Spok Holdings (NASDAQ: SPOK) reported Q3 EPS of $0.16, versus ($0.07) reported last year. Revenue for the quarter came in at $37.69 million, versus $39.45 million reported last year.

Key Third Quarter Operating Highlights:

• Software bookings in the third quarter totaled $21.4 million, up nearly 39% and nearly 5% on a sequential and year-over-year basis, respectively. Third quarter bookings included the Company's first two Spok Go® deals with an aggregate total contract value of $812,000. Third quarter software bookings included $9.4 million of operations bookings and $12.0 million of maintenance renewals. At September 30, 2020 the software revenue backlog totaled $51.7 million, up almost 7% from the backlog of $48.4 million at June 30, 2020.
• Third quarter 2020 software revenue totaled $16.9 million, up more than 15% from the prior quarter. Software revenue in the third quarter included $7.4 million of operations revenue and $9.5 million of maintenance revenue. This compares to operations revenue of $5.2 million and maintenance revenue of $9.5 million in the prior quarter.
• The quarterly rate of paging unit erosion was 1.9% in the third quarter of 2020, down from paging unit erosion of 2.3% in the year-earlier period. Gross disconnects were down on both a sequential and year-over-year basis.
• The rate of wireless revenue erosion in the third quarter was 1.2%, down 20 basis points from the revenue erosion rate in both the prior quarter and the third quarter of 2019.
• Total paging ARPU (average revenue per unit) was $7.34 in the third quarter of 2020, compared to $7.24 in the prior quarter and $7.32 in the year-earlier quarter.
• Operating expenses in the third quarter of 2020 totaled $35.0 million, up from $32.6 million in the prior quarter and down from $42.1 million in the third quarter of 2019. Adjusted operating expenses totaled $35.5 million in the third quarter of 2020, compared to $34.1 million in the prior quarter and $39.8 million in the third quarter of 2019. Benefiting operating expenses in the third quarter of 2020, the Company received $0.4 million in CARES Act tax credits, as well as approximately $2.2 million in cost savings from the previously discussed employee furloughs.
• Capital expenses were $0.9 million in the third quarter of 2020, compared to $1.4 million in the year-earlier quarter.
• The number of full-time equivalent employees at September 30, 2020 totaled 613, compared to 617 in the prior year quarter.
• Capital paid to stockholders in the third quarter of 2020 totaled $2.4 million. This came in the form of the Company's regular quarterly dividend.
• The Company’s cash, cash equivalents and short-term investments balance at September 30, 2020, was $79.2 million, up from $77.3 million at December 31, 2019.

Management Commentary:

“While we are still operating under the impact and uncertainty of the pandemic and many of our customers continue to struggle with the challenges presented by COVID-19, our outlook is improving as we saw many positive developments during the third quarter,” said Vincent D. Kelly, president and chief executive officer. "During the quarter, we saw significant increases in software operations bookings on both a sequential and year-over-year basis, as well as continued strong trends in our wireless business. Sustained expense management kept third quarter expense levels consistent with the prior quarter and down sharply from the prior year, even after adding back capitalized software development costs. Our software revenue backlog is at record levels and we generated nearly $4 million of adjusted EBITDA in the quarter. After capital expenditures and paying the quarterly dividend, Spok was able to grow our cash, cash equivalents and short-term investment balances from the prior quarter and prior year-end levels. We are focused on driving positive free cash flow for 2020 and Spok remains committed to paying our regular quarterly dividend. We believe we will be able to achieve this while continuing to support our Spok Care Connect® platform and in the near term, investing in innovation and the evolution of our cloud-native and integrated communication platform, Spok Go®.

"As we pointed out last quarter, many of our new software deals were pushed back due to the pandemic. I am pleased to report that several of those deals were closed during the third quarter, including our first two significant Spok Go deals. And, we expect to report more deals in the fourth quarter as well. During the third quarter our credibility in healthcare continued to grow, as we announced that all 20 adult hospitals and all 10 children’s hospitals named to U.S. News & World Report’s 2020-21 Best Hospitals Honor Roll use Spok clinical communication solutions to facilitate care collaboration and support exceptional patient care. For eight consecutive years Spok has partnered with all of the adult ‘Best Hospitals’. And, we did this while continuing to invest in and develop our software-as-a service, cloud-native platform, Spok Go. In the third quarter we were pleased to announce that this platform, along with Spok paging solutions, has earned System and Organization Controls (SOC) 2 Type II Compliance. This designation follows an audit performed by a Big 4 auditor and confirms that Spok’s information security practices, policies, procedures, and operations meet the SOC 2 Type II standards for managing customer data based on three trust service principles: security, availability and confidentiality.

"Finally, earlier this month Spok welcomed more than 600 attendees to Connect 20 Virtual, our annual conference for healthcare professionals. The virtual event gave healthcare clinicians, IT experts, and C-suite executives a chance to learn about Spok Go and to share information with each other about the future of care team communication, while sharing insights about how the COVID-19 pandemic has changed how they use health IT. Spok has received excellent feedback from our conference and based on requests that we have received, this year we will be providing access to selected presentations to the investment community on November 10th. We believe that Spok provides a critical function, that will become even more important in this environment. Spok's clinical communications platform provides hospitals with a system of action, delivering reliable communications and clinical information, including clinical test results, to care teams when and where it matters most to improve patient outcomes. We look forward to having our investors see this first hand." concluded Kelly.

Business Outlook:

Michael W. Wallace, chief operating officer and chief financial officer, said: “Expense management and strong financial discipline have always been critical in aligning our expense levels with anticipated near and long-term demand for our products, and that continued to be the case in the third quarter. In the period, operating expenses were down nearly 17% and adjusted operating expenses were down nearly 11% from prior year levels, with improvements in all expense categories over that period driven by furloughs, the CARES Act tax credits, and other reductions. Spok’s balance sheet remains strong, with a cash, cash equivalents and short-term investment balance of $79.2 million at September 30, 2020.”

Commenting on the Company’s previously provided financial guidance for 2020, Wallace noted, “Spok has been focused on continuing to understand the impact of the pandemic on our business and the potential for another spike, particularly given the impact of COVID-19 on the installation of our premise-based solutions and the roll-out of our new, cloud-native, SaaS based, Spok Go software solution. Because of the fluid nature of the situation, we, like many of our peer public companies, believe that it is most prudent to continue to suspend our practice of providing annual guidance for revenues and expenses at this time. We look forward to returning to our normal guidance format for 2021, when we report our financial results for the fourth quarter of 2020.”

For earnings history and earnings-related data on Spok Holdings (SPOK) click here.