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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-Q
 
(Mark One)
☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2023
 
or
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission File Number: 001-32358
spok_hor_flat_4C.jpg
SPOK HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 16-1694797
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)
 
5911 Kingstowne Village Pkwy, 6th Floor 
Alexandria, Virginia 22315
(Address of principal executive offices) (Zip Code)
(800) 611-8488
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.0001 per shareSPOKNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐  Smaller reporting company☒
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
19,949,504 shares of the registrant’s common stock (par value $0.0001 per share) were outstanding as of April 28, 2023.


SPOK HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
  Page  
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 6.
Exhibits


PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands)March 31, 2023December 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$29,550 $35,754 
Accounts receivable, net22,644 26,861 
Prepaid expenses7,150 6,849 
Other current assets628 587 
Total current assets59,972 70,051 
Non-current assets:
Property and equipment, net7,802 8,223 
Operating lease right-of-use assets13,401 13,876 
Goodwill99,175 99,175 
Deferred income tax assets, net50,706 52,398 
Other non-current assets694 754 
Total non-current assets171,778 174,426 
Total assets$231,750 $244,477 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$4,659 $5,880 
Accrued compensation and benefits6,063 11,628 
Deferred revenue24,629 26,274 
Operating lease liabilities4,964 5,096 
Other current liabilities4,823 4,573 
Total current liabilities45,138 53,451 
Non-current liabilities:
Asset retirement obligations7,353 7,237 
Operating lease liabilities 10,064 10,604 
Other non-current liabilities846 1,107 
Total non-current liabilities18,263 18,948 
Total liabilities63,401 72,399 
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock$— $— 
Common stock2 2 
Additional paid-in capital99,599 99,908 
Accumulated other comprehensive loss(1,897)(1,909)
Retained earnings70,645 74,077 
Total stockholders’ equity168,349 172,078 
Total liabilities and stockholders' equity$231,750 $244,477 
            
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
2

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended March 31,
(Unaudited and in thousands except share and per share amounts)20232022
Revenue:
Wireless revenue$19,028 $18,846 
Software revenue14,152 14,979 
Total revenue33,180 33,825 
Operating expenses:
Cost of revenue (exclusive of items shown separately below)6,536 7,804 
Research and development2,493 6,497 
Technology operations6,587 7,013 
Selling and marketing3,901 5,315 
General and administrative7,700 10,435 
Depreciation, amortization and accretion1,236 934 
Severance and restructuring10 4,495 
Total operating expenses28,463 42,493 
Operating income (loss)4,717 (8,668)
Interest income272 67 
Other income (expense)53 (13)
Income (loss) before income taxes5,042 (8,614)
(Provision for) benefit from income taxes(1,925)1,400 
Net income (loss)$3,117 $(7,214)
Basic net income (loss) per common share$0.16 $(0.37)
Diluted net income (loss) per common share$0.15 $(0.37)
Basic weighted average common shares outstanding19,897,445 19,599,526 
Diluted weighted average common shares outstanding20,182,692 19,599,526 
Cash dividends declared per common share$0.3125 $0.3125 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
3

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 For the Three Months Ended March 31,
(Unaudited and in thousands)20232022
Net income (loss)$3,117 $(7,214)
Other comprehensive income, net of tax:
Foreign currency translation adjustments12 25 
Other comprehensive income12 25 
Comprehensive income (loss)$3,129 $(7,189)

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

4

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY 
(Unaudited and in thousands except share amounts)Outstanding
Common
Shares		Common
Stock		Additional
Paid-In
Capital & Accumulated Other Comprehensive Loss		Retained
Earnings		Total
Stockholders’
Equity
Balance, January 1, 202219,481,429 $2 $95,703 $77,986 $173,691 
Net loss— — — (7,214)(7,214)
Issuance of common stock for vested restricted stock units under the equity plans346,604 — — — — 
Purchase of common stock for tax withholding and other(134,354)— (1,209)— (1,209)
Amortization of stock-based compensation— — 1,115 — 1,115 
Cash dividends declared— — — (6,513)(6,513)
Cumulative translation adjustment— — 25 — 25 
Balance, March 31, 202219,693,679 $2 $95,634 $64,259 $159,895 

Balance, January 1, 202319,703,800 $2 $97,999 $74,077 $172,078 
Net income— — — 3,117 3,117 
Issuance of common stock for vested restricted stock units under the equity plans382,568 — — — — 
Purchase of common stock for tax withholding and other(144,516)— (1,245)— (1,245)
Amortization of stock-based compensation— — 936 — 936 
Cash dividends declared— — — (6,549)(6,549)
Cumulative translation adjustment— — 12 — 12 
Balance, March 31, 202319,941,852 $2 $97,702 $70,645 $168,349 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

5

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months Ended March 31,
(Unaudited and in thousands)20232022
Operating activities:
Net income (loss)$3,117 $(7,214)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion1,236 934 
Deferred income tax expense (benefit)1,886 (1,024)
Stock-based compensation936 1,115 
Provisions for credit losses, service credits and other29 594 
Changes in assets and liabilities:
Accounts receivable4,187 2,951 
Prepaid expenses and other assets(282)(1,421)
Net operating lease liabilities(197)(91)
Accounts payable, accrued liabilities and other(6,680)879 
Deferred revenue(1,621)(1,602)
Net cash provided by (used in) operating activities2,611 (4,879)
Investing activities:
Purchases of property and equipment(649)(679)
Purchase of short-term investments— (14,967)
Maturity of short-term investments— 15,000 
Net cash used in investing activities(649)(646)
Financing activities:
Cash distributions to stockholders(6,933)(6,524)
Purchase of common stock for tax withholding on vested equity awards(1,245)(1,209)
Net cash used in financing activities(8,178)(7,733)
Effect of exchange rate on cash and cash equivalents12 25 
Net decrease in cash and cash equivalents(6,204)(13,233)
Cash and cash equivalents, beginning of period35,754 44,583 
Cash and cash equivalents, end of period$29,550 $31,350 
Supplemental disclosure:
Income taxes paid/(refunded)$(6)$(39)

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
6
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Spok Holdings, Inc. (NASDAQ: SPOK) ("Spok," "we," "our" or the "Company"), through its wholly owned subsidiary Spok, Inc., is proud to be the global leader in healthcare communications. We deliver clinical information to care teams when and where it matters most to improve patient outcomes. Top hospitals rely on Spok products and services to enhance workflows for clinicians, support administrative compliance, and provide a better experience for patients.
We offer a focused suite of unified clinical communication and collaboration solutions that include call center applications, clinical alerting and notifications, one-way and advanced two-way wireless messaging services, mobile communications and public safety solutions.
We provide one-way and advanced two-way wireless messaging services, including information services, throughout the United States. These services are offered on a local, regional and nationwide basis employing digital networks. One-way messaging consists of numeric and alphanumeric messaging services. Numeric messaging services enable subscribers to receive messages that are composed entirely of numbers, such as a phone number, while alphanumeric messages may include numbers and letters, which enable subscribers to receive text messages. Two-way messaging services enable subscribers to send and receive messages to and from other wireless messaging devices, including pagers, personal digital assistants and personal computers. We also offer voice mail, personalized greetings, message storage and retrieval, and equipment loss and/or maintenance protection to both one-way and two-way messaging subscribers. These services are commonly referred to as wireless messaging and information services.
We also develop, sell and support enterprise-wide systems for hospitals and other organizations needing to automate, centralize and standardize clinical communications. These solutions are used for contact centers, clinical alerting and notification, mobile communications and messaging and for public safety notifications. These areas of market focus complement the market focus of our wireless services outlined above.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements include our accounts and the accounts of our wholly owned direct and indirect subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). In management's opinion, the unaudited Condensed Consolidated Financial Statements include all adjustments and accruals that are necessary for the presentation of the results of all interim periods reported herein and all such adjustments are of a normal, recurring nature.
Amounts shown in the Condensed Consolidated Statements of Operations within the operating expense categories of cost of revenue; research and development; technology operations; selling and marketing; and general and administrative are recorded exclusive of depreciation, amortization and accretion. These items are shown separately to the extent that they are considered material for the periods presented.
Certain prior period amounts in the Condensed Consolidated Financial Statements have been reclassified to conform to the current period's presentation. These reclassifications had no effect on the reported results of operations or the Condensed Consolidated Balance Sheets.
The financial information included herein, other than the Condensed Consolidated Balance Sheet as of December 31, 2022, is unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2022, has been derived from, but does not include all, the disclosures contained in the audited Consolidated Financial Statements as of and for the year ended December 31, 2022.
These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”). The Condensed Consolidated Statements of Operations for the interim periods presented are not necessarily indicative of the results that may be expected for a full year.
7
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Use of Estimates
The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an ongoing basis, we evaluate estimates and assumptions, including, but not limited to, those related to the impairment of long-lived assets, goodwill, accounts receivable allowances, revenue recognition, determining the standalone selling price of performance obligations, variable consideration, depreciation expense, asset retirement obligations and income taxes. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
NOTE 2 - RISKS AND OTHER IMPORTANT FACTORS
See “Item 1A. Risk Factors” of Part II of this Quarterly Report on Form 10-Q (“Quarterly Report”) and "Item 1A. Risk Factors" of Part I of the 2022 Annual Report, which describe key risks associated with our operations and industry. 
NOTE 3 - RECENT ACCOUNTING STANDARDS
The Company considers the applicability and impact of all Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB"). The Company has determined that all recent ASUs issued by the FASB are either not applicable or are not expected to have a material impact on the Company's Condensed Consolidated Financial Statements.
NOTE 4 - SIGNIFICANT ACCOUNTING POLICIES UPDATE
Our significant accounting policies are detailed in Note 1, “Organization and Significant Accounting Policies” of the 2022 Annual Report.
NOTE 5 - RESTRUCTURING
In February 2022, the Company announced a new strategic business plan that included a restructuring of its business to discontinue Spok Go, eliminate all associated costs and optimize the Company’s existing structure to drive continued cost improvement.
As part of the restructuring program, the Company eliminated 176 positions, primarily in research and development, and also in professional services, selling and marketing, and back-office support functions.
For the three months ended March 31, 2022, the Company incurred total severance and restructuring costs of $4.5 million related to the restructuring program, which are included within the Condensed Consolidated Statement of Operations. These costs are as follows:
For the Three Months Ended March 31,
(Dollars in thousands)2022
Severance and personnel related costs$3,997 
Contractual terminations498 
Total severance and restructuring costs$4,495 

8
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of activity for the three months ended March 31, 2023 and 2022, for restructuring-related liabilities associated with the strategic business plan, which is included within accrued compensation and benefits and other current liabilities within the Condensed Consolidated Balance Sheet, is as follows:
(Dollars in thousands)
Balance at December 31, 2021$— 
Restructuring and other charges4,495 
Payments(34)
Non-cash adjustment(124)
Balance at March 31, 2022$4,337 
Balance at December 31, 2022$2,208 
Restructuring and other charges— 
Payments(2,051)
Non-cash adjustment(4)
Balance at March 31, 2023$153 
NOTE 6 - REVENUE, DEFERRED REVENUE AND PREPAID COMMISSIONS
Wireless Revenue
Wireless revenue consists of two primary components: paging revenue and product and other revenue. Paging revenue consists primarily of recurring fees associated with the provision of messaging services and fees for paging devices and is net of a provision for service credits. Product and other revenue reflects system sales, the sale of devices and charges for paging devices that are not returned and are net of anticipated credits. Our core offering includes subscriptions to one-way or two-way messaging services for a periodic (monthly, quarterly, semiannual, or annual) service fee. This is generally based upon the type of service provided, the geographic area covered, the number of devices provided to the customer and the period of commitment. A subscriber to one-way messaging services may select coverage on a local, regional or nationwide basis to best meet their messaging needs. Two-way messaging is generally offered on a nationwide basis. (See Item 1. “Business,” in the 2022 Annual Report for more details.)
Software Revenue
Software revenue consists of two primary components: operations revenue and maintenance revenue. Operations revenue consists primarily of license revenues for our healthcare communications solutions, revenue from the sale of equipment that facilitates the use of our software solutions, and professional services revenue related to the implementation of our solutions. Maintenance revenue is for ongoing support of our software solutions or related equipment and access to when-and-if available software updates. Maintenance is generally purchased and renewed on an annual basis.
Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Our software licenses and hardware are generally recognized at a point in time when we have transferred control to the customer. For software licenses, revenue is not recognized until the related license(s) has been made available to the customer and the customer can begin to benefit from its right to use the license(s). Our software licenses represent a right to use Spok’s intellectual property ("IP") as it exists at a point in time at which the license is granted. Many of our software licenses have significant standalone functionality due to their ability to process a transaction or perform a function or task, and we do not need to maintain those products, once provided to the customer, for value to exist. While the functionality of the IP that we license may substantively change during the license period, customers are not contractually or practically required to update their license as a result of those changes.
9
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Our wireless, professional services, and maintenance are generally recognized over time due to a customer's simultaneous receipt and consumption of the benefit as we perform the work. As we transfer control over time, we recognize revenue based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires significant judgment and is based on the nature of the products or services to be provided. Generally, we use the time-elapsed measure of progress for performance obligations that include wireless or maintenance services. We believe this method best depicts the simultaneous transfer and consumption of the benefit based on our performance as these services are generally considered standby services. For professional services, we leverage an input methodology based on the number of hours worked on a project versus the total expected hours necessary to complete the project. Revenues are recognized proportionally as hours are incurred.
The following table presents our revenues disaggregated by revenue type:
For the Three Months Ended March 31,
(Dollars in thousands)20232022
Revenue:
Paging revenue$18,525 $18,313 
Product and other revenue503 533 
Wireless revenue$19,028 $18,846 
License$1,618 $1,824 
Professional services3,239 3,336 
Hardware356 589 
Operations revenue5,213 5,749 
Maintenance8,939 9,230 
Software revenue$14,152 $14,979 
Total revenue$33,180 $33,825 
The U.S. was the only country that accounted for more than 10% of the Company’s total revenue for the three months ended March 31, 2023, and 2022. Revenue generated in the U.S. and internationally consisted of the following for the periods stated:
For the Three Months Ended March 31,
(Dollars in thousands)20232022
United States$32,210 $32,772 
International970 1,053 
Total revenue$33,180 $33,825 

10
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred Revenues
Our deferred revenues represent payments made by, or due from, customers in advance of our performance. Changes in the balance of total deferred revenue during the three months ended March 31, 2023, are as follows:
(Dollars in thousands)December 31, 2022AdditionsRevenue RecognizedMarch 31, 2023
Deferred Revenue$26,524 $12,470 $(14,091)$24,903 
During the three months ended March 31, 2023, the Company recognized $10.0 million related to amounts deferred as of December 31, 2022.
Prepaid Commissions
Our prepaid commissions represent payments made to employees in advance of our performance on the related underlying contracts. These costs have been incurred directly in relation to obtaining a contract. As such, these costs are amortized over the estimated period of benefit. Changes in the balance of total prepaid commissions during the three months ended March 31, 2023 are as follows:
(Dollars in thousands)December 31, 2022AdditionsCommissions RecognizedMarch 31, 2023
Prepaid Commissions$1,745 $797 $(799)$1,743 
Prepaid commissions are included within prepaid expenses in the Condensed Consolidated Balance Sheets and commissions expense is included within selling and marketing in the Condensed Consolidated Statements of Operations.
Remaining Performance Obligations
The balance of remaining performance obligations at March 31, 2023, was $46.5 million. We expect to recognize approximately $34.9 million of our remaining performance obligations over the next 12 months, with the remaining balance recognized thereafter.
NOTE 7 - LEASES
We have operating lease arrangements for corporate offices, cellular towers, storage units and small building space. The building space is used to house infrastructure, such as transmitters, antennae and other various equipment for the Company’s wireless paging services. For leases with a term of 12 months or less, renewal terms are generally of an evergreen nature (either month-to-month or year-to-year). For leases with a term greater than 12 months, renewal terms are generally explicit and provide for one to five optional renewals consistent with the initial term. Many of our leases, with the exception of those for our corporate offices, include options to terminate the lease within one year. Variable lease payments, residual value guarantees or purchase options are not generally present in these leases.
In May 2022, we extended twenty-three site leases on a Master License Agreement which included a term of 10 years with an option to terminate within 45 days of notification of termination. At that time, we recorded a $2.9 million right-of-use asset and a corresponding operating lease liability for these leases.
In December 2022, we modified an office lease to reduce the leased space and optimize costs, which resulted in a reduction of $1.8 million in right-of-use assets and corresponding operating lease liabilities.
Lease costs are included in technology operations and general and administrative expenses in the Condensed Consolidated Statements of Operations. The following table presents lease costs disaggregated by type:
For the Three Months Ended March 31,
(Dollars in thousands)20232022
Operating lease cost$1,178 $1,482 
Short-term lease cost 2,280 2,633 
Total lease cost$3,458 $4,115 

11
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents supplemental cash flow information:
For the Three Months Ended March 31,
(Dollars in thousands)20232022
Cash paid for amounts included in the measurement of lease liabilities - operating leases$1,368$1,535

The following table presents the weighted average remaining lease term and discount rate:
March 31,
(Dollars in thousands)20232022
Weighted average remaining lease term - operating leases (in years)4.704.60
Weighted average discount rate - operating leases4.79%4.42%
Maturities of lease liabilities as of March 31, 2023, were as follows:
For the Year Ended December 31,(Dollars in thousands)
2023 (remaining nine months)
$3,874 
20244,031 
20253,006 
20262,304 
20271,118 
Thereafter2,475 
Total future lease payments16,808 
Imputed interest(1,780)
Total$15,028 
NOTE 8 - CONSOLIDATED FINANCIAL STATEMENT COMPONENTS
Depreciation and Accretion
Depreciation and accretion expenses consisted of the following for the periods stated:
For the Three Months Ended March 31,
(Dollars in thousands)20232022
Depreciation
Leasehold improvements$13 $19 
Asset retirement costs66 (175)
Paging and computer equipment938 850 
Furniture, fixtures and vehicles55 70 
Total depreciation1,072 764 
Accretion164 170 
Total depreciation and accretion expense$1,236 $934 
Accounts Receivable, Net
Accounts receivable was recorded net of an allowance of $1.6 million at March 31, 2023, and $1.8 million at December 31, 2022. Accounts receivable, net includes $6.8 million and $5.9 million of unbilled receivables at March 31, 2023, and December 31, 2022, respectively. Unbilled receivables are defined as the Company's right to consideration in exchange for goods or services that we have transferred to the customer but have not yet billed for, generally as a result of contractual billing terms.
12
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property and Equipment, Net
Property and equipment, net consisted of the following as of the dates stated:
(Dollars in thousands)Useful Life
 (In Years)		March 31, 2023December 31, 2022
Leasehold improvementsshorter of useful life or lease term$2,497 $2,497 
Asset retirement costs
1-5
3,848 3,848 
Paging and computer equipment
1-5
87,224 88,427 
Furniture, fixtures and vehicles
3-5
3,225 3,289 
Total property and equipment96,794 98,061 
Accumulated depreciation(88,992)(89,838)
Total property and equipment, net$7,802 $8,223 
NOTE 9 - GOODWILL
During the three months ended March 31, 2023, we performed a qualitative assessment of goodwill and determined that a triggering event had not occurred. While an impairment assessment is performed annually in the fourth quarter, the Company monitors its business environment for potential triggering events on a quarterly basis. There is potential for further impairment charges being recognized in future periods based on these ongoing assessments.
NOTE 10 - ASSET RETIREMENT OBLIGATIONS
The components of the changes in the asset retirement obligation liabilities were:
(Dollars in thousands)Short-Term
Portion		Long-Term
Portion		Total
Balance at December 31, 2022$243 $7,237 $7,480 
Accretion(1)165 164 
Amounts paid(83)— (83)
Reclassifications49 (49)— 
Balance at March 31, 2023$208 $7,353 $7,561 
The short-term portion of the balance above is included within other current liabilities in the Condensed Consolidated Balance Sheets at March 31, 2023, and December 31, 2022.
The cost associated with the estimated removal costs and timing refinements due to ongoing network rationalization activities is expected to accrete to a total liability of $9.1 million. The total estimated liability is based on the transmitter locations remaining after we have consolidated the number of networks we operate and assuming the underlying leases continue to be renewed to that future date. Accretion expense related solely to asset retirement obligations and was recorded based on the interest method.
NOTE 11 - STOCKHOLDERS' EQUITY
General
Our authorized capital stock consists of 75 million shares of common stock, par value $0.0001 per share, and 25 million shares of preferred stock, par value $0.0001 per share.
At March 31, 2023, and December 31, 2022, we had no stock options outstanding.
At March 31, 2023, and December 31, 2022, there were 19,941,852 and 19,703,800 shares of common stock outstanding, respectively, and no shares of preferred stock outstanding.
13
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Dividends
Cash distributions to stockholders, as disclosed in the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023, and 2022, include previously declared cash dividends on shares of vested restricted common stock ("restricted stock") issued to our non-executive directors and dividends related to vested restricted stock units ("RSUs") issued to eligible employees. Cash dividends on RSUs and restricted stock have been accrued and are paid when the applicable vesting conditions are met. Accrued cash dividends on forfeited restricted stock and RSUs are also forfeited. The following table details our cash dividends declared and paid in 2023 through the date hereof:
(Dollars in thousands)
Declaration DateRecord DatePayment DatePer Share Amount
Total Declared(1)
February 22, 2023March 16, 2023March 30, 2023$0.3125 $6,549 
Total$0.3125 $6,549 
(1) The total declared reflects the cash dividends declared in relation to common stock, deferred stock units ("DSUs") and unvested RSUs.
On May 3, 2023, our Board of Directors declared a regular quarterly cash dividend of $0.3125 per share of common stock with a record date of May 25, 2023, and a payment date of June 23, 2023. Cash dividends related to common stock of approximately $6.2 million will be paid from available cash on hand.
Common Stock Repurchase Program
On February 16, 2022, our Board of Directors authorized a share repurchase program for up to $10 million of the Company’s common stock. Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions, legal requirements and other considerations. The repurchase program does not obligate the Company to acquire any particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. For the three months ended March 31, 2023, we did not repurchase any common stock.

14
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed on the basis of the weighted average common shares outstanding. Diluted net income (loss) per common share is computed on the basis of the weighted average common shares outstanding plus the effect of all potentially dilutive common shares, including outstanding restricted stock and RSUs, which are treated as contingently issuable shares, using the “treasury stock” method.
The components of basic and diluted net income (loss) per common share were as follows for the periods stated:
For the Three Months Ended March 31,
(in thousands, except for share and per share amounts)20232022
Numerator:
Net income (loss)$3,117 $(7,214)
Denominator:
Basic weighted average common shares outstanding19,897,445 19,599,526 
Diluted weighted average common shares outstanding20,182,692 19,599,526 
Basic net income (loss) per common share$0.16 $(0.37)
Diluted net income (loss) per common share$0.15 $(0.37)
For the three months ended March 31, 2023, and 2022 the following securities were excluded from the calculation of diluted shares outstanding as the effect would have been anti-dilutive:
For the Three Months Ended March 31,
20232022
Restricted stock units— 270,225 
Stock-Based Compensation Plans
On March 23, 2012, our Board of Directors adopted the Spok Holdings, Inc. 2012 Equity Incentive Award Plan (the “2012 Equity Plan”) that our stockholders subsequently approved on May 16, 2012. A total of 2,194,986 shares of common stock were reserved for issuance under this plan.
On April 29, 2020, our Board of Directors adopted the Spok Holdings, Inc. 2020 Equity Incentive Award Plan (the “2020 Equity Plan” and, together with the 2012 Equity Plan, the "Equity Plans") that our stockholders subsequently approved on July 28, 2020. At July 28, 2020, a total of 1,699,950 shares of common stock had been reserved for issuance under the Equity Plans, including 1,600,000 shares available under the 2020 Equity Plan and 99,950 shares which, as of the stockholders approval date, remained available for issuance under the 2012 Equity Plan. No further grants will be made under the 2012 Equity Plan, although, the 2012 Equity Plan continues to govern all outstanding awards thereunder.
Awards under the 2020 Equity Plan may be in the form of stock options, restricted common stock, RSUs, performance awards, dividend equivalents, stock payment awards, deferred stock, DSUs, stock appreciation rights or other stock or cash-based awards.
Restricted stock awards generally vest one year from the date of grant. Related dividends accumulate during the vesting period and are paid at the time of vesting.
Contingent RSUs generally vest over a three-year performance period upon successful completion of the performance objectives. Non-contingent RSUs generally vest in thirds, annually, over a three-year period. Dividend equivalent rights generally accompany each RSU award and those rights accumulate and vest along with the underlying RSU.
Dividend equivalent rights generally accompany each DSU award and are paid to participants in cash on the Company's applicable dividend payment date whether the DSU is vested or unvested. The dividend equivalent right associated with a DSU continues until delivery of the underlying shares of common stock is made.
Payment of the underlying shares of common stock occurs at the earliest of a participant's separation from service, disability, death, or a change in control.
15
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the activities under the Equity Plans from January 1, 2023, through March 31, 2023:
 Activity
Total equity securities available at January 1, 2023683,052 
RSU, DSU, and restricted stock awarded to eligible employees, net of forfeitures(411,935)
Total equity securities available at March 31, 2023271,117 
The following table details activities with respect to outstanding RSUs, DSUs, and restricted stock under the Equity Plans for the three months ended March 31, 2023:
SharesWeighted
Average Grant
Date Fair Value
Unvested at January 1, 20231,015,749 $10.25 
Granted441,442 8.19 
Vested(373,103)11.21 
Forfeited(29,507)12.08 
Unvested at March 31, 20231,054,581 $9.00 
Of the 1,054,581 unvested RSUs, DSUs and restricted stock outstanding at March 31, 2023, 543,585 RSUs include contingent performance requirements for vesting purposes. At March 31, 2023, there was $5.3 million of unrecognized net compensation cost related to RSUs and restricted stock, which is expected to be recognized over a weighted average period of 2.0 years.
Employee Stock Purchase Plan
In 2016, our Board of Directors adopted the Spok Holdings, Inc. Employee Stock Purchase Plan (the "ESPP") that our stockholders subsequently approved on July 25, 2016. A total of 250,000 shares of common stock were reserved for issuance under this plan.
The ESPP allows employees to purchase shares of common stock at a discounted rate, subject to plan limitations. Under the ESPP, eligible participants can voluntarily elect to have contributions withheld from their pay for the duration of an offering period, subject to the ESPP limits. At the end of an offering period, contributions will be used to purchase the Company's common stock at a discount to the market price based on the first or last day of the offering period, whichever is lower.
Participants are required to hold common stock for a minimum period of two years from the grant date. Participants will begin earning dividends on shares after the purchase date. Each offering period will generally last for no longer than six months. Once an offering period begins, participants cannot adjust their withholding amount. If a participant chooses to withdraw, any previously withheld funds will be returned to the participant, with no stock purchased, and that participant will be eligible to participate in the ESPP during the next offering period. If the participant terminates employment with the Company during the offering period, all contributions will be returned to the employee and no stock will be purchased.
The Company uses the Black-Scholes model to calculate the fair value of the common stock to be purchased during each offering period on the offer date. The Black-Scholes model requires the use of estimates for the expected term, the expected volatility of the underlying common stock over the expected term, the risk-free interest rate and the expected dividend payment.
For the three months ended March 31, 2023 and 2022, no shares of the Company's stock were purchased. The following table summarizes the activities under the ESPP from January 1, 2023, through March 31, 2023:
 Activity
Total ESPP equity securities available at January 1, 2023133,184 
ESPP common stock purchased by eligible employees— 
Total ESPP securities available at March 31, 2023133,184 
16
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amounts withheld from participants will be classified as accrued compensation and benefits in the Condensed Consolidated Balance Sheets until funds are used to purchase shares. This liability amount is immaterial to the Condensed Consolidated Financial Statements.
Stock-Based Compensation Expense
We record all stock-based compensation, which consist of RSUs, DSUs, restricted stock, equity in lieu of salary, and the option to purchase common stock under the ESPP, at fair value as of the grant date. Stock-based compensation expense is recognized based on a straight-line amortization basis over the respective service period. Forfeitures and withdrawals are accounted for as incurred.
The following table reflects the items for stock-based compensation expense in the Condensed Consolidated Statements of Operations for the periods stated:
For the Three Months Ended March 31,
(Dollars in thousands)20232022
Performance-based RSUs$381 $460 
Time-based RSUs, DSUs and restricted stock542 655 
ESPP13 — 
Total stock-based compensation$936 $1,115 
NOTE 12 - INCOME TAXES
Spok files a consolidated U.S. federal income tax return and income tax returns in various state, local and foreign jurisdictions as required.
Our quarterly tax provision and our quarterly estimate of our annual effective tax rate are subject to significant variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, changes in how we do business, changes in our stock price, foreign currency gains (losses), tax law developments (including changes in statutes, regulations, case law, and administrative practices), and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.
For 2023, the anticipated effective income tax rate is expected to continue to differ from the federal statutory rate of 21%, primarily due to the effect of state income taxes, permanent differences between book and taxable income, and certain discrete items.
We had total net deferred income tax assets ("DTAs") of $50.7 million and $52.4 million as of March 31, 2023, and December 31, 2022, respectively. We had a valuation allowance of $2.3 million as of March 31, 2023, and December 31, 2022.
We assess the recoverability of our deferred income tax assets, which represent the tax benefits of future tax deductions, based on available positive and negative evidence and by considering the adequacy of future taxable income from all sources, including prudent and feasible tax planning strategies. This assessment is required to determine whether, based on all available evidence, it is "more likely than not" (meaning a probability of greater than 50%) that all or some portion of the deferred income tax assets will be realized in future periods. During the fourth quarter of each year, we update our multi-year forecast of taxable income for our operations, which assists in analyzing the recoverability of our DTAs.
The Company maintains a valuation allowance related to Federal Foreign Tax Credits and certain net operating losses and state tax credits, as we do not believe current projections of future taxable income will be sufficient to utilize those tax assets prior to expiration. Deferred income tax assets that are not currently covered by a valuation allowance are those that are indefinite-lived, or whose temporary differences would reverse in the future and may result in the creation of an indefinite-lived deferred income tax asset, which we consider to be realized through future taxable income. The amount of deferred income tax assets considered realizable, however, could be adjusted in the future if objective negative evidence in the form of cumulative losses is no longer present, additional weight is given to subjective evidence such as our projections for future profitability and growth, or other relevant factors arise.
17
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 13 - COMMITMENTS AND CONTINGENCIES
There have been no material changes during the three months ended March 31, 2023, to the commitments and contingencies previously reported in the 2022 Annual Report.
NOTE 14 - RELATED PARTIES
A member of our Board of Directors, who was appointed at the beginning of 2020, serves as EVP and Chief Information Officer for an entity that is also a customer of the Company. For both the three months ended March 31, 2023, and 2022, we recognized revenues of $0.1 million, related to contracts from the entity at which the individual is employed.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements and information relating to Spok Holdings, Inc. and its subsidiaries (collectively, “we,” "us," “Spok,” “our” or the “Company”) that set forth anticipated results based on management’s current plans, known trends and assumptions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “target,” “forecast” and similar expressions, as they relate to Spok are forward-looking statements.
Although these statements are based upon current plans, known trends and assumptions that management considers reasonable, they are subject to certain risks, uncertainties and assumptions, including, but not limited to, those discussed in this section and "Risk Factors" below and under the captions “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”),” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 ("2022 Annual Report"). Should known or unknown risks or uncertainties materialize, known trends change, or underlying assumptions prove inaccurate, actual results or outcomes may differ materially from past results and those described herein as anticipated, believed, estimated, expected, intended, targeted or forecasted. Investors are cautioned not to place undue reliance on these forward-looking statements.
The Company undertakes no obligation to update forward-looking statements. Investors are advised to consult all further disclosures the Company makes in its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that it will file with the SEC. Also note that, in the 2022 Annual Report, the Company provides a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to its business. These are factors that, individually or in the aggregate, could cause the Company’s actual results to differ materially from past results as well as those results that may be anticipated, believed, estimated, expected, intended, targeted or forecasted. It is not possible to predict or identify all such risk factors. Consequently, investors should not consider the risk factor discussion to be a complete discussion of all of the potential risks or uncertainties that could affect Spok's business, statement of operations or financial condition, subsequent to the filing of this Quarterly Report.
Overview
The following MD&A is intended to help the reader understand the results of operations and financial condition of Spok. This MD&A is provided as a supplement to, and should be read in conjunction with, our 2022 Annual Report and our unaudited Condensed Consolidated Financial Statements and accompanying notes. A reference to a “Note” in this section refers to the accompanying Unaudited Notes to Condensed Consolidated Financial Statements.
Spok, acting through its indirect wholly owned operating subsidiary, Spok, Inc., delivers smart, reliable clinical communication and collaboration solutions to organizations, primarily in the U.S. healthcare industry, to help protect the health, well-being and safety of individuals. Organizations rely on Spok for workflow improvement, secure messaging, paging services, contact center optimization and public safety response.
Business
See Note 1, "Organization and Significant Accounting Policies" in Item 1 of Part I of this Quarterly Report and Item 1. "Business" of Part I of the 2022 Annual Report, which describe our business in further detail.
18

Strategic Business Plan
In February 2022, our Board of Directors announced a new strategic business plan that included a restructuring of our business to discontinue Spok Go and eliminate all associated costs and optimize the Company’s existing structure to drive continued cost improvement. The strategic business plan included a renewed focus on our existing and established business, including the Spok Care Connect Suite and our wireless service offerings. These restructuring efforts were completed during the fourth quarter of 2022. As a result of the implementation of the plan, we eliminated 176 positions, primarily in research and development, and also in professional services, selling and marketing, and back-office support functions. These actions allowed us to better align costs and, as a result, return capital to stockholders in the form of increased quarterly dividends of $0.3125 per share starting in 2022. We will continue to focus on optimizing costs to allow us to prioritize cash flow generation and the return of capital to stockholders.
Further details can be found in Note 5 "Restructuring" in the Notes to Condensed Consolidated Financial Statements.

Results of Operations
The following table is a summary of our Condensed Consolidated Statement of Operations for the three months ended March 31, 2023, and 2022:
 For the Three Months Ended March 31,Change
(Dollars in thousands)20232022Total%
Revenue:
Wireless revenue$19,028 $18,846 $182 1.0 %
Software revenue14,152 14,979 (827)(5.5)%
Total revenue33,180 33,825 (645)(1.9)%
Operating expenses:
Cost of revenue (exclusive of items shown separately below)6,536 7,804 (1,268)(16.2)%
Research and development2,493 6,497 (4,004)(61.6)%
Technology operations6,587 7,013 (426)(6.1)%
Selling and marketing3,901 5,315 (1,414)(26.6)%
General and administrative7,700 10,435 (2,735)(26.2)%
Depreciation, amortization and accretion1,236 934 302 32.3 %
Severance and restructuring10 4,495 (4,485)(99.8)%
Total operating expenses28,463 42,493 (14,030)(33.0)%
Operating income (loss)4,717 (8,668)13,385 (154.4)%
Interest income272 67 205 306.0 %
Other income (expense)53 (13)66 (507.7)%
Income (loss) before income taxes5,042 (8,614)13,656 (158.5)%
(Provision for) benefit from income taxes(1,925)1,400 (3,325)(237.5)%
Net income (loss)$3,117 $(7,214)$10,331 (143.2)%
Supplemental Information
Full-Time Equivalent ("FTE") Employees380 548 (168)(30.7)%
Active transmitters3,300 3,399 (99)(2.9)%

19

Revenue
We offer a focused suite of unified clinical communications and collaboration solutions that include call center applications, clinical alerting and notifications, one-way and advanced two-way wireless messaging services, mobile communications and public safety solutions.
We develop, sell and support enterprise-wide systems for healthcare, government, large enterprise and other organizations needing to automate, centralize and standardize their approach to clinical communications and collaboration. Our solutions can be found in prominent hospitals, large government agencies, leading public safety institutions, colleges and universities, large hotels, resorts and casinos, and well-known manufacturers. Our primary market is the healthcare provider industry, particularly hospitals. While we have historically identified hospitals with 200 or more beds as the primary targets for our software solutions, as well as our paging services, we have expanded our focus to include smaller hospitals with shorter sales cycles, including academic medical centers.
Revenue generated by wireless messaging services (including voice mail, personalized greeting, message storage and retrieval), equipment, maintenance plans and/or equipment loss protection for both one-way and two-way messaging subscribers is presented as wireless revenue in our Statement of Operations. Revenue generated by the sale of our software solutions, which includes software license, professional services (installation, consulting and training), equipment (to be used in conjunction with the software), and post-contract support (ongoing maintenance), is presented as software revenue in our Condensed Consolidated Statement of Operations. Our software is licensed to end users under an industry standard software license agreement.
Refer to Note 6, "Revenue, Deferred Revenue and Prepaid Commissions" in the Notes to Condensed Consolidated Financial Statements for additional information on our wireless and software revenue streams.
The table below details revenue for the periods stated:
For the Three Months Ended March 31,Change
(Dollars in thousands)20232022Total%
Revenue - wireless:
Paging revenue$18,525 $18,313 $212 1.2 %
Product and other revenue503 533 (30)(5.6)%
Total wireless revenue19,028 18,846 182 1.0 %
Revenue - software:
License1,618 1,824 (206)(11.3)%
Professional services3,239 3,336 (97)(2.9)%
Hardware356 589 (233)(39.6)%
Operations revenue5,213 5,749 (536)(9.3)%
Maintenance revenue8,939 9,230 (291)(3.2)%
Total software revenue14,152 14,979 (827)(5.5)%
Total revenue$33,180 $33,825 $(645)(1.9)%
Wireless Revenue
The increase in wireless revenue for the three months ended March 31, 2023, compared to the same periods in 2022, reflects the nominal increase in the standard rate, as a result of price increases initiated in the latter part of 2022, and general increases in Universal Service Fees ("USF"), offset by the secular decrease in demand for our wireless services. Wireless revenue is generally reflective of the number of units in service and measured monthly as Average Revenue Per User ("ARPU"). On a consolidated basis, ARPU is affected by several factors, including the mix of units in service and the pricing of the various components of our services. The number of units in service changes based on subscribers added, referred to as gross placements, less subscriber cancellations, or disconnects.
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ARPU was $7.59 and $7.24 for the three months ended March 31, 2023 and 2022, respectively. Total units in service were 0.8 million as of both March 31, 2023, and 2022. The increase in ARPU was primarily driven by nominal increases in the standard rate, as a result of price increases initiated in late third quarter of 2022 as well as increases in USF, which are effectively pass-through items that have corresponding costs associated with them. Excluding the pass-through items, ARPU increased by $0.20 as compared to the first quarter of 2022, primarily driven by price increases initiated in the latter part of 2022, as part of our effort to offset rising costs and maximize cash generation.
We believe that demand for wireless services will continue to decline for the foreseeable future in line with recent trends, as our wireless products and services are replaced with other competing technologies, such as the shift from narrowband wireless service offerings to broadband technology services.
The following reflects the impact of subscribers and ARPU on the change in paging revenue:
 For the Three Months Ended March 31,Change Due To:
(in thousands)20232022ChangeARPUUnits
Paging revenue$18,525 $18,313 $212 $840 $(628)
As demand for one-way and two-way messaging has declined, we have developed or added service offerings such as encrypted paging and Spok Mobile with a pager number to increase our revenue potential. These service offerings, along with the nominal increases in the standard rate, are designed to mitigate the decline in our wireless revenue. We will continue to explore ways to innovate and provide customers with the highest value possible.
In late 2021, we began offering our newest pager, GenA. This one-way alphanumeric pager features a high resolution ePaper display, intuitive modern user interface, advanced encryption and security features, over-the-air remote programming, and an antimicrobial housing. Users can select from various font sizes, and the large GenA display also leverages proportional fonts to maximize key information on a single screen.
The GenA pager is the only product available on the market with these capabilities, and we maintain an exclusive arrangement with the product's manufacturer. Given the product differentiation of the GenA pager, its development is a key initiative providing a competitive advantage, and we expect this new technology will be popular with our customers in clinical environments and may help slow our wireless revenue attrition.
Software Revenue
Software revenue consists of two components: operations revenue and maintenance revenue. Operations revenue consists primarily of license revenues for our healthcare communications solutions, revenue from the sale of equipment that facilitates the use of our software solutions, and professional services revenue related to the implementation of our solutions. Maintenance revenue is generated from our ongoing support of our software solutions or related equipment, typically for a period of one year after project completion.
To a large degree, software revenue corresponds to our backlog of performance obligations ready to deliver at some point in the future, and any delays in implementation may affect the timing of revenue recognition. Our software projects generally originate from fixed-bid contracts, although many involve a protracted sales cycle and may result in unforeseen complexity and deviation from the original scope. The time needed to complete projects, therefore, may not align with our original expectations, which affects our backlog. As a result, software revenue may fluctuate on a short-term basis, and we generally evaluate longer-term trends when managing this business.
Operations Revenue
Software operations revenue decreased during the three months ended March 31, 2023, when compared to the same periods in 2022. This decrease in revenue was primarily due to fluctuations in the timing of license and equipment delivery. Professional services revenue remained generally in line with first quarter 2022, despite having significantly less billable resources, primarily as a result of improvements in resource utilization.
Maintenance Revenue
Compared to the same periods in 2022, maintenance revenue decreased for the three months ended March 31, 2023. Current trends in revenue churn rates remain relatively stable and are in line with historical trends. However, the deterioration of maintenance revenue from new license bookings has created an environment where churn is greater than the inflow of new revenue.
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While we have not seen a meaningful increase in our normal customer churn, our ability to replace this churn with new revenues will not likely replicate what we have accomplished historically nor do we expect to fully offset this with annual increases of our existing base. Given these dynamics, we believe annual maintenance revenue is likely to be down slightly until such time that we are able to enhance our existing software solutions, which would provide an avenue to reduce levels of gross churn and result in additional maintenance revenue.

Operating Expenses
Our operating expenses are presented in functional categories. Certain of our functional categories are especially important to overall expense control and management. These operating expenses are categorized as follows:
•Cost of Revenue. These are expenses we incur for the delivery of products and services to our customers and consist primarily of hardware, third-party software, outside services expenses and payroll and related expenses for our professional services, logistics, customer support and maintenance staff.
•Research and Development. These expenses relate primarily to the development of new software products and the ongoing maintenance and enhancement of existing products. This classification consists primarily of employee payroll and related expenses, outside services related to the design, development, testing and enhancement of our solutions and to a lesser extent hardware equipment. Research and development expenses exclude any development costs that qualify for capitalization.
•Technology Operations. These are expenses associated with the operation of our paging networks. Expenses consist largely of site rent expenses for transmitter locations, telecommunication expenses to deliver messages over our paging networks, and payroll and related expenses for our engineering and pager repair functions. We actively pursue opportunities to consolidate transmitters and other service, rental and maintenance expenses in order to maintain an efficient network while simultaneously ensuring adequate service for our customers. We believe continued reductions in these expenses will occur for the foreseeable future as we continue to consolidate our networks, although the benefits of such network rationalization efforts and resulting costs savings will continue to decline.
•Selling and Marketing. The sales and marketing staff are involved in selling our communication solutions primarily in the United States. These expenses support our efforts to maintain gross placements of units in service, which mitigated the impact of disconnects on our wireless revenue base, and to identify business opportunities for additional or future software sales. We maintain a centralized marketing function that is focused on supporting our products and vertical sales efforts by strengthening our brand, generating sales leads and facilitating the sales process. These marketing functions are accomplished through targeted email campaigns, webinars, regional and national user conferences, monthly newsletters and participation at industry trade shows. Expenses consist largely of payroll and related expenses, commissions and other costs such as travel and advertising costs.
•General and Administrative. These are expenses associated with information technology and administrative functions, including finance and accounting, human resources and executive management. This classification consists primarily of payroll and related expenses, outside services expenses, taxes, licenses and permit expenses, and facility rent expenses.
•Depreciation, Amortization and Accretion. These are expenses that may be associated with one or more of the aforementioned functional categories. This classification generally consists of depreciation from capital expenditures or other assets that are core to our ongoing operations, amortization of intangible assets, amortization of capitalized software development costs, and accretion of asset retirement obligations.

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The following is a review of our operating expense categories for the three months ended March 31, 2023, and 2022. Certain prior period amounts have been reclassified to conform to the current period's presentation.
Cost of Revenue
Cost of revenue consisted primarily of the following items:
 For the Three Months Ended March 31,Change
(Dollars in thousands)20232022Total%
Payroll and related$3,980 $5,110 $(1,130)(22.1)%
Cost of sales1,205 1,557 (352)(22.6)%
Recoverable taxes and fees971 712 259 36.4 %
Stock-based compensation76 109 (33)(30.3)%
Other304 316 (12)(3.8)%
Total cost of revenue$6,536 $7,804 $(1,268)(16.2)%
FTE Employees131 177 (46)(26.0)%
For the three months ended March 31, 2023, cost of revenue decreased compared to the same period in 2022, driven by decreases in payroll and related expenses and cost of sales, offset by an increase in recoverable taxes and fees.
The decrease in payroll and related expenses is attributable to the restructuring activities and the related elimination of positions. Cost of sales decreased primarily due to lower equipment sales. Recoverable taxes and fees increased due to the rate change for USF fees, as established by the Federal Communications Commission on a quarterly basis. These fees are passed through to our wireless customer base and have a corresponding revenue impact.
Research and Development
Research and development expenses consisted of the following items:
 For the Three Months Ended March 31,Change
(Dollars in thousands)20232022Total%
Payroll and related$1,541 $4,305 $(2,764)(64.2)%
Outside services846 1,899 (1,053)(55.5)%
Stock-based compensation27 130 (103)(79.2)%
Other79 163 (84)(51.5)%
Total research and development$2,493 $6,497 $(4,004)(61.6)%
FTE Employees40 101 (61)(60.4)%
For the three months ended March 31, 2023, research and development expenses decreased compared to the same periods in 2022, driven by the decision to discontinue Spok Go in the first quarter of 2022 and the resulting elimination of positions and associated outside services.
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Technology Operations
Technology operations expenses consisted primarily of the following items:
For the Three Months Ended March 31,Change
(Dollars in thousands)20232022Total%
Payroll and related$2,339 $2,509 $(170)(6.8)%
Site rent2,881 3,067 (186)(6.1)%
Telecommunications707 771 (64)(8.3)%
Stock-based compensation55 55 — — %
Other605 611 (6)(1.0)%
Technology Operations$6,587 $7,013 $(426)(6.1)%
FTE Employees73 85 (12)(14.1)%
For the three months ended March 31, 2023, technology operations expenses decreased compared to the same period in 2022, due to a decrease in payroll and related expenses attributable to the restructuring activities and the related elimination of positions. In addition, as a result of our network rationalization efforts, site rent and telecommunications costs decreased in response to a 2.9% decline in active transmitters from March 31, 2022, to March 31, 2023. As we reach certain minimum frequency commitments, as outlined by the United States Federal Communications Commission, we may be unable to continue our efforts to rationalize and consolidate our networks.
Selling and Marketing
Selling and marketing expenses consisted of the following items:
 For the Three Months Ended March 31,Change
(Dollars in thousands)20232022Total%
Payroll and related$2,449 $3,468 $(1,019)(29.4)%
Commissions799 1,024 (225)(22.0)%
Stock-based compensation94 79 15 19.0 %
Advertising and events231 568 (337)(59.3)%
Other328 176 152 86.4 %
Total selling and marketing$3,901 $5,315 $(1,414)(26.6)%
FTE Employees66 91 (25)(27.5)%
For the three months ended March 31, 2023, selling and marketing expenses decreased compared to the same period in 2022, driven primarily by decreases in payroll and related expenses and advertising and events expenses.
Payroll and related expenses declined for the three months ended March 31, 2023, largely due to restructuring activities and the related elimination of positions.
The decrease in advertising and events expenses for the three months ended March 31, 2023, largely reflects changes in timing of trade show participation as compared to the same period in 2022. Nationwide travel and in-person participation in larger marketing events has increased but continues to remain below pre-pandemic levels.
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General and Administrative
General and administrative expenses consisted of the following items:
 For the Three Months Ended March 31,Change
(Dollars in thousands)20232022Total%
Payroll and related$3,266 $4,051 $(785)(19.4)%
Stock-based compensation684 742 (58)(7.8)%
Facility rent, office and technology costs1,848 2,680 (832)(31.0)%
Outside services1,003 1,900 (897)(47.2)%
Taxes, licenses and permits262 265 (3)(1.1)%
Bad debt(135)(14)(121)864.3 %
Other772 811 (39)(4.8)%
Total general and administrative$7,700 $10,435 $(2,735)(26.2)%
FTE Employees70 94 (24)(25.5)%
For the three months ended March 31, 2023, general and administrative expenses decreased compared to the same period in 2022, driven primarily by decreases in outside services, facility rent, office and technology costs and payroll and related expenses.
Outside services decreased as a result of lower legal and other professional services for the three months ended March 31, 2023.
Payroll and related expenses decreased due to savings from the reduction of headcount due to restructuring activities.
The decrease in facility rent, office and technology costs was primarily due to the closing of the Minnesota office in February 2022.
Depreciation, Amortization and Accretion
For the three months ended March 31, 2023, and 2022, depreciation, amortization and accretion expenses were $1.2 million and $0.9 million, respectively. These expenses increased for the three months ended March 31, 2023, compared to the same periods in 2022, primarily due to increases in asset retirement cost and pager depreciation.
Severance and Restructuring
For the three months ended March 31, 2022, we incurred severance and restructuring expenses of $4.5 million related to the restructuring program announced in February 2022. No severance and restructuring expenses related to the February 2022 restructuring plan were incurred for the three months ended March 31, 2023 as the restructuring program culminated in the fourth quarter of 2022.
Income Taxes
(Provision for) benefit from income taxes was $(1.9) million and $1.4 million for the three months ended March 31, 2023 and 2022, respectively. (Provision for) benefit from income taxes changed for the three months ended March 31, 2023 compared to the same periods in 2022 primarily due to the generation of pre-tax book income as compared to a pre-tax book loss, along with the effect of the anticipated annual effective tax rate change resulting from certain permanent tax differences, estimated research and development tax credits and related valuation allowance, and certain discrete items. Further details can be found in Note 12, "Income Taxes" in the Notes to Condensed Consolidated Financial Statements.
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Liquidity and Capital Resources
Cash and Cash Equivalents
As of March 31, 2023, we held cash and cash equivalents of $29.5 million. The available cash and cash equivalents consist of cash in our operating accounts and cash invested in interest-bearing funds managed by third-party financial institutions. These funds invest in U.S. Treasury securities and are therefore classified as held-to-maturity and are reported at amortized cost in our Condensed Consolidated Balance Sheets. The Company maintains a majority of its cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and the majority of our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business, financial condition and results of operations.
Cash Sources
Our primary sources of liquidity have been our cash flows generated from operations and existing cash and cash equivalents. We maintain a level of liquidity sufficient to allow us to meet our cash needs in both the short term (next 12 months) and long term (beyond 12 months). At any point in time, we maintain approximately $5.0 million to $10.0 million in our operating accounts at third-party financial institutions. While we monitor daily the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, we have experienced no loss or lack of access to cash in our operating accounts.
Cash Uses
We intend to use our cash on hand to provide working capital, to support operations, to invest in our business, and to return value to stockholders through cash dividends and repurchases of our common stock. We may also consider using cash to fund or complete opportunistic investments and acquisitions that we believe will provide a measure of growth or revenue stability while supporting our existing operations. As a result of our discontinuation of Spok Go, we will no longer invest heavily in its development, and, as a result, we anticipate that we will have more cash available for other uses than in prior years.
On February 16, 2022, the Board authorized a share repurchase program for up to $10 million of the Company’s common stock. Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions, legal requirements and other considerations. The repurchase program does not obligate the Company to acquire any particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion.
With the successful completion of the restructuring plan and our ongoing efforts to stabilize revenue and optimize costs, we anticipate future operating periods will return to positive cash flow generation, considering the majority of accrued liabilities of $2.2 million as of December 31, 2022, related to the strategic business plan, were paid out in the first quarter of 2023.
Cash Flows Overview
In the event that net cash provided by operating activities and cash on hand are not sufficient to meet future cash requirements, we may be required to reduce planned capital expenses, reduce or eliminate our cash dividends to stockholders, not repurchase shares of our common stock under the share repurchase program, sell assets or seek additional financing. We can provide no assurance that reductions in planned capital expenses or proceeds from asset sales would be sufficient to cover shortfalls in available cash or that outside financing would be available on acceptable terms.
Based on current and anticipated levels of operations, we anticipate that net cash provided by operating activities, together with the available cash on hand at March 31, 2023, should be adequate to meet our anticipated cash requirements for the short term (next 12 months) and long term (beyond 12 months).
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The following table sets forth information on our net cash flows from operating, investing, and financing activities for the periods stated:
 Three Months Ended March 31,Change
(Dollars in thousands)20232022
Net cash provided by (used in) operating activities$2,611 $(4,879)$7,490 
Net cash used in investing activities(649)(646)(3)
Net cash used in financing activities(8,178)(7,733)(445)
Operating Activities
As discussed above, we are dependent on cash flows from operating activities to meet our cash requirements. Cash from operations varies depending on changes in various working capital items, including deferred revenues, accounts payable, accounts receivable, prepaid expenses and various accrued expenses.
For the three months ended March 31, 2023, net cash provided by operating activities was $2.6 million primarily due to the net income of $3.1 million, changes in accounts receivable of $4.2 million depreciation, amortization and accretion of $1.2 million and stock-based compensation of $0.9 million. This was partially offset by changes in accounts payable, accrued liabilities and other of $6.7 million and deferred revenue of $1.6 million.
For the three months ended March 31, 2022, net cash used in operating activities was $4.9 million due primarily to a net loss of $7.2 million, changes in deferred revenue of $1.6 million and in prepaid expenses and other assets of $1.4 million and a deferred income tax benefit of $1.0 million. This was partially offset by changes in accounts receivable of $3.0 million, stock-based compensation of $1.1 million, depreciation, amortization and accretion of $0.9 million, and changes in accounts payable, accrued liabilities and accretion of $0.9 million.
Investing Activities
For the three months ended March 31, 2023 and 2022, net cash used in investing activities was $0.6 million. Net cash used in investing activities reflects purchases of property and equipment, as well as the purchase and maturity of short-term investments for the three months ended March 31, 2022.
Financing Activities
For the three months ended March 31, 2023, and 2022, net cash used in financing activities was $8.2 million and $7.7 million, respectively, primarily due to cash distributions to stockholders and the purchase of common stock for tax withholding purposes on vested equity awards.
On May 3, 2023, our Board of Directors declared a regular quarterly cash dividend of $0.3125 per share of common stock with a record date of May 25, 2023, and a payment date of June 23, 2023. This cash dividend of approximately $6.2 million, applicable to our common stock outstanding, will be paid from available cash on hand.
Commitments and Contingencies
In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.
Purchase obligations are defined as agreements to purchase goods or services that are enforceable, legally binding, non-cancelable, have a remaining term in excess of one year and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable pricing provisions; and the approximate timing of transactions. The amounts of such obligations are based on our contractual commitments, however, it is possible that we may be able to negotiate lower payments if we choose to exit these contracts before their expiration date.
Our contractual payment obligations for operating leases apply to leases for office space and transmitter locations. Substantially all of these leases have lease terms ranging from one month to five years. We continue to review our office and transmitter locations and intend to replace, reduce or consolidate leases where possible. As we reach certain minimum frequency commitments, as outlined by the United States Federal Communications Commission, we may be unable to continue our efforts to rationalize and consolidate our networks.
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We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that may have arisen if we had engaged in such relationships.
The Company evaluates contingencies on an ongoing basis and establishes loss provisions for matters in which losses are probable and the amount of loss can be reasonably estimated.
The following table provides the Company's significant commitments and contractual obligations as of March 31, 2023:
 Payments Due by Period
(Dollars in thousands)Total 1 year or Less1 to 3 years3 to 5 yearsMore than 5 years
Operating lease obligations$17,170 $4,236 $7,037 $3,422 $2,475 
Unconditional purchase obligations4,296 2,8011,493 2 — 
Total contractual obligations$21,466 $7,037 $8,530 $3,424 $2,475 
Refer to Note 7, "Leases," and Note 13, "Commitments and Contingencies" in the Notes to Condensed Consolidated Financial Statements for further discussion on our commitments and contingencies.
Related Party Transactions
See Note 14, "Related Parties" in the Notes to Condensed Consolidated Financial Statements for a discussion regarding our related party transactions.
Critical Accounting Policies and Estimates

The preceding discussion and analysis of financial condition and operations is based on our Condensed Consolidated Financial Statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of our Condensed Consolidated Financial Statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. On an ongoing basis, we evaluate estimates and assumptions, including, but not limited to, those related to the impairment of long-lived assets and intangible assets subject to amortization and goodwill, accounts receivable, revenue recognition, asset retirement obligations, and income taxes. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no changes to the critical accounting policies reported in the 2022 Annual Report that affect our significant judgments and estimates used in the preparation of our Condensed Consolidated Financial Statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
As of March 31, 2023, we had no outstanding debt and no revolving credit facility.
Foreign Currency Exchange Rate Risk
We conduct a limited amount of business outside the United States. The financial impact of transactions billed in foreign currencies is immaterial to our financial results and, consequently, we do not have any material exposure to the risk of foreign currency exchange rate fluctuations.
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ITEM 4.  CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management carried out an evaluation, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the participation of our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures, as of the end of our last fiscal quarter. Disclosure controls and procedures are defined under Rule 13a-15(e) under the Exchange Act as controls and other procedures of an issuer that are designed to ensure that the information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based upon this evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2023.
Changes in Internal Control over Financial Reporting
There were no changes made to the Company’s internal control over financial reporting during the three months ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to Note 13, "Commitments and Contingencies" in the Notes to Condensed Consolidated Financial Statements for information regarding legal proceedings in which we are involved.
ITEM 1A. RISK FACTORS
The risk factors included in “Item 1A – Risk Factors” of Part I of the 2022 Annual Report have not materially changed during the three months ended March 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company did not repurchase any shares of its common stock during the three months ended March 31, 2023.
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ITEM 6. EXHIBITS
The exhibits listed in the accompanying Exhibit Index below are filed or incorporated by reference as part of this report.
EXHIBIT INDEX
Incorporated by Reference
Exhibit NumberExhibit DescriptionFormFile No.Exhibit/AppendixFiling DateFiled/Furnished Herewith
31.1Filed
31.2Filed
32.1Furnished
32.2Furnished
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document*Filed
101.SCHInline XBRL Taxonomy Extension Schema*Filed
101.CALInline XBRL Taxonomy Extension Calculation*Filed
101.DEFInline XBRL Taxonomy Extension Definition*Filed
101.LABInline XBRL Taxonomy Extension Labels*Filed
101.PREInline XBRL Taxonomy Extension Presentation*Filed
104Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101Filed
*The financial information contained in these XBRL documents is unaudited.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
SPOK HOLDINGS, INC.
Dated: May 4, 2023 /s/ Calvin C. Rice
 Name: 
Calvin C. Rice
 Title: Chief Financial Officer
(Principal Financial Officer and duly authorized officer)


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