) (1,537 ) (1,445 ) (2,024 ) (1,318 )
 
Plus: Severance  

        1,438     12         (4 )   1,056     141  
Adjusted OCF (as defined by the Company) $ 2,908   $ 1,754   $ 7,439   $ 7,874   $ 7,318   $ 7,674   $ 8,944   $ 8,895  
 
For the six months ended

6/30/2017

6/30/2016

Reconciliation of net income to EBITDA (b) (c):
Net income $ 2,352 $ 6,895
Plus: Income tax expense 1,774 4,993
Less: Other income (58 ) (357 )
Less: Interest income   (276 )   (109 )
Operating income 3,792 11,422
Plus: depreciation, amortization and accretion   6,074     6,558  
EBITDA (as defined by the Company)   9,866     17,980  
Less: Purchases of property and equipment (5,204 ) (2,982 )
Plus: Severance  

   

(4

)
Adjusted OCF (as defined by the Company) $ 4,662   $ 14,994  
 
(a) Slight variations in totals are due to rounding.
(b) EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only.
(c) EBITDA is the starting point for calculation of operating cash flow for purposes of the Company’s short term and long term incentive plans. Management and the Board of Directors also rely on EBITDA for purposes of determining the Company’s capital allocation policies.

Contacts

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

Contacts

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