Spok Holdings, Inc. · NASDAQ:SPOK
Spok — Investor Day (November 2015)
72 slides from Spok's investor day presentation, Nov 3, 2015
Slide 1: Investor Day November 3, 2015
INVESTOR DAY November 3, 2015 Vince Kelly CEO
Slide 2: Safe Harbor Statement
2 SAFE HARBOR STATEMENT This presentation includes forward-looking statements that are subject to risks and uncertainties relating to Spok’s future financial and business performance. Such statements may include estimates of revenue, expenses, and income, as well as other predictive statements or pl
Slide 3: Presenting Today
3 PRESENTING TODAY Vince Kelly Chief Executive Officer Hemant Goel President Tom Saine Chief Information Officer Kyle Gunderson Vice President of Development and Chief Technology Officer Shawn Endsley Chief Financial Officer Brian Edds Vice President of Product Strategy Gary Ash Global Executive Vic
Slide 4: Today's Agenda
4 •Closing •Q&A •Solution Development •Technical Support •Sales •Market Overview •Spok Overview •Our Strategy •Performance •Solution Direction TODAY’S AGENDA VINCE KELLY SHAWN ENDSLEY HEMANT GOEL BRIAN EDDS KYLE GUNDERSON GARY ASH TOM SAINE ALL
Slide 5: Spok Overview
5 SPOK OVERVIEW Public Company Since 2004 Profitable & Debt Free Return Capital to Shareholders Focus on Growth Invest in the Future Deliver smart, reliable communication solutions to help protect the health, well- being, and safety of people around the globe.
Slide 6: Company Values
6 COMPANY VALUES VALUES We put the customer first in everything we do What we do matters: our solutions improve communications in critical situations We are committed to innovation and offering new solutions for future growth We are accountable to each other, to shareholders, and to our customers
Slide 7: The Best Adult and Children's Hospitals Choose Spok
7 THE BEST ADULT AND CHILDREN’S HOSPITALS CHOOSE SPOK Source: U.S. News & World Report’s “Best Hospitals” list 2015-16 5,000 ADULT HOSPITALS SURVEYED 15 QUALIFIED for “HONOR ROLL” ALL USE SPOK SOLUTIONS 184 CHILDREN’S HOSPITALS SURVEYED 12 QUALIFIED for “HONOR ROLL” ALL USE SPOK SOLUTIONS Source: U.
Slide 8: Healthcare: A Key Spok Focus
8 HEALTHCARE: A KEY SPOK FOCUS • Healthcare sector now comprises over 69% of Spok revenue, up from 61% in 2012 • Annual Healthcare Software revenues increased 30.6% from 2012 to 2014 • Healthcare Wireless revenues have remained relatively stable over the last 5 quarters, an indication of the stickin
Slide 9: Why Customers Have Chosen Spok
9 WHY CUSTOMERS HAVE CHOSEN SPOK Banner Health and Spok created a video to highlight ways Spok technology improves staff communication and patient care
Slide 10: 2015 Reflects Successful Execution of Our Strategy
10 2015 REFLECTS SUCCESSFUL EXECUTION OF OUR STRATEGY Capitalized on Our New Global Spok Brand Completed Comprehensive Market Evaluation Reorganized Our Management Team Continued to Make Significant Investments in Key Spok Teams Met/Exceeded Majority of Key Performance Goals Committed a Minimum of $
Slide 11: Long-Range Plan Growth Strategy
11 LONG-RANGE PLAN GROWTH STRATEGY Focused on growth in Unified Communication and Workflow Collaboration Key “post-MU” investment area for health systems focused on accountable care Incumbency is value…Spok serves hundreds of U.S. hospitals Significant whitespace opportunity Building blocks are in p
Slide 12: The Problem: Islands of Information in Healthcare
12 THE PROBLEM: ISLANDS OF INFORMATION IN HEALTHCARE Electronic Health Record (EHR) System PBX System Patient Care and Monitoring Systems Picture Archiving and Communications System (PACS) Patient Flow System Resource Scheduling Patient Portals
Slide 13: The Answer: Integrated Enterprise Communication Solutions
13 THE ANSWER: INTEGRATED ENTERPRISE COMMUNICATION SOLUTIONS Meeting unified communication requirements • Care coordination • Outcomes
Slide 14: Analogy: Remember These 'Indispensable' Systems?
14 ANALOGY: REMEMBER THESE ‘INDISPENSABLE’ SYSTEMS?
Slide 15: Spok Solutions in the Marketplace
15 • Leverage our installed base for innovation • Consolidate, integrate, modernize, and extend solution portfolio into an integrated enterprise solution • End-to-end solutions • Already helping leading organizations solve challenges • Our customers guide our solutions and roadmap • Viewed as a stra
Slide 16: A Word on Paging
16 A WORD ON PAGING Paging Revenue in Q3: 63.6% of Revenue Our Results Reflect Continued Focus on Paging We Expect Paging to Decline but Erosion Has Slowed Paging Integrated With Software; New T5 Many Customers Have Paging and Software Software Is Our Future, But Paging Will Be Around a Long Time
Slide 17: Key Points in Support of Our Strategy
17 KEY POINTS IN SUPPORT OF OUR STRATEGY We are financially strong, with an extensive customer base Product strategy and development have a clear vision and plan Our network and underlying infrastructure are best-in-class Spok is well positioned to provide THE integrated healthcare communications an
Slide 18: Performance
PERFORMANCE Shawn Endsley Chief Financial Officer
Slide 19: 2015 Results to Date
19 2015 RESULTS TO DATE Grow software bookings and revenue Retain wireless subscribers and revenues Deploy capital to stockholders
Slide 20: Grow Our Software Bookings and Revenue: Bookings
20 GROW OUR SOFTWARE BOOKINGS AND REVENUE Software Bookings - Cumulative Milli o n s *The software business was acquired on March 3, 2011. $8.7 $7.0 $8.8 $8.8 $9.0 $16.6 $14.3 $17.4 $19.9 $19.7 $25.1 $23.8 $26.5 $32.4 $28.6 $32.7 $33.2 $35.1 $45.4 $- $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $4
Slide 21: Grow Our Software Bookings and Revenue: Revenue
21 GROW OUR SOFTWARE BOOKINGS AND REVENUE Software Revenue $20.2 $25.4 $32.4 $37.1 $25.5 $26.6 $13.8 $25.9 $27.9 $30.8 $22.8 $25.4 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 2011 2012 2013 2014 2014 2015 Million s Through 3Q TOTAL: $34.0 TOTAL: $51.3 TOTAL: $60.3 TOTAL: $67.9 TOTAL: $48.3 G
Slide 22: Retain Our Wireless Revenue Stream
22 $199.7 $168.4 $149.5 $132.4 $100.7 $90.3 $233.7 $219.7 $209.8 $200.3 $149.0 $142.3 $- $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 2011 2012 2013 2014 3Q14 YTD 3Q15 YTD Wireless Revenue - Actual Consolidated Revenue RETAIN OUR WIRELESS REVENUE STREAM Wireless Revenue Million s Consolidated Revenue Pe
Slide 23: Cumulative Operating Cash Flow: 2004-3Q2015
23 CUMULATIVE OPERATING CASH FLOW: 2004-3Q2015 - Generated significant operating cash flow since inception of the company. - OCF – defined as EBITDA less capital expenses. $85.8 $230.8 $350.2 $456.4 $554.0 $636.1 $708.7 $771.9 $829.3 $879.6 $913.5 $939.0 $0 $100 $200 $300 $400 $500 $600 $700 $800 $9
Slide 24: Cumulative Capital Allocation: 2004-2015
24 CUMULATIVE CAPITAL ALLOCATION: 2004-2015 TOTAL CUMULATIVE FREE CASH: $939.0 $0 $100 $200 $300 $400 $500 Long-term Debt Repayment Distributions to Stockholders Stock Repurchase Acquisitions* Cash Balance 9/30/15 [CELLRANGE], [VALUE] 47%, [VALUE] [CELLRANGE], [VALUE] [CELLRANGE], [VALUE] [CELLRANGE
Slide 25: 2015 Commitment: Return Minimum of $26.0 Million to Stockholders
25 $- $4.0 $8.0 $12.0 $16.0 $20.0 $24.0 $28.0 $11.8 [CELLRANGE] $8.4 2015 COMMITMENT: RETURN MINIMUM OF $26.0 MILLION TO STOCKHOLDERS Amount to Return in 4Q15 Millions Dividends Year-to-Date Stock Repurchases** As of October 31, 2015 *Amount available for share repurchases in 4Q15 is $3.2 million. R
Slide 26: Market Overview
MARKET OVERVIEW Hemant Goel President
Slide 27: The Future of Spok Solutions
THE FUTURE OF Wspok SOLUTIONS
Slide 28: The Headlines
THE HEADLINES = Yes: Healthcare can balance mobility and BYOD a JOHNS HOPKINS with HIPAA Soma implement mobile platforms and BYOD ee Bee THE KANSAS C ITY STAR. — a = eile) news rors susnss 000 SS] Siar ORBENOWT J uy Sign U Actionable Alarm por cana Meaty doh Ha Hopkins Safety a ) Today! USATODAY new
Slide 29: Healthcare Environment
29 HEALTHCARE ENVIRONMENT Rise in healthcare spending as a % of GDP IOM report on quality: “To Err Is Human” Regulatory intervention (HITECH) EMR/EHR adoption Patient engagement and satisfaction Clinician satisfaction and alignment • Value Based Reimbursement • Accountable Care Models • Patient Cent
Slide 30: The Healthcare Communications Factor
30 THE HEALTHCARE COMMUNICATIONS FACTOR 96% of Clinicians: Poor communication is a barrier Rise in healthcare spending as a % of GDP IOM report on quality: “To Err Is Human” Regulatory intervention (HITECH) EMR/EHR adoption Patient engagement and satisfaction Clinician satisfaction and alignment Col
Slide 31: The Mobility Factor
31 THE MOBILITY FACTOR All communications, including healthcare, are becoming more mobile. Healthcare Mobile Communications Opportunity U.S. Evolution to Smartphones SPOK BYOD SURVEY 2015 WHICH TYPES OF MOBILE DEVICES DOES YOUR HOSPITAL SUPPORT? TOP 3 190 230 260 274 80 45 25 16 2014 2016 2018 2020
Slide 32: Healthcare Community Model
32 HEALTHCARE COMMUNITY MODEL GOVERNMENT REGULATION HITECH ANALYTICS • CMS • HCAHPS • NCQA MOVING TO VALUE BASED REIMBURSEMENT EHR CONSOLIDATED HOSPITALS AND/OR ACCOUNTABLE CARE ORGANIZATIONS PATIENT CENTERED MEDICAL HOME Exercise BP Glucose POPULATION HEALTH PATIENT AND FAMILY ENGAGEMENT Laboratori
Slide 33: Healthcare Strategy: Integrated Enterprise Solutions
33 Healthcare Communications and Collaboration Platform Software Solutions Device/ Nurse-Centered Middleware, Other Secure Messaging HEALTHCARE STRATEGY: INTEGRATED ENTERPRISE SOLUTIONS
Slide 34: Spok Solution Vision
34 Notification ● Alerting ● Test Results ● Protocol Response CONTACT AND SCHEDULING APPLICATIONS Analytics Mobile Workflow Services COMMON DATA REPOSITORY C OMMUNI C A TION S COMMUNIC A TION S SPOK SOLUTION VISION
Slide 35: Focus Areas
35 Clinical - Nursing Middleware/ Device Centered Innovation New Solutions Consolidation/ Integration Unified Platform Mobile Secure Messaging FOCUS AREAS
Slide 36: The Spok Care Connect Platform
36 Platform Care Connect CONSOLE Care Connect WEB Care Connect SPEECH Care Connect ALERTING Care Connect MOBILE THE SPOK CARE CONNECT PLATFORM
Slide 37: Public Safety Environment
37 PUBLIC SAFETY ENVIRONMENT Regionalization / Consolidation – State / Regional Text to 9-1-1 – New Way to Contact 9-1-1 Migration to IP – Voice & Radio Hosted / Cloud – State / Regional ESINet
Slide 38: Innovation Incubator
38 INNOVATION INCUBATOR Customers Suggest Ideas to Spok Idea Selection Project Kickoff Iteration Reviews Customer/ Market Feedback Innovation Lab Productization Business Case Review Idea Funding Solution Launch
Slide 39: Solution Direction
SOLUTION DIRECTION Brian Edds Vice President of Product Strategy
Slide 40: Key Trends in Critical Communications
40 KEY TRENDS IN CRITICAL COMMUNICATIONS ENTERPRISE COLLABORATION NEW RULES & REGULATIONS EVENTS & ALARMS APP INTEROPERABILITY FAST DATA
Slide 41: Improving Workflows with Communication Solutions
41 IMPROVING WORKFLOWS WITH COMMUNICATION SOLUTIONS Contact and Scheduling Information STAFF MEMBERS CLINICAL SYSTEMS INTERFACES STAFF MEMBERS SMARTPHONES TABLETS WIRELESS TELEPHONY REMOTE MONITORING DEVICES PAGERS DIGITAL SIGNAGE WHITEBOARDS MODES OF INTEGRATION • Alarms/Events • Messages • Calls N
Slide 42: 2015/16 Solution Lineup
42 2015/16 SOLUTION LINEUP CALL CENTER ALERTING MOBILE PUBLIC SAFETY AMERICAS EMEA & APAC Console, Web ENH Recording ENH Speech, Accounting Console ENH Web ENH Speech Clinical Alerting ENH Campus Notification Secure Texting/Alerting ENH Paging E9-1-1 Call-Taking/Location NG9-1-1 Call-Taking NEW NG9-
Slide 43: Competitive Advantage
43 COMPETITIVE ADVANTAGE Integrated Suite Communication- Driven Workflow Multi-Modal Certifications/ Integrations Enterprise Directory
Slide 44: Solution Development
SOLUTION DEVELOPMENT Kyle Gunderson Vice President of Development and Chief Technology Officer
Slide 45: Delivering the Vision
45 DELIVERING THE VISION Leading Software Development Practice Continuous innovation and improvement Frameworks Technology Talent Workflow-enabled communications
Slide 46: Product Development - Framework for Success
46 PRODUCT DEVELOPMENT - FRAMEWORK FOR SUCCESS GUIDING PRINCIPLES • Focus on quality • Dedicated development teams • Consistent estimation process • Limit work in progress • Technology and automation • Transparency and visibility Predictability Quality Productivity Responsiveness
Slide 47: Innovation in Software Solution Development
47 INNOVATION IN SOFTWARE SOLUTION DEVELOPMENT TOOLS TECHNOLOGY ARCHITECTURE
Slide 48: Software Technology Talent
48 SOFTWARE TECHNOLOGY TALENT Develop and Grow Attract and Retain Partner and Extend Train and Prepare Mobile 1 Web Mobile 3 Clinical 3 Console 1 Mobile 2 Clinical 1 Console 2 Platform 1 Telephony Clinical 2 Platform 2 Development Teams
Slide 49: Software Solution Development
49 SOFTWARE SOLUTION DEVELOPMENT Development Team Effectiveness Software Product Release Software Solution Quality Spok Agile Framework
Slide 50: Technical Support
TECHNICAL SUPPORT Thomas Saine, CISSP Chief Information Officer
Slide 51: Systems Enhancements
51 SYSTEMS ENHANCEMENTS Development, QA, and Performance Testing Systems Well positioned to support existing operations and growth into the future Cloud: CRM, incident management Tools: KM, Idea Management, and CPQ Billing, Operations, and Financial Support System
Slide 52: Security
52 SECURITY HIPAA and PCI compliant Executive-level team Security appliances Continued evaluation and testing of security risks to ensure protected data is secure BCDR plans External Verification HIPAA compliance | PCI testing |American Express Multilayered Security Framework
Slide 53: Information Technology Architecture
53 INFORMATION TECHNOLOGY ARCHITECTURE Internal IT systems ready to meet revenue growth and security requirements Upgraded phone system Implemented RSA 2- level authentication Upgraded data communications Upgrading training and sales demos Conducting SOC2 Type II audit Consolidating server environme
Slide 54: The Power of Paging
THE POWER OF PAGING \@" ” @spok
Slide 55: Paging Architecture: Technology Refresh
55 PAGING ARCHITECTURE: TECHNOLOGY REFRESH Core paging systems operating in efficient and supportable environments DID PHONE NUMBERS CORE WIRELESS MESSAGING ENGINE PAGING TERMINALS & ENCODERS
Slide 56: Sales
SALES Gary Ash Global Executive Vice President of Sales
Slide 57: When Communications Matter, Spok Delivers
57 WHEN COMMUNICATIONS MATTER, SPOK DELIVERS OUR GOAL
Slide 58: Customer Perception of Spok
58 CUSTOMER PERCEPTION OF SPOK LEADER/ EXPERT TRUSTED SERVICE ORIENTED INNOVATIVE
Slide 59: In Their Words
59 IN THEIR WORDS Spok is the best fit for us. It fulfills all of our requirements and quickly delivers messages wherever they need to go—in all the formats and to all the devices we use. We could survive without our EHR for a few hours if we had to, but we don't feel like we could survive even for
Slide 60: Customer Expectations: Clinical Workflow
60 CUSTOMER EXPECTATIONS: CLINICAL WORKFLOW • Clinician communications • Integration • Notifications • Patient-centric alerting • Contextual/alarming info • Alarm fatigue reduction
Slide 61: Customer Expectations: Mobile Enablement
61 CUSTOMER EXPECTATIONS: MOBILE ENABLEMENT • Mobile is the new desktop • Experience of a social platform • Information and alarms • Integrated directory • Data security
Slide 62: Customer Expectations: Public Safety
62 CUSTOMER EXPECTATIONS: PUBLIC SAFETY • Experience delivering mission-critical communications • Next-generation technology • JITC-certified solutions • Integration
Slide 63: Software Sales Opportunity in the U.S.
63 SOFTWARE SALES OPPORTUNITY IN THE U.S. 33.6% Existing Spok Customers 66.4% Opportunity *Source: American Hospital Association, September 2015 (data reflects hospitals which reported bed size) TOTAL U.S. HOSPITALS: 6,119* NEW Software Opportunities 0-199 Beds 200-599 Beds 600+ Beds 4,266 811 78
Slide 64: Software Sales Opportunity in EMEA and APAC
64 SOFTWARE SALES OPPORTUNITY IN EMEA AND APAC EMEA: 6,000+ hospitals APAC: 8,400+ hospitals
Slide 65: Anatomy of a Successful Win
65 ANATOMY OF A SUCCESSFUL WIN Trusted Advisor Status Need, Value, Budget Defined Collaborative Discovery at All Levels Clearly Defined Delivery and Support C-Level Endorsement Reference-ability
Slide 66: A Regional Not-for-Profit Health System
66 A REGIONAL NOT-FOR-PROFIT HEALTH SYSTEM 28 affiliate hospitals, 40,000 employees NEED: safety, quality, efficiency 17 CMIOs involved, CNOs and broad committee $1.1 million purchase: Spok Mobile platform scalable to 40,000 users
Slide 67: 400-Bed Non-Profit in Missouri
67 400-BED NON-PROFIT IN MISSOURI On-call for surgeons led to broader requirements NEED: eliminate paper-based, manual processes CMIO IT Director ED Head $140,000 for web and console
Slide 68: 500+ Beds in Hawaii
68 500+ BEDS IN HAWAII 3,000 employees, 1,200 physicians NEED: secure texting, then console CEO CMIO CIO $121,000 console in phase 1, $180,000 pending
Slide 69: We Win Today and Will Continue to Win
69 WE WIN TODAY AND WILL CONTINUE TO WIN WE SOLVE CRITICAL PROBLEMS: • Collaboration of care • Faster emergency response • Alarm fatigue • Patient and citizen safety WE WILL CONTINUE TO WIN AS WE INNOVATE: • Enhanced clinical workflow solutions • Enhanced mobile platform • Next-generation 9-1-1 offe
Slide 70: Wrap-Up
WRAP-UP Vince Kelly
Slide 71: Spok Is Well Positioned for Future Growth
71 SPOK IS WELL POSITIONED FOR FUTURE GROWTH Highly Leveragable Customer Base Compelling Product Position Resources to Invest Strong Expansion Potential • Potential to expand beyond Unified Communications and into a comprehensive workflow solutions platform: Patient flow/bed tracking RTLS Pati
Slide 72: Questions & Discussion
QUESTIONS & DISCUSSION