Spok Holdings, Inc.

Greetings and welcome to the Spoke Holdings Inc. Q3 2024 Earnings Results Call. At this time, all participants are in a 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 your host. Thank you. You may begin.

Hello, everyone, and welcome to Spoke Holdings third quarter 2024 earnings call. I am joined by Vince Kelly, Chief Executive Officer, Mike Wallace, President of Spoke Inc., and 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 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. spokes 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 third quarter 2024 Form 10-Q 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, Alan. Good afternoon, everyone. Thank you for joining us for our third quarter 2024 earnings call. I'm proud of the performance that our team was able to deliver in the third quarter as we continue to serve our customers at a high level and position spoke for strong performance in the fourth quarter and throughout 2025. We continue to make progress across the organization and believe that our strong operating platform and professional sales organization will result in solid full-year software bookings growth. As we have previously stated, we expect to achieve low double-digit year-over-year software bookings growth for the full year. Contributing to our strong level of software operations bookings in Q3 where 24 six-figure customer contracts doubled the amount generated in the prior quarter. Further, we are positioned strongly for 2025. We have amazing relationships with the top healthcare systems in the nation who continue to purchase from us on a regular basis. We continue to invest in and enhance our platforms consistent with what our customers are requesting and Spokesproducts and services are viewed as an indispensable utility by our customers, leading to strong customer loyalty. Let me 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. That is our primary focus. Returning capital to shareholders is our legacy. We feel good about executing a strategy we believe in, and one where we have enjoyed a lot of historical success. Today, we will share with you an update on how our strategic business plan is progressing in support of this goal, as well as our financial results for the quarter. I'll start by reviewing the agenda for today's call, and the order will be as follows. Number one, I'll provide a review of our company performance for the quarter. Number two, Michael Wallace, our President and Chief Operating Officer, will review quarterly sales and operational highlights. Number three, Calvin Rice, our Chief Financial Officer, will review our third quarter financial highlights and financial guidance for 2024. And number four, I'll come back and wrap up the call and open it up for your questions. Again, as I said up front, we're proud of what the SPOKE team has been able to accomplish in the third quarter, and we believe we're positioned for a strong fourth quarter. Third quarter highlights included a nearly 65% year-over-year growth in software operations bookings compared to Q3 last year, an increase in software backlog to 63.6 million, up more than 19% from the prior year quarter, continued pipeline growth in terms of both size and quality, continued strength in our professional services business with year-over-year growth of 26%, continued strong levels of adjusted EBITDA, which covered our quarterly dividend and capital expenditure requirements, a resulting increase in cash balances, which grew approximately $4 million during the quarter and will continue to build through the remainder of the year, and lastly, continued expansion for wireless average revenue per unit, further reflecting the impact of prior pricing actions and sales of our encrypted, HIPAA-compliant, alphanumeric Gen A pager. In short, we were very pleased with our performance in the third quarter and believe that our results in the first nine months of the year provide a strong foundation for a solid fourth quarter in 2025. Kyle will review the specifics later, but based on our most recent forecast, we are reiterating our previous guidance range for 2024. In the third quarter of 2024, we generated over $7.5 million of adjusted EVTA, which more than covered the $6.3 million we returned to our stockholders. However, at the same time, we increased our third quarter research and development investment by nearly 0.3 million, or 10.5%, on a year-over-year basis. But we believe we're on track to invest approximately $11.5 million in product research and development expenses in 2024. That represents an investment in our future and upside for solutions to sales momentum. As I mentioned, Spoke has a proud legacy of creating stockholder value through free cash flow generation, We intend to continue this track record. In fact, over the last 20 years, this focus returned a total of more than $690 million to our stockholders, either through our regular quarterly dividend, special dividends, or share repurchases. Our focus on maximizing cash over the long term supports the four major tenets of our strategy. Those are, number one, continued investment in our wireless and software solutions. Number two, growing our revenue base, number three, continued disciplined expense management, and number four, a stockholder-friendly capital allocation plan. Going forward, we believe our extensive experience selling and operating our established communication solutions and world-class customer base will create significant value for stockholders. Before I turn the call over to Mike, let me take a moment to review what I believe gives Spoke its competitive advantage. As you can see from the chart today, Spoke commands a strong competitive position, and there are many methods that point to the strength of our platform. There are multiple factors that have contributed to Spoke's industry-leading reputation and best-in-class product offering. I'd like to take a few moments to review some of our key recent accomplishments in product research and development. We believe our work here will fuel future software revenue growth and that our extensive experience selling and operating our established communication solutions will create significant value for stockholders by maximizing revenue and cash flow generation. Our product and development teams have been hard at work executing our product roadmap deliverables. For example, we recently completed and made available upgrades, and a new UI to our operator consoles, which hospitals use to efficiently process and route calls. We also launched SpokeCare Connect Contact Center for universal interoperability. During the fourth quarter, we intend to, number one, deploy upgrades to our SpokeCare Connect enterprise reporting. Number two, provide enhanced dashboard services for clinical and operational alerting. Number three, expand soft phone support and SMS two-way service improvements. And number four, expand HL7 standards to support a wider variety of alerting systems. We look forward to future growth opportunities as a result of this work. Earlier this month, we hosted our Connect24 Users Conference. This year, we had 233 customers registered for the virtual event. Our conference... At the conference, we were able to showcase our product roadmap and our recent research and development efforts. Customer feedback was very positive, and we look forward to the growth opportunities this conference created for 2025 and beyond. With that, I'll turn the call over to Mike.