Spok Reports Third Quarter 2024 Results Form 8 K

Spok Reports Third Quarter 2024 Results

Strong Q3 Software Operations Bookings Up Both Sequentially and Year-Over-Year

Software Backlog Up More Than 19% From Prior Year Quarter

Plano, Tx. (October 30, 2024) - Spok Holdings, Inc.(NASDAQ: SPOK), a global leader in healthcare communications, today announced results for the third quarter ended September 30, 2024. In addition, the Company's Board of Directors declared a regular quarterly dividend of $0.3125 per share, payable on December 9, 2024, to stockholders of record on November 18, 2024.

Recent Highlights:

•Software operations bookings totaled $10.4 million in the third quarter, up 64.4% from the third quarter of 2023, and representing the highest third quarter total in the past six years

•Third quarter software operations bookings included 24 six-figure customer contracts, double the amount generated in the prior year quarter

•Software backlog totaled $63.6 million at September 30, 2024, up more than 19% from the prior year quarter

•Third quarter 2024 Wireless average revenue per unit (ARPU) was $7.95, up nearly 5% on a year-over-year basis

•Capital returned to stockholders in the third quarter of 2024 totaled $6.3 million

•Cash and cash equivalents increased by nearly $4.0 million in the third quarter, totaling $27.8 million at September 30, 2024

•Research and development costs totaled $9.0 million in the first nine months of 2024, supporting Spok's investment in the Company's industry-leading solutions to fuel future growth

"I am proud of the performance that our team was able to deliver in the third quarter as we continue to serve our customers at a high level and position Spok for strong growth in the fourth quarter and 2025," said Vincent D. Kelly, chief executive officer. "We continue to achieve our goal to consistently generate cash flow in order to return capital to our loyal stockholders over the long term. I am

NEWS RELEASE

particularly pleased with our performance in generating both sequential and year-over-year growth in software operations bookings."

"I believe Spok is doing an excellent job of balancing the necessary investments in our products and infrastructure in order to fuel future growth, while continuing to return capital to our stockholders," continued Kelly. "Through the first nine months of this year, Spok has generated more than $11.3 million of net income and over $22.1 million of adjusted EBITDA. More importantly, adjusted EBITDA in the third quarter was more than enough to cover our quarterly dividend payment, as well as our capital expenditure requirements. This also resulted in a nearly $4.0 million increase in our cash and cash equivalents balance, which we believe will continue to build through the remainder of the year.

"We were very pleased with our performance in the third quarter and believe that our results in the first nine months of the year provide a solid foundation for the remainder of 2024. As a result, we are reiterating the guidance ranges for revenue and adjusted EBITDA that we had previously outlined," concluded Kelly.

NEWS RELEASE

Financial Highlights:

For the three months ended September 30,	For the nine months ended September 30,
(Dollars in thousands)	2024	2023	Change (%)	2024	2023	Change (%)
Revenue
Wireless revenue
Paging revenue	$	17,605	$	18,119	(2.8)	%	$	53,208	$	54,915	(3.1)	%
Product and other revenue	656	853	(23.1)	%	1,945	1,962	(0.9)	%
Total wireless revenue	$	18,261	$	18,972	(3.7)	%	$	55,153	$	56,877	(3.0)	%
Software revenue
License	$	2,042	$	2,413	(15.4)	%	$	6,365	$	7,723	(17.6)	%
Professional services	4,835	3,833	26.1	%	13,146	10,909	20.5	%
Hardware	395	798	(50.5)	%	1,113	2,088	(46.7)	%
Maintenance	9,337	9,412	(0.8)	%	27,984	27,475	1.9	%
Total software revenue	$	16,609	$	16,456	0.9	%	$	48,608	$	48,195	0.9	%
Total revenue	$	34,870	$	35,428	(1.6)	%	$	103,761	$	105,072	(1.2)	%

For the three months ended September 30,	For the nine months ended September 30,
(Dollars in thousands)	2024	2023	Change(%)	2024	2023	Change(%)
GAAP
Operating expenses	$	29,909	$	29,215	2.4	%	$	89,434	$	87,926	1.7	%
Net income	$	3,660	$	4,451	(17.8)	%	$	11,321	$	12,301	(8.0)	%
Cash and cash equivalents (as of period end)	$	27,830	$	27,301	1.9	%	$	27,830	$	27,301	1.9	%
Capital returned to stockholders	$	6,330	$	6,241	1.4	%	$	20,045	$	19,404	3.3	%
Non-GAAP
Adjusted operating expenses	$	28,509	$	27,871	2.3	%	$	85,123	$	83,963	1.4	%
Adjusted EBITDA	$	7,534	$	8,422	(10.5)	%	$	22,118	$	23,833	(7.2)	%

NEWS RELEASE

For the three months ended September 30,	For the nine months ended September 30,
(Dollars in thousands, excluding units in service and ARPU)	2024	2023	Change(%)	2024	2023	Change(%)
Key Statistics
Wireless units in service (000's)	730	785	(7.0)	%	730	785	(7.0)	%
Wireless average revenue per unit (ARPU)	$	7.95	$	7.59	4.7	%	$	7.91	$	7.62	3.8	%
Software operations bookings(1)	$	10,379	$	6,312	64.4	%	$	26,959	$	26,000	3.7	%
Software backlog (as of period end)(2)	$	63,579	$	53,309	19.3	%	$	63,579	$	53,309	19.3	%

(1) Software operations bookings includes net new (i.e., new customers or incremental add-on sales to existing customers) sales of license, professional services, equipment, and first-year maintenance.

(2) Software backlog excludes $5.3 million and $5.4 million of contractual obligations that are deemed cancellable by the customer without significant penalty as of September 30, 2024 and 2023, respectively.

Financial Outlook:

Regarding financial guidance, the Company reiterated the following expectations for the full year 2024:

(Unaudited and in millions)	Current Guidance Full Year 2024
From	To
Revenue
Wireless	$	72.0	$	75.0
Software	$	64.0	$	69.0
Total Revenue	$	136.0	$	144.0
Adjusted EBITDA	$	27.5	$	32.5

2024 Third Quarter Call:

Management will host a conference call and webcast to discuss these financial results on Wednesday, October 30, 2024, at 5:00 p.m. Eastern Time. The presentation is open to all interested parties and may include forward-looking information.

Conference Call Details

Date/Time:	Wednesday, October 30, 2024, at 5:00 p.m. ET
Webcast:	https://www.webcast-eqs.com/register/spok_q324_en/en
U.S. Toll-Free Dial In:	877-407-0890
International Dial In:	1-201-389-0918

NEWS RELEASE

To access the call, please dial in approximately ten minutes before the start of the call. For those unable to join the live call, an OnDemand version of the webcast will be available following the call under the URL link and on the investor relations website.

* * * * * * * * *

About Spok

Spok Holdings, Inc. (NASDAQ: SPOK), headquartered in Plano, Texas, is proud to be a 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 and support administrative compliance. Our customers send over 70 million messages each month through their Spok® solutions. Spok enables smarter, faster clinical communication. For more information, visit spok.com.

Spok is a trademark of Spok Holdings, Inc. Spok Care Connect and Spok Mobile are trademarks of Spok, Inc.

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: adjusted operating expenses and adjusted EBITDA. Adjusted operating expenses excludes depreciation and accretion expense, impairment of intangible assets and severance and restructuring costs. Adjusted EBITDA represents net income/(loss) before interest income/expense, income tax benefit/expense, depreciation and accretion expense, stock-based compensation expense, impairment of intangible assets and severance and restructuring. With respect to our expectations under "Financial Guidance" above, reconciliation of adjusted EBITDA to net income is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and uncertainty with respect to certain items included in net income that are excluded from adjusted EBITDA, in particular, income tax benefit/expense, stock-based compensation expenses, impairment of intangible assets, severance and restructuring and other non-recurring expenses. These items can have unpredictable fluctuations based on unforeseen activity that is out of our control and/or cannot be reasonably predicted.

We believe that these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to Spok's financial condition and results of operations. We use these non-GAAP measures for financial, operational, and budgetary decision-making purposes, to understand and evaluate our core operating performance and trends, and to generate future operating plans. We believe that these non-GAAP financial measures permit us to more thoroughly analyze key financial metrics used to make operational decisions and allow us

NEWS RELEASE

to assess our core operating results. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other software companies who present similar non-GAAP financial measures. We adjust for certain items because we do not regard these costs as reflective of normal costs related to the ongoing operation of the business in the ordinary course. In general, these items possess one or more of the following characteristics: non-cash expenses, factors outside of our control, items that are non-operational in nature, and unusual items not expected to occur in the normal course of business. We believe it is important to exclude these costs, given that they do not represent future operational costs under this strategic business plan. This allows us to assess the underlying performance of our core business under this new strategic business plan.

We do not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principle of these non-GAAP financial measures is that they exclude significant amounts that are required by GAAP to be recorded in the Company's financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. We urge investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures, which are included in this press release, and not to rely on any single financial measure to evaluate our business.

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 our 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 our 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, our ability to manage wireless network rationalization to lower our costs without causing disruption of service to our customers; our ability to retain key management personnel and to attract and retain talent within the organization; the productivity of our sales organization and our ability to deliver effective customer support; economic conditions such as recessionary economic cycles, higher interest rates, inflation and higher levels of unemployment; risks related to our overall business strategy, including maximizing revenue and cash generation from our established businesses and returning capital to stockholders through dividends and repurchases of shares of our common stock; competition for our services and products from new technologies or those offered and/or developed from firms that are substantially larger and have much greater financial and human capital resources; continuing decline in the number of paging units we have in service with customers, commensurate with a continuing decline in our wireless revenue; our ability to address changing market conditions with new or revised software solutions; undetected defects, bugs, or security vulnerabilities in our products; our dependence on the U.S. healthcare industry; the sales cycle of our software solutions and services can run from six to eighteen months, making it

NEWS RELEASE

difficult to plan for and meet our sales objectives and bookings on a steady basis quarter-to-quarter and year-to-year; our reliance on third-party vendors to supply us with wireless paging equipment; our ability to maintain successful relationships with our channel partners; our ability to protect our rights in intellectual property that we own and develop and the potential for litigation claiming intellectual property infringement by us; our use of open source software, third-party software and other intellectual property; the reliability of our networks and servers and our ability to prevent cyberattacks and other security issues and disruptions; our reliance on data centers and other systems and technologies provided by third parties, and technology systems and electronic networks supplied and managed by third parties; cyberattacks, data breaches or other compromises to our or our critical third parties' systems, data, products or services; our ability to realize the benefits associated with our deferred income tax assets; future impairments of our long-lived assets or goodwill; risks related to data privacy and protection-related laws and regulation; and our ability to manage changes related to regulation, including laws and regulations affecting hospitals and the healthcare industry generally, 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 OPERATIONS
(Unaudited and in thousands except share, per share amounts and ARPU)
For the three months ended	For the nine months ended
9/30/2024	9/30/2023	9/30/2024	9/30/2023
Revenue:
Wireless	$	18,261	$	18,972	$	55,153	$	56,877
Software	16,609	16,456	48,608	48,195
Total revenue	34,870	35,428	103,761	105,072
Operating expenses:
Cost of revenue (exclusive of items shown separately below)	7,133	6,622	21,435	19,885
Research and development	2,831	2,561	8,958	7,907
Technology operations	6,083	6,405	18,563	19,444
Selling and marketing	3,928	4,067	11,582	12,322
General and administrative	8,534	8,216	24,585	24,405
Depreciation and accretion	1,075	1,267	3,210	3,768
Severance and restructuring	325	77	1,101	195
Total operating expenses	29,909	29,215	89,434	87,926
% of total revenue	85.8	%	82.5	%	86.2	%	83.7	%
Operating income	4,961	6,213	14,327	17,146
% of total revenue	14.2	%	17.5	%	13.8	%	16.3	%
Interest income	264	240	908	866
Other (expense) income	(75)	41	(91)	(45)
Income before income taxes	5,150	6,494	15,144	17,967
Provision for income taxes	(1,490)	(2,043)	(3,823)	(5,666)
Net income	$	3,660	$	4,451	$	11,321	$	12,301
Basic net income per common share	$	0.18	$	0.22	$	0.56	$	0.62
Diluted net income per common share	$	0.18	$	0.22	$	0.55	$	0.61
Basic weighted average common shares outstanding	20,264,055	19,970,936	20,229,146	19,942,325
Diluted weighted average common shares outstanding	20,523,873	20,304,092	20,534,883	20,308,973
Cash dividends declared per common share	0.3125	0.3125	0.9375	0.9375

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
9/30/2024	12/31/2023
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	27,830	$	31,989
Accounts receivable, net	21,377	23,314
Prepaid expenses	8,450	7,885
Other current assets	723	704
Total current assets	58,380	63,892
Non-current assets:
Property and equipment, net	6,988	7,321
Operating lease right-of-use assets	8,597	10,526
Goodwill	99,175	99,175
Deferred income tax assets, net	42,635	46,260
Other non-current assets	987	510
Total non-current assets	158,382	163,792
Total assets	$	216,762	$	227,684
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	3,944	$	5,969
Accrued compensation and benefits	5,188	7,284
Deferred revenue	28,743	26,298
Operating lease liabilities	2,961	4,184
Other current liabilities	4,796	4,273
Total current liabilities	45,632	48,008
Non-current liabilities:
Asset retirement obligations	7,268	7,191
Operating lease liabilities	6,148	6,902
Other non-current liabilities	1,426	1,812
Total non-current liabilities	14,842	15,905
Total liabilities	60,474	63,913
Commitments and contingencies
Stockholders' equity:
Preferred stock	$	-	$	-
Common stock	2	2
Additional paid-in capital	104,119	102,936
Accumulated other comprehensive loss	(1,747)	(1,764)
Retained earnings	53,914	62,597
Total stockholders' equity	156,288	163,771
Total liabilities and stockholders' equity	$	216,762	$	227,684

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
For the nine months ended
9/30/2024	9/30/2023
Operating activities:
Net income	$	11,321	$	12,301
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and accretion	3,210	3,768
Deferred income tax expense	3,624	5,605
Stock-based compensation	3,480	2,743
Provisions for credit losses, service credits and other	450	415
Changes in assets and liabilities:
Accounts receivable	1,481	1,305
Prepaid expenses and other assets	(1,061)	(1,102)
Net operating lease liabilities	(48)	(1,243)
Accounts payable, accrued liabilities and other	(4,284)	(7,396)
Deferred revenue	2,342	(2,000)
Net cash provided by operating activities	20,515	14,396
Investing activities:
Purchases of property and equipment	(2,348)	(2,419)
Net cash used in investing activities	(2,348)	(2,419)
Financing activities:
Cash distributions to stockholders	(20,045)	(19,404)
Proceeds from issuance of common stock under the Employee Stock Purchase Plan	130	90
Purchase of common stock for tax withholding on vested equity awards	(2,428)	(1,245)
Net cash used in financing activities	(22,343)	(20,559)
Effect of exchange rate on cash and cash equivalents	17	129
Net decrease in cash and cash equivalents	(4,159)	(8,453)
Cash and cash equivalents, beginning of period	31,989	35,754
Cash and cash equivalents, end of period	$	27,830	$	27,301
Supplemental disclosure:
Income taxes paid	$	298	$	236

SPOK HOLDINGS, INC.
UNITS IN SERVICE, MARKET SEGMENTS,
AND AVERAGE REVENUE PER UNIT (ARPU)
(Unaudited and in thousands)
For the three months ended
9/30/2024	6/30/2024	3/31/2024	12/31/2023	9/30/2023	6/30/2023	3/31/2023	12/31/2022
Account size ending units in service (000's)
1 to 100 units	41	42	43	44	46	48	48	50
101 to 1,000 units	125	128	135	142	143	144	149	147
>1,000 units	564	577	575	579	596	614	614	620
Total	730	747	753	765	785	806	811	817
Market segment as a percent of total ending units in service
Healthcare	85.7	%	85.8	%	86.1	%	85.9	%	86.0	%	86.1	%	85.7	%	85.4	%
Government	4.1	%	4.4	%	4.1	%	4.2	%	4.2	%	4.2	%	4.3	%	4.4	%
Large enterprise	4.0	%	4.0	%	3.9	%	4.1	%	4.1	%	4.0	%	4.1	%	4.0	%
Other(1)	6.2	%	5.8	%	5.9	%	5.8	%	5.7	%	5.7	%	5.9	%	6.2	%
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Account size ARPU
1 to 100 units	$	12.70	$	12.51	$	12.66	$	12.57	$	12.02	$	11.91	$	12.03	$	11.95
101 to 1,000 units	9.19	9.06	9.14	9.16	8.75	8.56	8.75	8.66
>1,000 units	7.33	7.21	7.23	7.15	6.97	6.94	6.95	6.86
Total	$	7.95	$	7.84	$	7.89	$	7.84	$	7.59	$	7.53	$	7.59	$	7.50
(1) Other includes hospitality, resort and indirect units

RECONCILIATION OF ADJUSTED OPERATING EXPENSES
(Unaudited and in thousands)
For the three months ended	For the nine months ended
9/30/2024	9/30/2023	9/30/2024	9/30/2023
Operating expenses	$	29,909	$	29,215	$	89,434	$	87,926
Add back:
Depreciation and accretion	(1,075)	(1,267)	(3,210)	(3,768)
Severance and restructuring	(325)	(77)	(1,101)	(195)
Adjusted operating expenses	$	28,509	$	27,871	$	85,123	$	83,963

RECONCILIATION OF ADJUSTED EBITDA
(Unaudited and in thousands)
For the three months ended	For the nine months ended
9/30/2024	9/30/2023	9/30/2024	9/30/2023
Net income	$	3,660	$	4,451	$	11,321	$	12,301
Add back:
Provision for income taxes	1,490	2,043	3,823	5,666
Other expense (income)	75	(41)	91	45
Interest income	(264)	(240)	(908)	(866)
Depreciation and accretion	1,075	1,267	3,210	3,768
EBITDA	$	6,036	$	7,480	$	17,537	$	20,914
Adjustments:
Stock-based compensation	1,173	865	3,480	2,724
Severance and restructuring	325	77	1,101	195
Adjusted EBITDA	$	7,534	$	8,422	$	22,118	$	23,833