|
|
x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
DELAWARE
|
|
16-1694797
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
6850 Versar Center, Suite 420
Springfield, Virginia
|
|
22151-4148
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Title of each class
|
|
Name of each exchange on which registered
|
Common Stock, par value $0.0001 per share
|
|
NASDAQ National Market
®
|
Large accelerated filer
|
|
¨
|
Accelerated filer
|
|
x
|
|
|
|
|
||
Non-accelerated filer
|
|
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
|
¨
|
|
|
|
|
|
|
|
|
Part I
|
|
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
|
Part II
|
|
|
|
|
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
|
||
Item 8
|
||
Item 9.
|
||
Item 9A.
|
||
Item 9B.
|
||
|
|
|
|
Part III
|
|
|
|
|
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
|
|
|
|
Part IV
|
|
|
|
|
Item 15.
|
||
|
•
|
Continuing decline in the number of paging units we have in service with customers, commensurate with a continuing decline in our wireless revenue
|
•
|
The sales cycle of our software solutions and services can run from six to eighteen months, making it difficult to plan for and meet our sales objectives and bookings on a steady basis quarter-to-quarter and year-to-year
|
•
|
Our ability to manage network rationalization to lower our costs without causing disruption of service to our customers
|
•
|
Our ability to design and develop an integrated critical communications platform to address mobile communications, clinical alerting, nursing and workflow functions at state of the art hospitals that gains market acceptance and wide-spread use by customers
|
•
|
Our ability to address changing market conditions with new or revised software solutions
|
•
|
Our ability to retain key management personnel and to attract and retain talent within the organization
|
•
|
Our ability to manage change related to regulation, including laws and regulations affecting hospitals and the healthcare industry generally
|
•
|
Competition for our services and products from new technologies or those offered and/or developed from firms that are substantially larger and have much greater financial and human capital resources
|
•
|
The reliability of our networks and servers and our ability to prevent cyber-attacks and other security issues and disruptions
|
•
|
Those matters discussed in this Annual Report under Item 1A “Risk Factors.”
|
•
|
a heightened awareness of the ubiquitous, critical role of communications in healthcare;
|
•
|
an increased focus within hospitals on quality of care and patient safety initiatives;
|
•
|
the importance of confidentiality when sharing information;
|
•
|
increased regulations that may result in process changes, increased documentation and reporting and increased costs;
|
•
|
a continuing focus within hospitals to reduce labor and administrative costs while increasing productivity; and
|
•
|
a broader proliferation of information technology in healthcare as hospitals strive to apply technology to solve their business problems.
|
•
|
Content marketing (eBriefs, case studies, brochures, videos, infographics, and more) as an underlying foundation of all marketing campaigns or initiatives;
|
•
|
Website development and maintenance, which provides product and Company information, customer support options, paging capabilities, as well as thought leadership and engagement;
|
•
|
Participation at trade shows and industry events, such as Healthcare Information and Management Systems Society, College of Healthcare Information Management Executives and Radiological Society of North America;
|
•
|
Webinars about current industry trends and our solutions;
|
•
|
Social media involvement to provide information regarding upcoming educational events or new product offerings;
|
•
|
Industry analyst relationships;
|
•
|
Newsletters and blog posts to provide information about industry trends and our solutions to customers, prospects, and alliances; and
|
•
|
Annual customer conferences that solicit feedback on our solutions and services.
|
•
|
Spok® Healthcare Console:
Provides operators with the information needed to process calls using their computers, with just a few keystrokes. This solution integrates with the customers’ existing phone systems and is used by the operator group to answer incoming calls to the contact center. Operators can quickly and accurately perform directory searches and code calls, as well as messaging and paging by individual, groups, and roles using the Spok Healthcare Console’s computer telephony integration ("CTI") and directory capabilities.
|
•
|
Spok® Web-Based Directory:
Makes employee contact information more accessible and enables staff to send messages quickly right from the directory. Authenticated users can log on anywhere, anytime to perform a variety of important updates to contact information and on-call schedules, search the directory, and send important messages.
|
•
|
Spok® Web-Based On-Call Scheduling:
Keeps personnel, calendars and on-call scheduling information updated, even with thousands of staff, using a secure web portal to maintain and allow password-protected access to the latest on-call schedules and personnel information.
|
•
|
Spok® Speech:
Enables the organization to process routine phone requests, including transfers, directory assistance, messaging and paging without live operators and with more ease-of-use than touchtone menus.
|
•
|
HigherGround® Call Recording and Quality Management:
Records, monitors, and scores operators’ conversations to allow for better management of calls, helping improve customer service.
|
•
|
Spok® Eclipse Call Accounting:
Provides a wealth of information about every call being made and received. The information can be formatted and used to analyze voice network resources, employee telephone usage and bill-back information.
|
•
|
Spok® Messenger:
Provides an intelligent, FDA, 510(k)-cleared solution that connects virtually all crucial alert systems, including nurse call, fire, security, patient monitoring, and building management to mobile staff via their wireless communication devices. This solution provides the ability to reach mobile team members within seconds of an alert, improving overall workflow, staff productivity, and the comfort and safety of everyone in the facility.
|
•
|
Spok® e.Notify:
Enables organizations to quickly and reliably notify and confirm team member availability during emergency situations without relying on calling trees, thereby reducing confusion that may arise in an emergency situation. This solution automatically delivers messages, collects responses, escalates issues to others, and logs all activities for reporting and analysis purposes.
|
•
|
Spok® Critical Test Results Management:
Automates and streamlines the process of delivering critical test results to the right clinicians to help ensure patient safety. This solution can send messages from the cardiology, laboratory and radiology departments by means of encrypted smartphone communications, two-way paging, secure email, secure text, images, annotations, and voice to a variety of endpoints such as workstations, laptops, tablets, smartphones, pagers, and other wireless devices.
|
•
|
Spok Mobile®:
Simplifies communications and strengthens care by using smartphones and tablets for secure code alerts, patient updates, results, consult requests, and much more. Allows users to access the full directory of accurate contact information to send messages/photos/videos to smartphones and other devices, and to ensure critical communications are logged, all with security, traceability, and reliability.
|
•
|
Spok® Device Preference Engine:
Facilitates voice conversations among doctors and caregivers by enabling users to choose the desired communication method based on factors such as message priority.
|
•
|
Spok® pc/psap:
Speeds emergency dispatch by giving Public Safety Answering Point ("PSAP") call-takers an easy-to-use, standards-based, graphical interface that integrates the underlying phone system, mapping systems, and other resources for critical information availability. 9-1-1 call-takers are able to instantly involve police, fire, EMT, and hazardous material personnel with a single click of the mouse or touch of the screen.
|
•
|
Spok® Enterprise Alert:
Directs emergency personnel to a 9-1-1 caller’s exact location (building, floor, room), helping to ensure speed, accuracy, and reliability of response. The E9-1-1 software provides real-time, onsite notification when 9-1-1 is dialed, and works to decrease emergency response time.
|
•
|
Professional Services:
We offer a full suite of professional services which are provided by a dedicated group of professional service employees. Our professional services include consultation, implementation and training services. For software solution implementations, our professional services staff uses a branded, consistent methodology that provides a comprehensive phased work plan for both new software installations and/or upgrades. In support of our implementation methodology, we manage the various aspects of the process through a professional services automation tool. A typical implementation process ranges from 30 to 180 days depending on the type of implementation. We may also use third-party professional services firms to implement our solutions for customers depending on the circumstances. Professional services revenue represented
10%
,
10%
and
9%
of total consolidated revenue for the years ended
December 31, 2016
,
2015
and
2014
respectively.
|
•
|
Software License Updates and Product Support (Maintenance):
Software license updates and product support, which is generally referred to as maintenance when sold to customers, is an important offering to customers who utilize our software solutions. In order to support our products that provide mission critical solutions to our customer’s organizations, we have a dedicated customer support organization. The customer support organization provides support 24 hours a day, 7 days a week, 365 days a year and the service can be accessed via telephone, email or the Internet via the Spok webpage. The Spok support service is augmented by third party services where needed. Software license updates and product support are generally priced together as a percentage of the software licenses for which these services will be provided. Largely all of our customers purchase maintenance when they purchase new software licenses after which renewals generally occur on an annual basis and are paid in advance. Software license updates provide customers with rights to unspecified product upgrades as well as maintenance and patch releases that are released during the term of the support period. Software license updates and product support revenue (i.e. maintenance revenue) represented
21%
,
18%
and
15%
of total consolidated revenue for the years ended
December 31, 2016
,
2015
and
2014
respectively.
|
•
|
An integrated product suite;
|
•
|
A communication-driven workflow;
|
•
|
Certifications, such as those through the Joint Interoperability Test Command (See "Joint Interoperability Test Command" below) and the FDA; and
|
•
|
A complete directory of contacts throughout the customer enterprise.
|
•
|
Amtel Communications, Inc. (AMTELCO) - Contact center solutions;
|
•
|
Nuance Communications, Inc. - Clinical alerting solutions;
|
•
|
peerVue, Inc. - Clinical alerting solutions;
|
•
|
TigerText, Inc. - Mobile communication solutions;
|
•
|
Vocera Communications, Inc. (including Extension Healthcare)- Mobile communications solutions;
|
•
|
Imprivata, Inc. - Mobile communications solutions;
|
•
|
Voalte, Inc. - Mobile communications solutions;
|
•
|
Ascom Holding AG - Mobile Communications solutions;
|
•
|
Emergin, a Phillips Healthcare company - Alerting and notification;
|
•
|
DBA HipLink Software, Inc. - Mobile communications solutions; and
|
•
|
Veriphy Ltd - Critical test results management.
|
•
|
Identify (interoperability) requirements;
|
•
|
Develop certification approach (planning);
|
•
|
Perform interoperability test and evaluation; and
|
•
|
Report certifications and statuses.
|
•
|
Requirements Definition - Our plans for an integrated communications suite may not meet the market's needs or customer expectations and could result in low market demand and/or acceptance.
|
•
|
Product Scope and Schedule - We may fail to manage the scope of our software development activities effectively, resulting in delays to meet key milestones, achieve network solutions on a fully integrated basis, or solve coding problems in a timely and efficient manner. In addition, the continuing software development efforts on our existing products could distract management time and focus on developing our integrated communications platform.
|
•
|
Staffing and Organization - The development of the integrated communications suite requires the hiring of new staff. We may be unable to attract, in a timely manner, the qualified staff to meet our requirements. The organizational changes and new hires necessary to address our development requirements could create attrition risk for our current staff.
|
•
|
Operational Readiness - While the development of the integrated communications suite could occur as we have planned, we may not be prepared or ready to sell, deliver and support the new platform technology.
|
•
|
Customer Dissatisfaction and Spok's Reputation - We may experience customer dissatisfaction with our solutions that could result in lost opportunities for sales. Potential low ratings of our solutions may negatively impact our perception by future prospects. In addition, fewer references for our solutions could impact our ability to prospect new sales.
|
•
|
Training - Training of our marketing and sales personnel as to the clinical requirements of our healthcare customers and the complexity of our service offerings, takes time and requires a substantial, continuing investment in new hires as well as long term employees.
|
•
|
Competitive Speed - Sales productivity can be impacted by the capabilities of our competitors. There is a risk that competitors can innovate or partner faster than we do to deliver a unified communications platform.
|
•
|
Employee Retention - The impact of the elements noted above can challenge the ability of employees to make sales. This is tough on morale and can affect employee retention.
|
•
|
such businesses will perform as expected;
|
•
|
such businesses will not incur unforeseen obligations or liabilities;
|
•
|
such businesses will generate sufficient cash flow to support the indebtedness, if incurred, to acquire them or the expenditures needed to develop them; and/or
|
•
|
the rate of return from such businesses will justify the decision to invest the capital to acquire them.
|
|
2016
|
|
2015
|
||||||||||||
For the Three Months Ended
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
March 31,
|
$
|
18.01
|
|
|
$
|
15.85
|
|
|
$
|
20.20
|
|
|
$
|
16.85
|
|
June 30,
|
19.29
|
|
|
16.17
|
|
|
21.04
|
|
|
16.18
|
|
||||
September 30,
|
20.56
|
|
|
16.34
|
|
|
17.63
|
|
|
15.46
|
|
||||
December 31,
|
21.30
|
|
|
16.40
|
|
|
18.95
|
|
|
15.92
|
|
Year
|
Dividends Declared Per Share
Amount |
|
Total
Payment (1) |
||||
|
|
|
(Dollars in
thousands) |
||||
2005
|
$
|
1.500
|
|
|
$
|
40,691
|
|
2006
(2)
|
3.650
|
|
|
98,904
|
|
||
2007
(3)
|
3.600
|
|
|
98,250
|
|
||
2008
(4)
|
1.400
|
|
|
39,061
|
|
||
2009
(3)
|
2.000
|
|
|
45,502
|
|
||
2010
(3)
|
2.000
|
|
|
44,234
|
|
||
2011
|
1.000
|
|
|
22,121
|
|
||
2012
(5)
|
0.750
|
|
|
16,512
|
|
||
2013
|
0.500
|
|
|
12,312
|
|
||
2014
|
0.500
|
|
|
10,826
|
|
||
2015
(6)
|
0.625
|
|
|
13,333
|
|
||
2016
(7)
|
0.750
|
|
|
10,287
|
|
||
Total
|
$
|
18.275
|
|
|
$
|
452,033
|
|
(1)
|
The total payment reflects the cash distributions paid in relation to common stock, vested RSUs and vested shares of restricted stock.
|
(2)
|
On August 8, 2006, we announced the adoption of a regular quarterly cash distribution of $0.65 per share of common stock.
|
(3)
|
The cash distribution includes an additional special one-time cash distribution to stockholders of $1.00 per share of common stock.
|
(4)
|
On May 2, 2008, our Board of Directors reset the quarterly cash distribution rate to $0.25 per share of common stock from $0.65 per share of common stock.
|
(5)
|
On July 30, 2012, our Board of Directors reset the quarterly cash distribution rate to $0.125 per share of common stock from $0.25 per share of common stock.
|
(6)
|
The cash distribution includes an additional special one-time cash distribution to stockholders of $0.125 per share of common stock.
|
(7)
|
The per share amount includes a special one-time dividend of $0.25 per share of common stock declared in 2016 but payable to stockholders in 2017.
|
|
December 31,
|
||||||||||||||||||||||
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
||||||
Spok Holdings, Inc.
|
$
|
100.00
|
|
|
$
|
89.46
|
|
|
$
|
113.44
|
|
|
$
|
142.50
|
|
|
$
|
155.87
|
|
|
$
|
184.09
|
|
NASDAQ Composite Index
|
100.00
|
|
|
116.41
|
|
|
165.47
|
|
|
188.69
|
|
|
200.32
|
|
|
216.54
|
|
||||||
NASDAQ Telecommunications Index
|
100.00
|
|
|
102.78
|
|
|
143.40
|
|
|
149.42
|
|
|
144.02
|
|
|
153.88
|
|
||||||
S&P Health Care Technology Index
|
100.00
|
|
|
126.76
|
|
|
182.01
|
|
|
211.13
|
|
|
196.47
|
|
|
154.68
|
|
Period
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share
(1)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Plans or Programs
|
||||||
|
|
|
|
|
|
|
(Dollars in thousands)
|
||||||
Beginning Balance as of January 1, 2016
|
|
|
|
|
|
|
$
|
10,000
|
|
||||
January 1 through January 31, 2016
|
152,198
|
|
|
$
|
16.53
|
|
|
152,198
|
|
|
7,484
|
|
|
February 1 through February 29, 2016
|
101,736
|
|
|
$
|
17.24
|
|
|
101,736
|
|
|
5,730
|
|
|
March 1 through March 31, 2016
|
37,927
|
|
|
$
|
16.44
|
|
|
37,927
|
|
|
5,106
|
|
|
April 1 through April 30, 2016
|
31,468
|
|
|
$
|
16.40
|
|
|
31,468
|
|
|
4,590
|
|
|
May 1 through May 30, 2016
|
34,323
|
|
|
$
|
16.37
|
|
|
34,323
|
|
|
4,028
|
|
|
June 1, through June 30, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
4,028
|
|
|
July 1, through July 31, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
4,028
|
|
|
August 1, through August 31, 2016
|
3,800
|
|
|
$
|
16.44
|
|
|
3,800
|
|
|
3,966
|
|
|
September 1, through September 30, 2016
|
10,084
|
|
|
$
|
16.46
|
|
|
10,084
|
|
|
3,800
|
|
|
October 1 through October 31, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
3,800
|
|
|
November 1 through November 30, 2016
|
16,719
|
|
|
$
|
16.43
|
|
|
16,719
|
|
|
3,525
|
|
|
December 1 through December 31, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
3,525
|
|
|
Total
|
388,255
|
|
|
$
|
16.67
|
|
|
388,255
|
|
|
|
|
For the Year Ended December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
(Dollars in thousands except per share amounts)
|
||||||||||||||||||
Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
$
|
179,561
|
|
|
$
|
189,628
|
|
|
$
|
200,273
|
|
|
$
|
209,752
|
|
|
$
|
219,696
|
|
Operating expenses
|
157,408
|
|
|
164,528
|
|
|
172,122
|
|
|
164,258
|
|
|
173,968
|
|
|||||
Operating income
|
22,153
|
|
|
25,100
|
|
|
28,151
|
|
|
45,494
|
|
|
45,728
|
|
|||||
Net income
|
13,979
|
|
|
80,246
|
|
|
20,745
|
|
|
27,530
|
|
|
26,984
|
|
|||||
Basic and diluted net income per common share
|
0.68
|
|
|
3.74
|
|
|
0.96
|
|
|
1.27
|
|
|
1.23
|
|
|||||
Cash dividends declared per common share
|
0.75
|
|
|
0.625
|
|
|
0.50
|
|
|
0.50
|
|
|
0.75
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||
Balance Sheets Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets
|
$
|
155,862
|
|
|
$
|
141,613
|
|
|
$
|
142,761
|
|
|
$
|
116,779
|
|
|
$
|
95,909
|
|
Total assets
|
388,087
|
|
|
386,433
|
|
|
337,890
|
|
|
326,898
|
|
|
322,627
|
|
|||||
Long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Long-term liabilities, excluding deferred revenue
|
8,921
|
|
|
8,972
|
|
|
8,131
|
|
|
9,259
|
|
|
9,789
|
|
|||||
Stockholders’ equity
|
322,087
|
|
|
329,564
|
|
|
279,059
|
|
|
269,950
|
|
|
251,419
|
|
|
|
For the Year Ended December 31, 2016
|
|
For the Year Ended December 31, 2015
|
|
For the Year Ended December 31, 2014
|
|||||||||||||||||||||||||||||||||||||||
Market Segment
|
|
Wireless
|
|
Software
|
|
Total
|
|
% of
Total |
|
Wireless
|
|
Software
|
|
Total
|
|
% of
Total |
|
Wireless
|
|
Software
|
|
Total
|
|
% of
Total |
|||||||||||||||||||||
|
|
(Dollars in thousands)
|
|||||||||||||||||||||||||||||||||||||||||||
Healthcare
|
|
$
|
81,788
|
|
|
$
|
44,406
|
|
|
$
|
126,194
|
|
|
70.3
|
%
|
|
$
|
85,148
|
|
|
$
|
44,113
|
|
|
$
|
129,261
|
|
|
68.2
|
%
|
|
$
|
90,092
|
|
|
$
|
42,117
|
|
|
$
|
132,209
|
|
|
66.0
|
%
|
Government
|
|
6,867
|
|
|
7,286
|
|
|
14,153
|
|
|
7.9
|
%
|
|
7,993
|
|
|
9,348
|
|
|
17,341
|
|
|
9.1
|
%
|
|
9,426
|
|
|
11,217
|
|
|
20,643
|
|
|
10.3
|
%
|
|||||||||
Large Enterprise
|
|
9,532
|
|
|
3,563
|
|
|
13,095
|
|
|
7.3
|
%
|
|
11,539
|
|
|
3,009
|
|
|
14,548
|
|
|
7.7
|
%
|
|
13,867
|
|
|
2,257
|
|
|
16,124
|
|
|
8.1
|
%
|
|||||||||
Other
(1)
|
|
11,403
|
|
|
14,716
|
|
|
26,119
|
|
|
14.5
|
%
|
|
14,334
|
|
|
14,144
|
|
|
28,478
|
|
|
15.0
|
%
|
|
19,017
|
|
|
12,280
|
|
|
31,297
|
|
|
15.6
|
%
|
|||||||||
Total
|
|
$
|
109,590
|
|
|
$
|
69,971
|
|
|
$
|
179,561
|
|
|
100.0
|
%
|
|
$
|
119,014
|
|
|
$
|
70,614
|
|
|
$
|
189,628
|
|
|
100.0
|
%
|
|
$
|
132,402
|
|
|
$
|
67,871
|
|
|
$
|
200,273
|
|
|
100.0
|
%
|
(1)
|
Other includes hospitality, resort, indirect and billable travel revenue.
|
•
|
Cost of revenue
. These are expenses primarily for hardware, third-party software, outside service 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.
|
•
|
Service, rental and maintenance
. 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.
|
•
|
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 have a centralized marketing function, which 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. This classification consists primarily of payroll and related expenses, outside service expenses, taxes, licenses and permit expenses, and facility rent expenses.
|
(Dollars in thousands)
|
2016
|
|
Change
|
|
2015
|
|
Change
|
|
2014
|
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wireless
|
$
|
109,590
|
|
|
(9,424
|
)
|
|
(7.9
|
)%
|
|
$
|
119,014
|
|
|
$
|
(13,388
|
)
|
|
(10.1
|
)%
|
|
$
|
132,402
|
|
|
Software
|
69,971
|
|
|
(643
|
)
|
|
(0.9
|
)%
|
|
70,614
|
|
|
2,743
|
|
|
4.0
|
%
|
|
67,871
|
|
|||||
Total
|
$
|
179,561
|
|
|
$
|
(10,067
|
)
|
|
(5.3
|
)%
|
|
$
|
189,628
|
|
|
$
|
(10,645
|
)
|
|
(5.3
|
)%
|
|
$
|
200,273
|
|
Selected operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of revenue
|
$
|
30,649
|
|
|
$
|
(3,202
|
)
|
|
(9.5
|
)%
|
|
$
|
33,851
|
|
|
$
|
1,295
|
|
|
4.0
|
%
|
|
$
|
32,556
|
|
Research and development
|
13,467
|
|
|
3,187
|
|
|
31.0
|
%
|
|
10,280
|
|
|
779
|
|
|
8.2
|
%
|
|
9,501
|
|
|||||
Service, rental and maintenance
|
32,734
|
|
|
(1,387
|
)
|
|
(4.1
|
)%
|
|
34,121
|
|
|
(1,863
|
)
|
|
(5.2
|
)%
|
|
35,984
|
|
|||||
Selling and marketing
|
24,768
|
|
|
(2,678
|
)
|
|
(9.8
|
)%
|
|
27,446
|
|
|
(2,567
|
)
|
|
(8.6
|
)%
|
|
30,013
|
|
|||||
General and administrative
|
41,381
|
|
|
(778
|
)
|
|
(1.8
|
)%
|
|
42,159
|
|
|
(3,737
|
)
|
|
(8.1
|
)%
|
|
45,896
|
|
|||||
Severance
|
1,446
|
|
|
(1,255
|
)
|
|
(46.5
|
)%
|
|
2,701
|
|
|
1,206
|
|
|
80.7
|
%
|
|
1,495
|
|
|||||
Total
|
$
|
144,445
|
|
|
$
|
(6,113
|
)
|
|
(4.1
|
)%
|
|
$
|
150,558
|
|
|
$
|
(4,887
|
)
|
|
(3.1
|
)%
|
|
$
|
155,445
|
|
FTEs
|
587
|
|
|
(13
|
)
|
|
(2.2
|
)%
|
|
600
|
|
|
13
|
|
|
2.2
|
%
|
|
587
|
|
|||||
Active transmitters
|
4,159
|
|
|
(84
|
)
|
|
(2.0
|
)%
|
|
4,243
|
|
|
(96
|
)
|
|
(2.2
|
)%
|
|
4,339
|
|
Revenue - wireless
|
2016
|
|
Change
|
|
2015
|
|
Change
|
|
2014
|
||||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Paging revenue
|
$
|
105,048
|
|
|
$
|
(9,059
|
)
|
|
(7.9
|
)%
|
|
$
|
114,107
|
|
|
$
|
(11,094
|
)
|
|
(8.9
|
)%
|
|
$
|
125,201
|
|
Product and other revenue
|
4,542
|
|
|
(365
|
)
|
|
(7.4
|
)%
|
|
4,907
|
|
|
(2,294
|
)
|
|
(31.9
|
)%
|
|
7,201
|
|
|||||
Total wireless revenue
|
$
|
109,590
|
|
|
$
|
(9,424
|
)
|
|
(7.9
|
)%
|
|
$
|
119,014
|
|
|
$
|
(13,388
|
)
|
|
(10.1
|
)%
|
|
$
|
132,402
|
|
(1)
|
All figures presented include both direct and indirect units in service.
|
|
For the Year Ended
|
|||||||
Account Size
|
2016
|
|
2015
|
|
2014
|
|||
1 to 100 Units
|
(14.7
|
)%
|
|
(15.0
|
)%
|
|
(17.7
|
)%
|
101 to 1000 Units
|
(10.5
|
)%
|
|
(12.4
|
)%
|
|
(8.2
|
)%
|
> 1000 Units
|
(2.3
|
)%
|
|
(3.3
|
)%
|
|
(7.1
|
)%
|
Total net unit loss %
|
(5.3
|
)%
|
|
(6.6
|
)%
|
|
(8.7
|
)%
|
(1)
|
All figures presented include both direct and indirect units in service.
|
(1)
|
All figures presented include both direct and indirect units in service.
|
|
Units in Service as of December 31,
|
|
Revenue For the Year Ended December 31,
|
|
Change Due To:
|
|||||||||||||||||||||||
|
2015
|
|
2014
|
|
Change
|
|
2015
|
|
2014
|
|
Change
|
|
ARPU
|
|
Units
|
|||||||||||||
|
(Units in thousands)
|
|
(Dollars in thousands)
|
|||||||||||||||||||||||||
Total
|
1,173
|
|
|
1,256
|
|
|
(83
|
)
|
|
$
|
114,107
|
|
|
$
|
125,201
|
|
|
$
|
(11,094
|
)
|
|
$
|
(1,236
|
)
|
|
$
|
(9,858
|
)
|
Revenue - software
|
2016
|
|
Change
|
|
2015
|
|
Change
|
|
2014
|
||||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Subscription
|
$
|
2,112
|
|
|
$
|
431
|
|
|
25.6
|
%
|
|
$
|
1,681
|
|
|
$
|
198
|
|
|
13.4
|
%
|
|
$
|
1,483
|
|
License
|
6,720
|
|
|
(3,076
|
)
|
|
(31.4
|
)%
|
|
9,796
|
|
|
(1,478
|
)
|
|
(13.1
|
)%
|
|
11,274
|
|
|||||
Services
|
18,594
|
|
|
(243
|
)
|
|
(1.3
|
)%
|
|
18,837
|
|
|
1,465
|
|
|
8.4
|
%
|
|
17,372
|
|
|||||
Equipment
|
5,472
|
|
|
(401
|
)
|
|
(6.8
|
)%
|
|
5,873
|
|
|
(1,066
|
)
|
|
(15.4
|
)%
|
|
6,939
|
|
|||||
Operations revenue
|
32,898
|
|
|
(3,289
|
)
|
|
(9.1
|
)%
|
|
36,187
|
|
|
(881
|
)
|
|
(2.4
|
)%
|
|
37,068
|
|
|||||
Maintenance revenue
|
37,073
|
|
|
2,646
|
|
|
7.7
|
%
|
|
34,427
|
|
|
3,624
|
|
|
11.8
|
%
|
|
30,803
|
|
|||||
Total revenue
|
$
|
69,971
|
|
|
$
|
(643
|
)
|
|
(0.9
|
)%
|
|
$
|
70,614
|
|
|
$
|
2,743
|
|
|
4.0
|
%
|
|
$
|
67,871
|
|
Bookings
|
2016
|
|
Change
|
|
2015
|
|
Change
|
|
2014
|
||||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operations and new maintenance orders
|
$
|
33,598
|
|
|
$
|
(4,979
|
)
|
|
(12.9
|
)%
|
|
$
|
38,577
|
|
|
$
|
(6,548
|
)
|
|
(14.5
|
)%
|
|
$
|
45,125
|
|
Maintenance and subscription renewals
|
40,256
|
|
|
4,810
|
|
|
13.6
|
%
|
|
35,446
|
|
|
2,057
|
|
|
6.2
|
%
|
|
33,389
|
|
|||||
Total bookings
|
$
|
73,854
|
|
|
$
|
(169
|
)
|
|
(0.2
|
)%
|
|
$
|
74,023
|
|
|
$
|
(4,491
|
)
|
|
(5.7
|
)%
|
|
$
|
78,514
|
|
|
For the Year Ended December 31,
|
||||||||||
Backlog
|
2016
|
|
2015
|
|
2014
|
||||||
|
(Dollars in thousands)
|
||||||||||
Beginning balance
|
$
|
38,650
|
|
|
$
|
42,391
|
|
|
$
|
40,211
|
|
Operations bookings
|
33,598
|
|
|
38,577
|
|
|
45,125
|
|
|||
Maintenance and subscription renewals
|
40,256
|
|
|
35,446
|
|
|
33,389
|
|
|||
Available backlog
|
$
|
112,504
|
|
|
$
|
116,414
|
|
|
$
|
118,725
|
|
Operations revenue
|
(32,898
|
)
|
|
(36,187
|
)
|
|
(37,068
|
)
|
|||
Maintenance revenue
|
(37,073
|
)
|
|
(34,427
|
)
|
|
(30,803
|
)
|
|||
Other
(1)
|
(4,238
|
)
|
|
(7,150
|
)
|
|
(8,463
|
)
|
|||
Ending balance
|
$
|
38,295
|
|
|
$
|
38,650
|
|
|
$
|
42,391
|
|
Change in backlog
|
(0.9
|
)%
|
|
(8.8
|
)%
|
|
5.4
|
%
|
(1)
|
Other reflects cancellations and adjustments to backlog.
|
Operating expenses
|
2016
|
|
Change
|
|
2015
|
|
Change
|
|
2014
|
||||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of revenue
|
$
|
30,649
|
|
|
$
|
(3,202
|
)
|
|
(9.5
|
)%
|
|
$
|
33,851
|
|
|
$
|
1,295
|
|
|
4.0
|
%
|
|
$
|
32,556
|
|
Research and development
|
13,467
|
|
|
3,187
|
|
|
31.0
|
%
|
|
10,280
|
|
|
779
|
|
|
8.2
|
%
|
|
9,501
|
|
|||||
Service, rental and maintenance
|
32,734
|
|
|
(1,387
|
)
|
|
(4.1
|
)%
|
|
34,121
|
|
|
(1,863
|
)
|
|
(5.2
|
)%
|
|
35,984
|
|
|||||
Selling and marketing
|
24,768
|
|
|
(2,678
|
)
|
|
(9.8
|
)%
|
|
27,446
|
|
|
(2,567
|
)
|
|
(8.6
|
)%
|
|
30,013
|
|
|||||
General and administrative
|
41,381
|
|
|
(778
|
)
|
|
(1.8
|
)%
|
|
42,159
|
|
|
(3,737
|
)
|
|
(8.1
|
)%
|
|
45,896
|
|
|||||
Severance
|
1,446
|
|
|
(1,255
|
)
|
|
(46.5
|
)%
|
|
2,701
|
|
|
1,206
|
|
|
80.7
|
%
|
|
1,495
|
|
|||||
Total
|
$
|
144,445
|
|
|
$
|
(6,113
|
)
|
|
(4.1
|
)%
|
|
$
|
150,558
|
|
|
$
|
(4,887
|
)
|
|
(3.1
|
)%
|
|
$
|
155,445
|
|
FTEs
|
587
|
|
|
(13
|
)
|
|
(2.2
|
)%
|
|
600
|
|
|
13
|
|
|
2.2
|
%
|
|
587
|
|
Cost of revenue
|
2016
|
|
Change
|
|
2015
|
|
Change
|
|
2014
|
||||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Payroll and related
|
$
|
18,119
|
|
|
$
|
998
|
|
|
5.8
|
%
|
|
$
|
17,121
|
|
|
$
|
1,370
|
|
|
8.7
|
%
|
|
$
|
15,751
|
|
Cost of sales
|
9,689
|
|
|
(3,184
|
)
|
|
(24.7
|
)%
|
|
12,873
|
|
|
401
|
|
|
3.2
|
%
|
|
12,472
|
|
|||||
Stock based compensation
|
56
|
|
|
(78
|
)
|
|
(58.2
|
)%
|
|
134
|
|
|
(217
|
)
|
|
(61.8
|
)%
|
|
351
|
|
|||||
Other
|
2,785
|
|
|
(938
|
)
|
|
(25.2
|
)%
|
|
3,723
|
|
|
(259
|
)
|
|
(6.5
|
)%
|
|
3,982
|
|
|||||
Total cost of revenue
|
$
|
30,649
|
|
|
$
|
(3,202
|
)
|
|
(9.5
|
)%
|
|
$
|
33,851
|
|
|
$
|
1,295
|
|
|
4.0
|
%
|
|
$
|
32,556
|
|
FTEs
|
181
|
|
|
(10
|
)
|
|
(5.2
|
)%
|
|
191
|
|
|
12
|
|
|
6.7
|
%
|
|
179
|
|
•
|
Payroll and related —
Payroll and related expenses were incurred largely for maintenance, support and service personnel. While there was
a decrease
of
10
FTEs for the year ended
December 31, 2016
compared to the same period in
2015
, payroll and related expenses
increased
by
$1.0 million
due primarily to the timing of hiring and departures and an increase in the average cost per employee. The
increase
of
$1.4 million
in payroll and related expenses for the year ended
December 31, 2015
compare to the same period in
2014
was due primarily to
an increase
of
12
FTEs
and
by an increase in the average cost per employee.
|
•
|
Cost of sales —
Cost of sales consisted primarily of third party software, use of third party resources for software implementation related work, inventory and maintenance of third party products. For the year ended
December 31, 2016
compared to the same period in
2015
cost of sales
decreased
by
$3.2 million
due primarily to a decrease in the sale of third party software, less use of third party resources for software implementation related work, a reduction in billable travel costs and a one-time charge of $0.8 million related to adjustments made to our inventory balances in 2015. The
increase
of
$0.4 million
in cost of sales for the year ended
December 31, 2015
compared to the same period in
2014
was due primarily to charges related to missing or obsolete inventory in the second quarter of 2015, which was partially off-set by lower third-party professional services related to the implementation of software sales orders.
|
•
|
Stock based compensation —
Stock based compensation expenses consisted primarily of amortization of compensation expense associated with restricted stock units (“RSUs”) granted to certain eligible employees. For the year ended
December 31, 2016
compared to the same period in
2015
stock based compensation expense
decreased
by
$0.1 million
due primarily to the reversal of stock compensation expense partially offset by the issuance and amortization of the 2016 grants under the 2015 LTIP. The
decrease
of
$0.2 million
in stock based compensation expense for the year ended
December 31, 2015
compare to the same period in
2014
was due primarily to lower amortization of compensation expense for awards under the 2015 Long-Term Incentive Plan ("LTIP"). (See Note
7
, "Stockholders' Equity").
|
•
|
Other — Other expenses consisted primarily of repairs and maintenance, shipping, outside services and travel costs. For the year ended
December 31, 2016
compared to the same period in
2015
other expenses
decreased
by
$0.9 million
due primarily to a reduction in outside services, shipping expenses, repairs and maintenance and travel costs. The
decrease
of
$0.3 million
in other expenses for the year ended
December 31, 2015
compared to the same period in
2014
was due primarily to a decrease in outside services, repairs and maintenance and travel costs.
|
Research and development
|
2016
|
|
Change
|
|
2015
|
|
Change
|
|
2014
|
||||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Payroll and related
|
$
|
10,941
|
|
|
$
|
3,195
|
|
|
41.2
|
%
|
|
$
|
7,746
|
|
|
$
|
718
|
|
|
10.2
|
%
|
|
$
|
7,028
|
|
Outside services
|
2,088
|
|
|
55
|
|
|
2.7
|
%
|
|
2,033
|
|
|
17
|
|
|
0.8
|
%
|
|
2,016
|
|
|||||
Stock based compensation
|
52
|
|
|
(34
|
)
|
|
(39.5
|
)%
|
|
86
|
|
|
(4
|
)
|
|
(4.4
|
)%
|
|
90
|
|
|||||
Other
|
386
|
|
|
(29
|
)
|
|
(7.0
|
)%
|
|
415
|
|
|
48
|
|
|
13.1
|
%
|
|
367
|
|
|||||
Total research and development
|
$
|
13,467
|
|
|
$
|
3,187
|
|
|
31.0
|
%
|
|
$
|
10,280
|
|
|
$
|
779
|
|
|
8.2
|
%
|
|
$
|
9,501
|
|
FTEs
|
88
|
|
|
28
|
|
|
46.7
|
%
|
|
60
|
|
|
7
|
|
|
13.2
|
%
|
|
53
|
|
•
|
Payroll and related —
Payroll and related expenses were incurred largely for product development personnel. For the year ended
December 31, 2016
compared to the same period in
2015
payroll and related expenses
increased
by
$3.2 million
due primarily to
an increase
of
28
FTEs and an increase in the average cost per employee. The
increase
of
$0.7 million
in payroll and related expenses for the year ended
December 31, 2015
compare to the same period in
2014
was due primarily to
an increase
of
7
FTEs and an increase in the average cost per employee.
|
•
|
Outside services —
Outside services consisted primarily of third party developers. For the years ended
December 31, 2016
and 2015 compared to the same period in
2015
and 2014 outside services remained relatively flat.
|
•
|
Stock based compensation —
Stock based compensation expenses consisted primarily of amortization of compensation expense associated with RSUs granted to certain eligible employees. For the years ended
December 31, 2016
and 2015 compared to the same period in
2015
and 2014 stock based compensation expense remained relatively flat. (See Note
7
, "Stockholders' Equity").
|
•
|
Other —
Other expenses consisted primarily of travel and office expenses. For the years ended
December 31, 2016
and 2015 compared to the same period in
2015
and 2014 other expenses remained relatively flat.
|
Service, rental and maintenance
|
2016
|
|
Change
|
|
2015
|
|
Change
|
|
2014
|
||||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Payroll and related
|
$
|
10,724
|
|
|
$
|
(164
|
)
|
|
(1.5
|
)%
|
|
$
|
10,888
|
|
|
$
|
249
|
|
|
2.3
|
%
|
|
$
|
10,639
|
|
Site rent
|
14,572
|
|
|
(404
|
)
|
|
(2.7
|
)%
|
|
14,976
|
|
|
(769
|
)
|
|
(4.9
|
)%
|
|
15,745
|
|
|||||
Telecommunications
|
4,569
|
|
|
(674
|
)
|
|
(12.9
|
)%
|
|
5,243
|
|
|
(1,120
|
)
|
|
(17.6
|
)%
|
|
6,363
|
|
|||||
Stock based compensation
|
13
|
|
|
(16
|
)
|
|
(55.2
|
)%
|
|
29
|
|
|
11
|
|
|
61.1
|
%
|
|
18
|
|
|||||
Other
|
2,856
|
|
|
(129
|
)
|
|
(4.3
|
)%
|
|
2,985
|
|
|
(234
|
)
|
|
(7.3
|
)%
|
|
3,219
|
|
|||||
Total service, rental and maintenance
|
$
|
32,734
|
|
|
$
|
(1,387
|
)
|
|
(4.1
|
)%
|
|
$
|
34,121
|
|
|
$
|
(1,863
|
)
|
|
(5.2
|
)%
|
|
$
|
35,984
|
|
FTEs
|
97
|
|
|
(1
|
)
|
|
(1.0
|
)%
|
|
98
|
|
|
(1
|
)
|
|
(1.0
|
)%
|
|
99
|
|
•
|
Payroll and related —
Payroll and related expenses were incurred largely for field technicians, their managers, in-house repair personnel and quality assurance personnel. For the year ended
December 31, 2016
compared to the same period in
2015
payroll and related expenses
decreased
by
$0.2 million
due primarily to
a decrease
of
1
FTE
partially offset by
an increase in the average cost per employee. The
increase
of
$0.2 million
in payroll and related expenses for the year ended
December 31, 2015
compared to the same period in
2014
was due primarily to
a decrease
of
1
FTE
offset by
an increase in the average cost per employee.
|
•
|
Site rent —
Site rent expenses consisted primarily of rent for transmitter locations used in our paging network. For the year ended
December 31, 2016
compared to the same period in
2015
and for the year ended
December 31, 2015
compared to the same period in
2014
, site rent expenses
decreased
by
$0.4 million
and
$0.8 million
, respectively, due primarily to the rationalization of our networks, which has decreased the number of transmitters required to provide service to our customers. The reduction in transmitters has, in turn, reduced the number of lease locations. The number of active transmitters declined
2.0%
from December 31, 2015 to December 31, 2016 and
2.2%
from December 31, 2014 to December 31, 2015.
|
•
|
Telecommunications —
Telecommunications expenses consisted primarily of expenses incurred to interconnect our paging networks and to provide telephone numbers for customer use, points of contact for customer service, and connectivity among our offices. For the year ended
December 31, 2016
compared to the same period in
2015
and for the year ended
December 31, 2015
compared to the same period in
2014
, telecommunications expenses
decreased
by
$0.7 million
and
$1.1 million
, respectively, due to the consolidation of our networks. We believe continued reductions in these expenses will occur as our networks continue to be consolidated for the foreseeable future.
|
•
|
Stock based compensation —
Stock based compensation expenses consisted primarily of amortization of compensation expense associated with RSUs granted to certain eligible employees. For the year ended
December 31, 2016
and
2015
compared to the same period in 2015 and 2014 stock based compensation expense remained relatively flat. (See Note
7
, "Stockholders' Equity").
|
•
|
Other —
Other expenses consisted primarily of repairs and maintenance and outside services and includes management of these expenses to reflect the continued transition to support the growth in software revenue. For the year ended
December 31, 2016
compared to the same period in
2015
other expenses
decreased
by
$0.1 million
due primarily to repairs and maintenance. The
decrease
of
$0.2 million
in other expenses for the year ended
December 31, 2015
compared to the same period in
2014
was due primarily to a reclassification of expenses to other functional categories.
|
Selling and marketing
|
2016
|
|
Change
|
|
2015
|
|
Change
|
|
2014
|
||||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Payroll and related
|
$
|
14,252
|
|
|
$
|
(841
|
)
|
|
(5.6
|
)%
|
|
$
|
15,093
|
|
|
$
|
(908
|
)
|
|
(5.7
|
)%
|
|
$
|
16,001
|
|
Commissions
|
5,649
|
|
|
(1,590
|
)
|
|
(22.0
|
)%
|
|
7,239
|
|
|
(1,230
|
)
|
|
(14.5
|
)%
|
|
8,469
|
|
|||||
Stock based compensation
|
67
|
|
|
(44
|
)
|
|
(39.6
|
)%
|
|
111
|
|
|
(433
|
)
|
|
(79.6
|
)%
|
|
544
|
|
|||||
Other
|
4,800
|
|
|
(203
|
)
|
|
(4.1
|
)%
|
|
5,003
|
|
|
4
|
|
|
0.1
|
%
|
|
4,999
|
|
|||||
Total selling and marketing
|
$
|
24,768
|
|
|
$
|
(2,678
|
)
|
|
(9.8
|
)%
|
|
$
|
27,446
|
|
|
$
|
(2,567
|
)
|
|
(8.6
|
)%
|
|
$
|
30,013
|
|
FTEs
|
107
|
|
|
(23
|
)
|
|
(17.7
|
)%
|
|
130
|
|
|
6
|
|
|
4.8
|
%
|
|
124
|
|
•
|
Payroll and related —
Payroll and related expenses were incurred largely for sales and marketing personnel. For the year ended
December 31, 2016
compared to the same period in
2015
payroll and related expenses
decreased
by
$0.8 million
due primarily to
a decrease
of
23
FTEs, predominately related to the reorganization of our sales staff and related sales territories,
partially offset by
an increase in the average cost per employee. This decrease in FTEs reflects the reorganization of the sales staff, which includes the replacement of underperforming sales employees. While there was
an increase
of
6
FTEs for the year ended
December 31, 2015
compared to the same period in
2014
, the average headcount outstanding for 2015 was lower by approximately 16 FTEs compared to the same period in 2014. The
decrease
of
$0.9 million
in payroll and related expenses in 2015 was due primarily to the lower average headcount, partially offset by an increase in the average cost per employee.
|
•
|
Commissions —
Commissions expense relates to the payments made to the sales representatives responsible for executing contracts. Commissions are expensed as projects are implemented and are impacted by the level of software operations revenue. For the year ended
December 31, 2016
compared to the same period in
2015
commissions expense
decreased
by
$1.6 million
due primarily to lower software operations revenue compared to the same period in the prior year and to a lesser extent due to the continued impact from the change in the commission plan incentives made in 2015. The
decrease
of
$1.2 million
in commissions expense for the year ended
December 31, 2015
compared to the same period in
2014
was due primarily to the impact of a change in the commission plan incentives, which lowered the commission paid on the sale of certain products and to a lesser extent on lower software operations revenue in 2015.
|
•
|
Stock based compensation —
Stock based compensation expenses consisted primarily of amortization of compensation expense associated with RSUs granted to certain eligible employees. For the year ended
December 31, 2016
compared to the same period in
2015
stock based compensation expense remained relatively flat due primarily to the reversal of stock compensation expense partially offset by the issuance and amortization of the 2016 grants under the 2015 LTIP. The
decrease
of
$0.4 million
in stock based compensation expense for the year ended
December 31, 2015
compare to the same period in
2014
was due primarily to lower amortization of compensation expense for awards under the 2015 LTIP. (See Note
7
, "Stockholders' Equity").
|
•
|
Other —
Other expenses consisted primarily of advertising, trade show, convention and related travel expenses and reflect our focus on identifying sales opportunities. For the year ended
December 31, 2016
compared to the same period in
2015
other expenses
decreased
by
$0.2 million
due primarily to customer referral fees and an aggregate of smaller insignificant costs partially offset by higher advertising expenses in 2015. Other expenses remained relatively consistent for the year ended
December 31, 2015
compared to the same period in
2014
.
|
General and administrative
|
2016
|
|
Change
|
|
2015
|
|
Change
|
|
2014
|
||||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Payroll and related
|
$
|
17,382
|
|
|
$
|
(458
|
)
|
|
(2.6
|
)%
|
|
$
|
17,840
|
|
|
$
|
(350
|
)
|
|
(1.9
|
)%
|
|
$
|
18,190
|
|
Stock based compensation
|
666
|
|
|
(842
|
)
|
|
(55.8
|
)%
|
|
1,508
|
|
|
(1,327
|
)
|
|
(46.8
|
)%
|
|
2,835
|
|
|||||
Facility rent
|
3,315
|
|
|
(190
|
)
|
|
(5.4
|
)%
|
|
3,505
|
|
|
(9
|
)
|
|
(0.3
|
)%
|
|
3,514
|
|
|||||
Outside services
|
8,005
|
|
|
844
|
|
|
11.8
|
%
|
|
7,161
|
|
|
196
|
|
|
2.8
|
%
|
|
6,965
|
|
|||||
Taxes, licenses and permits
|
4,254
|
|
|
(222
|
)
|
|
(5.0
|
)%
|
|
4,476
|
|
|
(479
|
)
|
|
(9.7
|
)%
|
|
4,955
|
|
|||||
Other
|
7,759
|
|
|
90
|
|
|
1.2
|
%
|
|
7,669
|
|
|
(1,768
|
)
|
|
(18.7
|
)%
|
|
9,437
|
|
|||||
Total general and administrative
|
$
|
41,381
|
|
|
$
|
(778
|
)
|
|
(1.8
|
)%
|
|
$
|
42,159
|
|
|
$
|
(3,737
|
)
|
|
(8.1
|
)%
|
|
$
|
45,896
|
|
FTEs
|
114
|
|
|
(7
|
)
|
|
(5.8
|
)%
|
|
121
|
|
|
(11
|
)
|
|
(8.3
|
)%
|
|
132
|
|
•
|
Payroll and related —
Payroll and related expenses were incurred for employees in information technology, administrative operations, finance, human resources and executive management. For the year ended
December 31, 2016
compared to the same period in
2015
payroll and related expenses
decreased
by
$0.5 million
due primarily to
a decrease
of
7
FTEs
partially offset by
an increase in the average cost per employee. The
decrease
of
$0.4 million
in payroll and related expenses for the year ended
December 31, 2015
compare to the same period in
2014
was due primarily to
a decrease
of
11
FTEs
partially offset by
an increase in the average cost per employee.
|
•
|
Stock based compensation —
Stock based compensation expenses consisted primarily of amortization of compensation expense associated with RSUs granted to certain eligible employees. For the year ended
December 31, 2016
compared to the same period in
2015
stock based compensation expense
decreased
by
$0.8 million
due primarily to the reversal of stock compensation expense partially offset by the issuance and amortization of the 2016 grants under the 2015 LTIP. The
decrease
of
$1.3 million
in stock based compensation expense for the year ended
December 31, 2015
compare to the same period in
2014
was due primarily to lower amortization of compensation expense for awards under the 2015 LTIP. (See Note
7
, "Stockholders' Equity").
|
•
|
Facility Rent—
Facility rent expenses consisted primarily of rent, utilities and other fees related to the lease of office space for administrative purposes. For the year ended
December 31, 2016
compared to the same period in
2015
facility rent expenses
decreased
by
$0.2 million
due primarily to reductions in rent and utilities. Facility rent expenses stayed relatively consistent for the year ended
December 31, 2015
compared to the same period in
2014
.
|
•
|
Outside services —
Outside service expenses consisted primarily of costs associated with professional services related to financial reporting, taxes and internal control compliance. For the year ended
December 31, 2016
compared to the same period in
2015
outside service expenses
increased
by
$0.8 million
due primarily to costs related to the enhancement and replacement of certain internal processes and systems. These costs include enhancement of our current customer relationship management solution, implementation of an enterprise resource planning platform, replacement of our sales quoting tool and the addition of commission software. The
increase
of
$0.2 million
in outside service expenses for the year ended
December 31, 2015
compared to the same period in
2014
was due primarily to higher professional service fees for external accounting and tax support services.
|
•
|
Taxes, licenses and permits —
Taxes, license and permit expenses consisted primarily of property, franchise, gross receipts and transactional taxes and are primarily impacted by our level of revenue and property and equipment base. For the year ended
December 31, 2016
compared to the same period in
2015
, taxes, license and permit expenses
decreased
by
$0.2 million
due primarily to a decrease in gross receipts, license and permits and personal property tax partially offset by an increase in sales and use tax. The
decrease
of
$0.5 million
in taxes, license and permit expenses for the year ended
December 31, 2015
compared to the same period in
2014
was due primarily to a decrease in gross receipts and sales and use tax partially offset by increases in license and permits expense.
|
•
|
Other —
Other expenses consisted primarily of bad debt, insurance, shipping costs, financial services and office rent and utilities. For the year ended
December 31, 2016
compared to the same period in
2015
other expenses
increased
by
$0.1 million
due primarily to an aggregate of smaller insignificant costs. The
decrease
of
$1.8 million
in other expenses for the year ended
December 31, 2015
compared to the same period in
2014
was due primarily to a non-recurring charge of $0.8 million related to future billing credits, relocation expenses and refunds and repairs and maintenance for the year ended
December 31, 2014
, which were not incurred in 2015.
|
Effective tax rate reconciliation
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Income before income tax expense
|
$
|
22,971
|
|
|
|
|
$
|
26,298
|
|
|
|
|
$
|
27,327
|
|
|
|
|||
Federal income tax expense at the Federal statutory rate
|
$
|
8,040
|
|
|
35.0
|
%
|
|
$
|
9,204
|
|
|
35.0
|
%
|
|
$
|
9,564
|
|
|
35.0
|
%
|
State income taxes, net of Federal benefit
|
867
|
|
|
3.8
|
%
|
|
1,021
|
|
|
3.9
|
%
|
|
1,188
|
|
|
4.3
|
%
|
|||
Change in valuation allowance
|
—
|
|
|
—
|
%
|
|
(64,159
|
)
|
|
(244.0
|
)%
|
|
(5,087
|
)
|
|
(18.6
|
)%
|
|||
Other, including permanent differences
|
85
|
|
|
0.4
|
%
|
|
(14
|
)
|
|
(0.1
|
)%
|
|
917
|
|
|
3.4
|
%
|
|||
Income tax expense (benefit)
|
$
|
8,992
|
|
|
39.1
|
%
|
|
$
|
(53,948
|
)
|
|
(205.1
|
)%
|
|
$
|
6,582
|
|
|
24.1
|
%
|
Pro forma effective tax rate
|
2016
|
|
2015
|
|
2014
|
|||
(Dollars in thousands)
|
|
|
|
|
|
|||
Effective tax rate
|
39.1
|
%
|
|
(205.1
|
%)
|
|
24.1
|
%
|
Change in valuation allowance
|
—
|
%
|
|
244.0
|
%
|
|
18.6
|
%
|
Pro-forma effective tax rate
|
39.1
|
%
|
|
38.9
|
%
|
|
42.7
|
%
|
|
For the Year Ended December 31,
|
|
Change Between 2016 and 2015
|
||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
|||||||||
|
(Dollars in thousands)
|
||||||||||||||
Net cash provided by operating activities
|
$
|
37,461
|
|
|
$
|
41,837
|
|
|
$
|
41,559
|
|
|
$
|
(4,376
|
)
|
Net cash used in investing activities
|
(6,254
|
)
|
|
(5,565
|
)
|
|
(7,614
|
)
|
|
(689
|
)
|
||||
Net cash used in financing activities
|
(16,723
|
)
|
|
(32,809
|
)
|
|
(15,151
|
)
|
|
16,086
|
|
|
Payments Due By Period
|
||||||||||||||||||
(Dollars in thousands)
|
Total
|
|
Less than 1 Year
|
|
1 to 3 years
|
|
3 to 5 years
|
|
More than 5 years
|
||||||||||
Operating lease obligations
|
$
|
17,150
|
|
|
$
|
6,672
|
|
|
$
|
6,703
|
|
|
$
|
2,678
|
|
|
$
|
1,097
|
|
Purchase obligations
|
3,992
|
|
|
—
|
|
|
3,992
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
21,142
|
|
|
$
|
6,672
|
|
|
$
|
10,695
|
|
|
$
|
2,678
|
|
|
$
|
1,097
|
|
•
|
there is persuasive evidence that an arrangement exists;
|
•
|
delivery has occurred or services rendered;
|
•
|
the fee is fixed or determinable; and
|
•
|
collectability is reasonably assured.
|
1.
|
Future reversals of existing taxable temporary differences.
|
2.
|
Future taxable income exclusive of reversing temporary differences and carryforwards.
|
3.
|
Taxable income in carryback years to the extent permitted by tax law.
|
4.
|
Tax planning strategies.
|
•
|
For entities electing to account for forfeitures as they are incurred, a modified retrospective transition approach, with a cumulative-effect adjustment recognized in equity, is required for stock based compensation accounted for prior to the date on which the standard is adopted. We made the policy election to account for forfeitures as incurred and therefore, recorded a cumulative-effect adjustment in equity to account for this change in the first quarter of 2016. The overall impact to our consolidated financial statements is immaterial. Future forfeitures will be accounted for as they are incurred rather than estimating the number of awards that are expected to be forfeited at the time of grant.
|
•
|
A retrospective transition approach is required for classification of employee taxes paid in the Statement of Cash Flows when an employer withholds shares for tax-withholding purposes. In the three months ended March 31, 2015, shares were withheld for tax-withholding purposes related to the payment of vested 2011 LTIP awards. Previously, the withholdings were classified as an operating activity within our Statement of Cash Flows. We have retrospectively reclassified those withholdings as a financing activity and the total reclassification was $3.8 million.
|
•
|
There was no additional impact on our financial statements, resulting from the adoption of ASU No. 2016-09, that required a retrospective or modified retrospective approach. Any additional requirements under this ASU will be accounted for on a prospective basis.
|
Non-GAAP Financial Measures
|
2016
|
|
2015
|
|
2014
|
||||||
(Dollars in thousands)
|
|
|
|
|
|
||||||
Net income
|
$
|
13,979
|
|
|
$
|
80,246
|
|
|
$
|
20,745
|
|
Plus (Less): Income tax expense (benefit)
|
8,992
|
|
|
(53,948
|
)
|
|
6,582
|
|
|||
Plus (Less): Other expense (income)
|
(543
|
)
|
|
(1,182
|
)
|
|
368
|
|
|||
Plus (Less): Interest expense (income)
|
(275
|
)
|
|
(16
|
)
|
|
456
|
|
|||
Operating income
|
22,153
|
|
|
25,100
|
|
|
28,151
|
|
|||
Plus: Depreciation, amortization and accretion
|
12,963
|
|
|
13,970
|
|
|
16,677
|
|
|||
EBITDA (as defined by the Company)
|
35,116
|
|
|
39,070
|
|
|
44,828
|
|
|||
Less: Purchases of property and equipment
|
(6,256
|
)
|
|
(6,374
|
)
|
|
(7,679
|
)
|
|||
OCF (as defined by the Company)
|
$
|
28,860
|
|
|
$
|
32,696
|
|
|
$
|
37,149
|
|
Index to Consolidated Financial Statements
|
Page
|
•
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and members of the Board of Directors of the Company; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
•
|
information regarding directors is set forth under the caption “Election of Directors”;
|
•
|
information regarding executive officers is set forth under the caption “Executive Officers”;
|
•
|
information regarding our audit committee and designated “audit committee financial expert” is set forth under the caption “Committees of the Board of Directors”; and
|
•
|
information regarding compliance with Section 16(a) of the Exchange Act is set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance”.
|
(a)
|
1.
Financial Statements
|
Index to Consolidated Financial Statements
|
Page
|
Index to Consolidated Financial Statements
|
Page
|
(a)
|
Exhibits
|
|
Spok Holdings, Inc.
|
|
|
By:
|
/s/ Vincent D. Kelly
|
|
Vincent D. Kelly
|
|
President and Chief Executive Officer
|
|
March 2, 2017
|
Signature
|
|
Title
|
|
Date
|
|
|
|
||
/s/ Vincent D. Kelly
|
|
Director, President and Chief Executive Officer (principal executive officer)
|
|
March 2, 2017
|
Vincent D. Kelly
|
|
|
||
|
|
|
|
|
/s/ Shawn E. Endsley
|
|
Chief Financial Officer (principal financial officer)
|
|
March 2, 2017
|
Shawn E. Endsley
|
|
|
|
|
|
|
|
||
/s/ Royce Yudkoff
|
|
Chairman of the Board
|
|
March 2, 2017
|
Royce Yudkoff
|
|
|
|
|
|
|
|
||
/s/ N. Blair Butterfield
|
|
Director
|
|
March 2, 2017
|
N. Blair Butterfield
|
|
|
|
|
|
|
|
||
/s/ Stacia A. Hylton
|
|
Director
|
|
March 2, 2017
|
Stacia A. Hylton
|
|
|
|
|
|
|
|
|
|
/s/ Brian O’Reilly
|
|
Director
|
|
March 2, 2017
|
Brian O’Reilly
|
|
|
|
|
|
|
|
|
|
/s/ Matthew Oristano
|
|
Director
|
|
March 2, 2017
|
Matthew Oristano
|
|
|
|
|
|
|
|
||
/s/ Samme L. Thompson
|
|
Director
|
|
March 2, 2017
|
Samme L. Thompson
|
|
|
|
|
Index to Consolidated Financial Statements
|
Page
|
/s/ GRANT THORNTON LLP
|
|
Arlington, Virginia
|
March 2, 2017
|
/s/ GRANT THORNTON LLP
|
|
Arlington, Virginia
|
March 2, 2017
|
|
December 31,
|
||||||
(Dollars in thousands except share and per share amounts)
|
2016
|
|
2015
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
125,816
|
|
|
$
|
111,332
|
|
Accounts receivable, net
|
23,666
|
|
|
22,638
|
|
||
Prepaid expenses and other
|
4,384
|
|
|
5,352
|
|
||
Inventory, net
|
1,996
|
|
|
2,291
|
|
||
Total current assets
|
155,862
|
|
|
141,613
|
|
||
Non-current assets:
|
|
|
|
||||
Property and equipment, net
|
12,818
|
|
|
15,386
|
|
||
Goodwill
|
133,031
|
|
|
133,031
|
|
||
Intangible assets, net
|
10,803
|
|
|
14,964
|
|
||
Deferred income tax assets, net
|
73,068
|
|
|
79,994
|
|
||
Other non-current assets
|
2,505
|
|
|
1,445
|
|
||
Total non-current assets
|
232,225
|
|
|
244,820
|
|
||
TOTAL ASSETS
|
$
|
388,087
|
|
|
$
|
386,433
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
1,909
|
|
|
$
|
2,121
|
|
Accrued compensation and benefits
|
13,268
|
|
|
10,864
|
|
||
Accrued dividends payable
|
5,140
|
|
|
—
|
|
||
Accrued taxes
|
4,132
|
|
|
3,465
|
|
||
Deferred revenue
|
29,145
|
|
|
27,045
|
|
||
Other current liabilities
|
2,733
|
|
|
3,661
|
|
||
Total current liabilities
|
56,327
|
|
|
47,156
|
|
||
Non-current liabilities:
|
|
|
|
||||
Deferred revenue
|
752
|
|
|
741
|
|
||
Other non-current liabilities
|
8,921
|
|
|
8,972
|
|
||
Total non-current liabilities
|
9,673
|
|
|
9,713
|
|
||
TOTAL LIABILITIES
|
66,000
|
|
|
56,869
|
|
||
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
||
STOCKHOLDERS’ EQUITY:
|
|
|
|
||||
Preferred stock—$0.0001 par value; 25,000,000 shares authorized; no shares issued or outstanding
|
—
|
|
|
—
|
|
||
Common stock—$0.0001 par value; 75,000,000 shares authorized; 20,525,614 and 20,886,261 shares issued and outstanding as of December 31, 2016 and December 31, 2015, respectively
|
2
|
|
|
2
|
|
||
Additional paid-in capital
|
104,810
|
|
|
110,435
|
|
||
Retained earnings
|
217,275
|
|
|
219,127
|
|
||
TOTAL STOCKHOLDERS’ EQUITY
|
322,087
|
|
|
329,564
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
388,087
|
|
|
$
|
386,433
|
|
|
For the Year Ended December 31,
|
||||||||||
(Dollars in thousands, except share and per share amounts)
|
2016
|
|
2015
|
|
2014
|
||||||
Revenue:
|
|
|
|
|
|
||||||
Wireless
|
$
|
109,590
|
|
|
$
|
119,014
|
|
|
$
|
132,402
|
|
Software
|
69,971
|
|
|
70,614
|
|
|
67,871
|
|
|||
Total revenue
|
179,561
|
|
|
189,628
|
|
|
200,273
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Cost of revenue
|
30,649
|
|
|
33,851
|
|
|
32,556
|
|
|||
Research and development
|
13,467
|
|
|
10,280
|
|
|
9,501
|
|
|||
Service, rental and maintenance
|
32,734
|
|
|
34,121
|
|
|
35,984
|
|
|||
Selling and marketing
|
24,768
|
|
|
27,446
|
|
|
30,013
|
|
|||
General and administrative
|
41,381
|
|
|
42,159
|
|
|
45,896
|
|
|||
Severance
|
1,446
|
|
|
2,701
|
|
|
1,495
|
|
|||
Depreciation, amortization and accretion
|
12,963
|
|
|
13,970
|
|
|
16,677
|
|
|||
Total operating expenses
|
157,408
|
|
|
164,528
|
|
|
172,122
|
|
|||
Operating income
|
22,153
|
|
|
25,100
|
|
|
28,151
|
|
|||
Interest income (expense)
|
275
|
|
|
16
|
|
|
(456
|
)
|
|||
Other income (expense)
|
543
|
|
|
1,182
|
|
|
(368
|
)
|
|||
Income before income tax expense
|
22,971
|
|
|
26,298
|
|
|
27,327
|
|
|||
Income tax benefit (expense)
|
(8,992
|
)
|
|
53,948
|
|
|
(6,582
|
)
|
|||
Net income
|
$
|
13,979
|
|
|
$
|
80,246
|
|
|
$
|
20,745
|
|
Basic and diluted net income per common share
|
$
|
0.68
|
|
|
$
|
3.74
|
|
|
$
|
0.96
|
|
Basic and diluted weighted average common shares outstanding
|
20,586,066
|
|
|
21,471,041
|
|
|
21,644,163
|
|
|||
Cash dividends declared per common share
|
$
|
0.750
|
|
|
$
|
0.625
|
|
|
$
|
0.500
|
|
(Dollars in thousands except share amounts)
|
Outstanding
Common Shares |
|
Common
Stock |
|
Additional
Paid-In Capital |
|
Retained
Earnings |
|
Total
Stockholders’ Equity |
|||||||||
Balance, January 1, 2014
|
21,652,341
|
|
|
$
|
2
|
|
|
$
|
127,264
|
|
|
$
|
142,684
|
|
|
$
|
269,950
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
20,745
|
|
|
20,745
|
|
||||
Issuance of common stock under the Equity Plan
|
5,820
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|
85
|
|
||||
Issuance of common stock for vested restricted stock units under the Equity Plan
|
559,689
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Amortization of stock based compensation
|
—
|
|
|
—
|
|
|
3,753
|
|
|
—
|
|
|
3,753
|
|
||||
Cash dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,050
|
)
|
|
(11,050
|
)
|
||||
Common stock repurchase program
|
(263,772
|
)
|
|
—
|
|
|
(4,325
|
)
|
|
—
|
|
|
(4,325
|
)
|
||||
Issuance of restricted common stock under the Equity Plan
|
24,684
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other
|
—
|
|
|
—
|
|
|
(99
|
)
|
|
—
|
|
|
(99
|
)
|
||||
Balance, December 31, 2014
|
21,978,762
|
|
|
$
|
2
|
|
|
$
|
126,678
|
|
|
$
|
152,379
|
|
|
$
|
279,059
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
80,246
|
|
|
80,246
|
|
||||
Purchase of common stock for tax withholding, net
|
(217,211
|
)
|
|
—
|
|
|
(3,824
|
)
|
|
—
|
|
|
(3,824
|
)
|
||||
Amortization of stock based compensation
|
—
|
|
|
—
|
|
|
1,868
|
|
|
—
|
|
|
1,868
|
|
||||
Cash dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,498
|
)
|
|
(13,498
|
)
|
||||
Common stock repurchase program
|
(897,177
|
)
|
|
—
|
|
|
(15,008
|
)
|
|
—
|
|
|
(15,008
|
)
|
||||
Issuance of restricted common stock under the Equity Plan
|
21,887
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other
|
—
|
|
|
—
|
|
|
721
|
|
|
—
|
|
|
721
|
|
||||
Balance, December 31, 2015
|
20,886,261
|
|
|
$
|
2
|
|
|
$
|
110,435
|
|
|
$
|
219,127
|
|
|
$
|
329,564
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
13,979
|
|
|
13,979
|
|
||||
Issuance of common stock under the Employee Stock Purchase Plan
|
3,961
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
53
|
|
||||
Purchased and retired common stock
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Amortization of stock based compensation
|
—
|
|
|
—
|
|
|
854
|
|
|
—
|
|
|
854
|
|
||||
Cash dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,766
|
)
|
|
(15,766
|
)
|
||||
Common stock repurchase program
|
(388,255
|
)
|
|
—
|
|
|
(6,489
|
)
|
|
—
|
|
|
(6,489
|
)
|
||||
Issuance of restricted common stock under the Equity Plan
|
23,649
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other
|
—
|
|
|
—
|
|
|
(43
|
)
|
|
(65
|
)
|
|
(108
|
)
|
||||
Balance, December 31, 2016
|
20,525,614
|
|
|
$
|
2
|
|
|
$
|
104,810
|
|
|
$
|
217,275
|
|
|
$
|
322,087
|
|
|
For the Year Ended December 31,
|
||||||||||
(Dollars in thousands)
|
2016
|
|
2015
|
|
2014
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
13,979
|
|
|
$
|
80,246
|
|
|
$
|
20,745
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation, amortization and accretion
|
12,963
|
|
|
13,970
|
|
|
16,677
|
|
|||
Amortization of deferred financing costs
|
—
|
|
|
—
|
|
|
456
|
|
|||
Deferred income tax (benefit) expense
|
6,926
|
|
|
(55,018
|
)
|
|
4,740
|
|
|||
Stock based compensation
|
854
|
|
|
1,868
|
|
|
3,838
|
|
|||
Provisions for doubtful accounts, service credits and other
|
761
|
|
|
1,290
|
|
|
1,128
|
|
|||
Adjustments of non-cash transaction taxes
|
(270
|
)
|
|
(686
|
)
|
|
(310
|
)
|
|||
(Gain)/Loss on disposals of property and equipment
|
2
|
|
|
(793
|
)
|
|
3
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
(1,790
|
)
|
|
1,041
|
|
|
(8,013
|
)
|
|||
Prepaid expenses, intangible assets and other assets
|
843
|
|
|
658
|
|
|
17
|
|
|||
Accounts payable, accrued liabilities and other
|
1,083
|
|
|
(3,556
|
)
|
|
1,192
|
|
|||
Deferred revenue
|
2,110
|
|
|
2,817
|
|
|
1,086
|
|
|||
Net cash provided by operating activities
|
37,461
|
|
|
41,837
|
|
|
41,559
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Purchases of property and equipment, net of proceeds from disposals of property and equipment
|
(6,254
|
)
|
|
(5,565
|
)
|
|
(7,614
|
)
|
|||
Net cash used in investing activities
|
(6,254
|
)
|
|
(5,565
|
)
|
|
(7,614
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Cash distributions to stockholders
|
(10,287
|
)
|
|
(13,976
|
)
|
|
(10,826
|
)
|
|||
Purchase of common stock (including commissions), net of proceeds from issuance of common stock
|
(6,436
|
)
|
|
(15,008
|
)
|
|
(4,325
|
)
|
|||
Employee stock based compensation tax withholding
|
—
|
|
|
(3,825
|
)
|
|
—
|
|
|||
Net cash used in financing activities
|
(16,723
|
)
|
|
(32,809
|
)
|
|
(15,151
|
)
|
|||
Net increase in cash and cash equivalents
|
14,484
|
|
|
3,463
|
|
|
18,794
|
|
|||
Cash and cash equivalents, beginning of period
|
111,332
|
|
|
107,869
|
|
|
89,075
|
|
|||
Cash and cash equivalents, end of period
|
$
|
125,816
|
|
|
$
|
111,332
|
|
|
$
|
107,869
|
|
Supplemental disclosure:
|
|
|
|
|
|
||||||
Income taxes paid
|
$
|
695
|
|
|
$
|
1,521
|
|
|
$
|
1,448
|
|
(Dollars in thousands)
|
As Previously Reported At December 31, 2015
|
|
Adjustment
|
|
As Revised At December 31, 2015
|
|||||
Gross deferred income tax asset
|
$
|
129,760
|
|
|
265
|
|
|
$
|
130,025
|
|
Valuation allowance
|
(45,777
|
)
|
|
(4,254
|
)
|
|
(50,031
|
)
|
||
Net deferred income tax asset
|
83,983
|
|
|
(3,989
|
)
|
|
79,994
|
|
||
Retained earnings
|
223,116
|
|
|
(3,989
|
)
|
|
219,127
|
|
(Dollars in thousands, except for share and per share amounts)
|
As Previously Reported for the Twelve Months Ended December 31, 2015
|
|
Adjustment
|
|
As Revised for the Twelve Months Ended December 31, 2015
|
||||||
Income tax benefit
|
$
|
57,937
|
|
|
$
|
(3,989
|
)
|
|
$
|
53,948
|
|
Net income
|
84,235
|
|
|
(3,989
|
)
|
|
80,246
|
|
|||
Basic net income per common share
|
3.99
|
|
|
(0.25
|
)
|
|
3.74
|
|
|||
Basic weighted average common shares outstanding
|
21,120,268
|
|
|
350,773
|
|
|
21,471,041
|
|
|||
Diluted net income per common share
|
3.98
|
|
|
(0.24
|
)
|
|
3.74
|
|
|||
Diluted weighted average common shares outstanding
|
21,186,750
|
|
|
284,291
|
|
|
21,471,041
|
|
(Dollars in thousands, except for share and per share amounts)
|
As Previously Reported for the Twelve Months Ended December 31, 2014
|
|
Adjustment
|
|
As Revised for the Twelve Months Ended December 31, 2014
|
||||||
Basic weighted average common shares outstanding
|
21,621,466
|
|
|
22,697
|
|
|
21,644,163
|
|
|||
Diluted net income per common share
|
$
|
0.94
|
|
|
$
|
0.02
|
|
|
$
|
0.96
|
|
Diluted weighted average common shares outstanding
|
22,090,770
|
|
|
(446,607
|
)
|
|
21,644,163
|
|
(Dollars in thousands, except for per share amounts)
|
As Previously Reported for the Three Months Ended December 31, 2015
|
|
Adjustment
|
|
As Revised for the Three Months Ended December 31, 2015
|
||||||
Income tax benefit
|
$
|
57,937
|
|
|
$
|
(3,989
|
)
|
|
$
|
53,948
|
|
Net income
|
72,721
|
|
|
(3,989
|
)
|
|
68,732
|
|
|||
Basic net income per common share
|
3.54
|
|
|
(0.26
|
)
|
|
3.28
|
|
|||
Diluted net income per common share
|
3.53
|
|
|
(0.25
|
)
|
|
3.28
|
|
(Dollars in thousands)
|
As Previously Reported At December 31, 2015
|
|
Adjustment
|
|
As Revised At December 31, 2015
|
||||||
Net income
|
$
|
84,235
|
|
|
$
|
(3,989
|
)
|
|
$
|
80,246
|
|
Deferred income tax (benefit) expense
|
(59,007
|
)
|
|
3,989
|
|
|
(55,018
|
)
|
•
|
there is persuasive evidence that an arrangement exists;
|
•
|
delivery has occurred or services rendered;
|
•
|
the fee is fixed or determinable; and
|
•
|
collectability is reasonably assured.
|
•
|
For entities electing to account for forfeitures as they are incurred, a modified retrospective transition approach, with a cumulative-effect adjustment recognized in equity, is required for stock based compensation accounted for prior to the date on which the standard is adopted. We made the policy election to account for forfeitures as incurred and therefore, recorded a cumulative-effect adjustment in equity to account for this change in the first quarter of 2016. The overall impact to our consolidated financial statements is immaterial. Future forfeitures will be accounted for as they are incurred rather than estimating the number of awards that are expected to be forfeited at the time of grant.
|
•
|
A retrospective transition approach is required for classification of employee taxes paid in the Statement of Cash Flows when an employer withholds shares for tax-withholding purposes. In the three months ended March 31, 2015, shares were withheld for tax-withholding purposes related to the payment of vested 2011 LTIP awards. Previously, the withholdings were classified as an operating activity within our Statement of Cash Flows. We have retrospectively reclassified those withholdings as a financing activity and the total reclassification was
$3.8 million
.
|
•
|
There was no additional impact on our financial statements resulting from the adoption of ASU No. 2016-09 that required a retrospective or modified retrospective approach. Any additional requirements under this ASU will be accounted for on a prospective basis.
|
|
For the Year Ended December 31,
|
||||||||||
(Dollars in thousands)
|
2016
|
|
2015
|
|
2014
|
||||||
Depreciation
|
|
|
|
|
|
||||||
Leasehold improvements
|
$
|
189
|
|
|
$
|
233
|
|
|
$
|
194
|
|
Asset retirement costs
|
(277
|
)
|
|
(505
|
)
|
|
(289
|
)
|
|||
Paging and computer equipment
|
7,974
|
|
|
8,489
|
|
|
9,370
|
|
|||
Furniture, fixtures and vehicles
|
294
|
|
|
353
|
|
|
925
|
|
|||
Total depreciation
|
8,180
|
|
|
8,570
|
|
|
10,200
|
|
|||
Amortization
|
4,160
|
|
|
4,735
|
|
|
5,722
|
|
|||
Accretion
|
623
|
|
|
665
|
|
|
755
|
|
|||
Total depreciation, amortization and accretion expense
|
$
|
12,963
|
|
|
$
|
13,970
|
|
|
$
|
16,677
|
|
|
Useful Life
(In Years) |
|
For the Year Ended December 31,
|
||||||
(Dollars in thousands)
|
|
2016
|
|
2015
|
|||||
Leasehold improvements
|
lease term
|
|
$
|
3,843
|
|
|
$
|
3,699
|
|
Asset retirement costs
|
1-5
|
|
3,263
|
|
|
3,566
|
|
||
Paging and computer equipment
|
1-5
|
|
113,175
|
|
|
114,390
|
|
||
Furniture, fixtures and vehicles
|
3-5
|
|
2,852
|
|
|
2,648
|
|
||
Total property and equipment
|
|
|
123,133
|
|
|
124,303
|
|
||
Accumulated depreciation
|
|
|
(110,315
|
)
|
|
(108,917
|
)
|
||
Total property and equipment, net
|
|
|
$
|
12,818
|
|
|
$
|
15,386
|
|
|
December 31,
|
||||||
(Dollars in thousands)
|
2016
|
|
2015
|
||||
Accrued outside services
|
$
|
975
|
|
|
$
|
1,455
|
|
Accrued network costs
|
773
|
|
|
917
|
|
||
Accrued accounting and legal
|
467
|
|
|
458
|
|
||
Accrued recognition awards
|
299
|
|
|
370
|
|
||
Deferred rent and other
|
134
|
|
|
165
|
|
||
Asset retirement obligations
|
85
|
|
|
296
|
|
||
Total other current liabilities
|
$
|
2,733
|
|
|
$
|
3,661
|
|
|
December 31,
|
||||||
(Dollars in thousands)
|
2016
|
|
2015
|
||||
Asset retirement obligations
|
$
|
7,472
|
|
|
$
|
7,543
|
|
Deferred rent and other
|
942
|
|
|
1,269
|
|
||
Dividends payable
|
507
|
|
|
160
|
|
||
Total other non-current liabilities
|
$
|
8,921
|
|
|
$
|
8,972
|
|
|
|
|
As of December 31,
|
||||||||||||||||||||||
|
|
|
2016
|
|
2015
|
||||||||||||||||||||
(Dollars in thousands)
|
Useful Life (In Years)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
Customer relationships
|
10
|
|
$
|
25,002
|
|
|
$
|
(14,585
|
)
|
|
$
|
10,417
|
|
|
$
|
25,002
|
|
|
$
|
(12,084
|
)
|
|
$
|
12,918
|
|
Acquired technology
|
2 - 4
|
|
8,452
|
|
|
(8,452
|
)
|
|
—
|
|
|
8,452
|
|
|
(8,339
|
)
|
|
113
|
|
||||||
Non-compete agreements
|
3
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,370
|
|
|
(2,352
|
)
|
|
18
|
|
||||||
Trademarks
|
6
|
|
5,754
|
|
|
(5,368
|
)
|
|
386
|
|
|
5,754
|
|
|
(3,839
|
)
|
|
1,915
|
|
||||||
Total amortizable intangible assets
|
2-10
|
|
$
|
39,208
|
|
|
$
|
(28,405
|
)
|
|
$
|
10,803
|
|
|
$
|
41,578
|
|
|
$
|
(26,614
|
)
|
|
$
|
14,964
|
|
(Dollars in thousands)
|
Severance
|
||
Balance at January 1, 2015
|
$
|
1,581
|
|
Charges
|
2,701
|
|
|
Cash paid
|
(2,926
|
)
|
|
Balance at December 31, 2015
|
1,356
|
|
|
Charges
|
1,446
|
|
|
Cash paid
|
(1,347
|
)
|
|
Balance at December 31, 2016
|
$
|
1,455
|
|
(Dollars in thousands)
|
Short-Term Portion
|
|
Long-Term Portion
|
|
Total
|
||||||
Balance at January 1, 2015
|
$
|
342
|
|
|
$
|
6,805
|
|
|
$
|
7,147
|
|
Accretion
|
125
|
|
|
540
|
|
|
665
|
|
|||
Amounts paid
|
(176
|
)
|
|
—
|
|
|
(176
|
)
|
|||
Increases and (reductions) recorded
|
(55
|
)
|
|
258
|
|
|
203
|
|
|||
Reclassifications
|
60
|
|
|
(60
|
)
|
|
—
|
|
|||
Balance at December 31, 2015
|
296
|
|
|
7,543
|
|
|
7,839
|
|
|||
Accretion
|
36
|
|
|
587
|
|
|
623
|
|
|||
Amounts paid
|
(213
|
)
|
|
—
|
|
|
(213
|
)
|
|||
Reductions recorded
|
(134
|
)
|
|
(558
|
)
|
|
(692
|
)
|
|||
Reclassifications
|
100
|
|
|
(100
|
)
|
|
—
|
|
|||
Balance at December 31, 2016
|
$
|
85
|
|
|
$
|
7,472
|
|
|
$
|
7,557
|
|
Period
|
Discount Rate
|
|
2016 – January 1 through December 31 – Additions
(1)
|
11.50
|
%
|
2016 – December 31 - Incremental Estimates
(2)
|
12.09
|
%
|
2015 – January 1 through December 31 – Additions
(1)
|
10.48
|
%
|
2015 – December 31 - Incremental Estimates
(2)
|
11.50
|
%
|
2014 – January 1 through December 31 – Additions
(1)
|
10.48
|
%
|
2014 – December 31 - Incremental Estimates
(2)
|
12.10
|
%
|
(1)
|
Transmitters moved to new sites resulting in additional liability. Weighted average credit adjusted risk-free rate used to discount additions.
|
(2)
|
Weighted average credit adjusted risk-free rate used to discount downward revision to estimated future cash flows.
|
For the Three Months Ended
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share
(1)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Plans or Programs
(Dollars in thousands) |
||||||
2014
|
|
|
|
|
|
|
|
||||||
March 31,
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
15,000
|
|
June 30,
|
—
|
|
|
—
|
|
|
—
|
|
|
15,000
|
|
||
September 30,
|
—
|
|
|
—
|
|
|
—
|
|
|
15,000
|
|
||
December 31,
|
263,772
|
|
|
16.36
|
|
|
263,772
|
|
|
10,685
|
|
||
Total for 2014
|
263,772
|
|
|
$
|
16.36
|
|
|
263,772
|
|
|
|
||
2015
|
|
|
|
|
|
|
|
||||||
March 31,
|
247,797
|
|
(2)
|
$
|
17.31
|
|
|
27,467
|
|
|
$
|
14,536
|
|
June 30,
|
177,330
|
|
|
16.93
|
|
|
177,330
|
|
|
11,531
|
|
||
September 30,
|
502,942
|
|
|
16.52
|
|
|
502,942
|
|
|
3,224
|
|
||
December 31,
|
189,438
|
|
|
16.87
|
|
|
189,438
|
|
|
—
|
|
||
Total for 2015
|
1,117,507
|
|
|
$
|
16.82
|
|
|
897,177
|
|
|
|
||
2016
|
|
|
|
|
|
|
|
||||||
March 31,
|
291,861
|
|
|
$
|
16.76
|
|
|
291,861
|
|
|
$
|
5,106
|
|
June 30,
|
65,791
|
|
|
16.38
|
|
|
65,791
|
|
|
4,028
|
|
||
September 30,
|
13,884
|
|
|
16.46
|
|
|
13,884
|
|
|
3,800
|
|
||
December 31,
|
16,719
|
|
|
16.43
|
|
|
16,719
|
|
|
3,525
|
|
||
Total for 2016
|
388,255
|
|
|
$
|
16.67
|
|
|
388,255
|
|
|
|
||
Total
|
1,769,534
|
|
|
$
|
16.72
|
|
|
1,549,204
|
|
|
|
(1)
|
Average price paid per share excludes commissions of approximately
$15,410
.
|
(2)
|
On March 6, 2015, we purchased a total of
220,330
shares of common stock from our CEO and other eligible employees at a price of
$17.36
per share in payment of required tax withholdings for the common stock awarded under the 2011 LTIP.
|
|
For the Year Ended December 31,
|
||||||||||
(in thousands, except for share and per share amounts)
|
2016
|
|
2015
|
|
2014
|
||||||
Numerator:
|
|
|
|
|
|
||||||
Net income
|
$
|
13,979
|
|
|
$
|
80,246
|
|
|
$
|
20,745
|
|
|
|
|
|
|
|
||||||
Denominator:
|
|
|
|
|
|
||||||
Weighted average shares used to compute net income per common share - basic and diluted
|
20,586,066
|
|
|
21,471,041
|
|
|
21,644,163
|
|
|||
Basic and diluted net income per common share
|
$
|
0.68
|
|
|
$
|
3.74
|
|
|
$
|
0.96
|
|
|
Activity
|
|
Total equity securities available at January 1, 2014
|
1,720,752
|
|
Add: LTIP RSUs forfeited by eligible employees
|
57,338
|
|
Less: Common stock awarded to eligible employees
|
(5,820
|
)
|
Less: Restricted stock awarded to non-executive members of the Board of Directors
|
(24,684
|
)
|
Total equity securities available at December 31, 2014
|
1,747,586
|
|
Less: LTIP RSUs awarded to eligible employees, net of forfeitures
|
(242,468
|
)
|
Less: Restricted stock awarded to non-executive members of the Board of Directors
|
(21,887
|
)
|
Total equity securities available at December 31, 2015
|
1,483,231
|
|
Less: LTIP RSUs awarded to eligible employees, net of forfeitures and other
|
(212,643
|
)
|
Less: Restricted stock awarded to non-executive members of the Board of Directors
|
(23,649
|
)
|
Total equity securities available at December 31, 2016
|
1,246,939
|
|
|
|
Shares
|
|
Weighted-
Average Grant Date Fair Value |
|
Total Unrecognized Compensation Cost (net of estimated forfeitures)
(In thousands) |
|
Weighted-Average
Period Over Which Cost is Expected to be Recognized (In months) |
|||||
Non-vested RSUs at January 1, 2015
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
Granted
|
|
260,900
|
|
|
$
|
17.35
|
|
|
|
|
|
||
Vested
|
|
—
|
|
|
—
|
|
|
|
|
|
|||
Forfeited
|
|
(18,432
|
)
|
|
17.36
|
|
|
|
|
|
|||
Non-vested RSUs at December 31, 2015
|
|
242,468
|
|
|
$
|
17.35
|
|
|
$
|
2,708
|
|
|
24
|
Granted
|
|
234,711
|
|
|
$
|
16.83
|
|
|
|
|
|
||
Vested
|
|
—
|
|
|
—
|
|
|
|
|
|
|||
Forfeited
|
|
(25,686
|
)
|
|
17.05
|
|
|
|
|
|
|||
Non-vested RSUs at December 31, 2016
|
|
451,493
|
|
|
$
|
17.10
|
|
|
$
|
1,882
|
|
|
18
|
|
|
For the Year Ended December 31,
|
||||
|
|
2016
|
|
2015
|
||
Expected term (in years)
|
|
2.00
|
|
—
|
|
|
Volatility
|
|
7.89% - 8.03%
|
|
—
|
|
|
Risk-free interest rate
|
|
0.34% - 0.80%
|
|
—
|
|
|
Dividend payment
|
|
$0.125 - 0.250
|
|
$
|
—
|
|
|
Activity
|
|
Total ESPP equity securities available at January 1, 2016
|
—
|
|
Plus: Registration of 2016 ESPP
|
250,000
|
|
Less: 2016 ESPP common stock purchased by eligible employees, net
|
(3,961
|
)
|
Total 2016 ESPP securities available at December 31, 2016
|
246,039
|
|
Service for The Three Months Ended
|
Grant Date
|
|
Price Per
Share (1) |
|
Restricted Stock Awarded
|
|||
December 31, 2013
|
January 1, 2014
|
|
$
|
14.28
|
|
|
6,475
|
|
March 31, 2014
|
April 1, 2014
|
|
18.17
|
|
|
5,093
|
|
|
June 30, 2014
|
July 1, 2014
|
|
15.40
|
|
|
6,006
|
|
|
September 30, 2014
|
October 1, 2014
|
|
13.01
|
|
|
7,110
|
|
|
December 31, 2014
|
January 1, 2015
|
|
17.36
|
|
|
5,328
|
|
|
March 31, 2015
|
April 1, 2015
|
|
19.17
|
|
|
4,823
|
|
|
June 30, 2015
|
July 1, 2015
|
|
16.84
|
|
|
5,494
|
|
|
September 30, 2015
|
October 1, 2015
|
|
16.46
|
|
|
6,242
|
|
|
December 31, 2015
(2)
|
January 1, 2016
|
|
18.32
|
|
|
5,869
|
|
|
March 31, 2016
(2)
|
April 1, 2016
|
|
17.51
|
|
|
6,141
|
|
|
June 30, 2016
(2)
|
July 1, 2016
|
|
19.17
|
|
|
5,605
|
|
|
September 30, 2016
(2)
|
October 1, 2016
|
|
17.82
|
|
|
6,034
|
|
|
Total
|
|
|
|
|
70,220
|
|
(1)
|
The quarterly restricted stock awarded is based on the price per share of our common stock on the last trading day prior to the quarterly award date.
|
(2)
|
The Board of Directors voted to grant a full award for services provided during the fourth quarter of 2016 and fully vest all unvested restricted stock for the Company's former Chairman of the Audit Committee who died on November 14, 2016.
|
|
For the Year Ended December 31,
|
||||||||||
(Dollars in thousands)
|
2016
|
|
2015
|
|
2014
|
||||||
Income before income tax expense (benefit)
|
$
|
22,971
|
|
|
$
|
26,298
|
|
|
$
|
27,327
|
|
Current:
|
|
|
|
|
|
||||||
Federal tax
|
$
|
669
|
|
|
$
|
432
|
|
|
$
|
753
|
|
State tax
|
1,294
|
|
|
622
|
|
|
1,087
|
|
|||
Foreign tax
|
103
|
|
|
16
|
|
|
2
|
|
|||
Total current
|
2,066
|
|
|
1,070
|
|
|
1,842
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal tax
|
6,811
|
|
|
(55,716
|
)
|
|
6,046
|
|
|||
State tax
|
41
|
|
|
1,020
|
|
|
(1,249
|
)
|
|||
Foreign tax
|
74
|
|
|
(322
|
)
|
|
(57
|
)
|
|||
Total deferred
|
6,926
|
|
|
(55,018
|
)
|
|
4,740
|
|
|||
Total income tax expense (benefit)
|
$
|
8,992
|
|
|
$
|
(53,948
|
)
|
|
$
|
6,582
|
|
Effective tax rate reconciliation
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Income before income tax expense
|
$
|
22,971
|
|
|
|
|
$
|
26,298
|
|
|
|
|
$
|
27,327
|
|
|
|
|||
Federal income tax expense at the Federal statutory rate
|
$
|
8,040
|
|
|
35.0
|
%
|
|
$
|
9,204
|
|
|
35.0
|
%
|
|
$
|
9,564
|
|
|
35.0
|
%
|
State income taxes, net of Federal benefit
|
867
|
|
|
3.8
|
%
|
|
1,021
|
|
|
3.9
|
%
|
|
1,188
|
|
|
4.3
|
%
|
|||
Change in valuation allowance
|
—
|
|
|
—
|
%
|
|
(64,159
|
)
|
|
(244.0
|
)%
|
|
(5,087
|
)
|
|
(18.6
|
)%
|
|||
Other, including permanent differences
|
85
|
|
|
0.4
|
%
|
|
(14
|
)
|
|
(0.1
|
)%
|
|
917
|
|
|
3.4
|
%
|
|||
Income tax expense (benefit)
|
$
|
8,992
|
|
|
39.1
|
%
|
|
$
|
(53,948
|
)
|
|
(205.1
|
)%
|
|
$
|
6,582
|
|
|
24.1
|
%
|
|
December 31,
|
||||||
(Dollars in thousands)
|
2016
|
|
2015
|
||||
Long-term:
|
|
|
|
||||
Net deferred income tax asset
|
$
|
73,068
|
|
|
$
|
130,025
|
|
Valuation allowance
|
—
|
|
|
(50,031
|
)
|
||
Total deferred income tax assets
|
$
|
73,068
|
|
|
$
|
79,994
|
|
|
December 31,
|
||||||
(Dollars in thousands)
|
2016
|
|
2015
|
||||
Net operating losses and tax credits
|
$
|
48,146
|
|
|
$
|
111,538
|
|
Property and equipment
|
12,995
|
|
|
12,628
|
|
||
Accruals and accrued loss contingencies
|
6,723
|
|
|
5,410
|
|
||
Intangible Assets
|
5,886
|
|
|
760
|
|
||
Gross deferred income tax assets
|
73,750
|
|
|
130,336
|
|
||
Deferred income tax liabilities:
|
|
|
|
||||
Prepaid expenses
|
(360
|
)
|
|
(311
|
)
|
||
Other
|
(322
|
)
|
|
—
|
|
||
Gross deferred income tax liabilities
|
(682
|
)
|
|
(311
|
)
|
||
Net deferred income tax assets
|
$
|
73,068
|
|
|
$
|
130,025
|
|
Valuation allowance
|
—
|
|
|
(50,031
|
)
|
||
Total deferred income tax assets
|
$
|
73,068
|
|
|
$
|
79,994
|
|
1.
|
Through 2016, the Company has generated seven consecutive years (2010-2016) of taxable income. This period includes the acquisition of the software related operations in March 2011. In addition the Company has forecasted future taxable income (including the use of tax planning strategies such as the capitalization of research and development costs and amortization over a
ten
year period).
|
2.
|
With the acquisition of the software related operations in March 2011, we have successfully merged the wireless and software operations, hired new software skilled management and rebranded the combined entity under the Spok name starting in July 2014. This rebranding effort has been successful throughout 2016.
|
3.
|
In 2016, management clearly evaluated the risks and benefits associated with the strategy to redesign and enhance our software solution suite into an integrated critical communication platform. These benefits and risks were included in the LRP reviewed and approved by the Board of Directors on December 20, 2016.
|
4.
|
Significant management changes were made during 2015 and 2016 to accomplish our goals and LRP. These included hiring a new president, an executive vice president of sales and new product development staff.
|
Operating Expense Category
|
For the Year Ended December 31,
|
||||||||||
(Dollars in thousands)
|
2016
|
|
2015
|
|
2014
|
||||||
Cost of revenue (LTIP)
|
$
|
56
|
|
|
$
|
134
|
|
|
$
|
351
|
|
Research and development (LTIP)
|
52
|
|
|
86
|
|
|
90
|
|
|||
Service, rental and maintenance (LTIP)
|
13
|
|
|
29
|
|
|
18
|
|
|||
Selling and marketing (LTIP)
|
67
|
|
|
111
|
|
|
544
|
|
|||
General and administrative (LTIP)
|
225
|
|
|
1,138
|
|
|
2,498
|
|
|||
General and administrative (ESPP)
|
23
|
|
|
—
|
|
|
—
|
|
|||
General and administrative (Board of Directors Restricted Stock)
|
418
|
|
|
370
|
|
|
337
|
|
|||
Total stock based compensation
|
$
|
854
|
|
|
$
|
1,868
|
|
|
$
|
3,838
|
|
For the Year Ended December 31,
|
(Dollars in thousands)
|
||
2017
|
$
|
6,672
|
|
2018
|
4,421
|
|
|
2019
|
2,282
|
|
|
2020
|
1,421
|
|
|
2021
|
1,257
|
|
|
Thereafter
|
1,097
|
|
|
Total
|
$
|
17,150
|
|
|
December 31,
|
||||||||||
(Dollars in thousands)
|
2016
|
|
2015
|
|
2014
|
||||||
Revenue
|
|
|
|
|
|
||||||
United States
|
$
|
173,852
|
|
|
$
|
185,741
|
|
|
$
|
194,886
|
|
International
|
5,709
|
|
|
3,887
|
|
|
5,387
|
|
|||
Total revenue
|
$
|
179,561
|
|
|
$
|
189,628
|
|
|
$
|
200,273
|
|
For the Year Ended December 31, 2016
|
First
Quarter |
|
Second
Quarter |
|
Third
Quarter |
|
Fourth
Quarter |
||||||||
|
(Dollars in thousands except per share amounts)
|
||||||||||||||
Revenues
(2)
|
$
|
45,388
|
|
|
$
|
44,635
|
|
|
$
|
45,355
|
|
|
$
|
44,184
|
|
Operating income
(2)
|
5,800
|
|
|
5,620
|
|
|
6,029
|
|
|
4,703
|
|
||||
Net income
(2)(4)
|
3,444
|
|
|
3,451
|
|
|
4,058
|
|
|
3,026
|
|
||||
Basic and diluted net income per common share
(1)
|
0.17
|
|
|
0.17
|
|
|
0.20
|
|
|
0.15
|
|
||||
For the Year Ended December 31, 2015
|
First
Quarter |
|
Second
Quarter |
|
Third
Quarter |
|
Fourth
Quarter (4) |
||||||||
|
(Dollars in thousands except per share amounts)
|
||||||||||||||
Revenues
(2)
|
$
|
48,138
|
|
|
$
|
47,969
|
|
|
$
|
46,181
|
|
|
$
|
47,339
|
|
Operating income
(2)
|
6,273
|
|
|
5,621
|
|
|
6,657
|
|
|
6,550
|
|
||||
Net income
(2)(3)
|
3,917
|
|
|
3,376
|
|
|
4,220
|
|
|
68,732
|
|
||||
Basic and diluted net income per common share
(1)
|
0.18
|
|
|
0.16
|
|
|
0.20
|
|
|
3.28
|
|
(1)
|
Basic and diluted net income per common share is computed independently for each period presented. As a result, the sum of the quarterly basic and diluted net income per common share for the years ended
December 31, 2016
and
2015
may not equal the total computed for the year.
|
(2)
|
Slight variations in totals are due to rounding.
|
(3)
|
Fourth quarter 2015 net income includes
$64.2 million
from the release of the deferred income tax asset valuation allowance (refer to Note
8
, "Income Taxes").
|
(4)
|
Fourth quarter 2015 net income reflects a revision to net income by
$4.0 million
to adjust deferred income taxes as further described in Note 1, "Organization and Significant Accounting Policies".
|
Allowance for Doubtful Accounts,
Service Credits and Other |
|
Balance at the
Beginning of the Period |
|
Charged to
Operations |
|
Write-offs
|
|
Balance at the
End of the Period |
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
Year ended December 31, 2016
|
|
$
|
1,286
|
|
|
$
|
761
|
|
|
$
|
(991
|
)
|
|
$
|
1,056
|
|
Year ended December 31, 2015
|
|
$
|
1,300
|
|
|
$
|
1,290
|
|
|
$
|
(1,304
|
)
|
|
$
|
1,286
|
|
Year ended December 31, 2014
|
|
$
|
2,221
|
|
|
$
|
1,128
|
|
|
$
|
(2,049
|
)
|
|
$
|
1,300
|
|
Inventory Excess and Obsolete Reserves
|
|
Balance at the
Beginning of the Period |
|
Charged to
Operations |
|
Write-offs
|
|
Balance at the
End of the Period |
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
Year ended December 31, 2016
|
|
$
|
214
|
|
|
$
|
—
|
|
|
$
|
(214
|
)
|
|
$
|
—
|
|
Year ended December 31, 2015
|
|
$
|
175
|
|
|
$
|
1,066
|
|
|
$
|
(1,027
|
)
|
|
$
|
214
|
|
Year ended December 31, 2014
|
|
$
|
75
|
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
175
|
|
Deferred Income Tax Asset Valuation
Allowance |
|
Balance at the
Beginning of the Period |
|
Additions
|
|
Deductions
|
|
Balance at the
End of the Period |
||||||||
|
|
(Dollars in thousands)
|
||||||||||||||
Year ended December 31, 2016
|
|
$
|
50,031
|
|
|
$
|
—
|
|
|
$
|
(50,031
|
)
|
|
$
|
—
|
|
Year ended December 31, 2015
|
|
$
|
114,190
|
|
|
$
|
—
|
|
|
$
|
(64,159
|
)
|
|
$
|
50,031
|
|
Year ended December 31, 2014
|
|
$
|
119,277
|
|
|
$
|
—
|
|
|
$
|
(5,087
|
)
|
|
$
|
114,190
|
|
|
|
|
Incorporated by Reference
|
|
|
|||||||
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed/Furnished Herewith
|
3.1
|
|
Amended and Restated Certificate of Incorporation
|
|
8-K
|
|
001-32358
|
|
3.1
|
|
7/8/2014
|
|
|
3.2
|
|
Second Amended and Restated Bylaws
|
|
8-K
|
|
001-32358
|
|
3.1
|
|
12/20/2016
|
|
|
4.1*
|
|
Specimen of common stock certificate, par value $0.0001 per share
|
|
S-4/A
|
|
333-115769
|
|
4.1
|
|
10/6/2004
|
|
|
10.1*
|
|
Form of Indemnification Agreement for directors and executive officers of USA Mobility, Inc.
|
|
8-K
|
|
001-32358
|
|
10.4
|
|
11/17/2004
|
|
|
10.2*
|
|
USA Mobility, Inc. Equity Incentive Plan
|
|
10-K
|
|
001-32358
|
|
10.9
|
|
3/17/2005
|
|
|
10.3*
|
|
USA Mobility, Inc. Equity Incentive Plan Restricted Stock Agreement (For Board of Directors) (amended)
|
|
10-Q
|
|
001-32358
|
|
10.18
|
|
11/1/2007
|
|
|
10.4*
|
|
Form of Director’s Indemnification Agreement
|
|
10-Q
|
|
001-32358
|
|
10.24
|
|
10/30/2008
|
|
|
10.5*
|
|
USA Mobility, Inc. 2011 Long-Term Incentive Plan
|
|
10-K
|
|
001-32358
|
|
10.21
|
|
3/5/2015
|
|
|
10.6*
|
|
Form of Amended Executive Severance and Change In Control Agreement
|
|
8-K
|
|
001-32358
|
|
99.1
|
|
5/5/2011
|
|
|
10.7*
|
|
USA Mobility, Inc. 2012 Equity Incentive Award Plan
|
|
DEF 14A
|
|
001-32358
|
|
A
|
|
3/28/2012
|
|
|
10.8*
|
|
USA Mobility, Inc. 2014 Short-Term Incentive Plan
|
|
10-K
|
|
001-32358
|
|
10.33
|
|
3/5/2015
|
|
|
10.9
|
|
Spok Holdings, Inc. 2015 Short-Term Incentive Plan
|
|
10-K
|
|
001-32358
|
|
10.35
|
|
2/25/2016
|
|
|
10.10
|
|
Spok Holdings, Inc. 2015 Long-Term Incentive Plan
(1)
|
|
10-K
|
|
001-32358
|
|
10.36
|
|
3/5/2015
|
|
|
10.11
|
|
Spok Holdings, Inc. 2016 Short-Term Incentive Plan
|
|
|
|
|
|
|
|
|
|
Filed
|
10.12
|
|
Exhibits to Spok Holdings, Inc., 2015 Long-Term Incentive Plan for the 2016 - 2018 performance period
(1)
|
|
10-K
|
|
001-32358
|
|
10.38
|
|
2/25/2016
|
|
|
10.13
|
|
Third Amended and Restated Employment Agreement, between Spok Holdings, Inc. and Vince D. Kelly, dated as of December 28, 2016
|
|
8-K
|
|
001-32358
|
|
10.1
|
|
12/28/2016
|
|
|
10.14
|
|
Spok Holdings, Inc. 2017 Short-Term Incentive Plan
(1)
|
|
|
|
|
|
|
|
|
|
Filed
|
10.15
|
|
Exhibits to Spok Holdings, Inc., 2015 Long-Term Incentive Plan for the 2017 - 2019 performance period
(1)
|
|
|
|
|
|
|
|
|
|
Filed
|
10.16*
|
|
Restricted Stock Unit Grant Notice for the USA Mobility, Inc. 2012 Equity Incentive Award Plan
|
|
|
|
|
|
|
|
|
|
Filed
|
10.17
|
|
Restricted Stock Unit Grant Notice for the Spok Holdings, Inc. 2015 Long-Term Incentive Plan
|
|
|
|
|
|
|
|
|
|
Filed
|
10.18*
|
|
Spok Holdings, Inc. Severance Pay Plan and Summary Plan Description (For certain C-Level, not including CEO) (amended and restated)
|
|
|
|
|
|
|
|
|
|
Filed
|
21
|
|
Subsidiaries of the Company
|
|
|
|
|
|
|
|
|
|
Filed
|
23
|
|
Consent of Grant Thornton LLP
|
|
|
|
|
|
|
|
|
|
Filed
|
31.1
|
|
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
|
|
|
|
|
|
|
|
|
Filed
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
|
|
|
|
|
|
|
|
|
Filed
|
32.1
|
|
Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350
|
|
|
|
|
|
|
|
|
|
Furnished
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
|
|
|
|
|
|
|
|
|
|
Furnished
|
101.INS
|
|
XBRL Instance Document**
|
|
|
|
|
|
|
|
|
|
Furnished
|
101.SCH
|
|
XBRL Taxonomy Extension Schema**
|
|
|
|
|
|
|
|
|
|
Furnished
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation**
|
|
|
|
|
|
|
|
|
|
Furnished
|
101.DEF
|
|
XBRL Taxonomy Extension Definition**
|
|
|
|
|
|
|
|
|
|
Furnished
|
101.LAB
|
|
XBRL Taxonomy Extension Labels**
|
|
|
|
|
|
|
|
|
|
Furnished
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation**
|
|
|
|
|
|
|
|
|
|
Furnished
|
**
|
The financial information contained in these XBRL documents is unaudited.
|
(1)
|
Portions of this document have been omitted and filed separately with the Securities and Exchange Commission
|
I.
|
Effective Date
. The 2016 Short-Term Incentive Plan (the “Plan”) for Spok Holdings, Inc., was adopted by the Compensation Committee of the Board of Directors (the “Compensation Committee”) of Spok Holdings, Inc., (the “Parent” or the “Company”), a Delaware corporation for the employees of Spok, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of the Parent (“Spok”) on December 15, 2015. (The Plan is effective as of January 1, 2016 and supersedes and replaces all former management short-term incentive plans, including the Spok Holdings, Inc., 2015 Short-Term Incentive Plan.
|
II.
|
Purpose
. The Plan is designed to attract, motivate, retain and reward key employees for their performance during the calendar year, from January 1 through December 31, 2016 (the “Performance Period”). The Plan rewards key employees by allowing them to receive cash bonuses based on how well the Company performs against the performance objectives selected by the Compensation Committee and set forth in Exhibit A (the “Performance Objectives”), as may be adjusted by the Compensation Committee in the event of a Change of Control or other corporate reorganization, merger, similar transaction, to take into account extraordinary events or as the Compensation Committee determines is in the best interests of the Company. In order for bonuses to be earned, the Company must meet the Performance Objectives as outlined in Exhibit A on December 31, 2016. Performance Objectives are based solely on the consolidated performance of the Company. For clarity, Performance Objectives and the attainment thereof does not include revenue or expenses related to acquisitions or due diligence expenses occurring after the Effective Date of this Plan except as directed by the Compensation Committee.
|
III.
|
Eligibility
. Participation in the Plan is limited to those key employees who are selected for participation in the Plan by the Compensation Committee, in its sole discretion (each such individual, a “Participant”). Individuals selected by the Compensation Committee to participate as of January 1, 2016 are listed on
Exhibit B
. Newly hired or promoted employees, or employees who otherwise become eligible to participate, who are selected to participate in the Plan after January 1, 2016 but before October 1, 2016 will participate in the Plan on a prorated basis based on the number of days worked during the performance period after becoming bonus eligible. Employees who are newly hired or promoted on or after October 1, 2016 will not be eligible to participate in the Plan.
|
IV.
|
Target Bonus
. The target bonus for each Participant is based on a percentage of the Participant’s annual (or prorated, if applicable) salary as of January 1, 2016 (or date of hire or promotion to an eligible position, if later). The applicable percentage is determined by the Compensation Committee with respect to executives earning $250,000 or more and by the CEO for other management and need not be identical among Participants. The earned bonus may be greater than or less than the target bonus depending on the level at which the Performance Objectives are attained.
|
V.
|
Payment of Earned Bonus
.
|
a.
|
Except as provided herein, each earned bonus under the Plan will be calculated based on the attainment of the Performance Objectives and will be paid in a lump sum (subject to any required withholding for income and employment taxes) after the 2016 annual audit of the Parent’s consolidated financial statement has been completed and the Parent’s 2016 Annual Report on Form 10-K has been filed with the Securities and Exchange Commission but in no event later than December 31, 2017.
|
b.
|
If the Participant involuntarily Separates from Service without Cause or due to disability or dies prior to December 31, 2016, he or she will be eligible to receive a prorated bonus provided that the Company is on track to attain the Performance Objectives as reasonably determined by the Compensation Committee and provided further that, in the event Participant involuntarily Separates from Service without Cause, he or she has executed a release, any waiting period in connection with such release has expired, he or she has not exercised any rights to revoke the release and he or she has followed any other applicable and customary termination procedures, as determined by the Parent in its sole discretion. The bonus will be prorated to the date of Participant’s Separation from Service or death, calculated as follows: one-hundred percent (100%) of a Participant’s target bonus will be multiplied by a fraction, the numerator of which is the number of days the Participant was continuously providing services to the Company from January 1, 2016 through the date immediately prior to the Participant’s Separation from Service or death, and the denominator of which is 365 days. Prorated bonuses will be paid to the Participant, or in the event of Participant’s death, the Participant’s estate, on the sixty-fifth (65th) day following the date of Participant’s Separation from Service or death.
|
i.
|
For purposes of the Plan, “Separation from Service” shall have the meaning provided in the Treasury Regulations under section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and “Separates from Service” shall have a consistent meaning. Unless otherwise defined in an employment agreement between the Participant and the Parent or the Company, for purposes of the Plan, “Cause” means (i) dishonesty of a material nature that relates to the performance of services for the Company by Participants; (ii) criminal conduct (other than minor infractions and traffic violations) that relates to the performance of services for the Company by Participant; (iii) the Participant’s willfully breaching or failing to perform his or her duties as an employee of the Company (other than any such failure resulting from the Participant having a disability (as defined herein)), within a reasonable period of time after a written demand for substantial performance is delivered to the Participant by the Compensation Committee, which demand specifically identifies the manner in which the Compensation Committee believes that the Participant has not substantially performed his duties; or (iv) the willful engaging by the Participant in conduct that is demonstrably and materially injurious to the Parent, Company or an Affiliate, monetarily or otherwise. No act or failure to act on the Participant’s part shall be deemed “willful” unless done, or omitted to be done; by the Participant not in good faith and without reasonable belief that such action or omission was in the reasonable best interests of the Parent, Company and Affiliates. For this purpose, “disability” means a condition or circumstance such that the Participant has become totally and permanently disabled as defined or described in the Parent’s long term disability benefit plan applicable to executive officers as in effect at the time the Participant incurs a disability.
|
c.
|
Notwithstanding anything to the contrary in this Plan, no payments contemplated by this Plan will be paid during the six-month period following a Participant’s Separation from Service unless the Company determines, in its good faith judgment, that paying such amounts at the time indicated in paragraph b above would not cause the Participant to incur an additional tax under Code section 409A (a)(2)(B)(i), in which case the bonus payment shall be paid in a lump sum on the first day of the seventh month following the Participant’s Separation from Service.
|
VI.
|
Forfeiture
. Any Participant whose employment is terminated for Cause or who voluntarily Separates from Service prior to the date bonuses are paid shall forfeit any right to receive a bonus award.
|
VII.
|
Clawback.
The Compensation Committee of the Board may require forfeiture or a clawback of any incentive compensation awarded or paid under this Plan in excess of the compensation actually earned based on a restatement of the Company’s financial statements as filed with the Securities and Exchange Commission for the period covered by this Plan.
|
VIII.
|
Administrator
. The Compensation Committee shall administer the Plan in accordance with its terms, and shall have full discretionary power and authority to construe and interpret the Plan; to prescribe, amend and rescind rules and regulations, terms, and notices hereunder; and to make all other determinations necessary or advisable in its discretion for the administration of the Plan. Any actions of the Compensation Committee with respect to the Plan shall be conclusive and binding upon all persons interested in the Plan. The Compensation Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or part of its authority and powers under the Plan to one or more directors and/or officers of the Parent or the Company.
|
IX.
|
Amendment; Termination
. The Compensation Committee, in its sole discretion, without prior notice to Participants, may amend or terminate the Plan, or any part thereof, including the Performance Objectives as described in Section II, at any time and for any reason, to the extent such action will not cause adverse tax consequences to a participant under Code section 409A. Any amendment or termination must be in writing and shall be communicated to all Participants. No award may be granted during any period of suspension or after termination of the Plan.
|
X.
|
Miscellaneous
.
|
a.
|
No Rights as Employee
. Nothing contained in this Plan or any documents relating to this Plan shall (a) confer on a Participant any right to continue in the employ of the Company; (b) constitute any contract or agreement of employment; or (c) interfere in any way with the Company’s right to terminate the Participant’s employment at any time, with or without Cause.
|
b.
|
Tax Withholding
. To the extent required by applicable federal, state, local or foreign law, the Company shall withhold all applicable taxes (including, but not limited to, the Participant’s FICA and Social Security obligations) from any bonus payment.
|
c.
|
Transferability
. A Participant may not sell, assign, transfer or encumber any of his or her rights under the Plan.
|
d.
|
Unsecured General Creditor
. Participants (or their beneficiary) may seek to enforce any rights or claims for payment under the Plan solely as an unsecured general creditor of the Parent or Spok.
|
e.
|
Successors
. This Plan shall be binding upon and inure to the benefit of the Parent, Company and any successor to the Company and the Participant’s heirs, executors, administrators and legal representatives.
|
f.
|
Code Section 409A
. The Plan is intended to be a nonqualified deferred compensation plan within the meaning of Code section 409A and shall be interpreted to meet the requirements of Code section 409A. To
the extent that any provision of the Plan would cause a conflict with the requirements of Code section 409A, or would cause the administration of the Plan to fail to satisfy Code section 409A, such provision shall be deemed null and void to the extent permitted by applicable law. Nothing herein shall be construed as a guarantee of any particular tax treatment to a Participant.
|
g.
|
Governing Law
. All questions pertaining to the validity, construction and administration of the Plan shall be determined in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions.
|
h.
|
Integration
. This document and each exhibit hereto represent the entire agreement and understanding between the Company and the Participants and supersede any and all prior agreements or understandings, whether oral or written, with the Company relating to the subject matter covered by this Plan.
|
i.
|
Severability
. In case any provision of this Plan shall be held illegal or invalid, such illegality or invalidity shall be construed and enforced as if said illegal or invalid provision had never been inserted herein and shall not affect the remaining provisions of this Plan, but shall be fully severable, and the Plan shall be construed and enforced as if any such illegal or invalid provision were not a part hereof.
|
Name,
|
Title
|
Bonus Target as % of Base Salary
|
Corporate Employee
|
||
Executives
|
|
|
Kelly, Vince
|
CEO
1
|
100%
|
Goel, Hemant
|
President
|
100%
|
Endsley, Shawn
|
CFO
|
75%
|
Saine, Tom
|
CIO
|
75%
|
Woods, Sharon
|
Corp Secretary/Treasurer
|
75%
|
Culp, Bonnie
|
EVP, H.R. & CCO
|
75%
|
Soucy, Don
|
EVP, Sales
|
75%
|
Brogan, Danielle
2
|
Controller & CAO
|
50%
|
Vice Presidents
|
|
|
Veldboom, Kathy
|
VP, Technical Support
|
35%
|
Gunderson, Kyle
|
VP, Development & CTO
|
50%
|
Ling, Mick
|
VP, Maintenance Revenue
|
45%
|
Olson-Stepp, Terri
|
VP, Professional Services
|
50%
|
Edds, Brian
|
VP, Product Strategy
|
45%
|
Deboer, John
|
VP, Technical Engineering
|
35%
|
Czop, Mike
|
VP, Technical Operations
|
35%
|
Scott, Donna
|
SVP, Marketing
|
45%
|
Van Wijk, Mathilde
|
VP, Customer Support
|
35%
|
Giorgi, Vincent
|
VP, Alliances
|
20%
|
I.
|
Effective Date
. The 2017 Short-Term Incentive Plan (the “Plan”) for Spok Holdings, Inc., was adopted by the Compensation Committee of the Board of Directors (the “Compensation Committee”) of Spok Holdings, Inc., (the “Parent” or the “Company”), a Delaware corporation for the employees of Spok, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of the Parent (“Spok”) on November 21, 2016. (The Plan is effective as of January 1, 2017 and supersedes and replaces all former management short-term incentive plans, including the Spok Holdings, Inc., 2016 Short-Term Incentive Plan.
|
II.
|
Purpose
. The Plan is designed to attract, motivate, retain and reward key employees for their performance during the calendar year, from January 1 through December 31, 2017 (the “Performance Period”). The Plan rewards key employees by allowing them to receive cash bonuses based on how well the Company performs against the performance objectives selected by the Compensation Committee and set forth in Exhibit A (the “Performance Objectives”), as may be adjusted by the Compensation Committee in the event of a Change of Control or other corporate reorganization, merger, similar transaction, to take into account extraordinary events or as the Compensation Committee determines is in the best interests of the Company. In order for bonuses to be earned, the Company must meet the Performance Objectives as outlined in Exhibit A on December 31, 2017. Performance Objectives are based solely on the consolidated performance of the Company. For clarity, Performance Objectives and the attainment thereof does not include revenue or expenses related to acquisitions or due diligence expenses occurring after the Effective Date of this Plan except as directed by the Compensation Committee.
|
III.
|
Eligibility
. Participation in the Plan is limited to those key employees who are selected for participation in the Plan by the Compensation Committee, in its sole discretion (each such individual, a “Participant”). Individuals selected by the Compensation Committee to participate as of January 1, 2017 are listed on
Exhibit B
. Newly hired or promoted employees, or employees who otherwise become eligible to participate, who are selected to participate in the Plan after January 1, 2017 but before October 1, 2017 will participate in the Plan on a prorated basis based on the number of days worked during the performance period after becoming bonus eligible. Employees who are newly hired or promoted on or after October 1, 2017 will not be eligible to participate in the Plan.
|
IV.
|
Target Bonus
. The target bonus for each Participant is based on a percentage of the Participant’s annual (or prorated, if applicable) salary as of January 1, 2017 (or date of hire or promotion to an eligible position, if later). The applicable percentage is determined by the Compensation Committee with respect to executives earning $250,000 or more and by the CEO for other management and need not be identical among Participants. The earned bonus may be greater than or less than the target bonus depending on the level at which the Performance Objectives are attained.
|
V.
|
Payment of Earned Bonus
.
|
a.
|
Except as provided herein, each earned bonus under the Plan will be calculated based on the attainment of the Performance Objectives and will be paid in a lump sum (subject to any required withholding for income and employment taxes) after the 2017 annual audit of the Parent’s consolidated financial statement has been completed and the Parent’s 2017 Annual Report on Form 10-K has been filed with the Securities and Exchange Commission but in no event later than December 31, 2018.
|
b.
|
If the Participant involuntarily Separates from Service without Cause or due to disability or dies prior to December 31, 2017, he or she will be eligible to receive a prorated bonus provided that the Company is on track to attain the Performance Objectives as reasonably determined by the Compensation Committee and provided further that, in the event Participant involuntarily Separates from Service without Cause, he or she has executed a release, any waiting period in connection with such release has expired, he or she has not exercised any rights to revoke the release and he or she has followed any other applicable and customary termination procedures, as determined by the Parent in its sole discretion. The bonus will be prorated to the date of Participant’s Separation from Service or death, calculated as follows: one-hundred percent (100%) of a Participant’s target bonus will be multiplied by a fraction, the numerator of which is the number of days the Participant was continuously providing services to the Company from January 1, 2017 through the date immediately prior to the Participant’s Separation from Service or death, and the denominator of which is 365 days. Prorated bonuses will be paid to the Participant, or in the event of Participant’s death, the Participant’s estate, on the sixty-fifth (65th) day following the date of Participant’s Separation from Service or death.
|
i.
|
For purposes of the Plan, “Separation from Service” shall have the meaning provided in the Treasury Regulations under section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and “Separates from Service” shall have a consistent meaning. Unless otherwise defined in an employment agreement between the Participant and the Parent or the Company, for purposes of the Plan, “Cause” means (i) dishonesty of a material nature that relates to the performance of services for the Company by Participants; (ii) criminal conduct (other than minor infractions and traffic violations) that relates to the performance of services for the Company by Participant; (iii) the Participant’s willfully breaching or failing to perform his or her duties as an employee of the Company (other than any such failure resulting from the Participant having a disability (as defined herein)), within a reasonable period of time after a written demand for substantial performance is delivered to the Participant by the Compensation Committee, which demand specifically identifies the manner in which the Compensation Committee believes that the Participant has not substantially performed his duties; or (iv) the willful engaging by the Participant in conduct that is demonstrably and materially injurious to the Parent, Company or an Affiliate, monetarily or otherwise. No act or failure to act on the Participant’s part shall be deemed “willful” unless done, or omitted to be done; by the Participant not in good faith and without reasonable belief that such action or omission was in the reasonable best interests of the Parent, Company and Affiliates. For this purpose, “disability” means a condition or circumstance such that the Participant has become totally and permanently disabled as defined or described in the Parent’s long term disability benefit plan applicable to executive officers as in effect at the time the Participant incurs a disability.
|
c.
|
Notwithstanding anything to the contrary in this Plan, no payments contemplated by this Plan will be paid during the six-month period following a Participant’s Separation from Service unless the Company determines, in its good faith judgment, that paying such amounts at the time indicated in paragraph b above would not cause the Participant to incur an additional tax under Code section 409A (a)(2)(B)(i), in which case the bonus payment shall be paid in a lump sum on the first day of the seventh month following the Participant’s Separation from Service.
|
VI.
|
Forfeiture
. Any Participant whose employment is terminated for Cause or who voluntarily Separates from Service prior to the date bonuses are paid shall forfeit any right to receive a bonus award.
|
VII.
|
Clawback.
The Compensation Committee of the Board may require forfeiture or a clawback of any incentive compensation awarded or paid under this Plan in excess of the compensation actually earned based on a restatement of the Company’s financial statements as filed with the Securities and Exchange Commission for the period covered by this Plan.
|
VIII.
|
Administrator
. The Compensation Committee shall administer the Plan in accordance with its terms, and shall have full discretionary power and authority to construe and interpret the Plan; to prescribe, amend and rescind rules and regulations, terms, and notices hereunder; and to make all other determinations necessary or advisable in its discretion for the administration of the Plan. Any actions of the Compensation Committee with respect to the Plan shall be conclusive and binding upon all persons interested in the Plan. The Compensation Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate all or part of its authority and powers under the Plan to one or more directors and/or officers of the Parent or the Company.
|
IX.
|
Amendment; Termination
. The Compensation Committee, in its sole discretion, without prior notice to Participants, may amend or terminate the Plan, or any part thereof, including the Performance Objectives as described in Section II, at any time and for any reason, to the extent such action will not cause adverse tax consequences to a participant under Code section 409A. Any amendment or termination must be in writing and shall be communicated to all Participants. No award may be granted during any period of suspension or after termination of the Plan.
|
X.
|
Miscellaneous
.
|
a.
|
No Rights as Employee
. Nothing contained in this Plan or any documents relating to this Plan shall (a) confer on a Participant any right to continue in the employ of the Company; (b) constitute any contract or agreement of employment; or (c) interfere in any way with the Company’s right to terminate the Participant’s employment at any time, with or without Cause.
|
b.
|
Tax Withholding
. To the extent required by applicable federal, state, local or foreign law, the Company shall withhold all applicable taxes (including, but not limited to, the Participant’s FICA and Social Security obligations) from any bonus payment.
|
c.
|
Transferability
. A Participant may not sell, assign, transfer or encumber any of his or her rights under the Plan.
|
d.
|
Unsecured General Creditor
. Participants (or their beneficiary) may seek to enforce any rights or claims for payment under the Plan solely as an unsecured general creditor of the Parent or Spok.
|
e.
|
Successors
. This Plan shall be binding upon and inure to the benefit of the Parent, Company and any successor to the Company and the Participant’s heirs, executors, administrators and legal representatives.
|
f.
|
Code Section 409A
. The Plan is intended to be a nonqualified deferred compensation plan within the meaning of Code section 409A and shall be interpreted to meet the requirements of Code section 409A. To
the extent that any provision of the Plan would cause a conflict with the requirements of Code section 409A, or would cause the administration of the Plan to fail to satisfy Code section 409A, such provision shall be deemed null and void to the extent permitted by applicable law. Nothing herein shall be construed as a guarantee of any particular tax treatment to a Participant.
|
g.
|
Governing Law
. All questions pertaining to the validity, construction and administration of the Plan shall be determined in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions.
|
h.
|
Integration
. This document and each exhibit hereto represent the entire agreement and understanding between the Company and the Participants and supersede any and all prior agreements or understandings, whether oral or written, with the Company relating to the subject matter covered by this Plan.
|
i.
|
Severability
. In case any provision of this Plan shall be held illegal or invalid, such illegality or invalidity shall be construed and enforced as if said illegal or invalid provision had never been inserted herein and shall not affect the remaining provisions of this Plan, but shall be fully severable, and the Plan shall be construed and enforced as if any such illegal or invalid provision were not a part hereof.
|
•
|
Performance Requirements
|
•
|
Achievement of Project Catapult Milestones - 50% Weighting
|
•
|
Prototype Platform complete by **** - 25%
|
•
|
Platform ready for Alpha/Beta delivery by **** - 25%
|
•
|
Achievement of Financial Metrics - 50% Weighting
|
•
|
Operating and Capital Expenses - 15%
|
•
|
Wireless Revenue - 10%
|
•
|
Payout Parameters:
|
•
|
Achievement of Project Catapult Milestones
|
•
|
All or nothing payout for Prototype Platform Completion
|
•
|
All or nothing payout for platform ready for Alpha/Beta delivery
|
•
|
Achievement of Financial Metrics
|
•
|
Scaled payout based on actual achievement
|
Name,
|
Title
|
Bonus Target as % of Base Salary
|
Corporate Employee
|
||
Executives
|
|
|
Kelly, Vince
|
CEO
*
|
100%
|
Goel, Hemant
|
President
|
100%
|
Endsley, Shawn
|
CFO
|
75%
|
Saine, Tom
|
CIO
|
75%
|
************
|
************
|
**%
|
Culp, Bonnie
|
EVP, H.R. & CCO
|
75%
|
************
|
************
|
**%
|
Vice Presidents
|
|
|
************
|
************
|
**%
|
************
|
************
|
**%
|
************
|
************
|
**%
|
************
|
************
|
**%
|
************
|
************
|
**%
|
************
|
************
|
**%
|
************
|
************
|
**%
|
************
|
************
|
**%
|
************
|
************
|
**%
|
************
|
************
|
**%
|
************
|
************
|
**%
|
Name,
|
Title
|
Corporate Employee
|
|
Executives
|
|
Kelly, Vince
|
CEO*
|
Goel, Hemant
|
President
|
Endsley, Shawn
|
CFO
|
Saine, Tom
|
CIO
|
************
|
************
|
Culp, Bonnie
|
EVP, H.R. & CCO
|
************
|
************
|
Vice Presidents
|
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
************
|
Participant:
|
|
Employer:
|
|
Grant Date:
|
|
Number of RSUs:
|
|
Type of Shares Issuable:
|
Common Stock of Spok Holdings, Inc.
|
Vesting Schedule:
|
Subject to the terms of the Agreement, the RSUs shall vest in three equal annual installments over a three-year period, with the first installment vesting on December 31, 2017, the second installment vesting on December 31, 2018 and the third installment vesting on December 31, 2019.
Notwithstanding anything in the Agreement to the contrary, in the event of a Participant’s Qualifying Termination, the RSUs shall vest with respect to a pro-rated number of RSUs that would have otherwise vested as of the next anniversary of the Grant Date (based on the number of days elapsed prior to the date of the Qualifying Termination, divided by 365),
provided
, that, in the event of a Participant’s Qualifying Termination following a Change of Control, all outstanding and unvested RSUs shall vest as of immediately prior to Participant’s Qualifying Termination.
|
|
In the event of the Participant’s death
, the Participant’s estate will be eligible to receive an amount not greater than one-hundred percent (100%) of the Participant’s Target Award, prorated to reflect the number of days the Participant worked during the Performance Period, and such amount, which will be determined in the Committee’s sole discretion, will be paid in the year following Participant’s death.
If the Participant involuntarily Separates from Service without Cause
(as such terms are defined in the LTIP) or due to disability, he or she will be eligible to receive a prorated Target Award following the first year of the Performance Period in accordance with Section 4.4(b) of the LTIP if the Performance Goals are met provided that, in the event Participant involuntarily Separates from Service without Cause, the Participant has executed a release, any waiting period in connection with such release has expired, the Participant has not exercised any rights to revoke the release and he has followed any other applicable and customary termination procedures, as determined by the Company in its sole discretion.
|
EMPLOYEES OF SPOK, INC. SEVERANCE BENEFITS CHART
|
|
Salaried Employees, Hourly Employees
And Commissioned Direct-Sales Employees
|
Minimum of two (2) weeks of Compensation for each Year of Service, up to a maximum of twenty-six (26) weeks of Compensation.
|
Vice Presidents*
|
Minimum of four (4) weeks of Compensation, plus an additional two (2) weeks of Compensation for each Year of Service, up to a maximum of thirty (30) weeks of Compensation.
|
Controller, Senior Vice Presidents and Corporate Secretary & Treasurer *
|
Minimum of thirteen (13) weeks of Compensation, plus an additional two (2) weeks of Compensation for each Year of Service, up to a maximum of thirty-nine (39) weeks of Compensation.
|
President, Chief Operating Officer, Chief Financial Officer, Executive Vice Presidents and other C-level employees, if any, other than the Chief Executive Officer*
|
Minimum of twenty-six (26) weeks of Compensation, plus an additional two (2) weeks of Compensation for each Year of Service, up to a maximum of fifty-two (52) weeks of Compensation.
|
(a)
|
Participants (and their eligible dependents) may be eligible for health
|
(b)
|
Notwithstanding the preceding paragraph (a), upon the expiration of the
|
1.
|
I have reviewed this Annual Report on Form 10-K of Spōk Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated: March 2, 2017
|
/s/ Vincent D. Kelly
|
|
Vincent D. Kelly
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K of Spōk Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated: March 2, 2017
|
/s/ Shawn E. Endsley
|
|
Shawn E. Endsley
|
|
Chief Financial Officer
|
(i)
|
the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: March 2, 2017
|
/s/ Vincent D. Kelly
|
|
Vincent D. Kelly
|
|
President and Chief Executive Officer
|
(i)
|
the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: March 2, 2017
|
/s/ Shawn E. Endsley
|
|
Shawn E. Endsley
|
|
Chief Financial Officer
|