2024
Smarter, faster, clinical communication
ANNUAL REPORT
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A Message from the President and Chief Executive Officer
Dear Fellow Stockholders,
Let me start this letter by saying how proud I am of our Spok team and our ability to end the year strong,
generating a very impressive performance in 2024, while staying true to our mission. I am pleased with the
momentum that this team has created, and we are excited by our prospects and outlook. In 2024, our team
achieved numerous operational and financial milestones. Significant accomplishments were made, regarding:
•
Software revenue growth, particularly in our professional services business, and specifically as it
relates to our managed services offering
•
Reducing wireless net unit churn
•
Maintaining solid profitability levels
•
Continued expense management
•
Cash flow generation
•
Progress on our product roadmap and development
•
Augmenting our sales team
•
Generating record-level six-and seven-figure customer contracts and multi-year engagements
•
GenA® pager placements
•
Maintenance contract bookings and retention
•
Enhancing our industry reputation with continued high customer satisfaction scores
Since the strategic pivot we announced about three years ago now, our focus has not changed! That is - to grow
our software revenue, generate cash and return capital to our stockholders. In 2024, for the third consecutive
year, we again accomplished that mission! We returned $26.4 million of cash to our stockholders while
generating more than $29 million of adjusted EBITDA.
We were also successful in our stated goal to grow software revenue, driven by triple-digit growth in our
managed professional services PGGFSJOH and the more than 13% growth in our software operations bookings.
Coupled with a continued focus on expense management, Spok generated $15 million, or $0.73 per diluted
share, of net income. And we accomplished this while responsibly investing in our product and service
offerings.
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We believe Spok has struck an excellent balance between
making the necessary investments to fuel future growth,
while continuing to generate cash flow and returning capital
to our stockholders. In 2024, Spok invested more than $11.5
million in product research and development, a nearly 10%
increase from 2023. Investments such as these are critical to
creating a best of breed product platform and to maintaining
our solid industry reputation.
Our strategic business plan, which we began implementing
in early 2022, includes maximizing revenue and cash flow
generation from our established Spok Care Connect®
suite, including Spok Mobile®, and our Wireless service
offerings. The Company already has an excellent track
record of driving revenue from these businesses and enjoys
a significant market leadership position in narrowband
personal communications services and hospital call center
software solutions. We plan to continue to invest, in a
targeted and disciplined manner, in these important and
valuable franchises, to continue building on our long-standing
relationships with the nation’s leading healthcare providers.
Our customers include 18 of the top 20 adult hospitals and
9 of the 10 children’s hospitals named to the U.S. News &
World Report’s 2024 Best Hospitals Honor Roll. In fact, over
the past decade, nearly every hospital named to that honor
roll has been a Spok customer.
Over the course of the three years since we announced
our strategic pivot, Spok has returned approximately $77
million, or $3.75 per share, to our stockholders in the form
of our regular quarterly dividend. In fact, since we founded
this company in 2004, Spok has returned nearly $700 million
to our stockholders
either through our regular quarterly
dividend, special dividends, or share repurchases. When we
paid the quarterly dividend in the first quarter of 202, this
represented the 80th consecutive quarterly dividend paid
since becoming a public company
and we expect to pay
dividends in excess of $27 million in 2025. Spok remains
committed to our dividend policy and returning capital to our
stockholders.
Capital Returned to
Stockholders
13.2%
Software Managed Services
Software Operation
bookings
Wireless Average
Revenue per unit
Wireless Net Unit Churn
$26.4
million
3.4%
50 basis
points
134.6%
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Building on Spok’s Reputation
In 2024, Spok continued to build upon our premier industry reputation. We started the year with our participation at the
HIMSS24 conference
where we showcased our top-rated clinical communication platform. There, Spok experts
demonstrated the power of the new Spok Care Connect hosted solution and the new reporting dashboards and user
capabilities of Spok® Messenger.
At the HIMSS24 conference, attendees learned about the Spok Care Connect hosted solution, which enables hospitals
and clinics to access the power of Spok applications remotely with a simple, recurring subscription plan. Additionally,
Spok experts discussed how Spok Messenger’s new reporting and dashboard capabilities provide a user-friendly way to
showcase operational metrics for enterprise communications. This is an intelligent, FDA 510(k)-cleared software solution
designed to send critical information and updates from an organization’s various alert systems, such as nurse call and
patient monitoring, to mobile staff on their communication devices. The conference was a true success both in terms
of the excitement level generated by Spok’s products and the number of new sales leads we were able to add to our
pipeline.
In 2024, I believe that there were two key proof points that underscore our premier market position, as evidenced by:
1.
Receiving top honors for the seventh consecutive year in Black Book Market Research’s survey
of Clinical Communications Solutions – Acute Care Hospitals
2.
Having 18 of the 20 adult hospitals and 9 of the 10 children’s hospitals named to the 2024 U.S.
News and World Report Best Hospital Honor Roll as customers.
Spok is starting 2025 on a high note, having just wrapped up another successful HIMSS25 conference, and once again,
Black Book Research has awarded us top honors in their annual review. This year it comes in two categories: Secure
Clinical Communications Solutions and Enterprise Messaging & Critical Alert Management. Accolades such as these
do not come if you don’t have a best-in-class product offering and solid reputation with your customers. Spok has an
amazing Blue Chip customer base
and many of those customers have been with us for decades and continue to buy
from us.
Finally, in July 2024, Spok surpassed a very
important milestone as the company marked our
10-year anniversary branded as Spok. In 2011, USA
Mobility Inc. acquired Amcom Software. In 2014,
the company completed its integration, creating
a single, cohesive business—and the Spok brand
was born. Spok expanded on the strong legacy of
those companies to solve critical communication
challenges that help hospitals and health systems
improve patient outcomes and support public safety
when seconds count and lives are at stake. This is
our mission, and this is our passion!
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Corporate Highlights
In 2024, we continued to make significant progress in our strategic pivot and saw strong improvement in many
performance metrics, including software bookings and backlog levels, as well as expense management, as we further
aligned our cost structure with our business plan. In 2024, Spok generated nearly $15 million of net income, or $0.73
per diluted share, and returned $26.4 million to stockholders through the quarterly dividend, while generating $29.2
million of adjusted EBITDA. And as you’ve seen from our 2025 guidance, we are on track to do it again this year. With a
renewed focus on Spok Care Connect clients, full year 2024 software operations bookings totaled just over $34
million, a 13.2% year-over-year increase. We signed a record 82 six- and seven-figure customer contracts, and we saw
a 50% increase in our year-over-year average new contract size in the fourth quarter. Most importantly, last year's
performance included 40 multi-year engagements, up significantly from the level generated in 2023.
Software revenue totaled $64.1 million in 2024, up nearly 2% from the prior year. This performance was driven by
growth in professional services revenue. Professional services revenue of $17.9 million in 2024 was up 21.6% from
revenue of $14.7 million in 2023. We are seeing further sustained improvement in resource utilization, delivering on our
internal initiatives to better align total resources with our backlog and driving a higher rate of margin and net cash flow.
We hired additional service professionals in 2024 to meet our current backlog needs and to support our expanding
professional services opportunities, and we expect to continue doing so in 2025. Based on the rapid success of our
managed services offering, we have now begun separately reporting revenue from this category. Our professional
services revenues are now broken out between:
•
Projects—our traditional fixed-bid engagements, where revenues are recognized as work is performed; and
•
Managed services—an “a la carte” offering where customers are provided implementation and upgrade
services across the length of their contract
typically UISFF years, where revenues are recognized ratably over
theterm of the engagement.
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Managed services has become a more significant component of professional services revenue. Managed
services revenue totaled $3.3 million, or 18.2% of professional services revenue in 2024. This is up from
$1.4 million, or less than 10% of professional services revenue in 2023. We remain optimistic by the prospects
of this service offering and will continue to provide updates on our progress in the future.
With respect to wireless revenue, 2024 performance was primarily driven by improvement in average revenue
per unit, or ARPU, which saw growth of $0.26 on a year-over-year basis. Much of this increase was driven by
previous pricing actions and, to a lesser extent, incremental pass-through taxes and fees. We did see an
improvement in net unit churn, as net units in service declined in 2024 by roughly 5.9% from the prior year, as
compared to a 6.4% decline in 2023. While we are happy with the year-over-year decline in the net unit churn
rate, and it was still within the 4% to 6% weIBWFTFFO the last 5 to 7 years, we believe that the improvement
in the rate would have been even greater had several of the new additions that were anticipated in UIFGPVSUI
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$30.0
$9.8
$10.0
$26.4
$25.6
$25.0
2020
2021
2022
2023
2024
$25.0
$20.0
$15.0
$10.0
$5.0
$0.0
2024 Financial Performance
'PSGJTDBMZFBS
XFBDIJFWFEPVSQSFWJPVTMZDPNNVOJDBUFEGVMMZFBSGJOBODJBMHVJEBODFSBOHFTGPSSFWFOVF
BEKVTUFEPQFSBUJOHFYQFOTFT
BOEBEKVTUFE&#*5%". Total GAAP revenue for fiscal year 2024 was $138 million,
in line with prior year results. Revenue performance in 2024 consisted of wireless revenue of $74 million and
software revenue of $64 million. With respect to wireless revenue, 2024 performance was driven by a more
than 3.4% annual increase in average revenue per unit, or ARPU, while software revenue was driven by the
surge in professional services revenue and modest growth in our maintenance segment. Our 2024 adjusted
operating expenses of $113 million
$PNQBOZUPQSPWJEFSFDPODJMJBUJPOGPSBEKVTUFEPQFSBUJOHFYQFOTFT
were relatively flat to the prior year. Spok continues to implement efficiencies in our cost structure and further
align our expense base with the market demand that we are seeing. Our balance sheet remained strong with a
cash and cash equivalents balance of $29 million as of December 31, 2024, and deferred JODPNFtax assets
totaling approximately $42 million. Finally, we continue to operate as a debt-free company!
Cash Returned to Stockholders
Dividends
(dollars in millions)
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2025 and Beyond
We are optimistic about our prospects for 2025 and are confident in our plan to maximize revenue and cash flow
generation from our established Spok Care Connect solutions, including Spok Mobile, and our wireless service offerings.
Our offerings provide the Company with a very predictable revenue base, with over 80% of our revenue re-occurring in
nature, coming from either our legacy wireless offerings or software maintenance contracts. Additionally, our Spok Care
Connect solutions provide products with potential for new licenses sales, professional services contracts and a valuable
ongoing maintenance stream. Maintenance continues to provide a foundation under our legacy software business and is
important to maintain as we continue to focus on cash flow generation.
Our overall goal is to generate cash to return to TUPDLholders by producing sustainable, profitable business growth. The
allocation of capital remains a primary area of focus that our Board of Directors is constantly reviewing. Our multi-faceted
capital allocation strategy currently includes dividends as well as key strategic investments that augment our product
development, operating platform, and infrastructure. Our strategy also includes the potential for acquisitions that are both
strategic in nature and that are accretive to earnings. However, as I have previously outlined, our main focus continues to
be the development and enhancement of our software solutions rather than acquiring additional functionality.
We believe our work in product research and development 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.
Ten years ago, the company completed its integration, creating
a single, cohesive business—and the Spok brand was born. Spok
expanded on its legacy of solving critical communication challenges
that help hospitals and health systems improve patient outcomes and
support public safety when seconds count and lives are at stake.
This is our mission, and this is our passion!
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Our product and development teams have been hard at work executing our product roadmap deliverables. For
example, in 2024, we have 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 Spok Care Connect Contact Center
for universal interoperability. Late in the year, we:
Deployed upgrades to our Spok Care Connect Enterprise Reporting
Provided enhanced dashboard services for clinical and operational alerting
Expanded softphone support and SMS two-way service improvements and
Expanded HL7 standards to support a wider variety of alerting systems.
In short, we remain committed to our mission to be a strategic partner of choice for enterprise-grade
communications and patient care coordination across all sectors of the healthcare industry. This commitment
has allowed Spok to create a significant market position with longstanding relationships with the nation’s leading
healthcare providers. This vision serves as the framework for every aspect of our business. We want to express
to all our stakeholders that we are committed to the core principles that will guide our organization’s future. Every
Spok representative and partner must embody these core tenets of our values.
Our commitment to our stockholders, customers and other stakeholders has never wavered. We are moving
forward with a clear vision for the future, and we are focused on transforming that vision into action through
compelling products and innovative strategies that position us to capitalize on the robust opportunities in
our evolving marketplace. We wish to thank you, our stockholders, for your support and patience as we have
navigated through our transition. We believe that the best is yet to come. We also thank our Board of Directors
for their continued stewardship and guidance, our employees for their tireless dedication to our mission, and our
customers for their continued support. We look forward to the journey ahead.
Yours truly,
Vincent D. Kelly
President and Chief Executive Officer
April 2025
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Adjusted operating expenses excludes depreciation
accretionFYQFOTF, impairment of intangible assets, BOEseverance and
restructuring costs
Adjusted EBITDA represents net income/(loss) before interest income/expense, income tax benefit/expense, depreciation, accretion
expense, stock-based compensation expense, impairment of intangible assets, BOEseverance and restructuring
Statements contained herein
which are not historical fact, such as statements regarding our 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 our 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, our ability to manage wireless network rationalization to lower
our costs without causing disruption of service to our customers; our ability to retain key management personnel and to attract and
retain talent within the organization; the productivity of our sales organization and our ability to deliver effective customer support; our
ability to identify potential acquisitions, finance, consummate and successfully integrate such acquisitions, and achieve the expected
benefits of such acquisitions; economic conditions, such as recessionary economic cycles, higher interest rates, inflation and higher
levels of unemployment; risks related to our overall business strategy, including maximizing revenue and cash generation from our
established businesses and returning capital to stockholders through dividends and repurchases of shares of our common stock;
competition for our services and products from new technologies or those offered and/or developed from firms that are substantially
larger and have much greater financial and human capital resources; continuing decline in the number of paging units we have in
service with customers, commensurate with a continuing decline in our wireless revenue; our ability to address changing market
conditions with new or revised software solutions; undetected defects, bugs, or security vulnerabilities in our products; our
dependence on the United States healthcare industry; long sales cycle of our software solutions and services; our reliance on third-
party vendors to supply us with wireless paging equipment; our ability to maintain successful relationships with our channel partners;
our ability to protect our rights in intellectual property that we own and develop and the potential for litigation claiming intellectual
property infringement by us; our use of open source software, third-party software and other intellectual property; our reliance on data
centers and other IT Systems (as defined below) and technologies provided by third parties, and technology systems and electronic
networks supplied and managed by third parties; cyberattacks, data breaches, system disruptions or other compromises to our or our
critical third parties’ IT Systems (as defined below), data, products or services; our ability to realize the benefits associated with our
deferred income tax assets; future impairments of our long-lived assets or goodwill; risks related to data privacy and protection-related
laws and regulation; and our ability to manage changes related to regulation, including laws and regulations affecting hospitals and the
healthcare industry generally, 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.
For the year ended
12/31/2024
12/31/2023
Operating expenses
$ 118,688 $ 117,797
Add back:
Depreciation and accretion
(4,148)
(4,496)
Severance and restructuring
(1,104)
(573)
Adjusted operating expenses
$ 113,436 $ 112,728
For the year ended
12/31/2024
12/31/2023
Net income
$ 14,965 $ 15,666
Add back:
Provision for income taxes
5,067 6,659
Other income (expense)
86 2
Interest income
(1,153) (1,099)
Depreciation and accretion
4,148 4,496
EBITDA
$ 23,113 $ 25,724
Adjustments:
Stock-based compensation
4,956 4,045
Severance and restructuring
1,104 573
Adjusted EBITDA
$ 29,173 $ 30,342
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2024
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-32358
SPOK HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
16-1694797
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3000 Technology Drive ,
Suite 400
Plano ,
Texas
75074
(Address of principal executive offices)
(Zip Code)
(800) 611-8488
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $0.0001 per share
SPOK
NASDAQ
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and
"emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the registrant was $293 million based on the closing price of $14.81
per share on the NASDAQ National Market on June 28, 2024.
The number of shares of registrant’s common stock outstanding on February 21, 2025, was 20,419,025.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement for the 2025 Annual Meeting of Stockholders of the registrant, which will be filed with the
Securities and Exchange Commission pursuant to Regulation 14A no later than April 30, 2025, are incorporated by reference into Part III of this
Report.
®
Table of Contents
TABLE OF CONTENTS
Part I
Item 1.
Business
5
Item 1A.
Risk Factors
15
Item 1B.
Unresolved Staff Comments
25
Item 1C.
Cybersecurity
25
Item 2.
Properties
26
Item 3.
Legal Proceedings
26
Item 4.
Mine Safety Disclosures
26
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
26
Item 6.
[Reserved]
29
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
40
Item 8
Financial Statements and Supplementary Data
40
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
41
Item 9A.
Controls and Procedures
42
Item 9B.
Other Information
42
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
43
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
43
Item 11.
Executive Compensation
43
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
43
Item 13.
Certain Relationships and Related Transactions, and Director Independence
43
Item 14.
Principal Accountant Fees and Services
43
Part IV
Item 15.
Exhibit and Financial Statement Schedules
44
Item 16.
Form 10-K Summary
44
Signatures
45
2
Table of Contents
Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements and information relating to Spok Holdings, Inc. and its subsidiaries
("Spok" or the "Company") that set forth anticipated results based on management’s current plans, known trends and assumptions. These
statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are
predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "anticipate," "believe," "estimate,"
"expect," "intend," "will," "target," "forecast" and similar expressions, as they relate to Spok, are forward-looking statements.
Although these statements are based upon current plans, known trends and assumptions that management considers reasonable, they are
subject to certain risks, uncertainties and assumptions, including, but not limited to, the following:
•
Our ability to manage wireless network rationalization to lower our costs without causing disruption of service to our customers;
•
Our ability to retain key management personnel and to attract and retain talent within the organization;
•
The productivity of our sales organization and our ability to deliver effective customer support;
•
Our ability to identify potential acquisitions, finance, consummate and successfully integrate such acquisitions, and achieve the expected
benefits of such acquisitions;
•
Economic conditions, such as recessionary economic cycles, higher interest rates, inflation and higher levels of unemployment;
•
Risks related to our overall business strategy, including maximizing revenue and cash generation from our established businesses and
returning capital to stockholders through dividends and repurchases of shares of our common stock;
•
Competition for our services and products from new technologies or those offered and/or developed from firms that are substantially
larger and have much greater financial and human capital resources;
•
Continuing decline in the number of paging units we have in service with customers, commensurate with a continuing decline in our
wireless revenue;
•
Our ability to address changing market conditions with new or revised software solutions;
•
Undetected defects, bugs, or security vulnerabilities in our products;
•
Our dependence on the United States healthcare industry;
•
Long sales cycle of our software solutions and services;
•
Our reliance on third-party vendors to supply us with wireless paging equipment;
•
Our ability to maintain successful relationships with our channel partners;
•
Our ability to protect our rights in intellectual property that we own and develop and the potential for litigation claiming intellectual
property infringement by us;
•
Our use of open source software, third-party software and other intellectual property;
•
Our reliance on data centers and other IT Systems (as defined below) and technologies provided by third parties, and technology
systems and electronic networks supplied and managed by third parties;
•
Cyberattacks, data breaches, system disruptions or other compromises to our or our critical third parties’ IT Systems (as defined below),
data, products or services;
•
Our ability to realize the benefits associated with our deferred income tax assets;
•
Future impairments of our long-lived assets or goodwill;
•
Risks related to data privacy and protection-related laws and regulation;
•
Our ability to manage changes related to regulation, including laws and regulations affecting hospitals and the healthcare industry
generally; and
•
Those matters that are discussed in this Annual Report under "Item 1A. Risk Factors."
Should known or unknown risks or uncertainties materialize, known trends change, or underlying assumptions prove inaccurate, actual results or
outcomes may differ materially from past results and those described herein as anticipated, believed, estimated, expected, intended, targeted or
forecasted. Investors are cautioned not to place undue reliance on these forward-looking statements.
The Company undertakes no obligation to revise or update forward-looking statements, except as required by law. Investors are advised to
consult all further disclosures the Company makes in its subsequent quarterly reports on Form 10-Q and current reports on Form 8-K that it will
file with the United States Securities and Exchange Commission ("SEC"). Also note that, in the risk factors section, the Company provides a
cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to its business. These are factors that, individually or
in the aggregate, could
3
Table of Contents
cause the Company’s actual results to differ materially from past results as well as those results that may be anticipated, believed, estimated,
expected, intended, targeted or forecasted. It is not possible to predict or identify all such risk factors. Consequently, investors should not
consider the risk factor discussion to be a complete discussion of all of the potential risks or uncertainties that could affect Spok’s business,
results of operations or financial condition, subsequent to the filing of this Annual Report.
4
Table of Contents
PART I
The terms "we," "us," "our," "Company" and "Spok" refer to Spok Holdings, Inc. and its direct and indirect wholly owned subsidiaries.
ITEM 1. BUSINESS
Overview
Spok, Inc., a wholly owned subsidiary of Spok Holdings, Inc. (NASDAQ: SPOK), is proud to be a global leader in healthcare communications.
We deliver clinical information to care teams when and where it matters most to improve patient outcomes. Top hospitals rely on Spok products
and services to enhance workflows for clinicians, support administrative compliance, and provide a better experience for patients.
Our headquarters is located at 3000 Technology Drive, Suite 400, Plano, Texas 75074, and our telephone number is 800-611-8488. We maintain
a website at http://www.spok.com. This website address is for information only and is not intended to be an active link or to incorporate any
website information into this Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K").
We deliver smart, reliable clinical communication and collaboration solutions to help protect the health, well-being, and safety of people in the
United States and abroad, on a limited basis, in Europe, Canada, Australia, Asia and the Middle East. Our customers rely on Spok for workflow
improvement, secure texting, paging services, contact center optimization, and public safety response. We develop, sell, and support enterprise-
wide systems primarily for healthcare and other organizations needing to automate, centralize, and standardize their approach to clinical and
critical communications. Our solutions can be found in prominent hospitals, large government agencies, leading public safety institutions,
colleges and universities, large hotels, resorts and casinos and well-known manufacturers. We offer our services and products to three major
market segments: healthcare, government, and large enterprise, with a greater emphasis on the healthcare market segment.
In February 2022, our Board of Directors announced a new strategic business plan. In accordance with this plan, in 2022, we discontinued Spok
Go and successfully eliminated all associated costs. Since 2022, our focus has been and will continue to be on prioritizing generation of cash
flow and maximizing revenue in our Spok Care Connect® and Wireless products and service lines.
Industry Overview
The United States healthcare market continues to experience significant change. Healthcare costs continue to rise, reimbursements from
Centers for Medicare and Medicaid Services are being reduced in certain areas, digitization of healthcare information continues and the industry
continues to shift towards a value-based purchasing model and away from the traditional fee-for-service model. The value-based purchasing
model places an emphasis on incentivizing value and quality at an individual patient level in order to provide better patient outcomes and reduce
30-day readmissions.
In response, healthcare providers now require greater communication and better collaboration between clinicians in order to generate
improvements in the quality, safety, satisfaction and efficiency of patient care delivery. Improvements in these areas are necessary for healthcare
providers to successfully navigate many of these issues. Many providers are seeking improvement through the adoption of technology, looking to
take advantage of workflow automation, process improvement and, in limited circumstances, machine learning and artificial intelligence.
Providers also look to increase efficiencies through consolidation as larger health systems continue to acquire smaller hospitals for the primary
purpose of gaining regional market share amongst tough competition.
We believe these changes and continued pressure for organizations to provide improved services with fewer resources place an even greater
emphasis on the need for improved clinical communication and collaboration tools to meet the increasing requirements demanded by the
healthcare industry in today’s marketplace. Our solutions help hospitals significantly increase the quality and safety of patient care delivery, while
increasing patient and provider satisfaction and simultaneously increasing employee productivity, reducing costs and clinician burnout. This is
accomplished through workflow enhancement; secure, reliable and integrated communication tools; and mobile accessibility.
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Sales and Marketing
We offer a focused suite of unified clinical communication and collaboration solutions primarily to organizations in the healthcare sector. We
generate wireless revenue from the sales of wireless messaging services, equipment, maintenance plans and/or equipment loss protection to
both one-way and two-way messaging subscribers. We generate software revenue from the sale of our software solutions, including software
licenses, professional services, equipment we procure from third parties, and post-contract support.
Sales
We market and distribute our clinical communication and collaboration solutions through a direct sales force and an indirect sales channel.
The direct sales force contracts or sells products, solutions, messaging services and other services directly to customers ranging from small and
medium-sized businesses to companies in the Fortune 1000, as well as federal, state, and local government agencies. We will continue to
market primarily to commercial enterprises, with a focus on healthcare organizations, interested in our communication solutions. We maintain a
sales presence in key markets throughout the United States, and in limited markets internationally through strategic partnerships, in an effort to
gain new customers and to retain and increase sales to existing customers. The direct sales force targets leadership responsible for the
procurement of clinical communication and collaboration solutions such as chief information officers, chief technology officers, chief medical
officers, chief nursing officers, information technology directors, telecommunications directors, laboratory directors, radiology directors and
contact center managers. The timing for a direct sale varies but may take from six to 18 months depending on the type and scope of software
solution.
The indirect sales channel complements our direct sales force. Through relationships with alliance partners, we are able to sell our solutions to a
wider customer base. For wireless services that we do not provide directly, we contract with and invoice an intermediary for airtime services. For
our software sales, relationships with alliance partners assist us in broadening the distribution of our products and further diversifying into
markets outside of the healthcare provider vertical as well as in the Asia Pacific region. We continue to build our alliance partner relationships to
expand and broaden our distribution efforts.
Within our target market, our efforts continue to remain focused on addressing the following dynamics:
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A heightened awareness of the ubiquitous, critical role of communications in healthcare;
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An increased focus within hospitals on quality of care and patient safety initiatives;
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The importance of confidentiality when sharing information;
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Increased regulations that may result in process changes, increased documentation and reporting and increased costs;
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A continuing focus within hospitals to reduce labor and administrative costs while increasing productivity; and
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A broader proliferation of information technology in healthcare as hospitals strive to apply technology to address their operational issues.
Marketing
We have a centralized marketing function, which is focused on supporting our solutions and sales efforts by strengthening our corporate brand,
generating sales leads, and facilitating the sales process. Our principal marketing programs include:
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Website development and maintenance, which provides product and Company information, customer support options, paging
capabilities, as well as thought leadership and engagement;
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Content marketing (e.g., eBriefs, case studies, brochures, videos and infographics) as an underlying foundation of all marketing
campaigns or initiatives;
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Webinars about customer successes, current industry trends, and our solutions;
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Social media involvement to provide information regarding upcoming educational events or new product offerings;
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Blog posts to provide information about industry trends and our solutions to customers, prospects, and alliances;
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Participation at trade shows and industry events, such as Healthcare Information and Management Systems Society (HIMSS), College
of Healthcare Information Management Executives (CHIME), and other healthcare information technology related shows and
conferences; and
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Annual customer conferences (virtual) that solicit feedback on our solutions and services.
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Licenses and Messaging Networks
In order to provide our wireless services, we hold licenses to operate on various frequencies in the 900 MHz narrowband. We are licensed by the
United States Federal Communications Commission (the “FCC”) to operate Commercial Mobile Radio Services (“CMRS”). These licenses are
required to provide one-way and two-way messaging services over our networks.
Our messaging networks and related infrastructure are located exclusively in the United States. We operate local, regional and nationwide one-
way networks, which enable subscribers to receive messages over a desired geographic area. One-way networks operating in 900 MHz
frequency bands utilize the FLEX™ protocol developed by Motorola Mobility, Inc. (“Motorola"). The FLEX™ protocol has advantages of
functioning at higher network speeds (which increases the volume of messages that can be transmitted over the network) and of having more
robust error correction (which facilitates message delivery to a device with fewer transmission errors).
Our two-way networks utilize the ReFLEX 25™ protocol, also developed by Motorola. ReFLEX 25™ promotes spectrum efficiency and high
network capacity by dividing coverage areas into zones and sub-zones. Messages are directed to the zone or sub-zone where the subscriber is
located, allowing the same frequency to be reused to carry different traffic in other zones or sub-zones. As a result, the ReFLEX 25™ protocol
allows the two-way network to transmit substantially more messages than a one-way network using the FLEX™ protocols. The two-way network
also provides for assured message delivery. The network stores, for a limited amount of time, messages that could not be delivered to a device
that is out of coverage for any reason, and when the unit returns to service, those messages are delivered. The two-way paging network
operates under a set of licenses called narrowband Personal Communications Service, which uses 900 MHz frequencies. These licenses
require certain minimum five and ten-year build-out commitments established by the FCC, which have been satisfied.
Although the capacities of our networks vary by geographic area, we have excess capacity at a consolidated level. We have implemented a plan
to manage network capacity and to improve overall network efficiency by consolidating subscribers onto fewer, higher capacity networks with
increased transmission speeds. This plan is referred to as network rationalization. Network rationalization will result in fewer networks, and
therefore, fewer transmitter locations, which we believe will result in lower operating expenses due primarily to lower site rent expenses.
As we continue to implement our network rationalization plan, we expect to have fewer transmitters that can be removed efficiently from our
networks and still maintain the level of service required for our customers, and thus the benefits of network rationalization will decline. Cost
savings have slowed as compared to historical cost savings. As we reach certain minimum frequency commitments, as outlined by the FCC, we
may be limited in our ability to continue our efforts to rationalize and consolidate our networks.
Generally, our software solutions do not require licenses or permits from federal, state and/or local government agencies in order to be sold to
customers. However, certain of our software products are subject to regulation by the United States Food and Drug Administration ("FDA") and
are subject to certification by the Joint Interoperability Test Command to be sold to the branches of the armed services of the United States and
the United States government. (see "Regulation" below).
Our Strategy
In alignment with our strategic business plan announced in February 2022, our over-arching strategy has been, and will continue to be, the
prioritization of free cash flow generation and the return of capital to stockholders, by maximizing revenue and cash generation from our
established lines of business while effectively managing expenses. Through targeted investments in these important and valuable business
lines, we aim to reinvigorate growth in our legacy software solutions and minimize wireless revenue attrition.
Particular areas of strategic emphasis include:
Acquire new customers and expand relationships within our existing customer base - We will continue to focus our sales and marketing
efforts in the healthcare market in order to identify opportunities for new sales as well as grow revenues from our existing customer base. We
have ongoing initiatives to further penetrate the hospital segment in the United States, and while we believe there is a significant opportunity to
sell clinical communication and collaboration solutions to hospitals located outside the United States, our near-term focus is on the domestic
market.
We have a significant presence in the healthcare marketplace, and we intend to leverage the strength of our market presence and the breadth of
our product offerings to further expand our customer base in healthcare.
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Minimize wireless revenue attrition - We continue to have a valuable wireless presence in the healthcare market, particularly in larger
hospitals. We offer a comprehensive suite of wireless messaging products and services focused on healthcare and "campus" type environments
and critical mission notification. We will continue to focus on network reliability and customer service to help minimize the rate of revenue
attrition.
We recognize that the number of wireless subscribers, units in service, and the related revenue will likely continue to decline. We intend to
continue reducing our underlying cost structure impacting this declining wireless revenue stream by reducing payroll and related expenses as
well as network related expenses where possible, alongside periodic price increases. We will integrate and consolidate operations as necessary
to ensure the lowest cost operational platform for our consolidated business.
Enhance existing software applications - We will continue to invest in the development and enhancement of our Spok Care Connect suite of
products and services, at a similar rate consistent to the prior year. Targeted enhancements and continued development efforts are critical to our
ability to maintain our core software maintenance revenue and are necessary to drive future software operations revenue. Additionally, targeted
enhancements of the Spok Mobile® application will be critical in our ability to help further mitigate wireless customer attrition.
Manage expenses - With our focus on generating cash flow, it is critical that we manage costs in alignment with our revenue. We will continue
to look for ways to reduce our underlying cost structure, particularly if revenue declines. While we will continue to invest in the business, we will
do so in a targeted manner to drive tangible earnings that can be returned to our stockholders.
Return capital to our stockholders - We understand that our primary objective is to create long-term stockholder value. We will continue to
evaluate how best to deploy our capital resources to support sustainable business growth and maximize stockholder value. We expect to
continue to pay a quarterly dividend of $0.3125 per share of common stock, or $1.250 annually, in 2025.
Products and Services
Wireless Products and Related Services
We offer subscriptions to one-way or two-way messaging services for a periodic (monthly, quarterly, semi-annual, or annual) service fee. The
level of service fees is generally based upon the type of service provided, the geographic area covered, the number of devices provided to the
customer and the period of commitment. We also sell devices to resellers who lease or resell them to their subscribers and then sell messaging
services utilizing our networks.
Wireless products and services revenue represented 53%, 55% and 56% of total consolidated revenue for the years ended December 31, 2024,
2023 and 2022, respectively. Demand for one-way and two-way messaging services declined during these years, and we believe demand will
continue to decline for the foreseeable future. As demand for one-way and two-way messaging has declined, we have developed or added
service offerings, including our GenA® pagers discussed below, in order to optimize our revenue potential and mitigate the decline in our
wireless revenues. We will continue to evaluate opportunities within our wireless business while providing customers the highest value possible.
Legacy Wireless Services
A subscriber to one-way messaging services may select coverage on a local, regional, or nationwide basis to best meet their messaging needs,
while two-way messaging is generally offered on a nationwide basis. In addition, subscribers either contract to use a messaging device that we
own for an additional fixed monthly fee, or they own the device used, after either purchasing it from us or from another vendor.
We offer exclusive one-way (T5) and two-way (T52) alphanumeric pagers that are configurable to support unencrypted or encrypted operation.
When configured for encryption, these devices utilize AES-128 bit encryption, screen locking and remote wipe capabilities. With encryption,
these secure paging devices enhance our service offerings to the healthcare community by adding Health Insurance Portability and
Accountability Act ("HIPAA") security capabilities to the low cost and high reliability and availability benefits of paging. We also offer ancillary
services, such as voicemail and equipment loss or maintenance protection, which help increase the monthly recurring revenue we receive, along
with these traditional messaging services.
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GenA® Pagers
On November 16, 2021, we announced the launch of our newest pager, GenA. This one-way alphanumeric pager, available on our wide-area
paging network, features a high resolution ePaper display, intuitive modern user interface, advanced HIPAA-compliant encryption and security
features, over-the-air remote programming, and an antimicrobial housing. The ePaper display advances the user experience with its larger
screen featuring a high-resolution, high-contrast display for easy reading in all conditions, while an automatic front-light eases reading messages
in the dark. Users can select from various font sizes, and the large GenA display also leverages proportional fonts to maximize key information
on a single screen.
GenA pagers also allow for superior message reception in buildings with difficult coverage conditions using the high-powered Spok 900MHz
simulcast network. Enhanced over-the-air (OTA) programming through the Spok My Account customer web portal enables remote pager
configuration changes such as updating the user’s name on the pager, assigning a pager to a group, deleting message data and encryption
keys, modifying global security settings, and remotely unlocking the device. The GenA pager also provides advanced message management
features allowing critical messages to be locked to prevent deletion or saved to a separate folder. In addition, separate inbox folders can be set
up for group messages.
The GenA pager is the only product available on the market with these capabilities, and we maintain an exclusive arrangement with the product's
manufacturer whereby it may not market or sell the product to any third party without our consent. Given the uniqueness of the GenA pager, we
believe its development is a key initiative that may help slow our wireless revenue attrition.
Software
Dependable clinical communications are paramount for individuals in healthcare and a host of other industries. We offer a number of solutions,
providing our customers with the ability to communicate anywhere, anytime across a number of situations. Our solutions are used for contact
centers, clinical alerting and notification, mobile communications and messaging, and for public safety notifications.
Spok Care Connect® Suite
Contact Center
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Spok® Console: Provides operators with the information needed to process calls using their computers with just a few keystrokes. This
solution integrates with the customers’ existing phone systems and is used by the operator group to answer incoming calls to the contact
center. Operators can quickly and accurately perform directory searches and code calls, as well as messaging and paging by
individuals, groups, and roles using the Spok Console’s computer telephony integration and directory capabilities.
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Spok® Web Directory: Makes employee contact information more accessible and enables staff to send messages quickly right from
the directory. Authenticated users can log on anywhere, anytime to perform a variety of important updates to contact information and on-
call schedules, search the directory, and send important messages.
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Spok® Web On-Call Scheduling: Keeps personnel, calendars and on-call scheduling information updated, even with thousands of
staff, using a secure web portal to maintain and allow password-protected access to the latest on-call schedules and personnel
information.
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Spok Voice Connect®: Enables the organization to process routine phone requests, including transfers, directory assistance,
messaging and paging without live operators and with more ease-of-use than touch-tone menus.
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Spok® Call Recording and Quality Management: Records, monitors, and scores operators’ conversations to allow for better
management of calls, helping improve customer service.
Clinical Alerting
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Spok® Messenger: Provides an intelligent, FDA-compliant, 510(k)-cleared solution that connects virtually all crucial alert systems,
including nurse call, fire, security, patient monitoring, and building management to mobile staff via their wireless communication devices.
This solution provides the ability to reach mobile team members within seconds of an alert, improving overall workflow, staff productivity,
and the convenience and safety of everyone in the facility.
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Spok® e.Notify: Enables organizations to quickly and reliably notify and confirm team member availability during emergency situations
without relying on calling trees, thereby reducing confusion that may arise in an emergency situation. This solution automatically delivers
messages, collects responses, escalates issues to others, and logs all activities for reporting and analysis purposes.
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Spok® Critical Test Results Notification: Automates and streamlines the process of delivering critical test results to the appropriate
clinicians to help ensure patient safety. This solution can send messages from the radiology departments by means of encrypted
smartphone communications, two-way paging, secure email, secure text, images, annotations, and voice to a variety of endpoints such
as workstations, laptops, tablets, smartphones, pagers, and other wireless devices.
Mobile Communications
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Spok Mobile®: Simplifies communications and strengthens care by using smartphones and tablets for secure code alerts, patient
updates, results, consult requests, and much more. Allows users to access the full directory of accurate contact information to send
messages/photos/videos to smartphones and other devices and helps to ensure all clinical communications are logged with security,
traceability, and reliability.
Public Safety
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Spok® PC/PSAP: Speeds emergency dispatch by giving Public Safety Answering Point call-takers an easy-to-use, standards-based,
graphical interface that integrates the underlying phone system, mapping systems, and other resources for critical information
availability. 9-1-1 call-takers are able to instantly involve police, fire, EMT, and hazardous material personnel with a single click of the
mouse or touch of the screen.
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Spok® Enterprise Alert: Directs emergency personnel to a 9-1-1 caller’s exact location (building, floor, room), helping to ensure speed,
accuracy, and reliability of response. The E9-1-1 software provides real-time, onsite notification when 9-1-1 is dialed, and works to
decrease emergency response time.
Hosted Solution
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Spok Care Connect® Hosted Solution: Provides hospitals and healthcare systems with remote access to Spok Care Connect®
solutions (currently Spok® Console, Spok® Web Directory, Spok® On-Call Scheduling and Spok Mobile®) and reduces the burden on
information technology resources while providing immediate access to Spok solutions.
Services
We offer a variety of professional services to assist our customers in the successful implementation of, and to maximize the benefits obtained
from the use of, our software solutions. We also offer support services to enhance and refine the customer's experience throughout their
relationship with Spok.
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Professional Services: We offer a full suite of professional services that are provided by a dedicated group of professional service
employees. Our professional services projects include consultation, implementation, and training services. We also offer managed
services, which includes the implementation services for all the available upgrades to the software purchased by the customer over the
term of the contract. Our professional services staff uses a branded, consistent methodology that provides a comprehensive phased
work plan for both new software installations and/or upgrades. In support of our implementation methodology, we manage the various
aspects of the process through a professional services automation tool. We may also use third-party professional services firms as
supplemental resources to implement our solutions for customers as needed. Professional services revenue represented 13%, 11% and
9% of total consolidated revenue for the years ended December 31, 2024, 2023 and 2022, respectively. Professional services revenue
increased in 2024, primarily as a result of an increase in the sales of managed services offering, as well as an increase in staffing levels
to align with our backlog, which has grown as a result of our operations bookings results.
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Software License Updates and Product Support (Maintenance): Software license updates and product support, which is generally
referred to as maintenance when sold to customers, is an important offering to customers who utilize our on-premise software solutions.
In order to support our products that provide clinical communication and collaboration solutions to our customer’s organizations, we have
a dedicated customer support organization. The customer support organization provides support 24 hours a day, seven days a week,
365 days a year and the service can be accessed via telephone, email or the Internet via the Spok webpage. The Spok support service
is augmented by third-party services where needed. Software license updates and product support are generally priced together as a
percentage of the software licenses for which these services will be provided. Largely all of our customers purchase maintenance when
they purchase new software licenses, after which renewals generally occur on an annual basis and are paid in advance. Software
license updates provide customers with rights to unspecified product upgrades, as well as maintenance and patch releases that are
released during the term of the support period. Software license updates and product support revenue (i.e., Maintenance revenue)
represented 27% of total consolidated revenue for each of the years ended December 31, 2024, 2023 and 2022.
Sources of Equipment
We do not manufacture the messaging devices our customers need to make use of our wireless services or the network equipment we use to
provide wireless messaging services. We have relationships with several vendors to purchase new messaging devices. Used messaging
devices are available in the secondary market from various sources. We believe existing inventory, returns of devices from customers that
canceled wireless services, and purchases from other available sources of new and reconditioned devices will be sufficient to meet expected
messaging device requirements for the foreseeable future. With the exception of our GenA pagers, the network equipment and messaging
devices on which we may place our logo or label are generic.
We sell third-party equipment for use with our software solutions. The third-party equipment that we sell is generally available and does not
require any specialty manufacturing to accommodate our software solutions.
We currently have inventory and network equipment on hand that we believe will be sufficient to meet our wireless and software equipment
requirements for the foreseeable future.
Intellectual Property
As of December 31, 2024, we held 82 trademarks and two patents, which we believe are important to protect our intellectual property. We have
no pending trademarks or patents. We believe our intellectual property distinguishes our business from our competition and is integral to our
continued success in the area of clinical communication and collaboration solutions. The expiration dates of these trademarks range from 2025
to 2035 and can be extended for 10-year periods upon renewals.
Research and Development
We maintain a product development group, a substantial portion of which is focused on the enhancement of existing software products. Our
product development group uses a methodology that balances enhancement requests from a number of sources, including customers,
regulatory requirements, professional services staff, customer support incidents, known defects, market and technology trends, and competitive
requirements. These requests are reviewed and prioritized based on criteria that include the potential for increased revenue, customer/employee
satisfaction, possible cost savings, and development time and expense.
Customers
Our customers include businesses and their employees who need to be accessible to their offices or customers, first responders who need to be
accessible in emergencies, and third parties, such as other telecommunication carriers and resellers that pay us to use our networks. Customers
include businesses, professionals, management personnel, medical personnel, field sales personnel and service forces, members of the
construction industry and construction trades, real estate brokers and developers, sales and services organizations, specialty trade
organizations, manufacturing organizations and government agencies.
Our wide-ranging customer base allows for low customer revenue concentration and as a result, no single customer accounted for more than
10% of our total revenues in 2024, 2023 or 2022.
We pursue close, long-term relationships with our customers because we believe strong customer relationships enable us to retain our current
customer base and expand our services and revenue to that customer base.
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Competition
The competitors and degree of competition vary among our various product categories. Competition is particularly strong for our wireless
messaging services. Within the wireless industry, companies compete on the basis of price, coverage area, services offered, transmission
quality, network reliability and customer service. We compete by maintaining competitive pricing for our products and services, by providing
broad coverage options through high-quality, reliable messaging networks and by providing quality customer service. Direct competitors for
wireless messaging services include American Messaging Service, LLC and a variety of other regional and local providers. We also compete
with a broad array of wireless messaging services provided by mobile telephone companies, including AT&T Mobility LLC,T-Mobile USA, Inc.,
and Verizon Wireless, Inc. This competition has intensified as prices for the services of mobile telephone companies have declined and
messaging capabilities are generally available in today's mobile phone devices. Many of these companies possess far greater financial,
technical and other resources than we do.
Most personal communication and other mobile phone devices currently sold in the United States are capable of sending and receiving one-way
and two-way messages. Most subscribers that purchase these services no longer need to subscribe to a separate messaging service. As a
result, many one-way and two-way messaging subscribers can readily switch to cellular, personal communications service and other mobile
telephone services. The decrease in prices and increase in capacity and functionality for cellular, personal communications service, Wi-Fi, and
other mobile telephone services have led many subscribers to select combined voice and messaging services from mobile telephone companies
as an alternative to our stand-alone messaging services.
We also have a number of competitors whose software products compete with one or more modules of our clinical communication and
collaboration solutions. These competitors are a mix of privately held and public companies that offer a number of call center, alerting and mobile
communication products. Our primary competitive advantages include having:
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An integrated product suite;
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A communication-driven workflow;
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Certifications, such as those through the Joint Interoperability Test Command (see "Joint Interoperability Test Command" below) and the
FDA; and
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A complete directory of contacts throughout the customer enterprise.
Although we have no competitors that offer a comprehensive set of software modules that match our product offerings, several competitors offer
software similar to many of our solutions. Selected competitors for portions of our product portfolio include:
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Logility Inc. - Enterprise software solutions;
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CareCloud, Inc. - Healthcare solutions;
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Consensus Cloud Solutions - Cloud-based solutions;
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DarioHealth - Healthcare solutions;
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Domo, Inc. - Cloud-based solutions;
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eGain Corporation - Cloud-based solutions;
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Health Catalyst, Inc. - Healthcare data and analytics;
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HealthStream, Inc. - Healthcare workforce solutions;
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Kaltura, Inc. - Cloud-based solutions;
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KORE Group Holdings Inc. - Mobile communications solutions;
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LifeMD - Healthcare solutions;
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OptimizeRx Corporation. - Healthcare solutions;
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Sharecare - Healthcare solutions;
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Synchronoss Technologies - Cloud-based solutions;
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TruBridge - Healthcare solutions; and
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Weave Communications, Inc. - Software solutions.
In addition to these select competitors, substantially larger companies in the electronic medical records space such as Epic Systems
Corporation, Oracle Corporation, Athenahealth, Inc. and Veradigm, Inc. may choose to offer software-related solutions similar to our clinical
communication and collaboration solutions or may acquire one of our competitors.
Furthermore, the healthcare sector continues to experience significant consolidation, in large part due to COVID-19, which has highlighted the
need to improve patient outcomes, reduce the burden on providers and streamline operations. As certain industries have been challenged during
the pandemic, many organizations are motivated to reduce costs and
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improve efficiencies while others attempt to enter new markets with complementary or divergent product offerings and drive growth. With larger
organizations like Microsoft Corporation and Oracle Corporation entering the market in which we operate, they may have a competitive
advantage through aggressive pricing power, established brand recognition, extensive capital resources, and broader delivery and distribution
channels.
Human Capital
At December 31, 2024 and 2023, we had 410 and 384 full time equivalent employees ("FTEs"), respectively. Our employees are not represented
by labor unions or covered by a collective bargaining agreement.
Employee Health, Safety and Well-Being
Spok is committed to conducting its business operations in a manner that protects the health and safety of its employees, visitors, contractors
and the public, and reduces risks within our work centers. Spok believes that no job is so important that our employees cannot take the time to
ensure the work is performed safely and in an environmentally conscious manner. Spok’s policies and procedures are intended to provide
employees with the information needed to meet all federal, state and local guidelines for occupational health and safety.
As a global company, Spok strives to create an environment where everyone feels welcome and has equal access to opportunities, regardless of
background. We recognize the value and contributions of individuals with a wide range of capabilities, experience, and perspectives. This
creates value for our customers and helps to maintain an effective and engaged workforce. Spok is committed to providing a work environment
free from discrimination and harassment, and one where employees are treated with dignity and respect, while only using legally compliant
methods for advancing these efforts. We refuse to accept or tolerate harassment or discrimination against any employee or applicant for
employment.
Spok has a council composed of employees and executive sponsors to provide feedback and make recommendations regarding our policies and
practices regarding employee health, safety and well-being. We believe that by promoting, supporting and leveraging the capabilities and
experience of our employees, we have a competitive advantage that allows us to innovate and draw from our workforce’s differing perspectives.
By bringing together employees from different backgrounds and providing each with an opportunity to develop their skills and actively contribute
to our mission, we cultivate an engaged workforce which in turn helps us deliver value to our customers.
Ethical Standards
Integrity is a core tenet of Spok’s culture, and we have measures and controls in place to regularly ensure that our work and organization are
held to the highest ethical standards. We provide numerous resources to our employees, including regular, annual training on maintaining these
standards. We also maintain employee guidelines and policies that align with Spok’s Code of Business Conduct and Ethics.
Regulation
Federal Regulation
The FCC issues licenses to use radio frequencies necessary to conduct our business and regulate many aspects of the operations that support
our wireless revenue. Licenses granted to us by the FCC have varying terms, generally of up to 10 years, at which time the FCC must approve
renewal applications. In the past, FCC renewal applications generally have been granted upon showing compliance with the Communications
Act of 1934, as amended (the "Communications Act"), and FCC regulations and adequate service to the public. Other than those still pending,
the FCC has thus far granted each license renewal that we have requested.
The Communications Act requires radio licensees, including us, to obtain prior approval from the FCC for the assignment or transfer of control of
any construction permit or station license or authorization of any rights thereunder. The FCC has thus far granted each assignment or transfer
request we have made in connection with a change of control.
The Communications Act also places limitations on foreign ownership of CMRS licenses, which constitute the majority of our licenses. These
foreign ownership restrictions limit the percentage of stockholders’ equity that may be owned or voted, directly or indirectly, by non-United States
citizens or their representatives, foreign governments or their representatives, or foreign corporations. Our Amended and Restated Certificate of
Incorporation permits the redemption of our equity from stockholders where necessary to ensure compliance with these requirements.
The FCC’s rules require us to pay a variety of fees that increase our costs of doing business. For example, the FCC requires licensees, including
Spok, to pay levies and fees, such as universal service fees, to cover the costs of certain regulatory programs and to promote various other
societal goals. These requirements increase the cost of the services we provide. By law, we are permitted to bill our customers for these
regulatory costs and we typically do so.
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Additionally, the Communications Assistance to Law Enforcement Act of 1994, ("CALEA"), and certain rules implementing CALEA, require some
telecommunication companies, including Spok, to design and/or modify their equipment in order to allow law enforcement personnel to "wiretap"
or otherwise intercept messages. Other regulatory requirements restrict how we may use customer information and prohibit certain commercial
electronic messages, even to our own customers.
In addition, the FCC’s rules require us to pay other carriers for the transport and termination of some telecommunications traffic. As a result of
various FCC decisions, we no longer pay fees for the termination of traffic originating on the networks of local exchange carriers providing
wireline services interconnected with our services. In some instances, we received refunds for prior payments to certain local exchange carriers.
We have entered into a number of interconnection agreements with local exchange carriers in order to resolve various issues regarding charges
imposed by local exchange carriers for interconnection.
Failure to follow the FCC’s rules and regulations can result in a variety of penalties, ranging from monetary fines to the loss of licenses.
Additionally, the FCC has the authority to modify licenses, or impose additional requirements through changes to its rules.
The FDA has determined software systems that connect to medical devices are subject to regulation as medical devices as defined by the
federal Food, Drug and Cosmetic Act (the "FDC Act"). Since our middleware software products connect to medical devices, we are required to
comply with the FDC Act’s requirements, including, but not limited to: registration and listing, labeling, medical device reporting (reporting of
medical device-related adverse events), removal and correction, and good manufacturing practice requirements. We have complied with the
regulatory requirements of the FDC Act, and registered and received the necessary clearances for our products. As we modify and/or enhance
our software products (including our middleware product), we may be required to request FDA clearance before we are permitted to market
these products.
In addition, our software solutions may handle or have access to personal health information subject in the United States to the HIPAA, the
Health Information Technology for Economic and Clinical Health Act ("HITECH"), and related regulations. These statutes and related regulations
impose numerous requirements regarding the use and disclosure of personal health information with which we help our customers comply. Our
failure to accurately anticipate or interpret these complex and technical laws could subject us to civil and/or criminal liability. We believe that we
are in compliance with these laws and their related regulations.
Although these and other regulatory requirements have not, to date, had a material adverse effect on our operating results, such requirements
could have a material impact on our operating results in the future. We monitor discussions at the FCC and FDA on pending changes in
regulatory policy or regulations; however, we are unable to predict what changes, if any, may occur in 2025 to regulatory policy or regulations.
State Regulation
As a result of the enactment by the United States Congress of the Omnibus Budget Reconciliation Act of 1993 ("OBRA") in August 1993, states
are now generally preempted from exercising rate or entry regulation over any of our operations. States are not preempted, however, from
regulating "other terms and conditions" of our operations, including consumer protection and similar rules of general applicability. Zoning
requirements are also generally permissible, however, provisions of the OBRA prohibit local zoning authorities from unreasonably restricting
wireless services. Several states require us to hold a license or otherwise register to provide our wireless services in the jurisdiction, and those
states that regulate our services also may require us to obtain prior approval of (1) the acquisition of controlling interests in other paging
companies and (2) a change of control of the Company.
At this time, we are not aware of any proposed state legislation or regulations that would have a material adverse impact on our business.
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Joint Interoperability Test Command ("JITC") Certification
JITC is a military organization that tests technology for use by the branches of the armed services of the United States and the United States
government. JITC certification is required of all systems with joint interfaces or joint information exchanges with other systems used by these
organizations and is done to ensure all systems operate effectively together. All information technology and national security systems that
exchange and use information to enable units or forces to operate effectively in joint, combined, coalition and interagency operations and
simulations must be certified. Once a system has been certified under this program, the certification must be renewed every three to six years or
after any changes that may affect interoperability. The interoperability certification process consists of the following steps:
•
Identify requirements, such as general availability of the software;
•
Develop certification approach and submit for government sponsorship;
•
Perform interoperability testing, including setup, cybersecurity and mitigation strategies; and
•
Publish approved certifications and report statuses.
We submit and receive JITC certification for certain of our products through the Defense Information Systems Agency, which allows us to sell
and implement our solutions at federal government agencies. We currently certify a console, web, public safety answering point and call
recording products with JITC. We have a roadmap to renew the existing certifications with new releases of existing products and to bring
additional products to JITC to increase the products that can be sold to federal agencies.
Available Information
We make available on our website, http://www.spok.com, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such reports are electronically filed
with, or furnished to, the SEC. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at http://www.sec.gov. We also make available on our website, and in print, if
any stockholder or other person so requests, our code of business conduct and ethics entitled "Code of Business Conduct and Ethics" which is
applicable to all employees and directors, our "Corporate Governance Guidelines" and the charters for all committees of our Board of Directors,
including Audit, Compensation and Nominating and Governance. Any changes to our Code of Ethics or waiver, if any, of our Code of Ethics for
executive officers or directors will be posted on that website.
ITEM 1A. RISK FACTORS
The following important factors, among others, could cause our actual operating results to differ materially from those indicated or suggested by
forward-looking statements made in this 2024 Form 10-K or presented elsewhere by management from time to time.
Risks Related to our Business and Operations
Wireless service to our customers could be adversely impacted by network rationalization.
We have an active program to consolidate the number of wireless networks and related transmitter locations, which is referred to as network
rationalization. Network rationalization is necessary to match our technical infrastructure to our smaller subscriber base and to reduce both site
rent and telecommunication costs. The implementation of the network rationalization program could adversely impact wireless service to our new
and existing subscribers, and there can be no assurance that any efforts to minimize that impact would be successful. Any adverse impact to our
wireless service could lead to increases in the rate of gross subscriber cancellations and/or the level of wireless revenue erosion. Adverse
changes in gross subscriber cancellations and/or wireless revenue erosion could have a material adverse effect on our business, financial
condition, operating results and ability to pay cash dividends to stockholders.
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We depend on highly skilled personnel, and, if we are unable to retain or hire qualified personnel, we may not be able to achieve our
strategic objectives.
To execute our growth plan and achieve our strategic objectives, we must continue to attract, hire and retain highly qualified and motivated
personnel across our organization. In particular, to continue to enhance our software solutions, add new and innovative core functionality and
services and develop new products, it is critical for us to maintain a strong research and development organization, including hiring and retaining
highly skilled software engineers. Competition for talent is intense within our industry, and there continues to be upward pressure on
compensation, especially as a result of higher inflation. In addition, for us to achieve broader market acceptance of our software solutions, grow
our customer base, and pursue adjacent markets, we will need to continue to develop and maintain our sales and marketing and customer
support organizations. Identifying and recruiting qualified personnel, training them in the use of our software solutions and ensuring they are
well-equipped to serve our customers requires a significant investment of time and resources, and it can be particularly difficult to retain these
individuals.
We face significant competition for experienced personnel, and many of our competitors for talent have greater name recognition and financial
resources than we have. If we hire employees from competitors or other companies, former employers may assert claims against us for breach
of legal obligations to the former employer, resulting in a diversion of our time and resources. In addition, the job market for technology roles has
historically been very competitive. While we are able to expand our candidate pool by opening our opportunities nationwide, allowing us to be
more competitive, the job market continues to be a challenge everywhere, making it vitally important to retain our current team members. When
considering employment opportunities, candidates and existing employees often consider the value of equity awards. If the actual or perceived
value of our equity awards declines, or if the price of our common stock experiences significant volatility, this may adversely affect our ability to
recruit and retain highly skilled employees. As a result, we may have greater difficulty hiring and retaining skilled personnel than some of our
competitors. If we are unable to attract and retain the personnel necessary to execute our growth plan, we may be unable to achieve our
strategic objectives, and our business, financial condition, operating results and ability to pay cash dividends to stockholders may be adversely
affected.
Growth in our software revenue and bookings, and maintenance of our wireless revenue and subscriber base is dependent on the
productivity of our sales organization.
Our ability to achieve revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales
personnel to support our growth. New hires require significant training and may take significant time before they achieve full productivity. Based
on past experience, we expect new sales team members to reach full productivity after nine to 12 months of employment. However, our recent
and planned hires may not become productive as quickly as expected, or at all, and we may be unable to hire or retain a sufficient number of
qualified individuals in the markets in which we do business or plan to do business.
From time to time, it may be necessary to reorient our sales representatives to focus on specific market segments, product lines or new software
solutions or to remove underperforming individuals, which may require additional resources to maintain productivity. The impact of these
changes could adversely impact our ability to achieve our sales productivity goals. We have also identified the following risks that could impact
our sales productivity:
•
Customer Dissatisfaction and Reputational Harm. We may experience customer dissatisfaction with our solutions that could result in
lost opportunities for sales. Potential low ratings of our solutions by customers may result in us being excluded from consideration by
current and prospective customers with respect to future opportunities. In addition, fewer customer references for our solutions could
impact our ability to prospect new sales.
•
Training. Training of our marketing and sales personnel regarding the clinical requirements of our healthcare customers and the
complexity of our service offerings, takes time and requires a substantial, continuing investment for both new hires and long-term
employees.
•
Competitive Speed. Sales productivity can be impacted by the capabilities of our competitors. There is a risk that competitors may
innovate or partner faster than we do.
•
Employee Retention. The items noted above may challenge the ability of employees to generate sales, which may affect morale and
employee retention.
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If we are unable to deliver effective customer support, our relationships with our existing customers and our ability to attract new
customers could be harmed.
Our revenue growth depends, in part, on our ability to satisfy our customers, including by providing continued customer support, which may
contribute to increased customer retention and adoption and utilization of our wireless services and software solutions. Once our wireless
services and software solutions are deployed, our customers depend on our customer support group to resolve technical issues relating to their
use of our solutions. We may be unable to respond quickly to accommodate short-term increases in customer demand for support services or
may otherwise encounter difficult customer issues. If a customer is unsatisfied with the quality of our customer support, we may incur additional
costs or experience customer terminations or non-renewals.
Our sales process is highly dependent on the ease of use of our wireless services and software solutions, our reputation and positive
recommendations from our existing customers. Any failure to maintain high-quality or responsive customer support, or a market perception that
we do not maintain high-quality or responsive customer support, could harm our reputation, cause us to lose customers and adversely impact
our ability to sell our wireless services and software solutions to prospective customers.
We have investigated potential acquisitions and may be unable to identify an opportunity at favorable terms or have the ability to
close on the financing necessary to consummate the transaction.
We cannot provide any assurances that we will be successful in finding such acquisitions or consummating future acquisitions on favorable
terms. We anticipate that future acquisitions will be financed through a combination of methods, including, but not limited to, the use of available
cash on hand, and, if necessary, borrowings from third-party financial institutions. Disruptions or volatility in credit markets may impede our
access to capital markets, including higher borrowing costs, less available capital, more stringent terms and tighter covenants may limit our
ability to finance acquisitions.
We have investigated potential acquisitions and may be unable to successfully complete or integrate such acquisitions into our
business, and may not achieve all or any of the operating synergies or anticipated benefits of those acquisitions.
We continue to evaluate acquisitions of other businesses that we believe will yield increased cash flows, improved market penetration and/or
operating efficiencies and synergies. We may face various challenges with integration efforts related to any future acquisitions, including the
combination and simplification of product and service offerings, sales and marketing approaches and establishment of combined operations.
We may have limited or no history of owning and operating any business that we acquire. If we were to acquire these businesses, there can be
no assurance that:
•
Such businesses will perform as expected;
•
Such businesses will not incur unforeseen obligations or liabilities;
•
Such businesses will generate sufficient cash flow to support the indebtedness, if incurred, to acquire such business or the expenditures
needed to develop such business; and
•
The rate of return from such businesses will justify the decision to invest the capital to acquire them.
There can be no assurance that we will manage these challenges and risks successfully. Moreover, if we are not successful in completing
transactions that we have pursued or may pursue, our business may be adversely affected, and we may incur substantial expenses and divert
significant management time and resources. In addition, while pursuing and completing such transactions, we could use substantial portions of
our available cash to pay for all or a portion of the purchase price or retention incentives to employees of the acquired business, or we may incur
substantial debt. We could also issue additional securities to finance all or a portion of the purchase price for these transactions or as retention
incentives to employees of the acquired business, which could cause our stockholders to suffer significant dilution. Such transactions may not
generate additional revenue or profit for us, or may take longer than expected to do so, which may adversely affect our business, financial
condition, operating results and cash flows.
Economic conditions that are largely out of our control may adversely affect our financial condition and results of operations.
Our business is sensitive to recessionary economic cycles, higher interest rates, inflation, higher levels of unemployment, higher tax rates and
other changes in tax laws, or other economic factors that may affect business spending or buying habits that could adversely affect the demand
for our services. Adverse economic conditions could increase the rate of gross subscriber cancellations and/or the level of revenue erosion for
our wireless business and could cause delays in or
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the loss of software revenue or bookings, which impacts license, professional services, hardware and subscription revenues.
A significant portion of our revenue is derived from healthcare customers, and we are impacted by changes in the healthcare economic
environment. The healthcare industry is highly regulated and is subject to changing political, legislative, regulatory, and other economic
developments. These developments can have a dramatic effect on the decision-making and spending by our customers for information
technology and software, including our ability to increase prices. This economic uncertainty can add to the unpredictability of decision-making
and lengthen our sales cycle. We are unable to predict the full consequences of this uncertainty on our operations. Adverse changes in the
economic environment could adversely impact our ability to increase the prices we charge for our offerings, while effectively managing customer
churn, or to successfully market and sell our wireless and software solutions to healthcare customers.
Risks Related to our Products and Services
The rate of wireless subscriber and revenue erosion could exceed our ability to reduce wireless operating expenses in order to
maintain overall positive operating cash flow from our wireless business.
Our wireless revenue is dependent on the number of subscribers that use our paging devices. Our customers may not renew their subscriptions
after the expiration of their subscription agreements. In addition, our customers may opt for one of our lower-priced offerings or for fewer
subscriptions. Customer renewal rates may decline or fluctuate due to a number of factors, including their level of satisfaction with our offerings
and their ability to continue their operations and spending levels. Increasing awareness and concern over HIPAA/HITECH compliance is causing
healthcare organizations, our largest customer segment, to re-evaluate paging subscriptions for clinical use cases when users are not equipped
with our encrypted pager offerings.
We face intense competition for subscribers from other paging service providers and alternate wireless communications providers, such as
mobile phone and mobile data service providers. There is a risk that our competitors’ products may provide better performance or include
additional features when compared to our offerings. Competitive pressures could also affect the prices we may charge or the demand for our
offerings, resulting in reduced profit margins and loss of market share. In addition, new competitors may emerge as a result of changing
dynamics and trends in the market and industry, and we may not be adequately prepared to respond to these changes in the healthcare
landscape. If we are unable to compete effectively, our business, financial condition, operating results and ability to pay cash dividends to
stockholders may be adversely affected.
In addition to competition, our customer base may be impacted by the introduction of new technologies. As mobile communications technology
evolves, competitors that provide wireless broadband data services may lower their prices to customers that approach, meet or undercut our
prices for paging services. We are unable to predict how customer perceptions of the value of our wireless services will be impacted by the
development of new wireless technologies. Our continued success will depend on our ability to adapt to rapidly changing technologies and user
preferences, to adapt our offerings to evolving industry standards, to predict user preferences and industry changes in order to continue to
provide value to our customers and to improve the performance and reliability of our offerings. Our failure to adapt to such changes could harm
our business, and our efforts to adapt to such changes could require substantial expenditures on our part to modify our offerings or
infrastructure. Delays in developing, completing or delivering new or enhanced offerings and technologies could result in delayed or reduced
revenue for those offerings and could also adversely affect customer acceptance of those offerings and technologies. Even if we are able to
enhance our existing offerings or introduce new offerings that are well perceived by the market, if our marketing or sales efforts do not generate
interest in or sales for these offerings, they may be unsuccessful.
We expect our wireless subscriber results, units in service and revenue will continue to decline for the foreseeable future. As this revenue
erosion continues, maintaining positive operating cash flow from our wireless business is dependent on substantial and timely reductions in
selected wireless operating expenses. Reductions in wireless operating expenses require both the reduction of internal costs and negotiation of
lower costs from outside vendors. As we require fewer services and products from our vendors, our negotiating leverage to lower our costs is
diminished. There can be no assurance that we will be able to reduce our wireless operating expenses commensurate with the level of revenue
erosion. The inability to reduce wireless operating expenses would have a material adverse impact on our business, financial condition,
operating results and ability to pay cash dividends to stockholders.
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Technical problems and higher costs may affect our product development initiatives.
Our future software revenue growth depends on our ability to develop, introduce and effectively deploy new solutions and features to our existing
software solutions. These new features and functionalities are designed to address both existing and new customer requirements. We may
experience technical problems and additional costs as these new features are tested and deployed. Failure to effectively develop new or
improved software solutions could adversely impact software revenue growth and could have a material adverse effect on our business, financial
condition, operating results and ability to pay cash dividends to stockholders.
Undetected defects, bugs, or security vulnerabilities in our products could adversely affect the market acceptance of new products,
damage our reputation with current or prospective customers, and materially and adversely affect our operating costs.
Software products, such as those we offer, may contain defects, vulnerabilities and bugs when they are first introduced or as new versions are
released, or their release may be delayed due to unforeseen difficulties during product development. If any of our products, including products of
companies we have acquired, or third-party components used in our products, contain defects, vulnerabilities or bugs, or have reliability, quality
or compatibility problems, we may not be able to successfully design workarounds or resolve these issues. Any defects or vulnerabilities we do
not detect and fix in pre-release testing could result in reduced sales and revenue, damage to our reputation, repair or remediation costs, delays
in the release of new products or versions or legal liability. In addition, we do not control the quality, security or testing of various third-party
software, hardware or infrastructure products that are utilized in our business. There can be no assurance that provisions in our license
agreements that limit our exposure to liability will be sufficient or withstand legal challenge. Computer programmers and hackers also may be
able to develop and deploy, including through technologies such as artificial intelligence, viruses, worms, and other malicious software programs
that attack our or a critical third party's products or otherwise exploit any security vulnerabilities of such products.
We are dependent on the United States healthcare provider industry for most of our revenue.
We generate more than 75% of our revenue from sales to hospitals and other healthcare provider organizations in the United States. These
customers, both non-profit and for-profit, are greatly affected by macroeconomic conditions, pandemics or other public health emergencies,
healthcare reform legislation and the reimbursement policies of federal and state governments and health insurance companies, and any decline
in revenue received by our customers due to adverse economic conditions, pandemics or other public health emergencies, or legislative or
regulatory changes could significantly affect the type and amount of services and products they order from us.
We may experience a long sales cycle for our software products.
Our software revenue growth results from a long sales cycle that from initial contact to final sales order may take six to 18 months, depending on
the type of software solution. Our software sales and marketing efforts involve educating our customers on the technical capabilities of our
software solutions and the potential benefits from the deployment of our software, as well as educating ourselves as to the clinical needs of our
customers. The inherent unpredictability of decision-making in our target market segment of healthcare, resulting from customer budget
constraints, multiple approvals and administrative issues, may result in fluctuating bookings and revenue from month to month, quarter to quarter
and year to year. Our bookings and corresponding revenue are dependent on actions that have occurred in the past. Each month, we need to
spend substantial time, effort, and expense on our marketing and sales efforts that may not result in future revenue.
We may be unable to find vendors that are able to supply us with wireless paging equipment based on future demands.
We purchase paging equipment from third-party vendors. This equipment is sold or leased to customers in order to provide wireless messaging
services. The reduction in industry demand for paging equipment has caused various suppliers to cease manufacturing this equipment or
increase prices for devices. There can be no assurance that we will continue to find vendors to supply paging equipment, or that the vendors will
supply equipment at costs that allow us to remain a competitive alternative in the wireless messaging industry. A lack of paging equipment could
impact our ability to provide certain wireless messaging services and could have a material adverse effect on our business, leading to additional
wireless revenue erosion.
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We may be unable to maintain successful relationships with our channel partners.
We use channel partners, such as resellers, consulting firms, original equipment manufacturers, and technology partners, to license and support
our products. We rely, to a significant degree, on each of our channel partners to select, screen and maintain relationships with its respective
distribution network and to distribute our offerings in a manner that is consistent with applicable law and regulatory requirements and our quality
standards. Contract defaults by any of these channel partners or the loss of our relationships with them may materially adversely affect our
ability to develop, market, sell, or support our communication solution offerings. If our indirect distribution channel is disrupted, we may be
required to devote more resources to distribute our offerings directly and support our customers, which may not be as effective and could lead to
higher costs, reduced revenue and growth that is slower than expected.
Recruiting and retaining qualified channel partners and training them in the use of our enterprise technologies requires significant time and
resources. If we fail to devote sufficient resources to support and expand our network of channel partners, our business may be adversely
affected. In addition, because we rely on channel partners for the indirect distribution of our enterprise technologies, we may have little or no
contact with the ultimate end-users of our technologies, thereby making it more difficult for us to establish brand awareness, ensure proper
delivery and installation of our software, support ongoing customer requirements, estimate end-user demand, respond to evolving customer
needs and obtain subscription renewals from end users.
We may experience litigation claiming intellectual property infringement by us, and we may not be able to protect our rights in
intellectual property that we own and develop.
Intellectual property infringement litigation has become commonplace, particularly in the wireless and software industries in which we operate.
Litigation can be protracted, expensive, and time consuming. There is no assurance that we will remain immune to this litigation. Any such
claims, whether meritorious or not, could be time-consuming and costly in terms of both resources and management time.
We may receive claims that we have infringed the intellectual property rights of others, including claims regarding patents, copyrights, and
trademarks. The number and types of these claims may grow as a result of constant technological change, including the increased use of
artificial intelligence, in the segments in which our wireless services and software products compete, the extensive patent coverage of existing
technologies, and the rapid rate of issuance of new patents.
Our patents, trademarks, copyrights and trade secrets relating to our wireless services and networks, and our software solutions, are important
assets. The efforts we undertake to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual
property rights could harm our business and our ability to compete effectively. Protecting our intellectual property rights can be costly and time
consuming.
We seek to maintain certain of our intellectual property rights as trade secrets, including the source code for many of our software solutions and
innovations. Our source code and system architecture may be reverse engineered by our competitors, or the secrecy of our solutions and
designs could be compromised through a security breach, cyberattack or otherwise, or by our employees or former employees, intentionally or
accidentally. Any compromise of our trade secrets could cause us to lose any competitive advantage our software solutions have and the
investment we have made in developing our products and services.
Our portfolio of issued patents and copyrights may be insufficient to defend ourselves against intellectual property infringement claims, and the
validity and scope of our patents could be challenged by third parties were we to seek to enforce them.
Risks Related to Technology
Our use of open source software, third-party software and other intellectual property may expose us to risks.
We license and integrate certain software components from third parties into our software, and we expect to continue to use third-party software
in the future. Some open source software licenses require users who distribute or make available as a service open source software as part of
their own software product to publicly disclose all or part of the source code of the users’ developed software or to make available any derivative
works of the open source code on unfavorable terms or at no cost. Our efforts to use the open source software in a manner consistent with the
relevant license terms that would not require us to disclose our proprietary code or license our proprietary software at no cost may not be
successful. We may face claims by third parties seeking to enforce the license terms applicable to such open source software, including by
demanding the release of the open source software, derivative works or our proprietary source code that was developed using such software. In
addition, if the license terms for the open source code change, we may be forced to re-engineer our software or incur additional costs.
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Some of our products and services include other software or intellectual property licensed from third parties, and we also use software and other
intellectual property licensed from third parties in our business. This exposes us to risks over which we may have little or no control. For
example, a licensor may have difficulties keeping up with technological changes or may stop supporting the software or other intellectual
property that it licenses to us. There can be no assurance that the licenses we use will be available on acceptable terms, if at all. In addition, a
third party may assert that we or our customers are in breach of the terms of a license, which could, among other things, give such third party the
right to terminate a license or seek damages from us, or both. Our inability to obtain or maintain certain licenses or other rights or to obtain or
maintain such licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could result in delays in releases
of new products, and could otherwise disrupt our business, until equivalent technology can be identified, licensed or developed. In addition,
sophisticated hardware and operating system software and applications that we procure from third parties may contain defects in design or
manufacture, including "bugs," security vulnerabilities, and other problems that could unexpectedly interfere with the expected operation of our
products and services or expose us to cyberattacks and security breaches.
System disruptions, data compromises and other cybersecurity threats to our computer networks, satellite control,
telecommunications systems and other IT Systems, or to those of our service providers, could have a material adverse effect on our
business.
The performance and reliability of computer systems, hardware, software and satellite networks and telecommunications systems infrastructure
(collectively, “IT Systems”) is critical to our operations. We own and manage certain IT Systems but rely heavily on critical IT Systems that are
owned and/or managed by third parties. These IT Systems are vulnerable to material damage or interruption from natural disasters, power loss,
telecommunication failures, terrorist attacks, software errors and other events. Any IT System (such as a satellite network) error or failure,
regardless of cause, could result in a substantial outage that materially disrupts our operations. In addition, we face the threat of material
compromise to our computer systems, or those of our service providers, of unauthorized access, computer hackers, computer viruses, malicious
code, organized cyberattacks and other security problems and system disruptions (e.g., distributed denial of service (DDoS) attacks or
ransomware attacks). Our wireless services depend on connectivity provided by third-party satellite network services where failure would result
in a loss of service to our customers. With respect to our Enterprise Reporting and Management systems and data storage, and other
operational needs, we rely on third-party data centers and services for maintaining accessibility, reliability and uninterrupted connectivity, among
other things.
Our disaster recovery planning may not be sufficient for every eventuality, such as a ransomware attack that encrypts some or all of our or our
service providers' IT Systems, data or infrastructure. We may not carry business interruption insurance sufficient to protect us from all losses that
may result from interruptions in our services as a result of IT Systems and infrastructure failures or cyberattacks, or to cover all contingencies.
We expend significant resources to protect against the threat of these IT System disruptions. Any interruption in the availability of our websites
and online interactions with customers or partners may cause a reduction in customer or partner satisfaction levels, which in turn could result in
legal claims, reduced revenue or loss of customers or partners. There can be no assurance that any precautions we take will prove successful,
and such problems could result in, among other consequences, a loss of data, a loss of confidence in the stability and reliability of our offerings,
damage to our reputation, and legal liability, all of which may adversely affect our business, financial condition, operating results and cash flows.
We rely on data centers and other IT Systems and technologies provided by third parties, and technology systems and electronic
networks supplied and managed by third parties, to operate our business. Any major interruption or performance problems with these
systems, technologies and networks may adversely affect our business and operating results.
We rely on data centers and other IT Systems and technologies provided by third parties. If key third parties are unable to perform services for
us because of service interruptions or extended outages, or because those services are no longer available on commercially reasonable terms,
our expenses could materially increase. Switching our technology to another service provider, if available, could result in significant disruption,
data loss or corruption, or unsuccessful data transfers could cause data to be incomplete or contain inaccuracies.
We do not control, or in some cases have limited control over, the data center facilities we use. These facilities are vulnerable to damage from
natural disasters and adverse weather, including hurricanes, storms, earthquakes, floods, fires, power loss, telecommunications failures and
similar events. These facilities are also at risk of serious theft, vandalism or other security related events. Despite precautions taken at these
facilities, adverse events could result in lengthy interruptions in our services and the loss or corruption of, or unauthorized access to or
acquisition of, customer data. In addition, the owners of our data center facilities have no obligation to renew their agreements with us on
commercially reasonable terms. If we are required to relocate to another data center facility, we may not be able to rapidly identify and obtain
new facilities, and we may incur significant costs or interruptions to our services, as a result.
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Our ability to provide services to our customers depends on our ability to communicate with customers through the public internet and electronic
networks owned and operated by third parties. A major failure or disruption of the internet or third-party networks could impede our ability to
provide services to our customers, result in a loss of customers, subject us to potential liabilities, result in contract terminations or adversely
affect our renewal rates.
Cyberattacks, data breaches or other compromises to our or our critical third parties' IT Systems, data, products or services could
have a material adverse effect on our business.
We rely heavily on a range of IT Systems for critical business operations. In addition, we and various third parties collect, process and store our
customers’, suppliers’ and employees’ confidential information, as well as our own proprietary business information (collectively, "Confidential
Information"). We are also dependent on a number of third-party providers of various technology, tools and services relating to, among other
things, human resources, electronic communications, data storage, finance, and other business functions, and we are, of necessity, dependent
on the security systems of these providers.
We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of IT Systems and Confidential
Information. Accidental or willful cyberattacks, breaches or other unauthorized access events committed or enabled by third parties or by our
employees or contractors (for example, due to social engineering or phishing attacks) impact the security and integrity of our facilities, our
systems or the systems of our third-party providers, and the information maintained in such systems. In addition, computer viruses, malware (for
example, ransomware) or security vulnerabilities in our or our service providers' data, software, products or services, as well as external
cyberattacks and data breaches, expose us to the risks of material corruption, loss, and misappropriation of proprietary and confidential
information. We also routinely transmit and receive proprietary and Confidential Information, including through third parties, which makes that
information vulnerable to interception, misuse or mishandling that may materially impact our business.
The frequency and scope of cyberattacks has been steadily increasing, and attackers are increasingly sophisticated, using tools and techniques,
including artificial intelligence, to evade detection or cause significant delays in detection and identification. Even once identified, investigation
and remediation of an incident is increasingly challenging due to attackers taking steps to obfuscate or remove forensic evidence and to
circumvent logging tools and counter-measures, which renders us unable to fully anticipate or implement adequate preventative or restorative
measures.
We and our service providers are routinely subjected to cyberattacks, such as denial of service, attempted unauthorized network intrusions,
malware, viruses, social engineering (phishing), ransomware attacks or other persistent cyber threats. In addition, remote working arrangements
at our Company and many third-party providers, increase cybersecurity risks due to the IT challenges associated with managing remote
computing assets and vulnerabilities inherent in many non-corporate and home networks. There can also be no assurance that our or our third-
party providers’ cybersecurity risk management programs, including relevant policies, processes and controls, will be fully implemented,
complied with or effective in protecting IT Systems or Confidential Information that are critical to our business from materially adverse events.
Any cyberattack or incident that compromises the confidentiality, integrity or availability of IT Systems or Confidential Information, for example,
the theft, misuse of, or unauthorized access to Confidential Information, could result in, among other things, unfavorable publicity, damage to our
reputation, loss of our trade secrets and other competitive information, difficulty in marketing our products, increased costs of investigation,
remediation and compliance, allegations by our customers that we have not performed our contractual obligations, litigation by affected parties
(including class actions) and possible financial obligations for liabilities and damages related to the theft or misuse of such information,
regulatory investigations and enforcement actions, as well as fines and other sanctions pursuant to data privacy and security rules and
regulations, any or all of which could have a material adverse effect on our reputation, operations, business, profitability and financial condition.
Any losses, costs and liabilities may not be covered by, or may exceed the coverage limits of, any or all of our applicable insurance policies.
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Risks Related to our Financial Results
We may be unable to realize the benefits associated with our deferred income tax assets.
We have significant deferred income tax assets that are available to offset future taxable income and increase cash flows from operations. The
use of these deferred income tax assets is dependent on the availability of taxable income in future periods. The availability of future taxable
income is dependent on our ability to profitably manage our operations to support a growing base of software revenue offset by declining
wireless subscribers and revenue. To the extent that anticipated reductions in wireless operating expenses do not occur or sufficient revenue is
not generated, we may not achieve sufficient taxable income to allow for use of our deferred income tax assets. The accounting for deferred
income tax assets is based upon an estimate of future results, and any valuation allowance we may apply to our deferred tax assets may be
increased or decreased as conditions change or if we are unable to implement certain tax planning strategies. If we are unable to use these
deferred income tax assets, our financial condition and results of operations may be materially affected. In addition, a significant portion of our
deferred income tax assets relate to net operating losses. If our ability to utilize these losses is limited, due to Internal Revenue Code ("IRC")
Section 382, our financial condition and results of operations may be materially affected. For example, we maintained a valuation allowance of
$2.3 million at December 31, 2024 and 2023 to reduce net deferred income tax assets as their realization did not meet the applicable more-
likely-than-not criterion.
If our long-lived assets or goodwill become impaired, we may be required to record significant impairment charges.
We are required to evaluate the carrying value of our long-lived assets and goodwill. For long-lived assets, we assess quarterly whether
circumstances exist which suggest that the carrying value of long-lived assets may not be recoverable. We evaluate goodwill for impairment at
least annually, or when events or circumstances suggest a potential impairment has occurred. We generally perform this annual goodwill
impairment test in the fourth quarter of the fiscal year.
If our long-lived assets or goodwill are deemed to be impaired, an impairment loss equal to the amount by which the carrying amount exceeds
the fair value of the assets would be recognized. We may be required to record a significant charge in our financial statements during the period
in which any impairment of our long-lived assets or goodwill is determined, which would negatively affect our results of operations.
Our estimates of market opportunity for our software solutions are subject to significant uncertainty, and, even if the markets in which
we compete meet or exceed our size estimates, we could fail to increase our revenue or market share.
Market opportunity estimates are based on assumptions and estimates, and our internal analysis and industry experience. However, assessing
the market for clinical communication and collaboration solutions is difficult due to several factors, such as limited available information and rapid
evolution of the market. Our estimates of market opportunity depend on the assumptions we made, and the estimated market opportunity could
be materially different with different assumptions. Even if the markets in which we compete meet or exceed our size estimates, our software
solutions may fail to gain market acceptance and our business may not grow in line with our forecasts. In addition, an increase in the prevalence
of cloud-based offerings by our competitors could also unfavorably impact the pricing of our on-premise offerings and dampen overall demand
for our on-premise offerings, which could have a material adverse impact on our business, financial condition and operating results.
Risks Related to Regulatory Matters
We are subject to data privacy and protection-related laws and regulation, and we may encounter issues with privacy and security of
Personal Information.
In connection with running our business, we receive, store, use and otherwise process information that relates to individuals and/or constitutes
“personal data,” “personal information,” “personally identifiable information,” “protected health information” or similar terms under applicable data
privacy laws (collectively, “Personal Information”), including from and about actual and prospective customers, as well as our employees and
business contacts. As such, our business is subject to a variety of federal, state and international laws and regulations that apply to the
collection, use, retention, protection, disclosure, transfer and processing of Personal Information.
A substantial portion of our revenue comes from healthcare customers. Our software solutions may therefore handle or have access to personal
health information subject in the United States to HIPAA, HITECH and related regulations as well as legislation and regulations in foreign
countries. These statutes and related regulations impose numerous requirements
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regarding the use and disclosure of personal health information with which we and our software solutions must comply. Our failure to accurately
anticipate or interpret these complex and technical laws and regulations could subject us to civil and/or criminal liability. Such failure could
adversely impact our ability to market and sell our software solutions to healthcare customers and have a material adverse impact on our
software sales.
In addition, customers may use our wireless services to transmit protected health information subject to HIPAA and other regulatory
requirements. While we offer encrypted pagers to our customers, many customers use wireless devices provided by us that do not encrypt text
messages. While we disclaim liability for customer non-compliance with HIPAA and other privacy requirements, there remains some risk we
could be held responsible for privacy violations by our customers. In addition to protected health information, the Company may handle or have
access to Personal Information in the European Union or United Kingdom subject to the General Data Protection Regulation or its United
Kingdom equivalent (together, the "GDPR"). The GDPR imposes several stringent requirements for controllers and processors of Personal
Information and increases our obligations, including, for example, by requiring more robust disclosures to individuals, strengthening the
individual data rights regime, shortening timelines for data breach notifications, limiting retention periods and secondary use of information, and
imposing additional obligations when we contract third-party processors in connection with the processing of personal data. In addition, the
GDPR restricts transfers of personal data outside of the European Economic Area and the United Kingdom, including to the United States, under
certain scenarios. While lawful data transfer mechanisms exist, there remains uncertainty, and we are exposed to potential investigations and
enforcement in this area.
We are subject to existing privacy-related laws and regulations in the United States and other countries, which are evolving and are subject to
potentially differing interpretations, and various federal and state or other international legislative and regulatory bodies may expand or enact
laws regarding privacy and data security-related matters that impact our business. For example, in the United States, we are subject to the
California Consumer Privacy Act ("CCPA"), which requires covered businesses to, among other things, provide certain disclosures to California
consumers and afford such consumers certain privacy rights. The CCPA provides for civil penalties for violations, as well as a private right of
action for certain security breaches that may increase security breach litigation. The CCPA has spurred similar legislation in many other states,
and we expect this trend to continue.
There can be no assurance that the security and testing measures we take relating to our offerings and operations will prevent all security
breaches and data loss that could harm our business or the businesses of our customers and partners or otherwise expose us to privacy-related
liability. These risks may increase as we continue to grow our services and offerings and as we receive, store and process more of our
customers’ data. Actual or perceived vulnerabilities may lead to regulatory investigations, claims against us by customers, partners or other third
parties, or costs, such as those related to providing customer notifications and fraud monitoring. There can be no assurance that any provisions
in our customer agreements limiting our liability will be enforceable or effective under applicable law. In addition, the cost and operational
consequences of implementing further data protection measures could be significant.
The data privacy and protection-related laws and regulations to which we are subject are evolving, with new or modified laws and regulations
proposed and implemented frequently, and existing laws and regulations subject to new or different interpretations. Any failure by us to comply
with data privacy- and protection-related laws and regulations could result in enforcement actions, significant penalties or fines or other legal
actions (including class action lawsuits) against us or our customers or suppliers. An actual or alleged failure to comply, which could result in
negative publicity, reduce demand for our offerings, increase the cost of compliance, require changes in business practices that result in reduced
revenue, restrict our ability to provide our offerings in certain locations, result in our customers’ inability to use our offerings and prohibit data
transfers or result in other claims, liabilities or sanctions, including fines, and could have an adverse effect on our business, financial condition,
operating results and cash flows.
Our wireless products are regulated by the FCC and, to a lesser extent, state and local regulatory authorities. Changes in regulation
could result in increased costs to us and our customers and other operational impacts.
We are subject to regulation by the FCC and, to a lesser extent, by state and local authorities. Changes in regulatory policy could increase the
fees we must pay to the government or to third parties and could subject us to more stringent requirements or otherwise impact our operations
potentially causing us to incur additional capital and/or operating costs. To the extent additional regulatory costs are passed along to customers,
those increased costs could adversely impact subscriber cancellations.
For example, the FCC issued an order in October 2007 that mandated paging carriers (including the Company) along with all other CMRS
providers serving a defined minimum number of subscribers to maintain an emergency back-up power supply at all cell sites to enable operation
for a minimum of eight hours in the event of a loss of commercial power (the "Back-up Power Order"). Ultimately, after a hearing by the United
States Court of Appeals for the DC Circuit and
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disapproval by the Office of Management and Budget (the "OMB") of the information collection requirements of the Back-up Power Order, the
FCC indicated that it would not seek to override the OMB’s disapproval. Rather the FCC indicated that it would issue a Notice of Proposed
Rulemaking with the goal of adopting revised back-up power rules. To date, the FCC has not adopted revised back-up power rules applicable to
the Company, and we are unable to predict what impact, if any, revised back-up power rules to which the Company is subject could have on our
business, financial condition, operating results and ability to pay cash dividends to stockholders.
As a further example, the FCC has considered changes to the rules governing the collection of universal service fees, including a flat monthly
charge per assigned telephone number as opposed to assessing universal service contributions based on telecommunication carriers’ interstate
and international revenue. However, there is no timetable for any rulemaking to implement this numbers-based methodology. If the FCC adopts
a numbers-based methodology, our attempt to recover the increased contribution costs from our customers could significantly diminish demand
for our services, and our failure to recover such increased contribution costs could have a material adverse impact on our business, financial
condition and operating results. In addition, the FCC’s universal service contribution mechanism has been the subject of several recent court
challenges, and the United States Supreme Court has agreed to consider the validity of the methodology on constitutional and other grounds.
The outcome of this case is uncertain, but a decision by the Supreme Court invalidating the FCC’s universal service contribution mechanism
could impact our business.
As another example, in 2020, the FCC made available for broadband use spectrum in the 900 MHz band that is adjacent to certain frequencies
used by us to provide paging services. In early 2025, the FCC proposed to further expand these adjacent bands’ use for broadband services, in
part by eliminating 500 KHz guard bands between these frequencies and those in which we operate. Although the FCC has tentatively
concluded that this proposed band allocation would not result in harmful interference to users in adjacent spectrum bands, we cannot be certain
that this expectation will be validated in practice, and any harmful interference resulting from the adoption of this proposal could negatively
impact the Company by making its paging services less effective and its affected spectrum licenses less valuable.
Certain of our software products are regulated by the FDA. The application of or changes in regulations could impact our ability to
market new or revised software products to our customers.
Certain of our software products are regulated by the FDA as medical devices. The classification of our software products as medical devices
means that we are required to comply with certain registration and listing, labeling, medical device reporting, removal and correction, and good
manufacturing practice requirements. Updates to these products or the development of new products could require us to seek clearance from
the FDA before we are permitted to market or sell these software products.
In addition, changes to FDA regulations could impact existing software products or require updates to existing products. The impact of delays in
FDA clearance or changes to FDA regulations could impact our ability to market or sell our software products and could have a material adverse
effect on our business, financial condition, operating results and ability to pay cash dividends to stockholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We had no unresolved SEC staff comments as of February 27, 2025.
ITEM 1C. CYBERSECURITY
Spok's enterprise risk management program includes our cybersecurity risk management program ("Cybersecurity Program"), which is designed
to protect the confidentiality, integrity and availability of our critical systems and information. Our Cybersecurity Program is designed utilizing
guidance from the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) and includes security policies and
procedures, security appliances and software, third-party vulnerability testing, business continuity plans, and other administrative, physical and
technical measures. Executive management, including our Chief Information Officer (CIO)/Chief Information Security Officer (CISO) and VP
Technology Operations, has overall responsibility for assessing and managing key cybersecurity risks; implementation of the Cybersecurity
Program is led by key information technology and security management members, including the CIO/CISO and VP Technology Operations, who
have specialized training, and various certifications in information technology and cybersecurity strategy, tools and governance. The CIO/CISO
has over two decades of experience directing security programs, controls, policies and operationalizing them specific to the healthcare industry.
The VP Technology Operations has over a decade of experience managing the Cybersecurity Program, SOC2 audits and security controls and
policies. As part of the enterprise risk management program, our Cybersecurity Program shares similar methodologies, reporting channels and
governance processes to other areas across the Company.
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The Cybersecurity Program includes, but is not limited to, the following processes that collectively help management to stay informed about and
monitor the prevention, detection, mitigation and remediation of risks and incidents:
•
Risk assessment program to assess, track and address security risks.
•
Incident Response Plan to help identify, evaluate, remediate and report incidents, as appropriate.
•
Security testing by external third-party providers to identify potential threats and vulnerabilities.
•
Reviews of critical third-party connections, including a security assessment and restrictions based on the third-party's risk profile.
•
Security training for employees and contractors, including alerts for new security developments, as warranted.
Cybersecurity is part of our Board of Directors' oversight function. Our Board of Directors has delegated oversight of cybersecurity and other
information technology to its Audit Committee. Our Audit Committee receives regular reporting from executive management on our cybersecurity
risks and, as necessary, updates on cybersecurity incidents. Our Audit Committee and executive management report to our Board of Directors
regarding its activities, including the Cybersecurity Program. Our Board of Directors also receives continuing education on the cybersecurity risks
that impact public companies.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, which have materially
affected us, including our operations, business strategy, results of operations, or financial condition. We face certain ongoing risks from
cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of
operations, or financial condition. See "Item 1A. Risk Factors".
ITEM 2. PROPERTIES
In October 2024, we relocated our corporate headquarters to our existing office and facility in Plano, Texas upon the termination of the
Alexandria, Virginia lease in September 2024.
At December 31, 2024, we leased facility space, including our corporate headquarters, sales offices, technical facilities, warehouse and storage
facilities in 39 locations in 23 states in the United States. The total leased space is approximately 51,000 square feet. At December 31, 2024, we
owned three small parcels of land in three states in the United States.
At December 31, 2024, we leased transmitter sites on commercial broadcast towers, buildings and other fixed structures, some of which are free
of charge, in approximately 2,521 locations throughout the United States. These leases are for our active transmitters and are for various terms
and provide for periodic lease payments at various rates.
At December 31, 2024, we had 3,048 active transmitters on leased sites which provide service to our customers.
ITEM 3. LEGAL PROCEEDINGS
Refer to Note 10, "Commitments and Contingencies," in the Notes to Consolidated Financial Statements for information regarding legal
proceedings in which we are involved.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market Information
Our sole class of common equity is our $0.0001 par value common stock, which is listed on the NASDAQ National Market and is traded under
the symbol "SPOK."
Holders of Common Stock
®
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As of February 21, 2025, there were 2,607 holders of record of our common stock.
Dividends
The Company declared dividends totaling $26.8 million, $26.2 million and $25.8 million during the years ended December 31, 2024, 2023 and
2022, respectively. Cash dividends declared include dividends related to unvested restricted stock units ("RSUs") and shares of unvested
restricted common stock ("restricted stock") granted under the Company's Equity Plan (as defined below) to executives and non-executive
members of our Board of Directors. Cash distributions on RSUs and restricted stock are accrued and paid when the applicable vesting
conditions are met. Accrued cash distributions on forfeited RSUs and restricted stock are also forfeited.
The following table details information on our dividends declared and cash distributions since the formation of the Company in 2005 through the
year ended December 31, 2024:
(Dollars in Thousands)
Dividends Declared Per Share
Amount
Total
Payment
Year
Prior to 2020
$
19.775
$
487,150
2020
0.500
9,771
2021
0.500
10,025
2022
1.250
25,011
2023
1.250
25,642
2024
1.250
26,381
$
24.525
$
583,980
The total payment reflects the cash distributions paid in relation to common stock, vested RSUs and vested shares of restricted stock.
On February 26, 2025, the Board of Directors declared a regular quarterly cash dividend of $0.3125 per share of common stock, with a record
date of March 14, 2025, and a payment date of March 31, 2025. This cash dividend of approximately $6.4 million is expected to be paid from
available cash on hand.
(1)
(1)
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Performance Graph
We began trading on the NASDAQ National Market on November 17, 2004. The chart below compares the relative changes in the cumulative
total return of our common stock for the period of December 31, 2019 to December 31, 2024, against the cumulative total return of the NASDAQ
Composite Index and the S&P Composite 1500 Health Care Technology Index for the same period.
The chart assumes that $100 was invested in our common stock and in each of the indices on December 31, 2019. The comparisons assume
that all cash distributions were reinvested. The chart indicates the dollar value of each hypothetical $100 investment based on the closing price
as of the last trading day of each fiscal year from December 31, 2019 to December 31, 2024. The stock performance depicted on the chart
represents historical stock performance and is not necessarily indicative of future stock price performance.
December 31,
2019
2020
2021
2022
2023
2024
Spok Holdings, Inc.
$
100.00
$
95.65
$
84.40
$
87.03
$
181.58
$
203.66
NASDAQ Composite
100.00
144.92
177.06
119.45
172.77
223.87
S&P Composite 1500 Health Care Technology Index
100.00
118.47
140.91
109.81
118.85
130.27
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
No common stock was repurchased by the Company (excluding the purchase of common stock for tax withholdings) during the three months
ended December 31, 2024.
®
®
*$100 invested on 12/31/2019 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
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Repurchased shares of our common stock are accounted for as a reduction to common stock and additional paid-in-capital in the period in which
the repurchase occurs. In February 2022, the Company’s Board of Directors authorized a share repurchase program of up to $10 million of the
Company’s common stock.
Transfer Restrictions on Common Stock
In order to reduce the possibility that certain changes in ownership could impose limitations on the use of our deferred income tax assets, our
Amended and Restated Certificate of Incorporation contains provisions that generally restrict transfers by or to any 5% stockholder of our
common stock or any transfer that would cause a person or group of persons to become a 5% stockholder of our common stock. After a
cumulative indirect shift in ownership of more than 45% since our emergence from bankruptcy proceedings in May 2002 through a transfer of our
common stock, any transfer of our common stock by or to a 5% stockholder of our common stock or any transfer that would cause a person or
group of persons to become a 5% stockholder of such common stock, will be prohibited unless the transferee or transferor provides notice of the
transfer to us and our Board of Directors determines in good faith that the transfer would not result in a cumulative indirect shift in ownership of
more than 47%.
Prior to a cumulative indirect ownership change of more than 45%, transfers of our common stock will not be prohibited, except to the extent that
they result in a cumulative indirect shift in ownership of more than 47%, but any transfer by or to a 5% stockholder of our common stock or any
transfer that would cause a person or group of persons to become a 5% stockholder of our common stock requires notice to us. Similar
restrictions apply to the issuance or transfer of an option to purchase our common stock, if the exercise of the option would result in a transfer
that would be prohibited pursuant to the restrictions described above. These restrictions will remain in effect until the earliest of (1) the repeal of
IRC Section 382 (or any comparable successor provision) and (2) the date on which the limitation amount imposed by IRC Section 382 in the
event of an ownership change would not be less than the tax attributes subject to these limitations. Transfers by or to us and any transfer
pursuant to a merger approved by our Board of Directors or any tender offer to acquire all of our outstanding stock where a majority of the
shares have been tendered will be exempt from these restrictions.
Based on publicly available information and after considering any direct knowledge we may have, our combined cumulative change in ownership
was an insignificant amount as of December 31, 2024 and 2023.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related notes and the
discussion under "Organization and Significant Accounting Policies” (refer to Note 1 in the Notes to the Consolidated Financial Statements),
which describes key estimates and assumptions we make in the preparation of our Consolidated Financial Statements; the cautionary language
that appears under the title "Forward Looking Statements" immediately following the Table of Contents; "Item 1. Business," which describes our
operations; and "Item 1A. Risk Factors," which describes key risks associated with our operations and markets in which we operate. A reference
to a "Note" in this section refers to the accompanying Notes to Consolidated Financial Statements.
Overview and Highlights
We offer a focused suite of unified clinical communication and collaboration solutions that include call center applications, clinical alerting and
notifications, one-way and advanced two-way wireless messaging services, mobile communications and public safety solutions. Our customers
rely on Spok for workflow improvement, secure texting, paging services, contact center optimization and public safety response. Our product
offerings are capable of addressing a customer’s clinical communications needs. We develop, sell and support enterprise-wide systems for
healthcare and other organizations needing to automate, centralize and standardize their approach to clinical communications. While our primary
market has been the healthcare industry with a focus on prominent hospitals, our solutions can be found in prominent hospitals, large
government agencies, leading public safety institutions, colleges and universities, large hotels, resorts and casinos and well-known
manufacturers.
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Revenue generated by wireless messaging services (including voice mail, personalized greetings, message storage and retrieval, equipment,
maintenance plans and/or equipment loss protection to both one-way and two-way messaging subscribers is presented as wireless revenue in
our Consolidated Statements of Operations. Revenue generated by the sale of our software solutions, which includes software license,
professional services (installation, consulting and training), equipment procured by us from third parties (to be used in conjunction with our
software) and post-contract support (ongoing maintenance), is presented as software revenue in our Consolidated Statements of Operations.
Our software is licensed to end users under an industry standard software license agreement.
Strategic Business Plan
In February 2022, our Board of Directors announced a new strategic business plan that included a restructuring of our business to discontinue
Spok Go and eliminate all associated costs and optimize the Company’s existing structure to drive continued cost improvement. Since then, the
strategic business plan includes a focus on our existing and established business, including the Spok Care Connect Suite and our wireless
service offerings. The restructuring efforts were completed during the fourth quarter of 2022. These actions allowed us to better align costs and,
as a result, continue to return capital to stockholders in the form of quarterly dividends of $0.3125 per share in 2024. We will continue to focus on
optimizing costs to allow us to prioritize cash flow generation and the return of capital to stockholders.
Results of Operations
The following table is a summary of our Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022, and
the discussion that follows compares the year ended December 31, 2024 to the year ended December 31, 2023. For a discussion and analysis
of the year ended December 31, 2023, compared to the year ended December 31, 2022, please refer to Management's Discussion and Analysis
of Financial Condition and Results of Operations included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31,
2023, filed with the SEC on February 22, 2024:
(Dollars in thousands)
2024
Change
2023
Change
2022
Revenue:
Wireless revenue
$
73,523
$
(2,445)
(3.2)% $
75,968
$
346
0.5 % $
75,622
Software revenue
64,130
1,073
1.7 %
63,057
4,145
7.0 %
58,912
Total revenue
137,653
(1,372)
(1.0)%
139,025
4,491
3.3 %
134,534
Operating expenses:
Cost of revenue (exclusive of items
shown separately below)
28,430
1,612
6.0 %
26,818
(1,449)
(5.1)%
28,267
Research and development
11,548
999
9.5 %
10,549
(3,076)
(22.6)%
13,625
Technology operations
24,306
(1,537)
(5.9)%
25,843
(1,569)
(5.7)%
27,412
Selling and marketing
15,851
(499)
(3.1)%
16,350
54
0.3 %
16,296
General and administrative
33,301
133
0.4 %
33,168
(4,628)
(12.2)%
37,796
Severance and restructuring
1,104
531
92.7 %
573
(6,756)
(92.2)%
7,329
Depreciation and accretion
4,148
(348)
(7.7)%
4,496
925
25.9 %
3,571
Total operating expenses
118,688
891
0.8 %
117,797
(16,499)
(12.3)%
134,296
Operating income
18,965
(2,263)
(10.7)%
21,228
20,990
8,819.3 %
238
Interest income
1,153
54
4.9 %
1,099
507
85.6 %
592
Other (expense) income
(86)
(84)
4,200.0 %
(2)
(169)
(101.2)%
167
Income before income taxes
20,032
(2,293)
(10.3)%
22,325
21,328
2,139.2 %
997
(Provision for) benefit from income taxes
(5,067)
1,592
(23.9)%
(6,659)
(27,518)
(131.9)%
20,859
Net income
$
14,965
$
(701)
(4.5)% $
15,666
$
(6,190)
(28.3)% $
21,856
Supplemental Information
FTEs
410
26
6.8 %
384
8
2.1 %
376
Active transmitters
3,048
(167)
(5.2)%
3,215
(110)
(3.3)%
3,325
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Revenue
We offer a focused suite of unified clinical communications and collaboration solutions that include call center applications, clinical alerting and
notifications, one-way and advanced two-way wireless messaging services, mobile communications and public safety solutions.
We develop, sell and support enterprise-wide systems for healthcare, government, and large enterprise and other organizations needing to
automate, centralize and standardize their approach to clinical communications and collaboration. Our solutions can be found in prominent
hospitals, large government agencies, leading public safety institutions, colleges and universities, large hotels, resorts and casinos and well-
known manufacturers. Our primary market is the healthcare industry, particularly hospitals. While we have historically identified hospitals with
200 or more beds as the primary targets for our software solutions, as well as our paging services, we have recently expanded our focus to
include smaller hospitals with shorter sales cycles, including academic medical centers.
Revenue generated by wireless messaging services (including voice mail, personalized greetings, message storage and retrieval, equipment,
maintenance plans and/or equipment loss protection to both one-way and two-way messaging subscribers is presented as wireless revenue in
our Consolidated Statements of Operations. Revenue generated by the sale of our software solutions, which includes software license,
professional services (installation, consulting and training), equipment procured by us from third parties (to be used in conjunction with our
software) and post-contract support (ongoing maintenance), is presented as software revenue in our Consolidated Statements of Operations.
Our software is licensed to end users under an industry standard software license agreement.
Refer to Note 3, "Revenue, Deferred Revenue and Prepaid Commissions," in the Notes to Consolidated Financial Statements for additional
information on our wireless and software revenue streams.
The table below details total revenue for the periods stated:
(Dollars in thousands)
2024
Change
2023
Change
2022
Wireless revenue:
Paging revenue
$
70,958
$
(2,177)
(3.0)% $
73,135
$
(188)
(0.3)% $
73,323
Product and other revenue
2,565
(268)
(9.5)%
2,833
534
23.2 %
2,299
Wireless revenue
73,523
(2,445)
(3.2)%
75,968
346
0.5 %
75,622
Software revenue:
License
7,648
(1,073)
(12.3)%
8,721
1,519
21.1 %
7,202
Professional services - projects
14,616
1,311
9.9 %
13,305
1,721
14.9 %
11,584
Professional services - managed
services
3,259
1,870
134.6 %
1,389
408
41.6 %
981
Hardware
1,382
(1,293)
(48.3)%
2,675
464
21.0 %
2,211
Operations revenue
26,905
815
3.1 %
26,090
464
2.1 %
21,978
Maintenance
37,225
258
0.7 %
36,967
33
0.1 %
36,934
Software revenue
64,130
1,073
1.7 %
63,057
497
0.8 %
58,912
Total revenue
$
137,653
$
(1,372)
(1.0)% $
139,025
$
843
0.6 % $
134,534
Wireless Revenue
Wireless revenue consists of two primary components: paging revenue and product and other revenue. Paging revenue consists primarily of
recurring fees associated with the provision of messaging services and fees for paging devices and is net of a provision for service credits.
Product and other revenue reflects system sales, sales of paging devices and charges for devices that are not returned and are net of
anticipated credits. See "Item 1. Business" for more details.
We offer subscriptions to one-way or two-way messaging services for a periodic (monthly, quarterly, semiannual, or annual) service fee. The
level of service fees is generally based upon the type of service provided, the geographic area covered, the number of devices provided to the
customer and the period of commitment. We also sell devices to resellers who lease or resell such devices to their subscribers and then sell
messaging services utilizing our networks.
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A subscriber to one-way messaging services may select coverage on a local, regional or nationwide basis to best meet their messaging needs,
while two-way messaging is generally offered on a nationwide basis. In addition, subscribers either contract to use a messaging device that we
own and provide for an additional fixed monthly fee or they own the device used, after either purchasing it either from us or from another vendor.
We offer exclusive one-way (T5) and two-way (T52) alphanumeric pagers, which are configurable to support unencrypted or encrypted
operation. When configured for encryption, they utilize AES-128 bit encryption, screen locking and remote wipe capabilities. With encryption
enabled, these new secure paging devices enhance our service offerings to the healthcare community by adding HIPAA security capabilities to
the low cost, highly reliable and availability benefits of paging. We also offer ancillary services, such as voicemail and equipment loss or
maintenance protection, which help increase the monthly recurring revenue we receive along with these traditional messaging services.
Wireless revenue is generally reflective of the number of units in service and measured monthly as Average Revenue Per User ("ARPU"). On a
consolidated basis, ARPU is affected by several factors, including the mix of units in service and the pricing of the various components of our
services. The number of units in service changes based on subscribers added, referred to as gross placements, less subscriber cancellations, or
disconnects.
Wireless revenue decreased for the year ended December 31, 2024, as compared to 2023, reflective of the secular decrease in our wireless
units in service, from approximately 765 thousand units as of December 31, 2023 to approximately 720 thousand units as of December 31,
2024. These decreases were partially offset by an increase in ARPU as a result of price increases initiated in September 2024. ARPU was
$7.97, as compared to $7.71 for the same period in 2023.
We believe that demand for wireless services will continue to decline for the foreseeable future in line with recent trends, as our wireless
products and services are replaced with other competing technologies, such as the shift from narrowband wireless service offerings to
broadband technology services.
The following reflects the impact of subscribers and ARPU on the change in wireless revenue:
Units in Service as of December 31,
Revenue for the Year Ended December 31,
Change Due To:
(Units and Dollars in Thousands)
2024
2023
Change
2024
2023
Change
ARPU
Units
Paging revenue
720
765
(45)
$
70,958
$
73,135
$
(2,177)
$
2,306
$
(4,483)
As demand for one-way and two-way messaging has declined, we have developed or added service offerings such as encrypted paging and
Spok Mobile with a pager number in order to increase our revenue potential and mitigate the decline in our wireless revenue. We will continue to
explore ways to innovate and provide customers the highest value possible.
In late 2021, we began offering our newest pager, GenA. This one-way alphanumeric pager features a high resolution ePaper display, intuitive
modern user interface, advanced encryption and security features, over-the-air remote programming, and an antimicrobial housing. Users can
select from various font sizes, and the large GenA display also leverages proportional fonts to maximize key information on a single screen. The
GenA pager is the only product available on the market with these capabilities, and we maintain an exclusive arrangement with the product's
manufacturer. Given the product differentiation of the GenA pager, its development is a key initiative in providing a competitive advantage, and
we expect this new technology will be popular with our customers in clinical environments and may help slow our wireless revenue attrition.
Software Revenue
Software revenue consists of two components: operations revenue and maintenance revenue. Operations revenue consists primarily of license
and subscription revenues for our healthcare communications solutions, revenue from the sale of hardware that facilitates the use of our
software solutions, and professional services revenue related to the implementation of our solutions. Maintenance revenue is generated from the
ongoing support of our software solutions or related hardware, typically contracted for a period of between one and three years.
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To a large degree, software revenue corresponds to our backlog of performance obligations ready to deliver at some point in the future, and any
delays in implementation may affect the timing of revenue recognition. Our software projects generally originate from fixed-bid contracts,
although many involve a protracted sales cycle and may result in unforeseen complexity and deviation from the original scope. The time needed
to complete projects, therefore, may not align with our original expectations, which affects our backlog. As a result, software revenue may
fluctuate on a short-term basis, and we generally evaluate longer-term trends when managing this business.
Revenue items impacted by timing generally relate to specific renewal contracts that do not have auto-renewal terms and for which we must
negotiate at the end of each term. We are generally precluded from recognizing revenue on these contracts until new terms have been agreed to
even though we continue to provide maintenance service for these customers while negotiations are ongoing. While certain commercial
customers require this type of contract renewal, these contracts are generally limited to government organizations, including federal, state and
local entities. When a renewal of this nature has been contracted, it is often accompanied by several months of "catch-up" revenue from services
performed in past periods resulting in a one-time value that is greater than the normal monthly revenue expected over the life of the remaining
term.
Operations Revenue
Software operations revenue increased during 2024 when compared to 2023, primarily as a result of higher professional services revenue,
resulting from increased sales of our managed services offering as well as targeted hiring efforts over the last 12 months, as we aligned staffing
levels with our backlog, which had grown as a result of our operations bookings results. This increase was partially offset by decreases in license
and hardware revenue, driven by lower sales.
Maintenance Revenue
We have seen modest improvement in our gross maintenance revenue churn alongside increasing operational bookings, which drive new
maintenance revenue. Given these dynamics, we believe annual maintenance revenue is likely to remain flat or increase marginally, as we
continue to enhance our existing software solutions. Further enhancements are expected to provide additional avenues for license sales, which
generate new maintenance revenue and help to reduce levels of gross churn.
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Table of Contents
Operating Expenses
Our operating expenses are presented in functional categories. Certain of our functional categories are especially important to overall expense
control and management. These operating expenses are categorized as follows:
•
Cost of Revenue. These are expenses we incur for the delivery of products and services to our customers and consist primarily of
hardware, third-party software, outside services expenses and payroll and related expenses for our professional services, logistics,
customer support and maintenance staff.
•
Research and Development. These expenses relate primarily to the development of new software products and the ongoing
maintenance and enhancement of existing products. This classification consists primarily of employee payroll and related expenses,
outside services related to the design, development, testing and enhancement of our solutions and, to a lesser extent, hardware
equipment. Research and development expenses exclude any development costs that qualify for capitalization.
•
Technology Operations. These are expenses associated with the operation of our paging networks. Expenses consist largely of site
rent expenses for transmitter locations, telecommunication expenses to deliver messages over our paging networks, and payroll and
related expenses for our engineering and pager repair functions. We actively pursue opportunities to consolidate transmitters and other
service, rental and maintenance expenses in order to maintain an efficient network while simultaneously ensuring adequate service for
our customers. We believe continued reductions in these expenses will occur for the foreseeable future as we continue to consolidate
our networks, although the benefits of such network rationalization efforts and resulting costs savings will continue to decline.
•
Selling and Marketing. The sales and marketing staff are involved in selling our communication solutions primarily in the United States.
These expenses support our efforts to maintain gross placements of units in service, which mitigated the impact of disconnects on our
wireless revenue base, and to identify business opportunities for additional or future software sales. We maintain a centralized marketing
function, that is focused on supporting our products and vertical sales efforts by strengthening our brand, generating sales leads and
facilitating the sales process. These marketing functions are accomplished through targeted email campaigns, webinars, regional and
national user conferences, monthly newsletters and participation at industry trade shows. Expenses consist largely of payroll and related
expenses, commissions and other costs such as travel and advertising costs.
•
General and Administrative. These are expenses associated with information technology and administrative functions, including
finance and accounting, human resources and executive management. This classification consists primarily of payroll and related
expenses, outside service expenses, taxes, licenses and permit expenses, and facility rent expenses.
•
Depreciation and Accretion. These are expenses that may be associated with one or more of the aforementioned functional
categories. This classification generally consists of depreciation from capital expenditures or other assets that are core to our ongoing
operations and accretion of asset retirement obligations.
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Table of Contents
The following is a review of our operating expense categories for the years ended December 31, 2024 and 2023.
Cost of Revenue
Cost of revenue increased by $1.6 million, or 6.0%, for the year ended December 31, 2024, compared to 2023. This increase was primarily
driven by the need for additional professional services personnel to better align staffing levels with our backlog. This increase was partially offset
by lower hardware costs resulting from lower hardware sales as compared to 2023.
Research and Development
Research and development expenses increased by $1.0 million, or 9.5%, for the year ended December 31, 2024, compared to 2023. This
increase was driven by our continued effort to invest in the enhancement of our software solutions.
Technology Operations
Technology operations expenses decreased by $1.5 million, or 5.9%, for the year ended December 31, 2024, compared to 2023. The decrease
was driven by reduction in the number of active transmitters, resulting from our network rationalization efforts. The number of active transmitters,
which directly affects our telecommunications and site rent expenses, declined 5.2% from December 31, 2023 to December 31, 2024. As we
reach certain minimum frequency commitments, as outlined by the FCC, we may be unable to continue our efforts to rationalize and consolidate
our networks.
Selling and Marketing
Selling and marketing expenses decreased by $0.5 million, or 3.1%, for the year ended December 31, 2024, compared to 2023,. The decrease
in commissions is primarily due to the amortization of certain commissions expenses, which were previously expensed as incurred under an
ASC 606 practical expedient. With the growth in multi-year contracts over the last two years, more related revenue continues to extend beyond
the 12-month period allowed for under this practical expedient. As a result, the associated commission expenses are now amortized in alignment
with the related revenue, resulting in lower expenses compared to 2023. This resulted in a one-time benefit of approximately $0.9 million, as
commissions expense was adjusted to account for the deferral of certain items that had been previously expensed.
General and Administrative
General and administrative expenses increased by $0.1 million, or 0.4%, for the year ended December 31, 2024, compared to 2023. Expenses
were largely in line with 2023.
Depreciation and Accretion
For the year ended December 31, 2024, compared to 2023, depreciation and accretion expenses decreased by $0.3 million, primarily due to
decreases in asset retirement cost and pager depreciation.
Severance and Restructuring
For the years ended December 31, 2024 and 2023, severance and restructuring expenses were $1.1 million and $0.6 million, respectively,
primarily due to expenses related to the early termination of the lease of our corporate headquarters in Alexandria, Virginia.
Interest Income and Provision for (Benefit from) Income Taxes
Interest Income
Interest income increased by $0.1 million for the year ended December 31, 2024, compared to 2023, primarily due to an increase in interest
earned on the Company's cash balances, driven by higher interest rates from macroeconomic events.
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Table of Contents
Provision for (Benefit from) Income Taxes
The effects of foreign taxes are immaterial for all periods presented. The following provides the effective tax rate reconciliation for the years
ended December 31, 2024, 2023 and 2022, respectively (See Note 9, "Income Taxes" in the Notes to Consolidated Financial Statements for
further discussion on our income taxes):
(Dollars in thousands)
2024
2023
2022
Income before income taxes
$
20,032
$
22,325
$
997
Income taxes computed at the federal statutory rate
$
4,207
21.0 % $
4,688
21.0 % $
209
21.0 %
State income taxes, net of federal benefit
886
4.4 %
1,343
6.0 %
121
12.1 %
Change in valuation allowance
—
— %
—
— %
(21,850)
(2,191.6)%
Research and development and other tax credits
—
— %
—
— %
(88)
(8.8)%
Excess executive compensation
609
3.0 %
405
1.8 %
231
23.1 %
Other
(635)
(3.2)%
223
0.9 %
518
52.0 %
Provision for (benefit from) income taxes
$
5,067
25.3 % $
6,659
29.8 % $
(20,859)
(2,092.2)%
The provision for income taxes decreased by $1.6 million for the year ended December 31, 2024, compared to 2023, primarily due to a decrease
in both federal and state income taxes stemming from lower income in 2024. Our investment in research and development in prior years
qualified for the research and development income tax credit under Section 41 of the Internal Revenue Code. Unused research and
development tax credits have a 20-year carryover and will provide future tax benefits once Spok’s net operating losses are fully utilized. We did
not qualify for the research and development tax credits in 2024.
We assess the recoverability of our deferred income tax assets, which represent the tax benefits of future tax deductions, based on available
positive and negative evidence, and by considering the adequacy of future taxable income from all sources, including prudent and feasible tax
planning strategies. This assessment is required to determine whether, based on all available evidence, it is "more likely than not" (meaning a
probability of greater than 50%) that all or some portion of our deferred income tax assets will be realized in future periods.
We maintained a valuation allowance of $2.3 million related to federal foreign tax credits and certain state net operating losses and state tax
credits, as we do not believe current projections of future taxable income will be sufficient to utilize those tax assets and credits prior to
expiration.
Refer to Note 1, "Organization and Significant Accounting Policies" and Note 9, "Income Taxes" in the Notes to Consolidated Financial
Statements for further discussion.
Liquidity and Capital Resources
Cash and Cash Equivalents
At December 31, 2024, we held cash and cash equivalents of $29.1 million. The available cash and cash equivalents consist of cash in our
operating accounts and cash invested in interest-bearing funds managed by third-party financial institutions. We maintain the majority of our
cash and cash equivalents in accounts with major United States and multi-national financial institutions, and the majority of our deposits at these
institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial
institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a
timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business, financial condition and
results of operations.
We maintain a level of liquidity sufficient to allow us to meet our cash needs in both the short term (next 12 months) and long term (beyond 12
months). At any point in time, we maintain approximately $5.0 to $10.0 million in our operating accounts at third-party financial institutions. While
we monitor daily the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be
impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, we have
experienced no loss or lack of access to cash in our operating accounts.
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Table of Contents
We intend to use our cash on hand to provide working capital, to support operations, to invest in our business, and to return value to
stockholders through cash dividends and repurchases of our common stock. We may also consider using cash to fund or complete opportunistic
investments and acquisitions that we believe will provide a measure of growth or revenue stability while supporting our existing operations.
With the successful completion of the restructuring plan and our ongoing efforts to maximize revenue and optimize costs, we anticipate positive
cash flow generation will continue in future operating periods.
In February 2022, the Board of Directors authorized a share repurchase program of up to $10 million of the Company's common stock. This
repurchase authority allows us, at management’s discretion, to selectively repurchase shares of our common stock from time to time in the open
market depending upon market price and other factors.
On February 26, 2025, the Board of Directors declared a regular quarterly cash dividend of $0.3125 per share of common stock, with a record
date of March 14, 2025 and a payment date of March 31, 2025. This cash dividend of approximately $6.4 million is expected to be paid from
available cash on hand.
Cash Flows Overview
In the event that net cash provided by operating activities and cash on hand are not sufficient to meet future cash requirements, we may be
required to reduce planned capital expenses, reduce or eliminate our cash dividends to stockholders, not repurchase shares of our common
stock under the share repurchase program, sell assets or seek additional financing. We can provide no assurance that reductions in planned
capital expenses or proceeds from asset sales would be sufficient to cover shortfalls in available cash or that additional financing would be
available on acceptable terms.
Based on current and anticipated levels of operations, we anticipate that net cash provided by operating activities, together with the available
cash on hand at December 31, 2024, should be adequate to meet anticipated cash requirements for the short term (next 12 months) and long
term (beyond 12 months).
The following table sets forth information on our net cash flows from operating, investing, and financing activities for the periods stated:
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Net cash provided by operating activities
$
28,922
$
26,184
$
6,456
Net cash (used in) provided by investing activities
(3,209)
(3,417)
11,257
Net cash used in financing activities
(28,537)
(26,677)
(26,221)
Operating Activities
As discussed above, we are dependent on cash flows from operating activities to meet our cash requirements. Cash from operations varies
depending on changes in various working capital items, including deferred revenues, accounts payable, accounts receivable, prepaid expenses
and various accrued expenses.
Our operating cash results primarily from cash received from our customers, offset by cash payments we make for products and services,
operating expenses and income taxes. Significant non-cash expenses include depreciation and accretion, deferred income tax expense and
stock-based compensation. The cash impact from actual transaction gains and losses is reflected in the change in working capital.
For the years ended December 31, 2024 and 2023, net cash provided by operating activities was $28.9 million, and $26.2 million, respectively,
primarily due to an increase in cash received from customers, partially offset by cash payments for cost of revenues and operating expenses.
Investing Activities
For the years ended December 31, 2024 and 2023, net cash used in investing activities was $3.2 million and $3.4 million, respectively, primarily
due to capital expenditures.
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Financing Activities
For the years ended December 31, 2024 and 2023, net cash used in financing activities was $28.5 million and $26.7 million, respectively,
primarily due to cash distributions to stockholders of $26.4 million and $25.6 million, respectively.
Commitments and Contingencies
In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services,
operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.
Purchase obligations are defined as agreements to purchase goods or services that are enforceable, legally binding, non-cancelable, have a
remaining term in excess of one year and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed,
minimum or variable pricing provisions; and the approximate timing of transactions. The amounts of such obligations are based on our
contractual commitments, however, it is possible that we may be able to negotiate lower payments if we choose to exit these contracts before
their expiration date.
Our contractual payment obligations for operating leases apply to leases for office space and transmitter locations.
The following table provides the Company's significant commitments and contractual obligations as of December 31, 2024:
Payments Due by Period
(Dollars in thousands)
Total
Less than 1
year
1 to 3 years
3 to 5 years
More than 5
years
Operating lease obligations
$
10,548
$
3,479
$
4,285
$
1,794
$
990
Unconditional purchase obligations
4,896
2,189
2,632
75
—
Total contractual obligations
$
15,444
$
5,668
$
6,917
$
1,869
$
990
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or
special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually
narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in
such relationships.
The Company evaluates contingencies on an ongoing basis and establishes loss provisions for matters in which losses are probable and the
amount of loss can be reasonably estimated. As part of this evaluation, for the year ended December 31, 2024, the Company did not identify any
probable losses.
Related Parties
Refer to Note 12, "Related Parties" in the Notes to Consolidated Financial Statements for further discussion on our related party transactions.
Inflation
Inflation has not had a material effect on our operations to date. System equipment and operating costs have not significantly increased in price,
and the price of wireless messaging devices has tended to decline in recent years. Our general operating expenses, such as salaries, site rent
for transmitter locations, employee benefits and occupancy costs, are subject to normal inflationary pressures.
Critical Accounting Estimates
The Company’s accounting policies are described more fully in Note 1 of the Consolidated Financial Statements. As disclosed in Note 1, the
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ
significantly from those estimates. We believe that the following discussion addresses the Company’s most critical accounting estimates, which
are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the
Company’s financial condition and results of operations.
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Revenue Recognition
We review each contract to determine whether to account for the various promises as one or more performance obligations. The assessment
and determination of performance obligations for a given contract requires significant judgment. Wireless service contracts are generally
considered to be a single promise and therefore accounted for as a single performance obligation. Contracts which include goods or services
related to our software solutions and subscriptions are generally sold with multiple promises, and therefore, will often include multiple
performance obligations. Material performance obligations related to the sale of our software solutions include software licenses, professional
services - projects, professional services - managed services, hardware and maintenance.
If a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation
proportionately based on the estimated relative standalone selling price ("SSP") of the promised goods or services underlying each performance
obligation. We rarely sell goods or services as readily observable standalone sales, however, if we do, the observable standalone sales are used
to determine the SSP. In most cases, we must estimate the relative SSP which requires significant judgment and estimates. In instances where
SSP is not directly observable, we determine the SSP using information that may include contractually stated prices, market conditions, costs,
renewal contracts, list prices and other observable inputs. A discount is present if the total transaction price is less than the sum of the estimated
SSPs of the goods or services promised in the contract. Discounts are generally allocated proportionately based on the relative SSP of the
identified performance obligations for a given contract.
Our wireless, professional, maintenance, and subscription services are generally recognized over time due to a customer's simultaneous receipt
and consumption of the benefit as we perform the work. As we transfer control over time, we recognize revenue based on the extent of progress
towards completion of the performance obligation. The selection of the method to measure progress towards completion requires significant
judgment and is based on the nature of the products or services to be provided. Generally, we use the time-elapsed measure of progress for
performance obligations that include wireless, maintenance, professional services - managed services, or subscription services. We believe this
method best depicts the simultaneous transfer and consumption of the benefit based on our performance as these services are generally
considered standby services. For professional services - projects, we leverage an input methodology based on the number of hours worked on a
project versus the total expected hours necessary to complete the project. Revenues are recognized proportionally as hours are incurred. This is
a significant area of judgment as it requires an estimate at completion ("EAC") for each contract. Our initial EAC is primarily based on prior
experience also taking into consideration any specific facts and circumstances for a given contract. As projects progress, the EAC is periodically
updated and reviewed to ensure the timing of revenue recognition is appropriate. The creation, maintenance and review of a project's EAC
requires significant judgment to determine an appropriate number of hours over which the remaining project is expected to be completed.
Our software licenses and hardware are generally recognized at a point in time when we have transferred control to the customer. For software
licenses, revenue is not recognized until the related license(s) has been made available to the customer and the customer can begin to benefit
from its right to use the license(s). Our software licenses represent a right to use Spok’s Intellectual Property ("IP") as it exists at a point in time
at which the license is granted. Many of our software licenses have significant standalone functionality due to their ability to process a
transaction or perform a function or task, and we do not need to maintain those products, once provided to the customer, for value to exist. While
the functionality of IP that we license may substantively change during the license period, customers are not contractually or practically required
to update their license as a result of those changes. In most contracts, transfer of control for software licenses occurs in a short period of time
after a contract has been executed and licenses are made electronically available.
Income Taxes
Deferred income tax assets and liabilities are calculated based on temporary differences between the financial statement values and the tax
bases of assets and liabilities including net operating loss and tax credit carryforwards at the enacted tax rates expected to apply to taxable
income when taxes are actually paid or recovered. Changes in deferred income tax assets and liabilities are included as a component of
deferred income tax expense. Deferred income tax assets represent amounts available to reduce future income taxes payable. We assess the
recoverability of our deferred income tax assets, which represent the tax benefits of future tax deductions, based on available positive and
negative evidence and by considering the adequacy of future taxable income from all sources, including prudent and feasible tax planning
strategies. This assessment is required to determine whether, based on all available evidence, it is "more likely than not" (meaning a probability
of greater than 50%) that all or some portion of our deferred income tax assets will be realized in future periods. We provide a valuation
allowance when we consider it "more likely than not" that a deferred income tax asset will not be fully recovered. The assessment of our deferred
income tax assets requires significant judgment, however, our methods, assumptions, and estimates used in assessing the need for a valuation
allowance remained
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materially unchanged in 2024. We maintained a valuation allowance of $2.3 million related to federal foreign tax credits and certain state net
operating losses as we do not believe current projections of future taxable income will be sufficient to utilize those tax assets and credits prior to
expiration.
Impairment of Goodwill and Long-Lived Assets
We are required to evaluate the carrying value of our goodwill, long-lived assets and intangible assets subject to amortization.
Goodwill is not amortized but is evaluated for impairment at least annually, or when events or circumstances suggest a potential impairment has
occurred. We generally perform this annual impairment test in the fourth quarter of the fiscal year. We evaluate goodwill for impairment between
annual tests if indicators of impairment exist. Significant judgment is required in the determination of a triggering event given the qualitative
nature of the assessment. The fair value of the reporting unit is estimated under a market-based approach using the fair value of the Company's
common stock. The estimated fair value requires significant judgments, including timing and appropriateness of the price of common stock used
(e.g., point-in-time application, simple moving average, exponential moving average), as well as application of an estimated control premium, if
necessary. The estimated control premium is based on a review of current and past market information published by a third-party resource,
assessment of the Company's future projected discounted cash flows and other relevant information if available. Our methods, assumptions, and
estimates used in assessing goodwill in a quantitative form remained materially unchanged in 2024. We recorded no impairment of goodwill for
the years ended December 31, 2024, 2023 and 2022.
Quarterly, we assess whether circumstances exist which suggest that the carrying value of long-lived assets (asset groups) may not be
recoverable. Similar to our quarterly assessment of goodwill, significant judgment is required in the determination of a triggering event given the
qualitative nature of the assessment. We did not identify any triggering events for long-lived assets in 2024. We did not record any impairment of
long-lived assets for the years ended December 31, 2024 and 2023.
There were no remaining amortizable intangible assets at December 31, 2024 and 2023.
Recent Accounting Pronouncements
Refer to Note 2, "Recent Accounting Standards," in the Notes to Consolidated Financial Statements for a summary of recent and pending
accounting standards.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
At December 31, 2024, we had no outstanding borrowings or associated debt service requirements.
Foreign Currency Exchange Rate Risk
We conduct a limited amount of business outside the United States. The financial impact of transactions billed in foreign currencies is immaterial
to our financial results and, consequently, we do not have any material exposure to the risk of foreign currency exchange rate fluctuations.
40
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements are included in this Report beginning on Page F-1.
Index to Consolidated Financial Statements
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
F- 2
Consolidated Balance Sheets as of December 31, 2024 and 2023
F- 4
Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023 and 2022
F- 4
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, 2023 and 2022
F- 5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2024, 2023 and 2022
F- 6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022
F- 7
Notes to Consolidated Financial Statements
F- 8
Schedule II - Valuation and Qualifying Accounts
F- 28
41
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are no reportable events.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management carried out an evaluation, as required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with the participation of our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and
procedures, as of the end of our last fiscal year. Disclosure controls and procedures are defined under Rule 13a-15(e) under the Exchange Act
as controls and other procedures of an issuer that are designed to ensure that the information required to be disclosed by the issuer in the
reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in
SEC rules and forms, and (ii) is accumulated and communicated to the issuer’s management, including its principal executive officer and
principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based
upon this evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures
were effective as of December 31, 2024.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Exchange
Act Rule 13a-15(f) and 15d-15(f). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based
on the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO").
Such internal controls include those policies and procedures that:
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
•
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and members of
the Board of Directors of the Company; and
•
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Based on our evaluation under the 2013 Internal Control — Integrated Framework, our management concluded that our internal control over
financial reporting was effective as of December 31, 2024.
The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by Grant Thornton LLP, an
independent registered public accounting firm, as stated in its report which appears in this 2024 Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes made in the Company’s internal control over financial reporting during the quarter ended December 31, 2024, that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
During the three months ended December 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading
arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
42
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ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
Certain information called for by Items 10 through 14 is incorporated by reference from Spok’s definitive Proxy Statement for our 2025 Annual
Meeting of Stockholders, which will be filed with the SEC no later than April 30, 2025.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following information required by this item is incorporated by reference from Spok’s definitive Proxy Statement for our 2025 Annual Meeting
of Stockholders:
•
Information regarding directors is set forth under the caption "Election of Directors";
•
Information regarding executive officers is set forth under the caption "Executive Officers";
•
Information regarding our audit committee and designated "audit committee financial expert" is set forth under the caption "Committees
of the Board of Directors"; and
•
If applicable, information regarding compliance with Section 16(a) of the Exchange Act is set forth under the caption "Delinquent Section
16(a) Reports."
We also make available on our website, and in print, if any stockholder or other person so requests, our code of business conduct and ethics
entitled "Code of Business Conduct and Ethics" which is applicable to all employees and directors, our "Corporate Governance Guidelines," and
the charters for all committees of our Board of Directors, including Audit, Compensation and Nominating and Governance. Any changes to our
Code of Ethics or waiver, if any, of our Code of Ethics for executive officers or directors will be posted on our website.
We have adopted policies, Employee Policy Statement on Inside Information and Securities Trading and Policy Statement on Inside Information
and Securities Trading, that govern the purchase, sale, and/or other dispositions of our securities by directors, officers and employees that is
reasonably designed to promote compliance with insider trading laws, rules and regulations and NASDAQ listing standards. Copies of our
policies are filed as Exhibit 19.1 and Exhibit 19.2 to this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the section of Spok’s definitive Proxy Statement for our 2025 Annual
Meeting of Stockholders entitled "Compensation Discussion and Analysis."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference from the section of Spok’s definitive Proxy Statement for our 2025 Annual
Meeting of Stockholders entitled "Security Ownership of Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item with respect to certain relationships and related transactions is incorporated by reference from the section
of Spok’s definitive Proxy Statement for our 2025 Annual Meeting of Stockholders entitled "Related Party Transactions and Code of Business
Conduct and Ethics." The information required by this item with respect to director independence is incorporated by reference from the section of
Spok’s definitive Proxy Statement for our 2025 Annual Meeting of Stockholders entitled "Board of Directors and Governance Matters."
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference from the section of Spok’s definitive Proxy Statement for our 2025 Annual
Meeting of Stockholders entitled "Independent Registered Public Accounting Firm Fees."
43
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PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this 2024 Form 10-K:
1. Financial Statements. As listed in the index to financial information on page F-1
2. Exhibits. As listed in the index to exhibits on page F-1
ITEM 16. FORM 10-K SUMMARY
None.
44
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Spok Holdings, Inc.
By:
/s/ Vincent D. Kelly
Vincent D. Kelly
President and Chief Executive Officer
February 27, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Vincent D. Kelly
Director, President and Chief Executive Officer
(principal executive officer)
February 27, 2025
Vincent D. Kelly
/s/ Calvin C. Rice
Chief Financial Officer (principal financial officer
and principal accounting officer)
February 27, 2025
Calvin C. Rice
/s/ Christine M. Cournoyer
Chairman of the Board
February 27, 2025
Christine M. Cournoyer
/s/ Dr. Bobbie Byrne
Director
February 27, 2025
Dr. Bobbie Byrne
/s/ Randy Hyun
Director
February 27, 2025
Randy Hyun
/s/ Brett Shockley
Director
February 27, 2025
Brett Shockley
/s/ Todd Stein
Director
February 27, 2025
Todd Stein
45
Table of Contents
Index to Consolidated Financial Statements
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
F- 2
Consolidated Balance Sheets as of December 31, 2024 and 2023
F- 4
Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023 and 2022
F- 4
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, 2023 and 2022
F- 5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2024, 2023 and 2022
F- 6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022
F- 7
Notes to Consolidated Financial Statements
F- 8
Schedule II - Valuation and Qualifying Accounts
F- 28
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Spok Holdings, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Spok Holdings, Inc. (a Delaware corporation) and subsidiaries (the
“Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity,
and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and the financial statement schedule
included under Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles
generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the
Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated
February 27, 2025 expressed an unqualified opinion.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
Critical audit matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved
our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ GRANT THORNTON LLP
We have served as the Company's auditor since 2006.
Arlington, Virginia
February 27, 2025
F-2
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Spok Holdings, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Spok Holdings, Inc. (a Delaware corporation) and subsidiaries (the “Company”)
as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the
consolidated financial statements of the Company as of and for the year ended December 31, 2024, and our report dated February 27, 2025
expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Arlington, Virginia
February 27, 2025
F-3
Table of Contents
SPOK HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in thousands, except share and per share amounts)
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
$
29,145
$
31,989
Accounts receivable, net
21,950
23,314
Prepaid expenses
9,362
7,885
Other current assets
840
704
Total current assets
61,297
63,892
Non-current assets:
Property and equipment, net
5,952
7,321
Operating lease right-of-use assets
8,249
10,526
Goodwill
99,175
99,175
Deferred income tax assets, net
41,686
46,260
Other non-current assets
744
510
Total non-current assets
155,806
163,792
TOTAL ASSETS
$
217,103
$
227,684
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
5,630
$
5,969
Accrued compensation and benefits
7,363
7,284
Deferred revenue
28,366
26,298
Operating lease liabilities
2,904
4,184
Other current liabilities
4,511
4,273
Total current liabilities
48,774
48,008
Non-current liabilities:
Asset retirement obligations
5,945
7,191
Operating lease liabilities
5,869
6,902
Other non-current liabilities
1,769
1,812
Total non-current liabilities
13,583
15,905
TOTAL LIABILITIES
62,357
63,913
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY:
Preferred stock—$0.0001 par value; 25,000,000 shares authorized; no shares issued or
outstanding
$
—
$
—
Common stock—$0.0001 par value; 75,000,000 shares authorized; 20,284,177 and
19,992,102 shares issued and outstanding as of December 31, 2024 and December 31,
2023, respectively.
2
2
Additional paid-in capital
105,736
102,936
Accumulated other comprehensive loss
(1,784)
(1,764)
Retained earnings
50,792
62,597
TOTAL STOCKHOLDERS’ EQUITY
154,746
163,771
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
217,103
$
227,684
The accompanying notes are an integral part of these consolidated financial statements.
SPOK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31,
(Dollars in thousands, except share and per share amounts)
2024
2023
2022
Revenue:
Wireless revenue
$
73,523
$
75,968
$
75,622
Software revenue
64,130
63,057
58,912
Total revenue
137,653
139,025
134,534
Operating expenses:
Cost of revenue (exclusive of items shown separately below)
28,430
26,818
28,267
Research and development
11,548
10,549
13,625
Technology operations
24,306
25,843
27,412
Selling and marketing
15,851
16,350
16,296
General and administrative
33,301
33,168
37,796
Severance and restructuring
1,104
573
7,329
Depreciation and accretion
4,148
4,496
3,571
Total operating expenses
118,688
117,797
134,296
Operating income
18,965
21,228
238
Interest income
1,153
1,099
592
Other (expense) income
(86)
(2)
167
Income before income taxes
20,032
22,325
997
(Provision for) benefit from income taxes
(5,067)
(6,659)
20,859
Net income
$
14,965
$
15,666
$
21,856
Basic net income per common share
$
0.74
$
0.79
$
1.11
Diluted net income per common share
$
0.73
$
0.77
$
1.09
Basic weighted average common shares outstanding
20,241,073
19,953,747
19,672,423
Diluted weighted average common shares outstanding
20,565,287
20,343,912
19,991,202
Cash dividends declared per common share
$
1.250
$
1.250
$
1.250
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
SPOK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Net income
$
14,965
$
15,666
$
21,856
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
(20)
145
(321)
Other comprehensive (loss) income
(20)
145
(321)
Comprehensive income
$
14,945
$
15,811
$
21,535
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
SPOK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands, except share amounts)
Outstanding
Common
Shares
Common
Stock
Additional
Paid-In
Capital and
Accumulated Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Stockholders’
Equity
Balance, January 1, 2022
19,481,429
$
2 $
95,703
$
77,005
$
172,710
Net income
—
—
—
21,856
21,856
Issuance of restricted stock under the Equity Plan
355,397
—
—
—
—
Purchase of common stock for tax withholding
(133,026)
—
(1,210)
—
(1,210)
Amortization of stock-based compensation
—
—
3,827
—
3,827
Cash dividends declared
—
—
—
(25,765)
(25,765)
Cumulative translation adjustment
—
—
(321)
—
(321)
Balance, December 31, 2022
19,703,800
$
2 $
97,999
$
73,096
$
171,097
Net income
—
—
—
15,666
15,666
Issuance of common stock under the Employee
Stock Purchase Plan
23,422
—
210
—
210
Issuance of restricted stock under the Equity Plan
409,396
—
—
—
—
Purchase of common stock for tax withholding
(144,516)
—
(1,245)
—
(1,245)
Amortization of stock-based compensation
—
—
4,063
—
4,063
Cash dividends declared
—
—
—
(26,165)
(26,165)
Cumulative translation adjustment
—
—
145
—
145
Balance, December 31, 2023
19,992,102
$
2 $
101,172
$
62,597
$
163,771
Net income
—
—
—
14,965
14,965
Issuance of common stock under the Employee
Stock Purchase Plan
21,755
—
272
—
272
Issuance of restricted stock under the Equity Plan
421,346
—
—
—
—
Purchase of common stock for tax withholding
(151,026)
—
(2,428)
—
(2,428)
Amortization of stock-based compensation
—
—
4,956
—
4,956
Cash dividends declared
—
—
—
(26,770)
(26,770)
Cumulative translation adjustment
—
—
(20)
—
(20)
Balance, December 31, 2024
20,284,177
$
2 $
103,952
$
50,792
$
154,746
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
SPOK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Operating activities:
Net income
$
14,965
$
15,666
$
21,856
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and accretion
4,148
4,496
3,571
Valuation allowance
—
—
(21,850)
Deferred income tax expense
4,573
6,378
903
Stock-based compensation
4,956
4,063
3,827
Provisions for credit losses, service credits and other
846
950
1,777
Changes in assets and liabilities:
Accounts receivable
506
2,580
(1,757)
Prepaid expenses and other assets
(1,845)
(909)
(88)
Net operating lease liabilities
(36)
(1,264)
357
Accounts payable, accrued liabilities and other
(1,184)
(5,217)
(2,258)
Deferred revenue
1,993
(559)
118
Net cash provided by operating activities
28,922
26,184
6,456
Investing activities:
Purchases of property and equipment
(3,209)
(3,417)
(3,776)
Purchase of short-term investments
—
—
(14,967)
Maturity of short-term investments
—
—
30,000
Net cash (used in) provided by investing activities
(3,209)
(3,417)
11,257
Financing activities:
Cash distributions to stockholders
(26,381)
(25,642)
(25,011)
Proceeds from issuance of common stock under the Employee Stock Purchase Plan
272
210
—
Purchase of common stock for tax withholding on vested equity awards
(2,428)
(1,245)
(1,210)
Net cash used in financing activities
(28,537)
(26,677)
(26,221)
Effect of exchange rate on cash and cash equivalents
(20)
145
(321)
Net decrease in cash and cash equivalents
(2,844)
(3,765)
(8,829)
Cash and cash equivalents, beginning of period
31,989
35,754
44,583
Cash and cash equivalents, end of period
$
29,145
$
31,989
$
35,754
Supplemental disclosure:
Income taxes paid
$
571
$
179
$
223
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
SPOK HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Spok, Inc., a wholly owned subsidiary of Spok Holdings, Inc. (NASDAQ: SPOK) ("Spok," the "Company," "we," "us" and "our") is proud to be the
global leader in healthcare communications. We deliver clinical information to care teams when and where it matters most to improve patient
outcomes. Top hospitals rely on Spok products and services to enhance workflows for clinicians, support administrative compliance, and provide
a better experience for patients.
We offer a focused suite of unified clinical communication and collaboration solutions that include call center applications, clinical alerting and
notifications, one-way and advanced two-way wireless messaging services, mobile communications and public safety solutions.
We provide one-way and advanced two-way wireless messaging services, including information services, throughout the United States. These
services are offered on a local, regional and nationwide basis, employing digital networks. One-way messaging consists of numeric and
alphanumeric messaging services. Numeric messaging services enable subscribers to receive messages that are composed entirely of
numbers, such as a phone number, while alphanumeric messages may include numbers and letters, which enable subscribers to receive text
messages. Two-way messaging services enable subscribers to send and receive messages to and from other wireless messaging devices,
including pagers, personal digital assistants and personal computers. We also offer voice mail, personalized greetings, message storage and
retrieval, equipment, maintenance plans and/or equipment loss protection to both one-way and two-way messaging subscribers. These services
are commonly referred to as wireless messaging and information services.
We also develop, sell and support enterprise-wide systems for hospitals and other organizations needing to automate, centralize and
standardize clinical communications. These solutions are used for contact centers, clinical alerting and notification, mobile communications and
messaging and for public safety notifications. These areas of market focus compliment the market focus of our wireless services outlined above.
Basis of Presentation
The accompanying Consolidated Financial Statements include our accounts and the accounts of our wholly owned direct and indirect
subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our Consolidated Financial
Statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and the rules and
regulations of the United States Securities and Exchange Commission (the "SEC"). In management's opinion, the Consolidated Financial
Statements include all adjustments and accruals that are necessary for the presentation of the results of all periods reported herein and all such
adjustments are of a normal, recurring nature.
Amounts shown on the Consolidated Statements of Operations within the operating expense categories include cost of revenue exclusive of;
research and development, technology operations, selling and marketing, general and administrative, severance and restructuring and
depreciation and accretion. These items are shown separately on the Consolidated Statements of Operations within operating expenses to the
extent that they are considered material for the periods presented.
Use of Estimates
The preparation of these Consolidated Financial Statements requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues, expenses and related disclosures. On an ongoing basis, we evaluate estimates and assumptions,
including, but not limited, to those related to the impairment of long-lived assets, goodwill, accounts receivable allowances, revenue recognition,
depreciation expense, asset retirement obligations, and income taxes. We base our estimates on historical experience and various other
assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
Revenue Recognition
The majority of our revenues are derived from short-term contracts related to the sale of wireless paging services and software solutions. Our
arrangements exist primarily with customers in the healthcare market and, to a lesser extent, state and federal governments, as well as large
enterprise businesses.
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Under the typical payment terms of our software contracts, customers will normally pay a material amount of the contract price immediately upon
execution of the contract. The remaining payments are required when the product is delivered, when services begin and, to a lesser extent,
when services are completed. Wireless services are generally billed as incurred on a monthly basis. Our contracts will generally result in billings
in excess of revenue recognized, which we present as deferred revenues on the Consolidated Balance Sheets, primarily due to the receipt of
payment in advance of the product or services we provide. Amounts billed and due from our customers are classified as accounts receivable on
the Consolidated Balance Sheets. At times, we may have contracts which require us to perform work or provide products prior to billing which
will generally result in revenue recognized in excess of billings. This excess is presented as unbilled receivables in the Notes to the Consolidated
Financial Statements. We generally do not have transactions that include a significant financing component (whether payments are made in
advance or in arrears) as our contracts typically take less than 12 months to complete once started. We would not adjust the total consideration
for the effects of a significant financing component if we anticipate, at contract inception, that the period between when we transfer a promised
good or service to a customer and when the customer pays for that good or service will be one year or less.
We account for a contract when: (1) both parties have approved the contract through mutually signed agreements or through other methods
such as purchase orders or master agreements; (2) the rights of the parties have been identified; (3) payment terms have been identified; (4) the
contract has commercial substance; and (5) collectability of consideration is probable. We also evaluate whether two or more contracts should
be combined and accounted for as a single contract. In our evaluation, we consider criteria such as, but not limited to, whether: (1) the contracts
are negotiated as a package with a single commercial objective; (2) the amount of consideration to be paid in one contract is dependent on the
price or performance of another contract; and (3) some or all of the goods or services promised in the contracts are a single performance
obligation. Should we consider contracts related, we would account for those contracts as if they were a single contract. Evaluating whether two
or more contracts should be combined and accounted for as a single contract requires significant judgment. In the aggregate, a decision to
combine a group of contracts could significantly impact the amount of revenue and profit recorded in a given period.
We review each contract to determine whether to account for the various promises as one or more performance obligations. The assessment
and determination of performance obligations for a given contract requires significant judgment. Wireless service contracts are generally
considered to be a single promise and, therefore, accounted for as a single performance obligation. Contracts which include goods or services
related to our software solutions and subscriptions are generally sold with multiple promises, and therefore, will often include multiple
performance obligations. Material performance obligations related to the sale of our software solutions include software licenses, professional
services - projects, professional services - managed services, hardware and maintenance.
More often than not, total consideration will equate to the stated value on the contract taking into consideration any period or term over which
services are to be provided, if applicable. However, we could have contracts in which variable consideration is present. It is common for our
contracts that include wireless services to contain customer penalties if rental pagers are not returned and fees for usage of services in excess
of the contractually allotted amount for a given period. It is also common for our contracts that include professional services to include travel-
related costs. These are costs which we incur in the normal course of delivering professional services and are generally billable to the customer
based on our incurred expenses. These elements of variable consideration are fully constrained when an agreement is initially executed and are
generally not considered estimable until the penalties, fees or costs have been incurred or are otherwise known. We include estimated amounts
in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is resolved. Estimating variable consideration requires significant judgment and our assessment
includes all relevant information that is reasonably available to us including historical, current and forecasted information. We have elected to
exclude from revenue all amounts collected on behalf of third parties, and therefore, items such as sales and use tax are excluded from our
calculation of the total transaction price.
If a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation
proportionately based on the estimated relative standalone selling price ("SSP") of the promised goods or services underlying each performance
obligation. We rarely sell goods or services as readily observable standalone sales, however, if we do, the observable standalone sales are used
to determine the SSP. In most cases, we must estimate the relative SSP which requires significant judgment and estimates. In instances where
SSP is not directly observable, we determine the SSP using information that may include contractually stated prices, market conditions, costs,
renewal contracts, list prices and other observable inputs. A discount is present if the total transaction price is less than the sum of the estimated
SSPs of the goods or services promised in the contract. Discounts are generally allocated proportionately based on the relative SSP of the
identified performance obligations for a given contract.
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Our wireless, professional, maintenance, and subscription services are generally recognized over time due to a customer's simultaneous receipt
and consumption of the benefit as we perform the work. As we transfer control over time, we recognize revenue based on the extent of progress
towards completion of the performance obligation. The selection of the method to measure progress towards completion requires significant
judgment and is based on the nature of the products or services to be provided. Generally, we use the time-elapsed measure of progress for
performance obligations that include wireless, maintenance, professional services - managed services, or subscription services. We believe this
method best depicts the simultaneous transfer and consumption of the benefit based on our performance as these services are generally
considered standby services. For professional services - projects, we leverage an input methodology based on the number of hours worked on a
project versus the total expected hours necessary to complete the project. Revenues are recognized proportionally as hours are incurred. This is
a significant area of judgment as it requires an estimate at completion ("EAC") for each contract. Our initial EAC is primarily based on prior
experience also taking into consideration any specific facts and circumstances for a given contract. As projects progress, the EAC is periodically
updated and reviewed to ensure the timing of revenue recognition is appropriate. The creation, maintenance and review of a project's EAC
requires significant judgment to determine an appropriate number of hours over which the remaining project is expected to be completed.
Our software licenses and hardware are generally recognized at a point in time when we have transferred control to the customer. For software
licenses, revenue is not recognized until the related license(s) has been made available to the customer and the customer can begin to benefit
from its right to use the license(s). Our software licenses represent a right to use Spok’s Intellectual Property ("IP") as it exists at a point in time
at which the license is granted. Many of our software licenses have significant standalone functionality due to their ability to process a
transaction or perform a function or task, and we do not need to maintain those products, once provided to the customer, for value to exist. While
the functionality of IP that we license may substantively change during the license period, customers are not contractually or practically required
to update their license as a result of those changes. In most contracts, transfer of control for software licenses occurs in a short period of time
after a contract has been executed and licenses are made electronically available.
Contracts may be modified to account for changes in a project's scope or other customer requirements. Most of our contract modifications are
for goods or services that are distinct from the existing contract. In these instances, the contract modification would either be recognized as an
entirely new and separate contract or the modification would be treated as if it were a termination of the existing contract and the creation of a
new contract, including all undelivered goods and services under the previous contract. Revenue would be recognized on a prospective basis
and a cumulative catch-up would not be recognized.
Incremental Costs of Obtaining a Contract and Costs to Fulfill a Contract
Our incremental costs primarily relate to sales commissions. We capitalize commissions and proportionally recognize the related expense to
revenue as it is recognized on the underlying performance obligations. Some of these costs may relate to specific future anticipated contracts,
specifically future maintenance renewals, on which we do not pay commensurate sales commissions. We amortize commission costs
proportionally with revenue, thus it is necessary for us to estimate future revenues when there are future anticipated contracts. We estimate
future revenues based on anticipated renewal amounts over an expected useful life (e.g., the period over which we believe the initial sales
commissions relate to future anticipated contracts). The expected useful life is based on a review of our product life cycles, customer upgrade
patterns and the rate at which customers renew maintenance. Commission expense was $3.2 million, $4.5 million and $4.0 million for the years
ended December 31, 2024, 2023 and 2022, respectively. Commission expense is classified within the selling and marketing operating expenses
category.
Leases
Operating lease right-of-use ("ROU") assets and liabilities are recognized at the commencement date based on the present value of lease
payments over the lease term. We have made an accounting policy election not to apply the recognition requirements of ASC 842, "Leases," to
short-term leases. Those leases which have a term of less than 12 months will have lease payments recognized, in our Consolidated
Statements of Operations, on a straight-line basis over the lease term. An optional renewal or termination is not recognized as part of the lease
term unless we determine at lease inception that it is reasonably certain that we will exercise that option. The term reasonably certain is a high
threshold for which pervasive evidence generally does not exist, and therefore, optional renewal periods are generally excluded from our ROU
assets and lease liabilities until they have been exercised. Lease expense is recognized on a straight-line basis over the lease term.
As most of our leases do not provide an implicit rate, we use an estimated incremental borrowing rate in determining the present value of lease
payments. The Company uses a portfolio approach when determining the discount rate applied to its leases. Significant judgment is necessary
when determining a discount rate because we must estimate the discount
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rate based on a number of factors and observable inputs including current market conditions, market yields, government bond rates, credit risk,
and other factors as necessary. The Company must also exercise significant judgment when determining whether an option to renew or
terminate a lease should be included in the lease term. This judgment includes an assessment of all relevant economic factors such as costs
relating to the termination or extension of a lease, importance of the underlying asset to the Company’s operations, and the terms and conditions
of the optional periods in relation to current market rates.
Where we have lease agreements which contain lease and non-lease components, we have elected to make use of the practical expedient to
account for each separate lease component and associated non-lease component as a single lease component. This practical expedient is
applied to our facility and site leases whereby maintenance and utilities charges are included with lease components in the measurement of our
lease liability.
Impairment of Goodwill, Long-Lived Assets, and Intangible Assets Subject to Amortization
Goodwill is not amortized but is evaluated for impairment at least annually, or when events or circumstances suggest a potential impairment has
occurred. We perform this annual impairment test in the fourth quarter of the fiscal year. We evaluate goodwill for impairment between annual
tests if indicators of impairment exist. The impairment test involves comparing the fair value of the reporting unit with its carrying value. An
impairment charge is recognized for the amount that the carrying value exceeds the reporting unit's fair value. For purposes of the goodwill
impairment evaluation, the Company as a whole is considered the reporting unit. The fair value of the reporting unit is estimated under a market-
based approach using the fair value of the Company's common stock. The estimated fair value requires significant judgments, including timing
and appropriateness of the price of common stock used (e.g., point-in-time application, simple moving average, exponential moving average), as
well as application of an estimated control premium. The estimated control premium is based on a review of current and past market information
published by a third-party resource, assessment of the Company's future projected discounted cash flows and other relevant information, if
available.
We recorded no impairment of goodwill for the years ended December 31, 2024, 2023 and 2022.
We are required to evaluate the carrying value of our long-lived assets, amortizable intangible assets and goodwill. Quarterly, we assess
whether circumstances exist which suggest that the carrying value of long-lived assets (asset groups) may not be recoverable. When applicable,
we assess the recoverability of the carrying value of our long-lived assets based on estimated undiscounted cash flows generated from such
assets (asset groups). We determine asset groups based on the lowest level for which identifiable cash flows are largely independent of the
cash flows of other assets and liabilities. In assessing the recoverability of these assets, we forecast cash flows based on various operating
assumptions such as revenue forecasted by product line, in-process research and development cost, and other direct costs. Significant
judgment is required in determining the recoverability, including the timing and appropriateness of the estimated undiscounted cash flows. If the
forecast of undiscounted cash flows does not exceed the carrying value of the long-lived assets, we record an impairment charge to the extent
the carrying value exceeded the fair value of such assets. Significant judgment may be required in estimating fair value dependent on the
availability of objective, market-based, evidence and the input level (e.g., Level 1, 2 or 3) of that evidence.
There were no remaining amortizable intangible assets at December 31, 2024 and 2023.
We did not record any impairment of long-lived assets for the years ended December 31, 2024 and 2023.
Accounts Receivable Allowances
Our two most significant allowance accounts are: an allowance for credit losses and an allowance for service credits. Provisions for these
allowances are recorded on a monthly basis and are included as a component of general and administrative expenses, respectively.
Estimates are used in determining the allowance for credit losses and are based on historical collection experience and current and forecasted
trends, as well as known specific collection risks. In determining these estimates, we review historical write-offs, including comparisons of write-
offs to provisions for credit losses. We compare the ratio of the allowance to gross receivables to historical levels, and monitor amounts collected
and related statistics. We write-off receivables when they are deemed uncollectible. While write-offs of customer accounts have historically been
within our expectations and the provisions established, we cannot guarantee that the future write-off experience will be consistent with historical
experience, which could result in material differences when compared to the allowance for credit losses and related provisions.
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From time to time, we grant service credits for customer retention purposes or when there is an adjustment in the scope of work. The allowance
for service credits related provisions are based on historical credit percentages, current credit and aging trends, historical actual payment trends
and actual credit experience. We analyze our past credit experience over several time frames. Using this analysis along with current operational
data, including existing experience of credits issued and the time frames in which credits are issued, we establish an appropriate allowance for
service credits. This allowance also reduces accounts receivable for lost and non-returned pagers to the expected realizable amounts and for
free wireless services. While credits issued have been within our expectations and the provisions established, we cannot guarantee that future
credit experience will be consistent with historical experience, which could result in material differences when compared to the allowance for
service credits and maintenance-related provisions.
Property and Equipment
Property and equipment are reported at cost and are depreciated using the straight-line method based on estimated useful lives which range
from one to five years.
Asset Retirement Obligations
We recognize liabilities and corresponding assets for future obligations associated with the retirement of assets. We have paging equipment
assets, principally transmitters, which are located at leased locations. The underlying leases generally require the removal of equipment at the
end of the lease term; therefore, a future obligation exists. Asset retirement costs are reflected in paging equipment assets with depreciation
expense recognized over the estimated lives, which range between one and fifteen years. The asset retirement costs and the corresponding
liabilities that have been recorded to date generally relate to either current plans to consolidate networks or to the removal of assets at a future
terminal date. When an asset retirement obligation arises, the liabilities and corresponding assets are recorded at their present value using a
discounted cash flow approach and the liabilities are accreted using the interest method.
The recognition of an asset retirement obligation requires that management make numerous assumptions regarding such factors as the cost and
timing of deconstruction; the credit-adjusted risk-free rate to be used; inflation rates; and future advances in technology. The fair value of
contractor fees to remove each asset, based on historical trend, is estimated to escalate by 4.6% each year through the terminal date. The total
estimated liability is based on the estimated future value of those costs and the timing of deconstruction.
We believe these estimates are reasonable at the present time, but we can give no assurance that changes in technology, our financial
condition, the economy or other factors would not result in higher or lower asset retirement obligations. Any variations from our estimates would
generally result in a change in the assets and liabilities in equal amounts, and operating results would differ in the future by any difference in
depreciation expense and accretion expense (see Note 5, "Consolidated Financial Statements' Components" and Note 7, "Asset Retirement
Obligations" for additional details).
Income Taxes
We file a consolidated United States federal income tax return and income tax returns in state, local and foreign jurisdictions as required. The
provision for current income taxes is calculated and accrued on income and expenses expected to be included in current year United States and
foreign income tax returns. The provision for current income taxes may also include interest, penalties and an estimated amount reflecting
uncertain tax positions.
Deferred income tax assets and liabilities are calculated based on temporary differences between the financial statement values and the tax
bases of assets and liabilities including net operating loss and tax credit carryforwards at the enacted tax rates expected to apply to taxable
income when taxes are actually paid or recovered. Changes in deferred income tax assets and liabilities are included as a component of
deferred income tax expense. Deferred income tax assets represent amounts available to reduce future income taxes payable. We assess the
recoverability of our deferred income tax assets, which represent the tax benefits of future tax deductions, based on available positive and
negative evidence and by considering the adequacy of future taxable income from all sources, including prudent and feasible tax planning
strategies. This assessment is required to determine whether, based on all available evidence, it is "more likely than not" (meaning a probability
of greater than 50%) that all or some portion of our deferred income tax assets will be realized in future periods. We provide a valuation
allowance when we consider it "more likely than not" that a deferred income tax asset will not be fully recovered. The assessment of our deferred
income tax assets requires significant judgment. We reduced the valuation allowance by $21.9 million, as of December 31, 2022, based on the
assessment completed, utilizing our annual long-range planning and forecasting updates. The Company maintained a valuation allowance of
$2.3 million related to federal foreign tax credits and certain state net operating losses and credits as the Company does not believe current
projections of future taxable income will be sufficient to utilize those tax assets and credits prior to expiration.
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Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such
positions fail to meet the "more likely than not" threshold based on the technical merits of the positions. We assess whether previously
unrecognized tax benefits may be recognized when the tax position is (1) more likely than not of being sustained based on its technical merits,
(2) effectively settled through examination, negotiation or litigation, or (3) settled through actual expiration of the relevant tax statutes. The
assessment of an uncertain tax position requires significant judgment. We had no uncertain tax positions for the periods ended December 31,
2024 and 2023 (see Note 9, "Income Taxes" for additional details).
Research and Development
In accordance with ASC 985-20, Software to be Sold, Leased, or Marketed, certain software development costs are charged to operations and
expensed as incurred until technological feasibility has been established. Material costs incurred after technological feasibility is established and
before the product is ready for general release are capitalized and amortized on a straight-line basis over the estimated remaining economic life
of the product or the ratio of current revenues to total projected product revenues, whichever is greater. To date, the time between technological
feasibility and general release to the public has been extremely short and consequently expenses available for capitalization have been
immaterial. Accordingly, all research and developments costs incurred to date, accounted for in accordance with ASC 985-20, have been
expensed as incurred.
Shipping and Handling Costs
We incur shipping and handling costs to send and receive messaging devices and other equipment to/from our customers. Amounts billed to
customers related to shipping and handling are classified as revenue and the Company's shipping and handling costs are classified as cost of
revenue. These costs are expensed as incurred.
Advertising Expenses
Advertising costs are charged to operations when incurred. Advertising costs are classified as selling and marketing expenses. Advertising
expenses were $0.7 million for both the years ended December 31, 2024 and 2023 and $1.0 million for the year ended December 31, 2022.
Stock-Based Compensation
We account for share-based payments to employees, including restricted stock units ("RSUs"), restricted common stock ("restricted stock") and
the option to purchase common stock under the Employee Stock Purchase Plan ("ESPP"), based on their fair value and the estimated number of
shares we expect will vest based on the performance metrics associated with the award, if applicable. Fair value for RSUs and restricted stock is
measured based on the closing fair market value of the Company's common stock on the date of grant. Fair value for ESPP is measured using
the Black-Scholes model for each offering period based on the offer date. Compensation expense is recognized on a straight-line basis over the
requisite service period. Forfeitures and withdrawals are accounted for on an as incurred basis.
Changes in our estimates of the expected attainment of performance targets are reflected in the amount of compensation expense that we
recognize for the related instruments during the interim reporting period when the change in estimate is determined and may cause the amount
of compensation expense that we record for each period to vary. Further information regarding stock-based compensation can be found in Note
8, "Stockholders' Equity."
Concentrations of Credit Risk
Our financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash, cash equivalents, short-term
receivables and accounts receivable. While our cash and cash equivalents are managed by reputable financial institutions, deposits at these
institutions and funds may, at times, exceed federally insured limits. Management believes that these financial institutions and funds are
financially sound and, accordingly, that minimal credit risk exists.
Accounts receivable are typically unsecured and are derived from revenue earned from customers across different geographic locations,
primarily within the United States. We perform ongoing credit evaluations of our customers, and generally do not require collateral. We maintain
an allowance for estimated credit losses. Our bad debt expenses were $0.3 million for both the years ended December 31, 2024 and 2023 and
$1.2 million for the year ended December 2022. In the event that accounts receivable collection cycles deteriorate, our operating results and
financial position could be adversely affected. No customer represented 10% or more of total revenue or accounts receivable during the years
ended December 31, 2024, 2023 and 2022.
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Sales and Use Taxes
Sales and use taxes imposed on the ultimate consumer are excluded from revenue where we are required by law or regulation to act as
collection agent for the taxing jurisdiction.
Fair Value Measurements and Financial Instruments
We account for certain assets and liabilities at fair value. We categorize each of our fair value measurements in one of the following three levels
based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
•
Level 1: Inputs are based upon unadjusted quoted prices for identical instruments in active markets.
•
Level 2: Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments
in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are
corroborated by other observable market data.
•
Level 3: Unobservable inputs that cannot be corroborated by observable market data and typically reflect management's estimates of
assumptions that market participants would use in pricing the asset or liability.
We consider all highly liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents.
Those investments with an original maturity of greater than three months and less than one year are classified as short-term investments. Cash
and cash equivalents consist primarily of cash on deposit with banks and investments in money market funds.
Financial instruments including cash and cash equivalents, accounts receivable and accounts payable all have fair values that approximate their
carrying values at December 31, 2024 and 2023 due to their short maturities.
Earnings Per Common Share
The calculation of earnings per common share is based on the weighted-average number of common shares outstanding during the applicable
period. The calculation for diluted earnings per common share recognizes the effect of all potentially dilutive common shares that were
outstanding during the respective periods, unless the impact would be anti-dilutive. Further information regarding earnings per common share
can be found in Note 8, "Stockholders' Equity."
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NOTE 2 - RECENT ACCOUNTING STANDARDS
Recently adopted accounting pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, "Segment
Reporting (Topic 280): Improvements to Reportable Segment Disclosures". This ASU updates reportable segment disclosure requirements by
requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”)
and included within segment profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and
an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how
to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years
beginning after December 15, 2024. We adopted the ASU for the year ending December 31, 2024, which required additional disclosures but did
not otherwise impact our Consolidated Financial Statements. Refer to Note 13, "Segment Information" for the inclusion of the new required
disclosures. The amendments for interim periods will be adopted in our fiscal year beginning on January 1, 2025.
Recently issued accounting pronouncements not yet adopted
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which expands the
disclosure requirements for income taxes, specifically related to the rate reconciliation and the income taxes paid. The update is effective for
fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the potential effect that the updated
standard will have on our Consolidated Financial Statement disclosures.
In November 2024, the FASB issued ASU 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures
(Subtopic 220-40): Disaggregation of Income Statement Expenses," requiring public entities to disclose additional information about specific
expense categories in the notes to the financial statements. This update is effective for fiscal years beginning after December 15, 2026, and for
interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact the
update will have on our Consolidated Financial Statement disclosures.
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NOTE 3 - REVENUE, DEFERRED REVENUE AND PREPAID COMMISSIONS
Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the
consideration we expect to be entitled to in exchange for those goods or services.
The following table presents our revenues disaggregated by revenue type:
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Revenue:
Paging revenue
$
70,958
$
73,135
$
73,323
Product and other revenue
2,565
2,833
2,299
Wireless revenue
$
73,523
$
75,968
$
75,622
License
$
7,648
$
8,721
$
7,202
Professional services - projects
14,616
13,305
11,584
Professional services - managed services
3,259
1,389
981
Hardware
1,382
2,675
2,211
Operations revenue
26,905
26,090
21,978
Maintenance
37,225
36,967
36,934
Software revenue
$
64,130
$
63,057
$
58,912
Total revenue
$
137,653
$
139,025
$
134,534
The Company is currently structured as a single operating (and reportable) segment, a clinical communication and collaboration business. Sales
are assigned to subsidiaries based on the geographic location of the customer at the signing of a contract. The United States was the only
country that accounted for more than 10% of the Company’s total revenue for the years ended December 31, 2024, 2023 and 2022. Revenue
generated in the United States and internationally consisted of the following for the periods stated:
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Revenue:
United States
$
134,998
$
135,804
$
130,380
International
2,655
3,221
4,154
Total revenue
$
137,653
$
139,025
$
134,534
Deferred Revenues
Our deferred revenues represent payments made to, or due from, customers in advance of our performance. Changes in the balance of total
deferred revenue during the year ended December 31, 2024, are as follows:
(Dollars in thousands)
December 31, 2023
Additions
Revenue Recognized
December 31, 2024
Deferred Revenue
$
26,946
$
65,575
$
(63,582)
$
28,939
During the year ended December 31, 2024, the Company recognized $23.1 million of revenue related to amounts deferred as of December 31,
2023.
F-16
Table of Contents
Prepaid Commissions
Our prepaid commissions represent payments made to employees in advance of our performance on the related underlying contracts. These
costs have been incurred directly in relation to obtaining a contract. As such, these costs are amortized over the estimated period of benefit.
Changes in the balance of total prepaid commissions during the year ended December 31, 2024, are as follows:
(Dollars in thousands)
December 31, 2023
Additions
Commissions Recognized
December 31, 2024
Prepaid Commissions
$
2,285
$
4,235
$
(3,198)
$
3,322
Prepaid commissions are included within prepaid expenses in the Consolidated Balance Sheets and commissions expense is included within
Selling and marketing on the Consolidated Statements of Operations.
Remaining Performance Obligations
The balance of consideration allocated to remaining performance obligations at December 31, 2024 was $62.4 million, which excludes $5.6
million of additional transaction value that was deemed cancellable by the customer without significant penalty. We expect to recognize
approximately $36.4 million of our remaining performance obligations over the next 12 months, with the remaining balance recognized thereafter.
NOTE 4 - LEASES
We have operating lease arrangements for corporate offices, cellular towers, storage units and small building spaces. The building space is used
to house infrastructure, such as transmitters, antennae and other various equipment for the Company’s wireless paging services. For leases with
a term of 12 months or less, renewal terms are generally of an evergreen nature (either month-to-month or year-to-year). For leases with a term
greater than 12 months, renewal terms are generally explicit and provide for one to five optional renewals consistent with the initial term. Many of
our leases, with the exception of those for our corporate offices, include options to terminate the lease within one year. Variable lease payments,
residual value guarantees or purchase options are not generally present in these leases.
In September 2023, we exercised an early termination option for the lease of our corporate headquarters in Alexandria, Virginia. Upon exercising
the option, the lease term was reduced by two years, with a revised end date of September 30, 2024. As a result of the early termination, the
Company paid a one-time termination fee of $0.7 million, reflected in our cash balance as of December 31, 2023. A reduction of $1.3 million was
made to right-of-use assets, and a corresponding reduction of $2.0 million was made to non-current operating lease liabilities.
Lease costs are included in Technology Operations and General and Administrative expenses on the Consolidated Statements of Operations.
The following table presents lease costs disaggregated by type:
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Operating lease cost
$
3,860
$
4,572
$
6,063
Short-term lease cost
9,174
9,267
9,916
Total lease cost
$
13,034
$
13,839
$
15,979
The following table presents supplemental cash flow information:
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Cash paid for amounts included in the measurement of
lease liabilities - operating leases
$
4,433
$
5,995
$
5,708
Right-of-use assets obtained in exchange for lease
obligations
$
1,566
$
(60)
$
3,966
F-17
Table of Contents
The following table presents the weighted average remaining lease term and discount rate:
December 31,
(Dollars in thousands)
2024
2023
2022
Weighted-average remaining lease term - operating leases
(in years)
4.30
4.20
5.00
Weighted-average discount rate - operating leases
6.56%
5.84%
4.39%
Maturities of lease liabilities as of December 31, 2024, were as follows:
(Dollars in thousands)
For the Year Ended December
31,
2025
$
2,904
2026
2,464
2027
1,821
2028
1,291
2029
503
Thereafter
990
Total future lease payments
9,973
Imputed interest
(1,200)
Total
$
8,773
NOTE 5 - CONSOLIDATED FINANCIAL STATEMENTS' COMPONENTS
Depreciation and Accretion
Depreciation and accretion consisted of the following for the periods stated:
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Depreciation
Leasehold improvements
$
138
$
87
$
64
Asset retirement costs
(417)
(261)
(702)
Paging and computer equipment
3,435
3,792
3,289
Furniture, fixtures and vehicles
295
222
240
Total depreciation
3,451
3,840
2,891
Accretion
697
656
680
Total depreciation and accretion expense
$
4,148
$
4,496
$
3,571
Accounts Receivable, net
Accounts receivable was recorded net of an allowance of $1.0 million and $1.6 million for the years ended December 31, 2024 and 2023,
respectively. Accounts receivable, net, included $6.4 million and $6.0 million of unbilled receivables for the years ended December 31, 2024 and
2023, respectively. Unbilled receivables are defined as the Company's right to consideration in exchange for goods or services that we have
transferred to the customer but have not yet billed for, generally as a result of contractual billing terms.
F-18
Table of Contents
Property and Equipment, net
Property and equipment, net consisted of the following for the periods stated:
Useful Life
(In Years)
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
Leasehold improvements
lease term
$
2,430
$
2,202
Asset retirement costs
1-15
4,864
3,722
Paging and computer equipment
1-5
83,895
86,332
Furniture, fixtures and vehicles
3-5
2,570
3,129
Total property and equipment
93,759
95,385
Accumulated depreciation
(87,807)
(88,064)
Total property and equipment, net
$
5,952
$
7,321
For purposes of assessing our asset retirement costs, we completed a review of the estimated useful life of our transmitter assets during the
fourth quarter of 2024 (that are part of paging and computer equipment). This review was based on the results of our long-range planning and
network rationalization process and indicated that the expected useful life of the last tranche of the transmitter assets was no longer appropriate.
As a result of that review, the expected useful life of the final tranche of transmitter assets was extended. This change resulted in a revision of
the expected future depreciation expense for the transmitter assets and an immaterial impact on the Consolidated Financial Statements
beginning in 2025. We believe these estimates remain reasonable at the present time, but we can give no assurance that changes in technology,
customer usage patterns, our financial condition, the economy or other factors would not result in changes to our transmitter decommissioning
plans. Any further variations from our estimates could result in a change in the expected useful lives of the underlying transmitter assets and
operating results could differ in the future by any difference in depreciation expense. The extension of the depreciable life was accounted for as a
change in accounting estimate.
NOTE 6 - GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
For purposes of the goodwill impairment assessment, the Company as a whole is considered the reporting unit. The fair value of the reporting
unit is estimated under a market-based approach using the fair value of the Company's common stock. The estimated fair value requires
significant judgments, including the timing and appropriateness of the price of common stock used (e.g., point-in-time application, simple moving
average, exponential moving average), as well as application of an estimated control premium. There are a number of judgmental factors that
are incorporated into our assessment to establish an estimated control premium, including the review of current and past market information
published by a third-party resource, assessment of the Company's future projected discounted cash flows and other relevant information if
available. While a formal impairment assessment is performed annually, the Company monitors its business environment for potential triggering
events on a quarterly basis.
As of December 31, 2024, we had goodwill of $99.2 million, which includes accumulated impairment losses of $33.9 million. There was no
change in goodwill as compared to December 31, 2023.
Intangible Assets, Net
Intangible assets related primarily to customer relationships with an original gross carrying amount of $25.0 million, that were being amortized
over a period of 10 years and became fully amortized during the quarter ended March 31, 2021. As of December 31, 2024, we had no remaining
amortizable intangible assets. There was no change as compared to December 31, 2023.
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Table of Contents
NOTE 7 - ASSET RETIREMENT OBLIGATIONS
The components of the changes in the asset retirement obligation liabilities for the periods stated were as follows:
(Dollars in thousands)
Short-Term Portion
Long-Term Portion
Total
Balance as of December 31, 2022
$
243
$
7,237
$
7,480
Accretion
(4)
660
656
Amounts paid
(243)
—
(243)
Reductions
(33)
(463)
(496)
Reclassifications
243
(243)
—
Balance as of December 31, 2023
206
7,191
7,397
Accretion
589
108
697
Amounts paid
(462)
—
(462)
Reductions
287
(1,425)
(1,138)
Reclassifications
(71)
71
—
Balance as of December 31, 2024
$
549
$
5,945
$
6,494
Additions and reductions other than accretion, reclassifications and amounts paid primarily relate to changes in estimates of the underlying
liability, specifically related to updates in estimated costs to remove a transmitter and the estimated timing of removal. Estimated removal costs
and timing refinements due to ongoing network rationalization activities are expected to accrete to a total liability of $12.6 million.
Additional information regarding asset retirement costs and accretion expense can be found in Note 5, "Consolidated Financial Statements'
Components."
NOTE 8 - STOCKHOLDERS' EQUITY
General
Our authorized capital stock consists of 75 million shares of common stock, par value $0.0001 per share, and 25 million shares of preferred
stock, par value $0.0001 per share.
At December 31, 2024 and 2023, we had no stock options outstanding.
At December 31, 2024 and 2023, there were 20,284,177 and 19,992,102 shares of common stock outstanding, respectively, and no shares of
preferred stock were outstanding.
Dividends
For the years ended December 31, 2024, 2023 and 2022, our Board of Directors declared cash dividends of $1.25 per share of our outstanding
common stock. Dividends declared that relate to unvested RSUs and unvested shares of restricted stock are accrued for and paid when the
applicable vesting conditions are met. Accrued cash dividends on forfeited RSUs and restricted stock are also forfeited. Cash dividends paid as
disclosed in the Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 included previously declared
cash dividends on vested RSUs and on shares of vested restricted stock issued to non-executive members of our Board of Directors.
On February 26, 2025, the Board of Directors declared a regular quarterly cash dividend of $0.3125 per share of common stock, with a record
date of March 14, 2025 and a payment date of March 31, 2025. This cash dividend of approximately $6.4 million is expected to be paid from
available cash on hand.
Common Stock Repurchase Program
In February 2022, our Board of Directors authorized the repurchase of up to $10.0 million of our common stock. This repurchase authority allows
us, at management’s discretion, to selectively repurchase shares of our common stock from time to time in the open market depending upon
market price and other factors.
F-20
Table of Contents
The Company did not repurchase any of its common stock during 2024, 2023 or 2022.
Net Income per Common Share
Basic net income per common share is computed on the basis of the weighted average common shares outstanding. Diluted net income per
common share is computed on the basis of the weighted average common shares outstanding plus the effect of all potentially dilutive common
shares, including unvested and outstanding equity awards. The components of basic and diluted net income per common share were as follows
for the periods stated:
For the Year Ended December 31,
(In thousands, except for share and per share amounts)
2024
2023
2022
Numerator:
Net income
$
14,965
$
15,666
$
21,856
Denominator:
Basic weighted average common shares outstanding
20,241,073
19,953,747
19,672,423
Diluted weighted average common shares outstanding
20,565,287
20,343,912
19,991,202
Basic net income per common share
$
0.74
$
0.79
$
1.11
Diluted net income per common share
$
0.73
$
0.77
$
1.09
Share-Based Compensation Plans
On April 29, 2020, our Board of Directors adopted the Spok Holdings, Inc. 2020 Equity Incentive Award Plan (the “Equity Plan”) that our
stockholders subsequently approved on July 28, 2020. At July 28, 2020, a total of 1,699,950 shares of common stock had been reserved for
issuance under the Equity Plan.
On April 10, 2023, our Board of Directors adopted an amendment and restatement of the Equity Plan to increase the number of shares available
for issuance by 1,000,000 shares that our stockholders subsequently approved on July 25, 2023. At July 25, 2023, a total of 1,268,444 shares of
common stock had been reserved for issuance under the Equity Plan.
Awards under the Equity Plan may be in the form of stock options, restricted common stock, RSUs, performance awards, dividend equivalents,
stock payment awards, deferred stock, deferred stock units ("DSUs"), stock appreciation rights or other stock or cash-based awards.
Restricted stock awards generally vest one year from the date of grant. Related dividends accumulate during the vesting period and are paid at
the time of vesting.
Contingent RSUs generally vest over a three-year performance period upon successful completion of the performance objectives. Non-
contingent RSUs generally vest in thirds, annually, over a three-year period. Dividend equivalent rights generally accompany each RSU award
and those rights accumulate and vest along with the underlying RSU.
Dividend equivalent rights generally accompany each DSU award and are paid to participants in cash on the Company's applicable dividend
payment date whether the DSU is vested or unvested. The dividend equivalent right associated with a DSU continues until delivery of the
underlying shares of common stock is made.
Payment of the underlying shares of common stock occurs at the earliest of a participant's separation from service, disability, death, or a change
in control.
F-21
Table of Contents
The following table summarizes the activities under the Equity Plan from January 1, 2022 through December 31, 2024:
Activity
Total equity securities available at January 1, 2022
990,129
Less: RSU, DSU and restricted stock awarded to eligible employees, net of forfeitures
(307,077)
Total equity securities available at December 31, 2022
683,052
Plus: Additional shares available for issuance under the Equity Plan
1,000,000
Less: RSU, DSU and restricted stock awarded to eligible employees, net of forfeitures
(407,348)
Total equity securities available at December 31, 2023
1,275,704
Less: RSU, DSU and restricted stock awarded to eligible employees, net of forfeitures
(313,660)
Total equity securities available at December 31, 2024
962,044
The following table details activities with respect to outstanding RSUs, DSUs, and restricted stock under the Equity Plan for the year ended
December 31, 2024:
Shares
Weighted-Average Grant Date
Fair Value per Share
Unvested at January 1, 2024
1,035,268
$
9.12
Granted
317,704
15.46
Vested
(420,406)
10.15
Forfeited
(4,044)
11.13
Unvested at December 31, 2024
928,522
$
10.81
Of the 928,522 unvested RSUs, DSUs and restricted stock outstanding at December 31, 2024, 491,734 RSUs include contingent performance
requirements for vesting purposes. At December 31, 2024, there was $3.3 million of unrecognized net compensation cost related to RSUs and
restricted stock, which is expected to be recognized over a weighted average period of 1.5 years.
During the years ended December 31, 2023 and 2022, the Company granted 471,272 and 464,572 RSUs, respectively, with a weighted-average
grant date fair value of $8.46 and $8.63 per share, respectively. The fair value of RSUs that vested was $6.7 million, $3.4 million and $3.8 million
for the years ended December 31, 2024, 2023 and 2022, respectively, based on the closing price of the Company's common stock at the vesting
date.
Employee Stock Purchase Plan
In 2016, our Board of Directors adopted the ESPP that our stockholders subsequently approved on July 25, 2016. A total of 250,000 shares of
common stock were reserved for issuance under this plan.
The ESPP allows employees to purchase shares of common stock at a discounted rate, subject to plan limitations. Under the ESPP, eligible
participants can voluntarily elect to have contributions withheld from their pay for the duration of an offering period, subject to the ESPP limits. At
the end of an offering period, contributions will be used to purchase the Company's common stock at a discount to the market price based on the
first or last day of the offering period, whichever is lower.
Participants are required to hold common stock for a minimum period of two years from the grant date. Participants will begin earning dividends
on shares after the purchase date. Each offering period will generally last for no longer than six months. Once an offering period begins,
participants cannot adjust their withholding amount. If a participant chooses to withdraw, any previously withheld funds will be returned to the
participant, with no stock purchased, and that participant will be eligible to participate in the ESPP at the next offering period. If the participant
terminates employment with the Company during the offering period, all contributions will be returned to the employee and no stock will be
purchased.
The Company uses the Black-Scholes model to calculate the fair value of each offering period on the offer date. The Black-Scholes model
requires the use of estimates for the expected term, the expected volatility of the underlying common stock over the expected term, the risk-free
interest rate and the expected dividend payment.
F-22
Table of Contents
For the year ended December 31, 2024, 21,755 shares of the Company's stock were purchased for a total price of $272 thousand, as compared
to 23,422 shares purchased for the year ended December 31, 2023, for a total price of $210 thousand.
The following table summarizes the activities under the ESPP from January 1, 2022, through December 31, 2024:
Activity
Total ESPP equity securities available at January 1, 2022
133,184
Less: common stock purchased by eligible employees
—
Total ESPP equity securities available at January 1, 2023
133,184
Less: common stock purchased by eligible employees
(23,422)
Total ESPP equity securities available at January 1, 2024
109,762
Less: common stock purchased by eligible employees
(21,755)
Total ESPP equity securities available at December 31, 2024
88,007
Amounts withheld from participants are classified as a liability on the Consolidated Balance Sheets until funds are used to purchase shares. This
liability amount is immaterial to the Consolidated Financial Statements.
Stock-Based Compensation Expense
Compensation expense associated with common stock, RSUs and restricted stock was recognized based on the grant date fair value of the
instruments, over the instruments’ vesting period. The following table reflects stock-based compensation expense for the periods stated:
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Performance-based RSUs
$
2,140
$
1,809
$
1,559
Time-based RSUs and restricted stock
2,728
2,192
2,260
ESPP
88
62
8
Total stock-based compensation
$
4,956
$
4,063
$
3,827
F-23
Table of Contents
NOTE 9 - INCOME TAXES
The significant components of our provision for (benefit from) income taxes attributable to current operations for the periods stated were as
follows:
For the Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Income before income taxes
$
20,032
$
22,325
$
997
Current:
Federal tax
$
—
$
—
$
—
State tax
460
299
38
Foreign tax
34
(17)
50
Total current
494
282
88
Deferred:
Federal tax
4,047
5,099
(20,642)
State tax
522
1,010
25
Foreign tax
4
268
(330)
Total deferred
4,573
6,377
(20,947)
Provision for (benefit from) income taxes
$
5,067
$
6,659
$
(20,859)
Foreign income before income tax (benefit) expense is immaterial to consolidated income before income tax expense. The following table
summarizes the principal elements of the difference between the United States federal statutory rate of 21% and our effective tax rate for the
years ended December 31, 2024, 2023 and 2022:
(Dollars in thousands)
2024
2023
2022
Income before income taxes
$
20,032
$
22,325
$
997
Income taxes computed at the federal statutory rate
$
4,207
21.0 % $
4,688
21.0 % $
209
21.0 %
State income taxes, net of federal benefit
886
4.4 %
1,343
6.0 %
121
12.1 %
Change in valuation allowance
—
— %
—
— %
(21,850)
(2,191.6)%
Research and development and other tax credits
—
— %
—
— %
(88)
(8.8)%
Excess executive compensation
609
3.0 %
405
1.8 %
231
23.1 %
Other
(635)
(3.2)%
223
0.9 %
518
52.0 %
Provision for (benefit from) income taxes
$
5,067
25.3 % $
6,659
29.8 % $
(20,859)
(2,092.2)%
The anticipated effective income tax rate is expected to continue to differ from the federal statutory rate primarily due to the effect of state income
taxes and permanent differences between book and taxable income. The earnings of non-United States subsidiaries are deemed to be
indefinitely reinvested in non-United States operations.
F-24
Table of Contents
The components of deferred income tax assets at December 31, 2024 and 2023 were as follows:
December 31,
(Dollars in thousands)
2024
2023
Capitalized research and development costs
$
11,494
$
12,706
Net operating loss carryforward
19,722
22,959
Property and equipment
3,521
3,445
Accrued liabilities, reserves and other expenses
2,361
2,781
Research and development credits
6,430
6,430
Tax credits
681
681
Stock-based compensation
1,862
1,733
Operating lease liabilities
2,243
2,831
Other
339
167
Gross deferred income tax assets
48,653
53,733
Deferred income tax liabilities:
Intangible assets
(2,319)
(2,299)
Right-of-use assets
(2,109)
(2,688)
Prepaid and other expenses
(211)
(158)
Gross deferred income tax liabilities
(4,639)
(5,145)
Net deferred income tax assets
44,014
48,588
Valuation allowance
(2,328)
(2,328)
Total deferred income tax assets
$
41,686
$
46,260
Net Operating Losses and Tax Credits
As of December 31, 2024, we had approximately $85.2 million of federal net operating losses available to offset future taxable income, of which
approximately $40.2 million were with expiration dates between 2027 through 2030 and $45.0 million that were indefinite-lived.
As of December 31, 2024, we had approximately $34.6 million of state net operating losses available to offset future taxable income, of which
approximately $26.0 million were with expiration dates between 2026 through 2043 and $8.6 million that were indefinite-lived.
As of December 31, 2024, we had approximately $6.4 million of research and development tax credit carryforwards that expire in varying
amounts with expiration dates between 2030 through 2041.
Valuation Allowance
We assess the recoverability of our deferred income tax assets, which represent the tax benefits of future tax deductions, based on available
positive and negative evidence, and by considering the adequacy of future taxable income from all sources, including prudent and feasible tax
planning strategies. This assessment is required to determine whether, based on all available evidence, it is "more likely than not" (meaning a
probability of greater than 50%) that all or some portion of the deferred income tax assets will be realized in future periods.
Prior to 2022, the cumulative loss incurred by the Company over the prior three-year period, constituted a piece of objective negative evidence
which limited our ability to consider other subjective evidence. In 2022, due to the completion of restructuring efforts and our expected return to
profitability (as indicated by income generated before income taxes in 2022), we eliminated costs that had resulted in our cumulative loss over
the prior three-year period, that are not present in our current operating posture or future forecasts. As a result, we determined the negative
evidence presented by a cumulative loss position to be weighted less in our assessment compared to positive evidence from our historical core
operating results and future projections. Additionally, we considered there to be lower forecast uncertainty as a result of our new strategy and
lessening impacts of the COVID-19 pandemic, such that we believe that positive evidence from our projections of future profitability to be
weighted more heavily in our assessment of the recoverability of our deferred income tax assets. Based on the assessment completed, utilizing
our annual long-range planning and forecasting updates, traditionally completed in the fourth quarter of each year, we reduced the valuation
allowance by $21.9 million during the year ended December 31, 2022.
F-25
Table of Contents
The Company maintained a valuation allowance of $2.3 million as of December 31, 2024 and 2023 related to federal foreign tax credits and
certain state net operating losses and state tax credits, as the Company does not believe current projections of future taxable income will be
sufficient to utilize those tax assets and credits prior to expiration.
Income Tax Audits
On February 14, 2025, an ongoing federal audit covering fiscal year 2021 was completed. There was no impact on our Consolidated Financial
Statements as a result of the completion of the federal audit. The 2022 and 2023 federal and state income tax returns are within the statute of
limitations (“SOL”) and are not currently under examination by any federal and state tax authority. The federal SOL generally expire three years
following the filing of the return or in some cases three years following the utilization or expiration of net operating loss carry forwards.
We operate in all states and the District of Columbia and are subject to various state income and franchise tax audits. The states’ SOL varies
from three to four years from the later of the due date of the return or the date filed. We usually file our federal and all state and local income tax
returns on or before October 15 of the following year; therefore, the SOL for those states with a three-year SOL is open for calendar years
ending 2021 through 2023, and for the four-year SOL states, the SOL is open for years ending from 2020 through 2023.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Contractual Obligations
We had no significant commitments and contractual obligations as of December 31, 2024.
Other Commitments
We have various LOCs outstanding with multiple state agencies which are considered to be immaterial to the Consolidated Financial
Statements. The LOCs typically have one to three-year contract requirements and contain automatic renewal terms.
Loss Contingencies
The Company evaluates contingencies on an ongoing basis and establishes loss provisions for matters in which losses are probable and the
amount of loss can be reasonably estimated. As part of this evaluation, no loss contingencies were identified for the years ended December 31,
2024, 2023 and 2022.
Legal Contingencies
We are involved, from time to time, in lawsuits arising in the normal course of business. We believe the potential outcomes from these lawsuits
will not have a material adverse impact on our financial position or results of operations.
Operating Leases
We have operating leases for office and transmitter locations. Substantially all of these leases have lease terms ranging from one month to five
years. We continue to review our office and transmitter locations, and intend to replace, reduce or consolidate leases, where possible.
Future minimum lease payments under non-cancelable operating leases at December 31, 2024, were as follows:
(Dollars in thousands)
Operating Leases
For the Year Ended December 31,
2025
$
3,479
2026
2,464
2027
1,821
2028
1,291
2029
503
Thereafter
990
Total
$
10,548
These leases typically include renewal options and escalation clauses. Where material, we recognize rent expense on a straight-line basis over
the lease period.
F-26
Table of Contents
Total rent expense under operating leases for the years ended December 31, 2024, 2023 and 2022 was approximately $13.0 million,
$13.8 million and $16.0 million, respectively.
NOTE 11 - EMPLOYEE BENEFIT PLANS
The Company has a savings plan in the United States, the Spok Holdings, Inc. Savings and Retirement Plan, which qualifies under
Section 401(k) of the Internal Revenue Code. Participating United States employees may elect to contribute a percentage of their wages, subject
to certain limitations. Matching contributions under the savings plan were approximately $1.2 million for the years ended December 31, 2024,
2023 and 2022.
NOTE 12 - RELATED PARTIES
A member of our Board of Directors, who was appointed at the beginning of 2020, serves as Chief Information Officer for an entity that is also a
customer of the Company. For the years ended December 31, 2024, 2023 and 2022, we recognized revenues of $1.4 million, $0.7 million and
$0.6 million, respectively, related to contracts from the entity at which the individual is employed.
NOTE 13 - SEGMENT INFORMATION
FASB ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined
as components of a public entity about which separate financial information is available that is evaluated regularly by the chief operating decision
maker (“CODM”), in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer. We identify our
business as a single segment, clinical communications and collaboration solutions, which includes operating revenues from our wireless and
software solutions.
The accounting policies of the clinical communications and collaboration solutions segment is the same as those described in the summary of
significant accounting policies disclosed in Note 1, “Organization and Significant Accounting Policies.” The CODM evaluates the performance of
the clinical communications and collaboration segment based on net income that is also reported on the Consolidated Statements of Operations
as consolidated net income.
Significant expenses within net income, include cost of revenue, research and development, technology operations, selling and marketing, and
general and administrative expenses, which are each separately presented on the Company’s Consolidated Statements of Operations. Other
segment items within net income include interest and other income, net, and income tax expense.
The measure of segment assets is reported on the Consolidated Balance Sheets as total consolidated assets. Depreciation and accretion details
are tabulated in Note 5, "Consolidated Financial Statements' Components." An immaterial amount of long-lived assets were held outside of the
United States for the years ended December 31, 2024 and 2023.
The principal category we use to disaggregate revenues is the nature of our products and services as presented in Note 3, "Revenue, Deferred
Revenue and Prepaid Commissions." All of our revenues are derived from external customers. The table summarizing the disaggregation of the
revenue by geography is disclosed in Note 3, "Revenue, Deferred Revenue and Prepaid Commissions."
F-27
Table of Contents
SCHEDULE II
SPOK HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
Allowance for Credit Losses, Service Credits and Other
Balance at the
Beginning of
the Period
Charged to
Operations
Write-offs
Balance at the
End of the
Period
(Dollars in thousands)
Year ended December 31, 2024
$
1,590
$
238
$
(832)
$
996
Year ended December 31, 2023
$
1,808
$
481
$
(699)
$
1,590
Year ended December 31, 2022
$
1,442
$
1,268
$
(902)
$
1,808
F-28
Table of Contents
EXHIBIT INDEX
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
File No.
Exhibit
Filing Date
Filed/Furnished
Herewith
3.1
Amended and Restated Certificate of Incorporation
8-K
001-32358
3.1
7/8/2014
3.2
Fourth Amended and Restated Bylaws of Spok
Holdings, Inc dated October 26,2022.
8-K
001-32358
3.1
10/28/2022
3.3
Certificate of Designations of Series A Junior
Participating Preferred Stock of Spok Holdings, Inc.
8-K
001-32358
3.1
9/3/2021
4.1*
Specimen of common stock certificate, par value
$0.0001 per share
S-4/A
333-115769
4.1
10/6/2004
4.2
Description of securities registered under Section 12 of
the Securities Exchange Act of 1934
10-K
001-32358
4.3
2/17/2022
10.1
Form of Indemnification Agreement for executive officers
of Spok, Holding Inc.
10-Q
001-32358
10.1
10/25/2018
10.2*
Form of Director’s Indemnification Agreement
10-Q
001-32358
10.24
10/30/2008
10.3†
NEO Severance and Change in Control Document
10-Q
001-32358
10.2
4/27/2017
10.4†
Form of Executive Severance and Change in Control
Agreement
8-K
001-32358
10.1
8/16/2023
10.5†
Spok Holdings, Inc. Severance Pay Plan and Summary
Plan Description (For certain C-Level, not including
CEO) (amended and restated)
10-K
001-32358
10.18
3/2/2017
10.6†
Spok Holdings, Inc. Amended and Restated 2020 Equity
Incentive Award Plan
DEF 14A
001-32358
A
4/28/2023
10.7†
Restricted Stock Unit Grant Notice for the Spok
Holdings, Inc. 2020 Equity Incentive Award Plan
10-K
001-32358
10.21
2/18/2021
10.8†
Spok Holdings, Inc. 2018 Long-Term Incentive Plan
10-K
001-32358
10.12
2/18/2021
10.9†
Exhibits to Spok Holdings, Inc., 2018 Long-Term
Incentive Plan for the 2022-2024 performance period
Filed
10.10†
Spok Holdings, Inc. 2021 Short-Term Incentive Plan
10-K
001-32358
10.16
2/18/2021
10.11†
Spok Holdings, Inc. 2022 Short-Term Incentive Plan
10-K
001-32358
10.15
2/17/2022
10.12†
Spok Holdings, Inc. 2023 Short-Term Incentive Plan
10-K
001-32358
10.15
2/23/2023
10.13†
Spok Holdings, Inc. 2024 Short-Term Incentive Plan
10-K
001-32358
10.13
2/22/2024
10.14†
Spok Holdings, Inc. 2025 Short-Term Incentive Plan
Filed
10.15†
Employment Agreement, between Spok Holdings, Inc.
and Vince D. Kelly, dated as of January 1, 2019
8-K
001-32358
10.1
1/4/2019
10.16†
Employment Agreement Extension Letter, by and
between Spok Holdings, Inc. and Vincent D. Kelly, dated
as of February 16, 2022
10-Q
001-32358
10.1
4/28/2022
10.17†
Employment Agreement Extension Letter, by and
between Spok Holdings, Inc. and Vincent D. Kelly, dated
as of October 10, 2023
8-K
001-32358
10.1
10/10/2023
10.18
Voting and Standstill Agreement, dated March 20, 2022,
by and between Spok Holdings, Inc., Braeside
Investments, LLC, Braeside Capital, L.P. and Braeside
Capital II, L.P.
8-K
001-32358
10.1
3/21/2022
10.19
Spok Holdings, Inc. Deferred Compensation Plan For
Non-Employee Directors
10-K
001-32358
10.23
2/18/2021
19.1
Employee Policy Statement on Inside Information and
Securities Trading
Filed
Table of Contents
19.2
Policy Statement on Inside Information and Securities
Trading for Officers, Directors and Specified Employees
Filed
21.1
Subsidiaries of the Company
10-K
001-32358
21
3/1/2018
23.1
Consent of Grant Thornton LLP
Filed
31.1
Certification of President and Chief Executive Officer
pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended
Filed
31.2
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)/Rule 15d-14(a) of the Securities
Exchange Act of 1934, as amended
Filed
32.1
Certification of President and Chief Executive Officer
pursuant to 18 U.S.C. Section 1350
Furnished
32.2
Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350
Furnished
97.1
Spok Holdings, Inc. Policy for Recovery of Erroneously
Awarded Compensation
10-K
001-32358
10.13
2/22/2024
101.INS
Inline XBRL Instance Document - the instance does not
appear in the Interactive Data File because its XBRL tags
are embedded within the Inline XBRL document**
Filed
101.SCH
Inline XBRL Taxonomy Extension Schema**
Filed
101.CAL
Inline XBRL Taxonomy Extension Calculation**
Filed
101.DEF
Inline XBRL Taxonomy Extension Definition**
Filed
101.LAB
Inline XBRL Taxonomy Extension Labels**
Filed
101.PRE
Inline XBRL Taxonomy Extension Presentation**
Filed
104
Cover Page Interactive Data File (the cover page XBRL
tags are embedded within the Inline XBRL document and
included in Exhibit 101)
Filed
* On July 8, 2014, the Company changed its name from USA Mobility, Inc. to Spok Holdings, Inc.
** The financial information contained in these XBRL documents is unaudited.
† Denotes a management contract or compensatory plan or arrangement.
Exhibit 10.09
LONG TERM INCENTIVE PLAN
PERFORMANCE PERIOD 2022-2024
Exhibit 10.14
Spok Holdings, Inc.
2025 Short-Term IncenƟve Plan
(EffecƟve January 1, 2025)
I.
EffecƟve Date. The 2025 Short-Term IncenƟve Plan (the “Plan”) for Spok Holdings, Inc., was adopted by the CompensaƟon CommiƩee
of the Board of Directors (the “CompensaƟon CommiƩee”) of Spok Holdings, Inc., (the “Parent” or the “Company”), a Delaware
corporaƟon for the employees of Spok, Inc., a Delaware corporaƟon and an indirect wholly-owned subsidiary of the Parent (“Spok”) on
December 1, 2023. The Plan is effecƟve as of January 1, 2025 and supersedes and replaces all former management short-term
incenƟve plans, including the Spok Holdings, Inc., 2024 Short-Term IncenƟve Plan.
II.
Purpose. The Plan is designed to aƩract, moƟvate, retain and reward key employees for their performance during the calendar year,
from January 1 through December 31, 2025 (the “Performance Period”). The Plan rewards key employees by allowing them to receive
cash bonuses based on how well the Company performs against the performance objecƟves as set forth by the CompensaƟon
CommiƩee and, as may be adjusted by the CompensaƟon CommiƩee in the event of a Change of Control or other corporate
reorganizaƟon, merger, similar transacƟon, to take into account extraordinary events or as the CompensaƟon CommiƩee determines is
in the best interests of the Company. In order for bonuses to be earned, the Company must meet the quanƟtaƟve Performance
ObjecƟves by December 31, 2025. Performance ObjecƟves are based solely on the consolidated performance of the Company. For
clarity, Performance ObjecƟves and the aƩainment thereof does not include revenue or expenses related to acquisiƟons or due
diligence expenses occurring aŌer the EffecƟve Date of this Plan except as directed by the CompensaƟon CommiƩee.
III. Eligibility. ParƟcipaƟon in the Plan is limited to those key employees who are selected for parƟcipaƟon in the Plan by the CompensaƟon
CommiƩee, in its sole discreƟon (each such individual, a “ParƟcipant”). Individuals selected by the CompensaƟon CommiƩee to
parƟcipate as of January 1, 2025 are listed on Exhibit B. Newly hired or promoted employees, or employees who otherwise become
eligible to parƟcipate, who are selected to parƟcipate in the Plan aŌer January 1, 2025 but before October 1, 2025 will parƟcipate in
the Plan on a prorated basis based on the number of days worked during the performance period aŌer becoming bonus eligible.
Employees who are newly hired or promoted on or aŌer October 1, 2025 will not be eligible to parƟcipate in the Plan.
IV. Target Bonus. The target bonus for each ParƟcipant is based on a percentage of the ParƟcipant’s annual (or prorated, if applicable)
salary as of January 1, 2025 (or date of hire or promoƟon to an eligible posiƟon, if later) or a flat amount as designated. The applicable
percentage or amount is determined by the CompensaƟon CommiƩee with respect to execuƟves earning $250,000 or more and by the
CEO for other management and need not be idenƟcal among ParƟcipants. The earned bonus may be greater than or less than the
target bonus depending on the level at which the Performance ObjecƟves are aƩained.
V.
Exhibit 10.14
Payment of Earned Bonus.
a.
Except as provided herein, each earned bonus under the Plan will be calculated based on the aƩainment of the Performance
ObjecƟves and will be paid in a lump sum (subject to any required withholding for income and employment taxes) aŌer the
2025 annual audit of the Parent’s consolidated financial statement has been completed and the Parent’s 2025 Annual Report
on Form 10-K has been filed with the SecuriƟes and Exchange Commission but in no event later than December 31, 2025.
b.
If the ParƟcipant involuntarily Separates from Service without Cause or due to disability or dies prior to December 31, 2025, he
or she will be eligible to receive a prorated bonus provided that the Company is on track to aƩain the Performance ObjecƟves
as reasonably determined by the CompensaƟon CommiƩee and provided further that, in the event ParƟcipant involuntarily
Separates from Service without Cause, he or she has executed a release, any waiƟng period in connecƟon with such release has
expired, he or she has not exercised any rights to revoke the release and he or she has followed any other applicable and
customary terminaƟon procedures, as determined by the Parent in its sole discreƟon. The bonus will be prorated to the date of
ParƟcipant’s SeparaƟon from Service or death, calculated as follows: one-hundred percent (100%) of a ParƟcipant’s target
bonus will be mulƟplied by a fracƟon, the numerator of which is the number of days the ParƟcipant was conƟnuously providing
services to the Company from January 1, 2025 through the date immediately prior to the ParƟcipant’s SeparaƟon from Service
or death, and the denominator of which is 365 days. Prorated bonuses will be paid to the ParƟcipant, or in the event of
ParƟcipant’s death, the ParƟcipant’s estate, on the sixty-fiŌh (65th) day following the date of ParƟcipant’s SeparaƟon from
Service or death.
i. For purposes of the Plan, “SeparaƟon from Service” shall have the meaning provided in the Treasury RegulaƟons under
secƟon 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and “Separates from Service” shall have
a consistent meaning. Unless otherwise defined in an employment agreement between the ParƟcipant and the Parent
or the Company, for purposes of the Plan, “Cause” means (i) dishonesty of a material nature that relates to the
performance of services for the Company by ParƟcipants; (ii) criminal conduct (other than minor infracƟons and traffic
violaƟons) that relates to the performance of services for the Company by ParƟcipant; (iii) the ParƟcipant’s willfully
breaching or failing to perform his or her duƟes as an employee of the Company (other than any such failure resulƟng
from the ParƟcipant having a disability (as defined herein)), within a reasonable period of Ɵme aŌer a wriƩen demand
for substanƟal performance is delivered to the ParƟcipant by the CompensaƟon CommiƩee, which demand specifically
idenƟfies the manner in which the CompensaƟon CommiƩee believes that the ParƟcipant has not substanƟally
performed his duƟes; or (iv) the willful engaging by the ParƟcipant in conduct that is demonstrably and materially
injurious to the Parent, Company or an Affiliate, monetarily or otherwise. No act or failure to act on the ParƟcipant’s
part shall be deemed “willful” unless done, or omiƩed to be done; by the ParƟcipant not in good faith and without
reasonable belief that such acƟon or omission was in the reasonable best interests of the Parent, Company and
Affiliates. For this purpose, “disability” means a condiƟon or circumstance such that the ParƟcipant has become totally
and permanently disabled as defined or described in the Parent’s long term disability benefit plan applicable to
execuƟve officers as in effect at the Ɵme the ParƟcipant incurs a disability.
c.
Exhibit 10.14
Change in Control. Notwithstanding anything herein to the contrary, upon the occurrence of a Change in Control (as defined in the
Company’s 2020 Equity IncenƟve Award Plan) prior to the end of the Performance Period, each ParƟcipant who remains
employed with the Company through the date of the Change in Control will receive a cash payment equal to his or her target
bonus amount mulƟplied by a fracƟon, the numerator of which is the number of days elapsed from January 1, 2025 (or if later
the date of the ParƟcipant’s commencement of employment) through the date of the Change in Control and the denominator
of which is 365. Following payment of such amount, this Plan will terminate, and no further payments will be made hereunder,
unless otherwise determined by the CompensaƟon CommiƩee.
d.
Notwithstanding anything to the contrary in this Plan, no payments contemplated by this Plan will be paid during the six-month
period following a ParƟcipant’s SeparaƟon from Service unless the Company determines, in its good faith judgment, that
paying such amounts at the Ɵme indicated in paragraph b above would not cause the ParƟcipant to incur an addiƟonal tax
under Code secƟon 409A (a)(2)(B)(i), in which case the bonus payment shall be paid in a lump sum on the first day of the
seventh month following the ParƟcipant’s SeparaƟon from Service.
VI. Forfeiture. Any ParƟcipant whose employment is terminated for Cause or who voluntarily Separates from Service prior to the date
bonuses are paid shall forfeit any right to receive a bonus award.
VII. Clawback. The CompensaƟon CommiƩee of the Board may require forfeiture or a clawback of any incenƟve compensaƟon awarded or
paid under this Plan in excess of the compensaƟon actually earned based on a restatement of the Company’s financial statements as
filed with the SecuriƟes and Exchange Commission for the period covered by this Plan.
VIII.Administrator. The CompensaƟon CommiƩee shall administer the Plan in accordance with its terms, and shall have full discreƟonary
power and authority to construe and interpret the Plan; to prescribe, amend and rescind rules and regulaƟons, terms, and noƟces
hereunder; and to make all other determinaƟons necessary or advisable in its discreƟon for the administraƟon of the Plan. Any acƟons
of the CompensaƟon CommiƩee with respect to the Plan shall be conclusive and binding upon all persons interested in the Plan. The
CompensaƟon CommiƩee, in its sole discreƟon and on such terms and condiƟons as it may provide, may delegate all or part of its
authority and powers under the Plan to one or more directors and/or officers of the Parent or the Company.
IX. Amendment; TerminaƟon. The CompensaƟon CommiƩee, in its sole discreƟon, without prior noƟce to ParƟcipants, may amend or
terminate the Plan, or any part thereof, including the Performance ObjecƟves as described in SecƟon II, at any Ɵme and for any reason,
to the extent such acƟon will not cause adverse tax consequences to a parƟcipant under Code secƟon 409A. Any amendment or
terminaƟon must be in wriƟng and shall be communicated to all ParƟcipants. No award may be granted during any period of
suspension or aŌer terminaƟon of the Plan.
X.
Miscellaneous.
a.
No Rights as Employee. Nothing contained in this Plan or any documents relaƟng to this Plan shall (a) confer on a ParƟcipant
any right to conƟnue in the employ of the Company; (b) consƟtute any contract or agreement of employment; or (c) interfere
in any way with the Company’s right to terminate the ParƟcipant’s employment at any Ɵme, with or without Cause.
b.
Tax Withholding. To the extent required by applicable federal, state, local or foreign law, the Company shall withhold all
applicable taxes (including, but not limited to, the ParƟcipant’s FICA and Social Security obligaƟons) from any bonus payment.
Exhibit 10.14
c.
Transferability. A ParƟcipant may not sell, assign, transfer or encumber any of his or her rights under the Plan.
d.
Unsecured General Creditor. ParƟcipants (or their beneficiary) may seek to enforce any rights or claims for payment under the
Plan solely as an unsecured general creditor of the Parent or Spok.
e.
Successors. This Plan shall be binding upon and inure to the benefit of the Parent, Company and any successor to the Company
and the ParƟcipant’s heirs, executors, administrators and legal representaƟves.
f.
Code SecƟon 409A. The Plan is intended to be a nonqualified deferred compensaƟon plan within the meaning of Code secƟon
409A and shall be interpreted to meet the requirements of Code secƟon 409A. To the extent that any provision of the Plan
would cause a conflict with the requirements of Code secƟon 409A, or would cause the administraƟon of the Plan to fail to
saƟsfy Code secƟon 409A, such provision shall be deemed null and void to the extent permiƩed by applicable law. Nothing
herein shall be construed as a guarantee of any parƟcular tax treatment to a ParƟcipant.
g.
Governing Law. All quesƟons pertaining to the validity, construcƟon and administraƟon of the Plan shall be determined in
accordance with the laws of the State of Delaware, without regard to conflicts of law provisions.
h.
IntegraƟon. This document and each exhibit hereto represent the enƟre agreement and understanding between the Company
and the ParƟcipants and supersede any and all prior agreements or understandings, whether oral or wriƩen, with the Company
relaƟng to the subject maƩer covered by this Plan.
i.
Severability. In case any provision of this Plan shall be held illegal or invalid, such illegality or invalidity shall be construed and
enforced as if said illegal or invalid provision had never been inserted herein and shall not affect the remaining provisions of
this Plan, but shall be fully severable, and the Plan shall be construed and enforced as if any such illegal or invalid provision
were not a part hereof.
[ExecuƟon page follows]
Exhibit 10.14
IN WITNESS WHEREOF, Spok Holdings, Inc., by its duly authorized officer acƟng in accordance with a resoluƟon duly adopted by
the CompensaƟon CommiƩee of the Board of Directors of Spok Holdings, Inc., has executed this Plan for the benefit of employees of Spok
Holdings, Inc. and subsidiaries, effecƟve as of January 1, 2025.
SPOK HOLDINGS, INC.
Vincent D. Kelly, President & CEO
Exhibit 10.14
Exhibit A
Performance ObjecƟves
Exhibit 10.14
Exhibit B
ParƟcipants
Employee Name
Job Title
KELLY, VINCENT D.
CEO
Wallace, Michael W.
President & COO
Woods Keisling, Sharon
Corp Secretary &Treasurer
Czop, Michael
VP, Technology Ops
Hall, Lisa R.
VP, HR & Admin
Ling, Michael J.
VP, Maintenance Revenue
Rice, Calvin C.
Chief Financial Officer
Tindle, Timothy E.
Chief Information Officer
Wax, Jonathan
VP, Sales
Grandfield, Michele
VP, Customer Support
Hodes, Matthew
VP, PSG
Patel, Jinita
Controller
Smith, Jill
VP, Marketing
McNamee, David
VP, Software Engineering
Exhibit 19.1
EMPLOYEE POLICY STATEMENT ON INSIDE INFORMATION AND SECURITIES TRADING
Because of your posiƟon with Spok Holdings, Inc. or its subsidiaries (the “Company”, “we” or “us”), you are likely to learn or have
access to material informaƟon about the Company and other enƟƟes, including other public companies, with whom we do
business (collecƟvely, our “Business Acquaintances”) that is not generally available to the public. Material non-public informaƟon
is commonly referred to as "inside informaƟon”. Because of your relaƟonship with the Company, you have certain responsibiliƟes
and obligaƟons under the federal securiƟes laws regarding using such material non-public informaƟon in trading the Company’s
and our Business Acquaintances’ securiƟes, commonly referred to as “insider trading”. This Policy Statement is intended to
explain these responsibiliƟes and obligaƟons.
SUMMARY
1.
You may not buy or sell the securiƟes of the Company or any Business Acquaintance on the basis of material non-
public informaƟon concerning the Company or any Business Acquaintance.
2.
You may not aid or abet another person’s insider trading. That is, you may not “Ɵp” other persons by providing
them with material non-public informaƟon concerning the Company or any Business Acquaintance.
MATERIAL NON-PUBLIC INFORMATION
A. What is Material Non-Public InformaƟon?
1.
“Non-public informaƟon” is informaƟon about the Company or its Business Acquaintances that has not been
disclosed or made generally available to the public. InformaƟon with respect to the Company or a Business Acquaintance
is generally no longer “non-public” when it has been disclosed by the Company or such Business Acquaintance or by third
parƟes in a filing with the SEC or a press release or other statement to the general public. For example, the operaƟng
results of the Company for a parƟcular quarter, prior to an earnings release for such quarter, would be non-public
informaƟon. AŌer an earnings release for such quarter, the operaƟng results of the Company would no longer be non-
public to the extent disclosed in such earning release. But more detailed informaƟon than is actually disclosed in such
earnings release, for example, the various components of a revenue line item which are not detailed in the earnings
release may sƟll consƟtute non-public informaƟon.
2.
InformaƟon with respect to the Company or a Business Acquaintance is generally considered “material” if: (i) a
reasonable investor would likely find the informaƟon important to his or her decision to buy or sell the Company’s or such
Business Acquaintance’s securiƟes or (ii) such informaƟon, if made public, would likely affect the market price of the
Company’s or such Business Acquaintance’s securiƟes. There is no bright-line rule; instead materiality depends on
Exhibit 19.1
the facts and circumstances at hand. Some examples of material informaƟon include the following: a potenƟal merger or
acquisiƟon involving the Company; the Company’s operaƟng results; pending regulatory acƟon against the Company; the
public or private sale of addiƟonal securiƟes of the Company; a tender offer by the Company for another company’s
securiƟes; and major management changes at the Company.
3.
Generally, when in doubt about whether certain informaƟon is material, you should presume such informaƟon is in
fact material. If you are unsure whether informaƟon of which you are aware is material or non-public, you should contact
the office of the Chief Financial Officer to discuss the maƩer further before trading in the Company’s or a Business
Acquaintance's securiƟes.
B. ProhibiƟon on Insider Trading.
The federal securiƟes laws prohibit any person who obtains material non-public informaƟon relaƟng to the Company, or any
Business Acquaintance, and has a duty not to disclose it, such as an employee of the Company, from using such informaƟon
in trading the securiƟes of the Company or such Business Acquaintance. The raƟonale for this prohibiƟon is that the integrity
of the securiƟes markets would be seriously undermined if the deck were stacked against persons not privy to such
informaƟon. Furthermore, failure to maintain the confidenƟality of material non-public informaƟon about the Company and
our Business Acquaintances could greatly harm our ability to conduct business.
C. Safeguarding Material Non-public InformaƟon.
During the period that material informaƟon relaƟng to the Company or its business is unavailable to the general public, it
must be kept in strict confidence. Accordingly, such informaƟon should be discussed only with persons who have a “need to
know”, and should be confined to as small a group as possible. The utmost care and circumspecƟon must be exercised at all
Ɵmes. Thus, conversaƟons in public places, such as elevators, restaurants and airplanes, should be limited to maƩers that do
not involve informaƟon of a sensiƟve or confidenƟal nature.
To assure that Company confidences are protected to the maximum extent possible, no individuals other than specifically
authorized personnel may release material informaƟon to the public, or respond to inquiries from the media, analysts or
others outside the Company. Any such inquiries should be directed to the office of the Chief Financial Officer or any
spokesperson designated by the office of the Chief Financial Officer.
D. RestricƟons on Trading and Tipping.
In light of its responsibiliƟes under the federal securiƟes laws, the Company has adopted the following policies regarding your
trading in securiƟes:
1.
No employees of the Company may buy or sell securiƟes of the Company or any other publicly traded company
while in possession of material non-public informaƟon. Neither you nor any person affiliated with you (which generally
includes family members and business enƟƟes in which you are a director, officer or large shareholder) may buy or sell
securiƟes or engage in any other acƟon to take advantage of, or pass on to others, non-public material informaƟon. This
prohibiƟon extends not only to transacƟons involving Company securiƟes, but also transacƟons involving securiƟes of any
Business Acquaintance.
2. No employees of the Company may communicate material non-public informaƟon to other
Exhibit 19.1
persons generally prior to its public disclosure and disseminaƟon. Persons at the Company who come into possession of
material non-public informaƟon must not communicate that informaƟon prior to its public disclosure and disseminaƟon
to other persons who are not legally bound to keep such informaƟon confidenƟal. There is, therefore, a need to exercise
care when speaking with even other Company personnel who do not have a “need to know,” and when communicaƟng
with family, friends and other persons not associated with the Company. To avoid even the appearance of impropriety,
you should avoid making recommendaƟons about buying or selling securiƟes of the Company or any Business
Acquaintance.
PENALTIES AND COMPLIANCE
The penalƟes imposed under the federal securiƟes laws for engaging in insider trading are severe:
(i)
Liability of up to three (3) Ɵmes the profit gained or loss avoided from any insider trading transacƟon;
(ii) Fines of up to $1,000,000 per violaƟon;
(iii) Criminal penalƟes, including prison terms up to ten (10) years; and
(iv)
Civil liabiliƟes including enforcement acƟon by the SEC and the potenƟal for being barred for life from working in
the securiƟes industry or in certain posiƟons at public companies.
Given the extremely serious nature of any violaƟon of insider trading provisions and the repercussions for both you and
the Company, any person found to have commiƩed such a violaƟon will be subject to immediate dismissal and liable to
the Company for any damages sustained by the Company as a result of such person’s involvement in insider trading.
All recipients of this memorandum must sign, date and return the aƩached cerƟficate staƟng that they received the
Company’s policy regarding insider trading and the preservaƟon of confidenƟal informaƟon and that they agree to
comply with such policy. All Company personnel are bound by the policy, regardless of whether they sign the cerƟficate.
Exhibit 19.1
CERTIFICATION
The undersigned hereby cerƟfies that he/she has read and understands, and agrees to comply with, the Employee Policy
Statement on Inside InformaƟon and SecuriƟes Trading, a copy of which was distributed with this cerƟficate.
Signature:
Name (print):
Department & Title:
Date:
Return the signed copy of this form to: Spok, Inc.
AƩn: Human Resources/Records 6850 Versar Drive Suite 420
Springfield, VA 22151
Or fax a copy to: 703-269-6801
AƩn: Records
Exhibit 19.2
POLICY STATEMENT ON INSIDE INFORMATION AND SECURITIES TRADING
Because of your posiƟon as an officer and/or director of Spok Holdings, Inc. or its subsidiaries (the “Company”, “we” or “us”), you
are likely to learn or have access to material informaƟon about the Company and other enƟƟes, including other public
companies, with whom we do business (collecƟvely, our “Business Acquaintances”) that is not generally available to the public.
Accordingly, you may buy and sell the Company's securiƟes only as set forth in this Policy Statement. Material non-public
informaƟon is commonly referred to as "inside informaƟon". Because of your relaƟonship with the Company, you have certain
responsibiliƟes and obligaƟons under the federal securiƟes laws regarding using such material non-public informaƟon in trading
the Company’s and our Business Acquaintances’ securiƟes, commonly referred to as “insider trading”. This Policy Statement is
intended to explain these responsibiliƟes and obligaƟons. The Trading Compliance Officer referred to in this Policy Statement
shall be the Company’s Corporate Secretary, Sharon Woods Keisling, or such other officer of the Company designated from Ɵme
to Ɵme by the Chief ExecuƟve Officer of the Company.
SUMMARY
1. You may not buy or sell the securiƟes of the Company or any Business Acquaintance on the basis of material non-public
informaƟon concerning the Company or any Business Acquaintance.
2. Subject to the restricƟons contained under the heading “Blackout Period and Makeup Trading Provisions” described
below and compliance with SecƟon 1 above, you may buy and sell the
Company's securiƟes only under any of the following circumstances, and subject to the prior approval of the Trading
Compliance Officer and outside counsel:
(i)
during the period (a "PermiƩed Trading Period") of twenty consecuƟve trading days commencing on the third
trading day immediately following any filing by the Company of an annual report on Form 10-K or a quarterly
report on Form 10-Q with the SecuriƟes and Exchange Commission (the “SEC”);
(ii) pursuant to a Rule 10b5-1 trading plan as set forth below.
3. You may not aid or abet another person’s insider trading. That is, you may not “Ɵp” other persons by providing them with
material non-public informaƟon concerning the Company or any Business Acquaintance.
MATERIAL NON-PUBLIC INFORMATION
A. What is Material Non-Public InformaƟon?
1.
“Non-public informaƟon” is informaƟon about the Company or its Business Acquaintances that has not been
disclosed or made generally available to the public. InformaƟon with respect to the Company or a Business Acquaintance
is generally no longer “non-public” when it has been disclosed by the Company or such Business Acquaintance or by third
parƟes in a filing with the SEC or a press release or other statement to the general public. For example, the operaƟng
Exhibit 19.2
results of the Company for a parƟcular quarter, prior to an earnings release for such quarter, would be non-public
informaƟon. AŌer an earnings release for such quarter, the operaƟng results of the Company would no longer be non-
public to the extent disclosed in such earning release. But more detailed informaƟon than is actually disclosed in such
earnings release, for example, the various components of a revenue line item which are not detailed in the earnings
release may sƟll consƟtute non-public informaƟon.
2.
InformaƟon with respect to the Company or a Business Acquaintance is generally considered “material” if: (i) a
reasonable investor would likely find the informaƟon important to his or her decision to buy or sell the Company’s or such
Business Acquaintance’s securiƟes or (ii) such informaƟon, if made public, would likely affect the market price of the
Company’s or such Business Acquaintance’s securiƟes. There is no bright-line rule; instead materiality depends on the
facts and circumstances at hand. Some examples of material informaƟon include the following: a potenƟal merger or
acquisiƟon involving the Company; the Company’s operaƟng results; pending regulatory acƟon against the Company; the
public or private sale of addiƟonal securiƟes of the Company; a tender offer by the Company for another company’s
securiƟes; and major management changes at the Company.
3.
Generally, when in doubt about whether certain informaƟon is material, you should presume such informaƟon is in
fact material. If you are unsure whether informaƟon of which you are aware is material or non-public, you should contact
the Corporate Secretary, Sharon Woods Keisling, to discuss the maƩer further.
B. ProhibiƟon on Insider Trading.
The federal securiƟes laws prohibit any person who obtains material non-public informaƟon relaƟng to the Company, or any
Business Acquaintance, and has a duty not to disclose it, such as an officer or employee of the Company, from using such
informaƟon in trading the securiƟes of the Company or such Business Acquaintance. The raƟonale for this prohibiƟon is that
the integrity of the securiƟes markets would be seriously undermined if the deck were stacked against persons not privy to
such informaƟon. Furthermore, failure to maintain the confidenƟality of material non-public informaƟon about the Company
and our Business Acquaintances could greatly harm our ability to conduct business
C. .Safeguarding Material Non-public InformaƟon.
During the period that material informaƟon relaƟng to the Company or its business is unavailable to the general public, it
must be kept in strict confidence. Accordingly, such informaƟon should be discussed only with persons who have a “need to
know”, and should be confined to as small a group as possible. The utmost care and circumspecƟon must be exercised at all
Ɵmes. Thus, conversaƟons in public places, such as elevators, restaurants and airplanes, should be limited to maƩers that do
not involve informaƟon of a sensiƟve or confidenƟal nature.
To assure that Company confidences are protected to the maximum extent possible, no individuals other
than specifically authorized personnel may release material informaƟon to the public, or respond to inquiries from the
media, analysts or others outside the Company. Any such inquiries should be directed to the the General Counsel or any
spokesperson designated by the Chief ExecuƟve Officer (CEO).
D. RestricƟons on Trading and Tipping
Exhibit 19.2
In light of its responsibiliƟes under the federal securiƟes laws, the Company has adopted the following policies regarding
your trading in securiƟes:
1. Directors, officers and other employees of the Company may not buy or sell securiƟes of the Company or any other
publicly traded company while in possession of material non-public informaƟon. Neither you nor any person affiliated with you
(which generally includes family members and business enƟƟes in which you are a director, officer or large shareholder) may
buy or sell securiƟes or engage in any other acƟon to take advantage of, or pass on to others, non-public material informaƟon.
This prohibiƟon extends not only to transacƟons involving Company securiƟes but also transacƟons involving securiƟes of any
Business Acquaintance.
2. Directors, officers and other specified employees of the Company may trade the Company's securiƟes only (i) during a
PermiƩed Trading Period, subject to the blackout period and makeup trading provisions described below, (ii) in compliance
with the policy set forth in the preceding paragraph and
(iii) aŌer the prior approval of the Trading Compliance Officer and outside counsel. Trading during any other Ɵme period by you
or any person affiliated with you (which generally includes family members and business enƟƟes of which you are a director,
officer or large shareholder) is strictly prohibited. Because someone in your posiƟon is especially likely to receive material
informaƟon about the Company before it is made generally available, confining your trading in the Company's securiƟes to
PermiƩed Trading Periods will help ensure that trading is not based on material informaƟon that is not available to the public.
3. Directors, officers and other employees of the Company may not communicate material non-public informaƟon to
other persons generally prior to its public disclosure and disseminaƟon.
Persons at the Company who come into possession of material non-public informaƟon must not communicate that informaƟon
prior to its public disclosure and disseminaƟon to other persons who are not legally bound to keep such informaƟon
confidenƟal. There is, therefore, a need to exercise care when speaking with even other Company personnel who do not have a
“need to know”, and when communicaƟng with family, friends and other persons not associated with the Company. To avoid
even the appearance of impropriety, you should avoid making recommendaƟons about buying or selling securiƟes of the
Company or any Business Acquaintance.
10B5-1 TRADING PLAN
Notwithstanding the prohibiƟon against insider trading, Rule 10b5-1 and Company policy permit employees to trade in
Company securiƟes, subject to the prior approval of the Corporate Secretary and outside counsel, regardless of their awareness
of inside informaƟon if the transacƟon is made pursuant to a pre-arranged trading plan that was entered into when the
employee was not in possession of material nonpublic informaƟon. Company policy requires trading plans to be wriƩen and to
specify the amount of, date on, and price at which the securiƟes are to be traded or establish a formula for determining such
items. An employee who wishes to enter into a trading plan must submit the trading plan to the Trading Compliance Officer for
his approval prior to the adopƟon or amendment of the trading plan. Trading plans may not be adopted when the employee is
in possession of material nonpublic informaƟon about the Company. An employee may amend or replace his or her trading plan
only during periods when trading is permiƩed in accordance with this Policy.
BLACKOUT PERIOD AND MAKEUP TRADING
Exhibit 19.2
The Company reserves the right to restrict your trading in the Company's securiƟes at any Ɵme and from Ɵme to Ɵme for all or a
porƟon of any PermiƩed Trading Period because of certain developments relaƟng to the Company and the presumed possession
of material non-public informaƟon by you by providing noƟce to you that you may not trade the Company's securiƟes for any or a
porƟon of such PermiƩed Trading Period. Such period of restricƟon is commonly referred to as a "blackout period". Such blackout
period for trading during a PermiƩed Trading Period may be shortened or extended by the Company.
When the developments relaƟng to any such blackout period are first made public by the Company's filing of a current report on
Form 8-K or an amended annual report on Form 10-K or an amended quarterly report on Form 10-Q, you may buy and sell the
Company's securiƟes commencing on the third trading day immediately following any such filing for a period of successive
trading days which shall be of the same duraƟon as the period by which such blackout period shortened the relevant PermiƩed
Trading Period.
PENALTIES AND COMPLIANCE
The penalƟes imposed under the federal securiƟes laws for engaging in insider trading are severe:
(i)
Liability of up to three (3) Ɵmes the profit gained or loss avoided from any insider trading transacƟon;
(ii) Fines of up to $1,000,000 per violaƟon;
(iii) Criminal penalƟes, including prison terms up to ten (10) years; and
(iv)
Civil liabiliƟes including enforcement acƟon by the SEC and the potenƟal for being barred for life from working
in the securiƟes industry or in certain posiƟons at public companies.
Given the extremely serious nature of any violaƟon of insider trading provisions and the repercussions for both you and
the Company, any person found to have commiƩed such a violaƟon will be subject to immediate dismissal and liable to
the Company for any damages sustained by the Company as a result of such person’s involvement in insider trading.
All recipients of this memorandum must sign, date and return the aƩached cerƟficate staƟng that they received the
Company’s policy regarding insider trading and the preservaƟon of confidenƟal informaƟon and that they agree to
comply with such policy. All Company personnel are bound by the policy, regardless of whether they sign the cerƟficate.
Exhibit 19.2
CERTIFICATION
The undersigned hereby cerƟfies that he/she has read and understands, and agrees to comply with, the Policy Statement on
Inside InformaƟon and SecuriƟes Trading, a copy of which was distributed with this cerƟficate.
Signature:
Name (print):
Department & Title:
Date:
Return the signed copy of this form to: Spok, Inc.
AƩn: Human Resources/Records 6850 Versar Center Suite
420
Springfield, VA 22151
Or fax a copy to: 703-269-6801
AƩn: Records
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated February 27, 2025, with respect to the consolidated financial statements and internal control over financial
reporting included in the Annual Report of Spok Holdings, Inc. on Form 10-K for the year ended December 31, 2024. We consent to the
incorporation by reference of said reports in the Registration Statements of Spok Holdings, Inc. on Forms S-8 (File No. 333-182444, File No.
333-212724, File No. 333-240213, and File No. 333-273480).
/s/ GRANT THORNTON LLP
Arlington, Virginia
February 27, 2025
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13A-14(A) OR 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Vincent D. Kelly, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Spok Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 27, 2025
/s/ Vincent D. Kelly
Vincent D. Kelly
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13A-14(A) OR 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Calvin C. Rice, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Spok Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 27, 2025
/s/ Calvin C. Rice
Calvin C. Rice
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Spok Holdings, Inc.
(the “Company”) hereby certifies, to such officer’s knowledge, that:
(i)
the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2024 (the “Report”) fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: February 27, 2025
/s/ Vincent D. Kelly
Vincent D. Kelly
President and Chief Executive Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Spok Holdings, Inc.
(the “Company”) hereby certifies, to such officer’s knowledge, that:
(i)
the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2024 (the “Report”) fully complies with
the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: February 27, 2025
/s/ Calvin C. Rice
Calvin C. Rice
Chief Financial Officer
THIS PAGE INTENTIONALLY LEFT BLANK
Annual Meeting
A formal notice of the meeting is being mailed to
each stockholder. The proxy statement, proxy card,
and 2024 Annual Report on Form 10-K are available
at www.proxyvote.com.
This annual report contains the 2024 Annual
Report on Form 10-K filed with the Securities and
Exchange Commission. Spok Holdings, Inc. will
provide without charge to each stockholder of
record additional copies of the Company’s 2024
Annual Report on Form 10-K. Please send your
request to:
Investor Relations
Spok Holdings, Inc.
3000 Technology Drive, Suite 400
Plano, TX 75074
Investor and Media Information
Inquiries from investors, the financial community,
and news organizations should be directed to
Investor Relations and Corporate Communications
at the address noted above, by calling (800) 611-
8488, or by visiting our website at www.spok.com.
Securities Listing
The common stock of Spok Holdings, Inc., trading
symbol “SPOK,” trades on the NASDAQ National
Market®.
Transfer Agent and Registrar
Computershare
P.O. Box 505000
Louisville, KY 40233
Direct: (781) 575-2725
Toll Free: (877) 498-8865
Hearing Impaired: TDD (800) 952-9245
www.computershare.com/investor
Independent Public Accountants
Grant Thornton LLP
1000 Wilson Boulevard, Suite 1400
Arlington, VA 22209
Corporate Counsel
Latham & Watkins LLP
555 Eleventh Street, NW, Suite 1000
Washington, DC 20004-1304
Board of Directors
Christine M. Cournoyer
Chairperson of the Board, Spok,
Former Chair and Chief Executive Officer,
N-of-One, Inc.
Dr. Bobbie Byrne
&YFDVUJWF7JDF1SFTJEFOUBOE$IJFG*OGPSNBUJPO0GGJDFS,
AdvocatF Health
Randy Hyun
Chief Executive Officer,
CarepathRx LLC
Vincent D. Kelly
President and Chief Executive Officer,
Spok Holdings, Inc.
Brett Shockley
$IBJSBOE$IJFG&YFDVUJWF0GGJDFS,
Journey AI, Inc.
Todd Stein
Co-Investment Manager,
Braeside Investments, LLC
Corporate Officers
Vincent D. Kelly
President and Chief Executive Officer
Michael W. Wallace
Chief Operating Officer, President of Spok, Inc.
Calvin C. Rice
Chief Financial Officer, Chief Accounting Officer
Sharon Woods Keisling
Corporate Secretary and Treasurer
SM
© 2025 Spok, Inc. Spok is a trademark of Spok Holdings, Inc. Spok Care Connect and Spok Mobile are trademarks of Spok, Inc.
Other names and trademarks may be the property of their respective owners.
ABOUT SPOK, INC.
Spok, Inc., a wholly owned subsidiary of Spok Holdings, Inc. (NASDAQ: SPOK), headquartered in Plano, Texas, is proud to
be a global leader in healthcare communications. We deliver clinical information to care teams when and where it matters
most to improve patient outcomes. Top hospitals rely on the Spok Care Connect® platform to enhance workflows for
clinicians and support administrative compliance. Our customers send over 70 million messages each month through their
Spok® solutions. Spok enables smarter, faster clinical communication.
spok.com
Rev: /25
Spok, Inc.
3000 Technology Drive, Suite 400
Plano, TX 75074
Telephone (800) 611-8488
Fax (866) 382-1662
www.spok.com