Good morning and welcome to Spok's Third 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. 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 third 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 that 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 third 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.

Thanks, Shawn, and good morning. We continue to make steady progress toward our long-term business goals during the third quarter. Wireless subscriber and revenue trends continue to improve to their best levels in many years which is very gratifying given our long history as a paging carrier. However our software sales were lower than expected due in part to weaker economic conditions in certain international markets. Even so, our overall results reflected continued progress towards solidifying Spok's position as a leader in critical communication, particularly in the healthcare segment, and we remain on track in the year consistent with our previously provided financial guidance for 2015. During the quarter, we met many of our key performance objectives, enhanced our product offerings, expanded our market reach, strengthened our balance sheet, and again we turned capital to stockholders in the form of cash dividends and share repurchases. We ended the quarter with a strong software backlog in sales pipeline as well as near record low rates of paid return in wireless revenue erosion. In addition, we ended the quarter ahead of our operating goals for cash flow, expenses, operating margins, and average revenue per unit. 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 third quarter. Number one, wireless subscriber and revenue results continue to show solid improvement. The quarterly rate of paging unit erosion improved to a near record low of 1.5% for the quarter, while the annual rate improved to 6.4% its best level in more than a decade. In addition, the annual rate of wireless revenue erosion improved to 10.6% its third best level in many years. At the same time, paging ARPU remained relatively stable primarily due to consistent results from…

Thanks, Vince. Before I discuss financial highlights for the quarter, I would again encourage you to review our third quarter Form 10-Q which we expect to file later today. That should contain much more information about our business operations and financial performance than we will be able to cover on this call. Overall, we reported a solid quarter and continued on track for meeting our long-term business goals. Steady improvement in wireless trends and lower operating expenses offset in part by lower than expected software revenue and bookings enabled us to again generate positive cash flows and maintain a strong balance sheet. This morning, I will review four key areas that influenced our third quarter financial performance they include number one factors related to revenue; number two, selected items that influenced expenses; number three, a brief review of the balance sheet, including deferred tax assets; and number four, an update on our financial guidance for 2015. If you have specific questions about these items or any of our financial results I would be glad to address them during the Q&A. First, with respect to revenue for the third quarter consolidated revenue totaled $46.2 million compared to $49.8 million for the same quarter of 2014. Software revenue of $16.8 million was essentially flat with the year earlier quarter, while wireless revenue decline 10.6% to $29.4 million. Software revenue represented 36.4% of our total revenues for the quarter compared to 34% for the third quarter of 2014 reflecting the company's continued transition to a software based business model. Software revenue for the first nine months of 2015 increased 7.7% from the same period of 2014. Third quarter software revenue included $7.9 million of operations revenue and $8.9 million of maintenance revenue. Operations revenue declined 13.2% from $9.1 million in the year ago…

Thank you, Shawn, and good morning. Let me talk about sales and marketing activities. As mentioned, we saw mixed results of software sales during the third quarter. Our sales and marketing teams delivered third quarter software bookings of $16.7 million; down 20% from second quarter. However solid new customer bookings, along with a 99% maintenance renewal rates are driving healthy maintenance revenue numbers. Secure messaging remains one of our best performing solutions with sales remaining consistent with second quarter levels. In third quarter, we welcomed 30 new customers to the Spok family. Healthcare bookings overall in the U.S. are up 12% over third quarter 2014 and new customer bookings are up 140% over third quarter 2014. These are organizations that have never worked with us before and they are important part of our future growth. Consolidation amongst hospital networks continued as a national trend, creating a demand for solutions that can fit the needs of multiple interconnected facilities. This was demonstrated by several third quarter deals, including Spok's continued success, working with a hospital network with a broad national presence. Nine additional sites were closed during the third quarter with solutions that range from Console and Web, Messenger Middleware, and Spok mobile. Our customers consider us to be a true partner and place a high value on our ongoing support and training to get the most from their solutions. This trust and teamwork was evident when a prominent hospital in the Midwest came to Spok looking for heath transitioning from a legacy paging and text messaging systems to a communications enabled workflow approach. After an extensive evaluation process, the organization selected Spok's Console, Web, and Middleware solutions and also will become a significant Spok mobile customer. In addition, they will engage our consulting services team to guide them through the…

Thank you, Hemant. Before we take your questions, I want to comment briefly on several items that may be of interest. First, is I want to update you on our current capital allocation strategy. Second, brief you on our product development initiatives. And third, provide more details about our Investor Meeting coming up next week in New York. With respect to our overall capital allocation strategy, our goal remains to achieve sustainable business growth, while maximizing long-term stockholder value. We plan to do this by operating profitably, returning capital to our shareholders, and investing in our business through product development, market expansion, and potentially accretive acquisitions. We continue to expect paying our quarterly dividend of $0.125 per share or $0.50 annually for the foreseeable future based on our current projections for operating cash flow. Also we may buyback additional shares of our common stock from time to time under our share repurchase program, depending on the share price and market conditions. Approximately $3.2 million remains authorized for purchase under our 2015 buyback plan. Yesterday, our Board approved an extension of our repurchase program to December 31, 2015, and reset the repurchase authority in the amount of $10 million to begin the earlier of January 4 of the completion of the existing 2015 repurchase plan. Including the regular quarterly dividends, and special dividends announced yesterday, payable in December, we remain on track to fulfill our previously announced goal of returning at least $26 million in capital to our shareholders in 2015. Turning to our product development initiatives, which I outlined for you on our previous earnings call, we've taken additional steps in recent months to further refine the concept and review it with our Board. As you recall, we are undertaking this initiative significantly upgrade our product solutions offerings and related…

Thank you. [Operator Instructions]. We will now take our first question from Steven McIntyre from Braeside Capital. Please go ahead. Your line is open.

Thanks. Hi guys how is it going?

Good, Steve, fine. How are you?

Just a couple of quick questions. On the capital return, with the two dividends, I think that puts you right at 26 just looking at how much you spent through 9/30. And is that October, November, December if the stock is still attractive in your eyes, I mean, you talked about exceeding it, is that something we could probably look for?

Yes, it's potential that we could buy more, we have extended the plan. We still have some left in the basket as I mentioned and we have extended the plan to basically start it, the earlier of January 4, when the existing basket runs out, it's totally possible that we would buy more in the fourth quarter.

Okay. And then one question on the software side, kind of how is Q4 shaping up? I know it's only a month in but if you kind of look at the maintenance revenues versus last year you may be have a million head start versus, I guess, you guys said 1906 or something thereabouts; do you think on the operational revenues, how do you look at it year-over-year for Q4?

Generally you have a stronger fourth quarter on operational revenues because everybody is hustling to get things installed. We've got a lot in the backlog as we mentioned, I think it's over $41 million right now. We should have a good Q4. We're comfortable with the guidance that we gave at the beginning of the year from our annual results. We talked about where we would be on revenue; we talked about where we would be on operating expenses and CapEx. And then we will give guidance again in the first quarter when we report our fourth quarter numbers. But that's generally how we communicate.

Okay and just one more on the revenue side. The deferred revenue has, I think, picked up to like $29 million. How should we read that? I mean, that's kind of gone up pretty nice sequentially is that something on the maintenance side or it's up $3 million or $4 million, I think, year-over-year. Could you may be just talk about the deferred revenues?

I'll let our Chief Financial Officer do that.

Yes, our deferred revenue consists of both maintenance and operations revenues. So that we recognize out of that basically on a ratable basis, as we implement project and as the maintenance basically is incurred overtime. So, yes, I mean it's favorable. We look at that as favorable and also there is a favorable impact on our cash flow, because we collect that cash before it's recognized as revenue.

I'll sneak in one last one if I can too. On the PP&E disposal, I think it may be picked up like $600 grand in the quarter, could you may be just talk about what that was from?

Normally just equipment disposal and minor things. I mean, it's nothing unusual or out of line.

Okay, I just thought -- I think it was only a couple hundred thousand through 6/30 and it seemed like it was a little bit better. I mean, it's a nice small item. I was just curious if there was one thing that led to that?

Nothing, nothing unusual and we don't expect it to be of any consequence through the rest of the year.

Thank you. [Operator Instructions]. We will now take our next question from Rich Murphy from Cross River. Please go ahead. Your line is open.

Yes, keeping on the software, not to beat a dead horse, but the guidance that you've given assumes a pretty robust fourth quarter for software. What should I look at as a guidepost to see, that gives me a kind of -- it looks like about $19.5 million so up from $16.8 million. Just some color on that.

Yes, I mean, the guidance that we gave was for the year, right. And so, yes, we do have to have a pretty decent fourth quarter to achieve that guidance. The way we generally forecast as we get with our professional services group, we look at the projects that they're going to be installing. We go through them on a project-by-project basis and that's how we roll off our numbers and that's why we still feel good with the guidance that we gave you. Now, it's October, could a customer delay a project that we're expecting them to put in or could couple of customers delay a project, yes, but you also might have some customers that accelerate a project. So based on our view today, and based on the work we've done in professional services group blowing everything up, and based on the feedback that we've had from our sales group that's where we see. And I think if you look back, I don't have it laying in front of me, it looks like last year we had kind of a similar dynamic in the fourth quarter too because everyone is trying to get their numbers in by the end of the year.

Okay, so there -- I was wondering if there's some type of seasonal aspect to the software business but --

Generally fourth quarters, yes, in software is pretty good, yes.

And then more of a housekeeping question, the tax, how do I look at the tax if I look at a balance sheet I see that you get probably based on the cash flow statement you get some tax cash flow coming back. Is that something we can -- is that something that we can expect for the next year, two years, when does that kind of slow down?

I'm not -- I'm not following you with respect to when you said taxes.

I'm sorry, we're not paying -- you said we're not paying federal taxes. So --

We're paying all federal tax. We have a large net operating losses in. So we have deferred tax assets that are able to offset that income. Now, we're right in actually the flows of a process of evaluating that evaluation allowance on this deferred tax assets. And I think, may be Shawn mentioned in his comments, we're going to complete that evaluation this quarter, and we may be adjusting it. And if we do so obviously we will do that in the fourth quarter and report it in checks and balance about our fourth quarter results sometime next quarter.

Yes, in our, I think cash flow statement we do pay about $1.2 million of what we call income taxes. That is federal alternative minimum tax and basically state income taxes where certain jurisdictions do not allow us to use NOL, particularly states like Illinois and California. But we don't expect to see any uptick in that amount. They'll probably be right around that same level of payment.

Okay, so like a $2.9 million in deferred income tax -- what number is -- that has nothing to do with -- is that the PGA [ph] essentially?

No, that's -- that's just based on the difference between basically book and tax differences.

Okay.

Differences and the tax economy.

But that does not involve any cash payment on our part.

Thank you. [Operator Instructions]. There are no currently no question waiting in the queue.

Okay, look, folks. Thanks a lot for joining us this morning. We look forward to seeing some of you at our Investor Meeting next week in New York and to talk to all of you again after we release our fourth quarter results early next year. So everyone thank you and have a great day.

Thank you. That will conclude today's conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.