Spok Holdings Inc
NASDAQ:SPOK
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Spok Holdings Inc
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Good morning, and welcome to the Spok Holdings Second Quarter 2023 Earnings Call. At this time, all participants are in listen-only mode. [Operator Instructions].
As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Al Galgano. You may begin.
Hello, everyone, and welcome to Spok Holdings Second Quarter 2023 Earnings Call. I am joined by Vince Kelly, Chief Executive Officer; Mike Wallace, President of Spok Inc. and 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 may 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 2023 and 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, and good morning, everyone. Thank you for joining us for our second quarter 2023 earnings call. I want to preface my comments today with a reminder for everyone that our mission has not changed and simply put is to generate cash and return capital to our shareholders over the long term. We do this by responsibly growing revenue while closely managing our operating expenses and capital expenditures. That was our goal when we embarked upon our strategic pivot 18 months ago, and that is a goal we are achieving and intend to continue to achieve.
We believe we are on a sustainable path to continue paying our quarterly dividend at these levels for the foreseeable future. Further, we believe our cash flow is on a path to grow into our current dividend level and eventually cover in full on an annual basis as we have done in the first half of 2023. That is our job and our primary focus returning capital to shareholders has been our legacy, and we feel good about getting back to our roots and doing so.
Today, we will 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 operational performance for the quarter. I’ll then turn the call over to Calvin to review our second quarter 2023 financial highlights and performance in more detail. We will then conclude our prepared remarks with our business outlook in financial guidance for 2023, and then we’ll open up the call to your questions.
Any conversation about Spok’s second quarter results has to start with how truly proud I am of this team and the performance that they were able to deliver in the period. Most notably, for the first time in the company’s history, we were able to grow on a year-over-year basis, our consolidated revenue and also grow revenue in each of our product lines. Our team was able to shatter many of the performance records set previous quarters and we generated record levels of adjusted EBITDA, resulting in sequential growth in our cash balances.
We made tremendous progress in several other key performance areas, including wireless trends, software bookings, and backlog level. And we continued our focus on expense management as we drove expense reductions on a year-over-year basis while continuing to make the necessary investments in our product development and sales and marketing to support the growth of our Spok Care Connect and wireless solutions.
We look forward to continued success in the second half of the year and believe our extensive experience operating our established communication solutions will create significant value for stockholders by maximizing revenue and cash flow generation. In short, we’re firing on all cylinders and are confident that as we enter the second half of the year, we’re going to continue to outperform. While Calvin will go into more detail regarding our forward-looking guidance later in the call, based on our performance in the second quarter, we are once again increasing our guidance estimates for revenue and adjusted EBITDA generation.
We believe we are on track to grow consolidated revenue for 2023 on a year-over-year basis for the first time in the company’s history and the low point of our revenue guidance reflects that. Before I dive into our operational highlights for the second quarter, let me take this opportunity to summarize our mission for those of you that may be new to our story. Our strategic goal is simple: run the business profitably, generate cash flow and return that capital to shareholders. 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. Since the beginning of our strategic pivot, which started 18 months ago, Spok has returned approximately $38 million or $1.87 per share to our shareholders in the form of our regular quarterly dividend.
In fact, since we founded this company in 2004, Spok has returned more than $660 million to our stockholders, either through our regular quarterly dividend, special dividend or share repurchases. In the second quarter of 2023, this history of returning cash to our stockholders continues as we generated record levels of adjusted EBITDA and returned $6.2 million to our stockholders. And we expect to pay dividends totaling approximately $25 million in 2023 as we did in 2022. Spok remains committed to our dividend policy and returning capital to our stockholders. When you take into consideration our current cash balance, distributions to stockholders, share repurchases, debt repayments and acquisitions, Spok has now generated more than $1 billion of free cash flow since our inception. 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, stabilizing and growing our revenue base; number three, disciplined expense management; and number four, a stockholder-friendly capital allocation plan. Going forward, we believe our extensive expertise, operating our established communications solutions and world-class customer base will continue to create significant value for our stockholders. In early 2022, we announced a new strategic business plan that set a priority on maximizing cash flow with the goal of returning capital to our shareholders. As part of that strategic pivot, we made the decision to discontinue the development and sales of Spok Go, our cloud-native clinical communication and collaboration platform and eliminate all associated costs.
In retrospect, it was a hard decision to make, but it was the right decision during COVID and since the market has changed significantly and we had to do the same. Part of that plan to pivot and focus on our 2 core service lines also included continuing to invest in our wireless and contact center software solutions in a disciplined manner. We felt this was important to stabilize and then ultimately grow our revenue and cash generation potential. That is how we will maximize our ability to return capital to our shareholders over the long run. I’m happy to report that we have continued to execute on our business plan, in the second quarter of 2023, we generated GAAP net income of $4.7 million or $0.23 per diluted share, a 146% increase from net income of $1.9 million or $0.10 per diluted share in the prior year period.
We accomplished this while generating an all-time high of $14 million in second quarter software operations bookings a 90% increase from the prior year period and generating year-over-year wireless revenue growth and record low unit churn of less than 1% in the quarter. Amidst all the progress in creating a solid financial platform and shareholder-friendly capital allocation strategy, we remain true to our mission to being a global leader in health care communications.
We deliver clinical information to care teams when and where it matters most to improve patient outcomes as spoke enable smarter, faster, clinical communications for our customers. We have over 2,200 health care 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. This is coupled with the financial strength that over 80% of our revenue is reoccurring in nature, and we are a company with no debt, which provides us significant flexibility. Now let me take a few minutes to provide some perspective on our massive sales performance in the second quarter. Our $14 million of record software operations bookings included 23 new 6-figure customer contracts and 3 7-figure contracts. In fact, we closed one of our largest customer contracts in our history that totaled approximately $3.9 million. This is particularly impressive as we believe that this contract represents only about 30% of the overall opportunity with this customer.
We’ve been working on this deal with the health care system for a number of years, and it was executed during the quarter. Our team was also aggressive and able to put a number of deals in place that we have slated for Q3 and Q4. We don’t expect this level of booking success every quarter, and that is reflected in our updated revenue guidance. Nevertheless, there are some very large deals out there, and our team continues to hunt. And we could see more big quarters like this in future periods, depending on our success and our customers’ timing. Let me review a couple of our new customer contracts with you. First, as a multimillion-dollar deal, we secured with one of the largest health systems in the nation. The cell system post 140 hospitals across 21 states and is committed to achieving cost savings through vendor consolidation and enterprise standardization.
They identified our Spok Care Connect platform as the national standard solution for their hospitals paving the way for our partnership. Our engagement with this health system includes the medical operator console spoke Messenger, managed professional services, premium maintenance and support and value-added services at 37 of their locations. They asserted that our single communications platform allows them to achieve enterprise-wide efficiency and improve patient care while supporting their national standards. We’re excited about the prospects of expanding our support with this customer by expanding into other locations. Another of our standout new contracts last quarter was one of our largest enterprise messenger customers, a partnership that has been thriving for more than 13 years. This large East Coast health care center has 21 hospitals and 3,200 beds. In January of this year, we displaced a secure messaging competitor at 2 locations, a significant achievement that demonstrates the effectiveness of our Spok Mobile solutions.
In June of 2023, we further solidified our position in the industry by replacing another competitor’s contact center solution software for the organization’s enterprise call center. This was made possible through a multiyear engagement that included the deployment of our new Spok Mobile and web directory. With the deployment of 800 Spok Mobile licenses and our enterprise Smart Web, they have access to secure and efficient communication channels. What’s more, our commitment to ensuring a smooth and successful deployment has earned us praise from our partners. We offer value-added services, including workflow analysis and launch support to guarantee that our partners derive maximum value from our solutions.
This is just another example of our unwavering commitment to providing unmatched communication solutions to our clients. We’re pleased with the start to 2023, and it believes it reflects the dedication of our sales team and their ability to adapt to the shifting business environment for health care IT. However, while our sales pipeline continues to develop in terms of size and quality, I’d like to caution you about the nature of quarterly software license sales. While we’re very pleased with the historic level of second quarter operations bookings, we believe it’s more appropriate to look at bookings on a 12-month basis. A full year basis better normalizes both positive and negative timing anomalies that can arise out of the sales cycle.
We do not spend a great deal of time analyzing the sales performance of an individual quarter as opposed to viewing it in the broader context of our anticipated annual results. We believe looking at growth in software operations bookings over an annual period is more reflective of the momentum that we are generating and is most appropriate for investors as well. With that said, we expect 2023 software operations bookings growth in the mid- to upper teens for the full year. On a final note, I’d like to comment on our recent investor relations activity and our goal of better communicating Spok’s investment thesis to the financial community. Since the beginning of the year, we’ve attended 5 investor conferences and sponsored our own Investor Day event in Dallas.
Each of these presentations has been archived on our Investor Relations website, and we invite you to view these presentations. We will continue to look for opportunities to tell our story to the investment community and focus on investor marketing activities, though we know the ultimate attraction come as a result of our business execution. Also, towards the end of the second quarter, Spok was included in the Russell 2000 Index. We are honored to again be part of the Russell 2000 Index. I believe this reflects what the Spok team has accomplished over the past year with our focus on generating cash flow and returning capital to stockholders. It is rewarding to see the efforts, tough choices and hard work by our team pay off. We look forward to continued success and believe our extensive experience operating in our established communication solutions will create additional value for our stockholders. With that said, I’d like to turn the call over to our Chief Financial Officer, Calvin Rice. Calvin?
Thanks, Vince, and good morning, everyone. I would like to take a few minutes and provide a recap of our second quarter 2023 financial performance, which we reported yesterday. 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 2023, GAAP net income totaled $4.7 million or $0.23 per diluted share compared to net income of $1.9 million or $0.10 per diluted share in the similar 2022 period. For the second quarter of 2023, total GAAP revenue was $36.5 million, compared to $33.7 million in the second quarter of 2022. Revenue for the quarter consisted of wireless revenue of $18.9 million, which was up $0.2 million or 1% from the prior year and software revenue of $17.6 million, up 17.2% from last year, reflecting the significant year-over-year increase in license revenue.
With respect to wireless revenue, second quarter 2023 totaled $18.9 million, up on a year-over-year basis. This performance continues to be primarily driven by improvement in average revenue per unit or ARPU and which saw growth of $0.30 on a quarterly basis year-over-year. This improvement is a result of the previously discussed pricing actions taken in late 2022. Sales of our higher-priced G&A pager and increases in pass-through fees, which account for roughly 45% of the ARPU growth. We also continue to see historically low levels of net unit churn as net units in service declined by less than 3.5% on a trailing 12-month basis. 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 Genapager will continue 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 second quarter software revenue. License and hardware revenue was an all-time high of $4.6 million in the second quarter, up more than 87% from the second quarter of 2022. This performance is a direct result of the previously discussed record high operations bookings this quarter. Maintenance revenue totaled $9.1 million and was up from revenue of $8.9 million in the prior quarter and in line with the prior year quarter. As we have discussed in previous quarterly calls, as we continue to reorient our focus back on our Spok Care Connect software products, our expectation is for maintenance revenue to be flat to down slightly on a year-over-year basis, given gross churn and uplift levels remaining consistent with prior quarters. As we continue to make progress on our product road map with Spok Care Connect, we expect bookings will continue to grow in the coming years and maintenance revenue along with it.
Given the nature of maintenance revenue, higher license sales will work through revenue on a lagging basis. So, we look first to stabilizing that revenue decline and then beginning to grow it. Professional services revenue was a healthy $3.8 million versus $3.3 million in the second quarter of 2022 and up from $3.2 million in the first quarter of 2023. We continue to see significant improvement in resource utilization, delivering on our internal initiatives to better align total resources with our backlog and driving a higher rate of net cash flow despite having roughly 9 less billable resources as compared to the second quarter of 2022. Second quarter adjusted operating expenses, which excludes depreciation, amortization and accretion and severance and restructuring costs totaled $28.9 million compared to $30 million in the prior year period. The decline in cost is primarily the result of our restructuring efforts undertaken early last year and completed in late 2022. However, the year-over-year benefit of these efforts will be less profound in the second half of 2023, as the majority of our cost savings were achieved in the first half of 2022. With that said, please keep in mind that future investments in certain areas such as sales and marketing and professional services will likely be necessary from time to time to support the anticipated growth of our Spok Care Connect and wireless solutions.
And lastly, as Vince pointed out earlier in the call, adjusted EBITDA was a record high $8.5 million in the second quarter, up over 81% from $4.7 million in the same quarter of 2022. Reflecting the progress made to date with our strategic pivot. In fact, through the first 6 months of 2023, adjusted EBITDA has exceeded $15.4 million, a nearly fivefold increase from 2022. While we love to see these results, I want to highlight a point that Vince made earlier, which is that some of this was effectively pulled in from what we had previously anticipated in Q3 and Q4. While this certainly has had a positive impact on our expected results for the full year, investors should look to our revised annual financial guidance for 2023 to better understand this quarter within the context of our full year performance, which I’ll be discussing in more detail next.
Our performance in the second quarter in terms of the strengthening software operations bookings, robust backlog levels improvement in wireless trends and strong adjusted EBITDA has led us to increase our expectations across all categories for the full year. However, I would again encourage investors to consider the second quarter performance within the broader context of our full year guidance, as we would not expect to see adjusted EBITDA at these levels in the second half of the year. Although we still expect second half adjusted EBITDA to be strong on a relative basis. As a reminder, the figures I’m going to discuss today are included in our guidance table in the earnings release.
In 2023, we now expect total revenue to be in the range of $134.5 million to $137.5 million. A $1.75 million increase from the previous guidance midpoint. More importantly, as Vince pointed out, this represents the first time in the company’s history that we expect to grow consolidated revenue from the prior year, and the low end of our guidance reflects that with a 2.2% annual growth rate at the high end of our revised guidance. Included in the revised guidance, we expect wireless revenue to range between $74.5 million to $75.5 million, a $750,000 increase from the previous guidance midpoint as we expect recent trends will continue to improve, as I discussed earlier. Software revenue is expected to range from $60 million to $62 million, with the midpoint implying total software revenue growth of nearly 4% from prior year levels. Lastly, based on the improving trends in our performance in the second quarter, our revised adjusted EBITDA guidance for 2023 is $25 million to $28 million, a $1 million increase from the previous guidance midpoint.
With that said, I will now turn the call back over to Vince.
Thank you, Calvin. Before we open the call up for your questions, I want to comment briefly on a couple of items. First, with respect to our current capital allocation strategy, our overall goal is to generate cash to return to shareholders by producing sustainable, profitable business growth. The allocation of capital remains a primary area of focus that our Board is constantly reviewing. Our multifaceted capital allocation strategy currently includes dividends, as well as key strategic investments that augment our product development, operating platform, and infrastructure.
Our strategy also includes the potential for acquisitions that are both strategic in nature and that are accretive to earnings. However, as I’ve mentioned in prior quarters, our main focus is on the development and enhancement of our software solutions versus acquiring additional functionality at the present time. We believe the cost of acquisitions and the integration of disparate functionality is much less efficient than ultimately limiting relative to our current business focus with the internal build approach we are taking.
For example, we believe that there is an untapped potential to integrate artificial intelligence or AI into our product offering. While we’re in the very early stages of exploring the future potential from these applications, we believe there could be tremendous opportunity for AI-powered solutions to transform health care with opportunities, including disease diagnosis and monitoring clinical workflow augmentation and hospital optimization. We intend to enhance our solid industry-leading reputation by integrating these technologies into our product suite. And from an operational perspective, – though in the very early stages, we intend to explore AI as a tool to drive further efficiencies and increase the scale of our financial platform.
Before I open the call up for your questions, I’d like to thank our shareholders for their patience and support during our pivot. I’d also like to thank them for their participation in our annual meeting earlier this week. As we reported, each of the items of business, which included the election of 6 nominees as directors to the Board, ratification and appointment of Grant Thornton as our independent registered public accounting firm for the year ending December 31, 2023, and a nonbinding advisory vote to approve the 2022 named executive officer compensation or say-on-pay, a non-binding advisory vote on the frequency of future say-on-pay votes and approval for the amendment and restatement of the company’s 2020 Equity Incentive Award Plan.
All of these pass with an overwhelming majority. For a full review of the final voting results, please see our disclosures in our quarterly report on 10-Q – on Form 10-Q we filed with the SEC. 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 Instructions] And our first question is from Eric Martinuzzi with Lake Street Capital Markets.
Yes. Congrats on the quarter as well as the outlook. It’s really great to see both segments of the business in growth mode. I wanted to start with the wireless side here. This we’ve got the offset with the decline in units that being offset by a little bit better ARPU. How should we think about the impact of price increases this year and what to expect next year?
Yes, Eric, thanks for the compliment, by the way, and for your good question. With respect to wireless, you shouldn’t expect about the same impact. We did a price increase late last year to about 70% of our subscriber base, we couldn’t do 100% because of the long-term contracts on some of them. And we had great success. We didn’t get any real pushback. We didn’t see any increase in churn we’ll do it again this year. We’ll monitor it very closely. I think you’re also seeing a dynamic where the churn itself is slowing down because the customers that are still left using pagers really value the pagers for their functionality and utility. So it gets more sticky as it gets slightly smaller, if that makes sense to you. That combined with the fact that these price increases aren’t big numbers, what you pay for a page or even with a price increase is miniscule to what you would pay for, say, one of our competitors’ mobile apps. I mean, it’s not even in the same ballpark. And by the way, the page is going to work when the mobile app doesn’t work. So I don’t expect any major negative consequences in terms of the paving churn for 2024, and I would expect kind of more of the same.
Okay. And then shifting over to the software side, just to really blow out quarter there with the software ops bookings. I heard you loud and clear. We shouldn’t anticipate this to infinity and beyond. But this – the pipeline here, have we run the pipeline dry? What are we looking at for Q3, Q4? – and beyond, is there still – you still see a lot of potential both in the installed base as well as new logos.
Well, great question, and thanks for it. Well, first of all, obviously, we had a monster quarter. I mean there’s no other way to put it. We had some deals. I think I mentioned at the end of last quarter that we had thought we’d get in the first quarter that slipped into the second quarter. So that that kind of got us off to a really good start in the second quarter. And then our team is motivated to hit. They’re motivated to win. They pulled in some deals from the third quarter, they pulled in some deals in the fourth quarter. and about all the deals that we have slated for the second quarter came in. So, all that combined to make a really, really good and strong result. The pipeline continues to grow, and it’s growing with extremely high-quality qualified leads. So, we’re not concerned about that at all. We do think it’s better to look at it on a year-over-year basis, and we do think we’re going to show a year-over-year growth in 18% 19%, 20% range in software operations bookings for 2023. And that would be our plan going forward as well. We’ll give guidance on 2024 when we report the fourth quarter in late February.
But yes, I don’t expect it’s going to – we’re not going to do worse than that, and who knows we might even do better. Sales is always going to be lumpy in software. And second quarter was one of those good lumps to get – but I think for the entire year, you’re going to see that kind of 18%, 19%, 20% year-over-year software operations bookings growth. I want to say, Eric, I want to say one other thing about that, that we don’t talk a lot about publicly, we tell our Board and everything. But when we’re reporting software operations bookings, we’re reporting the sales bookings value. And that’s essentially the value that we use to pay commission to our salespeople, et cetera. So, for instance, the 2 deals we gave as examples, one was for $3.9 million that was the sales booking value. That deal is actually worth over $5.1 million to the company through the maintenance associated with it.
So, the value to the company is we’ve locked that customer up for three years and they are going to continue paying us maintenance in year 2 and year 3 which we don’t pay commission on that’s a much more valuable deal. The second deal we talked about was the $1.1 million deal on sales booking value but that deal is actually $3.5 million almost $3.6 million total booking value to the company because of the extra maintenance that we’re getting on it going forward into that very large customer. A number of them are like that if you looked at our top 26 deals the sales booking value on those is only right around $12 million but the booking value to the company when you count that the contractual obligation those customers to pay us maintenance in year 2 and year 3 is about $19 million. It’s all good news that’s going to result ultimately by the way in lower turn in maintenance right, because you locked in those customers in long term so like I’ve said we’re firing on all cylinders right now–
The 2 examples that you gave, the $3.9 million contract with the 140-hospital health care system, can you help me understand, I assume you had some installed but did they put out an RP for an enterprise wide and you picked up new locations or was this a new logo where the locations that you won are your first entrée to this customer?
Actually, great question, I’m glad you asked it and Mike and Calvin can weigh in, but my perspective from working with the sales team on this stuff is that every time we go on with one of these customers, the conversation with the customer starts out, “I don’t have any money”, “the budget’s tight”, “I can’t spend anything”, “I’ve been told to extract cost”, “we got to save money”, “I need help from my vendors”, et cetera. And what we remind the salespeople on a regular basis is that the truth of the matter is the human nature of these people, people do like to buy, and they like to buy from people they like. And they like people that help them with very complicated problems. So, if you’re a CIO of a hospital right now, you’ve got your CFO, your CEO, everybody is kind of beating on you to save money. – we sit down with them with our value-added services team and our sales team. We bring in a group of people. We look at their very complicated workflows. We look at the very complex integrations and the number of solutions that they’ve got to work with we analyze it very closely, and we say, here’s what you’re spending, here’s what you’re doing.
You can eliminate these 3 vendors, go with consolidated enterprise solution from Spok, save a lot of money. This particular customer is on an edict to go to a national command and control system. And they have about 140 hospitals. This deal is only for about 25% of that base are starting with the first 37 proof-of-concept get that to work, and then there’s potential to get all the rest of them – and so what’s happening is – and I don’t want to make you think all of a sudden the ticket is wide open and hospitals are buying like crazy because they’re as tight as they’ve been, but they’re buying from us because we have a huge incumbency – we have huge experience, and we actually know how to work with them and show them how they actually save money by maybe they’re paying a little more to spoke, but overall, they’re paying a lot less and they have a very predictable budget line going in the next 3 years because they know exactly what they’re going to pay for maintenance. They’ve seen our product road map. They know what they’re going to get for it. And then if you think about it, 3 years from now, that gives us another opportunity to go back there and we keep doing that across our base year after year after year, we’re farming that garden and it’s going to start yielding a lot of really nice crops for us, and this was one of the big examples this year. So hopefully, that extra color helps.
Yes, I appreciate it. Thanks for taking my question.
Thank you. [Operator Instructions]. Our next question is from Sid Tono with Who’s Private Investor.
Congrats to Mike, Calvin, and Alen team for the great quarter. My first question is from the moving on from the Spok Go, is there any learning as you’re working from the past few years on Spok Go that you can carry on to the car cone and other products?
Great question. The answer is absolutely massive learnings and massive leverage that we can use for what we did with Spok Go going into Spok Care Connect we are creating essentially a service-oriented architecture that will bridge a lot of common services between our specific console solutions where we are the industry leader by far. And that’s going to make us much more efficient. It’s going to make our customers much more efficient. And it’s actually going to reduce the amount of professional services.
So, I think operating expense or lower margin business, it will actually reduce that over the long term and let us get more efficient. We’ll be able to charge less for our solutions and make more, if you think about it, we’ll have higher margins. So absolutely, we did a heck of a job.
We created an amazing product. We’ve created an amazing solution. It had some just world-class state-of-the-art technology behind it. But our timing rolling it out in the midst of a global pandemic was not the greatest. So, we did have to reboot. We were spending about $20 million a year on that solution, and we weren’t getting a return and we didn’t see in the near term where we could really make that model work. So, we had to make the decision about 18 months ago. We made the change. And so, we’re still using some of that architecture and some of those learnings and what we’re doing with our Care Connect suite and it’s going great.
That’s great to hear. My second question is, I remember in the investor presentation, you show such and such companies, clients only have this solution and some other only wireless or software, is there any new effort on the cross-selling and incentive and whether actually there’s a benefit to use both solution in terms of interoperability and integrations.
Absolutely. We have something we call Spok Mobile with Pager, or what’s that up to Cabin, $6 million or $7 million a year. So, we’re already making $6 million or $7 million a year by taking our customers that that have Spok mobile and also allowing them to receive the message on the pagers and vice versa, and it’s growing. And we have some other things that we’re going to be announcing in the second half of this year, latter part of this year along that line that I think will be even more exciting.
But we’re very focused on that. We do separate our sales force. We have a specific discrete wireless sales force in a specific discrete software sales force with their teammates and they often bring each other into opportunities, and that’s one of the reasons for our success this year.
My last question is I know that you’re not in the final destination or finish yet, but can you take me a little bit more on like the model side optimism and stress level like two years ago, while you’re still in a trench of Spok Go and then last year when you make the tough decision to pivot and today, so give a little bit of comment or color on the soft side?
Thank you for the question. You’re very perceptive and it warms my heart to hear that question. Yes, we kind of Mike, Calvin, myself, our executive management team, our Board, we went through a lot over the past couple of years, and we had to make some tough decisions. But this team never gave up. I can’t tell you how high morale is in the company right now. It’s through the roof. Our voluntary turnover employee churn is the lowest it’s ever been. People are happy. They like being on a winning team. They see us continuing to post these numbers and they see what our customers are doing. I mean, we got an e-mail from one of these customer examples we gave you from the person that was in charge of making a decision.
We got an e-mail from them talking about just how complex it was to do the stuff that we’re doing and how good our people were in helping them do it. I shared it with our Board. It was so warming. And we shared it internally with our entire employee base. And we’re just – we’re in a really good place right now. We made some tough decisions, and we’re in a situation where last quarter significantly on revenue and adjusted EBITDA, we’ve up our guidance again this quarter on revenue and adjusted EBITDA. We’re now growth company, you know, we’re going to grow year-over-year on revenue and adjusted EBITDA. You know, we’re just – and we’re looking forward to share on our third quarter results with you guys on our fourth quarter. We’re just in a good place right now. And when I finished this call, we’re sending the note out to the employees about, you know, the great quarter that we just had. So they’re all in on the good news too. And we’re just – it’s good. I mean, Mike, Calvin, you guys want to add to that.
No, I think you articulated it perfectly. Big pivot from 18 months ago. It was very difficult to make the moves we did with Spok Go. We parted ways with a lot of our fine colleagues, but the company that is here today, a comment that I make a lot is, we’re rolling all in the same direction that may seem obvious, but to get an entire company absolutely focused and rowing in the same direction is really critical.
Yes. I mean, we gave a draft business plan to our Board yesterday, just to review. We’re not finalized with it. We’ll finalize it at the end of the quarter, at the end of the third quarter. But significant improvement in outlook to the one that we gave them a year ago in terms of our long-term financial projections and forecasts. So when you’re in an environment like that compared to the environment we were in when we were struggling with Spok Go and had activist quite frankly, knocking on the door and all that kind of distraction. None of that is there, everything is positive, and that builds its own synergy and it builds its own momentum as I’m sure you’re well aware. So thank you for the question.
Thank, Vince and Mike. Congrats again.
Okay, operator. That looks like that was the last question in the queue. We really appreciate everybody’s participation. Like I said earlier, we appreciate your patience while we’ve gone through this pivot. When we get to the end of this year, we’re going to have returned $50 million in cash to our shareholders over the course of the last 24 months. Our stock is going to be at a higher price, and our outlook is going to be much improved. So Spok is in a good place right now, and a lot of that is credit to you as investors who believe in with us and sticking with us. And we’re happy to be back in the Russell, and we look forward to sharing our third quarter results with you. Thank you very much.
Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.