Spok Holdings, Inc. (SPOK) Earnings

Management highlights

### Core Strategic Focus & Progress - The company maintains its post-2022 pivot priorities: growing software revenue, generating consistent cash flow, and returning capital to stockholders, while working to become a global leader in healthcare communications. - Q2 2026 delivered a nearly 92% sequential increase in software operations bookings, a record level of adjusted EBITDA, and a 3% year-over-year increase in software revenue. - Disciplined expense management drove an 8% year-over-year reduction in adjusted operating expenses from the April 2026 strategic realignment, while R&D investment for the first half of 2026 increased 10% year-over-year to over $6.7 million to support product development. - Artificial intelligence is being implemented across the organization to accelerate product development timelines, reduce time-to-market for new Spoke CareConnect capabilities, and drive broader operational efficiencies. ### Key New Business Wins - Secured 14 six-figure and 1 seven-figure new customer contracts in Q2, including two large, notable deals: one with a large Midwest health system serving 20 million annual patient encounters across 2,200 care sites expanding the existing Spoke CareConnect deployment to 85 additional locations, and another with a prestigious academic health system modernizing their clinical communication platform with additional Spoke solutions and workflow analysis services. ### Capital Allocation & Asset Monetization - Closed the previously announced sale of narrowband spectrum licenses to CensusUSA (a Xylem Inc. brand) for $8 million in cash, with most proceeds paid at closing in July 2026. All existing subscribers will be transferred to other company-owned frequencies, so the sale does not impact current customers. The entire pre-tax gain (less transaction costs) will not incur federal income tax due to available deferred tax assets, leaving a projected DTA balance of approximately $30 million post-transaction. - The company has returned approximately $118.7 million ($5.63 per share) to stockholders via quarterly dividends since the 2022 strategic pivot, and over $740 million in total returns (dividends, special dividends, share repurchases) since the company's 2004 founding. It returned $6.5 million in dividends in Q2 2026, with a current dividend yield exceeding 10%. - The company has generated nearly $1.1 billion in cumulative free cash flow since 2004, returning two-thirds of that amount to shareholders.

Guidance

- Full-year 2026 total revenue guidance is adjusted to a range of $132.5 million to $139.5 million, with a lower midpoint of $136 million (the high end of the range remains consistent with prior guidance). The downward midpoint adjustment reflects industry headwinds of extended deal closing timelines and customer preference for shorter contract terms over multi-year agreements, driven by tight hospital budgets and broader market uncertainty. - Adjusted EBITDA guidance for 2026 is maintained at a range of $28 million to $32 million, with an unchanged midpoint of $30 million. Cost reductions from the April 2026 strategic realignment are expected to fully offset the projected revenue downside. - The company projects ending 2026 with cash and cash equivalents between $26 million and $29 million, after including the ~$7 million in after-transaction cost proceeds from the spectrum sale closing in Q3 2026. - The company reaffirmed its commitment to its existing dividend policy, projecting total dividend payments exceeding $27 million in 2026.

Segment performance

Wireless segment: Revenue is projected to range from 67 million to 70 million for full-year 2026. In Q2 2026, average revenue per unit (ARPU) was $8.20, consistent with prior year levels, offsetting a less than 2% year-over-year reduction in wireless units in service. Wireless contributed approximately 49-51% of projected total 2026 revenue. Software segment: Full-year 2026 revenue is projected to range from 65.5 million to 69.5 million, accounting for approximately 49-51% of projected total 2026 revenue. In Q2 2026, software license revenue was $3.6 million, up from $2.4 million in Q2 2025, driven by strong bookings momentum. Managed professional services revenue hit $2.3 million in Q2 2026, a 53% year-over-year increase, with higher inherent margins compared to other software offerings. Total Q2 2026 software revenue grew more than 3% year-over-year, driven by double-digit growth in managed services and license sales.

Risks & headwinds

- Software bookings are inherently lumpy, making quarterly performance an inconsistent indicator of full-year results, with near-term revenue compressed by current industry dynamics. - Healthcare customers face sustained tight budgets, uncertainty around Medicare and Medicaid reimbursement, and broader technology market uncertainty, leading to longer deal closing timelines and increasing customer preference for flexible, shorter-term (often cancelable) contracts that compress near-term revenue. - Forward-looking statements around future performance, guidance, and strategic outcomes are inherently uncertain, and actual results may differ materially from projections due to unforeseen business and market changes.

Analyst Q&A

• Q: What drove the 92% sequential jump in Q2 software bookings, and was any of this growth pulled forward from Q3 2026? /

  A: The sharp sequential increase was driven by the closure of two very large, outsize new customer contracts, referred to as "elephant/whale" deals. Management notes that large deals of this size cause natural lumpiness in quarterly bookings, which is normal for the company's business, and does not indicate that meaningful volume was pulled forward from the third quarter.

• Q: The increase in cancelable backlog this quarter matches the trend of customers seeking shorter deal terms you noted. Is this trend tied to broader market uncertainty, and what is your outlook for it? /

  A: Yes, the rise in flexible, cancelable contract terms is directly connected to the same market uncertainty that is lengthening deal closing timelines. The trend is industry-wide, driven by hospital budget constraints and uncertainty around future Medicare/Medicaid reimbursement. Management is not overly concerned, as Spoke's products become deeply ingrained in customer clinical workflows, leading to very high customer retention after deployment.

• Q: What are the top reasons large health system customers choose Spoke over competing providers for large, seven-figure contracts? /

  A: First, Spoke offers an uncommonly broad and deep suite of enterprise healthcare communication solutions that integrate tightly with core healthcare systems, including leading electronic health records (such as Epic) and the most common hospital PBX systems, aligning perfectly with existing customer workflows. Second, most large customers have long tenures with Spoke (averaging over 20 years for the largest accounts), so the company's solutions are deeply embedded in operations, making them very difficult to replace. Spoke's decades of specialized healthcare expertise also allow it to support complex critical communication workflows that smaller or newer competitors cannot match.