Greetings. Welcome to Spok Holdings Third Quarter 2025 Earnings Results Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Al Galgano, Investor Relations. Thank you. You may begin.

Hello, everyone, and welcome to Spok Holdings' Third Quarter 2025 Earnings Call. I am joined by Vince Kelly, Chief Executive Officer; Mike Wallace, Chief Operating Officer; and Calvin Rice, Chief Financial Officer. 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, which are contained in our third quarter 2025 Form 10-Q 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, Al. Good afternoon, everyone, and thank you for joining us for our third quarter 2025 earnings call. I'm proud of the performance our team was able to deliver in the third quarter, especially after the exceptional performance in the second quarter, where we saw several new customer contracts get accelerated into that period and despite the seasonal headwinds we typically face in the slower summer months. On a year-to-date basis, we continue to make progress in key performance areas, including net income, adjusted EBITDA and cash generation, wireless ARPU trends, software revenue growth and gross backlog levels. Based on our solid performance through the first 9 months of the year and our visibility into our very robust product sales pipeline, we are reaffirming our guidance. We have advantages over the competition in our core healthcare software contact center space, including long-term and deep relationships with the top healthcare systems in the nation who continue to purchase from us on a regular basis, offering customers an integrated platform as opposed to multiple point solutions and continuing to invest in and enhance our platforms consistent with what our customers are requesting. Spok is viewed as an indispensable partner by many of our customers. In other words, they need Spok to efficiently carry out their day-to-day operations. Later in the call, Mike Wallace, our Chief Operating Officer, will lay out for you the product offerings that we have built that we believe will allow us to create significant shareholder value into the future. Let me also take this opportunity right upfront to remind everyone that our mission remains solidly unchanged. That is, to generate cash and return capital to our stockholders over the long term while responsibly investing in and growing our business. As we've demonstrated through our performance since our…

Thanks, Vince, and thank you, everyone, for joining us this afternoon. As Vince pointed out, timing issues impacted bookings levels during the third quarter after an exceptionally strong second quarter. However, on a year-to-date basis, we continue to make great progress in a number of key areas. As we discuss each quarter, we continue to build a solid financial platform and stockholder-friendly capital allocation strategy, and we remain true to our mission of being a global leader in healthcare communications. Today, I'd like to briefly provide you with a little more visibility into Spok's industry-leading product platform and what gives us confidence as we move forward. The cornerstone of that platform is Spok Console, which streamlines operator workflows and ensures rapid emergency response; Spok Messenger, which integrates with clinical systems to deliver alerts and notifications to the right person on the right device; and Spok Mobile, which empowers care teams with secure HIPAA-compliant messaging at their fingertips. Let's begin with Spok Console, being a secure healthcare contact center solution that serves as the central hub for hospital operator workflows. It gives operators the tools they need to respond promptly to every call and process priority communications. By uniting disparate data systems into a centralized digital directory, Spok Console ensures operators have fast access to physicians, patients and staff and that the right message reaches the right person at the right time. With a modern user-friendly interface, it integrates with the organization's PBX and leading UCaaS systems. Call center agents manage calls directly through the Console software, guided by intuitive screens and color-coded directories that simplify lookups and streamline communication. Spok Messenger is an FDA 510(k) cleared clinical alerting management solution that delivers critical information and updates from nurse call systems, patient monitors, clinical systems and other sources directly to the…

Thanks, Mike, and good afternoon, everyone. I would now like to take a few minutes and provide a recap of our third quarter 2025 financial performance, which we reported today. I encourage you to review our 10-Q when filed as it includes significantly more information about our business operations and financial performance than we will cover on this call. Turning to our income statement. In the third quarter of 2025, GAAP net income totaled $3.2 million or $0.15 per diluted share, down from net income of $3.7 million or $0.18 per diluted share in 2024. In the third quarter of 2025, total GAAP revenue was $33.9 million, down from total revenue of $34.9 million in the prior year. Revenue in the current year quarter consisted of wireless revenue of $17.8 million and software revenue of $16.1 million compared to $18.3 million and $16.6 million in the prior year, respectively. With respect to wireless revenue, we saw a 20 basis point sequential improvement in quarterly net unit churn in the third quarter at 1.4%, down from 1.6% in the prior quarter. ARPU increased $0.24 or 3% from the prior year, primarily driven by the continued impact from pricing actions and to a lesser extent, continued sales of our GenA pager. As a reminder, we implemented a 3.5% price increase in September that impacts roughly 50% to 60% of units in service, and that will be fully reflected in fourth quarter revenue. While we believe the demand for our wireless services will continue to decline on a secular basis, as reflected in declining pager units in service, we are hopeful that our focus on pricing and other initiatives like the GenA pager will continue to further offset revenue lost through pager unit decline. Also, we closely manage the expense base for the…

Thank you, Calvin, and thank you, Mike. On a final note, I'd like to again point out that I'm proud of the performance our team was able to deliver in the third quarter, especially after the exceptional performance in the second quarter and despite the seasonal headwinds we typically face in the slower summer months. We believe we can continue to grow our franchise value while returning capital to stockholders. We have a long-term organic growth engine in our software solutions through Spok Care Connect. We also maintain a source of strong recurring revenue in our wireless service line, which remains relevant and important to health care customers and supports critical communications even during network events when cell phones and other technology fail. We run the largest paging offering in the world and have integrated it with our software operations. We believe that the strong combination of these 2 product lines will take us into the future and create significant shareholder value. Before I open the call up to your questions, I'd like to thank our stockholders for their continued support. We appreciate your interest in Spok, and we look forward to updating everyone again when we report fourth quarter and full year results in February of 2026. Thank you for joining us this afternoon, and have a great day. Operator, you may now open the line to questions.

[Operator Instructions] Our first question is from Anderson Schock with B. Riley Securities.

So could you talk about the 55% year-over-year decline in licensing revenue? I guess, what drove this and whether we should expect to see similar license revenue going forward?

Anderson, it's Calvin. I mean, I think we've mentioned this before on calls, license revenue is going to be lumpy because the vast majority of it is directly related to sales. And from a quarter-to-quarter basis, given the enterprise nature of a lot of these sales, those can push and pull. Obviously, we pulled a lot of that into the second quarter. We had some big deals from the third quarter push into the fourth quarter. And so from that regard, no, I don't think it's an expectation that should be set that we're going to see a decline. I do think the expectation should be that there is variability in the license revenue from one quarter to the next.

Okay. Got it. And then you had a really strong second quarter for new software contracts and software operations bookings. I guess what led to the weaker third quarter? And how should we think about the fourth quarter? Is there any seasonality we should be thinking about that impacts the timing of these contracts?

Yes. We've looked at this closely, and we're very bullish on our outlook. That's why we reiterated our guidance. We're expecting to have a strong fourth quarter. We went back and looked at since the pivot, which was starting in the second quarter of 2022, we haven't missed a quarterly forecast until this quarter. We did miss our internal operations bookings forecast. Embedded in that was license. We're still forecasting license revenue grows on a year-over-year basis. Our company total revenue will grow on a year-over-year basis. And so we're looking for a strong fourth quarter here. We've got a very robust pipeline. We've got some very large deals in the hopper right now that we're working. We get a couple of those, and we're going to turn in another very strong quarter. We turned in $8.3 million in operations bookings in the first quarter, $11.6 million in the second quarter. We hit that air pocket, which was odd because July started off pretty well in the third quarter, but August and September were very slow. Some deals slipped. Like I said, we've got some large deals in the pipeline. We're very bullish, and we expect to close them this quarter and report a good fourth quarter when we report at the end of February.

Okay. Got it. And then do you still anticipate a 6% to 8% increase in R&D for 2026? And then could you just detail the focus of this investment? And when should we expect to see revenue contribution or margin improvement from these investments?

So R&D this year is going to be a little bit over $12 million. We've given the team more money to invest this year than they had last year, about $1 million more. Next year, it will be a little over $13 million. So about $2 million more a year on a run rate over what our baseline was in 2024 and prior. And a lot of that's going to the consolidation of our Care Connect suite, upgrading it, adding enhancement, adding functionality. And you'll see going forward in each quarter of 2026, some benefits from that. It will result in more new logo. It will result in increased upgrades and multiyear engagements. We're not doing this without the anticipation that we're going to get good benefits from that.

With no further questions, I would like to turn the floor back over to Vince Kelly for closing comments.

Okay. Folks, thanks for joining us this afternoon in our third quarter earnings call. We look forward to talking to you in a quarter at the end of February with much better results. Everyone, have a great day.

Thank you. This does conclude today's conference. You may disconnect at this time, and thank you for your participation.