Spok Holdings, Inc. Aktie

Greetings. Welcome to the Spok Holdings, Inc. Q2 '26 Earnings Results Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Al Galgano of Investor Relations. Thank you, Al. You may begin.

Hello, everyone, and welcome. I am joined today by Vince Kelly, Chief Executive Officer; and Michael Wallace, Chief Operating Officer and Chief Financial Officer. After a brief presentation by management, we will open up the call to your questions. I want to remind everyone that today's conference call may include forward-looking statements that are subject to risks and uncertainties relating to Spok's future financial and business performance. Such statements may include estimates of revenue, expenses and income as well as other predictive statements or plans, which are dependent upon future events or conditions. These statements represent the company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results.

Spok's actual results could differ materially from those anticipated in these forward-looking statements. Although these statements are based upon assumptions that the company believes to be reasonable, they are subject to risks and uncertainties. Please review the Risk Factors section relating to our operations and the business environment, which are contained in our second quarter 2026 Form 10-Q and related documents, which will be filed with the Securities and Exchange Commission. Please note that Spok assumes no obligation to update any forward-looking statements from past or present filings and conference calls.

With that, I'll turn the call over to Vince.

Good afternoon. Thank you for joining us for our second quarter 2026 earnings call. Let me preface my comments by saying how proud I am of our Spok team and that we remain true to our mission. Since the strategic pivot we announced a few years ago, our focus has not changed. That is to increase our software revenue, generate cash and return capital to our stockholders. In the second quarter, we were able to deliver a nearly 92% sequential increase in software operations bookings as well a sustained year-over-year levels of wireless average revenue per unit. Additionally, we generated a record level of adjusted EBITDA. We believe that Spok has struck an excellent balance between making the necessary investments to fuel future growth, while continuing to generate cash flow and return capital to stockholders.

While driving our top line, we also continued to focus on expense management as adjusted operating expense levels in the second quarter were down nearly 8% from the prior year. Much of that improvement results from the initial impact of the strategic realignment that we announced in April. Additionally, Spok is implementing artificial intelligence to drive further operational efficiencies across the organization with a particular focus on accelerating product development time lines, reducing time to market for new Care Connect suite capabilities and other internal uses. It is important to note that our focus on expense management as one of the key drivers to generate increased cash flow does not come at the expense of our product platform as we continue to make the necessary investments in product development, sales and marketing, customer support and professional services to support the growth of our Spok Care Connect solution offerings.

In the first half of 2026, Spok invested over $6.7 million in product research and development, a nearly 10% increase from 2025. Investments such as these are critical to creating a best-in-class product platform and to maintaining our solid industry reputation. In addition to the metrics I've outlined for you, there were many other operational accomplishments in the second quarter. We saw a more than 3% year-over-year increase in software revenue driven by double-digit growth in managed services revenue, as well as software license sales, a less than 2% reduction in wireless units in service, an 84 basis point improvement from the prior quarter and consistent with prior year levels and record adjusted EBITDA levels that more than covered our dividend and other capital obligations in the second quarter.

Today, we will provide you a sense of our strategic business plan is progressing. First, I will provide a review of our second quarter sales performance. Second, I'll cover an overview of the asset sale we closed last week and how it supports our capital allocation strategy. Next, Mike Wallace, our COO and CFO, will provide a review of our second quarter financial highlights, including Spok's updated financial expectations for 2026. And finally, I will conclude our prepared remarks with a brief wrap-up before opening the call to your questions.

Amidst all the progress in continuing to create a solid financial platform and stockholder-friendly capital allocation strategy, I want to reiterate that we remain true to our mission of being a global leader in health care communications. As we remind listeners each quarter, simply put, we deliver critical information to care teams when and where it matters most to improve patient outcomes as Spok enables smarter, faster communication throughput for our customers. And importantly, we continue to maintain our reputation as a thought leader in health care communications as we continue to see customer satisfaction ratings at very high levels.

In the second quarter of 2026, we were able to execute 14 6-figure and 1 7-figure new customer contracts. We are very pleased with our very strong performance in the second quarter, regaining our momentum. I'd like to highlight a couple of the notable customer agreements from the second quarter, including one of the largest contracts in our company's history and one with a well-known national health system. The first agreement is with a customer headquartered in the Midwest that delivers more than 20 million patient encounters annually across more than 2,200 care sites and employs more than 160,000 people, including 45,000 nurses and 25,000 physicians and advanced practice providers across 24 states.

The agreement expands the customer's existing software, managed services and premium maintenance and support contract, extending Spok solutions to 85 additional locations. The customer continues to unify operations with our Spok Care Connect platform using our operator console, alerting and alarm routing solutions. This means delivering a consistently positive experience across every channel the customer touches, sales, support, services and finance, a full 360-degree relationship with Spok.

Also in the second quarter, a prestigious academic health system and long-standing Spok Smart Suite customer made a significant strategic investment with Spok to modernize their clinical communication platform. The engagement expands their deployment to include Spok Messenger, Spok Mobile, SMS services, Epic chat integration, e-mail in and out and the Ascom Gateway. These additions complement their existing Spok Smart Suite solution and Spok GenA pagers, creating a comprehensive platform that delivers critical information through the most appropriate device and modality for every clinical need.

The agreement also includes an upgrade and expansion to the customers' test system and redundancy environment, along with our workflow analysis value-added service to design communication strategies tailored to the organization's clinical and operational processes. Together, these Spok solutions help ensure the right information reaches the right caregiver at the right time, reduces communication delays and ultimately improves caregiver efficiency and patient outcomes.

In summary, our team delivered an outstanding second quarter, reflecting focused execution and continued progress against our strategic priorities. These deals reinforce our expertise and ongoing commitment to delivering high-value communication solutions that drive meaningful outcomes for our customers. As you may have seen, a little over a month ago, we announced our entry into an agreement to sell certain narrowband spectrum licenses in our 2-way paging inventory to Sensus USA. The transaction has been approved by the FCC and closed on July 20.

For those of you who may not be familiar with Sensus USA, they are a brand within the Xylem Inc. family of products and are a designer and manufacturer of metering and automatic meter reading products catering to municipal and industrial markets worldwide. The total purchase price for the acquired licenses is a cash consideration totaling $8 million. Of that, the majority was paid at closing on July 20, with a small portion held back and paid on a pro rata basis only after Spok confirms that each spectrum license sold has been cleared of existing Spok users as they are being transferred to other frequencies.

Spok has 180 days after closing to clear the spectrum. We expect to complete the clearing this quarter. While the purchase price of $8 million is important as it contributes to our cash balances, this transaction is most important because of its strategic value as we continue to find efficiencies within our organization and create opportunities to monetize our highly valuable asset base. This is truly a win-win for all parties involved as we create stockholder value without impacting our 2-way subscribers, transferring them to alternative frequencies in our spectrum portfolio.

Also because the spectrum being sold has no cost basis on our balance sheet, the entire amount received less customary transaction costs will result in a gain. Given our available deferred tax assets, or DTAs, we would expect no federal tax to be due on the gain. After this transaction, our DTA balance is expected to be approximately $30 million. We believe that there may be additional opportunities to create stockholder value through monetizing our asset base. Combined with the benefits of the strategic realignment that we announced back in April, as well as the progress we are making on implementing AI initiatives to create operational efficiencies in our organization, we are confident in our future.

Before I turn the call over to Mike to review our financial performance, let me briefly summarize the goals that support our critical and important mission. Our strategic goal is simple: run the business for profitable growth, generate cash flow and return that capital to stockholders. Spok has a proud legacy of creating stockholder value and returning capital through free cash flow generation, and we intend to continue this track record. Our dividend level represents a yield in excess of 10% for our stockholders, and we're proud of our legacy there and our ability and commitment to continue funding.

Since the beginning of our strategic pivot, which started in 2022, Spok has returned approximately $118.7 million or nearly $5.63 per share to our stockholders in the form of our regular quarterly dividend. In fact, since we created this company in 2004, Spok has returned more than $740 million to our stockholders either through our regular quarterly dividend, special dividends or share repurchases.

In the second quarter of 2026, our history of returning cash to our stockholders continued as we returned $6.5 million in dividends. We expect to pay dividends in excess of $27 million in 2026, and we remain committed to our dividend policy and returning capital to our stockholders. When you take into consideration our current cash balance, distribution to stockholders, share repurchases, debt repayments and acquisitions, Spok has now generated nearly $1.1 billion of free cash flow since our creation in 2004 and returned approximately 2/3 of it to our shareholders.

Our focus on maximizing cash over the long term supports the 4 major tenets of our strategy. Those are: number one, continued investment in our product platform; number two, growing our revenue base; number three, disciplined expense management; and number four, a stockholder-friendly capital allocation plan. Going forward, we believe our extensive experience operating our established communication solutions and world-class customer base will continue to create significant value for stockholders.

Now I will turn the call over to our Chief Operating Officer and Chief Financial Officer, Mike Wallace, who will talk about financial performance and earnings guidance. Mike?

Thanks, Vince, and good afternoon. I'd like to take a few minutes and provide a recap of our second quarter 2026 performance, which we reported earlier today. As always, I encourage you to review our 10-Q when filed as it includes significantly more information about our business operations and financial performance than we will cover on this call.

Turning to our income statement. In the second quarter of 2026, GAAP net income totaled $4.1 million or $0.20 per diluted share compared to net income of $4.6 million or $0.22 per diluted share in the prior year. However, adjusting for one-time impacts in both quarters, which include an extraordinary gain of approximately $700,000 related to the sale of a domain name in the second quarter of 2025 and the $1.5 million of severance and restructuring expense related to the strategic realignment in the second quarter of 2026, then prior year net income would have been $4 million or $0.19 per diluted share. And in the current quarter, net income would have been $5.3 million or $0.25 per diluted share. Overall, an extremely strong quarter from a profitability perspective.

With respect to wireless revenue, the year-over-year revenue decline from lower units in service was partially mitigated by previously taken pricing actions over the course of the last couple of years. Product sales also continued to augment any losses related to units in service. Average revenue per unit, or ARPU, which totaled $8.20 was consistent with prior year levels, continues to be our primary tool in partially offsetting revenue decline from unit loss. Sustained ARPU levels have been driven by previously discussed pricing actions and to a lesser extent, incremental pass-through taxes and fees, as well as an increased mix of our higher ARPU GenA pagers in use.

Turning to software revenue for the quarter. License revenue totaled $3.6 million compared to $2.4 million in the same period of 2025 as a result of momentum in overall software operations bookings, specifically license bookings, which impact revenue immediately. As we have pointed out in the past, software operation bookings are lumpy in nature, and as a result, looking at a particular quarter may not always provide the entire picture. However, we are encouraged by the momentum we saw in the second quarter.

Additionally, the continued solid performance of professional services revenue, albeit slightly lower than last year due to the timing of some higher dollar value projects was a key driver in second quarter software revenue levels. Specifically, managed professional services revenue of $2.3 million in the second quarter was up 53% from revenue in the prior year. And we continue to see solid performance in resource utilization, delivering on our internal initiatives to better align total resources with our backlog and drive a higher rate of margin and net cash flow.

As discussed previously, we believe we have greatly achieved our optimal operating efficiency in professional services relative to our current product state. We will continue to align total resources with our backlog, and we should continue to see benefit from a continuing increase in our managed services mix, which traditionally has a higher margin profile.

Second quarter adjusted operating expenses, which excludes depreciation, amortization and accretion and severance and restructuring cost totaled $27.1 million, down from $29.4 million in the prior year or nearly 8%. Drilling down into the specifics, cost of revenue was down from the prior year, primarily due to the accelerated operations bookings level we saw in the second quarter of 2025. Increases in research and development reflect our continued investment in our product and services platform with reductions in technology operations driven by our normal practice of cost reduction in relationship to declining wireless revenues.

Selling and marketing costs decreased nearly 10% from the prior year, consistent with what we saw in the first quarter, reflecting lower commissions and lower trade show and event expenses. And year-over-year general and administrative costs also declined by nearly 14% as a result of the strategic realignment we announced in April.

Finally, I'd like to address our cash balances, which were $16.6 million at the end of the second quarter. Consistent with prior years, our cash balances declined in the first half of the year as a result of typical working capital needs that include items such as the payment of our short-term incentive plans and prepaid annual renewals of technology contracts. Additionally, first half cash flow financing activities are typically higher than in the second half of the year, reflecting payments on the company's long-term incentive plans. So, we anticipate cash balances will grow in the second half of the year, given that those working capital needs are behind us, coupled with our continued expectation of driving significant free cash flow.

Additionally, we are encouraged by the cash contribution of over $7 million after related transaction expenses and associated income taxes in the third quarter from the spectrum license sale that Vince outlined earlier. Given that contribution and the anticipated reduction in working capital needs throughout the remainder of the year, we anticipate that we will exit 2026 with $26 million to $29 million in cash and cash equivalents.

So moving on to financial guidance for 2026. Based on the anticipated full year financial impact of the strategic realignment, first half software operations bookings levels and our visibility into our product sales pipeline, we are adjusting our full year 2026 financial guidance estimates. In general, we believe that bookings levels we saw in the first quarter and the lumpiness of software sales that we have experienced over the past year, it is prudent to build in a more cautious approach to our guidance.

Given the pace of technological change and against the backdrop of consistently tight hospital budgets, we are seeing 2 effects show up in the pipeline. First, deals are taking longer to close as customers do more evaluation upfront before committing. Second, even when they do sign, they are increasingly favoring shorter terms over multiyear agreements. Budget pressure makes them reluctant to lock in long term and technology uncertainty makes them want to wait for more clarity. Together, these dynamics are compressing near-term revenue.

So with these factors in mind, we are slightly lowering the midpoint of the revenue guidance range, while the high end of that range is consistent with prior year revenue totals. Additionally, given the benefits we are seeing from the strategic realignment we announced in April, we believe those benefits will offset any revenue reduction. So importantly, we are not changing the midpoint of our adjusted EBITDA guidance for 2026. We now expect the midpoint for total revenue to be $136 million, while the midpoint for adjusted EBITDA remains at $30 million.

In 2026, we expect total revenue to range from $132.5 million to $139.5 million. We expect wireless revenue to now range from $67 million to $70 million and software revenue to range from $65.5 million to $69.5 million in 2026. Lastly, our adjusted EBITDA guidance for 2026 is expected to range from $28 million to $32 million. The midpoint reflects improvement over 2025, while the high end represents over 10% growth from 2025, largely expected to be driven by a greater mix of higher-margin software license bookings and the aforementioned benefits related to the strategic realignment cost reductions.

With that said, I will now turn the call back over to Vince.

Thanks, Mike. Before we open the call up for your questions, let me reiterate our focus on the opportunity in front of us in critical communications. From a business configuration and strategy perspective, we believe we are strongly positioned to grow our franchise value, while returning capital to our shareholders. We have a long-term organic growth engine in Spok Care Connect. We maintain a source of strong recurring revenue in our wireless service line. We run the largest paging offering in the world that has been integrated with our software operations. We have enhanced our paging platform and user devices to serve our core health care customer base.

We believe with these 2 assets going for us, our best financial results are ahead of us and Spok's future is bright. I'd like to take this opportunity to thank our stockholders for their continued support and want to assure you that our primary focus remains on generating cash and increasing stockholder value. We're committed to our current dividend policy and capital allocation policy.

That concludes our prepared remarks. So, at this point, I'll ask the operator to open the call for your questions. We'd ask you to limit your initial questions to one and a follow-up. And after that, we'll take additional questions as time allows. Operator?

Our first question is from Joseph France at MitchField (sic) [ Litchfield ]?Hills.

Just a couple of questions. What drove the 92% sequential jump in bookings? I apologize for my laryngitis in terms of numbers of deals and deal size? And how much, if any, of that was pulled forward from 3Q?

Well, I think we've said in the past on these calls, bookings is always going to be lumpy. We happen to pull in a couple of really big whales in the second quarter. We don't always get deals that size in terms of the absolute value of dollars on each of those deals every quarter. You'll see them -- if you look at our past on a quarterly basis, you'll see a few quarters in the past where it's just way out of line with the other quarters in the year because we pulled in a big deal. We're always elephant hunting. It's something that we incent our sales force to do, and we pulled off 2 very nice ones in the second quarter that we talked about in our earlier comments.

Another question I had was you mentioned, Mike did in the comments on the quarter that people are looking for shorter terms and that's taking longer to close. Your cancelable backlog also increased in the quarter versus last year. Is this sort of the same part of the negotiation that's going on because of all the uncertainty in the marketplace?

Yes. Yes, that's fortuitous that you said that because those are lined up. So, my comments regarding why we took revenue down a little bit, especially on the software side, actually dovetails exactly with what you're seeing from the standpoint of more customers where we have signed deals where they have a termination for convenience essentially. Net or grossed up for those amounts, our backlog stayed pretty much flat year-over-year. But clearly, there is a trend towards customers wanting more flexibility, although we're not overly concerned about that. I mean, once our products get into customers, they tend to remain pretty sticky at the end of the day. And once we're deep into a project, it's very difficult for a customer to sort of unwind what they've done. But clearly, that is something that is happening kind of throughout the industry. And I think it goes to just uncertainty that some of our hospital customers have with the one big beautiful bill and what some of the Medicare and Medicaid reimbursements are going to be as we move through the balance of '26 and into '27.

And as you probably know, in the healthcare sector at the end of the day, I mean, these hospitals always have very, very tight budget. So I think all of those things are kind of moving in tandem.

You actually -- if I could ask -- squeeze in one more. You actually highlighted a very large account in the Midwest. I'm not sure I know which one that is for sure, but congratulations. When you win these 6 and 7-digit contracts, and this was a really nice one, what are the top 2 or 3 reasons they choose you over their alternatives because some of those companies are pretty big. I'm just curious.

Yes. Yes. It's the sheer breadth and depth of our enterprise offering, all the different things we do from the contact center to our alerting project, which is Messenger to our mobile product, which is Spok Mobile, to our many integrations, our Epic integration, our integration with their PBXs through our CTI expertise. We really sit within the health care ecosystem very, very closely with how they function and how they do business. And many of these large customers that we've had, the average tenure of our enormous customers is over 20 years. So we get in their hospitals, we get ingrained into their workflows and we're hard to rip out. We can do a lot of things that other companies can't do that would like to come into the space just because of the years and years of legacy expertise that we have in our solutions. So that bodes well for us, and that's why we tend to -- when it comes to the very large IDNs, we tend to win those businesses.

We know the best practices with how they need to do their critical communications. We know which solutions they use. It's no secret we focus around their EHR of choice, there is no focus. Our top 2 PBXs that we interface are the top 2 PBXs that are used in the health care industry. And then with the alerting and with the mobile product, we can kind of tie it all together, so the right person gets the right message on the right device at the right time. We can pull in the on-call schedule. We just -- we really empower the codes, the code calls. We really empower a lot of workflows that the big institutions need to function. That's why we get those.

[Operator Instructions] We have reached the end of the question-and-answer session. I would like to turn the floor back over to Vince Kelly for closing comments.

Thank you, operator. And ladies and gentlemen, thank you for your participation and your support. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful evening. Bye.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings and welcome to the Spok Holdings First Quarter 2026 Earnings Results Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Al Galgano, Investor Relations. Please go ahead.

Hello, everyone, and welcome. Today, I am joined by Vince Kelly, Chief Executive Officer; and Michael Wallace, Chief Operating Officer and Chief Financial Officer. After a brief presentation by management, we will open up the call to your questions.

But before we begin, I want to remind everyone that today's conference call may include forward-looking statements that are subject to risks and uncertainties relating to Spok's future financial and business performance. Such statements may include estimates of revenue, expenses and income as well as other predictive statements or plans, which are dependent upon future events or conditions. These statements represent the company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results.

Spok's actual results could differ materially from those anticipated in these forward-looking statements. Although these statements are based upon assumptions that the company believes to be reasonable, they are subject to risks and uncertainties. Please review the Risk Factors section relating to our operations and the business environment, which are contained in our first quarter 2026 Form 10-Q and related documents, which will be filed with the Securities and Exchange Commission. Please note that Spok assumes no obligation to update any forward-looking statements from past or present filings and conference calls.

With that, I'll turn the call over to Vince.

Good afternoon. Thank you for joining us for our first quarter 2026 earnings call. Let me preface my comments by saying that Spok remains true to our mission and I believe with the actions taken a couple of weeks ago, we have positioned Spok for even greater success in the future. Since our strategic pivot we announced about 4 years ago now, our focus has not changed. That is to increase our software revenue, generate cash and return capital to our stockholders. In the first quarter, we were able to deliver a nearly 57% year-over-year increase in software managed services revenue as well as a continued increase in our wireless average revenue per unit.

Additionally, we generated nearly $2 million of net income and $5.3 million of adjusted EBITDA. Our ability to generate net income in various economic environments results from the financial platform our team has created with over 80% of our revenues generated from reoccurring revenue streams, including software maintenance and subscription contracts, managed services and wireless page revenue and a debt-free balance sheet. We can provide a consistent and predictable revenue stream. We believe that Spok has struck an excellent balance between making the necessary investments to fuel future growth while continuing to generate cash flow and returning capital to our stockholders.

While driving our top line, we also continue to focus on expense management as operating expense levels in the first quarter were essentially flat to the prior year. Additionally, a couple of weeks ago, we announced a strategic realignment to create even more efficiency and take advantage of artificial intelligence technologies to drive increased profitability and cash flow. However, it's important to note that our focus on expense management as one of the key drivers to generate increased cash flow does not come at the expense of our product platform as we continue to make the necessary investments in product development, sales and marketing, customer support and professional services to support the growth of our Spok Care Connect solution offerings.

In the first quarter of 2026, Spok invested almost $3.5 million in product research and development, a nearly 12% increase from 2025. Investments such as these are critical to creating a best-in-class product platform and to maintaining our solid industry reputation. And while software sales are always going to be lumpy quarter-to-quarter, our investments are already paying dividends. The software operations bookings for the second quarter were off to an excellent start and have already exceeded the levels we saw in the entirety of the first quarter. I look forward to sharing those results with you when we report our second quarter performance in July.

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 the full year. I'll start by reviewing the agenda for today's call. The order will be as follows. First, I'll provide an overview of our strategic realignment announcement and capital allocation strategy. Next, Mike Wallace, our COO and CFO, will provide a review of our first quarter sales performance and review our financial highlights, including Spok's financial expectations for '26. Finally, I'll conclude our prepared remarks with a brief wrap-up before opening the call to your questions.

As you may have seen, couple of weeks ago we announced a strategic realignment designed to reduce costs and sharpen operational focus across our go-to-market functions. These actions will enable us to allocate resources toward continued investment in our Care Connect suite and artificial intelligence initiatives while sustaining our commitment to returning cash to stockholders. After extensive analysis by our management team and advisers and with the support of our Board, we are confident that this strategic shift will create significant value for stockholders while continuing our quarterly dividend, which currently represents a yield in excess of 10%.

As part of the plan to realign and streamline Spok's leadership structure, we're reducing our workforce by approximately 10%. As a result, this will reduce headcount-related expenses excluding stock-based compensation and other operating expenses by over $6 million on an annualized basis. Related to this reduction, of course we estimate that we will incur restructuring charges, excluding stock-based compensation, of approximately $1.6 million to $2 million. These charges will primarily be taken in the second and third quarters of '26. We expect that the restructuring charges will be substantially completed by the third quarter.

While any reduction of our leadership team and employee base is a difficult decision, we believe these reductions will help us continue to drive productivity and efficiency, maintain profitability and streamline our organizational structure. This includes implementing artificial intelligence technologies to further optimize our processes and workflows both internally and externally. As part of this realignment, we are consolidating our executive team for efficiency. Michael Wallace, our Chief Operating Officer, will take on the additional role of Chief Financial Officer.

As you know, Mike has been with Spok since 2017 and has served as the company's Chief Financial Officer from 2017 to 2022. So we're able to maintain continuity in our management structure. We believe that the announced strategic realignment was the right thing to do in order to sustain our mission. We are firmly committed to maintaining profitability levels while returning value to our stockholders. Before I turn the call over to Mike to review our sales and financial performance, let me briefly summarize the goals that support our critical and important mission.

Our strategic goal is simple: run the business for profitable growth, generate cash flow and return that capital to stockholders. Spok has a proud legacy of creating stockholder value and returning capital through free cash flow generation and we intend to continue this track record. Our dividend level represents a significant yield for our stockholders and we are proud of our legacy there and our ability and commitment to continue funding it. Since the beginning of our strategic pivot, which started 4 years ago, Spok has returned approximately $112.3 million or more than $5.38 per share to our stockholders in the form of our regular quarterly dividend.

In fact since we created this company in 2004, Spok has returned more than $735 million to our stockholders either through our regular quarterly dividend, special dividends or share repurchases. In the first quarter of 2026, our history of returning cash to our stockholders continued as we returned $8 million in dividends. Our dividend level in the first quarter is typically a little higher than the out quarters of the year due to vesting of our incentive plan grants. Dividend levels in the following 3 quarters will total approximately $6.5 million per quarter.

So we expect to pay dividends in excess of $27 million in 2026. Spok remains committed to our dividend policy and returning capital to our stockholders. When you take into consideration our current cash balance, distribution to stockholders, share repurchases, debt repayments and acquisitions; Spok has now generated nearly $1.1 billion of free cash flow since our creation in 2004 and returned the majority of it to our shareholders. Our focus on maximizing cash over the long term supports the 4 major tenets of our strategy.

Those are: number one, continued investment in our wireless and software solutions; number two, growing our revenue base; number three, disciplined expense management; and number four, a stockholder-friendly capital allocation plan. Going forward, we believe our extensive experience, operating an established communication solutions and world-class customer base will continue to create significant value for our stockholders.

Now I'll turn the call over to our Chief Operating Officer and Chief Financial Officer, Mike Wallace, who will talk about our operational accomplishments and financial performance. Mike?

Thanks, Vince, and good afternoon. First, I want to thank you and our Board of Directors for trusting me with the additional responsibilities of Chief Financial Officer. Having been a part of the Spok team for the past 9 years, including serving as the company's Chief Financial Officer for the first 5 years of my tenure, I understand the tremendous potential of Spok's best-in-class product platform. In assuming the Chief Financial Officer's responsibilities, I will continue to remain laser-focused on creating additional efficiencies within our operating platform.

Next, I'd like to thank you all for joining us for our first quarter conference call. Amidst all the progress and continuing to create the solid financial platform and stockholder-friendly capital allocation strategy, I want to reiterate that we remain true to our mission of being a global leader in health care communications. Simply put, we deliver clinical information to care teams when and where it matters most to improve patient outcomes as Spok enables smarter, faster clinical communications for our customers.

And importantly, we continue to maintain our reputation as a thought leader in the health care communications space as we continue to see customer satisfaction ratings at very high levels. In the first quarter of 2026, we were able to execute 17 6-figure customer contracts, up from the prior quarter, with one of those customer contracts being a new logo agreement. As Vince mentioned, we are pleased with our very strong start to the second quarter and regaining the momentum we saw at the end of last year.

As I typically do, I'd like to highlight a few of the customer agreements from the first quarter. One with a well-known regional community-based health system in the Mid-Atlantic, one with a world-renowned leader in patient care also located in the Mid-Atlantic and a third with a health care organization in the Pacific Northwest. We are excited to continue our partnership with a health system that has been a Spok customer for more than 20 years. They are an approximately 600-bed health system managing high patient volumes annually, including nearly 100,000 emergency department visits and tens of thousands of admissions and emergency responses.

This customer uses the Spok Care Connect platform to initiate nearly 100,000 codes annually and provide highly specialized physician answering services as part of their overall patient care endeavors. For this engagement, they will be adding additional licenses for business continuity and Spok Care Connect reporting and dashboards for comprehensive data reporting and analytics. Spok also secured another multiyear commitment from a public academic health center comprising a system of hospitals and clinics serving patients across a broad multistate region that serves more than 300,000 unique patients annually.

They use the Spok Care Connect platform to manage nearly 800,000 operator calls annually, dispatching over 6 million messages or pages per year and oversee nearly 600 on-call groups. This multiyear engagement includes upgrade services, maintenance and support of their Spok Smart Suite solutions that include Smart Console, Smart Web, e.Notify and Spok Mobile usage for the organization's 4,000-plus licenses. The third customer agreement is with a prestigious health system that provides care and life-saving services to more than 430,000 ED and inpatients annually.

This organization manages over 2 million operator calls utilizing Spok console from a centralized hybrid call center. This 3-year managed services commitment extends our existing partnership, expanding their Spok console platform to include integrated Epic messaging, Spok Care Connect reporting and dashboards and 3 additional years of support coupled with our value-added services, including data integrity. These first quarter contracts underscore our momentum and continued commitment to delivering high-value communication solutions that drive meaningful outcomes for our customers.

I would now like to take a few minutes and provide a recap of our first quarter 2026 financial performance, which we reported earlier today. As always, I encourage you to review our 10-Q when filed as it includes significantly more information about our business operations and financial performance than we will cover on this call. Turning to our income statement. In the first quarter of 2026, GAAP net income totaled $2 million or $0.09 per diluted share, down from net income of $5.2 million or $0.25 per diluted share in 2025 driven primarily by the timing of software operations bookings and related license revenue as Vince mentioned earlier.

With respect to wireless revenue, the year-over-year revenue decline from lower units in service was partially offset by previously taken pricing actions over the course of the last couple of years. Product sales also continued to augment any losses related to units in service. Average revenue per unit or ARPU, which saw growth of $0.05 on a year-over-year basis, continues to be our primary tool in partially offsetting revenue decline from unit loss. Much of this increase was driven by previously discussed pricing actions and to a lesser extent, incremental pass-through taxes and fees as well as an increased mix of our GenA pagers in use.

Turning to software revenue for the quarter. License and hardware revenue totaled $1.5 million compared to $3 million in the same period of 2025 as a result of lower overall software operations bookings, specifically license bookings, which impact revenue immediately. But as noted previously in our comments, we have seen a very strong start to our second quarter operations bookings that already exceed the entirety of our performance in the first quarter. Additionally, the continued solid performance of professional services revenue albeit slightly lower than last year due to the timing of some higher dollar value projects worked and a onetime benefit we saw in the first quarter of last year was a key driver in the first quarter software revenue levels.

Specifically, managed professional services revenue of $2.1 million in the first quarter was up nearly 57% from revenue in the prior year. And we continue to see solid performance in resource utilization, delivering on our internal initiatives to better align total resources with our backlog and drive a higher rate of margin and net cash flow. At present, we believe we have greatly achieved our optimal operating efficiency in professional services relative to our current product state. We will continue to align total resources with our backlog and we should continue to see benefit from managed services.

First quarter adjusted operating expenses; which excludes depreciation, amortization and accretion and severance and restructuring cost; totaled $29.5 million, up slightly from $29.4 million in the prior year. Cost of revenue increased primarily due to the related hiring to support the services revenue I noted previously partially offset by lower equipment and software costs as a result of lower operations bookings. 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 of cost reduction in relationship to declining wireless revenues.

Selling and marketing costs decreased nearly 9% from the prior year reflecting lower commissions and lower trade show and event expenses. And year-over-year general and administrative costs also declined by 2%. Finally, I'd like to address our cash balances, which were $17.1 million at the end of the first quarter. Consistent with prior years, our cash balances declined in the first quarter as a result of typical working capital needs that occur in the first quarter each year, including items such as the payment of our short-term incentive plans and prepaid annual renewals of technology contracts.

Additionally, first quarter cash flow financing activities are typically higher than in the 3 remaining quarters of the year reflecting payments on the company's long-term incentive plans. However, we anticipate cash balances will generally grow throughout the remainder of the year given those needs are behind us with our expectation of driving significant free cash flow given our adjusted EBITDA guidance for the year. So moving on to guidance for 2026. We believe that at this point in the year, it is more prudent to reiterate our guidance estimates for revenue and adjusted EBITDA.

We believe that future guidance estimates could be buoyed by rebounding bookings levels and cost-cutting initiatives, both previously discussed, but we need to get more visibility before we commit to any of those impacts. In 2026, we expect total revenue to range from $136 million to $143 million. The midpoint of our guidance reflects consolidated revenue generally in line with 2025 results, but with a higher mix of software revenue while the high end of our guidance reflects a nearly 2.3% annual growth rate.

We expect wireless revenue to range from $68 million to $71 million and software revenue to range from $68 million to $72 million in 2026. The midpoint of software revenue guidance implying growth of more than 4% and more than 7% at the high end of the guidance range. Lastly, our adjusted EBITDA guidance for 2026 is $27.5 million to $32.5 million. The midpoint reflects improvement over 2025 while the high end represents over 12% growth, largely expected to be driven by a greater mix of higher-margin software license bookings and benefits related to the strategic realignment cost reductions announced a couple of weeks ago.

With that said, I'll now turn the call back over to Vince.

Thanks, Mike. Before we open the call up to your questions, let me reiterate our focus on the opportunity in front of us in critical communications. From a business configuration and strategy perspective, we believe we're strongly positioned to grow our franchise while returning capital to our shareholders. We have a long-term organic growth engine in Spok Care Connect. We maintain a source of strong recurring revenue in our wireless service line. We run the largest paging offering in the world integrated with our software operations and we have enhanced our paging platform and user devices to serve our core health care customer base.

We believe with these 2 assets going for us, our best financial results are ahead of us and Spok's future is bright. I'd like to take this opportunity to thank our stockholders for their continued support and want to assure you that our primary focus remains on generating cash and increasing stockholder value. We're committed to our current dividend and capital allocation policy. We started the year off strong and we very much look forward to speaking with you again when we report our Q2 results in late July.

That concludes our prepared remarks. So at this point, I'll ask the operator to open the call for your questions. We'd ask you to limit your initial questions to 1 and a follow-up and after that, we'll take additional questions as time allows. Operator?

[Operator Instructions]

There are no questions at this time. I would like to hand the floor back over to management for any closing remarks.

Okay. Everyone, thanks very much for joining us on our conference call today. We really look forward to speaking with you in late July when we report our second quarter earnings. Everyone, have a great evening.

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

Greetings, and welcome to the Spok Holdings, Inc. Q4 2025 Earnings Results Conference Call.

[Operator Instructions]

Please note, this conference is being recorded. I will now turn the conference over to your host, Al Galgano. Please go ahead.

Hello, everyone, and welcome. I am joined today by Vince Kelly, Chief Executive Officer; Michael Wallace, Chief Operating Officer; and Calvin Rice, Chief Financial Officer. After a brief presentation by management, we will open up the call to your questions. I want to remind everyone that today's conference call may include forward-looking statements that are subject to risks and uncertainties relating to Spok's future financial and business performance. Such statements may include estimates of revenue, expenses and income as well as other predictive statements or plans, which are dependent upon future events or conditions. These statements represent the company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results.

Spok's actual results could differ materially from those anticipated in these forward-looking statements. Although these statements are based upon assumptions that the company believes to be reasonable, they are subject to risks and uncertainties. Please review the Risk Factors section relating to our operations and the business environment, which are contained in our 2025 Form 10-K and related documents, which will be filed with the Securities and Exchange Commission. Please note that Spok assumes no obligation to update any forward-looking statements from past or present filings and conference calls.

With that, I'll turn the call over to Vince.

Good afternoon. Thank you for joining us for our fourth quarter 2025 earnings call. Let me preface my comments by saying how proud I continue to be of our Spok team and our ability to end the year strong and regain the positive momentum we saw in the first half of 2025. We accomplished this while staying true to our mission, and I'm very excited by our prospects and outlook. Since the strategic pivot we announced about 4 years ago now, our focus has not changed. That is to grow our software revenue, generate cash and return capital to our stockholders. In 2025, for the fourth consecutive year, we achieved that goal. We returned $27.3 million of cash to our stockholders while generating $29 million of adjusted EBITDA. We were also successful in our stated goal of growing software revenue and managing anticipated wireless declines.

Coupled with the continued focus on expense management, Spok generated $15.9 million or $0.75 per diluted share of net income for the full year of 2025, and we accomplished this while responsibly investing in our product and service offerings. This focus struck an excellent balance between making the necessary investments to fuel future growth while continuing to generate cash flow and returning capital to our stockholders. Today, we'll share with you an update on how our strategic business plan is progressing in support of our goals as well as our financial results for the fourth quarter and full year.

I'll start by reviewing the agenda for today's call. The order will be as follows: First, we will review our strategic focus and goals. Next, Mike Wallace, our COO, will provide a review of our sales performance. Then Calvin Rice, our CFO, will review our fourth quarter and full year 2025 financial highlights as well as a more detailed look at our financial expectations for 2026, and I'll then conclude our prepared remarks with a brief wrap-up. Finally, we'll open the call up to your questions.

In 2025, our team achieved significant accomplishments regarding software revenue growth, particularly in our professional services business and specifically as it relates to our managed services offering, managing wireless net churn and related revenue declines, maintaining solid profitability levels, continued expense management, maximizing cash flow generation, progress on our road map and development efforts, augmenting our sales team, generating 6- and 7-figure customer contracts and multiyear engagements, GenA pager placements, maintenance contract bookings and retention and enhancing our industry reputation with continued leadership recognition.

In the fourth quarter of 2025, Spok was able to generate a 14% year-over-year and 83% sequential increase in software operations bookings. As I mentioned previously, I'm very proud of our ability to regain momentum we saw in the first half of 2025. We are very happy with our ability to reverse the headwinds that we saw in Q3 bookings and believe that we will grow total bookings in 2026 from prior year levels with this year's focus on accelerating our license sales and maintaining growth in professional services.

Switching to operating expenses. While driving our top line, we also continued our focus on expense management as operating expense levels for the year increased at a slower pace than year-over-year revenue growth. 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 as we continue to make the necessary investments in product development, sales and marketing, customer support and professional services to support the growth of our Spok Care Connect and wireless solutions. In 2025, Spok invested more than $12 million in product research and development, a nearly 5% increase from 2024. Investments such as these are critical to creating a best-of-breed product platform and maintaining our solid industry reputation.

In 2025, Spok continued to build upon our premier industry reputation. We started the year with our participation in both the ViVE 25 and HIMSS 25 conferences, where we showcased our top-rated clinical communications platform, Spok Care Connect. At both events, Spok experts demonstrated how more efficient communication across contact centers, care teams and IT teams help health care organizations improve productivity and patient outcomes. Our presence at these industry-leading conferences was a true success, both in terms of the excitement level generated by Spok's products and the number of new sales leads we were able to add to our pipeline. We are excited to have a presence again at ViVE 26 this week and look forward to attending HIMSS 26 in March. But don't just take my word on how Spok continues to improve its reputation.

In 2025, I believe that there were 2 key proof points that underscore our premier market position as evidenced by: number one, earning top honors for the eighth consecutive year in a survey of health care industry clients by Black Book Market Research on top-rated secure messaging and clinical communication solutions. For the second time, Spok was also recognized as the leading performer of enterprise messaging and critical alert management solutions. And as you may have seen earlier this month, Spok received top honors for the ninth consecutive year in this survey. And number two, also in the 2025 U.S. News & World Report Best Hospitals Honor roll, 18 of the 20 adult hospitals and 9 of the 10 children's hospitals named to the list are Spok customers.

Accolades such as these do not come if you don't have a best-in-class product offering and solid reputation with your customers. Spok has an amazing blue-chip customer base, and many of those customers have been with us for decades and continue to buy from us. In short, we executed at a high level in 2025, and we are encouraged about the future as we start 2026. Based on our performance in 2025 and the momentum generated in the fourth quarter, we provided guidance estimates for revenue and adjusted EBITDA generation in 2026. Calvin will go into more detail regarding expectations later in the call.

Before I turn the call over to Mike to review our sales performance, let me briefly summarize the goals that support our critical and important mission. Our strategic goal is simple, run the business profitably, generate cash flow and return that capital to stockholders. Spok has a proud legacy of creating stockholder value through free cash flow generation, and we intend to continue this track record. Since the beginning of our strategic pivot, which started almost 4 years ago, Spok has returned approximately $104.3 million or $5 per share to our stockholders in the form of our regular quarterly dividend. In fact, since we created this company in 2004, Spok has returned nearly $730 million to our stockholders either through our regular quarterly dividend, special dividends or share repurchases.

In the fourth quarter of 2025, our history of returning cash to our stockholders continued as we returned $6.4 million in dividends. This continues our legacy of returning capital to shareholders since becoming a public company. Again, we expect to pay dividends in excess of $27 million in 2026. Spok remains committed to our dividend policy and returning capital to our stockholders. When you take into consideration our current cash balance, distribution to stockholders, share repurchases, debt repayments and acquisitions, Spok has now generated nearly $1.1 billion of free cash flow since our creation in 2004.

Our focus on maximizing cash over the long term supports the 4 major tenets of our strategy: number one, continued investment in our wireless and software solutions; number two, growing our revenue base; number three, disciplined expense management; and number four, a stockholder-friendly capital allocation plan. Going forward, we believe our extensive experience operating our established communication solutions and world-class customer base will continue to create significant value for stockholders.

Now I'll turn the call over to our President and Chief Operating Officer, Michael Wallace, who will talk about our operational accomplishments. Michael?

Thanks, Vince, and good afternoon. Thank you all for joining us for what we believe was a solid quarter and full year of results from Spok. We are pleased to report that we have continued to execute on our business plan. And in 2025, as Vince noted, we generated GAAP net income of $15.9 million or $0.75 per diluted share, up from the prior year results. Importantly, we achieved this bottom line performance while continuing to generate operations bookings levels in excess of $30 million for the third consecutive year as well as maintaining our professional services and maintenance backlog levels, which totaled more than $58 million. Amidst all the progress in continuing to create the solid financial platform and stockholder-friendly capital allocation strategy, we remain true to our mission of being a global leader in health care communications.

Simply put, we deliver clinical information to care teams when and where it matters most to improve patient outcomes as Spok enables smarter, faster clinical communications for our customers. And importantly, we continue to maintain our reputation as a thought leader in the health care communications space as we continue to see customer satisfaction ratings at very high levels. 2025 was a frustrating year with regards to our software operations bookings as we saw solid momentum in the first half of the year, offset by headwinds that we ran into in the third quarter. However, we regained that momentum in the fourth quarter, seeing 14% year-over-year and 83% sequential growth in bookings. In 2025, we were able to execute 73 6- and 7-figure customer contracts. And in the fourth quarter, we saw a more than 50% year-over-year growth in the average customer contract size. Additionally, in 2025, we saw a 47% increase in license bookings related to multiyear engagements with customers.

We believe this performance gives you a good indication of the momentum that our sales team is generating in the marketplace and the confidence we have as we work our way through 2026 with a growing sales pipeline, both in terms of size and quality. Supporting our achievements in the fourth quarter were 14 6- and 7-figure contracts that we were able to close. Our achievements in the fourth quarter are clearly represented by 3 of those customer contracts. The first being a private not-for-profit health care organization located in the Southeast; the second being a new partnership with a leading academic health system in the Northeast and the final contract with a large integrated nonprofit health care enterprise in the Mid-Atlantic serving patients across the United States.

Our first outstanding contract from last quarter is a customer in the Southeast who has been with Spok for almost 25 years. This customer is experiencing sustained growth driven by strategic acquisitions, new facility expansions and continued investments in its health care initiatives. To support this growth, we deployed Spok Smart Suite across 5 additional hospitals and executed a 3-year managed services agreement, providing recurring revenue and long-term engagement. This includes unlimited software upgrades, enterprise reporting, Spok Academy, our 24/7 on-demand self-paced learning platform, Spok Messenger, Communication dashboards and several of our value-added services.

These types of contracts where Spok is leveraging its footprint inside an existing premier customer that is growing through consolidation is critical as Spok maintains an over 50% market share of large hospitals, identified as those with more than 600 beds and are responsible for most of the industry's consolidation.

Spok also secured a new partnership with a well-known hospital that also serves as the only Level 1 trauma center in their geographic area. They are a 650-bed academic facility serving over 2 million patients annually and growing, resulting in their transformation into a regional health care system providing excellent patient care. As part of this engagement, they will implement Spok Smart Suite console and web, Spok Messenger for Code Blue automation, Spok Care Connect reporting and dashboards and several of our value-added services. This health system is also the newest partner of our premium support services team. Through this new partnership, Spok software will support critical patient care communications in areas such as reducing the number of applications being utilized by various stakeholders, automating processes and functionality, along with comprehensive data reporting and analytics.

Lastly, we secured another outstanding contract with a Spok customer we have done business with for decades. This Mid-Atlantic-based health care provider with an international footprint employs over 100,000 people and delivers care across more than 40 academic, community and specialty hospitals. They facilitate over 3.2 million pages and messages annually utilizing Spok Smart Suite from a centralized hybrid call center. This multiyear engagement consisting of Spok Smart Suite and web upgrades support this organization's interoperability needs that are key to system-wide standardization, all in parallel with the rollout of our new Spok Care Connect reporting and dashboards, Spok Academy and Consulting as a Service offering. This contract also includes a 5-year managed services commitment that will extend our existing partnership and continue to drive value in critical communication services that are core to this customer's mission and growth.

Finally, an additional site acquired through M&A will be integrated into their premium support service, further expanding the value and support that our customers expect. Looking ahead, expansion of their Spok Smart Suite consoles to additional sites is already under consideration. Overall, fourth quarter deal activity underscores steady execution and reinforces our focus on opportunities that align with our strategic and financial objectives.

With that said, I'd like to turn the call over to our Chief Financial Officer, Calvin Rice. Calvin?

Thanks, Mike, and good afternoon, everyone. I would now like to take a few minutes and provide a recap of our fourth quarter and full year 2025 financial performance, which we reported earlier today. As always, I encourage you to review our 10-K when filed as it includes significantly more information about our business operations and financial performance than we will cover on this call.

Turning to our income statement. In 2025, GAAP net income totaled $15.9 million or $0.75 per diluted share, up from net income of $15 million or $0.73 per diluted share in 2024. In 2025, total GAAP revenue was $139.7 million, up from revenue of $137.7 million in 2024. Wireless revenue of $72.5 million for the year was down from revenue of $73.5 million in the prior year. However, this was more than offset by growth in software revenue to $67.2 million in 2025. Year-over-year growth in software revenue was driven by a nearly 24% increase in professional services revenue and the continued success of our managed services offering. With respect to wireless revenue, the deceleration of revenue decline was primarily driven by pricing actions taken on unreturned pager equipment earlier in 2025. While net unit loss was relatively flat from 2024, product sales, of which unreturned pager equipment fees comprised more than 80% of the related revenue increased by $1.4 million or 54%.

Average revenue per unit, or ARPU, which saw growth of $0.23 on a year-over-year basis, continues to be our primary tool in combating revenue decline from unit loss. Much of this increase was driven by previous pricing actions and to a lesser extent, incremental pass-through taxes and fees. Net unit churn in the fourth quarter improved 12 basis points to 1.3% from the prior quarter, and we believe that we can continue to manage net unit churn to the mid-single-digit range in 2026. While we expect demand for our wireless services will continue to decline on a secular basis, as reflected in declining pager units in service, we remain focused on pricing and other initiatives like the GenA pager with over 72,000 units or roughly 11% of total units in service at the end of 2025 to further offset revenue lost through pager unit decline. This is further reflected in our updated financial guidance, which I will walk through shortly.

Turning to software revenue in 2025. License and hardware revenue of $8.6 million was down from $9 million in 2024. Maintenance and subscription revenue totaled $36.4 million, down 2.1% from the prior year. 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. As previously mentioned, growth in professional services revenue was a key driver in the annual growth of software revenue in 2025. Professional services revenue of $22.1 million in 2025 was up 23.7% from revenue of $17.9 million in 2024. We continue to see sustained improvement in resource utilization, delivering on our internal initiatives to better align total resources with our backlog and drive a higher rate of margin and net cash flow.

At present, we believe we have largely reached our optimal operating efficiency in professional services relative to our current product state. We will continue to align total resources with our backlog, and we should continue to see benefit from managed services. However, bookings growth will be the primary factor underlying continued growth of our services revenue. As we work towards developing and delivering a modernized solution, we anticipate a reduction in the complexity of our implementations, which is likely to create additional efficiencies in the future. Managed services revenue totaled $6.6 million or nearly 30% of professional services revenue in 2025. This is up from $3.3 million or 18% of professional services revenue in 2024. We remain optimistic by the prospects of this service offering and are thrilled by the success of this service offering thus far.

Before getting into operating expenses, I want to take a minute to highlight a reclassification exercise that we undertook at the end of 2025. Historically, we have included certain IT software and personnel costs within general and administrative that we now feel are better reflected in their functional groups. All prior period financials have been restated to conform to current period presentation and additional information regarding these costs are included within the footnotes of the 2025 Form 10-K once filed. Full year 2025 adjusted operating expenses, which excludes depreciation, amortization and accretion and severance and restructuring costs totaled $116.1 million, up 2.4% from the prior year. Cost of revenue increased primarily due to the aforementioned increase in professional services revenue 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 of cost reduction in relationship to declining wireless revenues. Selling and marketing costs increased 9.1% from the prior year, primarily driven by higher commissions on higher revenue, with 2024 expenses having also benefited from a one-time item of approximately $0.9 million when we began to amortize a subset of our commission expense that had historically been expensed as incurred.

General and administrative costs increased 2%, largely stemming from legal costs incurred in non-core business activities. Excluding these costs, general and administrative costs were generally in line with 2024. Adjusted EBITDA was $29 million in 2025, in line with 2024. Spok continues to generate healthy levels of adjusted EBITDA at a nearly 21% margin in 2025. 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. Finally, we ended 2025 with $25.3 million in cash and cash equivalents, which grew from $21.4 million at the end of the third quarter.

Moving on to guidance for 2026. 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. In 2026, we expect total revenue to range from $136 million to $143 million. The midpoint of our guidance reflects consolidated revenue generally in line with 2025 results, but with a higher mix of software revenue, while the high end of our guidance reflects a nearly 2.3% annual growth. We expect wireless revenue to range from $68 million to $71 million and software revenue to range from $68 million to $72 million in 2026. The midpoint of software revenue guidance implying growth of more than 4% and more than 7% at the high end of the guidance range.

Additionally, the midpoint for each revenue type would indicate the first time in the company's history whereby software revenue would be greater than wireless revenue. Lastly, our adjusted EBITDA guidance for 2026 is $27.5 million to $32.5 million. The midpoint reflects improvement over 2025, while the high end represents over 12% growth, largely expected to be driven by a greater mix of higher-margin software license bookings. With that said, I will now turn the call back over to Vince.

Thank you, Calvin. Before we open up the call to your questions, let me say again how proud I am of our entire Spok team in regaining the momentum that we saw in the first half of 2025. It's their efforts and dedication, which provides confidence in our outlook for 2026. We are focused on the opportunity in front of us in clinical communications. From a business configuration and strategy perspective, we believe we are strongly positioned to grow our franchise while returning capital to stockholders.

We have a long-term organic growth engine in Spok Care Connect. We maintain a strong source of recurring revenue in our wireless service line. We run the largest paging offering in the world integrated with our software operations. We have enhanced our paging platform and user devices to serve our core health care customer base. We believe these 2 assets going for us, our best financial results are ahead of us and Spok's future is bright. I'd like to take this opportunity to thank our stockholders for their continued support and want to assure you that our primary focus remains on generating cash and increasing stockholder value. We are committed to our current dividend and capital allocation policy.

I believe that today, we've provided you an appreciation for some of the great things that are happening at Spok and the market opportunities that lay ahead of us. While we've shared our initial guidance with you for 2026, we will work to exceed those expectations and update you each quarter. We started the year off strong, and we very much look forward to speaking with you again in 2 months when we report our Q1 results in late April.

That concludes our prepared remarks. So at this point, I'll ask the operator to open the call up for your questions. We'd ask you to limit your initial questions to one and a follow-up. And after that, we'll take additional questions as time allows. Operator?

[Operator Instructions]

And our first question will come from Anderson Schock with B. Riley Securities.

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

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

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

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

[Operator Instructions]

We'll go next to David Wright with Henry Investment Trust.

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

Yes. I think there's 2 things to look at right now. One is AI with respect to our own internal functioning and our R&D efforts in terms of our coding efficiency, et cetera, and just making us to spend less and get more. And that's something we're well down the path on with our internal teams, getting the training, evaluating how we do business and all those things that you read about on a daily basis in the financial blogs and newspaper. With respect to our customers, our primary functionality where we have the majority of large hospitals in the United States as customers, many of them for decades, our primary functionality is the operator console where they're often taking inbound calls that sometimes are life and death type situations, code calls, et cetera.

We're working with several partners right now to incorporate AI into that functionality, and we believe we'll do so this year. But we want to be very careful with respect to the feedback we're getting from our customers because they're not going to take -- you have a large health care system and they have 1 or 2 operators on call in the middle of the night and there's emergencies being called in. They're not at a point where they feel comfortable turning that type of functionality over to an AI operator. So I think what you'll see more likely is some type of helper for those operators to make them more efficient and more automated.

And I think one place that will really help them is with respect to training up new staff because it can often take one of these hospitals up to 3 months to train staff where they really feel like they could leave them in a situation where they can handle those types of life and death calls. So I think there's great opportunity there. And what we've seen is the same thing you're seeing every 3 months that seems to be an order of magnitude leap in terms of what this stuff can do. So we're looking very closely at these. We've contracted with a couple of the AI companies that are household names right now in terms of utilizing their software and our road map process.

And there's going to be more to come on that. But it's something we want to be very careful as we go to implement because you know sometimes these large language models can make a mistake, and we're in a business of saving time, connecting the right people to the right device at the right time and saving lives.

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

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

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

The world for '26 in terms of our vision matches the guidance we just gave. We are running a tight rope balance between -- we're a public company that has a free cash flow stated strategy. So we're generating that cash flow on a quarterly basis so we can fund that dividend and have a little bit left over. Last year, we invested about $12 million in our R&D process. And a big portion of that was going toward new platform, new capability, new functionality, including this AI area. And then a big portion was going to support the legacy software solutions that we offer.

Going forward, we're shifting that investment more toward what's coming new and less on the legacy. And so what you would expect to see in [indiscernible] and beyond is higher growth than was implied in our 2026 guidance [indiscernible] investment. But again, like in a perfect world, if we were, say, a private company, not a public company, we might be a lot more aggressive in terms of how we made those investments in the new platform because we wouldn't have to focus on [indiscernible] the dividend. But we think it's important in this software [indiscernible] to reward the shareholders and shareholders on the way as we go. And that's kind of why our strategy is balanced the way it is.

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

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

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

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

Hello, everyone, and welcome to Spok Holdings' Third Quarter 2025 Earnings Call. I am joined by Vince Kelly, Chief Executive Officer; Mike Wallace, Chief Operating Officer; and Calvin Rice, Chief Financial Officer.

I want to remind everyone that today's conference call may include forward-looking statements that are subject to risks and uncertainties relating to Spok's future financial and business performance. Such statements may include estimates of revenue, expenses and income as well as other predictive statements or plans, which are dependent upon future events or conditions. These statements represent the company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results.

Spok's actual results could differ materially from those anticipated in these forward-looking statements. Although these statements are based upon assumptions that the company believes to be reasonable, they are subject to risks and uncertainties. Please review the Risk Factors section relating to our operations and the business environment, which are contained in our third quarter 2025 Form 10-Q and related documents filed with the Securities and Exchange Commission. Please note that Spok assumes no obligation to update any forward-looking statements from past or present filings and conference calls.

With that, I'll turn the call over to Vince.

Thank you, Al. Good afternoon, everyone, and thank you for joining us for our third quarter 2025 earnings call. I'm proud of the performance our team was able to deliver in the third quarter, especially after the exceptional performance in the second quarter, where we saw several new customer contracts get accelerated into that period and despite the seasonal headwinds we typically face in the slower summer months.

On a year-to-date basis, we continue to make progress in key performance areas, including net income, adjusted EBITDA and cash generation, wireless ARPU trends, software revenue growth and gross backlog levels. Based on our solid performance through the first 9 months of the year and our visibility into our very robust product sales pipeline, we are reaffirming our guidance. We have advantages over the competition in our core healthcare software contact center space, including long-term and deep relationships with the top healthcare systems in the nation who continue to purchase from us on a regular basis, offering customers an integrated platform as opposed to multiple point solutions and continuing to invest in and enhance our platforms consistent with what our customers are requesting.

Spok is viewed as an indispensable partner by many of our customers. In other words, they need Spok to efficiently carry out their day-to-day operations. Later in the call, Mike Wallace, our Chief Operating Officer, will lay out for you the product offerings that we have built that we believe will allow us to create significant shareholder value into the future.

Let me also take this opportunity right upfront to remind everyone that our mission remains solidly unchanged. That is, to generate cash and return capital to our stockholders over the long term while responsibly investing in and growing our business. As we've demonstrated through our performance since our strategic pivot more than 3 years ago, we believe we are on a sustainable path to achieving that goal. So today, we'll share with you an update on how our strategic business plan is progressing in support of this goal as well as our financial results for the quarter.

I'll start by reviewing the agenda for today's call. The order will be as follows: we'll begin by providing a review of our company performance for the quarter. I will then turn the call over to Mike Wallace to review some of our quarterly sales and operational highlights as well as give you an overview of our product offering. Then our Chief Financial Officer, Calvin Rice, will review our third quarter financial highlights and financial guidance for 2025. I'll then wrap the call, and we'll take your questions as time allows.

As I said upfront, we're proud of what the Spok team has been able to accomplish through the first 9 months of the year. Year-to-date highlights include strong levels of adjusted EBITDA, which covered our quarterly dividend and capital expenditure requirements; continued sales pipeline growth, providing confidence in our outlook; an increase in cash balances, which we believe hit a low point in the first quarter and will continue to build through the remainder of the year, consistent with past year trends; a 5.2% increase in software revenue that includes triple-digit growth in managed services revenue on a year-over-year basis; improved wireless trends as net unit churn dropped by 20 basis points from the prior quarter; continued expansion of our wireless average revenue per unit, further reflecting the impact of prior pricing actions and sales of our encrypted HIPAA-compliant alphanumeric GenA pager; and continued discipline in expense management as we saw flat year-over-year adjusted operating expense levels while supporting the increase in software sales and making the necessary investments in product research and development to fuel future growth.

In short, we're very pleased with our performance in the first 3 quarters of the year and believe that these results provide a solid springboard for the remainder of the year and for 2026. In the third quarter of 2025, we generated more than $6.6 million of adjusted EBITDA, which more than covered the $6.4 million we returned to our stockholders in the form of dividend distributions. At the same time, we maintained our third quarter research and development investment and believe we are on track to invest approximately $12 million in product research and development in 2025.

We believe this investment will fuel future software revenue growth and that our extensive experience selling and operating our established communication solutions will continue to create significant value for stockholders by maximizing revenue and cash flow generation.

As I mentioned, Spok has a proud legacy of creating stockholder value through free cash flow generation, and we intend to continue this track record. In fact, over the last 20 years, Spok has returned a total of more than $720 million to our stockholders either through our regular quarterly dividend, special dividends or share repurchases.

More recently, since we announced our strategic pivot back in early 2022, Spok has returned nearly $100 million to our stockholders. When you take into consideration our current cash balance, distribution to stockholders, share repurchases, debt repayments and acquisitions since our inception, Spok has generated nearly $1.1 billion of free cash flow. Maximizing cash flow over the long term supports the 3 major tenets of our strategy, which include: number one, continued investment in our wireless and software solutions; number two, continued disciplined expense management; and number three, a stockholder-friendly capital allocation plan.

Before I turn the call over to Mike, let me take a moment to review Spok's significant positive attributes. As a leader in healthcare communications, we maintain the largest paging network in the United States, we control significant and valuable narrowband personal communication spectrum, we have a blue-chip customer base of more than 2,200 hospitals, we have created a large portfolio of intellectual property via strategic R&D investments, and we continue to generate significant cash flow and return to our investors on a quarterly basis.

Spok delivers the critical communication solutions hospitals rely on every day. Our Spok Care Connect suite of solutions integrates with existing workflows in the hospital and enables them to deliver information quickly and securely into the hands of clinicians who need to act on it wherever they are and on whatever device they're using. From the contact center to the patient's bedside, Spok Care Connect provides directory details, on-call schedules, staff preferences, secure texting and a lot more.

We have over 2,200 healthcare facilities as customers, representing the who's who of hospitals in the United States. We have built our solutions over many years and have long-standing valuable customer relationships. And as you probably saw earlier this month, we announced that 9 of the 10 children's hospitals named to the 2025 and 2026 U.S. News & World Report Best Children's Hospitals on a roll, rely on Spok industry-leading secure healthcare communication solutions to support care collaboration and deliver outstanding patient experiences. For over a decade, nearly every hospital named to the Children's Best Hospitals on a roll has relied on Spok solutions.

And this news comes on the heels of our announcement that 18 of the top 20 adult hospitals on the U.S. News & World Report listed also rely on Spok. This industry-leading reputation is coupled with the financial strength that nearly 80% of our revenue is reoccurring in nature, and we are a company with no debt, which provides us with significant flexibility. We're a pioneer in healthcare communications with a best-in-class product offering and have built an industry-leading reputation over the years.

So at this point, I'd like to hand the call over to Mike to outline our sales performance and give you a brief overview of our product offerings. Mike?

Thanks, Vince, and thank you, everyone, for joining us this afternoon. As Vince pointed out, timing issues impacted bookings levels during the third quarter after an exceptionally strong second quarter. However, on a year-to-date basis, we continue to make great progress in a number of key areas. As we discuss each quarter, we continue to build a solid financial platform and stockholder-friendly capital allocation strategy, and we remain true to our mission of being a global leader in healthcare communications.

Today, I'd like to briefly provide you with a little more visibility into Spok's industry-leading product platform and what gives us confidence as we move forward. The cornerstone of that platform is Spok Console, which streamlines operator workflows and ensures rapid emergency response; Spok Messenger, which integrates with clinical systems to deliver alerts and notifications to the right person on the right device; and Spok Mobile, which empowers care teams with secure HIPAA-compliant messaging at their fingertips.

Let's begin with Spok Console, being a secure healthcare contact center solution that serves as the central hub for hospital operator workflows. It gives operators the tools they need to respond promptly to every call and process priority communications. By uniting disparate data systems into a centralized digital directory, Spok Console ensures operators have fast access to physicians, patients and staff and that the right message reaches the right person at the right time.

With a modern user-friendly interface, it integrates with the organization's PBX and leading UCaaS systems. Call center agents manage calls directly through the Console software, guided by intuitive screens and color-coded directories that simplify lookups and streamline communication.

Spok Messenger is an FDA 510(k) cleared clinical alerting management solution that delivers critical information and updates from nurse call systems, patient monitors, clinical systems and other sources directly to the right care team members on their preferred devices, including pagers, smartphones and voice over IP devices. It intelligently routes, prioritizes and escalates alerts based on roles, schedules and rules, helping to reduce delays and improve response time.

Integrating with existing hospital systems, Spok Messenger enables seamless, secure communication across departments and devices. It also delivers near real-time visibility, empowering teams with the transparency they need to track alert delivery and respond with confidence. Designed for reliability and HIPAA compliance, Spok Messenger supports better workflow efficiency, reduces alert fatigue and enhances patient safety.

And lastly, Spok Mobile is a secure HIPAA-compliant messaging app that enables clinicians and staff to collaborate quickly and reliably. It integrates with hospital directory information, clinical monitoring systems and on-call schedules to ensure messages and alerts reach the right person on the right device. Spok Mobile supports message escalation based on established priorities and allows users to send notifications directly to providers' mobile devices as an alarm management option. It also maintains a detailed message history to ensure information is readily available for auditing purposes. With role-based messaging, group communication and delivery confirmation, Spok Mobile streamlines workflows and helps care teams stay focused on patient care.

In short, we are proud of the product platform that the Spok team has built and believe that these offerings will create significant sales opportunities and drive shareholder value into the future.

With that, I'd like to turn the call over to Calvin to review the financials. Calvin?

Thanks, Mike, and good afternoon, everyone. I would now like to take a few minutes and provide a recap of our third quarter 2025 financial performance, which we reported today. I encourage you to review our 10-Q when filed as it includes significantly more information about our business operations and financial performance than we will cover on this call.

Turning to our income statement. In the third quarter of 2025, GAAP net income totaled $3.2 million or $0.15 per diluted share, down from net income of $3.7 million or $0.18 per diluted share in 2024. In the third quarter of 2025, total GAAP revenue was $33.9 million, down from total revenue of $34.9 million in the prior year. Revenue in the current year quarter consisted of wireless revenue of $17.8 million and software revenue of $16.1 million compared to $18.3 million and $16.6 million in the prior year, respectively.

With respect to wireless revenue, we saw a 20 basis point sequential improvement in quarterly net unit churn in the third quarter at 1.4%, down from 1.6% in the prior quarter. ARPU increased $0.24 or 3% from the prior year, primarily driven by the continued impact from pricing actions and to a lesser extent, continued sales of our GenA pager.

As a reminder, we implemented a 3.5% price increase in September that impacts roughly 50% to 60% of units in service, and that will be fully reflected in fourth quarter revenue. While we believe the demand for our wireless services will continue to decline on a secular basis, as reflected in declining pager units in service, we are hopeful that our focus on pricing and other initiatives like the GenA pager will continue to further offset revenue lost through pager unit decline. Also, we closely manage the expense base for the wireless infrastructure to limit the impact of revenue loss.

Turning to third quarter software revenue. License and hardware revenue totaled $1.5 million compared to $2.4 million in the same period of 2024 as a result of lower software license bookings. Total professional services revenue in the third quarter was $5.5 million versus $4.8 million in the third quarter of 2024, up nearly 13% from the prior year period and more than 26% for the first 9 months of 2025.

Our outperformance in professional services has been primarily driven by the triple-digit year-over-year growth of our managed services. This service offering provides customers with all necessary implementation and upgrade services for any Spok software products they own over their multiyear term, which is typically 3 years. While managed services are likely to be cost prohibitive to our smaller customers, we continue to see great traction with enterprise-focused customers.

Adjusted operating expenses, which excludes depreciation, accretion and severance and restructuring costs, totaled $28.5 million in the third quarter, largely unchanged from the prior year period. During the quarter, increases in research and development expenses, selling and marketing expenses and the cost of product were offset by declines in technology operations expense and G&A costs.

Technology operations expense continues to decline as we manage costs in relation to our declining wireless unit totals. Adjusted EBITDA in the third quarter totaled $6.6 million as compared to $7.5 million in the prior year period. Despite the year-over-year decline, adjusted EBITDA levels were sufficient to cover our quarterly dividend. We ended the third quarter with $21.4 million in cash and cash equivalents, which grew from the prior quarter as anticipated. Based on our current outlook, we anticipate cash balances to continue to grow through the end of the year.

Moving on to guidance for 2025. Based on performance in the 3 quarters of 2025, we are reaffirming our financial outlook in the year 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. For the year, we expect total revenue to range from $138 million to $143.5 million. Included in this financial guidance is wireless revenue ranging between $71.5 million and $73.5 million and software revenue range between $66.5 million and $70 million. Lastly, adjusted EBITDA is expected to range from $28.5 million to $32.5 million.

With that said, I will now turn the call back over to Vince.

Thank you, Calvin, and thank you, Mike. On a final note, I'd like to again point out that I'm proud of the performance our team was able to deliver in the third quarter, especially after the exceptional performance in the second quarter and despite the seasonal headwinds we typically face in the slower summer months.

We believe we can continue to grow our franchise value while returning capital to stockholders. We have a long-term organic growth engine in our software solutions through Spok Care Connect. We also maintain a source of strong recurring revenue in our wireless service line, which remains relevant and important to health care customers and supports critical communications even during network events when cell phones and other technology fail.

We run the largest paging offering in the world and have integrated it with our software operations. We believe that the strong combination of these 2 product lines will take us into the future and create significant shareholder value.

Before I open the call up to your questions, I'd like to thank our stockholders for their continued support. We appreciate your interest in Spok, and we look forward to updating everyone again when we report fourth quarter and full year results in February of 2026. Thank you for joining us this afternoon, and have a great day.

Operator, you may now open the line to questions.

[Operator Instructions]

Our first question is from Anderson Schock with B. Riley Securities.

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

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

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

Yes. We've looked at this closely, and we're very bullish on our outlook. That's why we reiterated our guidance. We're expecting to have a strong fourth quarter. We went back and looked at since the pivot, which was starting in the second quarter of 2022, we haven't missed a quarterly forecast until this quarter. We did miss our internal operations bookings forecast. Embedded in that was license. We're still forecasting license revenue grows on a year-over-year basis. Our company total revenue will grow on a year-over-year basis. And so we're looking for a strong fourth quarter here.

We've got a very robust pipeline. We've got some very large deals in the hopper right now that we're working. We get a couple of those, and we're going to turn in another very strong quarter. We turned in $8.3 million in operations bookings in the first quarter, $11.6 million in the second quarter. We hit that air pocket, which was odd because July started off pretty well in the third quarter, but August and September were very slow. Some deals slipped.

Like I said, we've got some large deals in the pipeline. We're very bullish, and we expect to close them this quarter and report a good fourth quarter when we report at the end of February.

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

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

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

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

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