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; and Mike Wallace, Chief Financial Officer. At this time, for opening comments, I will turn the call over to Mr. Wallace. Please go ahead, sir.

Good morning, and thank you for joining us for our second quarter 2019 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 and 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 business environment in which we compete contained in our 2018 Form 10-K, and our second quarter 2019 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.

Thank you, Mike, and good morning. We're 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 2019. Our performance in the second quarter of 2019 was in line with our seasonal expectations. During the quarter, we saw strong performance in a number of key operating measures including; solid growth in year-over-year software bookings levels, both sequential and year-over-year improvements in subscriber retention, increased software backlog levels and continued strong 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 totaling $3.8 million in the first half of 2019 up from $3.6 million in the year-earlier period. We also returned nearly $7 million of capital to our stockholders through the first half of the year in the form of dividends and share repurchases and enhanced our product offerings through our continued investments in our integrated communication platforms Spok Care Connect. We continue our substantial investment in our development team and are leveraging our decades of experience in critical health care communication to deliver a cloud-based platform that will bring the latest in communication technology 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 team. Our teams remain on target to meet our development goals for the year. As we further our transition, we were pleased to see first half software revenue grow year-over-year with each quarter up from the prior year. Additionally, we continue to see a more than 99% renewal rate…

Thanks, Vince. Let me give you all a little more detail on our financial performance in the second quarter. I would again encourage you to review our second quarter 2019 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 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 levels of year-over-year software operations revenue; software maintenance revenue renewal rates, which continue to exceed 99%; and lower levels of churn in wireless paging units. Lastly, continued discipline in our operating expense management has allowed us to absorb the impacts of our planned investments in product research and development expenses and generate 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 selected items which influenced second quarter expenses; a brief review of the balance sheet; and finally I will review our financial guidance for 2019. 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 2019, total GAAP revenue was $39.5 million compared to $40.6 million in the second quarter of 2018. Through the first six months of 2019, GAAP revenue totaled $81.3 million compared to revenue of $83.7 million in the first half of 2018. While total…

Thanks Mike and good job. Before we open the call up for your questions, I'd like 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 the remainder of 2019. With respect to our current capital allocation strategy, our overall goal is to achieve sustainable profitable business growth, while maximizing long-term stockholder value. Towards that end, the allocation of capital remains a primary area of focus. Our multifaceted capital allocation strategy still includes dividends and share repurchases as well as key strategic investments that augment our product, development, 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're a company in transition and believe that 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 communication platform will be a game changer in our chosen markets. 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 our technology. We will continue to evaluate our capital allocation strategy and communicate our plans to you each quarter when we report earnings. Finally, with regard to our key goals and business outlook, we believe our first half activities and investments have positioned us to be successful in the second half of 2019. In order to take advantage of the 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. Last quarter, we were pleased to host our 2019 Investor Day in New York City. At that event, we were excited to give you an update on our business, have you meet the team and most importantly to provide a demonstration of our next-generation Spok Care Connect platform. For those of you that were not able to attend in person or via the webcast, the event and the slide presentation are on our website. We believe that these presentations will give you a sense for the excitement level our team has with the introduction of our enhanced platform and the opportunity ahead of us. We will continue to update you as we make progress in our transition and appreciate your continued support. At this point, I'll ask the operator to open the call for your questions. [Operator Instructions] Operator?

Thank you. [Operator Instructions] And we'll take our first question from Ryan Vardeman with Palogic.

Hey, guys. Thanks for taking my question.

Hi, Ryan.

It sounds like you're on track to start selling the Spok 2.0 in the back half of this year. How do you intend on pricing that -- those platform sales? And what are some bookings goals between now and the end of the year on that?

So the pricing, the rollout, the pilot program are something that we're in deep development right now. We're working with an outside consultant on that as well. I think when we did our Investor Day and thank you for coming -- Mike showed you an example of how a premise-based package solution looks and how that might look under a SaaS-based model. So that work is all in process and it's not complete yet. So we're not prepared to share that today. We're not going to give specific booking targets for the new platform this year other than to reiterate the guidance that we gave at the beginning of the year and that Mike just reiterated a couple of minutes ago in terms of where we see our revenue our operating expenses and our CapEx. We are in the process. We have completed release 2. We are in the process of working on release 3. And as I said it at Investor Day, we're going to have three releases a year one approximately every four months. And each time we do a release on that platform, Ryan we'll be adding features and functionality. Obviously, that'll change the value for the platform. Traditionally in our business, our contact center solution which if you look at all the hospitals out there in the United States, the hospitals that have 600 or more beds the large hospitals -- traditionally we've got about half of those hospitals are Spok customers with our contact center solution. And so that contact center solution if you think about it was kind of the nucleus or the platform upon which we sold our other packages including our messenger package, our mobile package, our critical test results package. All of those packages kind of pivoted off that contact center…

Yes. I mean, clearly I'm -- and I've been fairly consistent in asking for this, but we're four years into this development of this NextGen platform. And we don't really have any bookings targets that we can measure you by. The stock's trading well below what we paid for the business plus our -- the software business plus what we've put into it. Clearly, the market is missing something. And so, either you're wrong or the market's wrong. And in the event that the market's wrong, I would love to be able to understand truly what the ROI targets are associated with the investment -- the large investment that we've made.

Yes. We think that we'll...

So I think you can help by letting us understand those things I think.

Ryan, thank you. You've been very consistent, and I appreciate your questions and understand it fully. We do think the market's wrong. We look at the value of the recurring revenue stream off of our paging business and we get a very nice number long-term. We look at the software business, and we're not going to get valued, and we're not going to get appreciated until we actually show those bookings from the new platform. So right now, if you think about it within Spok, there's essentially a start-up company. There's a start-up company that has no revenue, no bookings and a lot of expenses. We think from feedback we've got, not from each other sitting around the table saying, how wonderful we are, but from actual customers, we've shown these things to. We think we've got something that's going to be a game changer and going to be significant. We don't expect the market to give us value for that until they actually see sales and result. I just think that's just the way it's going to work. And so, we know what we have to do. We are very frustrated with the stock price, but we're not losing our enthusiasm for what we're doing. We think our strategy is the absolute right strategy to create significant upside for our shareholders long-term as opposed to other strategies. Everybody talks about different kind of things companies can do go back to just milking your revenue streams for cash flow. We don't think that would give nearly as good a result as the investments we're making in our cloud data platform, but it is going to take time to see those investments come to fruition. And I appreciate the frustration. I'm frustrated myself. I'm a very large shareholder in this company. And I do think we're doing the right thing. The management team thinks we're doing the right thing. We've got Board support on this and customers doing this. We're able to attract very talented programmers. We're able to attract very talented leadership. Our sales team has seen the demos of our new products, and they are jazzed about it. We just attracted a very good high-level Chief Medical Officer that we'll be announcing that's joining us later in this month, who saw in his -- loves that things were on the right track. So we've got some good things going on, but I don't expect anybody to give us value for it until we actually -- show me we deliver. And that's what we have to do and that's what we're going to do. Thank you.

[Operator Instructions]

Operator, I don't see any other -- yeah, I don't see any other -- okay, there's one more. It looks like Ryan's got another question, yes, coming in the queue, so go ahead and put him back on.

Okay. And Ryan, your line is open.

Thanks. So, what is the Board's thought as it relates to capital allocation strategy going into 2020? Do you intend to continue the dividend? Thanks.

Yes, absolutely. Yes. The Board's thought is consistent with what I said in my comments. And with respect to 2020, we will continue the dividend. We don't have any plan anytime in the near future to cut that dividend.

Thanks a lot. Good luck.

Thank you. Operator that was all the calls that I saw in the queue. But Ryan, thank you very much for all your questions today. And thanks, everyone, for joining us this morning. We look forward to speaking with you again after we release our third quarter results in October. And everyone have a great day.

And that does conclude today's conference. Thank you for your participation. You may now disconnect.