Business Wire | Jul 29, 2020 04:10PM EDT

Spok Reports 2020 Second Quarter Operating Results; Continued Strong Wireless Trends and Operating Expense Improvements Contribute to Strong Second Quarter Net Income and EBITDA

Jul. 29, 2020

SPRINGFIELD, Va.--(BUSINESS WIRE)--Jul. 29, 2020--Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in healthcare communications, today announced operating results for the second quarter ended June 30, 2020. In addition, the Company's Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on September 10, 2020, to stockholders of record on August 17, 2020.

Key Second Quarter Operating Highlights:

* Second quarter software revenue was $14.7 million. Included in second quarter software revenue was $5.2 million of operations revenue and $9.5 million in maintenance revenue, compared to $7.4 million in operations revenue and $10.0 million in maintenance revenue in the second quarter of 2019. * Software bookings in the second quarter totaled $15.4 million. Second quarter bookings included $5.8 million of operations bookings and $9.6 million of maintenance renewals. At June 30, 2020 the software revenue backlog totaled $48.4 million, up from the backlog of $39.7 million at June 30, 2019. * The quarterly rate of paging unit erosion was 1.2 percent in the second quarter of 2020. This compares to paging unit erosion of 1.3 percent in the prior quarter and 0.5 percent in the year-earlier period. Net paging unit losses were 11,000 in the second quarter of 2020, compared to 12,000 in the prior quarter and 5,000 in the second quarter of 2019. Paging units in service at June 30, 2020, totaled 915,000, compared to 977,000 at June 30, 2019. * The rate of wireless revenue erosion was 1.4 percent, down from 2.1 percent erosion in the second quarter of 2019. * Total paging ARPU (average revenue per unit) was $7.24 in the second quarter of 2020, compared to $7.31 in the prior quarter and $7.26 in the year-earlier quarter. * Operating expenses in the second quarter of 2020 totaled $32.6 million, down from $41.5 million in the prior year quarter. Adjusted operating expenses (excludes depreciation, amortization and accretion and includes capitalized software costs) totaled $34.1 million in the second quarter of 2020, compared to $39.2 million in the prior year quarter. Benefiting operating expenses for the second quarter of 2020, the Company received $0.8 million in CARES Act credits, as well as approximately $2 million in cost savings from the previously discussed employee furloughs. * Capital expenses were $846,000 in the second quarter of 2020, compared to $1.5 million in the year-earlier quarter. * The number of full-time equivalent employees at June 30, 2020 totaled 610, compared to 600 in the prior year quarter. * Capital paid to stockholders in the second quarter of 2020 totaled $2.4 million. This came in the form of the Company's regular quarterly dividend. * The Company's cash, cash equivalents and short-term investments balance at June 30, 2020, was $70.9 million.

2020 Second Quarter and Year-To-Date Results:

Consolidated revenue for the second quarter of 2020 under Generally Accepted Accounting Principles ("GAAP") was $35.7 million compared to $39.5 million in the second quarter of 2019. For the first six months of 2020, consolidated revenue totaled $73.0 million, compared to $81.3 million in the first six months of 2019.

For the three months ended For the six months ended

(Dollars in June 30, June 30, Change June 30, June 30, Changethousands) 2020 2019 2020 2019 (%) (%)

Wireless revenue

Paging $ 19,990 $ 21,342 (6.3 ) $ 40,441 $ 43,029 (6.0 )revenue % %

Product and 1,088 785 38.6 % 2,024 1,708 18.5 %other revenue

Total ) )wireless $ 21,078 $ 22,127 (4.7 % $ 42,465 $ 44,737 (5.1 %revenue



Software revenue

Operations $ 5,162 $ 7,353 (29.8 ) $ 11,390 $ 16,361 (30.4 )revenue % %

Maintenance 9,499 10,045 (5.4 ) 19,151 20,190 (5.1 )revenue % %

Total ) )software 14,661 17,398 (15.7 % 30,541 36,551 (16.4 %revenue

Total revenue $ 35,739 $ 39,525 (9.6 ) $ 73,006 $ 81,288 (10.2 ) % %

GAAP net income for the second quarter of 2020 was $3.8 million, or $0.20 per diluted share, compared to a net loss of $0.7 million, or $0.03 per diluted share, in the second quarter of 2019. GAAP net loss for the first half of 2020 was $0.8 million, or $0.04 per diluted share, compared to net income of $0.1 million, in the first half of 2019.

In the second quarter of 2020, the Company generated $5.2 million of EBITDA (earnings before interest, taxes, depreciation and amortization), compared to EBITDA of $0.3 million in the prior year quarter. In the first half of 2020, the Company generated $3.3 million of EBITDA, compared to EBITDA of $3.8 million in the prior year period.

For the three months For the six months ended ended

(Dollars in thousands) June 30, June 30, June 30, June 30, 2020 2019 2020 2019

Net income (loss) $ 3,759 $ (670 ) $ (780 ) $ 72

Basic and diluted net income $ 0.20 $ (0.03 ) $ (0.04 ) $ -(loss) per share

EBITDA $ 5,231 $ 343 $ 3,270 $ 3,816

Management Commentary

"We are in the throes of a 100-year pandemic that has negatively impacted the finances of our healthcare customer base. As such, software product sales were slow in the second quarter, as this was the first full quarter impacted by the pandemic. The majority of our healthcare customer base continued to struggle with the challenges presented by COVID-19," said Vincent D. Kelly, president and chief executive officer. "However, on a positive note, while hospitals are focusing their efforts on the current crisis, surveys are showing that by the end of the second quarter hospitals were back to more than a third of their pre-COVID-19 elective volumes and by the end of the year hospitals expect to be back to more than three-quarters of those volumes, with full recovery sometime in 2021," continued Kelly. "While we did not lose a lot of deals, many were pushed back due to the pandemic, including our first significant Spok Go(r) deal, which was booked in July. The same was true with the installation of our backlog from prior bookings. As hospitals begin to open back up, we expect to see these trends improve. In the meantime, Spok continues to demonstrate a stable revenue base, as nearly 86 percent of our revenues in the second quarter were recurring in nature, coming from either our legacy wireless business or software maintenance contracts. This, combined with disciplined expense control, has allowed us to post profitable results. And, we did this while continue to invest in and develop our cloud native platform, Spok Go. Spok provides a critical function, which we believe will become even more important in this environment. Spok's clinical communications platform provides hospitals with a system of action, not just of record, delivering reliable communications and clinical information, including clinical test results, to care teams when and where it matters most to improve patient outcomes."

In the second quarter of 2020, Spok returned $2.4 million in capital to stockholders, in the form of its regular quarterly dividend. "During the quarter, we took immediate steps to position our operations to a positive free cash flow basis through a combination of furlough and other cost savings initiatives. As a result, we were able to generate increased levels of net income and EBITDA. We are focused on running positive EBITDA and Spok remains committed to paying our regular quarterly dividend. We believe we will be able to achieve this while continuing to support our Spok Care Connect(r) platform and in the near term, investing in the evolution of our cloud-native and integrated communication platform, Spok Go.

Business Outlook

Michael W. Wallace, chief operating officer and chief financial officer, said: "Expense management and strong financial discipline have always been critical in balancing the short and long-term components of our business and that was especially so in the second quarter, given the impacts of COVID-19. In the second quarter, GAAP operating expenses were down nearly 22% from prior year levels, with improvements in all expense categories driven by furloughs, the CARES Act credits, and including a $3.6 million benefit versus 2019 due to capitalization of software costs required in 2020. Spok's balance sheet remains strong, with a cash, cash equivalents and short-term investment balance of $70.9 million at June 30, 2020."

Commenting on the Company's previously provided financial guidance for 2020, Wallace noted: "Spok has been focused on continuing to understand the impact of the pandemic on our business, particularly given the impact of COVID-19 on the roll-out of our Spok Go software business. Because of the fluid nature of the situation, we, like many of our peer public companies, believe that it is most prudent to continue to suspend our practice of providing annual guidance for revenues and expenses at this time. We look forward to returning to our normal guidance format after the crisis is over."

2020 Annual Meeting Results

At its annual meeting of stockholders yesterday, the Company announced that each of the 10 nominees to the company's board of directors were elected for one-year terms. The board members are:

Royce Yudkoff Matthew Oristano

N. Blair Butterfield Todd Stein

Stacia A. Hylton Dr. Bobbie Byrne

Vincent D. Kelly Christine M. Cournoyer

Brian O'Reilly Brett Shockley

Additionally, Spok Holdings, Inc. stockholders voted to approve the following items proposed by the board of directors:

* The appointment of Grant Thornton LLP as the company's independent auditor * In an advisory vote, the compensation of Spok's named executive officers, as described in the 2020 proxy statement. * The Company's 2020 Equity Incentive Award Plan.

Additionally, the shareholder proposal regarding Board of Director Independence and Refreshment was defeated.

When final voting results are available, they will be filed with the SEC.

2020 Second-Quarter Call and Replay:

Spok plans to host a conference call for investors to discuss its 2020 second quarter results at 10:00 a.m. ET on Thursday, July 30, 2020. Dial-in numbers for the call are 334-323-0501 or 800-353-6461. The pass code for the call is 4509240. A replay of the call will be available from 1:00 p.m. ET on July 30, 2020 until 1:00 p.m. ET on Thursday, August 13, 2020. To listen to the replay, please register at http://tinyurl.com/Spok2020Q2earningsreplay. Please cut and paste this address into your browser, enter the registration information, and you will be given access to the replay.

About Spok

Spok, Inc., a wholly owned subsidiary of 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(r) and Spok Go(r) platforms 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(r) 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 Go 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 and statements relating to the unsolicited takeover bid from B. Riley Financial, Inc., 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, adverse economic, political or market conditions in the U.S. and international markets and other factors such as natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as coronavirus disease 2019 (COVID-19), 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.

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 six months ended

6/30/2020 6/30/2019 6/30/2020 6/30/2019

Revenue:

Wireless $ 21,078 $ 22,127 $ 42,465 $ 44,737

Software 14,661 17,398 30,541 36,551

Total revenue 35,739 39,525 73,006 81,288

Operating expenses:

Cost of 5,901 7,239 14,165 14,831 revenue

Research and 2,754 6,807 8,203 12,974 development

Technology 7,212 7,866 15,115 15,540 operations

Selling and 3,831 5,574 10,192 11,684 marketing

General and 10,810 11,696 22,061 22,443 administrative

Depreciation,amortization 2,072 2,335 4,218 4,694 and accretion

Totaloperating 32,580 41,517 73,954 82,166 expenses

% of total 91.2 % 105.0 % 101.3 % 101.1 %revenue

Operating 3,159 (1,992 ) (948 ) (878 )income (loss)

% of total 8.8 % (5.0 ) (1.3 ) (1.1 )revenue % % %

Interest 146 452 509 901 income

Other income 101 602 (37 ) 367 (expense)

Income (loss)before income 3,406 (938 ) (476 ) 390 taxes

Benefit from(provision 353 268 (304 ) (318 )for) incometaxes

Net income $ 3,759 $ (670 ) $ (780 ) $ 72 (loss)

Basic anddiluted net(loss) income $ 0.20 $ (0.03 ) $ (0.04 ) $ - per commonshare

Basic weightedaverage common 19,016,853 19,217,866 18,987,469 19,207,476 sharesoutstanding

Dilutedweightedaverage common 19,115,148 19,217,866 18,987,469 19,375,599 sharesoutstanding

Cash dividendsdeclared per 0.125 0.125 0.25 0.25 common share

Key statistics:

Units in 915 977 915 977 service

Averagerevenue per $ 7.24 $ 7.26 $ 7.27 $ 7.28 unit (ARPU)

Bookings $ 15,411 $ 21,334 $ 31,050 $ 35,989

Backlog $ 48,441 $ 39,718 $ 48,441 $ 39,718



(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

6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018

Revenue:

Wireless $ 21,078 $ 21,386 $ 21,615 $ 21,814 $ 22,127 $ 22,610 $ 23,091 $ 23,259

Software 14,661 15,881 17,933 17,639 17,398 19,154 20,165 19,217

Total revenue 35,739 37,267 39,548 39,453 39,525 41,764 43,256 42,476

Operating expenses:

Cost of revenue ^ 5,901 8,264 8,051 7,190 7,239 7,592 8,772 8,141 (b)

Research and 2,754 5,449 7,132 7,437 6,807 6,167 6,618 5,934 development

Technology 7,212 7,904 8,083 7,805 7,866 7,674 8,120 7,787 operations

Selling and 3,831 6,361 5,891 5,595 5,574 6,110 6,275 5,716 marketing

General and 10,810 11,251 11,531 11,813 11,696 10,747 10,721 13,673 administrative

Depreciation,amortization and 2,072 2,146 2,250 2,305 2,335 2,359 2,601 2,785 accretion

Goodwill impairment - - 8,849 - - - - -

Total operating 32,580 41,375 51,787 42,145 41,517 40,649 43,107 44,036 expenses

% of total revenue 91.2 % 111.0 % 130.9 % 106.8 % 105.0 % 97.3 % 99.7 % 103.7 %

Operating (loss) 3,159 (4,108 ) (12,239 ) (2,692 ) (1,992 ) 1,115 149 (1,560 )income

% of total revenue 8.8 % (11.0 ) (30.9 ) (6.8 ) (5.0 ) 2.7 % 0.3 % (3.7 ) % % % % %

Interest income 146 363 350 399 452 449 628 384

Other income 101 (137 ) 206 163 602 (236 ) (593 ) (110 )(expense)

(Loss) income 3,406 (3,882 ) (11,683 ) (2,130 ) (938 ) 1,328 184 (1,286 )before income taxes

Benefit from(provision for) 353 (657 ) 2,172 804 268 (586 ) 5 446 income taxes

Net income (loss) $ 3,759 $ (4,539 ) $ (9,511 ) $ (1,326 ) $ (670 ) $ 742 $ 189 $ (840 )

Basic and dilutednet (loss) income $ 0.20 $ (0.24 ) $ (0.50 ) $ (0.07 ) $ (0.03 ) $ 0.04 $ 0.01 $ (0.04 )per common share

Basic weightedaverage common 19,016,853 18,958,716 18,860,020 19,086,811 19,217,866 19,196,970 19,445,401 19,456,149 shares outstanding

Diluted weightedaverage common 19,115,148 18,958,716 18,860,020 19,086,811 19,217,866 19,356,712 19,445,401 19,456,149 shares outstanding

Key statistics:

Units in service 915 926 938 955 977 982 992 999

Average revenue per $ 7.24 $ 7.31 $ 7.33 $ 7.32 $ 7.26 $ 7.32 $ 7.36 $ 7.40 unit (ARPU)

Bookings $ 15,411 $ 15,639 $ 21,932 $ 20,421 $ 21,334 $ 14,654 $ 23,076 $ 21,580

Backlog $ 48,441 $ 49,052 $ 50,553 $ 42,604 $ 39,718 $ 37,392 $ 40,422 $ 36,366



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

(b) An adjustment of $771 to cost of revenue, identified in the fourth quarterof 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 havebeen adjusted accordingly to reflect these changes.

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (a)

(In thousands)



6/30/2020 12/31/2019

Unaudited

Assets

Current assets:

Cash and cash equivalents $ 40,886 $ 47,361

Short term investments 29,974 29,899

Accounts receivable, net 29,595 30,174

Prepaid expenses 7,921 7,517

Other current assets 2,997 2,714

Total current assets 111,373 117,665

Non-current assets:

Property and equipment, net 7,169 8,000

Operating lease right-of-use assets 14,795 16,317

Capitalized software development 5,300 -

Goodwill 124,182 124,182

Intangible assets, net 1,667 2,917

Deferred income tax assets, net 48,022 48,983

Other non-current assets 1,187 1,808

Total non-current assets 202,322 202,207

Total assets $ 313,695 $ 319,872

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 5,717 $ 3,615

Accrued compensation and benefits 10,576 11,680

Accrued taxes 1,487 1,529

Deferred revenue 24,688 25,944

Operating lease liabilities 5,267 5,437

Other current liabilities 3,165 2,978

Total current liabilities 50,900 51,183

Non-current liabilities:

Asset retirement obligations 6,146 6,061

Operating lease liabilities 10,162 11,575

Other non-current liabilities 806 959

Total non-current liabilities 17,114 18,595

Total liabilities 68,014 69,778

Commitments and contingencies

Stockholders' equity:

Preferred stock $ - $ -

Common stock 2 2

Additional paid-in capital 88,681 86,874

Accumulated other comprehensive loss (1,718 ) (1,601 )

Retained earnings 158,716 164,819

Total stockholders' equity 245,681 250,094

Total liabilities and stockholders' equity $ 313,695 $ 319,872



(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 six months ended

6/30/2020 6/30/2019

Operating activities:

Net (loss) income $ (780 ) $ 72

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

Depreciation, amortization and accretion 4,218 4,694

Deferred income tax expense 290 208

Stock based compensation 2,544 1,557

Provisions for doubtful accounts, service credits, 673 272 and other

Changes in assets and liabilities:

Accounts receivable (670 ) (6,682 )

Prepaid expenses, inventory and other assets 1,997 2,075

Accounts payable, accrued liabilities and other (440 ) (3,161 )

Deferred revenue (1,373 ) 1,734

Net cash provided by operating activities 6,459 769

Investing activities:

Purchases of property and equipment (1,895 ) (2,783 )

Capitalized software development (5,300 ) -

Purchase of short-term investments (29,877 ) (29,650 )

Maturity of short-term investments 30,000 4,000

Net cash used in investing activities (7,072 ) (28,433 )

Financing activities:

Cash distributions to stockholders (5,008 ) (5,049 )

Purchase of common stock (including commissions) - (1,810 )

Proceeds from issuance of common stock under the 166 119 Employee Stock Purchase Plan

Purchase of common stock for tax withholding on (903 ) (1,017 )vested equity awards

Net cash used in financing activities (5,745 ) (7,757 )

Effect of exchange rate on cash (117 ) (93 )

Net decrease in cash and cash equivalents (6,475 ) (35,514 )

Cash and cash equivalents, beginning of period 47,361 83,343

Cash and cash equivalents, end of period $ 40,886 $ 47,829

Supplemental disclosure:

Income taxes paid $ 148 $ 683



(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

6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 3/31/ 12/31/ 9/30/ 2020 2020 2019 2019 2019 2019 2018 2018

Revenue

Paging $ 19,990 $ 20,451 $ 20,826 $ 21,212 $ 21,342 $ 21,687 $ 21,997 $ 22,442

Non-paging 1,088 935 789 602 785 923 1,094 817

Total wireless $ 21,078 $ 21,386 $ 21,615 $ 21,814 $ 22,127 $ 22,610 $ 23,091 $ 23,259revenue



License 749 955 1,711 2,723 1,676 2,840 3,496 3,175

Services 3,812 4,549 4,947 4,202 4,835 5,206 5,103 4,555

Equipment 601 725 1,125 689 842 963 1,568 1,296

Operations $ 5,162 $ 6,229 $ 7,783 $ 7,614 $ 7,353 $ 9,009 $ 10,167 $ 9,026revenue



Maintenance $ 9,499 $ 9,652 $ 10,150 $ 10,025 $ 10,045 $ 10,145 $ 9,998 $ 10,191revenue

Total software $ 14,661 $ 15,881 $ 17,933 $ 17,639 $ 17,398 $ 19,154 $ 20,165 $ 19,217revenue



Total revenue $ 35,739 $ 37,267 $ 39,548 $ 39,453 $ 39,525 $ 41,764 $ 43,256 $ 42,476



(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

6/30/2020 3/31/2020 12/31/ 9/30/ 6/30/2019 3/31/ 12/31/ 9/30/ 2019 2019 2019 2018 2018

Cost of revenue

Payroll and $ 4,350 $ 5,785 $ 5,222 $ 5,099 $ 4,749 $ 4,931 $ 4,868 $ 4,923related

Cost of sales 1,098 1,940 2,278 1,567 1,900 2,080 3,349 2,623

Stock-based 134 119 42 21 97 107 44 75compensation

Other 319 420 509 503 493 474 511 520

Total cost of 5,901 8,264 8,051 7,190 7,239 7,592 8,772 8,141revenue (b)

Research and development

Payroll and 4,115 4,761 5,056 5,083 4,639 4,263 4,350 4,709related

Outside services 1,803 1,584 1,742 2,027 1,912 1,745 2,115 1,040

Capitalizedsoftware (3,596 ) (1,705 ) - - - - - -development

Stock-based 243 236 113 102 84 11 5 71compensation

Other 189 573 221 225 172 148 148 114

Total research and 2,754 5,449 7,132 7,437 6,807 6,167 6,618 5,934development

Technology operations

Payroll and 2,213 2,712 2,656 2,823 2,662 2,647 2,616 2,866related

Site rent 3,399 3,398 3,669 3,269 3,480 3,296 3,432 3,482

Telecommunications 961 1,001 1,026 1,016 1,019 996 1,021 950

Stock-based 47 43 32 30 30 30 24 24compensation

Other 592 750 700 667 675 705 1,027 465

Total technology 7,212 7,904 8,083 7,805 7,866 7,674 8,120 7,787operations

Selling and marketing

Payroll and 2,538 3,583 3,382 3,524 3,329 3,273 3,047 3,401related

Commissions 852 1,212 1,158 1,114 1,298 1,424 1,759 1,225

Stock-based 194 172 164 137 128 161 99 135compensation

Advertising and 160 784 1,034 703 656 933 1,236 857events

Other 87 610 153 117 163 319 134 98

Total selling and 3,831 6,361 5,891 5,595 5,574 6,110 6,275 5,716marketing

General and administrative

Payroll and 3,355 4,134 3,974 4,220 4,136 4,041 4,087 4,834related

Stock-based 744 612 770 674 690 219 860 1,118compensation

Bad debt 628 43 56 402 (96 ) 308 303 513

Facility rent,office, and 2,276 2,068 1,952 2,369 2,485 2,294 2,072 2,925technology costs

Outside services 2,043 2,036 2,350 2,004 2,306 1,776 2,062 1,864

Taxes, licenses 804 859 1,000 888 863 921 111 1,081and permits

Other 960 1,499 1,429 1,256 1,312 1,188 1,226 1,338

Total general and 10,810 11,251 11,531 11,813 11,696 10,747 10,721 13,673administrative

Depreciation,amortization and 2,072 2,146 2,250 2,305 2,335 2,359 2,601 2,785accretion

Goodwill - - 8,849 - - - - -impairment

Operating expenses $ 32,580 $ 41,375 $ 51,787 $ 42,145 $ 41,517 $ 40,649 $ 43,107 $ 44,036

Capital $ 846 $ 1,063 $ 679 $ 1,378 $ 1,495 $ 1,287 $ 830 $ 1,630expenditures



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

(b) An adjustment of $771 to cost of sales, identified in the fourth quarter of2018, 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 toreflect 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

6/30/2020 3/31/2020 12/31/ 9/30/2019 6/30/2019 3/31/2019 12/31/ 9/30/2018 2019 2018

Paging units in service

Beginning unitsin service 926 938 955 977 982 992 999 1,024 (000's)

Gross 35 24 22 28 35 27 30 31 placements

Gross (46 ) (36 ) (39 ) (50 ) (40 ) (37 ) (37 ) (56 )disconnects

Net change (11 ) (12 ) (17 ) (22 ) (5 ) (10 ) (7 ) (25 )

Ending units in 915 926 938 955 977 982 992 999 service

End of periodunits in service % oftotal (b)

Healthcare 83.6 % 82.6 % 82.4 % 81.7 % 81.7 % 81.6 % 81.4 % 81.7 %

Government 5.5 % 5.4 % 5.4 % 5.5 % 5.6 % 5.8 % 5.8 % 5.8 %

Large 4.4 % 5.5 % 5.5 % 6.1 % 5.9 % 5.9 % 5.9 % 6.0 %enterprise

Other(b) 6.6 % 6.5 % 6.6 % 6.7 % 6.8 % 6.7 % 6.9 % 6.5 %

Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Account sizeending units in service (000's)

1 to 100 units 65 67 69 72 74 77 78 81

101 to 1,000 165 171 173 175 179 186 190 192 units

>1,000 units 685 688 696 708 724 719 724 726

Total 915 926 938 955 977 982 992 999

Account sizenet loss rate (c)

1 to 100 units (3.1 ) (3.0 ) (3.8 ) (2.1 ) (3.2 ) (2.3 ) (1.7 ) (4.3 ) % % % % % % % %

101 to 1,000 (4.2 ) (1.0 ) (1.0 ) (2.4 ) (3.9 ) (2.3 ) - % (2.7 )units % % % % % % %

>1,000 units (0.4 ) (1.2 ) (1.8 ) (2.2 ) 0.7 % (1.1 ) (0.1 ) (2.2 ) % % % % % % %

Total (1.3 ) (1.3 ) (1.8 ) (2.2 ) (0.5 ) (1.1 ) (0.2 ) (2.5 ) % % % % % % % %

Account size ARPU

1 to 100 units $ 11.65 $ 12.01 $ 11.99 $ 11.84 $ 12.00 $ 11.90 $ 11.61 $ 11.33

101 to 1,000 8.24 8.34 8.31 8.41 8.47 8.35 8.28 8.19 units

>1,000 units 6.57 6.59 6.62 6.59 6.47 6.57 6.69 6.74

Total $ 7.24 $ 7.31 $ 7.33 $ 7.32 $ 7.26 $ 7.32 $ 7.36 $ 7.40



(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 inservice divided by prior period ending units in service.

SPOK HOLDINGS, INC.

RECONCILIATION FROM NET (LOSS) INCOME TO EBITDA (a)

(Unaudited and in thousands)



For the three months ended

6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018

Reconciliationof net (loss) income toEBITDA (b):

Net income $ 3,759 $ (4,539 ) $ (9,511 ) $ (1,326 ) $ (670 ) $ 742 $ 189 $ (840 )(loss) (c)

Plus (less):benefit from(provision (353 ) 657 (2,172 ) (804 ) (268 ) 586 (5 ) (446 )for) incometaxes

Plus (less):Other expense (101 ) 137 (206 ) (163 ) (602 ) 236 593 110 (income)

Less: Interest (146 ) (363 ) (350 ) (399 ) (452 ) (449 ) (628 ) (384 )income

Operating 3,159 (4,108 ) (12,239 ) (2,692 ) (1,992 ) 1,115 149 (1,560 )income (loss)

Plus:depreciation, 2,072 2,146 2,250 2,305 2,335 2,359 2,601 2,785 amortizationand accretion

EBITDA (asdefined by the $ 5,231 $ (1,962 ) $ (9,989 ) $ (387 ) $ 343 $ 3,474 $ 2,750 $ 1,225 Company)



For the six months ended

6/30/2020 6/30/2019

Reconciliationof net income (loss) toEBITDA (b):

Net (loss) $ (780 ) $ 72 income

(Less) plus:Benefit from(provision 304 318 for) incometaxes

Plus (less):Other 37 (367 ) (expense)income

Less: Interest (509 ) (901 ) income

Operating loss (948 ) (878 )

Plus:depreciation, 4,218 4,694 amortizationand accretion

EBITDA (asdefined by the $ 3,270 $ 3,816 Company)





RECONCILIATION FROM OPERATING EXPENSES TO ADJUSTED OPERATING EXPENSES (a)(d)



For the three months ended

6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018

(Dollars in thousands)

Operating $ 32,580 $ 41,375 $ 51,787 $ 42,145 $ 41,517 $ 40,649 $ 43,107 $ 44,036 expenses

Less:depreciation, 2,072 2,146 2,250 2,305 2,335 2,359 2,601 2,785 amortizationand accretion

Less: goodwill $ - $ - $ 8,849 $ - $ - $ - $ - $ - impairment

Add:capitalized $ 3,596 $ 1,705 $ - $ - $ - $ - $ - $ - software costs

Adjustedoperating $ 34,104 $ 40,934 $ 40,688 $ 39,840 $ 39,182 $ 38,290 $ 40,506 $ 41,251 expenses



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

(b) EBITDA or earnings before interest, taxes, depreciation, amortization andaccretion is a non-GAAP measure and is presented for analytical purposes only.Management and the Board of Directors rely on EBITDA for purposes ofdetermining the Company's capital allocation policies. EBITDA is also thestarting point for the calculation of operating cash flow for purposes ofdetermining whether management has achieved certain performance objectives inthe Company's short-term and long-term incentive plans.

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

(d) Adjusted operating expenses is a non-GAAP measure and is presented foranalytical purposes only. Management and the Board of Directors rely onadjusted operating expenses for purposes of assessing our core operatingresults based on expenses incurred within a period that directly driveoperating income in that period. Management adjusts for certain items becausewe do not regard these costs as reflective of normal costs related to theongoing operation of the business in the ordinary course. In general, theseitems possess one or more of the following characteristics; non-cash expenses,factors outside of our control, items that are non-operational in nature, andunusual items not expected to occur in the normal course of business.

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CONTACT: Al Galgano 952-567-0295 Al.Galgano@spok.com