Spok Holdings Inc

Previous wording

The following table is a summary of our Condensed Consolidated Statement of Operations for the three months ended March 31, 2024 and 2023:

Current wording

The following table is a summary of our Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2024 and 2023:

Previous wording

Wireless revenue decreased for the three months ended March 31, 2024, compared to the same period in 2023, reflective of the secular decrease in our wireless units in service, from 811 thousand as of March 31, 2023 to 753 thousand as of March 31, 2024. This was partially offset by an increase in ARPU, as a result of price increases initiated in September of 2023. ARPU was $7.89 for the three months ended March 31, 2024, as compared to $7.59 for the same period in 2023.

Current wording

Wireless revenue decreased for the three months ended June 30, 2024, compared to the same period in 2023, reflective of the secular decrease in our wireless units in service, from 806 thousand as of June 30, 2023 to 747 thousand as of June 30, 2024. This was partially offset by an increase in ARPU, as a result of price increases initiated in September of 2023. For the three months ended June 30, 2024, ARPU was $7.84 as compared to $7.53 for the same period in 2023.

Previous wording

Software operations revenue increased during the three months ended March 31, 2024, when compared to the same period in 2023. This increase in revenue was primarily due to license and professional services revenue. License revenue increases were driven by higher operations bookings as compared to the same period in 2023. The increase in professional services revenue was driven by our hiring efforts in the second half of 2023 and continuing into the first quarter, as we aligned staffing levels with our backlog which have grown as a result of our operations bookings results.

Current wording

Software operations revenue decreased during the three and six months ended June 30, 2024, when compared to the same periods in 2023. These decreases are primarily due to decreases in license and hardware revenue, driven by lower sales. More specifically, results from the second quarter of 2023 included $1.8 million in license revenue from a single customer contract with no similar performance in 2024. These decreases were partially offset by increases in professional services revenue, resulting from our targeted hiring efforts over the last twelve months, as we aligned staffing levels with our backlog which has grown as a result of our operations bookings results.

Previous wording

For the three months ended March 31, 2024, maintenance revenue increased compared to the same period in 2023, as a result of improvement in our gross revenue churn as well as net new maintenance driven by our operational bookings performance. Given these dynamics, we believe annual maintenance revenue is likely to remain flat or increase marginally, as we continue to enhance our existing software solutions. Further enhancements are expected to provide additional avenues for license sales which generate new maintenance revenue and help to reduce levels of gross churn.

Current wording

For the three and six months ended June 30, 2024, maintenance revenue increased compared to the same periods in 2023, as a result of improvement in our gross revenue churn as well as net new maintenance driven by our operational bookings performance. Given these dynamics, we believe annual maintenance revenue is likely to remain flat or increase marginally, as we continue to enhance our existing software solutions. Further enhancements are expected to provide additional revenues for license sales which generate new maintenance revenue and help to reduce levels of gross churn.

Previous wording

The following is a review of our operating expense categories for the three months ended March 31, 2024, and 2023. Certain prior period amounts have been reclassified to conform to the current period's presentation.

Current wording

The following is a review of our operating expense categories for the three and six months ended June 30, 2024, and 2023. Certain prior period amounts have been reclassified to conform to the current period's presentation.

Previous wording

For the three months ended March 31, 2024, cost of revenue increased compared to the same period in 2023, primarily driven by increases in payroll and related expenses, attributable primarily to increases in headcount for added professional services resources in conjunction with our efforts to better align staffing levels with our backlog, as well as increases in employee compensation costs.

Current wording

The increases in payroll and related expenses are primarily due to increases in headcount for added professional services resources in conjunction with our efforts to better align staffing levels with our backlog, as well as increases in employee compensation costs.

Previous wording

For the three months ended March 31, 2024, research and development expenses increased compared to the same period in 2023, primarily driven by an increase in outside services as we continue to invest in the enhancement of our software solutions.

Current wording

For the three and six months ended June 30, 2024, research and development expenses increased when compared to the same periods in 2023, primarily driven by an increase in outside services as we continue to invest in the enhancement of our software solutions.

Previous wording

For the three months ended March 31, 2024, technology operations expenses decreased compared to the same period in 2023, primarily due to a decrease in payroll and related expenses and site rent.

Current wording

For the three and six months ended June 30, 2024, technology operations expenses decreased compared to the same periods in 2023, primarily due to decreases in payroll and related expenses and site rent.

Previous wording

The decrease in payroll and related expenses is attributable to the reduction in headcount as a result of our continuous efforts to optimize costs, partially offset by increases in employee compensation costs. In addition, as a result of our network rationalization efforts, site rent and telecommunications costs decreased in response to a 4.1% decline in active transmitters from March 31, 2023 to March 31, 2024. As we reach certain minimum frequency commitments, as outlined by the United States Federal Communications Commission, we may be unable to continue our efforts to rationalize and consolidate our networks.

Current wording

The decreases in payroll and related expenses are primarily due to the reduction in headcount as a result of our continuous efforts to optimize costs, partially offset by increases in employee compensation costs. In addition, as a result of our network rationalization efforts, site rent and telecommunications costs decreased in response to a 5.4% decline in active transmitters from June 30, 2023 to June 30, 2024. As we reach certain minimum frequency commitments, as outlined by the United States Federal Communications Commission, we may be unable to continue our efforts to rationalize and consolidate our networks.

Previous wording

For the three months ended March 31, 2024, selling and marketing expenses increased compared to the same period in 2023, driven primarily by increases in payroll and related expenses and advertising and events expenses.

Current wording

For the three and six months ended June 30, 2024, selling and marketing expenses decreased compared to the same periods in 2023, driven primarily by decreases in commissions and partially offset by payroll and related costs.

Previous wording

The increase in payroll and related expenses is due to increases in employee compensation costs. The increase in advertising and events expenses, largely due to increased trade show participation and overall travel as compared to the same period in 2023.

Current wording

The increase in payroll and related expenses is due to increases in employee compensation costs.

Previous wording

For the three months ended March 31, 2024, general and administrative expenses increased compared to the same period in 2023, primarily driven by increases in bad debt, payroll and related expenses and stock-based compensation, partially offset by decreases in facility rent, office and technology costs.

Current wording

For the three and six months ended June 30, 2024, general and administrative expenses decreased compared to the same periods in 2023, primarily driven by decreases in facility rent, office and technology costs resulting from reductions in office space in late 2023. These decreases were partially offset by increases in stock-based compensation expenses due to increases in employee compensations costs.

Previous wording

For the three months ended March 31, 2024, and 2023, depreciation and accretion expenses were $1.1 million and $1.2 million, respectively, primarily due to decreases in asset retirement cost.

Current wording

For the three months ended June 30, 2024, and 2023, depreciation and accretion expenses were $1.1 million and $1.3 million, respectively. For the six months ended June 30, 2024, and 2023, depreciation and accretion expenses were $2.1 million and $2.5 million, respectively. These expenses decreased for the three and six months ended June 30, 2024, compared to the same periods in 2023 primarily due to decreases in asset retirement costs.

Previous wording

For the three months ended March 31, 2024, we incurred severance and restructuring expenses of $0.4 million, primarily related to early termination for the lease of our corporate headquarters in Alexandria, Virginia in September 2023 as a result of our continuous efforts to optimize costs. No significant severance and restructuring expenses were incurred for the three months ended March 31, 2023.

Current wording

For the three and six months ended June 30, 2024, we incurred severance and restructuring expenses of $0.3 million and $0.8 million, respectively, primarily related to early termination for the lease of our corporate headquarters in Alexandria, Virginia in September 2023 as a result of our continuous efforts to optimize costs. No significant severance and restructuring expenses were incurred for the three and six months ended June 30, 2023.

Previous wording

Provision for income taxes was $0.9 million and $1.9 million for the three months ended March 31, 2024 and 2023, respectively. Provision for income taxes changed for the three months ended March 31, 2024 compared to the same period in 2023, primarily due to the effect of the anticipated annual effective tax rate change resulting from certain permanent tax differences, estimated research and development tax credits and related valuation allowance, and certain discrete items. Further details can be found in Note 11, "Income Taxes" in the Notes to Condensed Consolidated Financial Statements.

Current wording

Provision for income taxes was $1.4 million and $1.7 million for the three months ended June 30, 2024 and 2023, respectively. Provision for income taxes was $2.3 million and $3.6 million for the six months ended June 30, 2024 and 2023, respectively. Provision for income taxes changed for the three and six months ended June 30, 2024 compared to the same periods in 2023, primarily due to the effect of the anticipated annual effective tax rate change resulting from certain permanent tax differences, estimated research and development tax credits and related valuation allowance, and certain discrete items. Further details can be found in Note 11, "Income Taxes" in the Notes to Condensed Consolidated Financial Statements.

Previous wording

As of March 31, 2024, we held cash and cash equivalents of $23.3 million. The available cash and cash equivalents consist of cash in our operating accounts and cash invested in interest-bearing funds managed by third-party financial institutions. The Company maintains a majority of its cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and the majority of our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business, financial condition and results of operations.

Current wording

As of June 30, 2024, we held cash and cash equivalents of $23.9 million. The available cash and cash equivalents consist of cash in our operating accounts and cash invested in interest-bearing funds managed by third-party financial institutions. The Company maintains a majority of its cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and the majority of our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business, financial condition and results of operations.

Previous wording

For the three months ended March 31, 2024, net cash provided by operating activities was $2.0 million, a decrease of $0.6 million compared to the three months ended March 31, 2023. This decrease was primarily driven by accounts payable, accrued liabilities and other of $6.4 million and deferred revenue of $1.4 million, partially offset by net income of $4.2 million, accounts receivable of $1.3 million and non-cash items such as depreciation and accretion of $1.1 million, deferred income tax expense of $0.9 million and stock-based compensation of $1.1 million.

Current wording

For the six months ended June 30, 2024, net cash provided by operating activities was $9.4 million, a decrease of $1.8 million compared to the six months ended June 30, 2023. This decrease was primarily driven by net income of $7.7 million and non-cash items such as depreciation and accretion of $2.1 million, deferred income tax expense of $2.3 million and stock-based compensation of $2.3 million partially offset by, accounts payable, accrued liabilities and other of $3.0 million and deferred revenue of $1.2 million.

Previous wording

For the three months ended March 31, 2023, net cash provided by operating activities was $2.6 million, an increase of $7.5 million compared to the three months ended March 31, 2022. This increase was primarily driven by net income of $3.1 million, accounts receivable of $4.2 million and non-cash items such as depreciation and accretion of $1.2 million and stock-based compensation of $0.9 million. These increases were partially offset by accounts payable, accrued liabilities and other of $6.7 million and deferred revenue of $1.6 million.

Current wording

For the six months ended June 30, 2023, net cash provided by operating activities was $11.2 million, primarily driven by net income of $7.9 million, accounts receivable of $1.2 million and non-cash items such as depreciation and accretion of $2.5 million, deferred income tax expense of $3.6 million and stock-based compensation of $1.9 million. These increases were partially offset by accounts payable, accrued liabilities and other of $1.7 million and deferred revenue of $3.3 million.

Previous wording

For the three months ended March 31, 2024, and 2023, net cash used in investing activities was $0.9 million and $0.6 million, respectively. Net cash used in investing activities reflects purchases of property and equipment.

Current wording

For the six months ended June 30, 2024, and 2023, net cash used in investing activities was $1.5 million and $1.8 million, respectively. Net cash used in investing activities reflects purchases of property and equipment.

Previous wording

For the three months ended March 31, 2024, and 2023, net cash used in financing activities was $9.8 million and $8.2 million, respectively, primarily due to cash distributions to stockholders and the purchase of common stock for tax withholding purposes on vested equity awards.

Current wording

For the six months ended June 30, 2024, and 2023, net cash used in financing activities was $16.0 million and $14.3 million, respectively, primarily due to cash distributions to stockholders and the purchase of common stock for tax withholding purposes on vested equity awards.