Spok Holdings, Inc. · NASDAQ:SPOK
Spok — Investor Day (May 2023)
74 slides from Spok's investor day presentation, May 4, 2023
Slide 1: Investor Day, May 4, 2023
::: Investor Day May 4, 2023
Slide 2: Safe harbor statement
Safe harbor statement Statements contained in this presentation which are not historical fact, such as statements regarding Spok’s future operating and financial performance, and future dividend payments are forward-looking statements for purposes of the safe harbor provisions under the Private Secu
Slide 3: Table of Contents
Table of Contents Our Mission – Vince Kelly, CEO Business Strategy – Mike Wallace, COO Product & Development – Tim Tindle, CIO Go-To-Market Strategy – Jon Wax, EVP Sales Financials – Calvin Rice, CFO Capital Allocation & Wrap-Up – Vince Kelly, CEO 1 2 4 5 6 3 3
Slide 4: Our Mission & Investment Highlights
Our Mission & Investment Highlights Vince Kelly, CEO
Slide 5: Our Mission: Generate cash and return capital
Our Mission: Generate cash and return capital Returning capital to shareholders is our goal as well as our legacy Nearly $655 million returned to stockholders since 2004 2022 capital return - $25 million 2023 capital return forecast - $25 million Focus on maximizing cash over the long-term I
Slide 6: Key Investment Highlights
Key Investment Highlights Significant Annual Free Cash Flow Generation and Strong Balance Sheet ~$25 million of annual Adjusted EBITDA, $29.5 million cash, no debt, ~$52 million of Deferred Tax Assets Software Operations Bookings Momentum, Large Identified Pipeline 2022 Software Operations Bookings
Slide 7: Continuing History of Service and Commitment
7 Continuing History of Service and Commitment Leader in healthcare communications - A clinical communications & collaboration solution provider. Significant experience integrating to critical hospital contact centers, EHRs and many other core healthcare information systems. We continue to invest in
Slide 8: Our Plan
Our Plan Growth in value and return of capital 8 Long-term objective • Growing cash flow while stabilizing our top line with growth in software revenue Short-term energy focus 1. Software Bookings: Achieve plan and show YoY growth 2. Product Roadmap Progress: Demonstrable benefit to the business and
Slide 9: Healthcare responds to fiscal challenges
9 Healthcare responds to fiscal challenges Changes in economic conditions Fiscal alignment of healthcare IT strategy Staff Shortages (Nursing, IT and others) High Labor Costs Higher Capital Cost / Reduced Capital Spending High Inflation Economic Recession Thinner Margins Tighter IT Bud
Slide 10: Spok responds to fiscal challenges
10 Spok responds to fiscal challenges New product release cadence Provide 3- or 5-year managed maintenance & services agreement Limit costly major upgrades to a 3- to 4-year cycle Deliver product enhancements releases twice/year with minor in-place upgrades Perform benefit realization assessme
Slide 11: Updated 2023 Financial Outlook
11 Prior Guidance Current Guidance From To From To Total Revenue: $ 129.0 $ 136.5 $ 131.0 $ 137.5 Wireless Revenue $ 71.5 $ 74.5 $ 73.0 $ 75.5 Software Revenue $ 57.5 $ 62.0 $ 58.0 $ 62.0 Adjusted EBITDA(2) $ 24.0 $ 26.0 $ 24.5 $ 26.5 (Dollars in millions) (1) Company Guidance as of May 3, 2023 and
Slide 12: Spok Earns Top Client Satisfaction Scores for Sixth Consecutive Year
12 Spok Earns Top Client Satisfaction Scores for Sixth Consecutive Year Overall Vendor Total No. 1 criteria ranks 1 Spok 11 2 Tiger Connect 2 3 Epic Secure Chat 3 4 Vocera 2 5 AT&T 1 6 Qlik 1 © 2023 Black Book Research LLC | Published: February 2023, Secure Clinical Communications Platforms
Slide 13: Longstanding Customer Relationships
Customer Wireless Software Tenure (Yrs) 1 36 2 20 3 13 4 23 5 24 6 32 7 37 8 26 9 34 10 19 1 13 2 3 21 4 29 5 26 6 15 7 36 8 29 9 26 10 19 11 4 12 17 13 43 14 20 15 28 16 31 17 Tie 15 17 Tie 19 12 20 19 TOP 10 CHILDREN’S HOSPITALS (2022-2023) TOP 20 ADULT HOSPITALS (2022-2023) Rochester Phoenix Wire
Slide 14: Spok Leadership Team
Spok Leadership Team Sharon Woods Keisling Corporate Secretary and Treasurer Renee Hall Chief Compliance Officer VP of Human Resources Tim Tindle Chief Information Officer Vince Kelly Chief Executive Officer Mike Wallace President and Chief Operating Officer Mick Ling Vice President of Maintenance R
Slide 15: Business Strategy
Business Strategy Mike Wallace, COO
Slide 16: Overall Strategy
Overall Strategy Critical Communications Purpose Built Over Time Evolution of Spok • Acquiring new customers by further penetrating the hospitals domestically with significant opportunity outside the U.S. • Continuing to expand relationships within the existing customer base with additional R&D spen
Slide 17: Software Strategy
Software Strategy • With Spok Care Connect, the contact center is the base, with products like Messenger and Spok Mobile® sold as accessories to our contact center solution, which are all on-premise solutions Wireless Integration Spok Care Connect… …Product Direction • With the pivot from Spok Go, r
Slide 18: Wireless Strategy
Wireless Strategy Spok continues to maximize Wireless cash flow by pursuing a strategy of simultaneously minimizing churn and revenue erosion while maximizing margins through network cost reduction efforts Network Rationalization Plan The Company has ongoing efforts to manage network capacity and to
Slide 19: Focus on Healthcare
61% H e a l t h c a r e Other Large Enterprise Government 2012 19 Focus on Healthcare 85% H e a l t h c a r e Government Large Enterprise Other 2023 Percentage of revenue
Slide 20: Spok Care Connect Market Size
20 Spok Care Connect Market Size 4.2 billion By 2030 (2023 $1.9B) Total Addressable Market 11.6 CAGR from 2023 to 2030 Growth Rate Largest Market 30% 570 million In 2023 North America Market Size
Slide 21: Spok Care Connect Competitive Positioning
Spok Care Connect Competitive Positioning KEY VALUE PROPOSITIONS Strategic partner that solves enterprise challenges from one platform allowing the right message to get to the right person on the right device Source of truth, especially in complex IDNs, for the directory and on-call schedules In
Slide 22: Spok Care Connect Operations Bookings
Spok Care Connect Operations Bookings Historical Bookings performance highlights potential Company places focus on Spok Go Selling and Marketing efforts Strategic Pivot reorients focus on Core Product offerings and future growth $33.2 $35.1 $45.1 $38.6 $33.6 $38.9 $39.5 $36.5 $27.3 $21.2 $24.7 0 5 1
Slide 23: Highly Profitable Reoccurring Maintenance Revenue
Spok Care Connect Highly Profitable Reoccurring Maintenance Revenue Post acquisition of Amcom, expansion of reoccurring maintenance attributable to growth in license sales and focus on Spok Care Connect Company places focus on Spok Go Selling and Marketing efforts While revenue is flat in the near t
Slide 24: Product & Development
Product & Development Tim Tindle, CIO
Slide 25: Wireless
::: Wireless
Slide 26: Nationwide Wireless Paging Network
26 Nationwide Wireless Paging Network • Largest carrier in the U.S. • Over 100 million messages / month • Carrier-grade network with 99.92% availability • Secure nationwide network • Dominates the healthcare paging market and is part of a full critical communication platform with leading-edge softwa
Slide 27: Paging Remains Relevant
Paging Remains Relevant Paging’s value remains high for critical messaging • Paging has facilitated hospital workflows and critical response • Pagers receive messages when cellular and Wi-Fi cannot • Paging’s survivable architecture provides advantages, especially in crisis and disaster scenarios •
Slide 28: The new Gen A alphanumeric pager
The new Gen A alphanumeric pager - Why it’s different • Large, high-contrast ePaper Display • Modern user interface • Advanced encryption & security features • Antimicrobial case and lens • Over-the-air remote programming Exclusive to Spok!
Slide 29: GenA Importance and Strategy
GenA™ Importance and Strategy • Increase features, functions and benefits to improve retentionContinue to Improve UIS Trends Increase ARPU Leverage Current Investments (Wireless / Software) • Increased feature, function and benefits to drive higher Monthly Recurring Revenue • Increase encrypted page
Slide 30: Spok Care Connect Suite
~ ‘spok ::: Sook Care Connect Suite
Slide 31: Spok Care Connect
31 Spok Care Connect® • The Spok Care Connect platform extends to many areas of the hospital • Each puzzle piece represents a different solution offered
Slide 32: Console
Console 32 The Spok Care Connect® platform has the Console at its core. Unparalleled customer service with a constantly curated Directory and more automated and efficient processes that increase operator productivity, reduce costs, and allows the call center to be the clinical communication hub of t
Slide 33: On-call scheduling
On-call scheduling 33 The data behind on-call schedules allow us to route messages, alerts, alarms, etc. based on those schedules. It also allows users to send messages to an on-call role rather than simply a name. For example, a user can look up the on-call cardiologist from their device and send t
Slide 34: Interactive speech: Spok Voice Connect
Interactive speech 34 Spok Voice Connect™ Spok Voice Connect empowers contact center managers to offload routine calls like simple transfer or “dial-zero” requests, with a user-friendly speech recognition experience. Built on the latest interactive speech technologies using IVR (interactive voice
Slide 35: Secure texting: Spok Mobile
Secure texting 35 Spok Mobile® Spok Mobile differs from many of the other secure messaging options on the market due to the breadth of potential integration offerings. Spok Mobile allows a sender to look up a recipient by name or on-call role. Users can also receive messages, alerts, and alarms from
Slide 36: Clinical alerting: Spok Messenger
Clinical alerting 36 Spok® Messenger Spok can integrate with a wide variety of alerting and monitoring systems across the hospital, from systems such as patient monitors, nurse call, bed alarms, telemetry, or blood fridge. Spok can take alerts and direct them to the appropriate clinicians. Spok can
Slide 37: Incident Management: Spok e.Notify
Incident Management 37 Spok® e.Notify Critical events require critical notification and response. Spok e.Notify provides mass notification group alerting, two-way responses, escalation management, and audit trail capabilities. Hospital personnel can reach large groups quickly with simultaneous notif
Slide 38: Value-Added Services
38 Value-Added Services • Spok solutions are designed to solve communication challenges across health systems • To ensure communication solutions deliver tangible outcomes and solve new business challenges, we offer an array of services to ensure customers are making the most of their investment
Slide 39: Spok Care Connect Roadmap
~ ‘spok ::: Sook Care Connect® Roadmap
Slide 40: Creating value: Roadmap development
Creating value: Roadmap development 40 Product Roadmap Inputs Voice of Customer Competitive Landscape Product Vision & Business Strategy Technology Lifecycle Management Implementation, Upgrades, Support & Integration Customer Success / Value / Outcomes This information is intended to outline our gen
Slide 41: Spok Care Connect: Strategic Area of Focus
Spok Care Connect®: Strategic Area of Focus 41 • Eliminate hardware dependencies • Server consolidation / Containerization • Virtualization • Cloud support (Customer, Spok) • Reduce implementation & upgrade costs Containerization Spok Customer’s Public Cloud Reduce Life Cycle Costs This information
Slide 42: Spok Care Connect 2023 Release Themes
Spok Care Connect® 2023 Release Themes 42 Refreshed user interface Improved reporting Deeper clinical integration Expanded enterprise support CTI / PBX integration leadership Client configuration options Faster time to market This information is intended to outline our general product direction. It
Slide 43: New roadmap release type & cadence
New roadmap release type & cadence 43 Software release cadence • Major Infrastructure Upgrade (~3-4 years) • Feature Releases (Twice / year) • Software patches as needed Maximizing Benefit Realization (ROI) • 3-year managed service • Upgrades Included • Designed around customers needs This informati
Slide 44: Go-To-Market Strategy
Go-To-Market Strategy Jon Wax, EVP Sales
Slide 45: 2023 Sales initiatives
45 2023 Sales initiatives Multi-year engagements Value-Added Services New business Customer business reviews GenA sales New/AMSI wireless customers Channel/Partner business growth Cross sell collaboration Premium maintenance Licensing expansion
Slide 46: Hunters/Farmers sales resources
Hunters/Farmers Value-Added Services Software Wireless Business Development Sales Engineering Operations 46 Sales Resources Across East-West Regions
Slide 47: Software
::: Software
Slide 48: US health systems/hospitals by lines of business
48 US health systems/hospitals by lines of business* 847 Wireless Only 50% 486 Software Only 29% 345 Both 21% 1,850+ total Spok customers Total Population 7,079 26% Market Penetration 5% 30% 1-199 Beds 268 customers 50% 200-599 Beds 382 customers 600+ Beds 158 customers 5,481 1,308 314 Software-only
Slide 49: Mid-Large US Hospital (Multi-Year Engagements)
49 Mid-Large US Hospital (Multi-Year Engagements) Maximize business value for our customers through a software satisfaction program. Includes software, upgrades, Value-Added Services, and support; in a predictable annual expense during the term. Predictable spend Flattened maintenance for duration o
Slide 50: Small US Hospital Strategy
50 Small US Hospital Strategy (New subscription offering) Spok Care Connect® Hosted Solution Reduces your organization’s information technology (IT) burden Requires no upfront capital or start-up fees Easy installation upon sign-up No physical footprint Minimize or eliminate downtime Simple monthly
Slide 51: Channel/Partner growth
Prioritize the top partnerships Build more strategic partnerships and engagements Conduct business reviews and account mapping with each partner Train and educate on the value Spok brings Our plan is to double the channel partner sales to over $10M+ in next 12-24 months by working with bigger, bette
Slide 52: APAC Strategy
52 APAC Strategy • Maintenance Renewals to drive Upgrades, Expansions • Spok Console growth as a Priority o InTechnology leadership will help drive this • Quarterly Product Roadmap sessions, Webinars for Clients and Prospects • Marketing Coordination on various Campaigns • Product Strategy for Gamin
Slide 53: Recent win: Medical Center usage
53 # of Smart Consoles (CTI and non) 114 Total monthly pages/messages sent from Console 272,264 Number messages through Speech per month 44,125 Total # of devices Spok Messenger routes alarms to 5,500+ Number of Web messages sent per month 14,550 Spok pagers (2000+ GenA) 18,000 Recent win: How this
Slide 54: Medical Center in the Northeast
54 Medical Center in the Northeast • 3Y Multi-Year Engagement: Smart Suite Upgrade to 8.X (none of this includes their Messenger instances) • Upgrade onto Smart Suite 8.X • For security requirements and to stay on latest Spok release/functionality • Upgrade VRU to Spok 's new speech solution • Note:
Slide 55: Recent win: Health organization usage
55 6 Call center locations with 40+ operator workstations 6 & 40+ 100,000+ 320+ Recent win: How this Health organization leverages Spok In use today Spok whitespace 224 On-call schedules managed monthly Monthly messages are sent through Spok application Monthly CODE procedures are routed through the
Slide 56: Health center in MidWest USA
56 Health center in MidWest USA • 3Y Multi-Year Engagement: • Platform upgrade to SmartSuite v8.x and unlimited in-place upgrades − Upgrading production, test and redundant Spok environments • Six Avaya to Cisco CTI conversions for their remote contact center locations − Hammond. Munster, Crown Poin
Slide 57: Our value proposition
Our value proposition 57 Care team communication Provides clinician-to-clinician messaging and delivers real-time information from clinical systems to everyone on the care team Efficient clinical workflows Clinical alerting and alarm management with flexible routing and escalation of alerts to the r
Slide 58: How Spok Care Connect sets us apart
58 How Spok Care Connect sets us apart Enterprise platform for health systems, hospitals, & IDNs Extensive interoperability that supports existing workflows Powerful central directory Device-agnostic platform supports the right device for the right role Can be accessed and updated in real time by al
Slide 59: Financials
::: Financials Calvin Rice, CFO
Slide 60: Strategic pivot
60 Strategic pivot 01 02 03 Strategic business plan prioritizing maximization of free cash flow and returning capital to shareholders officially implemented on Feb. 17, 2022 Significant business improvement in virtually all areas, including sales, product development, and overall execution 04 Comple
Slide 61: Full Year 2022 and 1Q 2023 Financial Results
61 Full Year 2022 and 1Q 2023 Financial Results For the Three Months Ended March 31, For the Twelve Months Ended December 31, 2023 2022 2022 2021 Total Revenue $33.2 $33.8 $134.5 $142.2 Wireless $19.0 $18.8 $75.6 $78.8 Software $14.2 $15.0 $58.9 $63.4 Adjusted EBITDA (1) $6.9 $(2.1) $15.0 $(4.9) • C
Slide 62: First Quarter 2023 Highlights
First Quarter 2023 Highlights 62 • Company executing on strategic business plan generating $3.1 million of GAAP net income, and $6.9 million of adjusted EBITDA • Software operations bookings increased nearly 9% from prior year with 15 six figure customer contracts • Wireless average revenue per unit
Slide 63: 2022 Pro Forma & 2023 Adjusted EBITDA
2022 Pro Forma & 2023 Adjusted EBITDA(2) 63 2022 1Q23 2023(1) Adjusted EBITDA(2) $ 15.0 $6.9 $25.5 Terminated Employees 7.5 - - Non-Payroll Spok Go® and Other 2.0 - - Pro Forma Adjusted EBITDA(2) $ 24.5 $6.9 $25.5 (Dollars in millions) (1) Reflects the midpoint of the Company’s current guidance (2)
Slide 64: Balance Sheet
64 Balance Sheet • Exceptionally clean and simple balance sheet • No debt • Common stock only • $29.5 million of cash and equivalents • Significant deferred tax assets to shield income from taxes for many years
Slide 65: Capital Allocation
Capital Allocation Vince Kelly, CEO
Slide 66: Capital Allocation
Capital Allocation Return of Capital • Higher $1.25 annual dividend since February 2022 • Opportunistic capital deployment for shareholder value via share repurchase authorization – current basket of $10.0 million M&A • Not a current focus/priority • Will approach with an open mind, but current focu
Slide 67: History of FCF generation and return of capital
67 History of FCF generation and return of capital • Since the 2004 merger, Spok has generated almost $1 billion in cumulative free cash flow. • Both our Wireless and Software businesses drive significant FCF and allow for the continued investment in our software business. 67
Slide 68: Wrap-Up
::; Wrap-Up Vince Kelly, CEO
Slide 69: Spok Value
Spok Value Enormous customer base and strong relationships with leading healthcare providers Largest wireless paging network in the country with 800,000+ units in service No debt, $29.5mm cash balance, significant deferred tax assets, funding 80%+ of dividend from free cash flow, substantial dividen
Slide 70: Q & A
Q & A
Slide 71: Non-GAAP Reconciliations
~ ‘spok ::: Non-GAAP Reconciliations
Slide 72: Reconciliation of Adjusted EBITDA
72 Reconciliation of Adjusted EBITDA For the Three Months Ended March 31, For the Twelve Months Ended December 31, 2023 2022 2022 2021 Net income (loss) $3.1 ($7.2) $21.9 ($22.2) Add back: Provision for (benefit from) income taxes $1.9 ($1.4) ($20.9) ($5.2) (Other income) expense $0.0 $0.0 ($0.2) ($
Slide 73: Contact Investor Relations
Contact Investor Relations 73 Al Galgano + 1 (952) 224-6096 al.galgano@spok.com
Slide 74: Slide 74