# Spok Holdings, Inc: Form 10-Q for the period ended Mar 31, 2024

- Company: [Spok Holdings, Inc](/companies/spok.md) (CIK 1289945)
- Form: 10-Q
- Filed: 2024-05-02
- Accepted by EDGAR: May 2, 2024, 16:04 ET
- Period: 2024-03-31
- Accession: 0001289945-24-000032
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1289945/000128994524000032/spok-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1289945/000128994524000032/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $34.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $7.1m | us-gaap:CostOfRevenue |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $3.0m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $4.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $907.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $4.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.21 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.21 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 20,446,587 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $2.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $875.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $7.4m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-03-31 | $23.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $52.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $215.0m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $39.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $54.8m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $160.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 35,356 characters.

### 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.

### 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 months ended March 31, 2024 and 2023:

*(Dollars in thousands)*

| Revenue: | For the Three Months Ended March 31, 2024 | 2023 | Change Total% |  |
| --- | ---: | ---: | ---: | ---: |
| Wireless revenue | $18,595 | $19,028 | $(433) | (2.3)% |
| Software revenue | 16,314 | 14,152 | 2,162 | 15.3% |
| Total revenue | 34,909 | 33,180 | 1,729 | 5.2% |
| Operating expenses: |  |  |  |  |
| Cost of revenue (exclusive of items shown separately below) | 7,139 | 6,536 | 603 | 9.2% |
| Research and development | 2,951 | 2,493 | 458 | 18.4% |
| Technology operations | 6,299 | 6,587 | (288) | (4.4)% |
| Selling and marketing | 4,149 | 3,901 | 248 | 6.4% |
| General and administrative | 7,984 | 7,700 | 284 | 3.7% |
| Depreciation and accretion | 1,068 | 1,236 | (168) | (13.6)% |
| Severance and restructuring | 428 | 10 | 418 | 4,180.0% |
| Total operating expenses | 30,018 | 28,463 | 1,555 | 5.5% |
| Operating income | 4,891 | 4,717 | 174 | 3.7% |
| Interest income | 254 | 272 | (18) | (6.6)% |
| Other (expense) income | (2) | 53 | (55) | (103.8)% |
| Income before income taxes | 5,143 | 5,042 | 101 | 2.0% |
| Provision for income taxes | (907) | (1,925) | 1,018 | (52.9)% |
| Net income | $4,236 | $3,117 | $1,119 | 35.9% |
| **Supplemental Information** |  |  |  |  |
| Full-Time Equivalent ("FTE") Employees | 392 | 380 | 12 | 3.2% |
| Active transmitters | 3,165 | 3,300 | (135) | (4.1)% |

17

### 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 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:

*(Dollars in thousands)*

| Revenue - wireless: | For the Three Months Ended March 31, 2024 | 2023 | Change Total% |  |
| --- | ---: | ---: | ---: | ---: |
| Paging revenue | $17,970 | $18,525 | $(555) | (3.0)% |
| Product and other revenue | 625 | 503 | 122 | 24.3% |
| Total wireless revenue | 18,595 | 19,028 | (433) | (2.3)% |
| Revenue - software: |  |  |  |  |
| License | 2,626 | 1,618 | 1,008 | 62.3% |
| Professional services | 4,025 | 3,239 | 786 | 24.3% |
| Hardware | 384 | 356 | 28 | 7.9% |
| Operations revenue | 7,035 | 5,213 | 1,822 | 35.0% |
| Maintenance revenue | 9,279 | 8,939 | 340 | 3.8% |
| Total software revenue | 16,314 | 14,152 | 2,162 | 15.3% |
| Total revenue | $34,909 | $33,180 | $1,729 | 5.2% |

### 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 March 31, 2024, compared to the same period in 2023, reflective of the secular decrease in our wireless units in service, from 811 thousand as of March 31, 2023 to 753 thousand as of March 31, 2024. This was partially offset by an increase in ARPU, as a result of price increases initiated in September of 2023. ARPU was $7.89 for the three months ended March 31, 2024, as compared to $7.59 for the same period in 2023.

The decrease in paging revenue was also partially offset by the increase in product revenue due to one-time fees when customers cancel our services as a result of the secular decrease in our wireless units in service noted above.

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.

The following reflects the impact of subscribers and ARPU on the change in paging revenue:

*(in thousands)*

|  | For the Three Months Ended March 31, 2024 | 2023 | Change | Change Due To: ARPU | Units |
| --- | ---: | ---: | ---: | ---: | ---: |
| Paging revenue | $17,970 | $18,525 | $(555) | $695 | $(1,250) |

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 March 31, 2024, when compared to the same period in 2023. This increase in revenue was primarily due to license and professional services revenue. License revenue increases were driven by higher operations bookings as compared to the same period in 2023. The increase in professional services revenue was driven by our hiring efforts in the second half of 2023 and continuing into the first quarter, as we aligned staffing levels with our backlog which have grown as a result of our operations bookings results.

### Maintenance Revenue

For the three months ended March 31, 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 avenues 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.

The following is a review of our operating expense categories for the three months ended March 31, 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:

*(Dollars in thousands)*

|  | For the Three Months Ended March 31, 2024 | 2023 | Change Total% |  |
| --- | ---: | ---: | ---: | ---: |
| Payroll and related | $4,568 | $3,980 | $588 | 14.8% |
| Cost of sales | 1,221 | 1,205 | 16 | 1.3% |
| Recoverable taxes and fees | 945 | 971 | (26) | (2.7)% |
| Stock-based compensation | 80 | 76 | 4 | 5.3% |
| Other | 325 | 304 | 21 | 6.9% |
| Total cost of revenue | $7,139 | $6,536 | $603 | 9.2% |
| FTE Employees | 152 | 131 | 21 | 16.0% |

For the three months ended March 31, 2024, cost of revenue increased compared to the same period in 2023, primarily driven by increases in payroll and related expenses, attributable primarily 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.

### Research and Development

Research and development expenses consisted of the following items:

*(Dollars in thousands)*

|  | For the Three Months Ended March 31, 2024 | 2023 | Change Total% |  |
| --- | ---: | ---: | ---: | ---: |
| Payroll and related | $1,537 | $1,541 | $(4) | (0.3)% |
| Outside services | 1,266 | 846 | 420 | 49.6% |
| Stock-based compensation | 49 | 27 | 22 | 81.5% |
| Other | 99 | 79 | 20 | 25.3% |
| Total research and development | $2,951 | $2,493 | $458 | 18.4% |
| FTE Employees | 35 | 40 | (5) | (12.5)% |

For the three months ended March 31, 2024, research and development expenses increased compared to the same period in 2023, primarily driven by an increase in outside services as we continue to invest in the enhancement of our software solutions.

### Technology Operations

Technology operations expenses consisted primarily of the following items:

*(Dollars in thousands)*

|  | For the Three Months Ended March 31, 2024 | 2023 | Change Total% |  |
| --- | ---: | ---: | ---: | ---: |
| Payroll and related | $2,208 | $2,339 | $(131) | (5.6)% |
| Site rent | 2,787 | 2,881 | (94) | (3.3)% |
| Telecommunications | 692 | 707 | (15) | (2.1)% |
| Stock-based compensation | 45 | 55 | (10) | (18.2)% |
| Other | 567 | 605 | (38) | (6.3)% |
| Technology Operations | $6,299 | $6,587 | $(288) | (4.4)% |
| FTE Employees | 67 | 73 | (6) | (8.2)% |

For the three months ended March 31, 2024, technology operations expenses decreased compared to the same period in 2023, primarily due to a decrease in payroll and related expenses and site rent.

The decrease in payroll and related expenses is attributable 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 4.1% decline in active transmitters from March 31, 2023 to March 31, 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:

*(Dollars in thousands)*

|  | For the Three Months Ended March 31, 2024 | 2023 | Change Total% |  |
| --- | ---: | ---: | ---: | ---: |
| Payroll and related | $2,578 | $2,449 | $129 | 5.3% |
| Commissions | 732 | 799 | (67) | (8.4)% |
| Stock-based compensation | 135 | 94 | 41 | 43.6% |
| Advertising and events | 336 | 231 | 105 | 45.5% |
| Other | 368 | 328 | 40 | 12.2% |
| Total selling and marketing | $4,149 | $3,901 | $248 | 6.4% |
| FTE Employees | 67 | 66 | 1 | 1.5% |

For the three months ended March 31, 2024, selling and marketing expenses increased compared to the same period in 2023, driven primarily by increases in payroll and related expenses and advertising and events expenses.

The increase in payroll and related expenses is due to increases in employee compensation costs. The increase in advertising and events expenses, largely due to increased trade show participation and overall travel as compared to the same period in 2023.

### General and Administrative

General and administrative expenses consisted of the following items:

*(Dollars in thousands)*

|  | For the Three Months Ended March 31, 2024 | 2023 | Change Total% |  |
| --- | ---: | ---: | ---: | ---: |
| Payroll and related | $3,443 | $3,266 | $177 | 5.4% |
| Stock-based compensation | 839 | 684 | 155 | 22.7% |
| Facility rent, office and technology costs | 1,679 | 1,848 | (169) | (9.1)% |
| Outside services | 915 | 1,003 | (88) | (8.8)% |
| Taxes, licenses and permits | 242 | 262 | (20) | (7.6)% |
| Bad debt | 131 | (135) | 266 | (197.0)% |
| Other | 735 | 772 | (37) | (4.8)% |
| Total general and administrative | $7,984 | $7,700 | $284 | 3.7% |
| FTE Employees | 71 | 70 | 1 | 1.4% |

For the three months ended March 31, 2024, general and administrative expenses increased compared to the same period in 2023, primarily driven by increases in bad debt, payroll and related expenses and stock-based compensation, partially offset by decreases in facility rent, office and technology costs.

The increase in bad debt expenses was primarily driven by a reversal of bad debt expense for the three months ended March 31, 2023, based on our assessment of accounts receivable and estimated allowance needs, which did not occur during the three months ended March 31, 2024. Payroll and related and stock compensation expenses increased for the three months ended March 31, 2024 due to increases in employee compensation costs.

The decreases in facility rent, office and technology costs were primarily due to reductions in office space in late 2023.

### Depreciation and Accretion

For the three months ended March 31, 2024, and 2023, depreciation and accretion expenses were $1.1 million and $1.2 million, respectively, primarily due to decreases in asset retirement cost.

### Severance and Restructuring

For the three months ended March 31, 2024, we incurred severance and restructuring expenses of $0.4 million, primarily related to early termination for the lease of our corporate headquarters in Alexandria, Virginia in September 2023 as a result of our continuous efforts to optimize costs. No significant severance and restructuring expenses were incurred for the three months ended March 31, 2023.

### Income Taxes

Provision for income taxes was $0.9 million and $1.9 million for the three months ended March 31, 2024 and 2023, respectively. Provision for income taxes changed for the three months ended March 31, 2024 compared to the same period in 2023, primarily due to the effect of the anticipated annual effective tax rate change resulting from certain permanent tax differences, estimated research and development tax credits and related valuation allowance, and certain discrete items. Further details can be found in Note 11, "Income Taxes" in the Notes to Condensed Consolidated Financial Statements.

### Liquidity and Capital Resources

### Cash and Cash Equivalents

As of March 31, 2024, we held cash and cash equivalents of $23.3 million. The available cash and cash equivalents consist of cash in our operating accounts and cash invested in interest-bearing funds managed by third-party financial institutions. The Company maintains a majority of its cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and the majority of our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business, financial condition and results of operations.

### Cash Sources

Our primary sources of liquidity have been our cash flows generated from operations and existing cash and cash equivalents. We maintain a level of liquidity sufficient to allow us to meet our cash needs in both the short term (next 12 months) and long term (beyond 12 months). At any point in time, we maintain approximately $5.0 million to $10.0 million in our operating accounts at third-party financial institutions. While we monitor daily the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, we have experienced no loss or lack of access to cash in our operating accounts.

### Cash Uses

We intend to use our cash on hand to provide working capital, to support operations, to invest in our business, and to return value to stockholders through cash dividends and repurchases of our common stock. We may also consider using cash to fund or complete opportunistic investments and acquisitions that we believe will provide a measure of growth or revenue stability while supporting our existing operations.

With the successful completion of the restructuring plan and our ongoing efforts to stabilize revenue and optimize costs, we anticipate positive cash flow generation will continue in future operating periods. In February 2022, the Board of Directors authorized a share repurchase program for up to $10 million of the Company’s common stock. This repurchase authority allows us, at management's discretion, to selectively repurchase shares of our common stock from time to time in the open market depending upon market price and other factors.

### Cash Flows Overview

In the event that net cash provided by operating activities and cash on hand are not sufficient to meet future cash requirements, we may be required to reduce planned capital expenses, reduce or eliminate our cash dividends to stockholders, not repurchase shares of our common stock under the share repurchase program, sell assets or seek additional financing. We can provide no assurance that reductions in planned capital expenses or proceeds from asset sales would be sufficient to cover shortfalls in available cash or that outside financing would be available on acceptable terms.

Based on current and anticipated levels of operations, we anticipate that net cash provided by operating activities, together with the available cash on hand at March 31, 2024, should be adequate to meet our anticipated cash requirements for the short term (next 12 months) and long term (beyond 12 months).

The following table sets forth information on our net cash flows from operating, investing, and financing activities for the periods stated:

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Net cash provided by operating activities | $1,998 | $2,611 | $(613) |
| Net cash used in investing activities | (875) | (649) | (226) |
| Net cash used in financing activities | (9,814) | (8,178) | (1,636) |

24

### Operating Activities

As discussed above, we are dependent on cash flows from operating activities to meet our cash requirements. Cash from operations varies depending on changes in various working capital items, including deferred revenues, accounts payable, accounts receivable, prepaid expenses and various accrued expenses.

For the three months ended March 31, 2024, net cash provided by operating activities was $2.0 million, a decrease of $0.6 million compared to the three months ended March 31, 2023. This decrease was primarily driven by accounts payable, accrued liabilities and other of $6.4 million and deferred revenue of $1.4 million, partially offset by net income of $4.2 million, accounts receivable of $1.3 million and non-cash items such as depreciation and accretion of $1.1 million, deferred income tax expense of $0.9 million and stock-based compensation of $1.1 million.

For the three months ended March 31, 2023, net cash provided by operating activities was $2.6 million, an increase of $7.5 million compared to the three months ended March 31, 2022. This increase was primarily driven by net income of $3.1 million, accounts receivable of $4.2 million and non-cash items such as depreciation and accretion of $1.2 million and stock-based compensation of $0.9 million. These increases were partially offset by accounts payable, accrued liabilities and other of $6.7 million and deferred revenue of $1.6 million.

### Investing Activities

For the three months ended March 31, 2024, and 2023, net cash used in investing activities was $0.9 million and $0.6 million, respectively. Net cash used in investing activities reflects purchases of property and equipment.

### Financing Activities

For the three months ended March 31, 2024, and 2023, net cash used in financing activities was $9.8 million and $8.2 million, respectively, primarily due to cash distributions to stockholders and the purchase of common stock for tax withholding purposes on vested equity awards.

On May 1, 2024, our Board of Directors declared a regular quarterly cash dividend of $0.3125 per share of common stock with a record date of May 24, 2024, and a payment date of June 24, 2024. This cash dividend of approximately $6.3 million, applicable to our common stock outstanding, will be paid from available cash on hand.

### Commitments and Contingencies

In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

Purchase obligations are defined as agreements to purchase goods or services that are enforceable, legally binding, non-cancelable, have a remaining term in excess of one year and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable pricing provisions; and the approximate timing of transactions. The amounts of such obligations are based on our contractual commitments, however, it is possible that we may be able to negotiate lower payments if we choose to exit these contracts before their expiration date.

Our contractual payment obligations for operating leases apply to leases for office space and transmitter locations. Substantially all of these leases have lease terms ranging from one month to five years. We continue to review our office and transmitter locations and intend to replace, reduce or consolidate leases where possible. 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.

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

The Company evaluates contingencies on an ongoing basis and establishes loss provisions for matters in which losses are probable and the amount of loss can be reasonably estimated.

The following table provides the Company's significant commitments and contractual obligations as of March 31, 2024:

*(Dollars in thousands)*

|  | Payments Due by Period Total | 1 year or Less | 1 to 3 years | 3 to 5 years | More than 5 years |
| --- | ---: | ---: | ---: | ---: | ---: |
| Operating lease obligations | $12,650 | $3,653 | $4,844 | $2,701 | $1,452 |
| Unconditional purchase obligations | 5,850 | 2,193 | 2,914 | 743 | — |
| Total contractual obligations | $18,500 | $5,846 | $7,758 | $3,444 | $1,452 |

Refer to Note 6, "Leases" and Note 12, "Commitments and Contingencies" in the Notes to Condensed Consolidated Financial Statements for further discussion on our commitments and contingencies.

### Related Party Transactions

See Note 13, "Related Parties" in the Notes to Condensed Consolidated Financial Statements for a discussion regarding our related party transactions.

### Critical Accounting Policies and Estimates

The preceding discussion and analysis of financial condition and operations is based on our Condensed Consolidated Financial Statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of our Condensed Consolidated Financial Statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, 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 and goodwill, accounts receivable, 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.

There have been no changes to the critical accounting policies reported in the 2023 Annual Report that affect our significant judgments and estimates used in the preparation of our Condensed Consolidated Financial Statements.

## Market risk

As filed, 432 characters.

### Interest Rate Risk

As of March 31, 2024, we had no outstanding debt and no revolving credit facility.

### Foreign Currency Exchange Rate Risk

We conduct a limited amount of business outside the United States. The financial impact of transactions billed in foreign currencies is immaterial to our financial results and, consequently, we do not have any material exposure to the risk of foreign currency exchange rate fluctuations.

## Controls and procedures

As filed, 1,572 characters.

### Evaluation of Disclosure Controls and Procedures

Our management carried out an evaluation, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the participation of our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures, as of the end of our last fiscal quarter. Disclosure controls and procedures are defined under Rule 13a-15(e) under the Exchange Act as controls and other procedures of an issuer that are designed to ensure that the information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based upon this evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2024.

### Changes in Internal Control over Financial Reporting

There were no changes made to the Company’s internal control over financial reporting during the three months ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 163 characters.

The risk factors included in “Item 1A – Risk Factors” of Part I of the 2023 Annual Report have not materially changed during the three months ended March 31, 2024.

Filed May 2, 2024.
Source: SEC EDGAR, the filing index for accession 0001289945-24-000032. Last ingested by Listed: Nov 4, 2026, 17:13 ET. No prices; not investment advice.