Spok Holdings, Inc. (NASDAQ:SPOK) Q2 2018 Earnings Conference Call - Final Transcript

Jul 26, 2018 • 10:00 am ET

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Spok Holdings, Inc. (NASDAQ:SPOK) Q2 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning, and welcome to Spok's Second Quarter Investor Call. Today's call is being recorded. On line today, we have Vince Kelly, President and CEO; Mike Wallace, CFO; and Hemant Goel, President of Spok's Operating Company.

At this time, for opening comments, I will turn the call over to Mr. Wallace. Sir, please go ahead.

Executive
Mike Wallace

Good morning. Thank you for joining us for our second quarter 2018 investor update.

(Forward-Looking Cautionary Statements)

Please note that Spok assumes no obligation to update any forward-looking statements from past or present filings and conference calls. Also please remember on January 1, 2018, Spok adopted Accounting Standards Codification, ASC 606, Revenue from Contracts with Customers, using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Unless otherwise stated, results for reporting periods beginning after January 1, 2018, are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the company's historic accounting under ASC 605. Please refer to the tables provided in yesterday's press release to obtain revenue, net income, earnings per share and EBITDA results under both ASC 606 and 605 formats.

With that, I'll turn the call over to Vince.

Executive
Vince Kelly

Thanks, Mike, and good morning. We're pleased to speak with you today regarding our second quarter operating results, and what we believe is a good start as we enter the second half of 2018. Our performance in the second quarter of 2018 was in-line with our seasonal expectations. We saw strong performance on a number of key operating measures, and sequential improvement in subscriber retention, sales bookings, backlog levels and operating expense management. We believe our year-to-date results provide a solid base and position us well as we enter the second half of the year.

Overall, we continue to generate positive EBITDA. We returned nearly $15 million of capital to our stockholders through the first half of the year in the form of dividends and share repurchases, and we enhanced our product offerings through our continued investments in our integrated communications platform, Spok Care Connect. We continue our substantial investment in our development team and are leveraging our decades of experience in critical healthcare communication to deliver a cloud-based platform that will bring the latest in communication technology to the market. As previously outlined, we believe these investments will yield significant future benefits in the form of our improved, integrated communication platform as well as higher future bookings levels, supported by our enhanced and upgraded sales team. Our teams remain on target to meet our development goals for the year.

In the first half of the year, we were particularly pleased to see software revenue on a GAAP basis grow by 11% year-over-year, with each quarter up from the prior year. Additionally, we continued to see a more than 99% renewal rate on our software maintenance contracts. Similar to our wireless revenue stream, software maintenance revenue is largely a recurring revenue stream that provides the