Q4 2024 Spok Holdings Inc Earnings Call
Greetings and welcome to spoke Holdings, Inc. Fourth quarter 2024.
Results Conference call at this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
This conference is being recorded.
It is now my pleasure to introduce your host Mr. Al Galgano. Thank you you may begin.
Speaker Change: Hello, everyone and welcome I am joined today by Vince Kelly, Chief Executive Officer, Michael Wallace, Chief Operating Officer, and Calvin Rice, Chief Financial Officer.
Speaker Change: After a brief presentation by management, we will open up the call to your questions I want to remind everyone that todays conference call may include forward looking statements that are subject to risks and uncertainties related interest spokes future financial and business performance such statements may include estimates of <unk>.
Speaker Change: <unk> expenses and income as well as other predictive statements or plans, which are dependent upon future events or conditions.
Speaker Change: These statements represent the company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results.
Speaker Change: Folks actual results could differ materially from those anticipated in these forward looking statements.
Speaker Change: Although these statements are based upon assumptions that the company believes to be reasonable.
Speaker Change: They are subject to risks and uncertainties.
Speaker Change: Please review the risk factors section relating to our operations and the business environment, which are contained in our Form 10-K for 2024 and related documents.
Speaker Change: Which will be filed with the Securities and Exchange Commission. After this call.
Speaker Change: Please note that spoke assumes no obligation to update any forward looking statements from past or present filings and conference calls with that I'll turn the call over to Vince Vince.
Vince Kelly: Thank you al and good afternoon. Thank you for joining us for our fourth quarter 2024 earnings call. Let me preface my comments by saying a problem I am of our spoke team and our ability to end the year strong generating a very impressive performance in 2024, while staying true to our mission.
Vince Kelly: I'm very pleased with the momentum that this team has created we are excited by our prospects and outlook.
Vince Kelly: Since the strategic pivot, we announced about three years ago now our focus has not changed that is to grow our software revenue generate cash and return capital to stockholders.
Vince Kelly: In 2024 for the third consecutive year, we again accomplish that mission.
Vince Kelly: We returned $26 4 million of cash to our stockholders, while generating in excess of 29 million of adjusted EBITDA.
Vince Kelly: We were also successful in our stated goal to grow software revenue driven by double digit growth in our professional services business and our software operations bookings coupled with a continued focus on expense management spoke generated 15 million or 73 cents per diluted share of net income and we are.
Vince Kelly: Accomplish this while responsibly investing in our product and service offerings.
Vince Kelly: It's focused struck with excellent balance between making the necessary investments to fuel future growth, while continuing to generate cash flow and returning capital to our stockholders.
Vince Kelly: Today, we'll share with you an update on how our strategic business plan is progressing in support of our goals as well as our financial results for the quarter and full year.
Vince Kelly: I'll start by reviewing the agenda for today's call.
Vince Kelly: The order will be as follows.
Vince Kelly: First a review of our strategic focus and goals reporting our progress against those goals.
Speaker Change: Michael Wallace our C O O will provide a review of our sales performance.
Speaker Change: Then Calvin Rice, our CFO will review, our fourth quarter and full year 2024 financial highlights as well as a more detailed look at our financial expectations for 2025, and I will then conclude our prepared remarks with a brief wrap up.
Speaker Change: Finally, we will open the call up to your questions.
Speaker Change: Okay.
Speaker Change: In 2024, our team achieved numerous operational and financial milestones significant accomplishment accomplishments were made regarding software revenue growth, particularly in our professional services business and specifically as it relates to our managed services offering.
Speaker Change: Reduced wireless net unit churn maintaining solid profitability levels.
Speaker Change: Continued expense management.
Speaker Change: Cash flow generation.
Speaker Change: Progress on our product roadmap in development.
Speaker Change: Augmenting our sales team generating.
Speaker Change: Generating record level, six and seven figure customer contracts and multi year engagements.
Speaker Change: G&A pager placements.
Speaker Change: Maintenance contract bookings and retention and enhancing our industry reputation with continued high customer satisfaction scores.
Speaker Change: In 2024 spoke generated over 4 million of software operations bookings this was more than a 13% increase from the prior year.
Speaker Change: This annual growth was particularly impressive given that the prior year software operations bookings levels that included our largest single customer contract ever signed our largest ever quarterly bookings level in the second quarter.
Speaker Change: Well, we were very happy with our bookings level last year and believe that we will continue growing our total bookings this year, our focus will be on accelerating our license sales, while maintaining momentum in our professional services.
Speaker Change: Yeah.
Speaker Change: Switching to operating expenses, while driving our top line. We also continued to focus on expense management operating expense levels for the year were virtually unchanged from 2023. However, our focus on expense management is one of the key drivers to generate increased cash flow does not come at the expense of our product platform.
Speaker Change: As we continue to make the necessary investments in product development sales and marketing customer support and professional services to support the growth of spoke care connect and our wireless solutions in.
Speaker Change: In 2024 spoke invested more than $11 5 million in product research and development and nearly 10% increase from 2023 investment such as these are critical to creating a best of breed product platform and to maintaining our solid industry reputation.
Speaker Change: In 2024 spoke continued to build upon its premier industry reputation. We started the year with our participation at the HIMSS 24 conference, where we showcased our top rated critical communications platform.
Speaker Change: They're spoke experts demonstrated the power of the new spoke care connect hosted solution and the new reporting dashboards and user capabilities of spoke messenger at the HIMSS 24 conference attendees learned about bespoke care connect hosted solution, which enables hospitals and clinics to access the power spoke Apple case.
Speaker Change: <unk> remotely with a simple recurring subscription plan. Additionally spoke experts discussed that's supposed to messenger, new reporting and dashboard capabilities provide a user friendly way to showcase operational metrics for enterprise Communications. This is an intelligent F. D. A five 10-K cleared software.
Speaker Change: <unk> designs and critical information and updates from an organization various alerts systems, such as a nurse call and patient monitoring to mobile staff on their communications devices.
Speaker Change: The conference was a true success, both in terms of the excitement level generated by spokes products and a number of new sales leads we were able to add to our pipeline and we look forward to the 2025 HIMSS Conference next month.
Speaker Change: But don't just take my word on how spoke continues to improve its reputation in 2024 I believe that there were two key proof points that underscore our premier market position as evidenced by number one.
Speaker Change: Even top honors for the seventh consecutive year and Black book market Research or survey of clinical communications solutions acute care hospitals.
Speaker Change: To having 18 of the 20 adult hospitals and nine of the 10 children's hospitals named to the 2024 U S News and World Report's best hospitals honor roll as our customers.
Speaker Change: I believe it's supposed to have these did not come if you don't have a best in class product offering and solid reputation with the customers spoke is an amazing blue chip customer base and many of those customers have been with us for decades and continue to buy from us.
Speaker Change: And then July spoke surpassed a very important milestone as a company Mark our 10 year anniversary Brandon spoke.
Speaker Change: In 2011, USA Mobility, Inc. Acquired income software in 2014, the company completed its integration, creating single cohesive business and the Stoke brand was born.
Speaker Change: Spoke extended on a strong legacy of those companies to solve critical communications challenges that help hospitals and health systems to improve patient outcomes and support public safety when seconds count and lives are at stake. This is our mission and this is our passion.
Speaker Change: In short we executed at a high level, we are confident about the future as we start 2025 based on our performance in 2024, we are providing our guidance estimates for revenue and adjusted EBITDA generation in 2025. This guidance reflects the team's confidence and being able to continue our strong performance since the pivot.
Speaker Change: In 2022.
Speaker Change: We will go into more detail regarding our expectations later in the call of course like last year, We'll review our guidance with you on a quarterly basis and update as appropriate.
Speaker Change: Yeah.
Speaker Change: Before I turn the call over to Mike to review our sales performance. Let me briefly summarize the goals of support are critical and important mission. Our strategic goal is simple run the business profitably generate cash flow and return that capital to our stockholders spoke is a proud legacy of creating stockholder value and free cash flow generation and we intend.
Speaker Change: To continue this track record since the beginning of our strategic pivot, which started about three years ago spoke has returned approximately $77 million or $3 75 per share to our stockholders in the form of a regular quarterly dividend.
Speaker Change: In fact since we created this company way back in 2004 spoke has returned nearly $700 million to our stockholders.
Speaker Change: Our regular quarterly dividend special dividends or share repurchases.
Speaker Change: In the fourth quarter of 2024, our history of returning cash to our stockholders continued as we returned $6 $3 million in dividends. This continues our legacy and returning capital to shareholders since becoming a public company and.
Speaker Change: And we again expect to pay dividends in excess of $27 million in 2025 spoke remains committed to our dividend policy and returning capital to our stockholders.
Speaker Change: When you take into consideration our current cash balance distribution to stockholders share repurchases debt repayments and acquisition spoke has now joined it generated more than 1 billion of free cash flow since our creation in 2004 are focused on maximizing cash over the long term supports the four major tenants of our strategy those are.
Speaker Change: Number one continued investment in our wireless and software solutions.
Speaker Change: Number two growing our revenue base number three disciplined expense management and number four a stockholder friendly capital allocation plan.
Speaker Change: Going forward, we believe our extensive experience operating our established communication solutions and a world class customer base will continue to generate significant value for our stockholders now I will turn the call over to our President and Chief Operating Officer, Michael Walsh, who will talk about our operating accomplishments Mike.
Speaker Change: Yeah.
Michael Walsh: Thanks, Vince and good afternoon, and thank you all for joining us for what we believe was another solid quarter and full year results from spoke.
Michael Walsh: We are pleased to report that we have continued to execute on our business plan and in 2024, we generated GAAP net income of $15 million or 70, or 73 cents per diluted share which was in line with prior year results and a sharp increase from the breakeven adjusted GAAP net income performance from two years ago.
Michael Walsh: Importantly, we accomplished this bottom line performance, while continuing to generate double digit software operations growth, which drove revenue in 2024 as well as significantly building, our professional services and maintenance backlog levels to more than $62 million.
Michael Walsh: Growth of nearly 22% and will drive revenue in future periods.
On a full year basis software operations bookings totaled $34 1 million up more than 13% from prior year levels also totaled 2020 for software operations bookings reached levels not seen for the past five years and continue on a trajectory of growth following our pivot three years ago.
Michael Walsh: Amidst all the progress in creating a solid financial platform and stockholder friendly capital allocation strategy. We remained true to our mission of being a global leader in health care Communications.
Speaker Change: We deliver clinical information to care teams, when and where it matters most to improve patient outcomes are spoke enables smarter faster clinical communications for our customers.
Michael Walsh: And importantly, we continue to maintain our reputation as a thought leader in the health care communication space.
Speaker Change: Continue to see customer satisfaction ratings increase.
Speaker Change: Okay. That's over 'twenty 200 health care facilities as customers, representing the who's who of hospitals in the United States.
Speaker Change: We have built our solutions and industry, leading reputation over many years and have longstanding valuable customer relationships.
Speaker Change: This is an amazing and valuable asset for smoke.
Speaker Change: And these hospitals buy from us regularly and renew maintenance at a high level.
Speaker Change: Let me take the opportunity to drill down into our software operations bookings in 2024.
Speaker Change: 2024 was certainly a year of milestones with regard to our software operations bookings.
Speaker Change: In addition to the solid year over year growth in total bookings of 13, 2%.
Speaker Change: We were able to execute 82, six and seven figure customer contracts of 22% increase from our record setting performance in 2023.
Speaker Change: Additionally, in 2024, we executed 40 multi year engagements with customers a third higher than the prior year.
Speaker Change: Hopefully this performance gives you a good indication that our sales team is generating in the marketplace and the confidence we have as we work our way through 2025 with a growing sales pipeline both in terms of size and quality.
Speaker Change: Yeah.
Speaker Change: Supporting our achievements in the fourth quarter of 2024, or 26, and seven figure contracts that we were able to close.
Speaker Change: And this performance is epitomize by the three customer contracts I'm going to discuss today.
Speaker Change: First our new logo customer with one of the Midwest, mostly now nonprofit multi specialty academic medical centers.
Speaker Change: Another with one of the top academic medical centers in the U S and the final with a regional leader in high quality care and a mission driven physician led integrated health system in the mid Atlantic let.
Speaker Change: Let me take a few moments to review these brands.
Speaker Change: Our first contract from last quarter was a seven figure new logo contract with a health system headquartered in the Midwest.
Speaker Change: Comprised of 23 hospitals expand both Ohio and Florida.
Speaker Change: This organization ranked among the largest and most were now in health care systems in the world.
Speaker Change: With over 80000, caregivers 276, outpatient facilities and a significant international presence.
Speaker Change: This multiyear transaction includes an enterprise software license for our operator console and web Oncall solution.
Speaker Change: And during the first implementation phase spoke will migrate over 150, operator console workstations from another provider to spoke to support 14 different hospitals and remote workers.
Speaker Change: Additionally, our spoke messenger solution was included to facilitate critical alarm traffic, including nurse call medical gases and fire alarms.
Speaker Change: <unk> supports this health systems multi year strategy to accelerate the meaningful use of technology to better support patient and provider workflows. While also aligning directly with its infrastructure goal, which includes a system wide rollout of Cisco.
Speaker Change: Yeah.
Speaker Change: The second standout industrial contracts in the fourth quarter with a large public health system in the southwest.
Speaker Change: This prestigious hospital provides care and life saving services to more than 250000 patients annually manages over 600000 operating cost and process is over 2 million pages annually, Utah.
Speaker Change: Utilizing spokes Mark suite from a centralized hybrid call center.
Speaker Change: Spoke secured a five year managed service commitment that will extend our existing partnership into the future and continue to drive value and critical communication services that are core to this organization's mission and growth.
Speaker Change: [noise] spokes multi year engagement includes spoke smart suite and west upgrades are new spoke care connect enterprise reporting.
Speaker Change: We spoke messenger Andy notify upgrades.
Speaker Change: Coupled with our value added services that include data integrity and solution assessments. This health system will become one of the newest members of our premium support service.
Speaker Change: Which will further add an additional layer of value and attention that are our clients appreciate.
Speaker Change: The third customer contract with a longstanding spoke customer of over 35 years and is a nationally recognized integrated health system, serving parts of the mid Atlantic.
Speaker Change: This health care system as a regional mid Atlantic leader with over 23000 team members supporting client hospitals over 250 patient care locations and a multi specialty group employing over 3000 physicians.
Speaker Change: They rely on spoke to streamline their communications for code calls on call scheduling alarm routing and enterprise web directory that is heavily integrated with key systems and data.
Speaker Change: But their commitment to a new multi year engagements they benefit from four years of steady budgeting unlimited upgrades, new SMS messaging to support legacy hardware changes in carrier needs value added services, an allotment of ours to maintain their proactive ness and patching updates with third party systems and the flexibility to adopt upgrade.
Speaker Change: <unk> is required for cdti.
Speaker Change: Dependencies or desired feature functionality advances.
Speaker Change: This is a growing health system that is engaged in bringing on its newest site an existing store client into this multi year engagement.
Speaker Change: As you can see spoke continues to consistently deliver effective communication solutions to hospitals and health care systems.
Speaker Change: Our fourth quarter success underscores our steadfast dedication to offer an unparalleled communications solutions to our clients.
Speaker Change: We are confident that our software solutions will continue to bring positive change to healthcare institutions nationwide.
Speaker Change: But that said I would like to turn the call over to our Chief Financial Officer Calvin.
Speaker Change: Kelvin.
Speaker Change: Thanks, Mike and good afternoon, everyone I would now like to take a few minutes and provide a recap of our fourth quarter and full year 2024 financial performance, which we reported earlier today.
Speaker Change: As always I encourage you to review our 10-K when filed as it includes significantly more information about our business operations and financial performance than we will cover on this call.
Speaker Change: Turning to our income statement in 2024, GAAP net income totaled $15 million or <unk> 73 per diluted share compared to net income of $15 7 million or <unk> 77 per diluted share in 2023.
Speaker Change: In 2024 total GAAP revenues were $137 7 million down from revenue of $139 million in 2023.
Speaker Change: Wireless revenue of $73 5 million for the year was down from revenue of $76 million in the prior year. However, this was partially offset by growth in software revenue to $64 1 million in 2024, driven by a nearly 22% increase in professional services revenue and the success of our.
Speaker Change: Managed services offering we had discussed in our last earnings call.
Speaker Change: With respect to wireless revenue 2024 performance continues to be primarily driven by improvement in average revenue per unit or <unk>, which saw growth of 26 cents on a year over year basis.
Speaker Change: Much of this increase was driven by previous pricing actions and to a lesser extent incremental pass through taxes and fees.
Speaker Change: We did see an improvement in net unit churn has net units in service declined in 2024 by roughly five 9% from the prior year as compared to six 4% decline in 2023.
Speaker Change: While we are happy with the year over year decline in the net unit churn rate.
Speaker Change: And it was still within the 4% to 6% we've seen over the last five to seven years, we believe that the improvement in the rate would have been even greater at several of the new additions that were anticipated in Q4 not been delayed.
Speaker Change: While timing of new wireless placements is sometimes difficult to foresee on an individual basis, we have seen modest improvement as we began 2025, we are confident in our ability to execute in 2025 and in line with the last several years, we expect our net unit churn to range from 4% to 6%.
Speaker Change: We expect demand for our wireless services will continue to decline on a secular basis as reflected in declining Patriot units in service. However.
Speaker Change: We remain focused on pricing and other initiatives like the G&A pager to further offset revenue lost through pager unit decline.
Speaker Change: These initiatives are unlikely to completely offset revenue decline realized from unit loss on an annual basis. This is further reflected in our updated financial guidance, which I will walk through sharp shortly.
Speaker Change: Turning to software revenue in 2020 for license and hardware revenue of $9 million was down from $11 4 million in 2023.
Speaker Change: Maintenance revenue totaled $37 2 million and was up slightly from the prior year.
Speaker Change: As we have discussed in previous quarterly calls, we expect our product development efforts will lead to further growth of our operations bookings and increased software license sales in the coming years and maintenance revenue along with it.
Speaker Change: As previously mentioned growth in professional services revenue was a key driver and the annual growth of software revenue in 2020 for professional services revenue of $17 9 million in 2024 was up 21, 6% from revenue of $14 7 million in 2023.
Speaker Change: Seeing further sustained improvement and resource utilization delivering on our internal initiatives to better align total resources with our backlog and driving a higher rate of margin and net cash flow.
Speaker Change: We hired additional service professionals in 2024 to meet our current backlog needs and to support our expanding professional services opportunities and we expect to continue doing so into 2025.
Speaker Change: As discussed in our last earnings call based on the rapid success of our managed services offering we have now begun separately reporting revenue from this category.
Speaker Change: Professional services revenues are now broken out between one projects.
Speaker Change: Traditional fixed bid engagements where revenues are recognized as work is performed and to managed services and all you can eat offering web customers are provided implementation and upgrade services across the length of their contract, which is typically three years, where revenues are recognized ratably over the term of the engagement.
Speaker Change: Managed services has become a more significant component of professional services revenue.
Speaker Change: Managed services revenue totaled $3 3 million or 18, 2% of professional services revenue in 2024.
Speaker Change: This is up from $1 4 million or less than 10% of professional services revenue in 2023.
Speaker Change: We remain optimistic by the prospects of this service offering and will continue to provide updates on our progress in the future.
Speaker Change: Full year 2024, adjusted operating expenses, which excludes depreciation amortization and accretion and severance and restructuring cost totaled $113 4 million up less than 1% from the prior year.
Speaker Change: Cost of revenue increased primarily due to the aforementioned increase in professional services bookings and the related hiring to support those services increases in research and development reflected our continued investment in our product and services platform with reductions in technology operations, driven by our normal practice cost reduction and.
Speaker Change: Our relationship to declining wireless revenues.
Speaker Change: Selling and marketing costs benefited from a one time item of approximately 0.9 million in the second quarter. When we began to amortize a subset of our commissions expense that had historically been expensed as incurred.
Speaker Change: While general and administrative costs were generally flat to the prior year.
Speaker Change: Adjusted EBITDA was $29 2 million in 2024 down from $30 3 million in 2023, generally reflecting lower consolidated revenue.
Speaker Change: Down from the prior year's spoke continues to generate healthy levels of adjusted EBITDA at over 21% margin in 2024.
Speaker Change: We continue to operate a highly profitable business funding a strong dividend and delivering on our promises made in 2022 to shift our primary focus towards profitability.
Speaker Change: Finally, we ended 2024 with $29 1 million in cash and cash equivalents, which grew from $23 9 million in the third quarter, but was down from $32 million at the end of 2023.
Speaker Change: Moving on to guidance for 2025, we have provided estimates for revenue and adjusted EBITDA. As a reminder, the figures I'm going to discuss today are included in our guidance table in the earnings release.
Speaker Change: In 2025, we expect total revenue to range from $134 million to $142 million.
Speaker Change: The midpoint of our guidance reflects consolidated revenue generally in line with 2024 results, but with a higher mix of software revenue, while the high end of our guidance reflects nearly 3% annual growth.
Speaker Change: Included in the 2025 guidance, we expect wireless revenue to range between 69 million to $72 million.
Speaker Change: Software revenue is expected to range from $65 million to $70 million in 2025, with a midpoint, implying total software revenue growth of more than 5% and more than 9% annual growth at the high end of the guidance range.
Speaker Change: Lastly, our adjusted EBITDA guidance for 2025 is $27 5 million to $32 $5 million. The mid point reflects minor improvement over 2024, while the high end represents over 10% growth largely expected to be driven by a greater mix of higher margin software license bookings.
Ben: With that said I will now turn the call back over to Ben.
Ben: Thanks, Kelvin look before we open the call up to your questions. Let me say again, how proud I am of our entire spoke team and the results we posted for 2024.
Ben: Their efforts and dedication, which provides confidence for our outlook and guidance for another strong year in 2025.
Ben: We are focused on the opportunity in front of us and critical communications from a business configuration and strategy perspective, we believe we are strongly positioned to grow our franchise, while returning capital to our shareholders. We have a long term organic growth engine and spoke care connect we maintain a source on strong recurring.
Ben: Revenue in our wireless service line.
Ben: We run the largest paging offering in the world integrated with our software operations.
Ben: We have enhanced our paging platform end user devices to serve our core health care customer base.
Ben: We believe with these two assets going for US our best financial results are ahead of us and spoke future is bright.
Ben: I'd also like to take this opportunity to thank our stockholders for their continued support and want to assure you that our primary focus remains on generating cash and increasing stockholder value, we're committed to our current dividend and capital allocation policy.
Ben: I believe that today, we have provided you an appreciation for some of the great things that are happening as spoke and the market opportunities that lay ahead of us.
Ben: While we have shared our initial guidance with you for 2025, we will work to exceed those expectations and we will update you each quarter. We started the year off strong and we very much look forward to speaking with you again in two months when we report our first quarter results in late April.
Ben: That concludes our prepared remarks, so at this point I'll ask the operator to open the call up for your questions. We'd ask you to limit your initial questions to one and a follow up and then after that we'll take additional questions as time allows operator.
Ben: Yeah.
Speaker Change: Thank you David.
Speaker Change: Now be conducting a question and answer session. If you would like to ask a question. Please press star one on the telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue human.
Speaker Change: Start to if you would like to move your questions from the Q4.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Yeah.
Speaker Change: The first question comes from the line of Kyle Balsa Wood BYD Securities. Please go ahead.
Speaker Change: Great. Thank you hi, everyone. Thanks for all the updates today, great progress maybe.
Speaker Change: Maybe I'll start with our software operations bookings I think there are 26, and seven figure contract and that for the year is up 13%, which is great can you talk a little bit about some of the key attributes of this growth I mean is it.
Speaker Change: Winning contracts from.
Speaker Change: Competitors are adding new offerings within existing accounts or greenfield opportunities from our new clients that Eric.
Speaker Change: Innovating their operations if you will so I guess, that's the first part of the question is kind of key attributes of the growth and then.
Speaker Change: How should we think about the metric of 67 figure customer contracts going forward.
Speaker Change: Twentyish, a decent number or reasonable thank you.
Speaker Change: Yeah, Let me, let me take that one.
Speaker Change: The answer for your first question is it's a little bit of everything.
Speaker Change: You have to go back to 2022, when we made the pivot in the first quarter and we kind of stood down spoke go we said hey, we're going forward with <unk> care connect suite, we're gonna start enhancing.
Speaker Change: We're investing in it our R&D now is going into care connect suite.
During the course of 'twenty four we started doing a lot of work on it from a product roadmap perspective, and really saw some success there in terms of delivering things like a new UI on slow console care connect reporting package.
Speaker Change: The whole contact center look and feel with upgraded and that really happened kind of as the year progressed and late in the year and because of that roadmap and because of that progress. We were making we had good success signing multiyear engagements customers look at us like where utility we just work, but they want to know are we enhancing our plan.
Speaker Change: Form or are we taking them into the future.
Speaker Change: Doing things like adding agenda, AI and making it easier for them to interface.
CPI up to there you can see Cas folks in the cloud et cetera. So it was our successful was across the spectrum of some new customers. Some takeaways from competitors a lot of existing customers renewing and reopening for multiyear engagements and then some incremental sales to existing customers, who just wanted to add some more.
Speaker Change: Functionality and some more of our solutions in that care connect suite that circle. If you will that we have on our website and so I really think we've positioned ourselves quite well if those investments for 2025, and we're seeing that we were just talking with our board today as a matter of fact, we we look at our pipeline and we look at the top deals.
Speaker Change: And our pipeline.
Speaker Change: No.
Speaker Change: The top deals in our pipeline, they're all over half a million dollars a piece of it just fills over pay.
Speaker Change: Page and a half and.
Speaker Change: Two years ago, it was probably not uncommon to see a $100000 $120000 $60000 deal the size of the deals are getting larger.
And it's the opportunity as we deliver more functionality in the council's when we do more of this opportunity will shift more toward new business and more license than what we've seen in the past and.
Speaker Change: And that's something that we're looking forward to in 2025. So it was a little bit of everything last year, and we're looking to expand our license for us and our license efforts. This year because that would be gets more maintenance revenue is very profitable.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Got it I appreciate that that's helpful and maybe my second question on the EBIT guidance.
Speaker Change: Great to see it looks like it was about 100 basis points above what we were thinking so.
Speaker Change: Nice leverage can you talk a bit more about kind of the key contributors for this earnings leverage it sounds like a greater mix of software sales will help but also curious about kind of the expense reduction that you're focused on as well.
Speaker Change: Go ahead, Gautam, yes, sure I'll take that one head Kyle yes. So I think you pointed out a lot of that leverage lending five is really going to be focused on the on the software and the top line.
Made that pivot about three years ago at this point a lot of that leverage on the operating expense side has been factored in.
Speaker Change: From this point forward, we're really looking to grow that top line.
Speaker Change: The software license component comes with significant margin.
Speaker Change: With much of that dropping to the bottom line. So that's really going to be the critical focus for us into 'twenty five and beyond.
Speaker Change: Yeah, and I think you know also just adding onto that we soon our churn go down I'm on the software side, which is very encouraging because that's.
Speaker Change: That's makes us much more profitable and Mike has done a phenomenal job with our professional services group enrollment.
Speaker Change: On the managed service contracts that we sold and making us more efficient in terms of professional services billing rate or utilization.
That combined with the churn going down it's just made that whole maintenance portion of our revenue stream.
Speaker Change: Much more profitable on the professional services component that you see in the income statement much more profitable. So that's something that's also helping our bottom line margins in the software business are improving.
Speaker Change: Okay, Great I appreciate that sounds great and are excited to see the progress continues here. Thanks for the guidance and the update.
Carl: Thank you Carl.
Speaker Change: Thank you a reminder to all the participants that do them at the start and wanted to ask a question.
Speaker Change: Next question comes from the line of John Dickson Optimus Investment Group. Please go ahead.
Speaker Change: Oh, Hello events can you all hear me fine.
We hear you yes.
Speaker Change: Alright.
Speaker Change: I noticed that you guys actually.
Speaker Change: <unk> moved our headquarters from Virginia down to Plano.
Speaker Change:
Speaker Change: Can you kind of expound on why that occurred.
Speaker Change: What prompted you guys to make that change.
Speaker Change: Sure, we basically closed all of our real real estate.
Speaker Change: From a cost perspective, except for two locations.
Speaker Change: Now we've got a small location up in Bedford, New Hampshire, where we have some CPI testing and its just to save on costs. It's just that simple before we close that other offices and consolidated everything thats playing out.
Speaker Change: We had about half the company before the pandemic about half the company was.
Speaker Change: Essentially working out of an office anyway, because we've got technicians and salespeople spread out all over the country.
Speaker Change: And we've gotten very good at operating like that so we're trying to drive every cost we can out of the business.
Speaker Change: Some margin generate some cash and give it back to our shareholders as long as it doesn't negatively impact the business and we're finding that we can get our work done in our work business. So we know somebody is contributing or not contributing.
Speaker Change: We are very good at looking at productivity of people across the board in various categories in <unk>.
Speaker Change: After bad actors and bringing in new actors, where you need to so we're finding very effective now we need that office and playing out with the large distribution facility for us we do a lot of inventory management out of there so, but we even took that office and we cut it in half literally.
Speaker Change: And have to save money. So we're just we're trying to drive cost out of the business everywhere, we can possibly drive out cost.
Speaker Change: Oh that sounds great.
Speaker Change: Hmm.
Speaker Change: One of my other questions really goes.
Speaker Change: It goes back to the gentlemen from B Riley as it relates to the.
Speaker Change: To your bookings.
Speaker Change: I know and I've seen this repeatedly.
We've been invested with you now for about three years.
Speaker Change: 80% of your revenues really recurring so is that.
Speaker Change: Is that a good metric to saying that about 80% of your bookings are coming.
Speaker Change: Coming from from recurring current customers.
Michael Walsh: Mike why don't you take that one.
Mike: Yeah. It's a good question, John and yes, the the metrics that we've talked about.
Michael Walsh: Historically somewhere around 15% to 20% of our.
Mike: Operations bookings are what you would consider to be.
Mike: New logo, so 100% new customers that we do not have today.
Mike: Historically again about 80% of our bookings tend to be.
Mike: In our install base with either.
Mike: Add on type functionality upgrades things like that.
Mike: But when we mentioned the the 80%.
Mike: Recurring aspect of our revenue what were really two preferring to there is the entirety of our wireless business, which.
Mike: Sort of by definition is is recurring on a monthly basis and then the software maintenance component on the software side, where we know well.
Mike: Well in advance we know what our backlog is related to maintenance. So those two combined make up about 80% of our revenue. So when we start every year, we essentially know where 80% of our revenue is coming from so a little bit of apples and oranges, but.
Mike: I think your question is spot on yeah, one easy way to look at it is if you look at our P&L that's attached to the press release, you would take all of the wireless revenue. That's reoccurring and then you would look at the software revenue and you would take the maintenance component, which is obviously the largest portion of our software revenue that's reoccurring add there.
Mike: Two together and that's where you're getting your your 80 plus percent from.
Speaker Change: Awesome, well that sounds really good not I just want to cancel.
Speaker Change: The faster you guys, we were where investors not really analysts and I I just want to reemphasize to you and your team were very appreciative of what you've done.
Speaker Change: Being a part of your company and it's been a really good right over the last three years and up.
Speaker Change: What I'd tell you. Thank you.
Speaker Change: Well, thank you for your support and get ready to collect another dividend here in the not too distant future because we've improved it today.
Speaker Change: This afternoon, it's gonna be paid I think.
Speaker Change: On March 31.
Speaker Change: Well, we look forward to it and like I said you are a great company a were very impressed with you are playing to stay with you. So thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: As there are no further questions, ladies and gentlemen, we have reached the end of question and answer session I would now like to turn the floor over to.
Speaker Change: We have one more question.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: To be on ticket speakers sure.
Speaker Change: It's from the line of.
George Melas: Oh, George Melas with MGH.
<unk> management. Please go ahead.
Speaker Change: Great Thanks for that everybody.
George Melas: Just.
George Melas: Squeaked in at the end here.
George Melas: And congrats.
Speaker Change: Congratulations on continued really good results I have two questions one of them maybe is a little complicated, but it's about the product roadmap.
George Melas: And.
George Melas: Since you talked about sort of good progress in the world.
George Melas: Roadmap in 2024.
Speaker Change: Can you give us a little bit of a sense of that.
Speaker Change: What are you trying to accomplish and what are the timelines you're trying to achieve.
Yeah. So we have a new UI on the spoke operator council. So instead of having kind of an older software older look and feel that it's had for many many years, it's all completely new.
Speaker Change: I completely state of the art.
Speaker Change: Completely updated and it's much easier sale now going in with that that clean look our operator console, which is the core of our business has always had by far the most functionality coming in the industry George in terms of health care specific workflows, operator workflows that work at hospitals.
Speaker Change: All of that hospital functions when they are setting up a code team of code blue when they're calling.
Speaker Change: Calling a code word et cetera.
Speaker Change: They contact everybody that we've always had that functionality that you're hitting a lot of like function keys and stuff that the operators and memorized over the years, we've completely change that and built a new eye and the new Ias hooks in four agenda to AI.
Speaker Change: Which will make them a lot more efficient going forward in the future to think of ways for them to save money.
Speaker Change: We also did a major update on our care connect reporting package for one of our major consoles, where the old console the old reporting package was not.
Really that good to be honest with you and and customers have been asking for a lot of things for many many years, we got that done this year. If that's done completed we're out there selling it now selling it in the first quarter. They had some really good results from it quite frankly.
Speaker Change: Care connect contact center.
Speaker Change: Yeah that is complete it's out there we came up.
Speaker Change: Updated our SaaS hosting and our managed hosting platform that's out there.
Speaker Change: Got some more coming here in the first quarter. We've got you know from the <unk> type players. We've got to take 123 have been certified in terms of their CCI interfacing with our console remember, it's a huge fee castle ucas.
Speaker Change: <unk> wants to sell them to a hospital they have to basically come through spoke we're the dominant player. There so they've got to interface with us to work for that hospital function.
Speaker Change: One one of our space or try to do our hospital workflows, but they needed to be able to communicate with the operators. You know if you think about our hospital George inside of any hassle, if you've got a handful that had 100 employees, maybe 60 or more in the EHR and 40 of them weren't so.
Speaker Change: You know that other 40 is the backbone that makes the hospital work and those are the people that use it.
Speaker Change: Spoke care connect and so we've put a lot of effort into modernizing that interfacing with the cloud providers interface and quite frankly with the EHR is to make those EHR is even more valuable to the hospital. So we're seeing good good.
Speaker Change: Uptake on that and then we are updating our web product or what product is widely used across the United States, It's probably more used than when the operator console and we're doing the same new look and feel on that as well as our mobile products. So you'll be able to do everything on all three platforms.
Speaker Change: But right now you might have to go to a different platform to to use all of that is converging.
Speaker Change: The whole new modern look and feel so those are things that we delivered that we were working on all during 2020 for a lot of it has been recently delivered either in the fourth quarter of 'twenty, four or the last month and a half.
Speaker Change: We've done on our messenger product, which is which is our kind of machine to machine.
Speaker Change: Alerting product that connects everything we've got over 200 integrations on that we've turned in critical test results notification for radiology, we've updated the SMS service capabilities of that we've come up with a facility's bundle a lot of these hospitals might have.
Speaker Change: And alarm on a door or an alarm in AR.
Speaker Change: Blood lab, where if it goes below a certain temperature above a certain temperature they need to know there's a lot of alarms inside hospitals that need to be managed and we've created a facility's bundle that you can bill kind of as a SaaS type revenue model that's out delivered our teams out there selling it now.
Speaker Change: Messaging and clinical workflow bundles that we've got coming soon.
Speaker Change: We've updated our spokes spoke voice connect where we're going to replace the IV are with what we call virtual agent that can do call routing.
Speaker Change: And a lot of people are doing that right now, but we're going to add it in the hospital contact center context.
Speaker Change: AI names in process, that's out there and we've got a major project in that regard coming later on in the year second half of 2025, so a lot of progress on the product development side.
Speaker Change: Wow.
Speaker Change: Hard to take note, there's so much going on okay. Great. Yes. It does that is that what gives us confidence that license.
Speaker Change: Sales should pick up in 2025.
Speaker Change: Yes. It does that gives me the confidence as well as the pipeline that we've built give me confidence our pipeline keeps growing and its qualified leads and we're seeing great success with it. We also created a new business development team George and we really it's got I think seven people in it right now it doesn't have a ton of people in it but we only had two new <unk>.
Speaker Change: <unk>, we allocated some other people inside the company to it and they've already started making some some great traction within a matter of fact, we just had one huge hospital system that we've been chasing for years. This new.
Speaker Change: Business development team got in their showroom everything we can do and talk to them about what we're planning to do and the CIO said I want all of it and we're going to meet with the CIO next week in hands. So.
That kind of stuff gives you confidence the morale of the company is really high right now we're hitting our numbers we beat our numbers in January we're going to turn in a real strong February.
Speaker Change: A lot of these investments you know it takes time to do product development and have listened to the customer Murphy lives inside of software. So that you know something coming up but we're just we're just making progress across the board and it's going to help us in that license is very profitable and it creates maintenance revenue. So I think from a perspective of the future.
Speaker Change: I'm feeling pretty good.
Speaker Change: Now, we're obviously not going to grow like Nvidia, but.
Speaker Change: Relative to ourselves I think we're going to we're going to get stronger and our.
Speaker Change: Our customers again, they looked at us like where utility they count on us to work.
Speaker Change: And we're going to show them that not only can we continue to work we can work better and we can interface with a lot of modern things that are coming down the pike in terms of this agenda AI.
Speaker Change: Sounds good.
Speaker Change: Okay. Good luck and 25. Thank you very much. Thank you George Thanks for your question.
Speaker Change: Hey, folks I think that was the last question I just want to thank everybody for their participation in all of our shareholders for your support.
Speaker Change: This is going to wrap up the fourth quarter conference call. We are going to talk to you in about two months with our first quarter results, where we're really looking forward to that so everyone have a great day have a great weekend.
Speaker Change: We will be back to you real soon with another update thank you.
Speaker Change: Thank you <unk>.
Speaker Change: After todays teleconference. You may disconnect your lines at this time, thank you for your participation.
Speaker Change: [music].
Speaker Change: