Spok Holdings Inc (SPOK) 2015 Q2 法說會逐字稿

Good morning and welcome to Spok's second quarter investor call. Today's call is being recorded. Online today, we have Vince Kelly, President and Chief Executive Officer; Shawn Endsley, Chief Financial Officer; and Hemant Goel, President of the Company's operating company. At this time for opening comments, I will turn the call over to Mr. Endsley. Please go ahead, sir.

Good morning. Thank you for joining us for our second quarter investor update. Before we discuss our operating results, I want to remind everyone that today's conference call may include forward-looking statements that are subject to risks and uncertainties relating to Spok's future financial and business performance. Such statements may include estimates of revenue, expenses, and income as well as other predictive statements or plans, which are dependent upon future events or conditions. These statements represent the Company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results. Spok's actual results could differ materially from those anticipated in these forward-looking statements.

Although these statements are based upon assumptions that the Company believes to be reasonable, they are subject to risks and uncertainties. Please review the risk factor section relating to our operations and the business environment in which we compete contained in our 2014 Form 10-K; our second quarter Form 10-Q, which we expect to file later today; 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, Shawn, and good morning. Our second quarter results reflect substantial progress toward our goal of becoming a consistently growing leader of critical communications, as our software sales gain momentum and our wireless trends improve to their best levels in the Company's recent history.

Spok continues to be a leader in the critical communications field, particularly in the healthcare segment. All 15 hospitals recently names to the US News and World Report's 2015 to 2016 Best Hospitals Honor Roll, as well as all 12 best children's hospitals are Spok customers and rely on Spok's solutions to help them provide the best care.

For the second quarter, we met the majority of our performance goals consistent with our previously provided financial guidance for 2015. Key accomplishments included a strong performance by our sales team, which resulted in higher gross paid replacements and higher software revenue and bookings, along with a solid backlog and sales pipeline at June 30. Our wireless trends continue to improve as the rates of pager churn and wireless revenue erosion reached record low levels. Plus, we ended the quarter ahead of our operating goals for total revenue, gross placements on average per unit.

Overall, we met or exceeded the majority of our operating goals, enhanced our product offerings, expanded our market reach, strengthened our balance sheet, and again returned capital to our stockholders in the form of cash dividends and share repurchases. Shawn and Hemant will provide details on our financial performance and operating activity shortly, but first I want to remove some other key results for the second quarter.

Number one, software bookings increased 10.9% to $21 million from $19 million in the year-earlier quarter, reaching a record high for second quarter bookings. Software revenue rose 13.9% to $17.7 million from the second quarter of 2014 while our backlog totaled $43.5 million at June 30, also our near a record high. At the same time, our pipeline of qualified sales leads continued to grow, thanks to the excellent work by our sales and marketing team. Customer demand remains strongest in North America, specifically among hospitals and other healthcare organizations seeking more automation and advanced technology to improve efficiency. This included solutions for secure texting, critical smart phone communications, call center management, clinical alerting, and emergency notification. We also continued to expand our international presence during the quarter as well as widen our focus beyond healthcare in such market segments as public safety, business, hospitality, education, and government services.

Number two, wireless subscriber and revenue results also reflected solid improvement. The quarterly rate of paging unit erosion improved to a record low 1.6%, while the annual rate improved to an all-time low of 6.8%. The annual and quarterly rates of wireless revenue erosion also improved to record lows. In addition, paging ARPU remained relatively stable, primarily due to consistent results from our healthcare customer base Overall, we were pleased to see these positive results for our paging and wireless products and services, especially in our top of healthcare segment, which now comprises approximately 79% of our direct paging subscriber base.

Number three, consolidated operating expenses, excluding depreciation, amortization, and accretion totaled $38.9 million, up slightly from the first quarter and year earlier quarter. Absent non-recurring one-time charges, expenses would have been down slightly from the prior quarter. For the balance of the year, we expect operating expenses to drop in the third quarter and then increase slightly in the fourth quarter as we continue to invest in additional product development, as we position the Company for long-term growth. Shawn will review our second quarter operating expenses in greater detail in a few minutes.

Number four, consolidated EBITDA, or earnings before interest, taxes, depreciation, and amortization, was $9.1 million in the second quarter compared to $10 million in the first quarter. This represented an EBITDA margin of 18.9% versus 20.8% in the prior quarter. However, absent one-time charges, our second quarter EBITDA margin would have increased from the prior quarter consistent with our 2015 financial guidance and recent forecast. As we discussed in the beginning of the year, we implemented a margin improvement plan in January and are pleased to have made steady progress with it over the last two quarters.

Number five, finally we again generated sufficient free cash flow in the second quarter to return capital to stockholders in the form of cash dividends, and share repurchases. During the quarter, the Company paid quarterly cash dividends to stockholders totally $2.7 million or $0.125 per share. We also repurchased 177,330 shares of common stock under our buyback program for approximately $3 million at an average price of $16.97 per share. Over the past 11 years, we have now returned $434.1 million to our stockholders in cash dividends and repurchased $67.4 million of our common stock. I'll comment further on our capital allocation strategy shortly.

Overall, the Company posted excellent operating results for the quarter. We achieved our key operating goals, generated significant free cash flow, expanded our services and geographic reach, and returned capital to stockholders. We also made further progress toward our goal of transforming Spok into a company with a clear path for long-term growth. I'll make some additional comments on our operating performance and business activities in a few minutes, but first, Shawn Endsley, our Chief Financial Officer, will review the financial highlights of the quarter. And after that, Hemant Goel, who was recently promoted to President of our Operating Company, will comment on our second quarter sales and marketing activities. Shawn?

Thanks, Vince. Before I discuss financial highlights for the second quarter, I would again encourage you to review our second quarter Form 10-Q, which we expect to file later today, since it contains far more information about our business operations and financial performance than we will cover on this call.

As Vince noted, we are pleased with the Company's overall operating performance for the quarter. Continued growth of software revenue and bookings combined with solid improvement in wireless trends and focused expense management enabled us to again generate positive cash flows and maintain a strong balance sheet. We also continue to make steady progress toward our long-term business goals.

This morning, I will review four key areas that influence our second quarter financial performance. They include, number one, factors related to second quarter revenue; number two, selected items that influenced second quarter expenses; number three, a brief review of the balance sheet, including deferred tax assets; and number four, an update on our financial guidance for 2015. As usual, if you have specific questions about these items or any of our quarterly financial results, I would be glad to address them during the Q&A.

With respect to revenue for the second quarter, consolidated revenue totaled $48 million. Of the total, software revenue increased 13.9% from the year-earlier quarter to $17.7 million, while wireless revenue declined 9.8% to $30.2 million. Software revenue represented 37% of our total revenue for the quarter compared to 31.7% for the second quarter of 2014, reflecting the Company's continued success in transitioning to a software based business model.

Second quarter software revenue reflected increases in both operations and maintenance revenue compared to the second quarter of 2014. Software operations revenue, now generally recognized on a ratable basis, increased 16.1% to $9.3 million from $8.1 million in the second quarter of 2014. The increase was driven largely by the strong performance of our professional services organization that delivered a 29.5% increase in services revenue over the second quarter of 2014.

Maintenance revenue, the other component of software revenue, increased 11.6% to $8.4 million in the second quarter versus $7.5 million in the second quarter of 2014. The increase reflects our continuing maintenance renewal rates in excess of 99% from our installed software solution base and the increase in new name accounts with attached maintenance.

Wireless revenue was $30.2 million for the second quarter, declining 1.5% from the first quarter, as the quarter-to-quarter rate of revenue erosion reached a four-year low. In addition, annual revenue erosion improved to 9.8% from the year earlier quarter to fall below 10% for the first time in more than a decade.

A strong performance by our sales teams coupled with solid retention and stable ARPU contributed to wireless revenue results. We include an additional schedule in our news release detailing the components of our software and wireless revenue.

Turning to operating expenses, we reported consolidated operating expenses, excluding depreciation, amortization, and accretion of $38.9 million for the quarter compared to 37.4 million in the year-earlier quarter. Expenses were impacted by two one-time charges totaling $2.5 million. They included a $1.7 million expense for severance and stock-based compensation related to the departure of our former president, and an inventory write-off of $0.8 million.

Regarding the inventory charge, we consolidated our primary inventory location to our facility in Texas during the quarter. And based on the inventory count after the move and a review of our procedures, determined that a charge was required. We have changed our procedures to prevent future inventory write-offs. Absent both one-time charge-offs, second quarter operating expenses would have been $36.4 million. EBITDA would have been $11.5 million and our EBITDA margin would have been 24.1%.

In addition, cost of revenue expenses in the second quarter increased $1.9 million, which includes the one-time $0.8 million inventory charge from the year earlier quarter. Excluding the one-time inventory charge, cost of revenue expense increased 16.7% from the second quarter of 2014, generally in line with the increase in software operations revenue of 16.1% from the second quarter of 2014.

Cost of revenue expense reflects costs associated with the implementation of our solutions, including third-party installations and third-party hardware and software to meet our customer commitments. As noted on previous investor calls, we increased the use of more expensive third-party implementation services and third-party hardware and software in the fourth quarter of 2014 to meet customer requirements. We continued to use those services in the first and second quarters, but now manage these expenses more effectively to bring our margins more in line with expectations. Still, we will continue to manage this area of expense closely for the remainder of the year.

All other operating expenses declined from the second quarter of 2014 reflecting a focused effort to manage all expenses to accommodate the changing nature of our business.

With regard to headcount, full-time equivalent employees or FTEs increased to 608 at June 30 versus 604 at March 31, as we continued to adjust employee levels to meet the changing requirements of our business. Looking ahead, we expect recurring payroll and related expenses will reflect the level of our investments to grow software revenues and bookings and to support the Company's goals for wireless revenues and infrastructure.

Second quarter capital expenses were approximately $2 million and were incurred primarily for the purchase of pagers to support our wireless customers and infrastructure for general business operations. We do not expect any significant changes to the level of our capital expense requirements for the balance of 2015.

Looking at our deferred tax assets or DTAs, we had approximately $134.1 million in DTAs at June 30 before recognition of our valuation allowance. These DTAs allow us to shelter virtually all of our regular federal taxable income, although we are required to pay a minimal amount in federal alternative minimum tax. We continue to evaluate the need for a valuation allowance and will adjust the valuation allowance based on the relevant accounting and operational circumstances of our business. This evaluation usually occurs in the fourth quarter of each year.

Turning to the balance sheet and other financial items, the Company generated $21.7 million in cash from operating activities for the first six months of 2015, an increase of 18.1% from the first six months of 2014. Our net cash provided by operating activities in the first half of 2015 reflects our success in collecting our accounts receivable and in billing for our services, as reflected in increased deferred revenue.

We ended the quarter with a cash balance of $117.1 million. We expect to use that cash in connection with quarterly cash dividends as well as potential share repurchases in 2015. We continue to operate as a debt-free company. Vince will comment on our capital allocation strategy in a few minutes.

Finally, with respect to our financial guidance for 2015, we are maintaining the guidance we previously provided, which projects consolidated total revenue to range from $183 million to $201 million with wireless revenue between $112 million and $122 million and software revenue between $71 million and $79 million. Consolidated operating expenses excluding depreciation, amortization, and accretion of $145 million to $154 million and capital expenses to range from $5.5 million to $7.5 million. Finally, I would remind you that our projections are based on current trends and that those trends are always subject to change.

With that, I'll turn the call over to Hemant for a sales and marketing update. Hemant?

Thank you, Shawn, and good morning. Throughout the second quarter, our momentum from Q1 continued. Our sales and marketing teams helped us close record second quarter of software bookings of $21 million. This represents a 10.9% increase in Q2 in 2014 and includes a 99.8% renewal rate from maintenance. Our customers see us more than just a vendor, but as a partner and this high rate of renewal is evidence of the value they place in our supports services and ongoing product development.

Our customers trust our solutions for their critical communication needs and frequently return to Spok for upgrades to their existing applications, to add new products, and to solve their communications problems. For example, a midsize hospital in the Northeastern United States has been a long-time call center customer, came to us looking for a solution to several challenges. They needed a way to support secure physician communications with their bring your own device environment, often referred to as BYOD. They also wanted to send patient monitoring alerts to providers' mobile devices and deliver patient test results securely from both lab and radiology departments to ordering physicians.

Our robust suite of solutions was able to fulfill all of these needs and this customer is adding secure texting, clinical alerting, and critical test results management to the Spok solution set. This was one of our largest six-figure deals for the quarter.

We are experiencing a lot of momentum so far this year from mobile solutions as these growth trends continue throughout the healthcare industry. While secure texting is one of our fastest growing solutions with sales of over 50% over Q2 last year, we are hearing that security alone is not enough. Hospitals are now taking a broader view of communications and simultaneously want to improve clinical workflows, care team coordination, and patient safety. Spok is uniquely positioned to support these hospital initiatives. The distinctive integration of our console and web-based staff directory with on-call schedules, mobile solutions and [product] contact preferences means staff can easily find one another and share important information securely.

The advantages we offer as a single source for all of these communication options, plus clinical alerting and critical test results, are a key factor for a number of the hospitals and health systems we work with. For example, a new customer in second quarter, a midsized hospital in the Southern United States, chose Spok because we could fulfill all of their requirements for secure critical communication workflows with a single platform. We are working with this customer to improve patient care and physician satisfaction by allowing doctors to update their own on-call schedules, receive patient test results on their mobile devices, and communicate securely with other members of each patient's care team. We will also help them to streamline their contact center processes and enhance operator efficiency.

Switching gears for a moment, I want to talk a little bit about our professional services group because I think their success is not widely known. We provide more than software solutions for our customers. They consider us partners because we deliver exceptional customer service. One of the ways we've enhanced our services is the establishment of a new query response team. This team is assisting with new implementations and speeding the resolution of challenges that arise during installation. We are also continuing certification programs that help our staff provide the best quality service and a new risk assessment project is helping us identify potential challenges earlier or in new projects, allowing us to mitigate issues quickly for smoother implementations and improved customer satisfaction.

All of these developments not only benefit our customers, they also improve our margin for software operations. By continuing to use internal staff more efficiently and effectively, we have been able to reduce the use of third party services for implementation, which increase our margin contribute in the second quarter with respect to the services we deliver. We are making progress in other long-term -- long-range objectives as well. In Q2, we welcomed more than 50 new customers to the Spok family. These are hospitals, government agencies, and hospitality organizations that have never worked with us before, and they are an important part of our future growth. Some of these new customers are in the EMEA and APAC regions, further expanding our global presence.

Total international sales in Q2 increased 25% year-over-year. Clinical alerting and mobility support, along with call center efficiencies were the most sought after solution areas for us overseas. One of our largest international bookings during the second quarter was a six-figure console deal with a new luxury resort and casino in the APAC region. This hospitality customer is seeking efficient processes of guest requests, incoming bookings, wake up calls, and guest information management that integrates smoothly with their other systems.

Continuing with a focus on international growth, Spok representatives attended healthcare trade shows all over the world in the second quarter. For the first time ever, we exhibited in Latin America. HOSPITALAR in Sao Paulo, Brazil is one of the largest trade shows in the region and was an opportunity for our Spok team to build partnerships and learn more about the specific needs of Latin American hospitals.

In addition to Brazil, we also demonstrated our solutions at healthcare shows in the United Kingdom, Malaysia, Sydney, and South Africa. While healthcare comprises the largest percentage of our business, public safety remains an additional growth focus with dedicated sales team members. Public safety customers rely on our products to support emergency call handling at their 911 dispatch centers. Our solutions of dependability, which have been verified with Joint Interoperability Test Command, or JITC certification, is a significant factor in our continued success in adding government sector and US military locations to our customer base. In fact, four of our six-figure deals in Q2 were from government agencies and municipalities.

Regarding our innovation initiatives, we launched two new customer feedback forms earlier this year. Our Strategic Advisory Council, or SAC, and innovation partner alliance IPA. The SAC is made up of C-level executives from our marquee brand healthcare institutions, and at our first meeting we presented an overview of Spok's strategic direction to begin conversations. Our next meeting is in August and will focus on member information sharing, including each participant's healthcare environment and how their organization works with Spok. Our IPA panel brings together key representatives from several large healthcare customers and has been meeting regularly every other week. Members of this group have already provided us with valuable feedback on how they use our solutions. At the next meeting, they will be sharing a day in the life providing an in-depth look at their organization and how it functions.

To enhance all of these discussions and expand our customer engagement, we will be debuting an online networking tool in August. This customer community network will provide a place for members to connect, discuss issues, and select product ideas.

Before turning things back over to Vince, I want to provide an update on our marketing activities. The marketing team added two new members in the second quarter to grow our content development, lead generation, and international efforts. Ongoing investment and activities in these areas, which include digital campaigns, webinars, white papers, and website improvements help us drive leads and fill the sales pipeline.

In the second quarter, the amount of closed business that originated from qualified marketing leads achieved a new record, 130.4% over Q2 last year. As part of our brand awareness efforts, we have expanded our use of automation tools to coordinate social activities and maximize our social reach. Quarter-over-quarter, our social following has increased 6.5%, engagement with our audience is up 21.8%, and our social adds of free trial, offer secure texting solution contribution, over 18,000 clicks into the app store and Google Play. Marketing is also responsible for planning and coordinating Spok's presence at the international trade shows I've already mentioned, as well as events in the Americas.

In Q2, these included [HENS], one of the largest healthcare conferences in the United States, five additional healthcare exhibitions and five public safety shows. Staff conversations at these trade shows resulted in an increase in qualified leads of 31% year-over-year. In summary, I'm very pleased with our results for the second quarter. We look forward to continuing this positive momentum through the second half of 2015. With that, I'll pass it over to Vince. Vince?

Thank you, Hemant. Before we take your questions, I want to comment briefly on several items that may be of interest. First, I want to update you on our overall capital allocation strategy. Second, brief you on our product development initiatives, and third, provide details for our upcoming investor meeting and analyst day scheduled for early November in New York.

Turning to our overall capital allocation strategy, our goal remains to achieve sustainable business growth while maximizing long-term stockholder value. We will do this by operating profitably, returning capital to our stockholders, and investing back in our business in the form of product development, market expansion, and potentially accretive acquisitions.

We expect to continue paying our quarterly dividend of $0.125 per share, or $0.50 annually for the foreseeable future based on our current projections for operating cash flow. In addition, we may continue to buy back additional shares of our common stock from time to time under our share repurchase program, depending on the share price and market conditions. As I mentioned earlier, we repurchased 177,330 shares of common stock during the second quarter for approximately $3 million. As a result, approximately $11.5 million remains authorized for purchase under the buyback plan, which extends through the end of the year.

We remain on track to fulfill our previously announced goal of returning $26 million in capital to our shareholders in 2015. Including the September dividend distribution, we will have returned approximately $11.7 million to shareholders through cash dividends and share repurchases. Although the exact manner of distribution for the remaining $14.3 million has yet to be determined, along with distribution dates, it will include some combination of regularly quarterly dividends, periodic repurchases of common stock, and potentially a special dividend.

With respect to our product development initiative, our management team along with our financial advisors recently completed a comprehensive evaluation of the market for critical communications solutions and how we expect it to evolve in the future. Based on the evaluation findings, our conclusion is that in order to secure our leadership position in this space, we expect to increase our product development strategy and development spending over the next few years.

In our review, we believe that our customers are looking for a unified critical communications solution and we believe our investments will lead to significantly higher rates of consolidated revenue growth. We believe this is an area with strong rates of growth and returns on capital that will also allow us to leverage our sales teams, multiple solutions offerings, and deep customer relationships. We also believe these returns are significantly more attractive than tuck-in acquisitions with very high valuation expectations and inferior growth and profitability.

As we've discussed with you in the past, we've evaluated more than 70 software companies as we've looked at accelerating our growth. We expect the markets of unified communications and collaboration solutions, which is what Spok delivers, to grow significantly over the next decade, especially within the rapidly evolving healthcare segment. Trends, including the establishment of accountable care organizations, reimbursement changes, and the emphasis on quality improvement and care coordination are all driving a need to coordinate workflow activities between previously disparate departments and systems within outside hospitals.

As a result, this changing landscape will require communication solutions to be multi-modal, that is voice, text, and media, and deeply integrated as well as complementary with electronic medical records and clinical systems. The technology used in this evolving market has undergone a change as well. Existing solutions such as paging and purpose built Wi-Fi devices will continue to exist in healthcare but will evolve over time from device centric hardware solutions to software-oriented applications. While the multiple devices used by nurses and physicians likely will remain varied, the market will seek offerings that will bridge those platforms to provide a comprehensive healthcare solution.

Today, there are a number of point solutions being sold by a variety of vendors, solving pieces of an overall communications platform. However, we believe key to long-term success in this marketplace will be to provide an integrated enterprise solution that meets the unified communications requirements of today, along with the emerging requirements for mobility and healthcare deliver tomorrow. Unifying communications into an integrated platform is what Spok does and what we will continue to do.

I'd add that the majority of these evolving requirements for communication driven workflows for the healthcare market could be readily (inaudible) for use in numerous other vertical markets, including such major Spok market segments as hospitality, government, and public safety. Fortunately, Spok is well positioned for this changing marketplace with a large install base of marquee healthcare customers utilizing our communications solutions. Also, we already have products in many of the key solution segments and can leverage our position as the largest provider of wide area paging and enterprise directory via our contact center solution.

To protect and extend our market position however, both must invest to consolidate, integrate, and modernize, and extend our product portfolio. Importantly, we will continue to execute our product development initiative while operating profitably and returning capital to our shareholders at appropriate levels, while maintaining our liquidity.

I'd also note that our plan does not preclude our search for potential acquisition. Indeed, we continue our pursuit and evaluation of appropriate M&A candidates as those opportunities arise and valuations that we believe will make sense and are consistent with our acquisition criteria.

Finally, with regard to our 2015 investor meeting and analyst day, we've scheduled the meeting for Tuesday, November 3 in New York. The meeting will begin at 10 AM and will be held at the offices of Latham and Watkins, Spok's outside legal counsel, at 885 Third Avenue. This is the same location as last year's meeting. We will discuss our operations and business strategy in much greater detail than we do on our quarterly earnings calls. We plan to cover our view of the market and our product development initiatives, including discussing the importance of the unified platform. We will also review the impact of our continued investments on long-term growth and profitability.

Once again, a number of senior officers will provide insights and updates on their areas of responsibility and be available to respond to your questions. This should be an excellent opportunity for those looking to learn more about Spok. All of you are cordially invited to attend. We'll post additional details about the meeting on the Investor Relations section of our website soon, including where to RSVP. We look forward to seeing you there.

So in summary, we're pleased with our overall results for the second quarter. We continued to successfully execute our business plan, meet our primary performance goals, and make steady progress toward our strategic goal of becoming a leading provider of critical communication solutions on a worldwide basis. We continue to upgrade our portfolio of software solutions, expand our geographic footprint and vertical market reach, added management, and staff in critical positions, maintained our networks and systems at a high level of reliability, and improved organizational efficiencies throughout the Company. While we can take pride as a team in these achievements during the first half of 2015, we expect to make even further progress over the balance of the year.

At this point, I'll ask the operator to open the lineup for your questions. We'd ask you to limit your initial questions to one and a follow-up, and then after that we can take additional questions as time allows. Operator?

(Operator Instructions) And we'll take our first question from Rich Murphy. Please go ahead. Your line is open.

Hey, Vince. This is about the capital allocation. Maybe get more detail November 3, but as you know, we've been longtime shareholders, and from a stock buyback standpoint from 2008 to 2009 to (inaudible) on the stock, you guys bought back a tremendous amount of shares. But since then, the share count has been basically flat. So when you're looking at capital allocation, this is the first time since I've owned the stock that I could say that it looks like you've stabilized EBITDA. Growth looks good. Carrying $117 million cash on your balance sheet, no debt, and you probably could easily get 1 to 1.5 turns of debt if you wanted to do an acquisition.

So it just seems that there's -- we have way too much cash and there's risks with that. So is there any -- is the Board or are you guys thinking about how you can maybe do something to rectify that situation without hurting -- yes.

Sure, let me just address that for a little bit. So for this year, we said we returned $26 million of capital to our shareholders, which is a big chunk of our cash flow for 2015. So we'll return about $11 million of that in terms of recurring dividend and about $15 million of that in terms of share repurchases or if we don't use all of that on the share repurchase plan, we'd use some for a special dividend to cap it off to get to the $26 million.

The reason we're maintaining roughly $100 million of cash on our balance sheet is to be opportunistic with respect to acquisitions. Now, we've talked to you guys about this in the past. We've looked at a lot of companies, over 70 right now. And the evaluation expectations are a bit silly. I think the private equity world has traded these companies between each other and driven these values up at a very high level for whatever reason. And so we've walked away from most of those deals. That doesn't mean it's always going to stay there. And so it gives us an option in the future to execute an acquisition at a reasonable valuation.

In the meantime, we're just going to take our cash, as I said, and continue returning it to you guys as shareholders. We're going to continue investing back in the business in terms of product development so we can expand our capabilities and make sure we're the leader in unified communications and workflow. In healthcare, we define that as critical communication. And we'll look at, and we have not closed our mind from time to time, being more aggressive at share repurchases and other things to do with the cash.

But we're going to be good stewards of that cash. We're not going to do anything crazy with it. And I hear you loud and clear, and it's something that we look at and talk about all the time.

And I really do appreciate you don't want to do a silly acquisition. I understand the market is very frothy at this point in time. So I appreciate the fact that you're being very conservative in that nature. But I think the --returning $26 million, it's the first time that I've owned the stock that I could -- can honestly say that the EBITDA has almost stabilized. It was almost always kind of going down, down, down. With this new growth, with the service -- the healthcare services company, the (inaudible) software, it looks like we've got something where we're kind of stabilizing. And you could argue that you're trading for four times. You're not buying something for four times in the acquisition market. I can tell you that much. So four times cash flow.

So I don't know. I just feel like you guys could be a little more aggressive on that front and is there a mindset of the old school where declining, declining -- I mean I (inaudible) mindset change at some point because your business has changed. You're no longer in permanent decline and you're not getting the multiple for that.

I agree with your comments on the stabilization there and we've talked about this for a long time is the percentage of our total business that comes from software continues to rise and the percentage of our total business that's in the paging revenue side of our business continues to fall, but that begins to be a smaller percentage. Yes, things are absolutely going to stabilize. Also, our multiple, quite frankly, is going to change. When 65%, 70% of our revenue is coming from the software business down the road here, investors coming from the paging business, the multiple where we trade is obviously going to go up too.

So we hear you on all that. We know we're carrying a large cash balance. We're returning capital to shareholders. We have not precluded and we have not said to ourselves as a Board and a management team, we're not willing to be more aggressive in returning even more capital. We're keeping that option open right now. We've said what we'll do for 2015. As we get near the end of the year, we'll evaluate what we want to do for 2016 and we'll get back to you guys and let you know.

But I hear you. I understand the arguments on both sides of this issue and I very much appreciate your feedback.

Okay, good quarter guys. Take care.

Thank you. (Operator Instructions) And it appears we have no further questions at this time.

Okay, look folks, really appreciate your participation this morning. We really look forward to speaking to you again next quarter after we release our third quarter results and have a great day. And please come to our investor conference in November.

Thank you. This does conclude today's conference. You may disconnect at any time and have a great day.