Spok Holdings, Inc

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 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, equipment, maintenance plans and/or equipment loss 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 include cost of revenue exclusive of: research and development, technology operations, selling and marketing, general and administrative, severance and restructuring and depreciation and accretion. These items are shown separately to the extent that they are considered material for the periods presented.

The financial information included herein, other than the Condensed Consolidated Balance Sheet as of December 31, 2024, is unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2024 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, 2024.

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, 2024 (the “2024 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.

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, depreciation and accretion 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 2024 Annual Report, which describe key risks associated with our operations and industry.

NOTE 3 -RECENT ACCOUNTING STANDARDS

Recently issued accounting pronouncements not yet adopted

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and the income taxes paid. The update is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2025.

In November 2024, the FASB issued ASU 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses," requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements. This update is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact the update will have on our Consolidated Financial Statement disclosures.

NOTE 4 -SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are detailed in Note 1, “Organization and Significant Accounting Policies” of the 2024 Annual Report.

NOTE 5 -REVENUE, DEFERRED REVENUE AND PREPAID COMMISSIONS

Wireless Revenue

Wireless revenue consists oftwo primary components: paging revenue and product and other revenue. Paging revenue consists primarily of recurring fees associated with the provision of messaging services and fees for paging devices and is net of a provision for service credits. Product and other revenue reflects system sales, sales of paging devices and charges for devices that are not returned and are net of anticipated credits. Our core offering includes subscriptions to one-way or two-way messaging services for a periodic (monthly, quarterly, semiannual, or annual) service fee. This is generally based upon the type of service provided, the geographic area covered, the number of devices provided to the customer and the period of commitment. A subscriber to one-way messaging services may select coverage on a local, regional or nationwide basis to best meet their messaging needs. Two-way messaging is generally offered on a nationwide basis. See "Item 1. Business,” in the 2024 Annual Report for more details.

Software Revenue

Software revenue consists primarily of license revenues, including revenues from our perpetual and term software license arrangements, revenue from the sale of hardware that facilitates the use of our software solutions, professional services revenue related to the implementation of our solutions, and maintenance and subscription revenue that is generated from the ongoing support of our perpetual and term software license arrangements, typically contracted for a period of between one and three years.

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Our software licenses and hardware are generally recognized at a point in time when we have transferred control to the customer. For software licenses, revenue is not recognized until the related license(s) has been made available to the customer and the customer can begin to benefit from its right to use the license(s). Our software licenses represent a right to use Spok’s intellectual property ("IP") as it exists at a point in time at which the license is granted. Many of our software licenses have significant standalone functionality due to their ability to process a transaction or perform a function or task, and we do not need to maintain those products, once provided to the customer, for value to exist. While the functionality of the IP that we license may substantively change during the license period, customers are not contractually or practically required to update their license as a result of those changes.

Our wireless, professional services, and maintenance and subscription services are generally recognized over time due to a customer's simultaneous receipt and consumption of the benefit as we perform the work. As we transfer control over time, we recognize revenue based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires significant judgment and is based on the nature of the products or services to be provided. Generally, we use the time-elapsed measure of progress for performance obligations that include wireless, maintenance and subscription, and professional services - managed services. We believe this method best depicts the simultaneous transfer and consumption of the benefit based on our performance as these services are generally considered standby services. For professional services - projects, we leverage an input methodology based on the number of hours worked on a project versus the total expected hours necessary to complete the project. Revenues are recognized proportionally as hours are incurred.

The following table presents our revenues disaggregated by revenue type:

The Company is currently structured as a single operating (and reportable) segment, a clinical communication and collaboration business. Sales are assigned to subsidiaries based on the geographic location of the customer at the signing of a contract. The United States was the only country that accounted for more than 10% of the Company’s total revenue for the three and six months ended June 30, 2025, and 2024. Revenue generated in the United States and internationally consisted of the following for the periods stated:

Deferred Revenue

Our deferred revenue represents payments made by, or due from, customers in advance of our performance. Deferred revenue that is expected to be recognized as revenue during the next 12-month period is recorded in deferred revenue, and the remaining portion is recorded within other non-current liabilities in the Condensed Consolidated Balance Sheets.

Changes in the balance of total deferred revenue during the six months ended June 30, 2025, are as follows:

During the six months ended June 30, 2025, the Company recognized $18.9 million related to amounts deferred as of December 31, 2024.

Prepaid Commissions

Our prepaid commissions represent payments made to employees in advance of our performance on the related underlying contracts. These costs have been incurred directly in relation to obtaining a contract. As such, these costs are amortized over the estimated period of benefit. Changes in the balance of total prepaid commissions during the six months ended June 30, 2025 are as follows:

Prepaid commissions are included within prepaid expenses in the Condensed Consolidated Balance Sheets and commissions expense is included within selling and marketing in the Condensed Consolidated Statements of Operations.

Remaining Performance Obligations

The balance of consideration allocated to remaining performance obligations at June 30, 2025 was $65.2 million, which excludes $10.1 million of additional transaction value that was deemed cancellable by the customer without significant penalty. We expect to recognize approximately $38.1 million of our remaining performance obligations over the next 12 months, with the remaining balance recognized thereafter.

NOTE 6 -LEASES

We have operating lease arrangements for corporate offices, cellular towers, storage units and small building spaces. The building space is used to house infrastructure, such as transmitters, antennae and other various equipment for the Company’s wireless paging services. For leases with a term of 12 months or less, renewal terms are generally of an evergreen nature (either month-to-month or year-to-year). For leases with a term greater than 12 months, renewal terms are generally explicit and provide forone tofive optional renewals consistent with the initial term. Many of our leases, with the exception of those for our corporate offices, include options to terminate the lease withinone year. Variable lease payments, residual value guarantees or purchase options are not generally present in these leases.

Lease costs are included in technology operations and general and administrative expenses in the Condensed Consolidated Statements of Operations. The following table presents lease costs disaggregated by type:

The following table presents supplemental cash flow information:

The following table presents the weighted average remaining lease term and discount rate:

Maturities of lease liabilities as of June 30, 2025, were as follows:

NOTE 7 -CONDENSED CONSOLIDATED FINANCIAL STATEMENTS' COMPONENTS

Depreciation and Accretion

Depreciation and accretion expenses consisted of the following for the periods stated:

Other Income (Expense)

For the three and six months ended June 30, 2025, the Company recognized total Other income (expense) of $0.7 million and $0.8 million respectively, compared to negligible amounts in the same periods in 2024. The other income primarily includes gain of $0.7 million from the sale of a domain name.

Accounts Receivable, Net

Accounts receivable was recorded net of an allowance of $0.8 million at June 30, 2025, and $1.0 million at December 31, 2024. Accounts receivable, net includes $6.6 million and $6.4 million of unbilled receivables at June 30, 2025, and December 31, 2024, respectively. Unbilled receivables are defined as the Company's right to consideration in exchange for goods or services that we have transferred to the customer but have not yet billed for, generally as a result of contractual billing terms.

Property and Equipment, Net

Property and equipment, net consisted of the following as of the dates stated:

NOTE 8 -GOODWILL

During the three months ended June 30, 2025, we performed a qualitative assessment of goodwill and determined that a triggering event had not occurred. While an impairment assessment is performed annually in the fourth quarter, the Company monitors its business environment for potential triggering events on a quarterly basis. There is potential for further impairment charges being recognized in future periods based on these ongoing assessments.

NOTE 9 -ASSET RETIREMENT OBLIGATIONS

The components of the changes in the asset retirement obligation liabilities were:

The short-term portion of the balance above is included within other current liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2025, and December 31, 2024.

The cost associated with the estimated removal costs and timing refinements due to ongoing network rationalization activities is expected to accrete to a total liability of $12.6 million. The total estimated liability is based on the transmitter locations remaining after we have consolidated the number of networks we operate and assuming the underlying leases continue to be renewed to that future date. Accretion expense related solely to asset retirement obligations and was recorded based on the interest method.

NOTE 10 -STOCKHOLDERS' EQUITY

General

Our authorized capital stock consists of 75 million shares of common stock, par value $0.0001 per share, and 25 million shares of preferred stock, par value $0.0001 per share.

At June 30, 2025, and December 31, 2024, we hadno stock options outstanding.

At June 30, 2025, and December 31, 2024, there were 20,583,854 and 20,284,177 shares of common stock outstanding, respectively, andno shares of preferred stock were outstanding.

Dividends

Cash distributions to stockholders, as disclosed in the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025, and 2024, include previously declared cash dividends on shares of vested restricted common stock ("restricted stock") issued to our non-executive directors and dividends related to vested restricted stock units ("RSUs") issued to eligible employees. Cash dividends on restricted stock and RSUs have been accrued and are paid when the applicable vesting conditions are met. Accrued cash dividends on forfeited restricted stock and RSUs are also forfeited. The following table details our cash dividends declared and paid in 2025 through the date hereof:

(1) The total declared reflects the cash dividends declared in relation to common stock, deferred stock units ("DSUs"), unvested restricted stock and unvested RSUs.

On July 30, 2025, our Board of Directors declared a regular quarterly cash dividend of $0.3125 per share of common stock with a record date of August 19, 2025 and a payment date of September 9, 2025. Cash dividends related to common stock of approximately $6.4 million will be paid from available cash on hand.

Common Stock Repurchase Program

On February 16, 2022, our Board of Directors authorized a share repurchase program for up to $10 million of the Company’s common stock. Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions, legal requirements and other considerations. The repurchase program does not obligate the Company to acquire any particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. For the six months ended June 30, 2025, the Company did not repurchase any shares of common stock.

Net Income per Common Share

Basic net income per common share is computed on the basis of the weighted average common shares outstanding. Diluted net income per common share is computed on the basis of the weighted average common shares outstanding plus the effect of all potentially dilutive common shares, including outstanding restricted stock and RSUs, which are treated as contingently issuable shares, using the “treasury stock” method.

The components of basic and diluted net income per common share were as follows for the periods stated:

Stock-Based Compensation Plans

On April 10, 2023, our Board of Directors adopted an amendment and restatement of the Spok Holdings, Inc. 2020 Equity Incentive Award Plan (the "2020 Equity Plan") to increase the number of shares available for issuance by 1,000,000 shares that our stockholders subsequently approved on July 25, 2023. At July 25, 2023, a total of 1,268,444 shares of common stock had been reserved for issuance under the 2020 Equity Plan.

Awards under the 2020 Equity Plan may be in the form of stock options, restricted common stock, RSUs, performance awards, dividend equivalents, stock payment awards, deferred stock, DSUs, stock appreciation rights or other stock or cash-based awards.

Restricted stock awards generally vestone year from the date of grant. Related dividends accumulate during the vesting period and are paid at the time of vesting.

Contingent RSUs generally vest over athree-year performance period upon successful completion of the performance objectives. Non-contingent RSUs generally vest in thirds, annually, over athree-year period. Dividend equivalent rights generally accompany each RSU award, and those rights accumulate and vest along with the underlying RSU.

Dividend equivalent rights generally accompany each DSU award and are paid to participants in cash on the Company's applicable dividend payment date whether the DSU is vested or unvested. The dividend equivalent right associated with a DSU continues until delivery of the underlying shares of common stock is made.

Payment of the underlying shares of common stock occurs at the earliest of a participant's separation from service, disability, death, or a change in control.

The following table summarizes the activities under the 2020 Equity Plan from January 1, 2025, through June 30, 2025:

The following table details activities with respect to outstanding RSUs, DSUs, and restricted stock under the 2020 Equity Plan for the six months ended June 30, 2025:

Of the 822,142 unvested RSUs, DSUs and restricted stock outstanding at June 30, 2025,428,250 RSUs include contingent performance requirements for vesting purposes. At June 30, 2025, there was $5.7 million of unrecognized net compensation cost related to RSUs and restricted stock, which is expected to be recognized over a weighted average period of 1.7 years.

Employee Stock Purchase Plan

In 2016, our Board of Directors adopted the Spok Holdings, Inc. Employee Stock Purchase Plan (the "ESPP") that our stockholders subsequently approved on July 25, 2016. A total of 250,000 shares of common stock were reserved for issuance under this plan.

The ESPP allows employees to purchase shares of common stock at a discounted rate, subject to plan limitations. Under the ESPP, eligible participants can voluntarily elect to have contributions withheld from their pay for the duration of an offering period, subject to the ESPP limits. At the end of an offering period, contributions will be used to purchase the Company's common stock at a discount to the market price based on the first or last day of the offering period, whichever is lower.

Participants are required to hold common stock for a minimum period oftwo years from the grant date. Participants will begin earning dividends on shares after the purchase date. Each offering period will generally last for no longer thansix months. Once an offering period begins, participants cannot adjust their withholding amount. If a participant chooses to withdraw, any previously withheld funds will be returned to the participant, with no stock purchased, and that participant will be eligible to participate in the ESPP during the next offering period. If the participant terminates employment with the Company during the offering period, all contributions will be returned to the employee and no stock will be purchased.

The Company uses the Black-Scholes model to calculate the fair value of the common stock to be purchased during each offering period on the offer date. The Black-Scholes model requires the use of estimates for the expected term, the expected volatility of the underlying common stock over the expected term, the risk-free interest rate and the expected dividend payment.

For the six months ended June 30, 2025,11,558 shares of the Company's stock were purchased, compared to 9,933 shares purchased during the same period in 2024. The following table summarizes the activities under the ESPP from January 1, 2025 through June 30, 2025:

Amounts withheld from participants will be classified as accrued compensation and benefits in the Condensed Consolidated Balance Sheets until funds are used to purchase shares. This liability amount is immaterial to the Condensed Consolidated Financial Statements.

Stock-Based Compensation Expense

We record all stock-based compensation, which consist of RSUs, DSUs, restricted stock, equity in lieu of salary, and the option to purchase common stock under the ESPP, at fair value as of the grant date. Stock-based compensation expense is recognized based on a straight-line amortization basis over the respective service period. Forfeitures and withdrawals are accounted for as incurred.

The following table reflects the items for stock-based compensation expense in the Condensed Consolidated Statements of Operations for the periods stated:

NOTE 11 -INCOME TAXES

Spok files a consolidated United States federal income tax return and income tax returns in various state, local and foreign jurisdictions as required.

Our quarterly tax provision and our quarterly estimate of our annual effective tax rate are subject to significant variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, changes in how we do business, changes in our stock price, foreign currency gains (losses), tax law developments (including changes in statutes, regulations, case law, and administrative practices), and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

For 2025, the anticipated effective income tax rate is expected to continue to differ from the federal statutory rate of 21%, primarily due to the effect of state income taxes, permanent differences between book and taxable income, and certain discrete items.

We had total net deferred income tax assets ("DTAs") of $39.1 million and $41.7 million as of June 30, 2025, and December 31, 2024, respectively. We had a valuation allowance of $1.8 million and $2.3 million as of June 30, 2025, and December 31, 2024, respectively.

We assess the recoverability of our deferred income tax assets, which represent the tax benefits of future tax deductions, based on available positive and negative evidence and by considering the adequacy of future taxable income from all sources, including prudent and feasible tax planning strategies. This assessment is required to determine whether, based on all available evidence, it is "more likely than not" (meaning a probability of greater than 50%) that all or some portion of the deferred income tax assets will be realized in future periods. During the fourth quarter of each year, we update our multi-year forecast of taxable income for our operations, which assists in analyzing the recoverability of our DTAs.

The Company maintains a valuation allowance related to federal foreign tax credits and certain state net operating losses and state tax credits, as the Company does not believe current projections of future taxable income will be sufficient to utilize those tax assets and credits prior to expiration.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which includes permanent extensions of most expiring Tax Cuts and Jobs Act provisions and international tax changes. We are in the process of evaluating the impact of OBBBA on our Consolidated Financial Statement disclosures.

NOTE 12 -COMMITMENTS AND CONTINGENCIES

There have been no material changes during the six months ended June 30, 2025, to the commitments and contingencies previously reported in the 2024 Annual Report.

NOTE 13 -RELATED PARTIES

A member of our Board of Directors serves as EVP and Chief Information Officer for an entity that is also a customer of the Company. For the three months ended June 30, 2025 and 2024, we recognized revenues of $0.8 million and $0.4 million, respectively, related to the contracts from the entity at which the individual is employed. For the six months ended June 30, 2025 and 2024, we recognized revenues of $1.2 million and $0.8 million, respectively, related to contracts from the entity at which the individual is employed. We had $0.5 million and negligible amounts of outstanding receivables related to these contracts included in accounts receivable, net on the Condensed Consolidated Balance Sheets as of June 30, 2025, and December 31, 2024, respectively. The outstanding receivables were settled in July 2025.

NOTE 14 -SEGMENT INFORMATION

FASB ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of a public entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer. We identify our business as a single segment, clinical communications and collaboration solutions, which includes operating revenues from our wireless and software solutions.

The accounting policies of the clinical communications and collaboration solutions segment is the same as those described in the summary of significant accounting policies disclosed in Note 1, “Organization and Significant Accounting Policies” of the 2024 Annual Report. The CODM evaluates the performance of the clinical communications and collaboration segment based on net income that is also reported on the Condensed Consolidated Statements of Operations as consolidated net income.

Significant expenses within net income include cost of revenue, research and development, technology operations, selling and marketing, and general and administrative expenses, which are each separately presented on the Company’s Condensed Consolidated Statements of Operations. Other segment items within net income include interest and other income (expense) and provision for income taxes on the Condensed Consolidated Statements of Operations.

The measurement of segment assets is reported on the Condensed Consolidated Balance Sheets as total consolidated assets. Depreciation and accretion details are tabulated in Note 7, "Condensed Consolidated Financial Statements' Components." An immaterial amount of long-lived assets were held outside of the United States as of June 30, 2025 and 2024.

The principal category we use to disaggregate revenues is the nature of our products and services, as presented in Note 5, "Revenue, Deferred Revenue and Prepaid Commissions." All our revenues are derived from external customers. The table summarizing the disaggregation of the revenue by geography is disclosed in Note 5, "Revenue, Deferred Revenue and Prepaid Commissions."