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Spok Reports 2019 Third Quarter Operating Results; Wireless Trends Continue to Improve; Record Level Software Revenue Backlog and Continued Strong Expense Management

October 23, 2019 4:10 PM

Board Declares Regular Quarterly Dividend

SPRINGFIELD, Va.--(BUSINESS WIRE)-- Spok Holdings, Inc. (NASDAQ: SPOK), the global leader in healthcare communications, today announced operating results for the third quarter and year-to-date period ended September 30, 2019. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on December 10, 2019 to stockholders of record on November 15, 2019.

Key Third Quarter Operating Highlights:

2019 Third Quarter and Year-To-Date Results:
Consolidated revenue for the third quarter of 2019 under Generally Accepted Accounting Principles (“GAAP”) was $39.5 million compared to $42.5 million in the third quarter of 2018. For the nine months of 2019, consolidated revenue totaled $120.7 million, compared to $126.2 million in the first nine months of 2018.

For the three months ended

For the nine months ended

September 30,

September 30,

Change

September 30,

September 30,

Change

(Dollars in thousands)

2019

2018

(%)

2019

2018

(%)

Wireless revenue

Paging revenue

$

21,212

$

22,442

(5.5

)%

$

64,241

$

68,574

(6.3

)%

Product and other revenue

602

817

(26.3

)%

2,311

2,612

(11.5

)%

Total wireless revenue

$

21,814

$

23,259

(6.2

)%

$

66,552

$

71,186

(6.5

)%

Software revenue

Operations revenue

$

7,614

$

9,026

(15.6

)%

$

23,974

$

25,961

(7.7

)%

Maintenance revenue

10,025

10,191

(1.6

)%

30,215

29,071

3.9

%

Total software revenue

17,639

19,217

(8.2

)%

54,189

55,032

(1.5

)%

Total revenue

$

39,453

$

42,476

(7.1

)%

$

120,741

$

126,218

(4.3

)%

GAAP net loss for the third quarter of 2019 was $1.3 million, or $0.07 per diluted share, compared to a net loss of $0.8 million, or $0.04 per diluted share, in the third quarter of 2018. GAAP net loss for the first nine months of 2019 was $1.3 million, or $0.07 per diluted share, compared to a net loss of $1.7 million, or $0.09 per diluted share, in the first nine months of 2018.

In the third quarter of 2019, the EBITDA (earnings before interest, taxes, depreciation and amortization) loss totaled $0.4 million. This compares to EBITDA of $1.2 million in the prior year quarter. In the first nine months of 2019, the Company generated $3.4 million of EBITDA, compared to EBITDA of $4.8 million in the prior year period.

For the three months ended

For the nine months ended

(Dollars in thousands)

September 30, 2019

September 30, 2018

September 30, 2019

September 30, 2018

Net loss

$

(1,326

)

$

(840

)

$

(1,255

)

$

(1,667

)

Basic and diluted net loss per share

$

(0.07

)

$

(0.04

)

$

(0.07

)

$

(0.09

)

EBITDA

$

(387

)

$

1,225

$

3,430

$

4,847

Management Commentary:
“We believe our performance in the third quarter of 2019 has positioned us well as we prepare to demonstrate our improved cloud-native and integrated communication platform to our customer base next week at our annual user conference, Connect 19," said Vincent D. Kelly, president and chief executive officer. “In the third quarter, we continued to see improvements in both wireless unit and revenue trends, as well as a record level for our software revenue backlog. Third quarter performance was supported by continued strong software maintenance renewals and improved operating expense levels. This allowed us to return $7.2 million of capital to our stockholders in the form of dividends and share repurchases, while we continued to enhance our product offerings through our continued investments in our integrated communication platform, Spok Care Connect®.”

Kelly also noted that in addition to the Company’s quarterly financial performance, Spok made progress in several other areas, including product development, sales strategy and key strategic partnership agreements. “Earlier in the quarter, we were excited to announce that for the seventh consecutive year all 21 adult hospitals named to U.S. News & World Report’s 2019-20 Best Hospitals Honor Roll use Spok clinical communication solutions to facilitate care collaboration and support exceptional patient care. We believe this recognition enhances our industry-leading reputation and provides momentum as we welcome customers next week to Connect 19, Spok’s annual conference for healthcare professionals. There, we will bring together some of the industry’s leading innovators who are pushing the boundaries to advance and improve healthcare communications. This year, we are particularly pleased to demonstrate what we believe is a game-changer in healthcare communication technology, the next generation of the Spok Care Connect platform. Our collaboration with hospital leaders at these conferences, and throughout the year, has helped us create an enterprise platform that positions healthcare providers for success today and supports them with faster, smarter clinical communications for the next decade.”

Michael W. Wallace, chief financial officer, said, “Expense management and strong financial discipline have allowed us to continue to invest in our business for long-term growth. In the third quarter, operating expenses were down more than 4 percent on a year-over-year basis. Our balance sheet remains strong, as the cash, cash equivalents and short-term investments balance rose slightly from the prior quarter to $79.2 million at September 30, 2019, and we continue to have no debt.”

Business Outlook:
Commenting on the Company’s previously provided financial guidance for 2019, Wallace noted, “We are pleased that the third quarter results are in line with the full year 2019 guidance we had provided last quarter and we are reiterating those expectations." Regarding financial guidance for 2019, Wallace said the Company expects total revenue to range from $156 million to $174 million. Included in that total, the Company expects software revenue to comprise $75 million to $85 million. Also, Spok expects adjusted operating expenses (excludes depreciation, amortization and accretion) to range from $155 million to $165 million, and capital expenses to range from $3 million to $7 million.

2019 Third-Quarter Call and Replay:
Spok plans to host a conference call for investors to discuss its 2019 third quarter results at 10:00 a.m. ET on Thursday, October 24, 2019. Dial-in numbers for the call are 334-323-0501 or 800-353-6461. The pass code for the call is 6600007. A replay of the call will be available from 1:00 p.m. ET on October 24, 2019 until 1:00 p.m. ET on Thursday, November 7, 2019. To listen to the replay, please register at http://tinyurl.com/Spok2019Q3earningsreplay. Please enter the registration information, and you will be given access to the replay.

About Spok
Spok Holdings, Inc. (NASDAQ: SPOK), headquartered in Springfield, Virginia, 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, support administrative compliance, and provide a better experience for patients. Our customers send over 100 million messages each month through their Spok® solutions. Spok is making care collaboration easier. For more information, visit spok.com or follow @spoktweets on Twitter.

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

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, particularly third party consulting services and research and development costs, future capital needs, competitive pricing pressures, competition from traditional paging services, other wireless communications services and other software providers, many of which are substantially larger and have much greater financial and human capital resources, changes in customer purchasing priorities or capital expenditures, government regulation of our products and services and the healthcare and health insurance industries, reliance upon third-party providers for certain equipment and services, unauthorized breaches or failures in cybersecurity measures adopted by us and/or included in our products and services, the effects of changes in accounting policies or practices, 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 (a)

(Unaudited and in thousands except share, per share amounts and ARPU)

For the three months ended

For the nine months ended

9/30/2019

9/30/2018

9/30/2019

9/30/2018

Revenue:

Wireless

$

21,814

$

23,259

$

66,552

$

71,186

Software

17,639

19,217

54,189

55,032

Total revenue

39,453

42,476

120,741

126,218

Operating expenses:

Cost of revenue

7,190

8,141

22,021

23,635

Research and development

7,437

5,934

20,411

17,845

Technology operations

7,805

7,787

23,345

23,235

Selling and marketing

5,595

5,716

17,279

18,279

General and administrative

11,813

13,673

34,255

38,377

Depreciation, amortization and accretion

2,305

2,785

6,999

8,168

Total operating expenses

42,145

44,036

124,310

129,539

% of total revenue

106.8

%

103.7

%

103.0

%

102.6

%

Operating loss

(2,692

)

(1,560

)

(3,569

)

(3,321

)

% of total revenue

(6.8

)%

(3.7

)%

(3.0

)%

(2.6

)%

Interest income

399

384

1,300

1,009

Other income (expense)

163

(110

)

528

(56

)

Loss before income taxes

(2,130

)

(1,286

)

(1,741

)

(2,368

)

Benefit from income taxes

804

446

486

701

Net loss

$

(1,326

)

$

(840

)

$

(1,255

)

$

(1,667

)

Basic and diluted net loss income per common share

$

(0.07

)

$

(0.04

)

$

(0.07

)

$

(0.09

)

Basic weighted average common shares outstanding

19,086,811

19,456,149

19,166,812

19,742,869

Diluted weighted average common shares outstanding

19,086,811

19,456,149

19,166,812

19,742,869

Cash dividends declared per common share

0.125

0.125

0.375

0.375

Key statistics:

Units in service

955

999

955

999

Average revenue per unit (ARPU)

$

7.32

$

7.40

$

7.33

$

7.44

Bookings

$

20,421

$

21,580

$

56,410

$

58,192

Backlog

$

42,604

$

36,366

$

42,604

$

36,366

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

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (a)

(Unaudited and in thousands except share, per share amounts and ARPU)

For the three months ended

9/30/2019

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

3/31/2018

12/31/2017

Revenue:

Wireless

$

21,814

$

22,127

$

22,610

$

23,091

$

23,259

$

23,658

$

24,269

$

24,579

Software

17,639

17,398

19,154

20,165

19,217

16,970

18,845

19,191

Total revenue

39,453

39,525

41,764

43,256

42,476

40,628

43,114

43,770

Operating expenses:

Cost of revenue (b)

7,190

7,239

7,592

8,772

8,141

7,596

7,878

7,122

Research and development

7,437

6,807

6,167

6,618

5,934

6,177

5,735

4,934

Technology operations

7,805

7,866

7,674

8,120

7,787

7,698

7,750

7,617

Selling and marketing

5,595

5,574

6,110

6,275

5,716

6,093

6,490

6,039

General and administrative

11,813

11,696

10,747

10,721

13,673

12,741

11,964

11,695

Depreciation, amortization and accretion

2,305

2,335

2,359

2,601

2,785

2,669

2,713

2,774

Total operating expenses

42,145

41,517

40,649

43,107

44,036

42,974

42,530

40,181

% of total revenue

106.8

%

105.0

%

97.3

%

99.7

%

103.7

%

105.8

%

98.6

%

91.8

%

Operating (loss) income

(2,692

)

(1,992

)

1,115

149

(1,560

)

(2,346

)

584

3,589

% of total revenue

(6.8

)%

(5.0

)%

2.7

%

0.3

%

(3.7

)%

(5.8

)%

1.4

%

8.2

%

Interest income

399

452

449

628

384

342

283

229

Other income (expense)

163

602

(236

)

(593

)

(110

)

102

(47

)

(282

)

Loss (income) before income taxes

(2,130

)

(938

)

1,328

184

(1,286

)

(1,902

)

820

3,536

Benefit from (provision for) income taxes

804

268

(586

)

5

446

730

(475

)

(24,920

)

Net (loss) income

$

(1,326

)

$

(670

)

$

742

$

189

$

(840

)

$

(1,172

)

$

345

$

(21,384

)

Basic and diluted net (loss) income per common share

$

(0.07

)

$

(0.03

)

$

0.04

$

0.01

$

(0.04

)

$

(0.06

)

$

0.02

$

(1.07

)

Basic weighted average common shares outstanding

19,086,811

19,217,866

19,196,970

19,445,401

19,456,149

19,750,941

20,027,800

19,987,763

Diluted weighted average common shares outstanding

19,086,811

19,217,866

19,356,712

19,445,401

19,456,149

19,750,941

20,153,291

19,987,763

Key statistics:

Units in service

955

977

982

992

999

1,024

1,030

1,049

Average revenue per unit (ARPU)

$

7.32

$

7.26

$

7.32

$

7.36

$

7.40

$

7.41

$

7.47

$

7.46

Bookings

$

20,421

$

21,334

$

14,654

$

23,076

$

21,580

$

18,488

$

18,124

$

19,190

Backlog

$

42,604

$

39,718

$

37,392

$

40,422

$

36,366

$

36,295

$

35,930

$

42,305

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

(b) An adjustment of $771 to cost of revenue, identified in the fourth quarter of 2018, has been reflected in this table as an increase to cost of revenue of $166, $196 and $359 in the first, second and third quarters of 2018, respectively. Total operating expenses, operating income (loss), income (loss) before income taxes, Net (loss) income and net (loss) income per share have been adjusted accordingly to reflect these changes.

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (a)

(In thousands)

9/30/2019

12/31/2018

Unaudited

Assets

Current assets:

Cash and cash equivalents

$

49,319

$

83,343

Short term investments

29,870

3,963

Accounts receivable, net

31,071

32,386

Prepaid expenses and other

9,975

9,578

Inventory

995

1,708

Total current assets

121,230

130,978

Non-current assets:

Property and equipment, net

9,603

10,354

Operating Lease right-of-use assets

16,345

—

Goodwill

133,031

133,031

Intangible assets, net

3,542

5,417

Deferred income tax assets

46,961

46,484

Other non-current assets

1,319

1,448

Total non-current assets

210,801

196,734

Total assets

$

332,031

$

327,712

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

3,605

$

2,010

Accrued compensation and benefits

11,465

11,348

Accrued taxes

1,605

1,822

Deferred revenue

27,668

26,106

Operating lease liabilities

5,303

—

Other current liabilities

2,531

3,662

Total current liabilities

52,177

44,948

Non-current liabilities:

Asset Retirement obligations

6,756

6,513

Operating lease liabilities

11,658

—

Other long-term liabilities

643

1,697

Total non-current liabilities

19,057

8,210

Total liabilities

71,234

53,158

Commitments and contingencies

Stockholders' equity:

Preferred stock

$

—

$

—

Common stock

2

2

Additional paid-in capital

85,614

90,559

Accumulated other comprehensive loss

(1,499

)

(1,301

)

Retained earnings

176,680

185,294

Total stockholders' equity

260,797

274,554

Total liabilities and stockholders' equity

$

332,031

$

327,712

(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 nine months ended

9/30/2019

9/30/2018

Cash flows provided by operating activities:

Net loss

$

(1,255

)

$

(1,667

)

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

Depreciation, amortization and accretion

6,999

8,168

Deferred income tax expense

(569

)

(1,000

)

Stock based compensation

2,521

3,922

Provisions for doubtful accounts, service credits and other

652

1,631

Adjustments of non-cash transaction taxes

—

(156

)

Changes in assets and liabilities:

Accounts receivable

252

(2,534

)

Prepaid expenses, inventory and other assets

2,131

(1,160

)

Accounts payable, accrued liabilities and other

(1,366

)

(346

)

Deferred revenue

1,383

4,998

Net cash provided by operating activities

10,748

11,856

Cash flows from investing activities:

Purchases of property and equipment

(4,162

)

(5,094

)

Purchase of short-term investments

(44,499

)

(3,911

)

Maturities of short-term investments

19,000

4,000

Net cash used in investing activities

(29,661

)

(5,005

)

Cash flows from financing activities:

Cash distributions to stockholders

(7,440

)

(7,631

)

Purchase of common stock (including commissions)

(6,575

)

(10,026

)

Proceeds from issuance of common stock under the Employee Stock Purchase Plan

119

143

Purchase of common stock (including commissions)

(6,575

)

(10,026

)

Net cash used in financing activities

(14,913

)

(18,492

)

Effect of exchange rate on cash

(198

)

(965

)

Net decrease in cash and cash equivalents

(34,024

)

(12,606

)

Cash and cash equivalents, beginning of period

83,343

103,179

Cash and cash equivalents, end of period

$

49,319

$

90,573

Supplemental disclosure:

Income taxes paid

$

927

$

726

(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

9/30/2019

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

3/31/2018

12/31/2017

Revenue

Paging

$

21,212

$

21,342

$

21,687

$

21,997

$

22,442

$

22,824

$

23,308

$

23,624

Non-paging

602

785

923

1,094

817

834

961

955

Total wireless revenue

$

21,814

$

22,127

$

22,610

$

23,091

$

23,259

$

23,658

$

24,269

$

24,579

License

2,723

1,676

2,840

3,496

3,175

1,993

4,376

2,990

Services

4,202

4,835

5,206

5,103

4,555

4,363

4,071

5,437

Equipment

689

842

963

1,568

1,296

1,107

1,024

945

Operations revenue

$

7,614

$

7,353

$

9,009

$

10,167

$

9,026

$

7,463

$

9,471

$

9,372

Maintenance revenue

$

10,025

$

10,045

$

10,145

$

9,998

$

10,191

$

9,507

$

9,374

$

9,819

Total software revenue

$

17,639

$

17,398

$

19,154

$

20,165

$

19,217

$

16,970

$

18,845

$

19,191

Total revenue

$

39,453

$

39,525

$

41,764

$

43,256

$

42,476

$

40,628

$

43,114

$

43,770

(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

9/30/2019

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

3/31/2018

12/31/2017

Cost of revenue

Payroll and related

$

5,099

$

4,749

$

4,931

$

4,868

$

4,923

$

4,853

$

4,874

$

4,374

Cost of sales

1,567

1,900

2,080

3,349

2,623

2,119

2,475

1,990

Stock based compensation

21

97

107

44

75

75

55

58

Other

503

493

474

511

520

549

474

700

Total cost of revenue (b)

7,190

7,239

7,592

8,772

8,141

7,596

7,878

7,122

Research and development

Payroll and related

5,083

4,639

4,263

4,350

4,709

4,506

4,002

3,521

Outside services

2,027

1,912

1,745

2,115

1,040

1,481

1,513

1,361

Stock based compensation

102

84

11

5

71

90

71

(71

)

Other

225

172

148

148

114

100

149

123

Total research and development

7,437

6,807

6,167

6,618

5,934

6,177

5,735

4,934

Technology operations

Payroll and related

2,823

2,662

2,647

2,616

2,866

2,618

2,693

2,413

Site rent

3,269

3,480

3,296

3,432

3,482

3,538

3,496

3,471

Telecommunications

1,016

1,019

996

1,021

950

935

898

979

Stock based compensation

30

30

30

24

24

24

24

20

Other

667

675

705

1,027

465

583

639

734

Total technology operations

7,805

7,866

7,674

8,120

7,787

7,698

7,750

7,617

Selling and marketing

Payroll and related

3,524

3,329

3,273

3,047

3,401

3,311

3,294

2,573

Commissions

1,114

1,298

1,424

1,759

1,225

1,397

1,774

1,634

Stock based compensation

137

128

161

99

135

135

135

93

Advertising and events

703

656

933

1,236

857

996

1,158

1,481

Other

117

163

319

134

98

254

129

258

Total selling and marketing

5,595

5,574

6,110

6,275

5,716

6,093

6,490

6,039

General and administrative

Payroll and related

4,220

4,136

4,041

4,087

4,834

4,340

4,416

3,649

Stock based compensation

674

690

219

860

1,118

943

949

774

Bad debt

402

(96

)

308

303

513

279

528

143

Facility rent, office, and technology costs

2,369

2,485

2,294

1,573

2,426

1,824

2,144

1,865

Outside services

2,004

2,306

1,776

2,561

2,363

2,942

1,919

2,924

Taxes, licenses and permits

888

863

921

111

1,081

1,024

1,080

1,120

Other

1,256

1,312

1,188

1,226

1,338

1,389

928

1,220

Total general and administrative

11,813

11,696

10,747

10,721

13,673

12,741

11,964

11,695

Depreciation, amortization and accretion

2,305

2,335

2,359

2,601

2,785

2,669

2,713

2,774

Operating expenses

$

42,145

$

41,517

$

40,649

$

43,107

$

44,036

$

42,974

$

42,530

$

40,181

Capital expenditures

$

1,378

$

1,495

$

1,287

$

830

$

1,630

$

2,299

$

1,164

$

2,179

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

(b) An adjustment of $771 to cost of sales, identified in the fourth quarter of 2018, has been reflected in this table as an increase to cost of sales of $166, $196 and $359 in the first, second and third quarters of 2018, respectively. Total cost of revenue and operating expenses have been adjusted accordingly to reflect these changes.

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

9/30/2019

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

3/31/2018

12/31/2017

Paging units in service

Beginning units in service (000's)

977

982

992

999

1,024

1,030

1,049

1,063

Gross placements

28

35

27

30

31

35

25

26

Gross disconnects

(50

)

(40

)

(37

)

(37

)

(56

)

(41

)

(44

)

(40

)

Net change

(22

)

(5

)

(10

)

(7

)

(25

)

(6

)

(19

)

(14

)

Ending units in service

955

977

982

992

999

1,024

1,030

1,049

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

Healthcare

81.7

%

81.7

%

81.6

%

81.4

%

81.7

%

81.5

%

81.1

%

80.7

%

Government

5.5

%

5.6

%

5.8

%

5.8

%

5.8

%

5.7

%

5.9

%

6.0

%

Large enterprise

6.1

%

5.9

%

5.9

%

5.9

%

6.0

%

6.0

%

6.0

%

6.0

%

Other(b)

6.7

%

6.8

%

6.7

%

6.9

%

6.5

%

6.8

%

7.0

%

7.2

%

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

72

74

77

78

81

85

88

92

101 to 1,000 units

175

179

186

190

192

197

198

198

>1,000 units

708

724

719

724

726

742

744

759

Total

955

977

982

992

999

1,024

1,030

1,049

Account size net loss rate(c)

1 to 100 units

(2.1

)%

(3.2

)%

(2.3

)%

(1.7

)%

(4.3

)%

(3.8

)%

(4.7

)%

(3.6

)%

101 to 1,000 units

(2.4

)%

(3.9

)%

(2.3

)%

—

%

(2.7

)%

(0.6

)%

(10.0

)%

(1.1

)%

>1,000 units

(2.2

)%

0.7

%

(1.1

)%

(0.1

)%

(2.2

)%

(0.2

)%

(1.9

)%

(1.1

)%

Total

(2.2

)%

(0.5

)%

(1.1

)%

(0.2

)%

(2.5

)%

(0.6

)%

(1.8

)%

(1.3

)%

Account size ARPU

1 to 100 units

$

11.84

$

12.00

$

11.90

$

11.61

$

11.33

$

12.04

$

12.13

$

12.11

101 to 1,000 units

8.41

8.47

8.35

8.28

8.19

8.34

8.47

8.58

>1,000 units

6.59

6.47

6.57

6.69

6.74

6.62

6.65

6.59

Total

$

7.32

$

7.26

$

7.32

$

7.36

$

7.40

$

7.41

$

7.47

$

7.46

(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 (LOSS) TO EBITDA (a)

(Unaudited and in thousands)

For the three months ended

9/30/2019

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

3/31/2018

12/31/2017

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

Net (loss) income (c)

$

(1,326

)

$

(670

)

$

742

$

189

$

(840

)

$

(1,172

)

$

345

$

(21,384

)

Plus (less): provision for (benefit from) income taxes

(804

)

(268

)

586

(5

)

(446

)

(730

)

475

24,920

Plus (less): Other expense (income)

(163

)

(602

)

236

593

110

(102

)

47

282

Less: Interest income

(399

)

(452

)

(449

)

(628

)

(384

)

(342

)

(283

)

(229

)

Operating (loss) income

(2,692

)

(1,992

)

1,115

149

(1,560

)

(2,346

)

584

3,589

Plus: depreciation, amortization and accretion

2,305

2,335

2,359

2,601

2,785

2,669

2,713

2,774

EBITDA (as defined by the Company)

$

(387

)

$

343

$

3,474

$

2,750

$

1,225

$

323

$

3,297

$

6,363

For the nine months ended

9/30/2019

9/30/2018

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

Net loss

$

(1,255

)

$

(1,667

)

(Less) plus: (Benefit from) provision for income taxes

(486

)

(701

)

Plus (less): Other income (expense)

(528

)

56

Less: Interest income

(1,300

)

(1,009

)

Operating loss

(3,569

)

(3,321

)

Plus: depreciation, amortization and accretion

6,999

8,168

EBITDA (as defined by the Company)

$

3,430

$

4,847

RECONCILIATION FROM OPERATING EXPENSES TO ADJUSTED OPERATING EXPENSES (a)

For the three months ended

9/30/2019

6/30/2019

3/31/2019

12/31/2018

9/30/2018

6/30/2018

3/31/2018

12/31/2017

(Dollars in thousands)

Operating expenses

$

42,145

$

41,517

$

40,649

$

43,107

$

44,036

$

42,974

$

42,530

$

40,181

Less: depreciation, amortization and accretion

2,305

2,335

2,359

2,601

2,785

2,669

2,713

2,774

Adjusted operating expenses

$

39,840

$

39,182

$

38,290

$

40,506

$

41,251

$

40,305

$

39,817

$

37,407

(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. Management and the Board of Directors rely on EBITDA for purposes of determining the Company’s capital allocation policies. EBITDA is also the starting point for the calculation of operating cash flow for purposes of determining whether management has achieved certain performance objectives in the Company’s short-term and long-term incentive plans.

(c) An adjustment to cost of revenue identified in the fourth quarter of 2018 of $771 has been reflected in this table as a reduction of Net income (loss) of $166, $196 $359, and $771 in the first, second third, and fourth quarters respectively.

Al Galgano

952-567-0295

[email protected]

Source: Spok Holdings, Inc.

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