Operator Good morning and welcome to Spok's Second Quarter Investor Call. Today's call is being recorded. Online today, we have Vince Kelly, President and Chief Executive Officer; Shawn Endsley, Chief Financial Officer; and Hemant Goel, President of the Company's operating company. At this time for opening comments, I will turn the call over to Mr. Endsley. Please go ahead, sir.

Good morning. Thank you for joining us for our second quarter investor update. Before we discuss our operating results, I want to remind everyone that today's conference call may include forward-looking statements that are subject to risks and uncertainties relating to Spok's future financial and business performance. Such statements may include estimates of revenue, expenses and income, as well as other predictive statements or plans, which are dependent upon future events or conditions. These statements represent the Company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results. Spok's actual results could differ materially from those anticipated in these forward-looking statements. Although these statements are based upon assumptions, the Company believes to be reasonable; they are subject to risks and uncertainties. Please review the Risk Factors section relating to our operations and the business environment in which we compete contained in our 2014 Form 10-K, our second quarter Form 10-Q, which we expect to file later today, and related documents filed with the Securities and Exchange Commission. Please note that Spok assumes no obligation to update any forward-looking statements from past or present filings and conference calls. With that, I'll turn the call over to Vince.

Thank you, Shawn and good morning. Our second quarter results reflects substantial progress toward our goal of becoming a consistently growing leader of critical communications as our software sales gained momentum and our wireless trends improved to their best levels in the Company's recent history. Spok continues to be a leader in the critical communications field, particularly in the Healthcare segment. All 15 hospitals recently named to the US News and World Report 2015 to 2016 Best Hospitals Honor Roll, as well as all 12 Best Children’s Hospitals are Spok customers and rely on Spok’s solutions to help them provide the best care. For the second quarter, we met the majority of our performance goals consistent with our previously provided financial guidance for 2015. Key accomplishments included a strong performance by our sales team which resulted in higher gross paid replacements and higher software revenue and bookings, along with a solid backlog at June 30. Our wireless trends continue to improve as the rates of pager churn and wireless revenue rose and reached record low levels. Plus, we ended the quarter ahead of our operating goals for total revenue, gross placements and average revenue per unit. Overall, we met or exceeded the majority of our operating goals, enhanced our product offerings, expanded our market reach, strengthened our balance sheet and again returned capital to our stockholders in the form of cash dividends and share repurchases. Shawn and Hemant will provide details on our financial performance and operating activities shortly, but first I want to review some other key results for the second quarter. Number one, software bookings increased 10.9% to $21 million from $19 million in the year earlier quarter, reaching a record high for second quarter bookings. Software revenue rose 13.9% to $17.7 million from the second quarter of…

Thanks, Vince. Before I discuss financial highlights for the second quarter, I would again encourage you to review our second quarter Form 10-Q, which we expect to file later today, since it contains far more information about our business operations, and financial performance, and we will cover on this call. As Vince noted, we are pleased with the company's overall operating performance for the quarter. Continued growth of software revenue and bookings combined with solid improvement in wireless trends and focused expense management, enabled us to again generate positive cash flows and maintain a strong balance sheet. We also continued to make steady progress toward our long-term business goals. This morning, I will review four key areas that influenced our second quarter financial performance. They include, number 1, factors related to second quarter revenues, number 2, selected items that influenced second quarter expenses, number 3, a brief review of the balance sheet, including deferred tax assets and number 4, an update on our financial guidance for 2015. As usual, if you have specific questions about these items or any of our quarterly financial results, I would be glad to address them during the Q&A. With respect to revenue for the second quarter, consolidated revenue totaled $48 million. Of the total, software revenue increased 13.9% from the year earlier quarter to $17.7 million, while revenues declined 9.8% to $30.2 million. Software revenue represented 37% of our total revenue for the quarter, compared to 31.7% for the second quarter of 2014, reflecting the company's continued success in transitioning to a software-based business model. Second quarter software revenues reflected increases in both operations and maintenance revenue compared to the second quarter of 2014. Software operations revenue now generally recognized on a ratable basis increased 16.1% to $9.3 million from $8.1 million in the…

Thank you, Shawn and good morning. Throughout the second quarter, our momentum from Q1 continues. Our sales and marketing teams help us close record second quarter of software bookings of $21 million. This represents a 10.9% increase over Q2 in 2014 and includes a 99.8% renewal rate for maintenance. Our customers see us more than just a vendor, but as a partner and this high rate of renewal is evidence of the value that’s within our support services and ongoing product developments. Our customers trust our solutions for their critical communication needs, and frequently return to Spok for upgrades to their existing applications to add new products and to solve their communications problems. For example, a mid-sized hospital in the North Eastern United States has been a long time call center customer came to us looking for a solution to several challenges. They needed a way to support secured positioned communications with Bring Your Own Device environment often referred to as BYOD. They also wanted to send patient monitoring alerts to provide us mobile devices and deliver patient test results securely from both labs and radiology departments to ordering physicians. Our robust suite of solutions was able to fulfill all of these needs and this customer is adding secured texting, clinical alerting and critical test results management to the Spok solution set. This was one of our largest six-figure deals for the quarter. We are experiencing a lot of momentum so far this year for mobile solutions as this growth trend continues throughout the healthcare industry, while secured texting is one of our fastest growing solutions of sales awards to 50% over Q2 last year, we are hearing that security alone is not enough. Hospitals are now taking a broader view of communications and simultaneously want to improve clinical workflows,…

Thank you, Hemant. Before we take your questions, I want to comment briefly on several items that maybe of interest. First, I want to update you on our overall capital allocation strategy, second, brief you on our product development initiatives, and third, provide detail for our upcoming investor meeting and analyst day scheduled for early November in New York. Turning to our overall capital allocation strategy, our goal remains to achieve sustainable business growth, while maximizing long-term stockholder value. We will do this by operating profitably, returning capital to our stockholder, and investing back in our business in the form of product development, market expansion, potentially accretive acquisitions. We expect to continue paying our quarterly dividend of 12.5 cents per share or $0.50 annually for the foreseeable future based on our current projections for operating cash flow. In addition, we may continue to buyback additional shares of our common stock from time-to-time under our share repurchase program depending on the share price and market condition. As I mentioned earlier, we repurchased 177,330 shares of common stock during the second quarter for approximately $3 million. As a result, approximately 11 million remains authorized for purchase under the buyback plan which extends to the end of the year. We remain on track to fulfill our previously announced goal of returning $26 million in capital to our shareholders in 2015, including September dividend distribution, we will have returned approximately $11.7 million to shareholders through cash dividends and share repurchases. Although the exact manner of distribution for the remaining $14.3 million has yet to be determined, along with distribution days, it will include some combination of regular quarterly dividends, periodic repurchases of common stock and potentially a special dividend. With respect to our product development initiatives, our management team along with our financial advisors…

[Operator Instructions] And we will take our first question from Rich Murphy. Please go ahead. Your line is open.

Hey, Vince. This is about the capital allocation, maybe get more detail on November 3. But, as you know, we've been longtime shareholders and from a stock buyback standpoint, from 2008 to 2009 to shared a along with on the stock, you guys bought back a tremendous amount of shares. But since then, the share count has been basically flat. So, so, when you're looking at capital allocation, this is the first time since I've owned the stock then I could say that, it looks like you've stabilized EBITDA, growth looks good. Carrying $117 million cash on your balance sheet, no debt, and you probably could easily get 1 to 1.5 turns of debt if you want to do an acquisition. So it just seems that there is – we have a way too much cash and there is risk with that. So is there any - is the Board or are you guys thinking about, how you can maybe do something to rectify that situation without hurting cash?

Sure, sure, let me just address that for a little bit. So for this year, we said, we’ll return $26 million of capital to our shareholders, which is a big chunk of our cash flow for 2015. So we’ll return about $11 million of that in terms of our recurring dividend and about $15 million of that in terms of share repurchases or if we don’t use all of that on the share repurchase plan. We’ll give for some special dividend to capital to get the $26 million. The reason we are maintaining roughly $100 million of cash on our balance sheet is to be opportunistic with respect to acquisitions. Now, we’ve talked to you guys about this in the past, we’ve looked at a lot of companies, that’s over 70 right now and the valuation expectations are a bit silly. The private equity world has traded these companies between each other and driven these values up at a very high level for whatever reason and so we’ve walked away from those deals. That doesn’t mean it’s always going to stay there and so, it gives us an option in the future to execute an acquisition at a reasonable valuation. In the mean time, we are just going to take our cash as I said, and continue returning it to you guys as shareholders, we are going to continue investing back in the business in terms of product development. So we can expand our capabilities and make sure we are the leader in unified communications and workflow. In healthcare, we define that as critical communication. And we will look at and we have not closed our mind from time to time being more aggressive at share repurchases and other things to do with the cash. But we are going to be stewards of that cash and not going to do anything crazy with it and I mean, I hear you lot clearing with something that we look at and talk about all the time.

And I hear – and I’d really appreciate you don't want to do a silly acquisition I understand the market is very frothy at this point of time. So, I appreciate the fact that you are being very conservative in that nature. But I think, returning $26 million, it's the first time that I've owned the stock that I can honestly say that the EBITDA has almost stabilized. It was always kind of going down, down, down, with this new growth, with the service – the healthcare services company or software. It looks like we've got something where we are kind of stabilizing. And you could, I think - argue that you're trading for four times. You are not buying something for four times in an acquisition market, if you tell you that much. So four times cash flows. So I don't know, I just feel like you guys could be a little more aggressive on that front and is there a mindset of the old school where declining, I mean I am certainly at a mindset change at some point because your business has changed. I mean, you are not - no longer permanent decline and you are not getting the multiple for that.

Yes, I agree with your comments on the stabilization there. We’ve talked about this for a long time. The percentage of our total business that comes from software continues to rise. And the percentage of our total business sits in the paging revenue side of our business continues to fall, but that gets to be a smaller percentage. Yes, things are absolutely going to stabilize. Also are multiple quite frankly it’s going to change, when 65%, 70% of our revenue is coming from the software business, down the road here, just coming from the paging business, the multiple where we trade is obviously going to go up too. I mean, so we hear you on all that. We know we are carrying a large cash balance. We will return capital to shareholders. We have not precluded. We have not said ourselves as a Board and the management team, we are not willing to be more aggressive in returning even more capital to keep that option open right now. We’ve said, we will do for 2015 as we get near the end of the year, we will evaluate, we want to do for 2016 and we will get back to you guys and let you know. But, I hear you. I understand the arguments on both side of this issue and I very much appreciate your feedback.

Okay, good quarter guys. Take care.

Thank you.

[Operator Instructions] And it appears we have no further questions at this time.

Okay, look folks, really appreciate your participation this morning. We really look forward to speaking to you again next quarter after we release our third quarter results and have a great day. And please come to our investor conference in November.

Thank you. This does conclude today's conference. You may now disconnect at any time and have a great day.