10-Q 1 spok-20240930.htm 10-Q spok-20240930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-Q
 
(Mark One)
☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2024
 
or
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from                      to                     
Commission File Number: 001-32358
spok_hor_flat_4C.jpg
SPOK HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 16-1694797
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)
 
3000 Technology Drive
,
Suite 400
Plano
,
Texas
75074
(Address of principal executive offices)(Zip Code)
(800) 611-8488
(Registrant’s telephone number, including area code)
5911 Kingstowne Village Pkwy, 6th Floor
Alexandria, Virginia 22315
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.0001 per shareSPOKNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐  Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
20,272,355 shares of the registrant’s common stock (par value $0.0001 per share) were outstanding as of October 25, 2024.


SPOK HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
  Page  
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.


PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands)September 30, 2024December 31, 2023
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$27,830 $31,989 
Accounts receivable, net21,377 23,314 
Prepaid expenses8,450 7,885 
Other current assets723 704 
Total current assets58,380 63,892 
Non-current assets:
Property and equipment, net6,988 7,321 
Operating lease right-of-use assets8,597 10,526 
Goodwill99,175 99,175 
Deferred income tax assets, net42,635 46,260 
Other non-current assets987 510 
Total non-current assets158,382 163,792 
Total assets$216,762 $227,684 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$3,944 $5,969 
Accrued compensation and benefits5,188 7,284 
Deferred revenue28,743 26,298 
Operating lease liabilities2,961 4,184 
Other current liabilities4,796 4,273 
Total current liabilities45,632 48,008 
Non-current liabilities:
Asset retirement obligations7,268 7,191 
Operating lease liabilities 6,148 6,902 
Other non-current liabilities1,426 1,812 
Total non-current liabilities14,842 15,905 
Total liabilities60,474 63,913 
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock$— $— 
Common stock2 2 
Additional paid-in capital104,119 102,936 
Accumulated other comprehensive loss(1,747)(1,764)
Retained earnings53,914 62,597 
Total stockholders’ equity156,288 163,771 
Total liabilities and stockholders' equity$216,762 $227,684 
            
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
2

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
(Unaudited and in thousands except share and per share amounts)2024202320242023
Revenue:
Wireless revenue$18,261 $18,972 $55,153 $56,877 
Software revenue16,609 16,456 48,608 48,195 
Total revenue34,870 35,428 103,761 105,072 
Operating expenses:
Cost of revenue (exclusive of items shown separately below)7,133 6,622 21,435 19,885 
Research and development2,831 2,561 8,958 7,907 
Technology operations6,083 6,405 18,563 19,444 
Selling and marketing3,928 4,067 11,582 12,322 
General and administrative8,534 8,216 24,585 24,405 
Depreciation and accretion1,075 1,267 3,210 3,768 
Severance and restructuring325 77 1,101 195 
Total operating expenses29,909 29,215 89,434 87,926 
Operating income4,961 6,213 14,327 17,146 
Interest income264 240 908 866 
Other (expense) income(75)41 (91)(45)
Income before income taxes5,150 6,494 15,144 17,967 
Provision for income taxes(1,490)(2,043)(3,823)(5,666)
Net income$3,660 $4,451 $11,321 $12,301 
Basic net income per common share$0.18 $0.22 $0.56 $0.62 
Diluted net income per common share
$0.18 $0.22 $0.55 $0.61 
Basic weighted average common shares outstanding20,264,055 19,970,936 20,229,146 19,942,325 
Diluted weighted average common shares outstanding
20,523,873 20,304,092 20,534,883 20,308,973 
Cash dividends declared per common share$0.3125 $0.3125 $0.9375 $0.9375 

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

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
(Unaudited and in thousands)2024202320242023
Net income$3,660 $4,451 $11,321 $12,301 
Other comprehensive income, net of tax:
Foreign currency translation adjustments23 82 17 129 
Other comprehensive income23 82 17 129 
Comprehensive income$3,683 $4,533 $11,338 $12,430 

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

4

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY 
(Unaudited and in thousands except share amounts)Outstanding
Common
Shares		Common
Stock		Additional
Paid-In
Capital & Accumulated Other Comprehensive Loss		Retained
Earnings		Total
Stockholders’
Equity
Balance at January 1, 202319,703,800 $2 $97,999 $73,096 $171,097 
Net income— — — 3,117 3,117 
Issuance of restricted stock under the Equity Plan382,568 — — — — 
Purchase of common stock for tax withholding(144,516)— (1,245)— (1,245)
Amortization of stock-based compensation— — 936 — 936 
Cash dividends declared— — — (6,549)(6,549)
Cumulative translation adjustment— — 12 — 12 
Balance at March 31, 202319,941,852 $2 $97,702 $69,664 $167,368 
Net income— — — 4,733 4,733 
Amortization of stock-based compensation— — 923 — 923 
Cash dividends declared— — — (6,538)(6,538)
Issuance of restricted stock under the Equity Plan20,210 — 90 — 90 
Cumulative translation adjustment— — 35 — 35 
Balance at June 30, 202319,962,062 $2 $98,750 $67,859 $166,611 
Net income— — — 4,451 4,451 
Issuance of restricted stock under the Equity Plan10,416 — — — — 
Amortization of stock-based compensation— — 884 — 884 
Cash dividends declared— — — (6,523)(6,523)
Cumulative translation adjustment— — 82 — 82 
Balance at September 30, 202319,972,478 $2 $99,716 $65,787 $165,505 

5

(Unaudited and in thousands except share amounts)Outstanding
Common
Shares		Common
Stock		Additional
Paid-In
Capital & Accumulated Other Comprehensive Loss		Retained
Earnings		Total
Stockholders’
Equity
Balance at January 1, 202419,992,102 $2 $101,172 $62,597 $163,771 
Net income— — — 4,236 4,236 
Issuance of restricted stock under the Equity Plan396,771 — — — — 
Purchase of common stock for tax withholding(151,026)— (2,428)— (2,428)
Amortization of stock-based compensation— — 1,148 — 1,148 
Cash dividends declared— — — (6,600)(6,600)
Cumulative translation adjustment— — 42 — 42 
Balance at March 31, 202420,237,847 $2 $99,934 $60,233 $160,169 
Net income— — — 3,425 3,425 
Issuance of restricted stock under the Equity Plan17,768 — 131 — 131 
Amortization of stock-based compensation— — 1,159 — 1,159 
Cash dividends declared— — — (6,624)(6,624)
Cumulative translation adjustment— — (48)— (48)
Balance at June 30, 202420,255,615 $2 $101,176 $57,034 $158,212 
Net income— — — 3,660 3,660 
Issuance of restricted stock under the Equity Plan8,440 — — — — 
Amortization of stock-based compensation— — 1,173 — 1,173 
Cash dividends declared— — — (6,780)(6,780)
Cumulative translation adjustment— — 23 — 23 
Balance at September 30, 202420,264,055 $2 $102,372 $53,914 $156,288 

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

6

SPOK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Nine Months Ended September 30,
(Unaudited and in thousands)20242023
Operating activities:
Net income$11,321 $12,301 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and accretion3,210 3,768 
Deferred income tax expense3,624 5,605 
Stock-based compensation3,480 2,743 
Provisions for credit losses, service credits and other450 415 
Changes in assets and liabilities:
Accounts receivable1,481 1,305 
Prepaid expenses and other assets(1,061)(1,102)
Net operating lease liabilities(48)(1,243)
Accounts payable, accrued liabilities and other(4,284)(7,396)
Deferred revenue2,342 (2,000)
Net cash provided by operating activities20,515 14,396 
Investing activities:
Purchases of property and equipment(2,348)(2,419)
Net cash used in investing activities(2,348)(2,419)
Financing activities:
Cash distributions to stockholders(20,045)(19,404)
Proceeds from issuance of common stock under the Employee Stock Purchase Plan130 90 
Purchase of common stock for tax withholding on vested equity awards(2,428)(1,245)
Net cash used in financing activities(22,343)(20,559)
Effect of exchange rate on cash and cash equivalents17 129 
Net decrease in cash and cash equivalents(4,159)(8,453)
Cash and cash equivalents, beginning of period31,989 35,754 
Cash and cash equivalents, end of period$27,830 $27,301 
Supplemental disclosure:
Income taxes paid$298 $236 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.
7
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Spok Holdings, Inc. (NASDAQ: SPOK) ("Spok," "we," "our" or the "Company"), through its wholly owned subsidiary Spok, Inc., is proud to be the global leader in healthcare communications. We deliver clinical information to care teams when and where it matters most to improve patient outcomes. Top hospitals rely on Spok products and services to enhance workflows for clinicians, support administrative compliance, and provide a better experience for patients.
We offer a focused suite of unified clinical communication and collaboration solutions that include call center applications, clinical alerting and notifications, one-way and advanced two-way wireless messaging services, mobile communications and public safety solutions.
We provide one-way and advanced two-way wireless messaging services, including information services, throughout the United States. These services are offered on a local, regional and nationwide basis, employing digital networks. One-way messaging consists of numeric and alphanumeric messaging services. Numeric messaging services enable subscribers to receive messages that are composed entirely of numbers, such as a phone number, while alphanumeric messages may include numbers and letters, which enable subscribers to receive text messages. Two-way messaging services enable subscribers to send and receive messages to and from other wireless messaging devices, including pagers, personal digital assistants and personal computers. We also offer voice mail, personalized greetings, message storage and retrieval, and equipment loss and/or maintenance protection to both one-way and two-way messaging subscribers. These services are commonly referred to as wireless messaging and information services.
We also develop, sell and support enterprise-wide systems for hospitals and other organizations needing to automate, centralize and standardize clinical communications. These solutions are used for contact centers, clinical alerting and notification, mobile communications and messaging and for public safety notifications. These areas of market focus complement the market focus of our wireless services outlined above.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements include our accounts and the accounts of our wholly owned direct and indirect subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). In management's opinion, the unaudited Condensed Consolidated Financial Statements include all adjustments and accruals that are necessary for the presentation of the results of all interim periods reported herein and all such adjustments are of a normal, recurring nature.
Amounts shown in the Condensed Consolidated Statements of Operations within the operating expense categories of cost of revenue; research and development; technology operations; selling and marketing; and general and administrative are recorded exclusive of depreciation and accretion. These items are shown separately to the extent that they are considered material for the periods presented.
Certain prior period amounts in the Condensed Consolidated Financial Statements have been reclassified to conform to the current period's presentation. These reclassifications had no effect on the reported results of operations or the Condensed Consolidated Balance Sheets.
The financial information included herein, other than the Condensed Consolidated Balance Sheet as of December 31, 2023, is unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2023 has been derived from, but does not include all, the disclosures contained in the audited Consolidated Financial Statements as of and for the year ended December 31, 2023.
These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”). The Condensed Consolidated Statements of Operations for the interim periods presented are not necessarily indicative of the results that may be expected for a full year.
8
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Use of Estimates
The preparation of these Condensed Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an ongoing basis, we evaluate estimates and assumptions, including, but not limited to, those related to the impairment of long-lived assets, goodwill, accounts receivable allowances, revenue recognition, depreciation expense, asset retirement obligations and income taxes. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
NOTE 2 - RISKS AND OTHER IMPORTANT FACTORS
See “Item 1A. Risk Factors” of Part II of this Quarterly Report on Form 10-Q (“Quarterly Report”) and "Item 1A. Risk Factors" of Part I of the 2023 Annual Report, which describe key risks associated with our operations and industry. 
NOTE 3 - RECENT ACCOUNTING STANDARDS
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures". This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within segment profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is also permitted, and retrospective application is required. This ASU will likely result in additional required disclosures when adopted. We are currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and the income taxes paid. The update is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
NOTE 4 - SIGNIFICANT ACCOUNTING POLICIES UPDATE
Our significant accounting policies are detailed in Note 1, “Organization and Significant Accounting Policies” of the 2023 Annual Report.
NOTE 5 - REVENUE, DEFERRED REVENUE AND PREPAID COMMISSIONS
Wireless Revenue
Wireless revenue consists of two primary components: paging revenue and product and other revenue. Paging revenue consists primarily of recurring fees associated with the provision of messaging services and fees for paging devices and is net of a provision for service credits. Product and other revenue reflects system sales, sales of paging devices and charges for devices that are not returned and are net of anticipated credits. Our core offering includes subscriptions to one-way or two-way messaging services for a periodic (monthly, quarterly, semiannual, or annual) service fee. This is generally based upon the type of service provided, the geographic area covered, the number of devices provided to the customer and the period of commitment. A subscriber to one-way messaging services may select coverage on a local, regional or nationwide basis to best meet their messaging needs. Two-way messaging is generally offered on a nationwide basis. See Item 1. “Business,” in the 2023 Annual Report for more details.
9
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Software Revenue
Software revenue consists of two primary components: operations revenue and maintenance revenue. Operations revenue consists primarily of license and subscription revenues for our healthcare communications solutions, revenue from the sale of hardware that facilitates the use of our software solutions, and professional services revenue related to the implementation of our solutions. Maintenance revenue is generated from our ongoing support of our software solutions or related hardware and access to when-and-if available software updates. Maintenance is generally purchased and renewed on an annual basis.
Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
Our software licenses and hardware are generally recognized at a point in time when we have transferred control to the customer. For software licenses, revenue is not recognized until the related license(s) has been made available to the customer and the customer can begin to benefit from its right to use the license(s). Our software licenses represent a right to use Spok’s intellectual property ("IP") as it exists at a point in time at which the license is granted. Many of our software licenses have significant standalone functionality due to their ability to process a transaction or perform a function or task, and we do not need to maintain those products, once provided to the customer, for value to exist. While the functionality of the IP that we license may substantively change during the license period, customers are not contractually or practically required to update their license as a result of those changes.
Our wireless, professional services, and maintenance are generally recognized over time due to a customer's simultaneous receipt and consumption of the benefit as we perform the work. As we transfer control over time, we recognize revenue based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires significant judgment and is based on the nature of the products or services to be provided. Generally, we use the time-elapsed measure of progress for performance obligations that include wireless, maintenance or subscription services. We believe this method best depicts the simultaneous transfer and consumption of the benefit based on our performance as these services are generally considered standby services. For professional services, we leverage an input methodology based on the number of hours worked on a project versus the total expected hours necessary to complete the project. Revenues are recognized proportionally as hours are incurred.
The following table presents our revenues disaggregated by revenue type:
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Revenue:
Paging revenue$17,605 $18,119 $53,208 $54,915 
Product and other revenue656 853 1,945 1,962 
Wireless revenue$18,261 $18,972 $55,153 $56,877 
License$2,042 $2,413 $6,365 $7,723 
Professional services4,835 3,833 13,146 10,909 
Hardware395 798 1,113 2,088 
Operations revenue7,272 7,044 20,624 20,720 
Maintenance9,337 9,412 27,984 27,475 
Software revenue$16,609 $16,456 $48,608 $48,195 
Total revenue$34,870 $35,428 $103,761 $105,072 

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

The U.S. was the only country that accounted for more than 10% of the Company’s total revenue for the three and nine months ended September 30, 2024, and 2023. Revenue generated in the U.S. and internationally consisted of the following for the periods stated:
For the Three Months Ended September 30,For the Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
United States$34,206 $34,662 $101,650 $102,523 
International664 766 2,111 2,549 
Total revenue$34,870 $35,428 $103,761 $105,072 
Deferred Revenues
Our deferred revenues represent payments made by, or due from, customers in advance of our performance. Changes in the balance of total deferred revenue during the nine months ended September 30, 2024, are as follows:
(Dollars in thousands)December 31, 2023AdditionsRevenue RecognizedSeptember 30, 2024
Deferred Revenue$26,946 $50,421 $(48,078)$29,289 
During the nine months ended September 30, 2024, the Company recognized $21.3 million related to amounts deferred as of December 31, 2023.
Prepaid Commissions
Our prepaid commissions represent payments made to employees in advance of our performance on the related underlying contracts. These costs have been incurred directly in relation to obtaining a contract. As such, these costs are amortized over the estimated period of benefit. Changes in the balance of total prepaid commissions during the nine months ended September 30, 2024 are as follows:
(Dollars in thousands)December 31, 2023AdditionsCommissions RecognizedSeptember 30, 2024
Prepaid Commissions$2,285 $2,895 $(2,064)$3,116 
Prepaid commissions are included within prepaid expenses in the Condensed Consolidated Balance Sheets and commissions expense is included within selling and marketing in the Condensed Consolidated Statements of Operations.
Remaining Performance Obligations
The balance of remaining performance obligations at September 30, 2024 was $63.6 million, which excludes $5.3 million of additional transaction value that was deemed cancellable by the customer without significant penalty. We expect to recognize approximately $36.2 million of our remaining performance obligations over the next 12 months, with the remaining balance recognized thereafter.
NOTE 6 - LEASES
We have operating lease arrangements for corporate offices, cellular towers, storage units and small building space. The building space is used to house infrastructure, such as transmitters, antennae and other various equipment for the Company’s wireless paging services. For leases with a term of 12 months or less, renewal terms are generally of an evergreen nature (either month-to-month or year-to-year). For leases with a term greater than 12 months, renewal terms are generally explicit and provide for one to five optional renewals consistent with the initial term. Many of our leases, with the exception of those for our corporate offices, include options to terminate the lease within one year. Variable lease payments, residual value guarantees or purchase options are not generally present in these leases.

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

Lease costs are included in technology operations and general and administrative expenses in the Condensed Consolidated Statements of Operations. The following table presents lease costs disaggregated by type:
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Operating lease cost$999 $1,143 $3,049 $3,494 
Short-term lease cost 2,396 2,298 7,297 6,837 
Total lease cost$3,395 $3,441 $10,346 $10,331 

The following table presents supplemental cash flow information:
For the Nine Months Ended September 30,
(Dollars in thousands)20242023
Cash paid for amounts included in the measurement of lease liabilities - operating leases$3,634$3,993

The following table presents the weighted average remaining lease term and discount rate:
September 30,
(Dollars in thousands)20242023
Weighted average remaining lease term - operating leases (in years)4.404.60
Weighted average discount rate - operating leases6.51%4.98%
Maturities of lease liabilities as of September 30, 2024, were as follows:
For the Year Ended December 31,(Dollars in thousands)
2024 (remaining three months)
$796 
20252,816 
20262,366 
20271,742 
20281,263 
Thereafter1,395 
Total future lease payments10,378 
Imputed interest(1,269)
Total$9,109 
12
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 7 - CONSOLIDATED FINANCIAL STATEMENTS' COMPONENTS
Depreciation and Accretion
Depreciation and accretion expenses consisted of the following for the periods stated:
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Depreciation
Leasehold improvements$46 $24 $121 $51 
Asset retirement costs(104)66 (312)196 
Paging and computer equipment869 959 2,647 2,864 
Furniture, fixtures and vehicles90 54 231 165 
Total depreciation901 1,103 2,687 3,276 
Accretion174 164 523 492 
Total depreciation and accretion expense$1,075 $1,267 $3,210 $3,768 
Accounts Receivable, Net
Accounts receivable was recorded net of an allowance of $0.8 million at September 30, 2024, and $1.6 million at December 31, 2023. Accounts receivable, net includes $5.9 million and $6.0 million of unbilled receivables at September 30, 2024, and December 31, 2023, respectively. Unbilled receivables are defined as the Company's right to consideration in exchange for goods or services that we have transferred to the customer but have not yet billed for, generally as a result of contractual billing terms.
Property and Equipment, Net
Property and equipment, net consisted of the following as of the dates stated:
(Dollars in thousands)Useful Life
 (In Years)		September 30, 2024December 31, 2023
Leasehold improvements
lease term
$2,430 $2,202 
Asset retirement costs
1-5
3,722 3,722 
Paging and computer equipment
1-5
84,129 86,332 
Furniture, fixtures and vehicles
3-5
3,042 3,129 
Total property and equipment93,323 95,385 
Accumulated depreciation(86,335)(88,064)
Total property and equipment, net$6,988 $7,321 
NOTE 8 - GOODWILL
During the three months ended September 30, 2024, we performed a qualitative assessment of goodwill and determined that a triggering event had not occurred. While an impairment assessment is performed annually in the fourth quarter, the Company monitors its business environment for potential triggering events on a quarterly basis. There is potential for further impairment charges being recognized in future periods based on these ongoing assessments.
13
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 9 - ASSET RETIREMENT OBLIGATIONS
The components of the changes in the asset retirement obligation liabilities were:
(Dollars in thousands)Short-Term
Portion		Long-Term
Portion		Total
Balance as of December 31, 2023$206 $7,191 $7,397 
Accretion442 81 523 
Amounts paid(361)— (361)
Reclassifications4 (4)— 
Balance as of September 30, 2024$291 $7,268 $7,559 
The short-term portion of the balance above is included within other current liabilities in the Condensed Consolidated Balance Sheets as of September 30, 2024, and December 31, 2023.
The cost associated with the estimated removal costs and timing refinements due to ongoing network rationalization activities is expected to accrete to a total liability of $8.9 million. The total estimated liability is based on the transmitter locations remaining after we have consolidated the number of networks we operate and assuming the underlying leases continue to be renewed to that future date. Accretion expense related solely to asset retirement obligations and was recorded based on the interest method.
NOTE 10 - STOCKHOLDERS' EQUITY
General
Our authorized capital stock consists of 75 million shares of common stock, par value $0.0001 per share, and 25 million shares of preferred stock, par value $0.0001 per share.
At September 30, 2024, and December 31, 2023, we had no stock options outstanding.
At September 30, 2024, and December 31, 2023, there were 20,264,055 and 19,992,102 shares of common stock outstanding, respectively, and no shares of preferred stock were outstanding.
Dividends
Cash distributions to stockholders, as disclosed in the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024, and 2023, include previously declared cash dividends on shares of vested restricted common stock ("restricted stock") issued to our non-executive directors and dividends related to vested restricted stock units ("RSUs") issued to eligible employees. Cash dividends on RSUs and restricted stock have been accrued and are paid when the applicable vesting conditions are met. Accrued cash dividends on forfeited restricted stock and RSUs are also forfeited. The following table details our cash dividends declared and paid in 2024 through the date hereof:
(Dollars in thousands)
Declaration DateRecord DatePayment DatePer Share Amount
Total Declared(1)
February 21, 2024March 15, 2024March 29, 2024$0.3125 $6,600 
May 1, 2024May 24, 2024June 24, 20240.3125 6,624 
July 24, 2024August 19, 2024September 9, 20240.3125 6,780 
Total$0.9375 $20,004 
(1) The total declared reflects the cash dividends declared in relation to common stock, deferred stock units ("DSUs") and unvested RSUs.
On October 30, 2024, our Board of Directors declared a regular quarterly cash dividend of $0.3125 per share of common stock with a record date of November 18, 2024, and a payment date of December 9, 2024. Cash dividends related to common stock of approximately $6.3 million will be paid from available cash on hand.
14
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Common Stock Repurchase Program
On February 16, 2022, our Board of Directors authorized a share repurchase program for up to $10 million of the Company’s common stock. Under the repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements. The specific timing, price and size of purchases will depend on prevailing stock prices, general economic and market conditions, legal requirements and other considerations. The repurchase program does not obligate the Company to acquire any particular amount of common stock, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. For the nine months ended September 30, 2024, we did not repurchase any common stock.
Net Income per Common Share
Basic net income per common share is computed on the basis of the weighted average common shares outstanding. Diluted net income per common share is computed on the basis of the weighted average common shares outstanding plus the effect of all potentially dilutive common shares, including outstanding restricted stock and RSUs, which are treated as contingently issuable shares, using the “treasury stock” method.
The components of basic and diluted net income per common share were as follows for the periods stated:
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
(in thousands, except for share and per share amounts)2024202320242023
Numerator:
Net income$3,660 $4,451 $11,321 $12,301 
Denominator:
Basic weighted average common shares outstanding20,264,055 19,970,936 20,229,146 19,942,325 
Diluted weighted average common shares outstanding20,523,873 20,304,092 20,534,883 20,308,973 
Basic net income per common share$0.18 $0.22 $0.56 $0.62 
Diluted net income per common share
$0.18 $0.22 $0.55 $0.61 
Stock-Based Compensation Plans
On April 10, 2023, our Board of Directors adopted an amendment and restatement of the Spok Holdings, Inc. 2020 Equity Incentive Award Plan (the "2020 Equity Plan") to increase the number of shares available for issuance by 1,000,000 shares that our stockholders subsequently approved on July 25, 2023. At July 25, 2023, a total of 1,268,444 shares of common stock had been reserved for issuance under the 2020 Equity Plan.
Awards under the 2020 Equity Plan may be in the form of stock options, restricted common stock, RSUs, performance awards, dividend equivalents, stock payment awards, deferred stock, DSUs, stock appreciation rights or other stock or cash-based awards.
Restricted stock awards generally vest one year from the date of grant. Related dividends accumulate during the vesting period and are paid at the time of vesting.
Contingent RSUs generally vest over a three-year performance period upon successful completion of the performance objectives. Non-contingent RSUs generally vest in thirds, annually, over a three-year period. Dividend equivalent rights generally accompany each RSU award, and those rights accumulate and vest along with the underlying RSU.
Dividend equivalent rights generally accompany each DSU award and are paid to participants in cash on the Company's applicable dividend payment date whether the DSU is vested or unvested. The dividend equivalent right associated with a DSU continues until delivery of the underlying shares of common stock is made.
15
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Payment of the underlying shares of common stock occurs at the earliest of a participant's separation from service, disability, death, or a change in control.
The following table summarizes the activities under the 2020 Equity Plan from January 1, 2024, through September 30, 2024:
 Activity
Total equity securities available at January 1, 2024
1,275,704 
RSU, DSU and restricted stock awarded to eligible employees, net of forfeitures
(305,360)
Total equity securities available at September 30, 2024970,344 
The following table details activities with respect to outstanding RSUs, DSUs, and restricted stock under the 2020 Equity Plan for the nine months ended September 30, 2024:
Shares
Weighted
Average Grant
Date Fair Value per Share
Unvested at January 1, 20241,035,268 $9.12 
Granted309,404 15.47 
Vested(411,646)10.06 
Forfeited(4,044)11.13 
Unvested at September 30, 2024928,982 $10.81 
Of the 928,982 unvested RSUs, DSUs and restricted stock outstanding at September 30, 2024, 491,734 RSUs include contingent performance requirements for vesting purposes. At September 30, 2024, there was $4.2 million of unrecognized net compensation cost related to RSUs and restricted stock, which is expected to be recognized over a weighted average period of 1.6 years.
Employee Stock Purchase Plan
In 2016, our Board of Directors adopted the Spok Holdings, Inc. Employee Stock Purchase Plan (the "ESPP") that our stockholders subsequently approved on July 25, 2016. A total of 250,000 shares of common stock were reserved for issuance under this plan.
The ESPP allows employees to purchase shares of common stock at a discounted rate, subject to plan limitations. Under the ESPP, eligible participants can voluntarily elect to have contributions withheld from their pay for the duration of an offering period, subject to the ESPP limits. At the end of an offering period, contributions will be used to purchase the Company's common stock at a discount to the market price based on the first or last day of the offering period, whichever is lower.
Participants are required to hold common stock for a minimum period of two years from the grant date. Participants will begin earning dividends on shares after the purchase date. Each offering period will generally last for no longer than six months. Once an offering period begins, participants cannot adjust their withholding amount. If a participant chooses to withdraw, any previously withheld funds will be returned to the participant, with no stock purchased, and that participant will be eligible to participate in the ESPP during the next offering period. If the participant terminates employment with the Company during the offering period, all contributions will be returned to the employee and no stock will be purchased.
The Company uses the Black-Scholes model to calculate the fair value of the common stock to be purchased during each offering period on the offer date. The Black-Scholes model requires the use of estimates for the expected term, the expected volatility of the underlying common stock over the expected term, the risk-free interest rate and the expected dividend payment.
16
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the nine months ended September 30, 2024, 9,933 shares of the Company's stock were purchased, as compared to 12,558 shares purchased during the same period in 2023. The following table summarizes the activities under the ESPP from January 1, 2024, through September 30, 2024:
 Activity
Total ESPP equity securities available at January 1, 2024109,762 
ESPP common stock purchased by eligible employees(9,933)
Total ESPP equity securities available at September 30, 202499,829 
Amounts withheld from participants will be classified as accrued compensation and benefits in the Condensed Consolidated Balance Sheets until funds are used to purchase shares. This liability amount is immaterial to the Condensed Consolidated Financial Statements.
Stock-Based Compensation Expense
We record all stock-based compensation, which consist of RSUs, DSUs, restricted stock, equity in lieu of salary, and the option to purchase common stock under the ESPP, at fair value as of the grant date. Stock-based compensation expense is recognized based on a straight-line amortization basis over the respective service period. Forfeitures and withdrawals are accounted for as incurred.
The following table reflects the items for stock-based compensation expense in the Condensed Consolidated Statements of Operations for the periods stated:
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Performance-based RSUs$459 $332 $1,378 $1,087 
Time-based RSUs, DSUs and restricted stock692 536 2,038 1,613 
ESPP22 16 64 43 
Total stock-based compensation$1,173 $884 $3,480 $2,743 
NOTE 11 - INCOME TAXES
Spok files a consolidated U.S. federal income tax return and income tax returns in various state, local and foreign jurisdictions as required.
Our quarterly tax provision and our quarterly estimate of our annual effective tax rate are subject to significant variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, changes in how we do business, changes in our stock price, foreign currency gains (losses), tax law developments (including changes in statutes, regulations, case law, and administrative practices), and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.
For 2024, the anticipated effective income tax rate is expected to continue to differ from the federal statutory rate of 21%, primarily due to the effect of state income taxes, permanent differences between book and taxable income, and certain discrete items.
We had total net deferred income tax assets ("DTAs") of $42.6 million and $46.3 million as of September 30, 2024, and December 31, 2023, respectively. We had a valuation allowance of $2.3 million as of both September 30, 2024, and December 31, 2023.
We assess the recoverability of our deferred income tax assets, which represent the tax benefits of future tax deductions, based on available positive and negative evidence and by considering the adequacy of future taxable income from all sources, including prudent and feasible tax planning strategies. This assessment is required to determine whether, based on all available evidence, it is "more likely than not" (meaning a probability of greater than 50%) that all or some portion of the deferred income tax assets will be realized in future periods. During the fourth quarter of each year, we update our multi-year forecast of taxable income for our operations, which assists in analyzing the recoverability of our DTAs.
17
SPOK HOLDINGS, INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company maintains a valuation allowance related to Federal Foreign Tax Credits and certain state net operating losses and state tax credits, as the Company does not believe current projections of future taxable income will be sufficient to utilize those tax assets prior to expiration.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
There have been no material changes during the nine months ended September 30, 2024, to the commitments and contingencies previously reported in the 2023 Annual Report.
NOTE 13 - RELATED PARTIES
A member of our Board of Directors serves as EVP and Chief Information Officer for an entity that is also a customer of the Company. For the three months ended September 30, 2024 and 2023, we recognized revenues of $0.3 million and $0.1 million, respectively, related to the contracts from the entity at which the individual is employed. For the nine months ended September 30, 2024 and 2023, we recognized revenues of $1.1 million and $0.4 million, respectively, related to the contracts from the entity at which the individual is employed.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements and information relating to Spok Holdings, Inc. and its subsidiaries (collectively, “we,” "us," “Spok,” “our” or the “Company”) that set forth anticipated results based on management’s current plans, known trends and assumptions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “target,” “forecast” and similar expressions, as they relate to Spok are forward-looking statements.
Although these statements are based upon current plans, known trends and assumptions that management considers reasonable, they are subject to certain risks, uncertainties and assumptions, including, but not limited to, those discussed in this section and "Risk Factors" below and under the captions “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”),” and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Annual Report"). Should known or unknown risks or uncertainties materialize, known trends change, or underlying assumptions prove inaccurate, actual results or outcomes may differ materially from past results and those described herein as anticipated, believed, estimated, expected, intended, targeted or forecasted. Investors are cautioned not to place undue reliance on these forward-looking statements.
The Company undertakes no obligation to update forward-looking statements. Investors are advised to consult all further disclosures the Company makes in its subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that it will file with the SEC. Also note that, in the 2023 Annual Report, the Company provides a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to its business. These are factors that, individually or in the aggregate, could cause the Company’s actual results to differ materially from past results as well as those results that may be anticipated, believed, estimated, expected, intended, targeted or forecasted. It is not possible to predict or identify all such risk factors. Consequently, investors should not consider the risk factor discussion to be a complete discussion of all of the potential risks or uncertainties that could affect Spok's business, statement of operations or financial condition, subsequent to the filing of this Quarterly Report.
Overview
The following MD&A is intended to help the reader understand the results of operations and financial condition of Spok. This MD&A is provided as a supplement to, and should be read in conjunction with, our 2023 Annual Report and our unaudited Condensed Consolidated Financial Statements and accompanying notes. A reference to a “Note” in this section refers to the accompanying Unaudited Notes to Condensed Consolidated Financial Statements.
Spok, acting through its indirect wholly owned operating subsidiary, Spok, Inc., delivers smart, reliable clinical communication and collaboration solutions to organizations, primarily in the U.S. healthcare industry, to help protect the health, well-being and safety of individuals. Organizations rely on Spok for workflow improvement, secure messaging, paging services, contact center optimization and public safety response.
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Business
See Note 1, "Organization and Significant Accounting Policies" in Item 1 of Part I of this Quarterly Report and Item 1. "Business" of Part I of the 2023 Annual Report, which describe our business in further detail.
Results of Operations
The following table is a summary of our Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2024 and 2023:
 For the Three Months Ended September 30,ChangeFor the Nine Months Ended September 30,Change
(Dollars in thousands)20242023Total%20242023Total%
Revenue:
Wireless revenue$18,261 $18,972 $(711)(3.7)%$55,153 $56,877 $(1,724)(3.0)%
Software revenue16,609 16,456 153 0.9 %48,608 48,195 413 0.9 %
Total revenue34,870 35,428 (558)(1.6)%103,761 105,072 (1,311)(1.2)%
Operating expenses:
Cost of revenue (exclusive of items shown separately below)7,133 6,622 511 7.7 %21,435 19,885 1,550 7.8 %
Research and development2,831 2,561 270 10.5 %8,958 7,907 1,051 13.3 %
Technology operations6,083 6,405 (322)(5.0)%18,563 19,444 (881)(4.5)%
Selling and marketing3,928 4,067 (139)(3.4)%11,582 12,322 (740)(6.0)%
General and administrative8,534 8,216 318 3.9 %24,585 24,405 180 0.7 %
Depreciation and accretion1,075 1,267 (192)(15.2)%3,210 3,768 (558)(14.8)%
Severance and restructuring325 77 248 322.1 %1,101 195 906 464.6 %
Total operating expenses29,909 29,215 694 2.4 %89,434 87,926 1,508 1.7 %
Operating income4,961 6,213 (1,252)(20.2)%14,327 17,146 (2,819)(16.4)%
Interest income264 240 24 10.0 %908 866 42 4.8 %
Other (expense) income(75)41 (116)(282.9)%(91)(45)(46)102.2 %
Income before income taxes5,150 6,494 (1,344)(20.7)%15,144 17,967 (2,823)(15.7)%
Provision for income taxes(1,490)(2,043)553 (27.1)%(3,823)(5,666)1,843 (32.5)%
Net income$3,660 $4,451 $(791)(17.8)%$11,321 $12,301 $(980)(8.0)%
Supplemental Information
Full-Time Equivalent ("FTE") Employees406 381 25 6.6 %
Active transmitters3,064 3,245 (181)(5.6)%
Revenue
We offer a focused suite of unified clinical communications and collaboration solutions that include call center applications, clinical alerting and notifications, one-way and advanced two-way wireless messaging services, mobile communications and public safety solutions.
We develop, sell and support enterprise-wide systems for healthcare, government, large enterprise and other organizations needing to automate, centralize and standardize their approach to clinical communications and collaboration. Our solutions can be found in prominent hospitals, large government agencies, leading public safety institutions, colleges and universities, large hotels, resorts and casinos, and well-known manufacturers. Our primary market is the healthcare provider industry, particularly hospitals. While we have historically identified hospitals with 200 or
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more beds as the primary targets for our software solutions, as well as our paging services, we have expanded our focus to include smaller hospitals with shorter sales cycles, including academic medical centers.
Revenue generated by wireless messaging services (including voice mail, personalized greeting, message storage and retrieval), equipment, maintenance plans and/or equipment loss protection for both one-way and two-way messaging subscribers is presented as wireless revenue in our Condensed Consolidated Statements of Operations. Revenue generated by the sale of our software solutions, which includes software license, professional services (installation, consulting and training), equipment procured by us from third parties (to be used in conjunction with our software), and post-contract support (ongoing maintenance), is presented as software revenue in our Condensed Consolidated Statements of Operations. Our software is licensed to end users under an industry standard software license agreement.
Refer to Note 5, "Revenue, Deferred Revenue and Prepaid Commissions" in the Notes to Condensed Consolidated Financial Statements for additional information on our wireless and software revenue streams.
The table below details revenue for the periods stated:
For the Three Months Ended September 30,ChangeFor the Nine Months Ended September 30,Change
(Dollars in thousands)20242023Total%20242023Total%
Revenue - wireless:
Paging revenue$17,605 $18,119 $(514)(2.8)%$53,208 $54,915 $(1,707)(3.1)%
Product and other revenue656 853 (197)(23.1)%1,945 1,962 (17)(0.9)%
Total wireless revenue18,261 18,972 (711)(3.7)%55,153 56,877 (1,724)(3.0)%
Revenue - software:
License2,042 2,413 (371)(15.4)%6,365 7,723 (1,358)(17.6)%
Professional services4,835 3,833 1,002 26.1 %13,146 10,909 2,237 20.5 %
Hardware395 798 (403)(50.5)%1,113 2,088 (975)(46.7)%
Operations revenue7,272 7,044 228 3.2 %20,624 20,720 (96)(0.5)%
Maintenance revenue9,337 9,412 (75)(0.8)%27,984 27,475 509 1.9 %
Total software revenue16,609 16,456 153 0.9 %48,608 48,195 413 0.9 %
Total revenue$34,870 $35,428 $(558)(1.6)%$103,761 $105,072 $(1,311)(1.2)%
Wireless Revenue
Wireless revenue is generally reflective of the number of units in service and measured monthly as Average Revenue Per User ("ARPU"). On a consolidated basis, ARPU is affected by several factors, including the mix of units in service and the pricing of the various components of our services. The number of units in service changes based on subscribers added, referred to as gross placements, less subscriber cancellations, or disconnects.
Wireless revenue decreased for the three months ended September 30, 2024, compared to the same period in 2023, reflective of the secular decrease in our wireless units in service, from 785 thousand as of September 30, 2023 to 730 thousand as of September 30, 2024. This was partially offset by an increase in ARPU, as a result of price increases initiated in September 2024. For the three months ended September 30, 2024, ARPU was $7.95 as compared to $7.59 for the same period in 2023.
Wireless revenue decreased for the nine months ended September 30, 2024, compared to the same period in 2023, reflective of the secular decrease in our wireless units in service, from 785 thousand as of September 30, 2023 to 730 thousand as of September 30, 2024. This was partially offset by an increase in ARPU, as a result of price increases initiated in September 2024. For the nine months ended September 30, 2024, ARPU was $7.91 as compared to $7.62 for the same period in 2023.
We believe that demand for wireless services will continue to decline for the foreseeable future in line with recent trends, as our wireless products and services are replaced with other competing technologies, such as the shift from narrowband wireless service offerings to broadband technology services.
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The following reflects the impact of subscribers and ARPU on the change in paging revenue:
 For the Three Months Ended September 30,Change Due To:
(in thousands)20242023ChangeARPUUnits
Paging revenue$17,605 $18,119 $(514)$795 $(1,309)
 For the Nine Months Ended September 30,Change Due To:
(in thousands)20242023ChangeARPUUnits
Paging revenue$53,208 $54,915 $(1,707)$1,965 $(3,672)
As demand for one-way and two-way messaging has declined, we have developed or added service offerings such as encrypted paging and Spok Mobile with a pager number to increase our revenue potential. These service offerings, along with the nominal increases in the standard rate, are designed to mitigate the decline in our wireless revenue. We will continue to explore ways to innovate and provide customers with the highest value possible.
In late 2021, we began offering our newest pager, GenA. This one-way alphanumeric pager features a high resolution ePaper display, intuitive modern user interface, advanced encryption and security features, over-the-air remote programming, and an antimicrobial housing. Users can select from various font sizes, and the large GenA display also leverages proportional fonts to maximize key information on a single screen.
The GenA pager is the only product available on the market with these capabilities, and we maintain an exclusive arrangement with the product's manufacturer. Given the product differentiation of the GenA pager, its development is a key initiative providing a competitive advantage, and we expect this new technology will be popular with our customers in clinical environments and may help slow our wireless revenue attrition.
Software Revenue
Software revenue consists of two components: operations revenue and maintenance revenue. Operations revenue consists primarily of license and subscription revenues for our healthcare communications solutions, revenue from the sale of hardware that facilitates the use of our software solutions, and professional services revenue related to the implementation of our solutions. Maintenance revenue is generated from our ongoing support of our software solutions or related hardware, typically for a period of one year after project completion.
To a large degree, software revenue corresponds to our backlog of performance obligations ready to deliver at some point in the future, and any delays in implementation may affect the timing of revenue recognition. Our software projects generally originate from fixed-bid contracts, although many involve a protracted sales cycle and may result in unforeseen complexity and deviation from the original scope. The time needed to complete projects, therefore, may not align with our original expectations, which affects our backlog. As a result, software revenue may fluctuate on a short-term basis, and we generally evaluate longer-term trends when managing this business.
Operations Revenue
Software operations revenue increased during the three months ended September 30, 2024, compared to the same period in 2023. The increase is primarily due to increases in professional services revenue, resulting from our targeted hiring efforts over the last 12 months, as we aligned staffing levels with our backlog which had grown as a result of our operations bookings results. This increase was partially offset by decreases in license and hardware revenue, driven by lower sales.
Software operations revenue decreased during the nine months ended September 30, 2024, compared to the same period in 2023. The decrease is primarily due to decreases in license and hardware revenue, driven by lower sales. More specifically, results from the second quarter of 2023 included $1.8 million in license revenue from a single customer contract with no similar performance in 2024. These decreases were partially offset by increases in professional services revenue, resulting from our targeted hiring efforts over the last 12 months, as we aligned staffing levels with our backlog, which had grown as a result of our operations bookings results.
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Maintenance Revenue
Maintenance revenue remained flat for the three months ended September 30, 2024 compared to the same period in 2023. For the nine months ended September 30, 2024, maintenance revenue increased compared to the same period in 2023, as a result of improvement in our gross revenue churn as well as net new maintenance driven by our operational bookings performance. Given these dynamics, we believe annual maintenance revenue is likely to remain flat or increase marginally, as we continue to enhance our existing software solutions. Further enhancements are expected to provide additional revenues for license sales, which generate new maintenance revenue and help to reduce levels of gross churn.
Operating Expenses
Our operating expenses are presented in functional categories. Certain of our functional categories are especially important to overall expense control and management. These operating expenses are categorized as follows:
•Cost of Revenue. These are expenses we incur for the delivery of products and services to our customers and consist primarily of hardware, third-party software, outside services expenses and payroll and related expenses for our professional services, logistics, customer support and maintenance staff.
•Research and Development. These expenses relate primarily to the development of new software products and the ongoing maintenance and enhancement of existing products. This classification consists primarily of employee payroll and related expenses, outside services related to the design, development, testing and enhancement of our solutions and, to a lesser extent, hardware equipment. Research and development expenses exclude any development costs that qualify for capitalization.
•Technology Operations. These are expenses associated with the operation of our paging networks. Expenses consist largely of site rent expenses for transmitter locations, telecommunication expenses to deliver messages over our paging networks, and payroll and related expenses for our engineering and pager repair functions. We actively pursue opportunities to consolidate transmitters and other service, rental and maintenance expenses in order to maintain an efficient network while simultaneously ensuring adequate service for our customers. We believe continued reductions in these expenses will occur for the foreseeable future as we continue to consolidate our networks, although the benefits of such network rationalization efforts and resulting costs savings will continue to decline.
•Selling and Marketing. The sales and marketing staff are involved in selling our communication solutions primarily in the United States. These expenses support our efforts to maintain gross placements of units in service, which mitigated the impact of disconnects on our wireless revenue base, and to identify business opportunities for additional or future software sales. We maintain a centralized marketing function that is focused on supporting our products and vertical sales efforts by strengthening our brand, generating sales leads and facilitating the sales process. These marketing functions are accomplished through targeted email campaigns, webinars, regional and national user conferences, monthly newsletters and participation at industry trade shows. Expenses consist largely of payroll and related expenses, commissions and other costs such as travel and advertising costs.
•General and Administrative. These are expenses associated with information technology and administrative functions, including finance and accounting, human resources and executive management. This classification consists primarily of payroll and related expenses, outside service expenses, taxes, licenses and permit expenses, and facility rent expenses.
•Depreciation, Amortization and Accretion. These are expenses that may be associated with one or more of the aforementioned functional categories. This classification generally consists of depreciation from capital expenditures or other assets that are core to our ongoing operations, amortization of intangible assets, amortization of capitalized software development costs, and accretion of asset retirement obligations.
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The following is a review of our operating expense categories for the three and nine months ended September 30, 2024, and 2023. Certain prior period amounts have been reclassified to conform to the current period's presentation.
Cost of Revenue
Cost of revenue consisted primarily of the following items:
 For the Three Months Ended September 30,ChangeFor the Nine Months Ended September 30,Change
(Dollars in thousands)20242023Total%20242023Total%
Payroll and related$4,584 $3,973 $611 15.4 %$13,861 $11,815 $2,046 17.3 %
Cost of sales1,199 1,381 (182)(13.2)%3,642 4,127 (485)(11.8)%
Recoverable taxes and fees1,017 904 113 12.5 %2,905 2,780 125 4.5 %
Stock-based compensation81 46 35 76.1 %241 179 62 34.6 %
Other252 318 (66)(20.8)%786 984 (198)(20.1)%
Total cost of revenue$7,133 $6,622 $511 7.7 %$21,435 $19,885 $1,550 7.8 %
FTE Employees155 135 20 14.8 %
For the three and nine months ended September 30, 2024, cost of revenue increased compared to the same periods in 2023, primarily driven by increases in payroll and related expenses, partially offset by decreases in cost of sales.
The increases in payroll and related expenses are primarily due to increases in headcount for added professional services resources in conjunction with our efforts to better align staffing levels with our backlog, as well as increases in employee compensation costs.
The decreases in cost of sales are primarily related to lower hardware sales as compared to the same periods in 2023.
Research and Development
Research and development expenses consisted of the following items:
 For the Three Months Ended September 30,ChangeFor the Nine Months Ended September 30,Change
(Dollars in thousands)20242023Total%20242023Total%
Payroll and related$1,599 $1,571 $28 1.8 %$4,600 $4,698 $(98)(2.1)%
Outside services1,049 985 64 6.5 %3,820 3,011 809 26.9 %
Stock-based compensation49 (43)92 (214.0)%147 14 133 950.0 %
Other134 48 86 179.2 %391 184 207 112.5 %
Total research and development$2,831 $2,561 $270 10.5 %$8,958 $7,907 $1,051 13.3 %
FTE Employees41 38 3 7.9 %
For the three and nine months ended September 30, 2024, research and development expenses increased, compared to the same periods in 2023, primarily driven by an increase in outside services as we continue to invest in the enhancement of our software solutions.
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Technology Operations
Technology operations expenses consisted primarily of the following items:
For the Three Months Ended September 30,ChangeFor the Nine Months Ended September 30,Change
(Dollars in thousands)20242023Total%20242023Total%
Payroll and related$2,057 $2,247 $(190)(8.5)%$6,418 $6,833 $(415)(6.1)%
Site rent2,635 2,859 (224)(7.8)%8,162 8,596 (434)(5.0)%
Telecommunications687 702 (15)(2.1)%2,066 2,117 (51)(2.4)%
Stock-based compensation45 39 6 15.4 %134 134 — — %
Other659 558 101 18.1 %1,783 1,764 19 1.1 %
Technology Operations$6,083 $6,405 $(322)(5.0)%$18,563 $19,444 $(881)(4.5)%
FTE Employees66 69 (3)(4.3)%
For the three and nine months ended September 30, 2024, technology operations expenses decreased compared to the same periods in 2023, primarily due to decreases in payroll and related expenses and site rent.
The decreases in payroll and related expenses are primarily due to the reduction in headcount as a result of our continuous efforts to optimize costs, partially offset by increases in employee compensation costs. In addition, as a result of our network rationalization efforts, site rent and telecommunications costs decreased in response to a 5.6% decline in active transmitters from September 30, 2023 to September 30, 2024. As we reach certain minimum frequency commitments, as outlined by the United States Federal Communications Commission, we may be unable to continue our efforts to rationalize and consolidate our networks.
Selling and Marketing
Selling and marketing expenses consisted of the following items:
 For the Three Months Ended September 30,ChangeFor the Nine Months Ended September 30,Change
(Dollars in thousands)20242023Total%20242023Total%
Payroll and related$2,565 $2,509 $56 2.2 %$7,707 $7,428 $279 3.8 %
Commissions899 1,134 (235)(20.7)%2,064 3,429 (1,365)(39.8)%
Stock-based compensation135 100 35 35.0 %405 286 119 41.6 %
Advertising and events251 232 19 8.2 %910 734 176 24.0 %
Other78 92 (14)(15.2)%496 445 51 11.5