Spok Holdings, Inc.

Greetings and welcome to the Spoke Holdings Inc. Fourth Quarter 2022 Earnings Results Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Al Golgano. Thank you, sir. Please go ahead.

Hello, everyone, and welcome to Spoke Holdings' fourth quarter 2022 earnings call. I am joined today by Vince Kelly, Chief Executive Officer, Mike Wallace, President of Spoke, 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 spokes' 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 condition. 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. folks' 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 factor section relating to our operations and the business environment, which are contained in our 2022 Form 10-K and related documents filed with the Securities and Exchange Commission. Please note that SPOKE 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 and good morning, everyone, and thank you for joining us this morning for our fourth quarter and full year 2022 earnings call. Today, we will share with you an update on how our strategic business plan is progressing, as well as our financial results for the quarter. I'll start by reviewing the agenda for today's call. The order will be as follows. We will begin by providing a review of our operational performance for the quarter and full year. I'll then turn the call over to Mike to review our fourth quarter and full year 2022 financial highlights, as well as our pro forma results. We will then conclude our prepared remarks with our business outlook and financial guidance for 2023. And finally, we'll wrap up with some Q&A. In general, I want to reiterate how proud I am of what the SPOKE team has been able to accomplish in 2022 and believe that we have established a solid foundation for the future as we continue to execute. We now have a singular focus of generating cash flow and returning capital to shareholders. We did it last year and we'll do it again this year. In terms of operating results over the last year, we made progress in key performance areas, including wireless trends, software bookings and backlog levels, as well as expense management as we successfully aligned our cost structure with our updated business plan. Going forward, we believe our extensive experience operating our established communications solutions will create significant value for stockholders by maximizing revenue, cash flow generation, and return of capital. Certainly, 2022 was a year of change. In an effort to quickly respond to marketplace dynamics, as well as demand for our products and solutions, last February, we announced a new strategic business plan that set a priority on maximizing cash flow with the goal of returning capital to our shareholders. As part of that strategic pivot, we made the tough decision to discontinue the development and sales of SpokeGo and eliminate all associated costs. Additionally, we expanded upon our already disciplined expense management track record to right-size the company to focus on cash flow generation. This was accomplished by streamlining spokes management and board structure by approximately 50 percent, reducing our employee headcount by about 30 percent, rationalizing external costs, reducing capital expenditures, and consolidating offices. These difficult steps were taken Due to the challenging financial and resource environment our hospital customer base has experienced and continues to experience due to the pandemic. This was and is not a good environment for new projects as hospital resources and budgets remain tight and are focused on getting more out of their existing solutions. Spoke's wireless and CareConnect Suite service lines are ideally situated for this environment. Spoke has an excellent track record of driving revenue and cash flow from these business lines and enjoys a significant market leadership position in narrowband personal communication services and hospital call center software. Since our strategic pivot last February, morale has been high and SPOKE has seen a significant improvement in virtually all areas, including sales, product development, and overall execution. In 2022, SPOKE generated nearly $25 million of pro forma adjusted EBITDA and has returned $25 million in cumulative capital to shareholders since the implementation of the Strategic Business Plan. And as you've seen from our guidance, we're on track to do it again this year. Despite the difficult changes that SPOKE implemented in 2022, we've remained true to our mission of being a global leader in healthcare communications. We deliver clinical information to care teams when and where it matters most to improve patient outcomes as Spoke enables smarter, faster clinical communications for our customers. Spoke solutions for critical communications provide a vital service for our trusted customers. These customers include 18 of the top 20 adult hospitals and all 10 children's hospitals named to the U.S. News and World Report's 2022-2023 Best Hospitals Honor Roll. In fact, over the past decade, nearly every hospital named to that honor roll has been Spoke customer. We have over 2,200 healthcare facilities as customers representing the who's who of hospitals in the United States. We've built our solutions over many years and have longstanding valuable customer relationships. We honor and respect our customer service in providing world-class healthcare, and we value our place in their communications ecosystem. This is coupled with a financial strength that over 83% of our revenue is reoccurring in nature. We're a company with no debt, which provides us significant flexibility. We continue to focus on investing in and enhancing our integrated Spoke CareConnect software solutions and wireless products in order to continue our longstanding relationships with the nation's leading healthcare providers. In 2022, though we sharply reduced our research and development spend from the previous year, we still spent approximately $8.7 million to support development of our Spoke CareConnect platform as well as wireless products such as our new Gen A pager. We expect to expand that investment to approximately $11.3 million this year in line with spending levels prior to the introduction of SpokeGo. This investment is important relative to our plans for stabilization and eventual growth of future software revenue, and these incremental costs are embedded in our guidance that Mike will cover later in this call. We believe these attributes, combined with our experienced, dedicated, and committed employee base, are what will allow us to generate significant cash flow into the future and return capital to our shareholders. So with that said, let me take you through a few highlights for the fourth quarter of 2022. We were successful in stabilizing our business and positioning SPOKE for future growth. In addition to the highlights listed on the slide, other noteworthy fourth quarter performance included a nearly 17% annual increase in year-over-year software operations bookings, Next, we ended the year with a $44 million software backlog up from the prior year and built by our success in software operations bookings. Third, quarterly unit erosion of our wireless pagers averaged less than 1%, resulting in a full-year unit erosion of 3.5%, down 80 basis points from the prior year. Next, we were able to implement a 28% reduction in year-over-year adjusted operating expenses primarily through phased-in actions I outlined previously with respect to our strategic pivot, and as a result, we generated $5.6 million of adjusted EBITDA. Our team was able to accomplish all this during the quarter while returning $6.25 million of cash to our shareholders in the form of our regular quarterly dividend, and we ended the year with approximately $36 million in cash and cash equivalents with over $52 million of deferred tax assets. At the same time, We generated 17 new six-figure customer contracts during the quarter. Let me take a few moments and highlight a couple of these. First, I'd like to highlight a multi-year agreement signed with a large health system in Oregon. This locally-owned, nonprofit, six-hospital health system includes a full-service children's hospital, a 24-hour mental and behavioral health services center, and more than 70 primary care, specialty, and urgent care clinics. With 14,000 employees and nearly 3,000 healthcare providers, the organization provides comprehensive healthcare services across the region and has the most five-star ratings for hospitals in the area. A customer for more than 20 years, this health system signed a five-year agreement that's an example of our new multi-year contract strategy. With multi-year contracts, customers have predictable annual spending, ensured supportability, quicker access to new functionality, and a streamlined procurement process among the many other benefits. The other customer contract I'd like to highlight for you is with a large health system in Minnesota that's received nationwide recognition across multiple areas of care. Founded in academics and with extensive deep roots in community medicine, this health system has 15 hospitals and nearly 100 primary, urgent care, specialty, and skilled nursing facilities and clinics. They have 12,000 employees and 4,500 healthcare providers. A spoke customer for over a decade, the health system signed a multi-year agreement for premium support and professional services for their spoke solutions. Even while the healthcare industry is under considerable financial pressure, the customer's leadership understood the value and role that spoke solutions play in delivering critical communication when seconds matter. Our multi-year agreement was ideal for the customer because they wanted a predictable annual spend deeper partnership with support, current software feature releases, and value-added services to maximize their investment in Spoke solutions. When we implemented our strategic pivot last year, I had said that I believed that this strategic shift would create significant value for our shareholders while allowing Spoke to continue to provide critical communication services to healthcare customers. The two examples I just shared provide a good sense of the value we're creating. Certainly our performance in the fourth quarter and for the full year demonstrates a company that has stabilized its operation and is poised to take advantage of growth opportunities in our chosen markets. Now, before I turn the call over to Mike for a more detailed discussion of our financial highlights and forward-looking guidance, I want to outline some of the assumptions that drive our financial expectations for 2023. First, we anticipate moderate growth in our software operations bookings as our customers operate within their resource constraints while we continue to focus on multi-year contracts and value-added service engagements. Next, we anticipate that we will be able to continue to minimize unit churn and maximize average revenue per unit, or ARPU, in our wireless products as we continue to benefit from the pricing actions that we took in 2022 and the deployment of our Gen A pager. And lastly, we take great pride in our ability to control costs, and although we have taken out the majority of costs related to the strategic pivot, we expect to continue driving incremental savings in 2023. Finally, Mike will provide more detailed guidance information in a few moments, but we believe that these assumptions can drive our business to generate adjusted EBITDA in the range of $24 to $26 million in 2023. With that said, I'd like to turn the call over to Mike Wallace to review our financial performance. Mike?

Thanks, Vince, and good morning, everyone. I would now like to take a few minutes and provide a recap of our fourth quarter and full year 2022 financial performance, which we reported yesterday. I encourage you to review our 10-K when filed as it includes significantly more information about our business operations and financial performance than we will cover on this call. But before I do, I would like to briefly outline for you our updated definition of adjusted EBITDA as contained in our financial statements and the associated adjusted EBITDA reconciliation table included in our earnings release. We believe that this treatment will give you greater clarity into the performance of the ongoing operations of our company, as well as be more reflective of best practices of our software peers. Under the old method, adjusted EBITDA started with net income and then subtracted capital expenses and added back stock-based compensation and any non-cash charges for asset impairment. Under the new method, the calculation again starts with net income and then adds back the stock-based compensation any non-cash asset impairment, and any severance or restructuring charges. The difference between the two methods being previously subtracting capital expenses, which were $3.8 million for 2022, and now adding back severance and restructuring charges. Again, we believe this will give you greater visibility into our operational performance as it takes out much of the noise that was created from the strategic pivot in 2022. And, of course, impacts from severance and restructuring costs will be significantly less impactful in 2023. As such, the results being reported today in this deck and in our earnings press release reflect this new definition for all periods presented unless otherwise noted. Turning to our income statement, in the fourth quarter of 2022, GAAP net income totaled $24.2 million, or $1.21 per diluted share, compared to a net loss of $16.7 million or $0.86 per diluted share in 2021. Fourth quarter net income included a $21.9 million non-cash gain related to the release of the previously established evaluation allowance for unused research and development tax credits. During the fourth quarter, we assessed our evaluation allowance and determined that it would be more likely than not that certain of our deferred tax assets related to federal and state net operating losses and other tax credits would be realizable based on several factors. The uncertainty surrounding COVID and SpokeGo were both significant detractors in our ability to reasonably rely on projections of future taxable income over the last several years. With these uncertainties largely removed, projections of future taxable income were primary consideration in our conclusion, largely resulting from our restructuring efforts and elimination of costs related to the development of SpokeGo in 2022. Additionally, our historical experience of profit generation prior to the introduction of SpokeGo, in conjunction with our deep knowledge of the existing wireless and software service lines, provides us with greater confidence in these projections. As a result, we have reduced the valuation allowance by $21.9 million which was previously established in the fourth quarter of 2020. The remaining $2.3 million valuation allowance relates to certain state net operating losses, state tax credits, and foreign tax credits that we do not currently expect to realize based on these projections. For a more detailed explanation, please see our discussion in the 10-K. For the fourth quarter of 2022, total GAAP revenue was $33.3 million. compared to revenue of $34.5 million in 2021. Revenue for the quarter consisted of wireless revenue of $19 million, which was down 0.2 million, or less than 1% from the prior year, and software revenue of $14.3 million, down 7.2% from last year, largely in line with our expectations. With respect to wireless revenue, fourth quarter 2022 performance was driven by a continued decline in pager unit churn on a year-over-year basis, as the net pager decline during full year 2022 was 3.5%, with units and service declining by only 30,000. The fourth quarter monthly paging revenue component of wireless, which represents 97% of overall wireless revenue, declined by only 3% on a year-over-year basis. And while wireless revenue did decline in the fourth quarter and full year, that decline was less than we expected, and the rate of erosion continues to slow. The remainder of wireless revenue relates to product sales primarily through lost pager fees, which are one time in nature and are far less impactful to the ongoing value of this business. For the full year wireless revenue declined by 4.1% compared to the prior year and again in the range of our expectations. With the monthly paging revenue component of wireless declining only 3.3% on a year over year basis. Turning to the fourth quarter software revenue, beginning with maintenance revenue, which is the largest component of our software revenue, was essentially flat to the prior year quarter, totaling $9.3 million. As we have discussed in previous quarterly calls, and as we continue through this pivot, with the focus being brought back to our SpokeCare Connect software products, our expectation is for maintenance revenue to be flat to down slightly on a year-over-year basis, given gross churn and uplift levels remaining consistent with prior quarters. However, as we continue to make progress on our product roadmap with SpokeCare Connect, we expect bookings will continue to grow in the coming years and maintenance revenue along with it. Given the nature of maintenance revenue, higher license sales will work through revenue on a lagging basis. So we look first to stabilizing that revenue decline and then beginning to grow it. Professional services revenue was $3.1 million versus $3.8 million in the fourth quarter of 2021. As we have stated in earnings calls over the past several quarters related to our financial guidance, we had expected a lower level of services revenue resulting from the planned reduction in personnel of approximately 35% to better align with our current backlog and to drive a higher rate of net cash flow in alignment with the strategic shift in our business plan. And we believe the actions required for this alignment are complete at this time. And as we have stated in several earnings calls, it is important to remember that services has not historically driven meaningful cash flow on a standalone basis, but has been viewed as an opportunity to expand our license footprint through customer engagement as well as to fulfill upgrade obligations under maintenance contracts, which is critical to maintaining our existing customers. Lastly, license and hardware revenue was $1.9 million compared with $2.2 million in the same period of the prior year. For the full year, total GAAP revenue was $134.5 million compared to revenue of $142.2 million in 2021. Wireless revenue on a year-to-date basis was $75.6 million compared to $78.8 million, reflecting net paging revenue churn in line with the trend seen in the fourth quarter. And in 2022, software revenue of $58.9 million compared to $63.4 million in the prior period. This was driven by maintenance revenue being down 2.8% on an annual basis, professional services down 27% due to the intentional reduction in professional services resources to better align with backlog just discussed, and which was offset by higher license revenue of 22%, driven by strong software operations bookings during the year. Turning to fourth quarter adjusted operating expenses. which excludes depreciation, amortization, and accretion of $0.9 million, and severance and restructuring costs of $0.9 million, totaled $28.5 million in the fourth quarter, compared to $39.5 million in 2021, or 28% lower. And for the full year, adjusted operating expenses were approximately $123.4 million compared to $154.3 million in 2021, or 20% lower, as we carried most of the costs and personnel related to SPOCO through April of 2022. As Vince mentioned earlier, the streamlining of employee and management head cap reduction is now complete, with substantially all of the remaining liability expected to be paid in the first quarter of 2023. And lastly, adjusted EBITDA, the definition of which I discussed earlier, and is defined in our earnings release tables and represents EBITDA before stock-based compensation expense, impairment of intangible assets, effects of capitalized software development costs, and severance and restructuring costs for the fourth quarter was a positive $5.6 million compared with a negative $3.8 million in the same quarter of 2021 and reflects the progress made to date with our strategic pivot. For the full year, our adjusted EBITDA was a positive $15 million compared to a negative $4.9 million in 2021. Now, turning to our pro forma adjusted EBITDA. Pro forma adjusted EBITDA results exclude one-time costs related to the strategic pivot as well as costs related to operations under our prior strategy that will not be incurred going forward. Had those strategic changes been in effect as of January 1, 2022, our adjusted EBITDA would have been $9.5 million higher for the year. This includes costs related to terminated employees of approximately $7.5 million and non-payroll SPOCO and other costs of approximately $2 million. Inclusive of these adjustments, our 2022 adjusted EBITDA would have been $24.5 million. Finally, I'd like to take a few minutes to outline our financial guidance for 2023. In general, this guidance was constructed with a base assumption of cautious optimism based on our performance in 2022 with our strategic pivot and the precepts that Vince reviewed earlier. As a reminder, the figures I'm going to discuss today are included in our guidance table in the earnings rules. In 2023, we expect total revenue to be in the range of $129 million to $136.5 million. of which we expect wireless revenue to range between 71.5 million to 74.5 million, as we continue to expect a slower year-over-year revenue erosion rate based on certain pricing actions we have taken and continued adoption of our Gen A pager. Software revenue is expected to range from 57.5 million to 62 million, with a midpoint implying total software revenue representing a small increase from 2022 software revenue. As we have discussed previously, our refocus on our SpokeCare Connect software business after discontinuing SpokeGo will involve the progress we have made in 2022, coupled with our research and development effort in 2023, which costs are included in our guidance to stabilize software revenue and position it for growth in future years. The efforts Vince summarized previously, along with continuing to tightly manage expenses, result in our adjusted EBITDA guidance of $24 million to $26 million for 2023. On a final note, though we are not providing specific guidance for CapEx due to timing and other issues, we would expect the CapEx levels would be in line with prior years. Total capital expenditures for the full year 2022 were $3.8 million, down from $4.4 million in the prior year. With that said, I will now turn the call back over to Vince.

Thank you, Mike. Finally, before we open the line up to questions, I'd like to dive a little deeper and answer some analyst questions we received prior to today's call. The first one was about sales full-time equivalent levels being down relative to prior years. Do you feel you have the necessary level to achieve your sales goals? I'd say yes. Our pipeline is growing every month. Many of the deals we're looking at are multi-year deals with additional licensing. value-added service engagements and further future upgrades. Our sales team coverage is good. They're more efficient now than they've been in the past. Most of the headcount we took out of our sales people was from SpokeGo and much less from our CareConnect Suite solutions. And we're in the process of adding inside sales roles now. A new channel director just came on board and two new regional sales directors as well. So we're going to continue to add talent when needed to support our sales targets, and we feel good about those resource levels. The second question has to do with customer sales engagement. During COVID, it was hard to get face-to-face meetings. How is this going in today's environment? That's a great question. So we're still seeing a hybrid mix of meetings. Some are in person, some are outside the hospitals, and some are still remote. It's getting better, but it's still a challenge. You know, we're always pushing to get on site, and when we can, we're traveling much more strategically. We're maximizing every meeting opportunity. And it's important to understand that the way our business works on both the software and the wireless side and the associated sales we drive, they're almost exclusively the result of our sales team's direct interaction with our customers versus responding to RFPs and the like. So it's critical that we're seeing more and more quote unquote in-person meetings, although like everyone, we've adapted to virtual meetings as best as possible given the pandemic. Third question, are sales cycles elongating just given rising interest rates and other macro pressures? So another quick question. We're not seeing any delays on our existing customer upgrade sales cycles, and we are seeing it shorten a bit with our multi-year deals. However, new project initiatives are still pretty slow in hospitals due to their resource constraints, both financial constraints and personnel resource constraints. They're trying to get more out of what they already have and leverage existing systems, and that works for our strengths because we're an industry leader in contact center solutions. We're an industry leader in narrowband wireless messaging, so we can really meet with them and help them see how they can leverage our solutions. So far, so good there. Fourth question, what percentage of your software base do you think went through communications upgrades, i.e., PBX in 22, and what are you expecting for 23? So, again, I mean, that's not something we track in terms of PBX upgrades at our customers. Our sales are not dependent on that. For customers with CTI integration, you know, the need to upgrade their spokes solutions can arise from a PBX upgrade. Now, CTI integration, I've said this before, it's one of our strengths, and we believe we're an industry leader there. However, that's only one of many drivers that can lead to additional sales opportunities. You know, over the last couple years, with increasing prevalence of cybersecurity breaches, you know, that need to maintain updated operating systems and update your database and other critical functions, that's been a really big factor in the upgrade frequency. And average upgrade cycles for our solutions in the past have generally ranged between two and four years, depending on the size and the complexity and the number of solutions a customer might have and the number of other factors. So, so far, so good there. Number five, you talked about the upsell opportunity within your base, i.e., customers only use one or two products. Where's the low hanging fruit and what we do differently today to capture that opportunity relative to how you pitched a few years ago. So we really have a good handle on what our customers do and don't have today with respect to our solutions and our strategy with the multi year deals allows us to build into their quotes, additional licensing opportunities for additional solutions and services. We're also focused on value added services that our customers purchase called a solution assessment. And that really shows the solutions that would be most helpful to their organization in terms of the way they're structured with their workflows. So our technology approach with full integration with our platform is one of our major advantages. Question number six was update on selling software into smaller hospitals. So we're in the process of hiring two inside salespeople right now to get started on selling our subscription offering into small hospitals. That's our hosted solution. We have one customer up on it right now and running, and we're going to bring that online around the 1st of April. We should be fully staffed by March 15th. We'll start selling immediately. None of that's in our forecast. There's no upside in the forecast for it or in our guidance. We've already had one customer, like I said, up and running, and we plan to ramp it up slowly in the second half of this year. So we'll see how that goes, and we'll keep you posted. Number seven, how is the next-gen pager release tracking? So we delivered 8,300 Gen As in 2022, and we're expecting to deliver more than 20,000 units in 2023. We're getting a big ARPU advantage from these units, and we want to maintain that balance discipline while we roll these new devices out. They've been very well received. Number eight, retention levels in 2022. Given the drop in full-time equivalents and a new strategic plan, How do those compare to prior years? So I would say right now morale inside the company is as high as it's been in years. And I think that's for a lot of reasons. They appreciate the business plan we're running right now. We're hitting our numbers. A lot of competitors are struggling. We're a company with no debt. We're making a lot of money. And so it's really helping morale. And you can see that in the numbers. In 2019 and 2020, what we call regrettable turnover, and regrettable turnover we define as people who voluntarily leave for other jobs. So it's not going to include people who we terminate for performance or for retirements. It's people we don't want to lose, basically. 2019 and 2020, it was running about 11.5%. In 2021, it was about 19.5%. About 9% last year in 22. Right now, we're at a less than 1% run rate. So we'll see how the year progresses, but we're really in good shape right there. Number nine, any synergies between the two businesses that are untapped? Can you grow the 20% of hospitals that use both services? So we've got a strong sales incentive plan in place right now, utilizes both wireless and software teams to maximize our success there. In 22, we sold about $2.5 million in software sales collaboration deals. In 2023, we're expecting to do more. We've also added numerous wireless accounts that weren't with Spoke prior. Our plan is to continue to grow the percentage of the hospitals that use those services, and our team's motivated and compensated to do so. Question number 10, is there a threshold of bookings where you'd have to consider reducing the dividend down the road if you fell below it? So we're committed to paying an annual dividend of $1.25 in 2023, and as stated previously, we believe we'll generate sufficient cash to continue paying this level of dividend for the foreseeable future. Now, obviously, this is a Board decision. The Board looks at this every quarter. We declare the dividend like we did in the press release last night and so far so good there. Last pre-submitted question, number 11. You had mentioned at one point trying to more purposely exploit opportunities for the communications console outside of healthcare. Is that something that's a priority for 23 or is it longer term? Short answer, longer term. We think there's opportunity there in other market segments, but we're not focused on that this year. We've got about 10% of our total revenues today coming from hospitality and from government. We would have to have additional development spend in those areas to really grow that a lot, and so that's a longer-term opportunity. So I just want to leave you with the fact that our priority is generating adjusted EBITDA. within the guidance range that we gave you and returning capital to our shareholders. So at this point, I'll ask the operator to open the line up for any additional questions. Operator?

Thank you, sir. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you wish to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Eric Martinuzzi of Lake Street Capital Markets. Please go ahead.

Congratulations on the strong finish to 2022. That's really a lot was accomplished in a relatively short period of time. My question has to do just starting off with the 2023 financial outlook. On the wireless revenue side, we had kind of a balance, if you will, in 2022 in the unit churn versus the ARPU. Just wondering what the expectation is for 2023 given the revenue guide for wireless.

Yeah. Hey, Eric. It's Mike. Good to talk to you. Yeah, our thought process is that, you know, we'll continue to see unit churn pretty much consistently with what we've seen in 22. We have, as you've probably noticed, actually seen an uptick from an ARPU perspective. That's a function of some of the pricing actions that we took. The Gen A pagers that Vince talked about in his remarks, all of that's having a solid impact, if you will, from an ARPU perspective. Those are kind of the underlying drivers, if you will, that's driving that range that we have there for 23 and wireless revenue.

Okay. And then just a Q4 question. The license revenue of 1.27 million, I only call it out just because it was down 15%. And that's the first negative comp we've seen in that revenue category since Q3 of 2021. What's going on there and what's the expectation?

Yeah, good question. There's there's nothing going on there, really. It's just a function of mix at the end of the day. You know, from from any given quarter, you can have some some ups and downs as it relates to what the mix is from a license perspective. And it's just it's tough as we, you know, go through the different quarters for that to be sort of static and grow in a linear fashion. The reality is, is that, you know, as we expect to grow bookings in total, we would expect that, you know, over, let's say, an annual period, you will certainly see license bookings and thus license revenue be up. So it should track with overall bookings.

Okay. And I realize it was a good count for the year in 2022, full year. The 17, congrats again also on the 17 six-figure deal that you had in Q4 and the 66 for the full year. You talked about your pipeline growing as you exited the year here. What, do you have a number for us? Is there a certain percentage you can give us either by customer category or just raw numbers of large deals versus a year ago?

Yeah, look, we don't provide guidance in terms of what our total pipeline growth is. We did start from a pretty low base last year because our focus prior to the pivot in February of 22 was on SpokeGo, so we really started growing that pipeline with our CareConnect suite solutions in, say, mid-2022. But it's been growing pretty nicely since then, and we did a lot of big deals in the last year, and we expect to do a lot more of them this year.

Okay. And my last question has to do with the cash. Obviously, you returned $25 million to shareholders in 2022, and that's the plan again in 2023. How much of that is coming from operations? Or maybe another way to ask it is, given this midpoint adjusted EBITDA of $25 million and let's call it $4 million of capex, is the assumption here that we'll generate about $21 million of the return to shareholders from operations and dip into the balance sheet for the remaining $4 million?

You're spot on.

Okay. Answered my own question. Thanks, guys.

Doesn't look like we have any other questions in the queue. Operator, are there?

No, we have no further questions. I'll turn the floor back to you.

yeah we're gonna wrap up I want to thank everyone for joining us today we appreciate your support and interest in spoke we look forward to updating you again next quarter and I want to on a final note kind of under the one more thing category we think it's important to give our customers our investors an opportunity to see our business and talk with our our broader management team we have customer meetings on a regular basis and with respect to our investors we're going to have an investor day on Thursday May 4th of 2023 We're going to host this one in Dallas. We may do another one in the fall and do that up north. The program's going to have management presentations, so I'll be there. Mike and Calvin will be there. So will our head of sales, John Wax, and our CIO, Tim Tindall, will all be presenting. There'll be Q&A opportunity, and the event will also be webcast for those that can't join us in person. We'll get more details on that out to you over the course of the next quarter, but if you have any questions about it, just reach out to Al Galgano. our investor relations contact, and he'll coordinate things with you. Anyway, thanks all for joining us this morning. Have a great day. We really look forward to talking to you next quarter when we report our first quarter earnings. Take care.

Thank you very much, sir. Ladies and gentlemen, that concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.