Good morning, and welcome to Spok's Second Quarter Investor Call. Today's call is being recorded. On line today, we have Vince Kelly, President and Chief Executive Officer; Mike Wallace, Chief Financial Officer; and Hemant Goel, President of Spok's Operating Company. At this time, for opening comments, I will turn the call over to Mr. Wallace. Sir, please go ahead.

Good morning. Thank you for joining us for our second quarter 2018 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 Factors section relating to our operations and business environment in which we compete contained in our 2017 Form 10-K, our second quarter 2018 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. Also, please remember, on January 1st, 2018 Spok adopted Accounting Standards Codification, ASC 606, revenue from contracts with customers, using the modified retrospective methods applied to those contracts which were not completed as of January 1st, 2018. Unless otherwise stated, results for reporting periods beginning after January 1, 2018 are presented under ASC 606. While prior period amounts have not been adjusted and continue to be reported in accordance with the Company's historic accounting under ASC 605. Please refer to the tables provided in yesterday's press release to obtain revenue, net income, earnings per share and EBITDA results under both ASC 606 and 605 formats. With that, I will turn the call over to Vince.

Thanks, Mike, and good morning. We are pleased to speak with you today regarding our second quarter operating results, and what we believe is a good start as we enter the second half of 2018. Our performance in the second quarter of 2018 was in line with our seasonal expectations. We saw strong performance on a number of key operating measures and sequential improvements in subscriber retention, sales bookings, backlog levels, and operating expense management. We believe our year-to-date results provide a solid base and position us well as we enter the second half of the year. Overall, we continue to generate positive EBITDA. We returned nearly 15 million of capital to our stockholders through the first half of the year in the form of dividends and share repurchases, and we enhanced our product offerings through our continued investments in our integrated communications platform, Spok Care Connect. We continue our substantial investment in our development team and are leveraging our decades of experience in critical healthcare communication to deliver a cloud-based data platform that will bring the latest in communication technologies to the market. As previously outlined, we believe these investments will yield significant future benefits in the form of our improved, integrated communication platform as well as higher future bookings levels supported by our enhanced and upgraded sales teams. Our teams remain on target to meet our development goals for the year. In the first half of the year, we were particularly pleased to see software revenue on a GAAP basis to grow by 11% year-over-year with each quarter up from the prior year. Additionally, we continue to see a more than 99% renewal rate on our software maintenance contracts. Similar to our wireless revenue stream, software maintenance revenue is largely a recurring revenue stream that provides the Company…

Thanks Vince. Let me give you a little more detail on our financial performance in the second quarter. I would again encourage you to review our second quarter 2018 Form 10-Q, which we expect to file later today as it contains far more information about our business operations and financial performance that we will cover on this call, as well as specific revenue comparisons between ASC 606 and ASC 605. As Vince noted, we were pleased with our overall operating performance in the second quarter and believe that our year-to-date performance positions us to take advantage of the typically increased activity in the second half of the year. Key drivers of our financial performance during the quarter were sustained year-over-year improvements in software operations revenue, software maintenance revenue renewal rates which continue to exceed 99% and continued stable levels of churn in wireless paging units. Lastly, continued disciplined operating expense management has also allowed us to absorb the impacts of our planned investments in product research and development expenses while generating positive EBITDA. Over the next few minutes, I will review key areas which drove our second quarter financial performance. They include; one, a review of certain factors impacting second quarter revenue. Two, selective items which influence second quarter expenses; and three, a brief review of the balance sheet. Finally, I will review our financial guidance for 2018. As usual, if you have specific questions about these items or any of our quarterly financial results, I will be happy to address them during the Q&A portion of this morning’s call. With respect to revenue for the second quarter of 2018, total GAAP revenue was 40.6 million or 41.8 million when adjusted to exclude the adoption of ASC 606 compared to 42.3 million in the first quarter of 2017. We were…

Thank you, Michael, and good morning. As you heard our sales and maintenance teams have delivered software bookings in the second quarter of 2018 totaling $18.5 million. Second quarter performance was up 2% from the prior period in line with our seasonal expectations. Healthcare remains a key part of our growth and primary focus making up 89% of overall bookings in the United States for the second quarter. During the quarter, we completed 17 six figure healthcare deals including three with customers who have never worked with us before. In total we added nine healthcare software customers to the more than 1900 hospitals that use Spok solutions. Those customers include all 30 adults and children healthcare organizations on the current best hospitals honored by U.S. News & World Report. During the second quarter, we closed a seven-figure deal with the large West Coast Academic Medical Center. The five year deal will nearly double the organizations licenses for our mobile application going from 4000 to 7000 users. The customer chose Spok as an important part of its initiative to improve its clinical communications. As with many hospitals today the customer look first to its electronic health record vendor for communications solutions. But they found that there are limitations to what they can do with the EHR. One of the main downfalls that relying on the EHR for clinical communication and collaboration is that only clinicians can communicate through the EHR and not the full range of the healthcare team will need to work together to deliver better patient care. Spok Care Connect is a perfect complement to these systems allowing for the delivery of the right message, to the right person, on the right device, at the right time. We see this partnership as a solid endorsement that we can help…

Thank you, Hemant. Before we open the call for your questions, I would like to comment briefly on a couple of 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 the remainder of 2018. With respect to our current capital allocation strategy, our overall goal is to achieve sustainable, profitable business growth, while maximizing long-term stockholder value. To that end, the allocation capital remains a primary area of focus. Our multifaceted capital allocation strategy includes dividends and share repurchases as well as key strategic investments that include augmenting our product development and operating platform and infrastructure. Our strategy also includes the potential for acquisitions that are both strategic in nature and that are accretive to earnings. We are a company in transition and believe the financial flexibility over the long term is important to the success of our strategy. Spok is laser focused on delivering the next generation of our software platform, and we believe that our cloud-based and fully integrated communications platform will be a game changer in our chosen market. As I said at the start of this call, I’m happy to report that we are on-track with our development efforts and rollout plan and look forward to taking advantage of what we believe is a large market opportunity for this technology. Our capital allocation policy includes occasional stock repurchases along with our recurring dividends of $0.125 per share per quarter and capital investments in our business. We remain debt-free. We will continue to evaluate our capital allocation strategy and communicate our plans in each quarter when we report our earnings. Finally, with regard to our key goals and business outlook, we believe our first half activities in investments have positioned us to be successful in the second half of 2018. In order to take advantage of a large opportunity in our chosen markets, our business goals for the year remain unchanged. They include accelerating development of our products and services, building a stronger infrastructure, aligning resources and focusing where most needed, and driving software revenue growth while managing wireless revenue declines. At this point, I will ask the operator to open the call for your questions. We would ask you to limit your initial questions to one and a follow-up and then after that we will take additional questions as time allows. Operator.

Yes sir, thank you. [Operator Instructions] Our first question will come from Scott Williams with [indiscernible] Capital Management.

Hey guys thanks for taking my question, this is Ryan [indiscernible]. We are three years into the five-year investment cycle. Now, first off, how do you see the software revenue building in the back half of the year? What specific line items do you see contributing to the growth, and then for the next couple of years, what sort of and when 2.0 is fully built out, what sort of revenue growth trajectory in the software would you be pleased with? Thanks.

Well first of all with respect to the back half of the year, I think we just reiterated this morning that we are fine with the guidance that we gave at the beginning of the year. There has been no change in that. We will have our results posted within that guidance. We typically have a better bookings experience in the back half of the year just because that’s the way the deals usually get done, so usually we have a much stronger fourth quarter than other quarters. Sometime, the third quarter is pretty good too depending on the government deals we bring in. Typically, Ryanit takes us about two months before you start recognizing revenue after a booking and then you recognize that ratably over about a nine -month period. So the later in the year that you generate bookings, the it more impacts the following year, and so if you have a really strong fourth quarter, that’s really going to impact 2019 not 2018. But in terms of what we see for this year, we feel very comfortable with the guidance range that we gave you guys at the beginning of the year and that we just reiterated today. In terms of looking out into the future, and we don’t give guidance past the current year. We have never done that in the past and we are not going to start doing that now, but obviously we wouldn’t be doing this if we didn't see a big market opportunity. We think the total addressable market out there for this type of critical communications and collaboration platform is over $2 billion. Now having said that, there’s other people that have targeted the same market, and so we are going to be competing against others. We think that the cloud-based platform we are delivering in many respects is going to be a game changer, and we think that the workflow engine and some other things and aspects that we are building into it is going to be transformative. We are very excited right now with our development partners, they are working with us on this. They are very happy with what they have seen so far. We expect to roll this out and begin to introducing it conceptually and demoing it at our user conference in October, Connect 18, and we expect to be in beta by the end of the year. We expect to have some sales of this platform in 2019, and you will see much more contribution for it in 2020. So, I can't give you specific numbers. Obviously, we have got our own forecast and we wouldn’t be doing this if we didn't think it was going to be very important to our future.

Okay. Thank you very much for the color.

Thank you.

Thank you [Operator Instructions] Alright, gentlemen, there are currently no further questions in the queue at this time.

Okay. Thank you operator and thank you shareholders and investors for joining us this morning. We look forward to speaking with you again after we release our third quarter results in October. Everyone have a great day.