Good morning and welcome to Spok’s Third Quarter Investor Call. Today’s call is being recorded. On line today we have Vince Kelly, Chief Executive Officer; Hemant Goel, President of the Company’s operating company; and Shawn Endsley, Chief Financial Officer. At this time, for opening comments, I will turn the call over to Mr. Endsley. Please go ahead, sir.

Good morning. Thank you for joining us for our third quarter 2016 investor update. Before we discuss our operating results, I want to remind everyone that today’s conference call may include 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 plans which are dependent upon future events or conditions. These statements represent the company’s estimates only on the date of this conference call and are not intended to give any assurance as to actual future results. Spok’s actual results could differ materially from those anticipated in these forward-looking statements. Although these statements are based on assumptions that the Company believes to be reasonable, they are subject to risks and uncertainties. Please review the risk factor section relating to our operations and the business environment in which we compete contained in our 2015 Form 10-K, our third quarter Form 10-Q, which we expect to file later today and related documents filed with the Securities and Exchange Commission. Please note that Spok assumes no obligation to update any forward-looking statements from past or present filings and conference calls. With that, I’ll turn the call over to Vince.

Thanks Shawn, and good morning. We’re pleased to speak with you today regarding our third quarter operating results and what we believe was another solid performance for Spok. Once again, we made tremendous progress as we continue our transition from a telecom-based wireless company to a best-in-class software provider with the goal of delivering industry-leading unified critical communication solutions. I have more to say on that as well as our business outlook in a couple of minutes. With respect to the third quarter, we saw strong performance in a number of key operating areas and year-over-year improvements in bookings, software revenue levels, and operating cash flow generation. Noteworthy in the third quarter was a strong net income performance that was driven by EBITDA margins in excess of 20%. Our performance in the third quarter was consistent with our expectations in the seasonal trends we typically experienced during the year. We were particularly pleased to see nearly double-digit growth on both the sequential and year-over-year basis. The software bookings improved more than 11% from the prior year and our backlog levels remain consistent with the prior quarter. While our paging units in wireless revenue continue to decline as expected, we are very pleased by a much slower than anticipated rate of quarterly and year-over-year reductions. Overall, we continue to operate profitably, enhance our product offerings and further strengthen our balance sheet. Our ability to continue to generate healthy cash flow has allowed us to execute against our capital allocation strategy and the commitment we’ve made to return $21 million to our shareholders in 2016. And we were able to accomplish this while adding more than $5 million to our cash balance. Shawn and Hemant will provide details on our financial performance and operating activity shortly, but before that, I want to…

Thanks, Vince. Before I review our financial highlights for the third quarter of 2016, I would again encourage you to review our third quarter Form 10-Q, which we expect to file later today. Since it contains far more information about our business operations and financial performance than we will cover on this conference call. As Vince noted, we were pleased with our overall operating performance for the third quarter and we remained focused on executing against our business plan, continued expense management and financial discipline have allowed us to invest in our business for the long-term growth. Our ability to align our expense base with the market demand we are seeing and drive high renewal rates in our recurring revenue categories helps both maintain operating cash flow and operating margins in the quarter. In addition to the substantial progress we made for meeting our long-term business goals, we saw sequential and year-over-year improvement in a number of key operating metrics. Revenue contribution from both software and wireless combined with focused expense management helped maintain our operating cash flow, EBITDA and operating margins for the quarter, as we continue to invest in our business for long-term growth. We also added to our already strong balance sheet and continue to operate as a debt-free company at quarter end. In the interest of time today, I will not review our third quarter performance on a line by line basis, since much of that information is contained in our news release schedules and federal filings. If you ask specific questions about our quarterly financial results, I would be glad to address those during the Q&A portion of this call. Instead, I would like to focus this morning on several key areas that I feel will give you a better idea of the drivers of…

Thank you, Shawn, and good morning. During the third quarter of this year, our sales and marketing team delivered software bookings of $18.7 million. This represents an 11.4% increase over the third quarter in 2015, and it includes a consistently high maintenance renewal rate in excess of 99%. We also welcomed more than 2,000 new customers to the Spok family, primarily in the healthcare and government sectors. I want to start by adding to Vince’s comments about our Spok Care Connect platform. He mentioned our ongoing investment and product development to create the industry leading critical communications platform for our customers. This integrated solution suite is resonating with our customers. Our sales pipeline has expanded 16.4% since mid-January and our global average pipeline deal size has gone 12.3% over this time last year. As anticipated, the increase in size and complexity for this offering is stretching the amount the time it takes to close some of these deals. We expect to increase our momentum as our unique platform gains more traction in the market. To illustrate this point, I want to highlight a health system in the Northeast. A customer for nearly a decade, this system uses different technologies across their multiple hospitals and clinics. After adding another hospital to the system, they approached Spok to integrate the new facilities, contact center capabilities with the rest of the network. While we are helping this customer with their immediate need to support the new contact center, an emergency response solution, this deal sparked a conversation about long-term goals. This customer is excited that we offer the capability to unify communication across their entire organization, including full backup systems and is currently becoming more educated on how we can help them address their challenges. Another customer, a healthcare network in the Southeast,…

Thank you, Hemant. Before we open the call up for your questions, I want to comment briefly on a couple of items first. I want to update you on our key goals and business outlook and then I want to review our capital allocation strategy. With respect to our key goals and business outlook, a little over a year ago we undertook our project Catapult plan which marked a shift in our strategic direction for healthcare, our largest customer segment. Catapult was initially created as a five-year plan that signaled a very intentional move from offering our customers point solutions or single product solutions for call center software, alarm management and secure messaging to offering them a single integrated platform called Spok Care Connect. We made a decision to focus on the Spok Care Connect platform for several reasons. Number one, customer needs. Our healthcare customers were telling us they needed a more unified approach for communications across their enterprise. Number two, market opportunity. Industry analysts confirmed to us that there is a multi-billion dollar opportunity for this type of enterprise offering in our largest market, United States healthcare market. Number three, business simplification. We’ve been offering our customers too many different products in multiple versions on several different platforms and this makes supporting them effectively a challenge. We needed to simplify our product offerings to create an efficient way to develop and offer our solutions. Number four, competitive positioning. We concluded that a single integrated platform for healthcare communications, Spok Care Connect would address our customers’ needs and also create a competitive advantage for Spok. For the past year we’ve invested heavily in additional talent, resources and tools to implement our Catapult plan. We’ve recruited experts to product strategy and development, created additional work teams and devised a plan…

[Operator Instructions] And we will take our first question from Steven McIntyre. Please go ahead.

Yes. Hi guys, just a couple of questions. It seems like paging continues to be better as you talked about. Software seems to be trending kind of on the right path. Cash is up year-over-year, and even if you kind of look at what would be a little heavier Q4 spend to kind of get to the $21 million. The cash just continues to kind of power up and with valuations not coming down unfortunately, and kind of doing a more internal growth path. How do you think about the cash in terms of, perhaps being more aggressive on the stock repurchase, and the reason I ask this, I think we did maybe about 1.1 million shares last year to around high 16, 17 on the stock, and there is more cash per share, the paging is in better shape, the software is in better shape yet, I think we’re under 400,000 shares purchased this year. Just maybe kind of talk about that and maybe you just – how much cash you think you need to keep on the balance sheet if the external kind of acquisition plan seems like it’s less likely as opposed to internally growing, which I think makes sense, but probably has less overall cash needs in a big $100 million, $150 million acquisition.

Steve, good question, and I would say that assuming we use the $3.8 million that’s left in the current share repurchase basket, we should end the year with north of $120 million of cash flow. You’re right. We’ve got a lot of cash there. We haven’t pulled the trigger on acquisitions, just because of the reasons I enumerated, they tend to be smaller in scale, negative cash flow, high multiple expectations, they want multiples of revenue and we just don’t think that’s a good way to create long-term term shareholder value, and we’re seeing that there is risk in some of these deals with respect to just the innovation alone. So, we’ve kind of set that aside, but we’re not giving up on it. We continue to look at things and you never know markets kind of -- they can change in the future and something might come up and we certainly have the ability to do it. We’re going to continue paying our dividend next year, but I think rather than go out and over pay for a large acquisition, we can increase our own R&D spend, we’ll add more staff, we’ll add more expertise that will certainly put a damper on our margins, we’re not going to be turn of this 20% EBITDA margins, but we think it’s a good investment for the long-term. And then, with respect to our share repurchase plan, that’s something that we talked about in our Board meeting yesterday, that’s something that the Board and our financial advisors and management are currently evaluating and our plans around that, we really want to share with you when we also share with you our 2017 guidance, which would be at the end of February in the first quarter of next year. So, I don’t have a plan for you right now other than to say we hear you loud and clear, we’re looking at that very closely, we understand that’s a big part of a capital allocation strategy for any company particularly a company like Spok.

And then just one follow-up, I mean would you agree, though, if you’re not as likely to make a big software deal and valuations take some time to come down and internally, just makes more sense, how the integration risk and all that kind of stuff. They probably does free up some more of that cash on the balance sheet than if you’d earmarked $100 million of valuations really, really low as opposed to, okay maybe here’s $10 million or $20 million more we want to spend, if you’re, if you’re building it better internally, doesn’t that give you little bit more fire power on the acquisition front, especially if Spok’s here still seem awfully cheap.

I mean, mathematically you’re right.

Okay. Now, that’s just what I was getting at -- yeah, it’s good to see software and paging both kind of continuing in the right directions.

Right, thank you very much Steve.

We’ll take our next question from [Peter Klein]. Please go ahead.

Hi, good morning and congratulations on another good quarter. Hey, you know, I was reviewing some of the information on the stock, and I noticed and I was surprised at this frankly. I noticed a fairly substantial short position of 600,000 shares, I’m not sure how accurate that is, but I assume it’s accurate. That seems like a lot and I don’t understand a) the bear story or the short story, a) perhaps, the shorts could be I’m saying it’s an increased dividend maybe a way to eliminate some of these short positions and I’m just wondering what you’re thinking is on that and if you even – if you understand what they’re cases or thesis, I’d appreciate knowing it.

I mean, Peter, good question. I wouldn’t [indiscernible] frankly that there is a 600,000 short position on our stock and I don’t know what their thesis would be. I think we’ve got about 20.5 million shares outstanding. So, I wish I had a better answer for you, but…

Yes, baffling. Truly baffling and I’m trying to understand the way this operates, if they have to pay the dividend to the shareholders that they are shorts – that borrowed stocks. So they’re actually costing us 3%.

You know what, you just heard from me they’re going to be paying the dividend all next year too, that I mean…

Right, yes, so interesting, but I appreciate you to keep up the good work, guys. Thank you.

Thank you.

[Operator Instructions] We’ll take our next question from Steven McIntyre. Please go ahead.

Hey guys one more. You guys talked about the R&D thing going from 10 to 14, I think if I heard you right, 50% to $21 million, roughly with that…

I think as of now that’s not the exact number, but it’s about right.

Okay. And just question on, you guys, you seem like on the total OpEx are kind of able I know the added expenditures kind of came through the year, so you don’t see the full-annualized rate. But you’re able to kind of find some levers to offset some of that during the year as well. Do you think there’s some of that opportunity in 2017 and kind in 2018 to where, or is that number the $21 million kind of net of where you think you can find some costs that kind of help pay for some of the extra R&D spend?

We have been taking the cost to a lot of other areas in the business to offset some of that R&D spend, and that’s why I think we’ll end up with a pretty good expense level for 2016 and that will benefit us starting 2017. So it won’t all be a net-net peer increase in expenses, because obviously we keep rationalizing the cost with our wireless initiatives and we have de-emphasized some of our international public safety initiatives and that gives us headcount efficiency, and we’re always and it’s just our nature, we’re always looking for efficiencies, but on a net-net basis, our expenses are still going to go up next year. I mean there is no question about it since we’re adding a lot of people. So it’s still going to go up, but yeah, we’ll look for other areas to offset, so you won’t see kind of a one for one increases in operating expenses based on what we had in R&D. But yes, you will see total expenses go up. Expenses will go up, prices will come down, but it’s still better than going up paying for acquisition somewhere in my view and we get something for it that we can use to our benefit in the future to grow this business.

You’re getting a bit of an offset on the maintenance margins that kind of renews, you’re getting a little incremental if that goes from 10 to 11, 12 over time. You are getting some benefit there?

Absolutely. That’s one of the beautiful things about maintenance.

Okay. Thank you. End of Q&A

[Operator Instructions]

Okay, I don’t see any more questions in the queue. So I just want to thank everyone for joining us this morning. We look forward to speaking with you again after we release our fourth quarter results in February and everyone have a great day.