Greetings, and welcome to the Spok Holdings, Inc. Q4 2025 Earnings Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Al Galgano. Please go ahead.

Hello, everyone, and welcome. I am joined today by Vince Kelly, Chief Executive Officer; Michael Wallace, Chief Operating Officer; and Calvin Rice, Chief Financial Officer. After a brief presentation by management, we will open up the call to your questions. 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 2025 Form 10-K and related documents, which will be 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.

Good afternoon. Thank you for joining us for our fourth quarter 2025 earnings call. Let me preface my comments by saying how proud I continue to be of our Spok team and our ability to end the year strong and regain the positive momentum we saw in the first half of 2025. We accomplished this while staying true to our mission, and I'm very excited by our prospects and outlook. Since the strategic pivot we announced about 4 years ago now, our focus has not changed. That is to grow our software revenue, generate cash and return capital to our stockholders. In 2025, for the fourth consecutive year, we achieved that goal. We returned $27.3 million of cash to our stockholders while generating $29 million of adjusted EBITDA. We were also successful in our stated goal of growing software revenue and managing anticipated wireless declines. Coupled with the continued focus on expense management, Spok generated $15.9 million or $0.75 per diluted share of net income for the full year of 2025, and we accomplished this while responsibly investing in our product and service offerings. This focus struck an excellent balance between making the necessary investments to fuel future growth while continuing to generate cash flow and returning capital to our stockholders. Today, we'll share with you an update on how our strategic business plan is progressing in support of our goals as well as our financial results for the fourth quarter and full year. I'll start by reviewing the agenda for today's call. The order will be as follows: First, we will review our strategic focus and goals. Next, Mike Wallace, our COO, will provide a review of our sales performance. Then Calvin Rice, our CFO, will review our fourth quarter and full year 2025 financial highlights as well as…

Thanks, Vince, and good afternoon. Thank you all for joining us for what we believe was a solid quarter and full year of results from Spok. We are pleased to report that we have continued to execute on our business plan. And in 2025, as Vince noted, we generated GAAP net income of $15.9 million or $0.75 per diluted share, up from the prior year results. Importantly, we achieved this bottom line performance while continuing to generate operations bookings levels in excess of $30 million for the third consecutive year as well as maintaining our professional services and maintenance backlog levels, which totaled more than $58 million. Amidst all the progress in continuing to create the solid financial platform and stockholder-friendly capital allocation strategy, we remain true to our mission of being a global leader in health care communications. Simply put, we deliver clinical information to care teams when and where it matters most to improve patient outcomes as Spok enables smarter, faster clinical communications for our customers. And importantly, we continue to maintain our reputation as a thought leader in the health care communications space as we continue to see customer satisfaction ratings at very high levels. 2025 was a frustrating year with regards to our software operations bookings as we saw solid momentum in the first half of the year, offset by headwinds that we ran into in the third quarter. However, we regained that momentum in the fourth quarter, seeing 14% year-over-year and 83% sequential growth in bookings. In 2025, we were able to execute 73 6- and 7-figure customer contracts. And in the fourth quarter, we saw a more than 50% year-over-year growth in the average customer contract size. Additionally, in 2025, we saw a 47% increase in license bookings related to multiyear engagements with customers.…

Thanks, Mike, and good afternoon, everyone. I would now like to take a few minutes and provide a recap of our fourth quarter and full year 2025 financial performance, which we reported earlier today. As always, I encourage you to review our 10-K 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 2025, GAAP net income totaled $15.9 million or $0.75 per diluted share, up from net income of $15 million or $0.73 per diluted share in 2024. In 2025, total GAAP revenue was $139.7 million, up from revenue of $137.7 million in 2024. Wireless revenue of $72.5 million for the year was down from revenue of $73.5 million in the prior year. However, this was more than offset by growth in software revenue to $67.2 million in 2025. Year-over-year growth in software revenue was driven by a nearly 24% increase in professional services revenue and the continued success of our managed services offering. With respect to wireless revenue, the deceleration of revenue decline was primarily driven by pricing actions taken on unreturned pager equipment earlier in 2025. While net unit loss was relatively flat from 2024, product sales, of which unreturned pager equipment fees comprised more than 80% of the related revenue increased by $1.4 million or 54%. Average revenue per unit, or ARPU, which saw growth of $0.23 on a year-over-year basis, continues to be our primary tool in combating revenue decline from unit loss. Much of this increase was driven by previous pricing actions and to a lesser extent, incremental pass-through taxes and fees. Net unit churn in the fourth quarter improved 12 basis points to 1.3% from the prior quarter, and we believe that we can continue…

Thank you, Calvin. Before we open up the call to your questions, let me say again how proud I am of our entire Spok team in regaining the momentum that we saw in the first half of 2025. It's their efforts and dedication, which provides confidence in our outlook for 2026. We are focused on the opportunity in front of us in clinical communications. From a business configuration and strategy perspective, we believe we are strongly positioned to grow our franchise while returning capital to stockholders. We have a long-term organic growth engine in Spok Care Connect. We maintain a strong source of recurring revenue in our wireless service line. We run the largest paging offering in the world integrated with our software operations. We have enhanced our paging platform and user devices to serve our core health care customer base. We believe these 2 assets going for us, our best financial results are ahead of us and Spok's future is bright. I'd like to take this opportunity to thank our stockholders for their continued support and want to assure you that our primary focus remains on generating cash and increasing stockholder value. We are committed to our current dividend and capital allocation policy. I believe that today, we've provided you an appreciation for some of the great things that are happening at Spok and the market opportunities that lay ahead of us. While we've shared our initial guidance with you for 2026, we will work to exceed those expectations and update you each quarter. We started the year off strong, and we very much look forward to speaking with you again in 2 months when we report our Q1 results in late April. That concludes our prepared remarks. So 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. And after that, we'll take additional questions as time allows. Operator?

[Operator Instructions] And our first question will come from Anderson Schock with B. Riley Securities.

So first, on software backlog, so it declined 6.8% year-over-year, but excluded from this are the cancelable contracts, which nearly tripled year-over-year to around $16 million. Can you explain what's driving the shift in the cancelable portion?

Anderson, this is Calvin. I'll get going. Yes, from a cancelable perspective, I think we've alluded to in the past from a bookings perspective that our deal size is growing. We're leveraging up to 7-figure contract deals. And with that's going to come terms that may be slightly unfavorable to the company. Obviously, we'd love to lock those in. But with some of these customers, we have to negotiate those terms. And I think that's primarily what's driving that, again, relative to the historical growth in the backlog and the bookings. And we really view that exclusive or I should say, inclusive of those cancelable portions. We fully expect to collect all of that. We have a history, while not as large in the past, we've never really had any customers reneg on those cancelable portions. And so we fully expect to realize the full value of those backlog numbers.

Okay. Got it. And then so on fourth quarter software operations bookings, so it recovered to roughly around the first quarter level. So I guess, how should we think about this going forward? Was the second quarter of 2025 an outlier? Or should we expect to return to this level at some point in 2026?

I think with respect to that we just issued, that obviously incorporates our bookings expectations in there in terms of what's going to flow through to revenue and push that forward. We think we're going to grow our operations bookings in 2026 over the level of 2025. It's very hard to say on a quarterly basis because these contracts sometimes, especially the larger ones that Calvin alluded to, they're very lumpy. We've got a really large one right now. We're waiting to get signed, and we're hoping it comes in the first quarter, may come in the second quarter. Those large contracts really can push quarter much higher. What really matters is what happens over the course of the 4 quarters, and we're optimistic this year from everything we see in the marketplace that our total bookings will grow this year over 2025 levels.

[Operator Instructions] We'll go next to David Wright with Henry Investment Trust.

A question. How does AI -- how do you look at AI with your business, particularly Spok Connect in terms of opportunities or threats?

Yes. I think there's 2 things to look at right now. One is AI with respect to our own internal functioning and our R&D efforts in terms of our coding efficiency, et cetera, and just making us to spend less and get more. And that's something we're well down the path on with our internal teams, getting the training, evaluating how we do business and all those things that you read about on a daily basis in the financial blogs and newspaper. With respect to our customers, our primary functionality where we have the majority of large hospitals in the United States as customers, many of them for decades, our primary functionality is the operator console where they're often taking inbound calls that sometimes are life and death type situations, code calls, et cetera. We're working with several partners right now to incorporate AI into that functionality, and we believe we'll do so this year. But we want to be very careful with respect to the feedback we're getting from our customers because they're not going to take -- you have a large health care system and they have 1 or 2 operators on call in the middle of the night and there's emergencies being called in. They're not at a point where they feel comfortable turning that type of functionality over to an AI operator. So I think what you'll see more likely is some type of helper for those operators to make them more efficient and more automated. And I think one place that will really help them is with respect to training up new staff because it can often take one of these hospitals up to 3 months to train staff where they really feel like they could leave them in a situation where they can handle those types of life and death calls. So I think there's great opportunity there. And what we've seen is the same thing you're seeing every 3 months that seems to be an order of magnitude leap in terms of what this stuff can do. So we're looking very closely at these. We've contracted with a couple of the AI companies that are household names right now in terms of utilizing their software and our road map process. And there's going to be more to come on that. But it's something we want to be very careful as we go to implement because you know sometimes these large language models can make a mistake, and we're in a business of saving time, connecting the right people to the right device at the right time and saving lives.

Yes. I meant to say Spok Console, by the way, not Spok Connect.

Yes. I [indiscernible] that's what you meant.

Okay. And then to follow up, Vince, you talk somewhat frequently about making investments to grow the revenue base and fuel future growth. And what does that look like? You've done a really good job of keeping the things stable over the last several years since you made the switch. But is -- growth has been on the top line 1.5% a year is like what does -- in an ideal world, what does your vision look like?

The world for '26 in terms of our vision matches the guidance we just gave. We are running a tight rope balance between -- we're a public company that has a free cash flow stated strategy. So we're generating that cash flow on a quarterly basis so we can fund that dividend and have a little bit left over. Last year, we invested about $12 million in our R&D process. And a big portion of that was going toward new platform, new capability, new functionality, including this AI area. And then a big portion was going to support the legacy software solutions that we offer. Going forward, we're shifting that investment more toward what's coming new and less on the legacy. And so what you would expect to see in [indiscernible] and beyond is higher growth than was implied in our 2026 guidance [indiscernible] investment. But again, like in a perfect world, if we were, say, a private company, not a public company, we might be a lot more aggressive in terms of how we made those investments in the new platform because we wouldn't have to focus on [indiscernible] the dividend. But we think it's important in this software [indiscernible] to reward the shareholders and shareholders on the way as we go. And that's kind of why our strategy is balanced the way it is.

This now concludes our question-and-answer session. I would like to turn the floor back over to Vince Kelly for closing comments.

Okay. Thank you very much for your participation and your support. It does conclude today's teleconference. Have a wonderful day, and we look forward to speaking with you again at the end of April when we report our first quarter results. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.