Spok Holdings, Inc Q2 FY2024 earnings call

• Vince Kelly highlighted the strong Q2 performance, progress in key areas, and the solid operating platform. He mentioned no competition in the core healthcare contact center space, strong relationships with top healthcare systems, investment in platforms, being viewed as indispensable, and comfort with full-year guidance. He also noted the company's mission to generate cash and return capital to shareholders.
• Mike Wallace discussed the strong quarter, over 2,200 healthcare customers, and highlighted two customer engagements: a three-year agreement with a 1,200-bed health system and a multi-year agreement with a 350-bed hospital. He also praised the wireless team's response to a hurricane.
• Calvin Rice reviewed Q2 financials, including GAAP net income, revenue breakdown, wireless churn and ARPU, software revenue components, adjusted operating expenses, adjusted EBITDA, cash position, and reiterated 2024 guidance.

In the second quarter of 2024, Spok Holdings had two main product segments: Software and Wireless. Software operations bookings in the second quarter included 18 six-figure and one 7-figure customer contracts, with software revenue consisting of $2 million in license and hardware revenue and $4.3 million in professional services revenue. Wireless revenue was $18.3 million, with second quarter net unit churn dropping below 1% and ARPU increasing. In terms of revenue contribution, wireless revenue was $18.3 million and software revenue was $15.7 million out of total Q2 revenue of $34 million.

• Reiterated 2024 revenue guidance: total revenue to range from $136 million to $144 million, wireless revenue between $72 million to $75 million, software revenue between $64 million to $69 million, and adjusted EBITDA from $27.5 million to $32.5 million.
• Expected full-year software bookings growth relative to 2023, with a large Q3 and Q4 pipeline to offset Q2 license shortfall.
• Wireless ARPU expected to benefit from price increases and GenA pager sales in the third and fourth quarters.

Q: Just wanted to ask about the software side, it looked like pretty consistent performance as far as the 19 deals, over 600,000 in Q1 and you had the 19 over 600 -- actually 18 over 600,000 and one over 700,000. Was that in line with your expectations going into the quarter? Because as I recall, you talked about having had a phenomenal April. Just wondering how things played out in May and June.

A: Yeah. It was in line with our expectations there. We had some of the deals that had a higher component of license software in the deal slip into the third quarter, then we had one of them close almost in the very first week of July. But in general, it's in line. The life of part has been a little bit lumpy, but we have a very large Q3 and Q4 pipeline where we think we're going to be more than offsetting the second quarter shortfall in the license there.

Q: Shifting over to the wireless side, I did see the churn, at least quarter-on-quarter, 0.8%. That's terrific. On a full year basis, we're down. The churn was about 7% and that was for basically Q2 as well as the first half of 2024. What's the expectation for the back half? Is this -- are we looking more like 0.8%? Or are we going to be creeping back up based on what you see in customer behavior?

A: Yeah. Hey, Eric, this is Calvin. Yes, we were really pleased with second quarter. I would say, it would be tough to continue expecting 0.8%. I mean, that's a phenomenal number. I would definitely take it if we could get it, but I'd still expect full year to be in line with what we've been saying over the last couple of quarters. That 4%, 4.5%, 5 will probably end the year in about that full range, maybe slightly better.

Q: The cash was up nicely here, Q2 versus Q1. You said we finished out the year at $28 million to $30 million. Is that correct?

A: That is correct.