Spok Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
July 27, 2023

There are 8 speakers on the call.

Operator

Good morning, and welcome to the Spok Holdings Second Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Al Galgano. You may begin.

Speaker 1

Hello, everyone, and welcome to Spok Holdings Second Quarter 2023 Earnings Call. I am joined by Vince Kelly, Chief Executive Officer Mike Wallace, President of Spok Inc. And Chief Operating Officer and Calvin Rice, Chief Financial Officer. After a brief presentation by management, we will open up the call to your questions. 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.

Speaker 1

Such statements may include estimates of revenue, 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. Spok's actual results may 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 Q2 2023 Form 10Q and related documents filed with the Securities and Exchange Commission.

Speaker 1

Please note that Spok assumes no obligation

Speaker 2

Thank you, Al, and good morning, everyone. Thank you for joining us for our Q2 2023 earnings call. I want to preface my comments today with a reminder for everyone that our mission has not changed and simply put is to generate cash and return capital to our shareholders over the long term. We do this by responsibly growing revenue While closely managing our operating expenses and capital expenditures, that was our goal when we embarked upon our strategic pivot 18 months ago, And that is a goal we are achieving and intend to continue to achieve. We believe we are on a We believe our cash flow is on a path to grow into our current dividend level and eventually cover it in full on an annual basis, As we have done in the first half of twenty twenty three.

Speaker 2

That is our job and our primary focus. Returning capital to shareholders has been our legacy And we feel good about getting back to our roots in doing so. 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. The order will be as follows.

Speaker 2

We'll begin by providing a review of our operational performance for the quarter. I'll then turn the call over to Calvin To review our Q2 2023 financial highlights and performance in more detail, we will then conclude our prepared remarks With our business outlook and financial guidance for 2023, then we'll open up the call to your questions. Any conversation about Spok's 2nd quarter results has to start with how truly proud I am of this team and the performance that they were able to deliver in the period. Most notably, for the first time in the company's history, we were able to grow on a year over year basis our consolidated revenue And also grow revenue in each of our product lines. Our team was able to shatter many of the performance records set previous quarters And we generated record levels of adjusted EBITDA, resulting in sequential growth in our cash balances.

Speaker 2

We made tremendous progress in several other key performance areas, including wireless trends, Software bookings and backlog levels. And we continued our focus on expense management As we drove expense reductions on a year over year basis, while continuing to make the necessary investments in our product development and sales and marketing to support the growth of our Spok Care Connect and wireless solutions. We look forward to continued success in the second half of the year and believe our extensive experience operating our established communication solutions will create significant value for stockholders By maximizing revenue and cash flow generation. In short, we're firing on all cylinders and are confident that as we enter the second half of the year, we're going to continue to outperform. While Calvin will go into more detail regarding our forward guidance later in the call.

Speaker 2

Based on our performance in the Q2, we are once again increasing our guidance estimates For revenue and adjusted EBITDA generation, we believe we are on track to grow consolidated revenue for 2023 on a year over year basis Before I dive into our operational highlights for the Q2, let me take this opportunity to summarize our mission for those of you that may be new to our story. Our strategic goal is simple, Run the business profitably, generate cash flow and return that capital to shareholders. As I mentioned, Spok has a proud legacy of creating stockholder value free cash flow generation and we intend to continue this track record. Since the beginning of our strategic pivot, which started 18 months ago, Spok has returned approximately $38,000,000 or $1.87 per share to our shareholders in the form of our regular quarterly dividend. In fact, since we founded this company in 2004, Spok has returned more than $660,000,000 to our stockholders either through our regular quarterly dividend, special dividends or share repurchases.

Speaker 2

In the Q2 2023, this history of returning cash to our stockholders continues as we generated record levels of adjusted EBITDA In 2023, as we did in 2022, Spok remains committed to our dividend policy and returning capital to our stockholders. When you take into consideration our current cash balance, distributions to stockholders, share repurchases, debt repayments and acquisitions, Spokus now generated more than $1,000,000,000 of free cash flow since our inception. Our focus on maximizing cash over the long term supports 4 major tenants of our strategy. Those are: number 1, continued investment in our wireless and software solutions number 2, Stabilizing and growing our revenue base number 3, disciplined expense management and number 4, A stockholder friendly capital allocation plan. Going forward, we believe our extensive expertise, Operating our established communication solutions and world class customer base will continue to create significant value for our stockholders.

Speaker 2

In early 2022, we announced a new strategic business plan that set a priority on maximizing cash flow with the goal of returning capital to our shareholders. As part of that strategic pivot, we made the decision to discontinue the development and sales of Spok Go, our cloud native In retrospect, it was a hard decision to make, But it was the right decision. During COVID and since, the market has changed significantly and we had to do the same. Part of that plan to pivot and focus on our 2 core service lines also included continuing to invest in our wireless and contact center software solutions In a disciplined manner, we felt this was important to stabilize and then ultimately grow our revenue and cash generation potential. That is how we will maximize our ability to return capital to our shareholders over the long run.

Speaker 2

I'm happy to report That we have continued to execute on our business plan, in the Q2 of 2023, we generated GAAP net income of 4,700,000 Our $0.23 per diluted share, a 146% increase from net income of $1,900,000 or $0.10 Per diluted share in the prior year period. We accomplished this while generating an all time high of $14,000,000 in 2nd quarter software operations bookings, A 90% increase from the prior year period and generating year over year wireless revenue growth and record low unit churn of less than 1% in the quarter. Amidst all the progress in creating a solid financial platform and shareholder friendly capital allocation strategy, we remain true to our mission to be Global leader in healthcare communications. We deliver clinical information to care teams when and where it matters most to improve patient outcomes As Spoke enables smarter, faster clinical communications for our customers. We have over 2,200 healthcare facilities as customers, Representing the who's who of hospitals in the United States.

Speaker 2

We have built our solutions over many years and have long standing valuable customer relationships. This is coupled with a financial strength that over 80% of our revenue is reoccurring in nature and we are a company with no debt, which provides us significant flexibility. Now let me take a few minutes to provide some perspective on our massive sales performance in the second quarter. Our $14,000,000 of record software operations bookings included 23 new 6 figure customer contracts And 3 7 figure contracts. In fact, we closed one of our largest customer contracts in our history that totaled approximately 3,900,000 This is particularly impressive as we believe that this contract represents only about 30% of the overall opportunity with this customer.

Speaker 2

We've been working on this deal with the healthcare system for a number of years and it was executed during the quarter. Our team was also aggressive and able to put a number of deals in place that we have slated for Q3 and Q4. We don't expect this level of booking success every quarter and that is reflected in our updated revenue guidance. Nevertheless, there are some very large deals out there and our team continues to hunt. And we could see more big quarters like this in future periods Depending on our success and our customers' timing.

Speaker 2

Let me review a couple of our new customer contracts with you. First, there's a multimillion dollar deal we secured with 1 of the largest health systems in the nation. This health system boasts 140 hospitals across 21 states And is committed to achieving cost savings through vendor consolidation and enterprise standardization. They identified our Spok Care Connect platform as the national Spok Messenger, Managed Professional Services, Premium Maintenance and Support and Value Added Services at 37 of their locations. They asserted that our single communications platform allows them to achieve enterprise wide efficiency and improve patient care While supporting their national standards, we're excited about the prospects of expanding our support with this customer by expanding into other locations.

Speaker 2

Another of our standout new contracts last quarter was one of our largest enterprise messenger customers, a partnership that has been thriving for more than 13 years. This large East Coast Healthcare Center has 21 hospitals and 3,200 beds. In January of this year, We displaced the secure messaging competitor at 2 locations, a significant achievement that demonstrates the effectiveness of our Spok Mobile solution. In June of 2023, we further solidified our position in the industry by replacing another competitor's contact center solution software For the organization's enterprise call center, this was made possible through a multiyear engagement that included the deployment of our new Spok Mobile and web directory. With the deployment of 800 Spok mobile licenses and our enterprise smart web, they have access to secure and efficient communication channels.

Speaker 2

What's more, our commitment to ensuring a smooth and successful deployment has earned us praise from our partners. We offer value added services, including workflow analysis and launch support to guarantee that our partners derive maximum value from our solutions. This is just another example of our unwavering commitment to providing unmatched communication solutions to our clients. We're pleased with the start to 2023 and it believes it reflects the dedication of our sales team and their ability to adapt to the shifting business environment However, while our sales pipeline continues to develop in terms of size and quality, I'd like to caution you About the nature of quarterly software license sales, while we're very pleased with the historic level of 2nd quarter operations bookings, We believe it's more appropriate to look at bookings on a 12 month basis. A full year basis better normalizes both positive and negative timing anomalies can arise out of the sales cycle.

Speaker 2

We do not spend a great deal of time analyzing the sales performance of an individual quarter Over an annual period is more reflective of the momentum that we are generating and is most appropriate for investors as well. With that said, we expect I'd like to comment on our recent Investor Relations activity and our goal of better communicating Spok's investment thesis to the financial community. Since the beginning of the year, we've attended 5 investor conferences and sponsored our own Investor Day event in Dallas. Each of these presentations has been archived on our Investor Relations website and we invite you to view these presentations. We will continue to look for opportunities to tell our story to the investment community and focus on investor marketing activities that we know the ultimate attraction will come as a result of our business execution.

Speaker 2

Also towards the end of the Q2, Spok was included in the Russell 2,000 Index. We are honored to again be part of the Russell 2,000 Index. I believe this reflects what the Spok team has accomplished over the past year with our focus on generating cash flow and returning capital to stockholders. It is rewarding to see the efforts, tough choices and hard work by our team pay off. We look forward to continued success And believe our extensive experience operating our established communication solutions will create additional value for our stockholders.

Speaker 2

With that said, I'd like to turn the call over to our Chief Financial Officer, Calvin Rice. Calvin?

Speaker 3

Thanks, Vince, and good morning, everyone. I would like to take a few minutes and provide a recap of our Q2 2023 financial performance, which we reported yesterday. 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 Q2 of 2023, GAAP net income totaled $4,700,000 or $2.3 per diluted share compared to net income of $1,900,000 or $0.10 per diluted share in the similar 2022 period.

Speaker 3

For the Q2 of 2023, total GAAP revenue was $36,500,000 compared to $33,700,000 in the Q2 2022. Revenue for the quarter consisted of wireless revenue of $18,900,000 which was up $200,000 or 1 percent from the prior year and software revenue of $17,600,000 up 17 0.2% from last year, reflecting the significant year over year increase in license revenue. With respect to wireless revenue, Q2 2023 totaled $18,900,000 up on a year over year basis. This performance continues to be primarily driven by improvement in average revenue per unit or ARPU, which saw growth of $0.30 on a quarterly basis year over year. This improvement is a result of the previously discussed pricing actions taken in late 2022, Sales of our higher priced Gen A pager and increases in pass through fees, which account for roughly 45% of the ARPU growth.

Speaker 3

We also continue to see historically low levels of net unit churn as net units in service declined by less than 3.5% on a trailing As reflected in declining pager units in service, we are hopeful that our focus on pricing and other initiatives like Gen A pager will continue to further offset revenue lost through pager unit decline. This is further reflected in our updated financial guidance, in the prior quarter and in line with the prior year quarter. As we have discussed in previous quarterly calls, as we continue to reorient our focus back On our Spok Care Connect software products, our expectation is for maintenance revenue to be flat to down slightly on a year over year basis, Given gross churn and uplift levels remaining consistent with prior quarters. As we continue to make progress on our product roadmap with Spok Care Connect, We expect bookings will continue to grow in the coming years and maintenance revenue along with it. Given the nature of maintenance revenue, Higher license sales will work through revenue on a lagging basis, so we look first to stabilizing that revenue decline and then beginning to grow it.

Speaker 3

Professional services revenue was a healthy $3,800,000 versus $3,300,000 in the Q2 of 2022 up from $3,200,000 in the Q1 of 2023. We continue to see significant improvement in resource utilization, Delivering on our internal initiatives to better align total resources with our backlog and driving a higher rate of net cash flow Despite having roughly 9 less billable resources as compared to the Q2 of 2022. 2nd quarter adjusted operating expenses, which Excludes depreciation, amortization and accretion and severance and restructuring cost totaled $28,900,000 compared to $30,000,000 in the prior year period. The decline in cost is primarily the result of our With that said, please keep in mind that future investments in certain areas such as sales and marketing and professional services will likely be necessary from time to time And lastly, as Vince pointed out earlier in the call, Adjusted EBITDA was a record high $8,500,000 in the 2nd quarter, up over 81% from $4,700,000 in the same quarter of 2020 2, reflecting the progress made to date with our strategic pivot. In fact, through the 1st 6 months of 2023, Adjusted EBITDA has exceeded $15,400,000 a nearly fivefold increase from 2022.

Speaker 3

While we love to see these results, I want to highlight a point that Vince made earlier, which is that some of this was effectively pulled in from what we had previously anticipated in Investors should look to our revised annual financial guidance for 2023 to better understand this quarter within the context of our full year performance, which I'll be discussing in more detail next. Our performance in the second quarter in Has led us to increase our expectations across all categories for the full year. However, I would again encourage investors Although we still expect second half adjusted EBITDA to be strong on a relative basis. As a reminder, the figures I'm going $134,500,000 to $137,500,000 a $1,750,000 increase from the previous guidance Midpoint. More importantly, as Vince pointed out, this represents the first time in the company's history that we expect to grow consolidated revenue from prior year and the low end of our guidance reflects that with a 2.2% annual growth rate at the high end of our revised guidance.

Speaker 3

Included in the revised guidance, we expect wireless revenue to range between $74,500,000 to 75,500,000 A $750,000 increase from the previous guidance midpoint as we expect recent trends will continue to improve as I discussed earlier. Software revenue is expected to range from $60,000,000 to $62,000,000 with a midpoint implying total software revenue growth of nearly 4% from prior year levels. Lastly, based on the improving trends in our performance in the second quarter, our revised adjusted EBITDA guidance for 2023 is $25,000,000 to $28,000,000 a $1,000,000 increase from the previous guidance midpoint. With that said, I will now turn the call back over to Vince.

Speaker 2

Thank you, Calvin. Before we open the call up for your questions, I want to comment briefly on a couple of items. 1st, with respect to our current capital allocation strategy, our overall goal is to generate cash to return to shareholders by producing sustainable, Profitable business growth. The allocation of capital remains a primary area of focus that our Board is constantly reviewing. Our multifaceted capital allocation strategy currently includes dividends as well as key strategic investments that augment our product development, Operating platform and infrastructure.

Speaker 2

Our strategy also includes the potential for acquisitions that are both strategic in nature and that are accretive to earnings. However, as I've mentioned in prior quarters, our main focus is on the development and enhancement of our software solutions versus acquiring additional functionality at the present time. We believe the cost of acquisitions and the integration of disparate functionality It's much less efficient and ultimately limiting relative to our current business focus with the internal build approach we are taking. For example, we believe that there is an untapped potential to integrate artificial intelligence or AI into our product offering. While we're in the very early stages of exploring the future potential from these applications, we believe there could be tremendous opportunity for AI powered solutions to transform healthcare With opportunities including disease diagnosis and monitoring, clinical workflow augmentation and hospital optimization, We intend to enhance our solid industry leading reputation by integrating these technologies into our product suite.

Speaker 2

And from an operational perspective, Though in the very early stages, we intend to explore AI as a tool to drive further efficiencies and increase the scale of our financial platform. Before I open the call up for your questions, I'd like to thank our shareholders for their patience and support during our pivot. I'd also like to thank them for their participation in our annual meeting earlier this week as we reported each of the items of business, Which included the election of 6 nominees as directors to the Board, ratification and appointment of Grant Thornton as our Independent registered public accounting firm for the year ending December 31, 2023 a non binding advisory vote to approve 2022 named executive officer compensation or say on pay, a non binding advisory vote on the frequency of future say on pay votes And approval for the amendment and restatement of the company's 2020 Equity Incentive Award Plan. All of these pass with an overwhelming majority. For a full review of the final voting results, please see our disclosures in our quarterly report on Form 10 Q we filed with the SEC.

Speaker 2

So at this point, I'll ask the operator to open the call for your questions. We'd ask you to limit your initial questions to 1 and a follow-up. And after that, we'll take additional questions as time allows. Operator?

Operator

Thank you. We will now be conducting a question and answer session. And our first question is from Eric Martinuzzi with Lake Street Capital Markets. Please proceed with your question.

Speaker 4

Yes. Congrats on the quarter as well as the outlook. It's really great to see both segments of the business in growth mode. I wanted to start with the wireless side here. This we've got the offset with the decline in units being offset by Little bit better ARPU.

Speaker 4

How should we think about the impact of price increases this year and what to expect next year?

Speaker 5

Yes. Eric, thanks for the compliment by the way and for your good question. With respect to wireless, you should expect about the same impact. We Did a price increase late last year to about 70% of our subscriber base. We couldn't do 100% because of the long term contracts on some of them.

Speaker 5

And we had great success. We didn't get any real pushback. We didn't see any increase in churn. We'll do it again this year. We'll monitor it very Closely.

Speaker 5

I think you're also seeing a dynamic where the churn itself is slowing down because the customers that are still left using pagers Really value the pagers for their functionality and utility. So it gets more sticky as it gets slightly smaller, if that makes sense to you. That combined with the fact that these price increases aren't big numbers, what you pay for a pager even with a price increase is minuscule To what you would pay for, say, one of our competitors' mobile apps. I mean, it's not even in the same ballpark. And by the way, the pager is going to work when the mobile app doesn't work.

Speaker 5

So I don't And I would expect kind of more of the same. Okay.

Speaker 4

And then shifting over to the software side, just Really blowout quarter there with the software ops bookings. I heard you loud and clear. We shouldn't anticipate this To Infinity and beyond, but this the pipeline here, have we rung the pipeline dry? What are we looking at for Q3, Q4 and beyond? Is there still do you still have do you still see a lot of potential, Both in the installed base as well as new logos.

Speaker 5

Well, great question and thanks for it. First of all, obviously, we had a monster quarter. I mean, there's no other way to put it. We had some deals, I think I mentioned at the end of last quarter that we had thought we'd get in the Q1 that slipped Into the Q2. So that kind of got us off to a really good start in the Q2.

Speaker 5

And then our team is motivated to hit. They're motivated to win. They pulled in some deals from the 3rd quarter. They pulled in some deals in the 4th quarter. And about all the deals that we had slated for the 2nd Extremely high quality qualified leads.

Speaker 5

So we're not concerned about that at all. We do think it's better to look at it on a year over year basis We do think we're going to show a year over year growth in 18%, 19%, 20% range And software operations bookings for 2023 and that would be our plan going forward as well. We'll give guidance on 2024 when we report Q4 in late February. But, yes, I don't expect it's going to we're not going Yes, worse than that. And who knows, we might even do better.

Speaker 5

Sales is always going to be lumpy in software and second quarter was one of those good lumps to get. But I think for the entire year, you're going to see that kind of 18%, 19%, 20% year over year software operations bookings growth. Okay. Hey, Eric, I want to say one other thing about that, that we don't talk a lot about Publicly, we tell our Board and everything. But when we're reporting software operations bookings, we're reporting the sales bookings value.

Speaker 5

That's essentially the value that we use to pay commission store salespeople, etcetera. So for instance, the 2 deals we gave as examples, one was for $3,900,000 That was the sales booking value. That deal is actually worth over $5,100,000 to the company because that deal is a multiyear engagement that's got year 2 and year This got year 2 year 3 of maintenance associated with it. So the value to the company is we've now locked that customer up for 3 years and they're going to continue paying us maintenance in year 2 year 3, which we don't pay commission on, but that's a much more valuable The second deal we talked about was a $1,100,000 deal on sales booking value, but that deal is actually a $3,500,000 almost $3,600,000 Total booking value to the company because of the extra maintenance that we're getting on it going forward into that very large customer. A number of them are like that.

Speaker 5

If you looked at our top 26 deals, the sales booking value on those is only right around $12,000,000 but the booking value to the company When you counted the contractual obligation of those customers to pay us maintenance in year 2 year 3 is about $19,000,000 So It's all good news. And that's going to result ultimately, by the way, in lower churn on maintenance, right, because you've locked those customers in long term. It's all hitting in like I said, we're firing on all cylinders right now and I expect that to continue.

Speaker 4

Yes. Just one follow-up on the two examples that you gave, the $3,900,000 contract with the 140 hospital healthcare system. What can you help me understand? I assume you had Some installed base there, but did they put out an RFP for an enterprise wide and you picked up New locations or was this a new logo where the locations that you won was just your first entree into this Customer?

Speaker 5

Actually, great question and glad you asked it. And Mike and Calvin can weigh in. But my perspective from working closely with the sales team on this stuff is that Every time we go into one of these customers, the conversation with the customer starts out, I don't have any money, budget's tight, I can't spend anything, I've been told Extract cost, we got to save money, I need help from my vendors, etcetera. And what we remind the salespeople on a regular basis is that The truth of the matter is the human nature of these people, people do like to buy, and they like to buy from people they like, And they like people that help them with very complicated problems. So if you're a CIO of a hospital right now, you've got your CFO, your CEO, everybody's kind of beating on you to save money.

Speaker 5

We sit down with them with our value added services team and our sales team. We bring in a group of people. We look at their very complicated workflows. We look at the very complex integrations and the number of solutions that they've got to work with. We analyze it very closely and we say, here's what you're spending, here's what you're doing.

Speaker 5

You can eliminate these 3 vendors, go with the consolidated enterprise solution from Spok, Save a lot of money. This particular customer is on an edict to go to a national command and control system. And they have about 140 hospitals. This deal is only for about 25% of that base. They're starting with the first 37 proof of concept, get that to work, and then there's potential to get all the rest of And so what's happening is, and I don't want to make you think all of a sudden the spigot is wide open and hospitals Like crazy because they're as tight as they've been, but they're buying from us because we have a huge incumbency, we have huge experience, And we actually know how to work with them and show them how they actually save money by maybe they're paying a little more to spoke, but overall they're paying a lot less and they have a very predictable Budget line going in the next 3 years because they know exactly what they're going to pay for maintenance.

Speaker 5

They've seen our product roadmap. They know what they're going to get for it. Then if you think about it, 3 years from now, that gives us another opportunity to go back there and we keep doing that across our base year after year after year. We're farming that garden and it's going to start yielding a lot of really nice crops for us. And this was one of the big examples this year.

Speaker 5

So hopefully that extra color helps.

Speaker 4

Yes, I appreciate it. Thanks for taking my question.

Operator

Thank you. Our next question is from Sid Tanu, who is a private investor. Please proceed with your question.

Speaker 6

Hey, congrats Vince, Mike, Calvin and Alan team for a great quarter. My first question is From the moving on from the Spokle, is there any learning as you're working from the past few years on Spokle that You can carry on to the Care Connect and other products.

Speaker 5

Great question. The answer is absolutely massive learnings and massive leverage that We can use for what we did with Spok Go going into Spok Care Connect. We are creating essentially a service oriented architecture That will bridge a lot of common services between our specific console solutions where we are the industry leader by far. And that's going to make us Much more efficient. It's going to make our customers much more efficient.

Speaker 5

And it's actually going to reduce the amount of professional services. So think Yes. Operating expense or lower margin business, it will actually reduce that over the long term and let us Get more efficient, we'll be able to charge less for our solutions and make more if you think about it. We'll have higher margins. So absolutely, Yes, we did a heck of a job.

Speaker 5

We created an amazing product. We created an amazing solution. It had some just world class state of the art Technology behind it, but we rolled our timing rolling it out in the midst of a global pandemic Was not the greatest. So we did have to reboot. We were spending about $20,000,000 a year on that solution and we weren't getting a return and we didn't see In the near term where we could really make that model work.

Speaker 5

So we had to make the decision about 18 months ago, we made the change. So we're still using some of that architecture and some of those learnings and what we're doing with our Care Connect suite and it's going great.

Speaker 6

That's great to hear. My second question is, I remember in the investor presentation, you show such and such companies, clients only have this solution and some other only have Wireless or software, is there any new effort on the cross selling and the incentive and whether actually there's a benefit to Use both solution in terms of interoperability and integrations? Absolutely. We

Speaker 5

use we have something we call Spoke Mobile with pager, and I forgot what's that up to Calvin, dollars 6,000,000 or $7,000,000 a year. So we're already making $6,000,000 or $7,000,000 a year by taking our customers That have spoke mobile and also allowing them to receive the message on the pagers and vice versa, and it's growing. And we have some other things that we're going to be announcing in the second half of this year, latter part of this year, along that line. In the second half of this year, latter part of this year, along that line, that I think will be even more exciting. But we're very focused on that.

Speaker 5

We do separate our sales force. We have a specific discrete wireless sales force and a specific discrete software sales force, They're teammates and they often bring each other into opportunities. That's one of the reasons for our success this year.

Speaker 6

Thank you. My last question is, I know that you're not in the final destination or finish yet, but can you take me a little bit more on like the Moral side optimism and stress level like 2 years ago while you're still in the trench with Spok Go and then last year when you make the tough decision to pivot. And today, like so give a little bit of Comment or color on the soft sites on the offshore?

Speaker 2

Yes. Thank you for the question. You're very perceptive and it warms my heart to hear that question.

Speaker 5

Yes. We kind of Mike, Calvin, myself, our executive management team, our board, we went through a lot over the past couple of years and We had to make some tough decisions, but this team never gave up. I can't tell you how high morale is in the company right now. It's through the roof. Our Voluntary turnover, our voluntary employee churn is the lowest it's ever been.

Speaker 5

People are happy. They like being on a winning team. They see us Continue to post these numbers and they see what our customers are doing. I mean, we got an email from one of these customer examples we gave you, From the person that was in charge of making decisions, we had an email from them talking about just how complex it was To do the stuff that we're doing and how good our people were at helping them do it. I shared it with our board.

Speaker 5

It was so heartwarming. And We shared it internally with our entire employee base. And we're just we're in a really good place right now. We made some tough decisions And we're in a situation where last quarter we were able to up our guidance pretty significantly on revenue and adjusted EBITDA. We've upped our guidance again this quarter on revenue and adjusted EBITDA.

Speaker 5

We are now a growth company. We're going to grow Year over year on revenue and adjusted EBITDA, we're just and we're looking forward to sharing our Q3 results with you guys on our Q4 results. We're just In a good place right now. When I finish this call, we're sending the note out to the employees about the great quarter that we just had. So they're all in On the good news too, and we're just it's a good I mean, Mike, Calvin, you guys want to add to that?

Speaker 7

No, I think you articulated it perfectly. Big pivot from 18 months ago. It was very difficult to make the moves we did with Spok O. We parted ways with a lot of Our fine colleagues, but the company that is here today, a comment that I make a lot is we're rowing all in the same direction. That may seem obvious, but To get an entire company absolutely focused and rowing in the same direction is really critical.

Speaker 5

Yes. I mean, we gave a draft business plan to our board yesterday just to review. We're not We'll finalize it at the end of the quarter, at the end of the Q3. But it's significant improvement in outlook The one that we gave them a year ago in terms of our long term financial projections and forecasts. So when you're in an environment like that compared to the environment we were in when we were struggling Okay, operator, that looks like that was the last question in the queue.

Speaker 5

We really appreciate everybody's Participation, like I said earlier, we appreciate your patience while we've gone through this pivot. When we get to the end of this year, We're

Speaker 2

going to have returned $50,000,000 in cash to our shareholders

Speaker 5

over the course of the last 24 months. Our stock is going to be at a higher price and our outlook is going to be much improved. So Spok's in a good place right now and a lot of that is credit to you as investors for believing with us and Sticking with us. And we're happy to be back in the Russell and we look forward to sharing our Q3 results with you. Thank you very much.

Operator

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Earnings Conference Call
Spok Q2 2023
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