spok-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2023


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-32358


SPOK HOLDINGS, INC.
(Exact name of registrant as specified in its charter)


Delaware						16-1694797
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


5911 Kingstowne Village Pkwy, 6th Floor
Alexandria,	Virginia	22315
(Address of principal executive offices)		(Zip Code)

(800) 611-8488

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	SPOK	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

19,949,504 shares of the registrant’s common stock (par value $0.0001 per share) were outstanding as of April 28, 2023.

SPOK HOLDINGS, INC.

QUARTERLY REPORT ON FORM 10-Q

INDEX


			Page
PART I.	FINANCIAL INFORMATION
	Item 1.	Condensed Consolidated Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	2
		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	3
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	4
		Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	5
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 202 2 (Unaudited)	6
		Unaudited Notes to Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
	Item 4.	Controls and Procedures	29
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	29
	Item 1A.	Risk Factors	29
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
	Item 6.	Exhibits	30
Signatures

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands)	March 31, 2023		December 31, 2022
	(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	29,550	$	35,754

Accounts receivable, net	22,644		26,861
Prepaid expenses	7,150		6,849
Other current assets	628		587
Total current assets	59,972		70,051
Non-current assets:
Property and equipment, net	7,802		8,223
Operating lease right-of-use assets	13,401		13,876
Goodwill	99,175		99,175

Deferred income tax assets, net	50,706		52,398
Other non-current assets	694		754
Total non-current assets	171,778		174,426
Total assets	$	231,750	$	244,477

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,659	$	5,880
Accrued compensation and benefits	6,063		11,628
Deferred revenue	24,629		26,274
Operating lease liabilities	4,964		5,096
Other current liabilities	4,823		4,573
Total current liabilities	45,138		53,451
Non-current liabilities:
Asset retirement obligations	7,353		7,237
Operating lease liabilities	10,064		10,604
Other non-current liabilities	846		1,107
Total non-current liabilities	18,263		18,948
Total liabilities	63,401		72,399
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock	$	—	$	—
Common stock	2		2
Additional paid-in capital	99,599		99,908
Accumulated other comprehensive loss	(1,897)		(1,909)
Retained earnings	70,645		74,077
Total stockholders’ equity	168,349		172,078
Total liabilities and stockholders' equity	$	231,750	$	244,477

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	For the Three Months Ended March 31,
(Unaudited and in thousands except share and per share amounts)	2023		2022

Revenue:
Wireless revenue	$	19,028	$	18,846
Software revenue	14,152		14,979
Total revenue	33,180		33,825
Operating expenses:
Cost of revenue (exclusive of items shown separately below)	6,536		7,804
Research and development	2,493		6,497
Technology operations	6,587		7,013
Selling and marketing	3,901		5,315
General and administrative	7,700		10,435
Depreciation, amortization and accretion	1,236		934
Severance and restructuring	10		4,495

Total operating expenses	28,463		42,493
Operating income (loss)	4,717		(8,668)
Interest income	272		67
Other income (expense)	53		(13)
Income (loss) before income taxes	5,042		(8,614)
(Provision for) benefit from income taxes	(1,925)		1,400
Net income (loss)	$	3,117	$	(7,214)
Basic net income (loss) per common share	$	0.16	$	(0.37)
Diluted net income (loss) per common share	$	0.15	$	(0.37)
Basic weighted average common shares outstanding	19,897,445		19,599,526
Diluted weighted average common shares outstanding	20,182,692		19,599,526
Cash dividends declared per common share	$	0.3125	$	0.3125

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	For the Three Months Ended March 31,
(Unaudited and in thousands)	2023		2022

Net income (loss)	$	3,117	$	(7,214)
Other comprehensive income, net of tax:
Foreign currency translation adjustments	12		25
Other comprehensive income	12		25
Comprehensive income (loss)	$	3,129	$	(7,189)

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


(Unaudited and in thousands except share amounts)	Outstanding Common Shares	Common Stock		Additional Paid-In Capital & Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity

Balance, January 1, 2022	19,481,429	$	2	$	95,703	$	77,986	$	173,691
Net loss	—	—		—		(7,214)		(7,214)
Issuance of common stock for vested restricted stock units under the equity plans	346,604	—		—		—		—
Purchase of common stock for tax withholding and other	(134,354)	—		(1,209)		—		(1,209)
Amortization of stock-based compensation	—	—		1,115		—		1,115
Cash dividends declared	—	—		—		(6,513)		(6,513)


Cumulative translation adjustment	—	—		25		—		25
Balance, March 31, 2022	19,693,679	$	2	$	95,634	$	64,259	$	159,895





Balance, January 1, 2023	19,703,800	$	2	$	97,999	$	74,077	$	172,078
Net income	—	—		—		3,117		3,117
Issuance of common stock for vested restricted stock units under the equity plans	382,568	—		—		—		—
Purchase of common stock for tax withholding and other	(144,516)	—		(1,245)		—		(1,245)
Amortization of stock-based compensation	—	—		936		—		936
Cash dividends declared	—	—		—		(6,549)		(6,549)


Cumulative translation adjustment	—	—		12		—		12
Balance, March 31, 2023	19,941,852	$	2	$	97,702	$	70,645	$	168,349

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

SPOK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Three Months Ended March 31,
(Unaudited and in thousands)	2023		2022

Operating activities:
Net income (loss)	$	3,117	$	(7,214)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion	1,236		934


Deferred income tax expense (benefit)	1,886		(1,024)
Stock-based compensation	936		1,115
Provisions for credit losses, service credits and other	29		594
Changes in assets and liabilities:
Accounts receivable	4,187		2,951
Prepaid expenses and other assets	(282)		(1,421)
Net operating lease liabilities	(197)		(91)
Accounts payable, accrued liabilities and other	(6,680)		879
Deferred revenue	(1,621)		(1,602)
Net cash provided by (used in) operating activities	2,611		(4,879)
Investing activities:
Purchases of property and equipment	(649)		(679)

Purchase of short-term investments	—		(14,967)
Maturity of short-term investments	—		15,000
Net cash used in investing activities	(649)		(646)
Financing activities:
Cash distributions to stockholders	(6,933)		(6,524)


Purchase of common stock for tax withholding on vested equity awards	(1,245)		(1,209)
Net cash used in financing activities	(8,178)		(7,733)
Effect of exchange rate on cash and cash equivalents	12		25
Net decrease in cash and cash equivalents	(6,204)		(13,233)
Cash and cash equivalents, beginning of period	35,754		44,583
Cash and cash equivalents, end of period	$	29,550	$	31,350
Supplemental disclosure:

Income taxes paid/(refunded)	$	(6)	$	(39)

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

SPOK HOLDINGS, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Spok Holdings, Inc. (NASDAQ: SPOK) ("Spok," "we," "our" or the "Company"), through its wholly owned subsidiary Spok, Inc., is proud to be the 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 Spok products and services to enhance workflows for clinicians, support administrative compliance, and provide a better experience for patients.

We offer a focused suite of unified clinical communication and collaboration solutions that include call center applications, clinical alerting and notifications, one-way and advanced two-way wireless messaging services, mobile communications and public safety solutions.

We provide one-way and advanced two-way wireless messaging services, including information services, throughout the United States. These services are offered on a local, regional and nationwide basis employing digital networks. One-way messaging consists of numeric and alphanumeric messaging services. Numeric messaging services enable subscribers to receive messages that are composed entirely of numbers, such as a phone number, while alphanumeric messages may include numbers and letters, which enable subscribers to receive text messages. Two-way messaging services enable subscribers to send and receive messages to and from other wireless messaging devices, including pagers, personal digital assistants and personal computers. We also offer voice mail, personalized greetings, message storage and retrieval, and equipment loss and/or maintenance protection to both one-way and two-way messaging subscribers. These services are commonly referred to as wireless messaging and information services.

We also develop, sell and support enterprise-wide systems for hospitals and other organizations needing to automate, centralize and standardize clinical communications. These solutions are used for contact centers, clinical alerting and notification, mobile communications and messaging and for public safety notifications. These areas of market focus complement the market focus of our wireless services outlined above.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements include our accounts and the accounts of our wholly owned direct and indirect subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). In management's opinion, the unaudited Condensed Consolidated Financial Statements include all adjustments and accruals that are necessary for the presentation of the results of all interim periods reported herein and all such adjustments are of a normal, recurring nature.

Amounts shown in the Condensed Consolidated Statements of Operations within the operating expense categories of cost of revenue; research and development; technology operations; selling and marketing; and general and administrative are recorded exclusive of depreciation, amortization and accretion. These items are shown separately to the extent that they are considered material for the periods presented.

Certain prior period amounts in the Condensed Consolidated Financial Statements have been reclassified to conform to the current period's presentation. These reclassifications had no effect on the reported results of operations or the Condensed Consolidated Balance Sheets.

The financial information included herein, other than the Condensed Consolidated Balance Sheet as of December 31, 2022, is unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2022, has been derived from, but does not include all, the disclosures contained in the audited Consolidated Financial Statements as of and for the year ended December 31, 2022.

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”). The Condensed Consolidated Statements of Operations for the interim periods presented are not necessarily indicative of the results that may be expected for a full year.

SPOK HOLDINGS, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Use of Estimates

The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an ongoing basis, we evaluate estimates and assumptions, including, but not limited to, those related to the impairment of long-lived assets, goodwill, accounts receivable allowances, revenue recognition, determining the standalone selling price of performance obligations, variable consideration, depreciation expense, asset retirement obligations and income taxes. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

NOTE 2 - RISKS AND OTHER IMPORTANT FACTORS

See “Item 1A. Risk Factors” of Part II of this Quarterly Report on Form 10-Q (“Quarterly Report”) and "Item 1A. Risk Factors" of Part I of the 2022 Annual Report, which describe key risks associated with our operations and industry.

NOTE 3 - RECENT ACCOUNTING STANDARDS

The Company considers the applicability and impact of all Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB"). The Company has determined that all recent ASUs issued by the FASB are either not applicable or are not expected to have a material impact on the Company's Condensed Consolidated Financial Statements.

NOTE 4 - SIGNIFICANT ACCOUNTING POLICIES UPDATE

Our significant accounting policies are detailed in Note 1, “Organization and Significant Accounting Policies” of the 2022 Annual Report.

NOTE 5 - RESTRUCTURING

In February 2022, the Company announced a new strategic business plan that included a restructuring of its business to discontinue Spok Go, eliminate all associated costs and optimize the Company’s existing structure to drive continued cost improvement.

As part of the restructuring program, the Company eliminated 176 positions, primarily in research and development, and also in professional services, selling and marketing, and back-office support functions.

For the three months ended March 31, 2022, the Company incurred total severance and restructuring costs of $4.5 million related to the restructuring program, which are included within the Condensed Consolidated Statement of Operations. These costs are as follows:

SEC Form 10-Q filed by Spok Holdings Inc.