Good morning, and welcome to the Spok's First Quarter Investor Call. Today's call is being recorded. On line today we have Vince Kelly, President and Chief Executive Officer; Michael Wallace, Chief Financial Officer; Hemant Goel, President of the company's operating company; and Shawn Endsley, Chief Accounting 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 first quarter 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 upon assumptions that the company believes to be reasonable, they are subject to risks and uncertainties. Please review the Risk Factors section relating to our operations and the business environment in which we compete contained in our 2016 Form 10-K; our first 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 first quarter operating results and what we believe was a strong quarter for Spok and a great start to 2017. During the quarter, we made further progress toward our goal of transitioning Spok from a telecom-based wireless company to a software provider that delivers industry-leading unified health care communication solutions. We saw strong year-over-year performance in a number of key operating measures, including software bookings and backlog levels, as well as wireless subscriber retention. We achieved these results as we increased our investment in our business by enhancing and upgrading our product development team and tools, as well as our sales infrastructure and management. As we've previously outlined, we believe these investments will yield significant future benefits in the form of our improved, integrated communication platform, Spok Care Connect, as well as higher future booking levels, supported by an enhanced and upgraded sales team. Overall, we continue to operate profitably as a debt-free company while enhancing our product offerings. We executed against our capital allocation strategy by continuing to make key strategic investments in our business while returning cash to our stockholders during the quarter in the form of dividends. We were particularly pleased with our strong software bookings levels, as we posted the largest first quarter results in our company's history. We also set records for our highest bookings month and highest single day of software bookings. Our new logo bookings, which have historically represented in the 30% range of operations bookings, were over 50% for the quarter, and the average contract value of our new logo bookings, which has traditionally been in the $100,000 and below range, almost doubled to just over $190,000. While one quarter does not represent a trend, we were nevertheless…

Thanks, Vince, and good morning. Before I begin, I really want to express my appreciation to Vince and the board for bringing me on to Spok as the Chief Financial Officer. I'm extremely happy to be here and working with an exceptional group of professionals as I have made my way through the company during my first month. My first month has confirmed that there is not a more exciting time to join Spok. Our transformation and the investments that we are making in our systems, people and marketing programs is the right strategy to position the company to capture the large market opportunity ahead of us and drive sustained, long-term growth. Our team clearly recognizes and appreciates the importance of Spok's mission, which is to deliver clinical information to care teams when and where it matters most, to improve patient outcomes, and I am certainly delighted to be part of it. Now let me give you a little more detail on our financial performance in the first quarter. And again, I would encourage you to review our first quarter Form 10-Q, which we expect to file later today, as it contains far more information about our business operations and financial performance than we will cover on this call. As Vince noted, we were pleased with our overall operating performance in the first quarter. Key drivers of our financial performance during the quarter were software maintenance renewal rates that continue to exceed 99%, coupled with a lower-than-anticipated level of churn in both paging units and wireless revenue. Continued operating expense management has allowed us to mostly migrate the impacts of our planned investments in products, research and development expenses. We also continue to make steady progress toward our long-term business goals that Vince mentioned earlier. But overall, we believe we…

Thank you, Mike, and good morning. During the first quarter of 2017, our sales and marketing team delivered software bookings of $19.8 million. This is up 31% year-over-year. Our forward momentum is building, and our strategy is resonating with our customers. Market recognition and appreciation for the value of our enterprise health care communications platform is increasing, demonstrated by the level of conversations we have with customers and prospects, the volume of activity we see on our website and most notably are the stories behind our quarterly bookings. Maintenance renewal rates remain strong at 99%, and we welcomed two dozen new Spok customers to the Spok family, primarily in the health care and government sectors. Health care remains a key part of our growings, comprising -- of our growth, comprising 77% of overall bookings in the United States for the first quarter. While much of that business is our present customers who are expanding their enterprise communications and adding more of our services and solutions, 40% in the first quarter came from new hospitals and health systems that have never worked with us before. These organizations joined a prestigious list of customers that includes all of U.S. News & World Report's 2016, 2017 Best Hospitals Honor Roll. These 20 adult hospitals and 11 children's hospitals rely on our solutions to help them provide the best care. Our solutions continue to resonate with all segments of the market. Among our new customers this quarter is a large health system with multiple hospitals around the country. This customer is looking to enhance scheduling coordination with HIPAA compliance communications while maintaining the flexibility to send messages to a variety of staff devices, including pagers, smartphones and WiFi phones. This health system also wants to support communications on a centralized platform that can meet…

Thanks, Hemant. Before we open the call up for your questions, I want to comment briefly on a couple items. First, I want to update you on our current capital allocation strategy. And second, I want to review our key goals and business outlook for 2017. With respect to our current capital allocation strategy, our overall goal is to achieve sustainable, profitable business growth while maximizing long-term stockholder value. Toward that end, the allocation of capital remains a primary area of focus. Our multi-faceted capital allocation strategy includes dividends and share repurchases, as well as key strategic investments that include augmenting our product, development, operating platform and infrastructure. It also includes the potential for acquisitions as we have discussed in the past. Even though we have not been satisfied with valuation expectations for most of the targets we have reviewed, we continue to explore M&A opportunities and conduct business due diligence. Yesterday our board authorized a $10 million share repurchase basket for the balance of 2017. Also, as we have previously stated, we are committed to continue paying our $0.125 per share quarterly dividend this year while we aggressively increase our investments in our company to benefit the future and create long-term stockholder value. We're a company in transition, and management and our board believes that financial flexibility over the long term is important to the success of the strategy. We review our capital allocation posture on a quarterly basis and remain comfortable that we are striking a reasonable balance in serving the longer-term interest of shareholders. We will continue to evaluate our capital allocation strategy and communicate our plans to you with respect to dividends, share repurchases and other uses of capital each quarter when we report earnings. Finally, with regard to our key goals and business outlook, we believe our first quarter activities and investments have positioned us well for a successful 2017. In order to take advantage of the large opportunity in our chosen markets, our business goals for the year are simple and straightforward. They include accelerating the development of our products and services, building a stronger infrastructure, aligning resources and focusing where most needed, and increasing Spok's long-term growth potential. We'll do all this with the ultimate goal of creating long-term stockholder value, fulfilling our commitments. Wrapping up, Spok continues to build an industry-leading reputation. We remain committed to our core values of putting the customer first, providing solutions that matter, innovation and accountability. We believe our past results and future plans reflect those values and beliefs. At this point, I'll ask the operator to open the call up for your questions. We'd ask you to limit your initial questions to one and a follow-up. Then after that, we'll take additional questions as time allows. Operator?

[Operator Instructions] And we'll go first to Steven McIntyre with Braeside Capital.

Could you maybe walk me through a scenario? Let's say we get to the end of '18 and the suite is largely built out and valuations are still crazy. How do you guys think about the cash from that standpoint? Is there still other stuff outside the suite that you're interested in? Or just maybe think about how the capital allocation might change once the suite is built out if we don't get an acquisition opportunity in that time.

One of the things, Steve, that happened this quarter, one of our salespeople came to us, and he had gotten a big six-figure deal and said, gee, look at this, they bought everything from us. He went right down line and said, one, two, three, four, five, every single thing we offer, he bought in the platform in our Care Connect Suite. And Hemant's comment to him was -- and to our product team is we need to come up with something else because we've got these large customers and we've got this blue-chip customer base, we need to add functionally to our suite. So there's a number of things we can do to do that, Steve. One of them would be an acquisition. And again, I think you've known us long enough to know that we're not going to be crazy about valuations that don't make sense and multiples that are in the stratosphere, particularly multiples of revenue when the companies are losing money. But another way to do it would be to do another project catapult internally, do some more investment. But we wouldn't do that until we see success with the first investment. So we look at this on a quarterly basis. We talk about it longer-term, but we look at it on a quarterly basis. For this quarter, we decided that we continue the dividend, we institute a $10 million basket for share purchases, and we'll review that as we go forward. Our goal right now is to be successful prosecuting the business plan that we have right now and delivering on that business plan. And then in the future, if we're successful at that, I think there will be other opportunities to leverage that success and create even more opportunity for bookings and profitability over the long term.

Okay. If I could just ask one follow-up. On the bookings, like, obviously, this quarter was pretty strong. And if you looked in the past, there'd be a strong quarter, and sometimes there was kind of fits and starts. How do you think about that over the next couple of quarters going into '18 in terms of kind of having the really strong bookings kind of quarter after quarter? What changes? Is it the suite? Or what makes it more consistent?

Yes, so here's the thing, and we don't really give, like, guidance on bookings. And bookings in any software company are always going to be lumpy. Some companies don't even report their quarterly bookings; they just wait until the end of the year and report it all at once. We do. What we did today is we reiterated our guidance for 2017. Our revenue guidance, our operating expenses, our CapEx. Embedded within that guidance is our expectations for booking. So when we sit around and we do our management report and we report to the board like we did yesterday and we look at our latest thinking forecast, right now, we are showing that we are making our plan this year. And in fact, in some cases, we're doing better than our plan this year. And so that doesn't mean that you can't have a big quarter of bookings, then a smaller quarter of bookings and then a big quarter of bookings, or maybe you could have 3 quarters that are fairly equal. When you're doing these pipelines and you're looking at some of these larger deals, particularly the six-figure deals, they take longer. You're going to committees, you're meeting with CIOs, you're meeting with CFOs, and they can take longer. And then sometimes, all of a sudden, you can have a bunch hit, and then sometimes you can be a little dry on it. I will tell you that when we go through the pipeline with our sales team now, compared to, say, how we did it a year ago and we're looking at the size of the deals, there is a marked difference in the size of the deals in the pipeline. Now we are seeing multiple, multiple. I mean, we looked yesterday at pages full of large deals, whereas in the past, you'd have a couple six-figure deals and then there'd be $70,000, $60,000, $50,000 and add-on type things. So as we've pivoted to the suite approach, we're training our people to sell the enterprise suite, we're recruiting and hiring sales management and sales talent more comfortable in that environment, talking to the suits, going in there and doing the buyer process map and getting to the right folks, we're seeing larger deals populate in that pipeline. That's the good news. Bad news is sometimes larger deals just take a little bit longer to bring in. But you're more effective when you do larger deals as a software company, and so that's what the goal is. So hopefully, that helps you. If not, bookings in softwares are never going to be -- it's not like the paging business where things are recurring and you can implement -- incrementally up or down each month. It's always going to be a little bit lucky, but we consider all of that within our forecast and within our guidance. Any other questions?

[Operator Instructions] We'll go next to Peter Klein with HighTower.

Just a quick question. I heard a mention of an interaction with a company. Was it Shine? Or did I miss the name?

CHIME.

It's C-H-I-M-E, stands for College of Healthcare Information Management Executives.

It's a forum for essentially CIOs in health care to get together.

Yes, those from the health care organizations.

Okay, if there's no other questions in the queue, then we're going to wrap up. So thank you very much, everyone, for joining us this morning. We look forward to speaking with you again when we release our second quarter results, which will be in July. And everybody, have a great day. Thank you.

This does conclude today's conference. We thank you for your participation.