Greetings, and welcome to the Spok Holdings Q2 2024 Earnings Results Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Al Galgano, Investor Relations. Thank you, Al. You may begin.

Hello everyone, and welcome to Spok Holdings second quarter 2024 earnings call. I am joined by Vince Kelly, Chief Executive Officer; Mike Wallace, President of Spok Inc. and Chief Operating Officer; and Calvin Rice, Chief Financial Officer. 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 related to our operations and the business environment, which are contained in our second quarter 2024 Form 10-Q 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.

Good afternoon, everyone, and thank you for joining us for our second quarter 2024 earnings call. I'm proud of the performance our team was able to deliver in the second quarter. We made tremendous progress in several key areas and believe that our solid operating platform will generate a successful second half of the year leading to full year software bookings growth relative to 2023. As I mentioned in our press release, we've started the third quarter off very strong. Software sales are always going to be lumpy, but our trajectory over 12-months is up and to the right. As we moved the quarter, we knew the year-over-year comparable was going to be tough as the second quarter of 2023 included many performance records, in particular, a single sales contract worth almost $4 million. However, positive takeaways from where we sit moving into the third quarter include; Number one, we don't have a lot of competition in our core healthcare contact center space. Number two, we have amazing relationships with the top healthcare systems in the nation who continue to purchase from us on a regular basis. Number three, we continue to invest in and enhance our platforms consistent with what our customers are requesting. Number four, in many respects, we're viewed as an indispensable utility, and number five, we're very comfortable with our full year guidance. We also take this opportunity right up front to remind everyone that our mission remains solidly unchanged. That is to generate cash and return capital to our shareholders over the long term while responsibly investing in and growing our business. As we've demonstrated through our performance since our strategic pivot more than two years ago, we believe we are on a sustainable path to doing so and that our cash flow is on…

Thanks, Vince, and thank you everyone for joining us this afternoon. As Vince pointed out, it was a very strong quarter and we made tremendous progress in a number of key performance areas. He had amidst solid progress in continuing to build a solid financial platform and shareholder friendly capital allocation strategy. We remain true to our mission of being a global leader in healthcare communications. It is important to remember we deliver clinical information to care teams when and where it matters most to improve patient outcomes, as Spok enables smarter, faster clinical communications for our customers. As Vince noted, we have over 2,200 healthcare facilities as customers representing the who's who of hospitals in the United States. We have built our solutions over many years and have longstanding valuable customer relationships. This has coupled with the financial strength that more than 80% of our revenue is reoccurring in nature and we are a company with no debt, which provides a significant flexibility. In the second quarter, our $8.7 million of software operations bookings included 18 six figure and one 7 figure customer contracts, sustaining the momentum that we saw last year. Most impressively second quarter software operations bookings included 14 multi-year engagements and those six and seven figure contracts had an average contract size that was up nearly 14% in the prior quarter. So we are extremely pleased with the first six months of 2024. Now let me take a few minutes to highlight a couple of the customer engagements that we signed in the second quarter. The first is a three-year agreement with a three hospital, 1,200 bed health system located in the southwestern part of the United States. As an epic forward organization, this organization plans to use as many epic modules as possible. However, the…

Thanks, Mike, and good afternoon everyone. I would now like to take a few minutes and provide a recap of our second quarter 2024 financial performance, which we reported today. I encourage you to review our 10-Q and filed as it includes significantly more information about our business operations and financial performance than we will cover on this call. Turning to our income statement, in the second quarter of 2024, GAAP net income totaled $3.4 million or $0.17 per diluted share compared to net income of $4.7 million or $0.23 per diluted share in 2023. In the second quarter of 2024, total GAAP revenue was $34 million compared to total revenue of $36.5 million in the prior year. Revenue for the quarter consisted of wireless revenue of $18.3 million and software revenue of $15.7 million compared to $18.9 million and $17.6 million in the prior year, respectively. With respect to wireless revenue, we saw significant improvement in quarterly net unit churn for the second quarter in a row at 0.8% down from 1.6% in the prior quarter. ARPU increased $0.31 or 4.1% from the prior year, primarily driven by continued pricing actions undertaken in late 2023 and to a lesser extent continued sales of our new GenA pager. While we believe the demand for our wireless services will continue to decline on a secular basis as reflected in declining pager units in service, we are hopeful that our focus on pricing and other initiatives like the GenA pager will continue to further offset revenue lost through pager unit decline. Turning to second quarter software revenue, license and hardware revenue totaled $2 million in the second quarter of 2024 compared to $4.6 million in the same period of 2023. As Vince previously touched on, in the second quarter of 2023. We…

Thank you, Calvin. I'd like to again point out how proud I am of the strong performance our team was able to deliver in the second quarter, and again, believe these results position us well for the remainder of the year. We believe we are strongly positioned to grow our franchise value while returning capital to stockholders. We have a long-term organic growth engine in our software solutions through Spok Care Connect and we maintain a source of strong recurring revenue in our wireless service line. We run the largest paging offering in the world integrated with our software operations, and we've enhanced our paging platform and user devices to serve our core healthcare customer base. We believe with these two assets going for us, our best financial results are ahead of us and Spok’s future is bright. Before I open the call up for your questions, I'd like to thank our shareholders for their support during our pivot. I'd also like to thank them for their participation in our annual meeting yesterday. As we reported, each of the items of business, which included number one, the election of six nominees to our board of directors; number two, the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2024; and number three, a non-binding advisory vote to approve 2023 named Executive Officer Compensation or say on pay, all passed with an overwhelming majority. For a full review of the final voting results, please see our disclosures in a quarterly report on Form 10-Q filed with the SEC. We appreciate your interest in Spok and we look forward to updating everyone again next quarter, when we report third quarter results in October. Operator, you may now open the call up to questions.

[Operator Instructions] Our first question is from Eric Martinuzzi with Lake Street.

Just wanted to ask about the, first of all, on the software side, it looked like pretty consistent performance as far as the 19 deals, over 600,000 in Q1 and you had the 19 over 600 -- actually 18 over 600,000 and one over 700,000. Was that in line with your expectations going into the quarter? Because as I recall, you talked about having had a phenomenal April. Just wondering how things played out in May and June.

Yeah. It was in line with our expectations there. We had some of the deals that had a higher component of license software in the deal slip into the third quarter, then we had one of them close almost in the very first week of July. But in general, it's in line. The life of part has been a little bit lumpy, but we have a very large Q3 and Q4 pipeline where we think we're going to be more than offsetting the second quarter shortfall in the license there.

Yeah. I wanted to just kind of underline that point you just made because we're looking at software operations bookings, 16%. At least at the six-month point, we're down 16%. Obviously, we had a big win in Q2 a year ago. Are you continuing to back that double-digit growth for the full year 2024 on the software operations bookings?

Absolutely.

Okay. All right. And then, shifting over to the wireless side, I did see the churn, at least quarter-on-quarter, 0.8%. That's terrific. On a full year basis, we're down. The churn was about 7% and that was for basically Q2 as well as the first half of 2024. What's the expectation for the back half? Is this -- are we looking more like 0.8%? Or are we going to be creeping back up based on what you see in customer behavior?

Yeah. Hey, Eric, this is Calvin. Yes, we were really pleased with second quarter. I would say, it would be tough to continue expecting 0.8%. I mean, that's a phenomenal number. I would definitely take it if we could get it, but I'd still expect full year to be in line with what we've been saying over the last couple of quarters. That 4%, 4.5%, 5 will probably end the year in about that full range, maybe slightly better.

Okay. And then on the wireless ARPU, it wasn't a huge step down, but I did notice a sequential step down, which I thought was, strange just given, we've got -- we had a price increase and then we had -- we've got the, next gen, the GenA pagers rolling out. What's behind that? It looks like about a nickel per unit on the ARPU step down Q1 to Q2?

Yes, sure. So from an ARPU perspective, we kind of look at that in three trunks. One is kind of that standard component. The other part is the kind of pass through component. And the third part, albeit pretty small, is a variable component, and that's going to be based on, believe it or not, things like overcharges still. And typically, we don't see a move from one quarter to the next. It's going to impact ARPU on a larger scale because generally there's offsets, but really it's coming from that variable piece. So nothing to worry about from that expectation. We've got price increases going through again here similar to last year, in the middle of third quarter. And so we expect that to start benefiting us here in the next couple of months.

Yeah. We have a couple of very large GenA pager sale deals queuing up here for the third quarter and the fourth quarter too and that will have a positive impact on ARPU as well.

Okay. So the expectation is those sequentially higher through the remainder of the year?

Yeah, that's right.

Okay. All right. And then last question for me. The cash was up nicely here, Q2 versus Q1. You said we finished out the year at $28 million to $30 million. Is that correct?

That is correct.

[Operator Instructions] Thank you. There are no further questions at this time. I would like to hand the floor back over to Vincent Kelly for any closing comments.

Shareholders, thank you again very much for your support. We look forward to updating you again here at the end of next quarter in October when we report our third quarter results. Everyone have a great day and a great evening.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.