Spok Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
April 30, 2025
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Operator

Greetings, and welcome to Spok's First Quarter twenty twenty five Earnings Results Conference Call. At this time, participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. As a reminder, this conference is being recorded.

Operator

It is now my pleasure to introduce your host, Al Galgano. Thank you. You may begin.

Al Galgano
Al Galgano
VP - Investor & Corporate Relations at Spok

Hello, everyone, and welcome to Spok Holdings first quarter two thousand and twenty five earnings call. I am joined by Vince Kelly, chief executive officer Mike Wallace, Chief Operating Officer and Calvin Rice, Chief Financial Officer. I want to remind everyone that today's conference call may include forward looking statements that are subject to risks and uncertainties relating to Spok's future financial and business performance. Such statements may include estimates of revenues, expenses and income as well as other predictive statements or plans, which are dependent upon future events or conditions. These statements represent the company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results.

Al Galgano
Al Galgano
VP - Investor & Corporate Relations at Spok

Spokes' actual results could differ materially from those anticipated in these forward looking statements. Although these statements are based upon assumptions that the company believes to be reasonable, they are subject to risks and uncertainties. Please review the risk factors section relating to our operations and the business environment, which are contained in our first quarter two thousand twenty five Form 10 Q and related documents filed with the Securities and Exchange Commission. Please note that Spok assumes no obligation to update any forward looking statements from past or present filings and conference calls. With that, I'll turn the call over to Vince.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

Thank you, Al, and good afternoon, everyone, and thank you for joining us for our first quarter twenty twenty five earnings call. I'm very proud of the strong performance our team was able to deliver in the first quarter, and I believe these results position us well for the remainder of the year. We've gotten off to a great start, outperforming our internal forecast, and we're maintaining that momentum. Let me also take this opportunity right up front to remind everyone that our mission remains solidly unchanged. That is to generate cash and return capital to our shareholders over the long term while responsibly investing in and growing our business.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

As we've demonstrated with our performance over these last three years, we believe we are on a sustainable path to doing so. That is our job and our primary focus. Returning the capital to shareholders is our public company legacy, and we feel good about executing the strategy we believe in and that we have had a lot of historical success with. Today, we will share with you an update on how our strategic business plan is progressing in support of this goal as well as our financial results for the quarter. I'll start by reviewing the agenda for today's call.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

The order will be as follows. We will begin by providing a review of our company performance for the quarter. I'll then turn the call over to Mike Wallace, our COO, to review some of our quarterly sales highlights. Then our CFO, Calvin Rice, will review our first quarter financial highlights and financial guidance for 2025. I will then wrap the call up and open it up for your questions.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

As I said upfront, we're proud of what Spok has been able to deliver and accomplish in the first quarter and believe our results provide a solid springboard for the year ahead. First quarter highlights include a 4% year over year growth in total revenues driven by a more than 9% increase in software revenues. Strong year over year increases in net income and adjusted EBITDA levels of twenty two point seven percent and eight point nine percent respectively. A near 6% year over year increase in software operations bookings from already strong prior year levels. A 44% increase in year over year professional services revenue driven by a threefold increase in the managed services category.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

A more than 15% increase in our software backlog and improved wireless trends as net unit churn was primarily offset by continued expansion of our wireless average revenue per unit and sales of our higher revenue encrypted HIPAA compliant, alphanumeric Gen a pager. And we were able to accomplish all of this while continuing to invest in our products and infrastructure at levels consistent with 2024. In short, I believe Spok is doing an excellent job of balancing our goal of returning cash to our stockholders with those investments in order to fuel future growth. In the first quarter twenty twenty five, we generated over 8,200,000.0 of adjusted EBITDA, which more than covered the 7,900,000.0 we returned to our stockholders. However, at the same time, we maintained research and development investment at prior year levels.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

We're on track to invest between eleven and twelve million dollars in product research and development expense in 2025. We believe this investment will fuel future software revenue growth and that our extensive experience selling and operating our established communication solutions will create significant value for stockholders by maximizing revenue and cash flow generation. As I mentioned, Spok has a proud legacy of creating stockholder value through free cash flow generation, and we intend to continue this track record. In fact, over the last twenty years, Spok has returned a total of more than 700,000,000 to our stockholders either through our regular quarterly dividend, special dividends, or share repurchases. Our focus on maximizing cash over the long term supports the four major tenants of our strategy.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

Those are, number one, continued investment in our wireless and software solutions. Number two, growing our revenue base. Number three, continued disciplined expense management. And number four, a stockholder friendly capital allocation plan. Going forward, we believe our extensive experience selling and operating our established communication solutions and world class customer base will create significant value for our stockholders.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

Before I turn the call over to Mike, for all of you that are new to the story, let me take a moment to review what Spok evolved into since its inception about twenty five years ago. As you know, Spok started as a wireless technology communications company, and until 02/2011, prior to the acquisition of Amcom Software, operated solely as a telecom company with a % of our revenues coming from that product offering. Since Spok has transformed into a global healthcare communications provider offering both software and wireless products and solutions to customers. Given our recent focus on Spok Care Connect and our pivot about three years ago to a new strategic direction, we believe that we've transformed into one of the leading health care technology companies in the nation. When you look at Spoke today, we're a leader in health care communications with a solid reputation.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

We maintain the largest paging network in The United States. We have a blue chip customer base of more than 2,200 hospitals who keep buying from us. We've created a large portfolio of intellectual property via strategic r and d investments. We have generated significant shareholder value through cash flow generation, returning capital to our investors, and we have a best in class product offering. Spok has built an industry leading reputation over the years.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

Under the Spok banner, we are recognized as the top clinical communications platform in our industry for eight of the past ten years by Black Book Research since we fully integrated our company. We are honored by the unwavering trust our health care clients have placed and spoke as their go to partner for clinical communications. The achievement of securing the top position for eight consecutive years underscores our commitment to delivering critical communication technology enhances hospital and health system communication, which ultimately enhances patient care and safety. And lastly, I wanna briefly address the current uncertainty in the macro environment around tariffs and its impact on the health care industry and Spok in particular. Based on the current landscape, we believe that neither our revenue nor our supply chain will be materially impacted.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

Additionally, Spok's products and solutions are viewed as an essential utility within the walls of our hospital customers. For these reasons and coupled with our first quarter performance, we feel comfortable reiterating our guidance for the full year of 2025 that Calvin will review in detail later in the call. With that, I'll turn the call over to Mike Wallace. Mike?

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

Thanks, Vince, and thank you everyone for joining us this afternoon. As Vince pointed out, it was a very strong quarter and we made tremendous progress in a number of key performance areas. Yet amidst all of the progress and continuing to create a solid financial platform and shareholder friendly capital allocation strategy, we remain true to our mission of being a global leader in health care communications. We deliver clinical information to care teams when and where it matters most to improve patient outcomes as Spok enables smarter, faster clinical communications for our customers. And Spok continues to build upon its strong industry reputation.

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

In late March, we announced that for the eighth consecutive year, we earned top honors in Black Book's two thousand twenty five survey of health care industry clients. We are particularly proud this year as top honors came in two categories of the survey. This incredible milestone demonstrates our commitment to delivering robust and reliable technology that removes barriers to exceptional patient experiences and care. Spoke received the highest honors for customer satisfaction in 12 of the 18 key performance indicators that BlackBook Research measures for secure messaging and clinical communication solutions. For the new category of enterprise messaging and critical alert management solutions, Spok received the top rated spot for individual key performance metrics such as alert accuracy and relevance, usability and adoption rate by clinicians and staff, customer support and vendor responsiveness, and impact on patient safety and clinical outcomes.

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

Now turning to our software operations bookings performance in the first quarter, we generated 8,200,000 of bookings that included $22.06 figure customer contracts, sustaining the momentum that we saw last year. This performance included two new logo agreements, and those 6 figure contracts had an average contract size that continues to grow from prior year levels. We are extremely pleased with the start to 02/2025. Now let me take a few minutes to hot a few minutes to highlight a few of the customer engagements that we signed in the last quarter. The first contract was with a large Midwest health system that provides care and life saving services to more than a hundred thousand patients annually.

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

Each year, the organization also manages over 450,000 operator calls and processes over 4,000,000 messages through its spoke system. Last quarter, we secured a three year managed services commitment that will extend our partnership with this health system and will continue to drive value in critical communication services that are core to their mission and growth in the Midwest. This multiyear engagement includes Spok Smart Suite, console and web upgrades, our new Spok Care Connect reporting and dashboards, Spok Mobile, and Spok Messenger upgrades. Coupled with our value added services, including solution assessment and data integrity, our platform is being extended to deliver priority alerts to clinicians using Epic Chat. This organization will continue to build out its Spok and Epic coexistence strategy to manage system wide communication workflows.

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

The second outstanding contract from the last quarter was with a faith based nonprofit health care network that has partnered with Spok for more than twenty three years. This health system has 11 hospitals and over 28,000 employees, 4,500 physicians, and a hundred physician practices in outpatient facilities. As part of the agreement, Spok will provide medical and web directory upgrades to the core system as well as Spok's value added services such as data integrity and solution assessment, which will help our partner derive maximum value from their Spok solutions. Additionally, two new sites will join the enterprise and leverage the Spok platform. Lastly, Spok is excited to continue our partnership with a valued customer of almost thirty years located in the Southeast.

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

This health system is dedicated to innovating medicine, teaching the caregivers of the future, and supporting the health care needs of their patients. This customer signed a three year agreement to upgrade their existing Spok Smart Suite console, Spoky Notify, and Spok Mobile solutions, and will add Spok Voice Connect, Spok Care Connect enterprise reporting, and Spok Messenger with dashboards for SMS. Also included in this engagement are several of Spok's value added services to assist with closer collaboration with the clinical teams. So as you can see, Spok continues to consistently deliver effective communication solutions to hospitals and health care systems. Our first quarter success underscores our steadfast dedication to offering unparalleled communication solutions to our clients.

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

We are confident that our software solutions will continue bringing positive change to health care institutions nationwide. I will now turn the call over to Calvin Rice, our Chief Financial Officer, to briefly review the first quarter financial performance. Calvin?

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

Thanks, Mike, and good afternoon, everyone. I would now like to take a few minutes and provide a recap of our first quarter twenty twenty five financial performance, which we reported today. I encourage you to review our 10 Q when filed as it includes significantly more information about our business operations and financial performance than we will cover on this call. Turning to our income statement. In the first quarter of twenty twenty five, GAAP net income totaled $5,200,000 or $0.25 per diluted share, up from net income of $4,200,000 or $0.21 per diluted share in 2024.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

For the first quarter of twenty twenty five, total GAAP revenue was 36,300,000.0, up more than 7% from prior quarter revenue of 33,900,000.0 and up nearly 4% from revenue of 34,900,000.0 in the first quarter of twenty twenty four. Revenue for the quarter consisted of wireless revenue of 18,500,000.0, nearly flat to the first quarter of twenty twenty four, and software revenue of 17,800,000.0, up 9.2 from the prior year quarter. With respect to wireless revenue, we saw an 80 basis point decline in the trailing twelve month net unit churn to 6.4% in the first quarter of twenty twenty five from 7.2% in the first quarter of twenty twenty four. Adding to the positive trend in net unit churn was a 4.4% year over year increase in the average revenue per unit, or ARPU, to eight twenty four. The increase in ARPU was primarily driven by the success of our prior pricing actions and, to a lesser extent, continued sales of our new Gen eight patron.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

While we believe the demand for our wireless services will continue to decline on a secular basis as reflected in declining pager units and service, we are hopeful that our focus on pricing and other initiatives like the Gen a pager will continue to further offset revenue lost through pager unit decline. One of those more recent initiatives includes an increase in the price that we charge our customers for pagers that are not returned when service is discontinued. This increase went into effect in February, and we believe this should lead to an annualized benefit of at least $1,000,000 going forward as a result of this initiative. These revenues are recorded as product sales under our wireless revenue. Turning to first quarter software revenue.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

Maintenance revenue totaled $9,100,000 and was down slightly from the prior year quarter by approximately 2.1%. New maintenance revenue was down slightly in 2025 as a result of license sales. While first quarter bookings were strong, as Vince highlighted, it will take several quarters for us to grow new maintenance revenue back to a point where we can return to revenue growth. In the near term, we expect to be in line or slightly below prior year results. As previously mentioned, growth in professional services revenue was a key driver in the growth of software revenue in the February.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

Professional services revenue of 5,800,000.0 in the February was up nearly 44% from revenue of 4,000,000 in the first quarter of twenty twenty four. We are seeing further sustained improvement in our resource utilization, delivering on our internal initiatives to better align total resources with our backlog and driving a higher rate of margin and net cash flow. Managed services has evolved into a significant component of our professional services revenue. In the first quarter, managed services revenue totaled $1,300,000 or 22.7% of total professional services revenue. This is up more than 7% from prior quarter revenue of 1,200,000.0 and up more than 180% from revenue of 500,000.0 in the first quarter of twenty twenty four.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

License and hardware revenue totaled nearly 3,000,000 and was in line with the same period of 2024, consistent with the strong levels of software operations bookings we continue to see. First quarter adjusted operating expenses, which excludes depreciation, accretion, and severance and restructuring cost, totaled $29,400,000 in the first quarter compared to $28,500,000 in the prior year period. While year over year expenses were up $800,000 most of the increase was driven by selling and marketing expense, primarily to a greater presence at this year's HEMS conference, additional personnel, and costs directly related to more to the more than 9% increase in software revenue. Technology operations continues to benefit from network rationalization and cost reductions as we look to minimize the impact of unit churn. General and administrative costs were generally in line apart from timing variances and severance and restructuring no, and severance and restructuring no longer includes amortization of the New York lease, which ended in the fourth quarter last year.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

Adjusted EBITDA totaled 8,200,000.0, a nearly 9% increase from adjusted EBITDA in the same quarter of 2024. This is a reflection of our strong top line results to begin the year. I'd also like to address our cash balances, which were just under 20,000,000 at the end of the first quarter. Consistent with prior years, our cash balances declined in the first quarter because of typical working capital needs, including things like the payment of our short term incentive plans, prepaid annual renewals of technology contracts, etcetera. Additionally, first quarter cash flow financing activities are typically higher than in the three remaining quarters of the year, reflecting payments on the company's long term incentive plans.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

However, we anticipate cash balances will generally grow through the remainder of the year given those needs are behind us. Based on our current outlook, we anticipate annual free cash flow in the range of 24 to 28,000,000 and expect to exit 2025 with cash balances between 23,000,000 and $27,000,000 Moving on to guidance for 2025. We have provided estimates for revenue and adjusted EBITDA. As a reminder, the figures I'm going to discuss today are included in our guidance table in the earnings release. We have begun 2025 on very positive footing, and no doubt our solid performance in the first quarter twenty twenty five might lead many to impute a higher level of performance than is reflected by the midpoint of our current financial guidance ranges.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

However, like many of our peers, as Vince noted earlier, we believe that given the current uncertainty in the macroeconomic environment and its potential impact on the health care industry, it is more prudent to maintain a position of guarded optimism until we have greater visibility on the year. As a result, we are reiterating our guidance estimates for revenue and adjusted EBITDA generation for this year. In 2025, we expect total revenue to range from 134 to 142,000,000. The midpoint of our guidance reflects consolidated revenue generally in line with 2024 results, but with a higher mix of software revenue, while the high end of our guidance reflects nearly 3% annual growth. Included in the 2025 guidance, we expect wireless revenue to range between 69 to 72,000,000.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

Software revenue is expected to range from 65 to 70,000,000 in 2025, with the midpoint implying total software revenue growth of more than 5% and more than 9% annual growth at the high end of the guidance range. Lastly, our adjusted EBITDA guidance for 2025 is 27.5 to 32,500,000.0. The midpoint reflects minor improvement over 2024, while the high end represents over 10% growth, largely expected to be driven by a greater mix of higher margin software license bookings. With that said, I will now turn the call back over to Vince.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

Thank you, Calvin. Before I open the call up for your questions, I'd like to again point out how proud I am of the strong performance our team was able to deliver in the first quarter and believe these results position us well for the remainder of the year. We believe we are strongly positioned to grow our franchise while returning capital to our shareholders. We have a long term organic growth engine in our software solutions through Spok Care Connect, and we maintain a source of strong recurring revenue in our wireless service line. We won the largest paging company offering in the world, integrated with our software operations, and we have enhanced our paging platform and user devices to serve our core health care customer base.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

We believe these two assets going for us, our best financial results are ahead of Spok, and Spok's future is bright. We appreciate your support and interest in Spok, and we look forward to updating everyone again next quarter when we report second quarter results in July. Thank you for joining us this morning. Operator, you may now open the call up to questions.

Operator

Great. Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Operator

You may press 2 to remove the cell from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while you pull for questions. First question here is from Anderson Shock from B. Riley.

Operator

Congratulations

Anderson Schock
Research Analyst at B Riley Financial

on a really strong quarter. So first, you signed $22.06 figure customer contracts in the first quarter. I guess, is there any seasonality with the larger 7 figure contracts that we should be thinking about? I I know you signed seven in the fourth quarter last year.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

You know, there there's really not. We've noticed a good trend so far this year. We we signed more in March than we signed in February than we signed in in January. So it's certainly been trending in the right direction. And so far in the second quarter, it's looking pretty good too.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

So no no seasonality. We've not seen any type of, you know, tariff related or economic slowdown related pressure on our customers. They're they're they're buying in a in a healthy rate.

Anderson Schock
Research Analyst at B Riley Financial

Okay. Got it. And then it was a really strong quarter for wireless product revenue. I I guess, what drove this? And should we expect to see this continue, or will this return to the historic around 600,000 to 700,000 range per quarter?

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

Hey, Anderson. This is Calvin. Yeah. So I mentioned a little bit about that in the prepared remarks, specifically with the initiative around, increasing the prices of, our disconnect speeds. So when we, when a customer disconnects a pager and and the units are not returned to us, they they are charged for those units, and we increased that pricing in the first quarter.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

And so most of that benefit you're seeing there is specifically from that, and we do expect on an annualized basis to get a benefit of about a million dollars. So I would expect to see, you know, probably about $250,000 a quarter higher, relatively speaking, go forward.

Anderson Schock
Research Analyst at B Riley Financial

Okay. That that's really helpful. And then on gross margin, so gross margin improved to 80%. I guess, what drove this? And should we expect to see this continue at this level through the year?

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

Yeah. So the gross margin is gonna fluctuate, you know, just depending upon you know, we had a really strong revenue quarter. So that's gonna be the primary driver there. The the cost side of the equation was relatively similar to what we've seen. And so, you know, you might get a a blip up or down just based on a a strong quarter like this.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

But I wouldn't expect the the overall dynamics to really be changing much, from what we've seen.

Anderson Schock
Research Analyst at B Riley Financial

Okay. Got it. And then software backlog up about 15% year over year. I guess, what's the conversion timeline for this? And I guess, how will this impact the revenue recognition through the year?

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

Yeah. I mean, most of the, of the backlog, Anderson, this is Mike. You know, about half of it is gonna be services, and the other half is gonna be maintenance. So the maintenance component will will generally kind of run through over a a one year period. And then I would say on the services part, you're looking at at at probably, like, nine to twelve months, generally speaking, that you run through that maybe nine to fifteen months or so.

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

That's kind of the usual transmission time, as we go through, go through that backlog.

Anderson Schock
Research Analyst at B Riley Financial

Okay. Got it. Well, thank you again for taking the questions, and congratulations on the great quarter.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

Thank you.

Operator

Next question is from George Melas from MKH Management. Please go ahead.

George Melas-Kyriazi
President at MKH Management Company

Great. Thank you. Good afternoon. Congratulations on a great start to the year. A few few quick questions.

George Melas-Kyriazi
President at MKH Management Company

Vince, you talked about the HIMSS conference on the last quarter, and I just I think it was in March. Just wanted to see what was your experience there, and what did you see that maybe you found surprising, or how was the reception, you know, for the new products that you guys are putting out?

Vincent Kelly
Vincent Kelly
President and CEO at Spok

Yeah. George, great question and much better than what it was last year. The conference is kinda waking back about. We took a different approach this year and that we sent a sales team that had to prequalify meetings ahead of time so that we didn't just send a bunch of people to stand at our booth and try to catch people walking down the aisle because it HIMSS is still not back to that level that that it used to be pre pandemic where you could do that and and have great success. But what what it is able to do is put customers together that are interested in Spok, that wanna do an upgrade, and that we can set those meetings up ahead of time.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

And and we had great success with that. They like what we're doing with the new software. They like the new UI, the look and feel. We think it helped drive a lot of good numbers here. In the first quarter, it was gonna drive a lot of good pipeline that we have for the second quarter.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

So very encouraged by it, and and we're gonna actually go again next year. We're gonna get a booth again because remember last year, we didn't have a booth. So we spent a little bit of money this year, and I think we're gonna, you know, cautiously, incrementally increase that investment next year as well.

George Melas-Kyriazi
President at MKH Management Company

Great. Okay. Good to know. On the services side, the professional just the professional services is growing, and then on top of that, you have the managed services. Maybe help us understand what you're doing on the professional service.

George Melas-Kyriazi
President at MKH Management Company

Is it somewhat different than twelve months ago or twenty four months ago? Or is it, you know, maybe it was just a little bit more of the same?

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

Yeah. I'll I'll go ahead, George. It's Mike. I'll go ahead and answer that, and Calvin can can fill in anything I missed. But, you know, generally speaking, it's it's it's the same as far as the underlying work that we're doing, George.

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

The biggest difference, as it relates to managed services is, you know, managed managed services ends up being great for the customer because over a usually a three year, time period, they get a fixed cost. They know what their cost is gonna be for all of the upgrades and work that we're gonna do for them. And as opposed to kind of the traditional fixed fee time and expense that we had historically been doing, let's say, two, three, four years ago. So as we've gone forward, one of the things we're doing from a sales perspective is really trying to drive more managed services such that, it helps the customer from the standpoint of knowing what their cost is gonna be. It helps us from, from a revenue recognition standpoint because the the revenue is ratable.

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

And and thirdly, it helps a great deal from a churn perspective because, we know we've got those customers locked in for that three year period of time. So, at the end of the day, if we do everything right, that customer is happy because they know their spend for those three years. And at the end of that three year period, we renew them and essentially do the same thing over again from a pure services perspective.

George Melas-Kyriazi
President at MKH Management Company

Okay.

George Melas-Kyriazi
President at MKH Management Company

And the hosted the hosted revenue, is that included in managed services? And is that do we have a few customers at this point on on hosted?

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

Yeah. This is Calvin, George. We've got, several customers. We've probably got about a dozen customers, I think, at this point on the hosted, services. We're slowly making, chipping away at that.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

It's not included in the managed services component. We've we've, have that, accounted for separately. But right now, we're just not breaking it out. It's just not material enough. So slowly chipping away at that, and, obviously, that's something that compounds over time.

Calvin Rice
Calvin Rice
Chief Financial Officer at Spok

And so the the long term benefit is there.

George Melas-Kyriazi
President at MKH Management Company

Great. Okay. And then one last question. Mike, can you tell us a little bit about those two new logos? Are they are they meaningful customers?

George Melas-Kyriazi
President at MKH Management Company

Are they customers that you've been after for a long time?

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

Yeah. I mean, look, we know the the total population of of every customer in The United States that we're going after. So Yeah. Definitely been after them for a while. They were both two really good wins to to get in the stable.

Michael Wallace
Michael Wallace
Chief Operating Officer at Spok

It it kind of falls you you've asked this question before, George, kind of in the 15 to 20%, you know, from a revenue or not from a revenue, from a bookings amount standpoint. You know, and as we continue the the r and d investment that Vince talked about in his prepared remarks, that's something that we are really looking forward to to getting more of as we go forward. So, yeah, two great wins for us, on the new logo front.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

Yeah. And we expect to see more towards. We we've created a new business development team that is doing nothing but going after new logo. They are qualifying these customers that we don't have. They know exactly what vendors those customers are using for what functionality, And we can often go in there and show them that you're spending a lot of money, and you could turn around and get spoke and save a lot of money, with our integrated solution.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

So it just becomes a question of whether or not they can prioritize a move like that right now cause they have a lot of other competing technology and and projects inside these hospitals. But we're very optimistic that we're gonna gain momentum and see more and more results out of this new business development group going forward. It's gonna be a good thing for Spok.

George Melas-Kyriazi
President at MKH Management Company

Okay. Any are there any big elephants in the the sales pipeline? I mean, I know those are rare, you know, but just wondering. Yes. Yes.

George Melas-Kyriazi
President at MKH Management Company

Okay. Thanks.

Operator

This concludes the question and answer session. I'd like to turn the floor back to Vince Kelly for any closing comments.

Vincent Kelly
Vincent Kelly
President and CEO at Spok

Thank you, everyone. You know, we had a good quarter and a very strong quarter, and we expect to do it again in in the second quarter here. And we look forward to talking to you when we report, later in July. Everyone have a great day.

Operator

This concludes today's teleconference. You may disconnect your line at this time. Thank you again for your participation.

Executives
    • Al Galgano
      Al Galgano
      VP - Investor & Corporate Relations
    • Vincent Kelly
      Vincent Kelly
      President and CEO
    • Michael Wallace
      Michael Wallace
      Chief Operating Officer
    • Calvin Rice
      Calvin Rice
      Chief Financial Officer
Analysts
    • Anderson Schock
      Research Analyst at B Riley Financial
    • George Melas-Kyriazi
      President at MKH Management Company
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Key Takeaways

  • 4% revenue growth in Q1 2025 was driven by a 9% increase in software revenue, with net income up 22.7% and adjusted EBITDA rising 8.9% year-over-year.
  • Software operations bookings totaled $8.2 million (up ~6%), professional services revenue grew 44%, and software backlog increased 15%, highlighted by two new six-figure logo contracts.
  • Wireless unit churn improved to 6.4% (from 7.2%), average revenue per unit rose 4.4%, and a pricing change for unreturned pagers is expected to add $1 million in annual revenue.
  • Spok generated $8.2 million in adjusted EBITDA, fully covering the $7.9 million returned to shareholders, while maintaining R&D investment and extending a 20-year track record of returning over $700 million to shareholders.
  • Management reiterated full-year 2025 guidance of $134–142 million in revenue (software up 5–9%) and $27.5–32.5 million in adjusted EBITDA, citing strong Q1 momentum and limited macro headwinds.
AI Generated. May Contain Errors.
Earnings Conference Call
Spok Q1 2025
00:00 / 00:00

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