[April 29, 2015]

Spok Reports First Quarter Operating Results

Spok Holdings, Inc. (NASDAQ: SPOK), a global leader in critical communications, today announced operating results for the first quarter ended March 31, 2015. In addition, the Company's Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on June 25, 2015 to stockholders of record on May 22, 2015.

Software revenue increased 10.7 percent to $17.4 million in the first quarter from $15.8 million in the year-earlier quarter, while wireless revenue was $30.7 million versus $34.3 million in the first quarter of 2014. Consolidated revenue for the first quarter was $48.1 million, compared to $50.1 million in the first quarter of 2014.

First quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $10.0 million, or 20.8 percent of revenue, compared to $12.1 million, or 24.2 percent of revenue, in the year-earlier quarter, and $8.7 million, or 16.9 percent of revenue, in the fourth quarter of 2014.

Net income for the first quarter was $3.9 million, or $0.18 per fully diluted share, compared to $4.9 million, or $0.22 per fully diluted share, in the first quarter of 2014.

Other key results and highlights for the first quarter included:

• Software bookings increased to $17.7 million from $16.9 million in the year-earlier quarter. First quarter bookings included $8.8 million of operations bookings and $8.9 million of maintenance renewals.
• Software backlog totaled $40.6 million at March 31, 2015, compared to $41.4 million a year earlier.
• Of the $17.4 million in software revenue for the first quarter, $9.4 million was operations revenue and $8.0 million was maintenance revenue, compared to $8.4 million and $7.4 million, respectively, of the $15.8 million in software revenue for the first quarter of 2014.
• The renewal rate for software maintenance in the first quarter was 99.7 percent.
• The quarterly rate of paging unit erosion improved to 2.1 percent in the first quarter, compared to 3.5 percent in the year-earlier quarter, while the annual rate of unit erosion improved to 7.3 percent from 10.3 percent in the year-earlier quarter, and was the Company's lowest rate of net unit loss in more than a decade. Net paging unit losses total 26,000 versus 49,000 in the first quarter of 2014. Paging units in service at March 31, 2015 totaled 1,230,000, compared to 1,327,000 a year earlier.
• The quarterly rate of wireless revenue erosion improved to 3.1 percent in the first quarter from 4.1 percent in the year-earlier quarter, while the annual rate of wireless revenue erosion improved to 10.7 percent versus 11.4 percent in the first quarter of 2014.
• Total paging ARPU (average revenue per unit) was $7.91, compared to $8.11 in the year-earlier quarter and $7.92 in the fourth quarter of 2014.
• Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $38.1 million in the first quarter, compared to $38.0 million in the year-earlier quarter.
• Capital expenses were $1.0 million, compared to $2.6 million in the year-earlier quarter.
• Capital returned to stockholders in the form of dividends and share repurchases in the first quarter totaled $3.3 million and $0.5 million, respectively.
• The Company's cash balance at March 31, 2015 was $105.6 million.
• The number of full-time equivalent employees at March 31, 2015 totaled 604, compared to 587 at year-end 2014.

Vincent D. Kelly, president and chief executive officer, said: "Our continued focus is to invest in and build our company for long-term consolidated growth. We are doing that by growing our software revenue while managing our declining paging revenue. We are not yet at the point where our software revenue growth exceeds our paging revenue decline on an annual basis. However, we are on plan and believe we started the year on a very positive note. We met or exceeded our expectations on most key operating metrics for the quarter, including revenue, cash flow, software bookings and subscriber churn. Software revenue and bookings increased from the year-earlier quarter and our backlog and pipeline remained strong. In addition, wireless trends continued to improve as our annual paging unit churn reached its best level in many years. Overall, we continued to operate profitably, enhance our product offerings, expand our global market reach, and generate sufficient cash flow to again return capital to stockholders in the form of cash dividends and share repurchases."

Commenting on software results, Kelly said: "Software revenue totaled $17.4 million for the first quarter, a record high for the first quarter of our fiscal year, and third highest quarterly software revenue result in the Company's history." He attributed the increase in part to larger contract values of software projects during the quarter, as well as an overall increase in software licenses, hardware and professional services to Spok's expanding worldwide customer base. "In addition," Kelly noted, "both operations and maintenance revenue rose from the first quarter of 2014, with the higher maintenance revenue reflecting our continued success in achieving maintenance renewals rates in excess of 99 percent."

Kelly said first quarter bookings of $17.7 million included $8.8 million of operations bookings, close to a record high for the first quarter, while the software backlog of $40.6 million at March 31^st also remained near a record high. "Bookings included sales to both new and current customers, with existing customers adding products and applications to expand their portfolio of communications solutions. Customer demand remained strongest for upgrades to call center solutions, healthcare applications to increase patient safety, and improved nursing workflows." Kelly added: "We also experienced growing demand for such software solutions as critical smartphone communications, secure texting, emergency management, and clinical alerting. Our public safety sector also grew substantially during the quarter with bookings up 50 percent from the first quarter of 2014."

Kelly said the Company continued to expand software sales outside the United States during the quarter. "While overall demand remained strongest in North America, we continued to grow our customer base in Europe, the Middle East and the Asia-Pacific region where our healthcare solutions - including clinical alerting, mobility strategies, and call center efficiencies -- continued to attract significant interest. At the same time, we continued to build a solid pipeline of new business leads throughout targeted markets worldwide."

The Company also recorded solid results for its wireless products and services in the first quarter. "Gross pager placements totaled 29,000 versus 39,000 in the year-earlier quarter, while gross disconnects of 55,000 improved from 88,000 a year ago," Kelly said. "As a result, annual net pager losses for the quarter improved to an all-time low of 7.3 percent. Overall, wireless sales efforts continued to focus primarily on our core market segments of Healthcare, Government and Large Enterprise. Healthcare continued to be our best performing market segment with the highest rate of gross placements and lowest rate of unit disconnects, and comprised 77.9 percent of our direct units-in-service and 73.1 percent of direct paging revenue at March 31^st."

Kelly added that Spok again returned capital to stockholders during the first quarter, distributing cash dividends totaling $3.3 million and repurchasing 27,467 shares of common stock for $465,504, or $16.95 per share, under its stock buy-back program.

Shawn E. Endsley, chief financial officer, said: "Strong revenue from both software and wireless, coupled with focused expense management, resulted in solid operating cash flow and operating margins for the quarter even as we continued to invest in opportunities for long-term growth. Our balance sheet also remained strong with no debt and a cash balance of $105.6 million at March 31^st."

Endsley said the Company is maintaining its previously provided financial guidance for 2015, which projects total revenue to range from $183 million to $201 million, operating expenses (excluding depreciation, amortization and accretion) to range from $145 million to $154 million, and capital expenses to range from $5.5 million to $7.5 million.

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Spok plans to host a conference call for investors on its first quarter operating results at 10:00 a.m. Eastern Time on Thursday, April 30, 2015. Dial-in numbers for the call are 719-325-2144 or 888-438-5524. The pass code for the call is 8073220. A replay of the call will be available from 1:00 p.m. ET on April 30 until 1:00 p.m. on Thursday, May 14. Replay numbers are 719-457-0820 or 888-203-1112. The pass code for the replay is 8073220.

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About Spok

Spok Holdings, Inc., headquartered in Springfield, Va., is proud to be a leader in critical communications for healthcare, government, public safety, and other industries. We deliver smart, reliable solutions to help protect the health, well-being, and safety of people around the globe. Organizations worldwide rely on Spok for workflow improvement, secure texting, paging services, contact center optimization, and public safety response. When communications matter, Spok delivers. Visit us at spok.com or find us on Twitter @Spoktweets.

Safe Harbor Statement under the Private Securities Litigation Reform Act: Statements contained herein or in prior press releases which are not historical fact, such as statements regarding Spok's future operating and financial performance, are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may cause Spok's actual results to be materially different from the future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expectations include, but are not limited to, declining demand for paging products and services, continued demand for our software products and services, our ability to develop additional software solutions for our customers and manage our development as a global organization, the ability to manage operating expenses, future capital needs, competitive pricing pressures, competition from both traditional paging services and other wireless communications services, competition from other software providers, government regulation, reliance upon third-party providers for certain equipment and services, as well as other risks described from time to time in our periodic reports and other filings with the Securities and Exchange Commission. Although Spok believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Spok disclaims any intent or obligation to update any forward-looking statements.

Tables to Follow

(a) Slight variations in totals are due to rounding.
(b) EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only.

(a) Slight variations in totals are due to rounding.
(b) Gross disconnect rate is current period disconnected units divided by prior period ending units in service.
(c) Net loss rate is net current period placements and disconnected units in service divided by prior period ending units in service.