Summary
Spok Holdings reported a weaker third quarter of 2021 on both the top and bottom lines. Revenue was $35.85 million, down 4.9% from the prior-year quarter. For the first nine months of 2021, revenue was $107.61 million, down 2.8% from the prior-year period. The profit picture deteriorated more sharply. The quarter produced an operating loss of $3.56 million, compared with operating income a year earlier, and a net loss of $2.49 million, compared with net income a year earlier. Diluted EPS swung to a loss of $0.13 from positive earnings a year earlier. Operating margin was -9.9%, down 17.2 percentage points from the prior-year quarter. For the first nine months, operating margin was -6.4%, down 8.0 percentage points from the prior-year period. The nine-month net loss was $5.51 million, compared with net income for the first nine months of 2020, and nine-month diluted EPS was a loss of $0.28, compared with positive earnings a year earlier.
Operational activity offered some offsets. Spok received record-level software maintenance renewal bookings of $12.1 million. Management said the company welcomed four new customers, three in software and one in wireless, and closed 12 six-figure deals from its pipeline. It added one Spok Go win in the quarter and signed three more Spok Go deals so far in the fourth quarter. Product work included a new version of Spok Go and the ReadyCall Text pager. The company also held its Connect 21 customer conference on Oct. 11-12, 2021. For nine consecutive years, Spok has partnered with all adult Best Hospitals named to the U.S. News & World Report 2021-22 Best Hospitals Honor Roll, and it completed its eleventh annual State of Healthcare Communications Survey. Pager unit erosion improved year over year on a trailing twelve-month basis. Still, forward-looking indicators were soft. Remaining performance obligations were $45.60 million, down 11.8% from the prior-year quarter, and deferred revenue was $27.74 million, down 5.3% from the prior-year quarter. Bookings were $17.1 million, compared with $21.4 million in the prior-year quarter. Units in service were 0.9 million, and ARPU was $7.29, compared with $7.34. Active transmitters fell 5.9% to 3,497 from 3,716, and FTE employees were 581 versus 613.
Cash generation weakened. Operating cash flow was $5.66 million in the quarter, down 60.9% from the prior-year quarter, and $9.53 million for the first nine months, down 54.5% from the prior-year period. Capital expenditures were $0.90 million in the quarter, down 2.6% from the prior-year quarter, but rose 9.9% to $3.10 million for the first nine months from the prior-year period. Adjusted EBITDA moved to a loss of $1.6 million from adjusted EBITDA a year earlier, and the nine-month adjusted EBITDA loss was $1.4 million versus adjusted EBITDA for the first nine months of 2020. Adjusted operating expenses were $39.5 million in the quarter, reflecting the end of the work schedule plan and the strategic alternatives review. Spok reaffirmed its full-year 2021 guidance for total revenue and adjusted operating expenses. The board declared a quarterly dividend of $0.125 per share, payable December 10, 2021, to stockholders of record on November 16, 2021, about $2.4 million. Spok said it would not host a conference call because of the strategic alternatives review announced on September 3, 2021.
Several risks cloud the outlook. COVID-19 continues to delay software bookings and on-site implementations, and management expects software revenue to remain affected for the rest of 2021. Wireless revenue faces secular decline as paging services are replaced by other technologies. Maintenance revenue churn now exceeds the inflow of new revenue, and the company expects annual maintenance revenue to be relatively flat or slightly down as customers move to subscription models. Temporary cost savings from reduced work schedules and equity in lieu of cash are fading, and the work schedule plan ended at the end of the second quarter, raising payroll costs. The strategic alternatives review announced on September 3, 2021, adds uncertainty, and Spok cited risks tied to that process, its limited-duration shareholder rights plan, and the ability to develop and deploy Spok Go.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $35.9M | $35.7M | +0.4% | $37.7M | -4.9% |
| Gross profit | $28.3M | $28.8M | -1.5% | $31.1M | -9.0% |
| Gross margin | 79.0% | 80.5% | -1.5 pp | 82.6% | -3.6 pp |
| Research & development | $4.2M | $4.3M | -2.3% | $3.5M | +20.8% |
| Sales & marketing | $5.2M | $5.0M | +3.7% | $4.3M | +20.9% |
| General & administrative | $12.5M | $11.6M | +8.5% | $11.0M | +14.0% |
| Total operating expenses | $39.4M | $37.3M | +5.6% | $35.0M | +12.7% |
| Operating income (loss) | -$3.6M | -$1.6M | -121.1% | $2.7M | -230.2% |
| Operating margin | -9.9% | -4.5% | -5.4 pp | 7.3% | -17.2 pp |
| Net income (loss) | -$2.5M | -$719.0K | -246.9% | $3.2M | -178.8% |
| Net margin | -7.0% | -2.0% | -5.0 pp | 8.4% | -15.4 pp |
| Diluted EPS | -$0.13 | -$0.04 | -$0.09 | $0.16 | -$0.29 |
Risks
On August 31, 2021 Spok announced an unsolicited proposal to acquire all outstanding shares, and on September 3, 2021 it initiated a review of strategic alternatives including a possible sale. The filing says perceived uncertainty about future operations or employment needs may limit retention and hiring and may contribute to unplanned loss of highly skilled employees.
Spok depends on highly skilled personnel, especially software engineers, and cites intense competition, upward pressure on compensation, and a competitive Minneapolis-St. Paul labor market. It also notes that equity award value or stock price volatility can adversely affect recruiting and retention.
Total revenue declined 4.9% in the current quarter and 2.8% year to date, while wireless revenue declined 5.7% in the quarter and 5.8% year to date. Management expects wireless demand to keep declining as one-way and two-way messaging are replaced by competing broadband technologies.
Maintenance revenue churn now exceeds the inflow of new revenue as new license bookings deteriorate, and management expects a continued decline in its ability to sell new licenses for the Care Connect Suite. Spok intends to replace this churn with Spok Go and cloud subscriptions over several years, with annual maintenance revenue likely flat or slightly down in the meantime.
The board adopted a stockholder rights plan on September 2, 2021 with a 10% beneficial ownership trigger, or 20% for passive institutional investors, expiring August 31, 2022. The plan could delay or discourage a merger, tender offer, or change of control not approved by the board and could adversely affect the common stock price.
Pandemic-related sales-cycle delays, restrictions on on-site implementation services, and periodic hospital capacity constraints continue to affect software bookings and services revenue. Management expects software revenue to remain impacted for the remainder of 2021 and says new variants could further delay a return to normal customer operating levels.
Spok held $67.5 million in cash, cash equivalents and short-term investments at September 30, 2021, but expects cash on hand to decrease significantly while it invests in Spok Go amid declining wireless revenue. It says it may need to reduce planned capital expenses, reduce or eliminate cash dividends, sell assets, or seek additional financing if operating cash and cash on hand are insufficient.
SaaS KPIs
All quarters →Backlog
Bookings
Summary, forecast, risks and KPIs are extracted from Spok Holdings, Inc's SEC filings for Q3 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.