SPOK HOLDINGS, INC MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

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, 2021 ("2021 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.

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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 2021 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.

Insight

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 2021 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.

Company

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 2021 Annual
Report, which describe our business in further detail.

New strategic business plan

In February 2022, our Board of Directors announced a new strategic business plan
that includes restructuring of our business to discontinue Spok Go®, eliminate
all associated costs and optimize the Company's existing structure to drive
continued cost improvement. The strategic business plan includes a renewed focus
on our existing and established business, including the Spok Care Connect Suite
and our wireless service offerings. While there are numerous factors that went
into this decision, the ongoing challenge of the COVID-19 pandemic made it
difficult for the Spok Go platform to gain sufficient traction with customers or
for our business to continue operating with our current level of costs and
personnel. This shift in focus will allow us to prioritize cash flow generation
and the return of capital to stockholders. As a result of this new strategic
business plan, our Board of Directors has increased the regular quarterly
dividend from $0.125 to $0.3125 and has authorized a share repurchase program of
up to $10 million of our common stock.

As part of the restructuring program, the Company initially estimated
elimination of approximately 175 positions, primarily in research and
development, but also in professional services, selling and marketing, and
back-office support functions. The Company currently expects total eliminations
of approximately 150 positions, with the majority of positions having been
terminated as of June 30, 2022. We expect to incur pre-tax restructuring charges
of approximately $6.0 million to $6.5 million, comprised of approximately $5.5
million to $5.8 million in severance and personnel related costs and
approximately $0.5 million to $0.7 million in contractual terminations. As of
June 30, 2022, of these estimates, $4.3 million has been incurred in severance
and personnel related costs and $0.6 million in contractual termination related
costs. Future cash payments related to these charges are expected to generally
be within the same range. The restructuring activities associated with these
changes are substantially complete, and we expect the remainder to be completed
in the second half of 2022. Further details can be found in Note 5
"Restructuring" in the Notes to Condensed Consolidated Financial Statements.

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COVID-19[feminine]

In March 2020, the World Health Organization declared COVID-19 a global
pandemic. In the ensuing months, the global economy was significantly impacted,
as schools and businesses shut down in an effort to prevent the spread of the
virus. We began to experience a direct impact on our sales cycle in late
February 2020 as hospitals, our largest customer segment, began to delay
purchasing decisions and address staff reductions. These delays continued to
affect our software bookings, which directly impacted license and equipment
revenues during 2021. We also experienced delays in our ability to deliver
on-site implementation services, which impacted our services revenue resulting
in delays in the timing of revenue recognition during 2021, as the associated
revenue corresponds to our backlog of performance obligations ready for delivery
in the future.

During 2021, we continued to prudently manage operating expenses and liquidity,
with the goal of neutralizing the impact of the pandemic on our cash flows. We
enacted a Company-wide plan that reduced work schedules, resulting in a
temporary reduction in compensation expenses during the second, third and fourth
quarters of 2020 and continuing through the first half of 2021. We also enacted
a plan for the first three quarters of 2021 whereby qualified employees received
a portion of their compensation in the form of shares of the Company's common
stock in lieu of cash. Under this alternative payment plan, which was in effect
from the third quarter of 2020 through the third quarter of 2021, all
non-employee directors voluntarily elected to receive either DSUs or restricted
stock in lieu of the entire cash portion of their compensation.

Hospitals have continued to struggle with significant burnout and resource
constraints caused by the pandemic, which further adds to the overall financial
strain they have been facing. The U.S. Healthcare system has lost between one in
five and one in six healthcare workers since the pandemic began, and nursing
staffs have been significantly depleted. On average it takes four to five years
to train a nurse, and we expect these resource constraints to last well into the
future.

Barring the emergence of a severe COVID-19 variant in the near future, which
might have significant negative effects on the overall economy and our customer
base specifically, we believe we are and will continue operating at pre-pandemic
levels in 2022.


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Operating results

The following table is a summary of our Condensed Consolidated Statement of Income for the three and six months ended June 30, 2022and 2021:

                                          For the Three Months Ended June                                             For the Six Months Ended June
                                                        30,                                 Change                                 30,                                 Change
         (Dollars in thousands)               2022               2021              Total               %                 2022               2021              Total               %

Revenue:
Wireless revenue                          $   18,700          $ 19,859          $ (1,159)              (5.8) %       $   37,547          $ 39,979          $ (2,432)              (6.1) %
Software revenue                              15,010            15,864              (854)              (5.4) %           29,988            31,780            (1,792)              (5.6) %
Total revenue                                 33,710            35,723            (2,013)              (5.6) %           67,535            71,759            (4,224)              (5.9) %
Operating expenses:
Cost of revenue (exclusive of items shown
separately below)                              6,980             7,859              (879)             (11.2) %           14,784            15,840            (1,056)              (6.7) %
Research and development                       2,624             4,156            (1,532)             (36.9) %            9,121             8,600               521                6.1  %
Technology operations                          6,880             7,022              (142)              (2.0) %           13,893            14,226              (333)              (2.3) %
Selling and marketing                          3,874             5,184            (1,310)             (25.3) %            9,189            10,323            (1,134)             (11.0) %
General and administrative                     9,619            10,480              (861)              (8.2) %           20,054            20,761              (707)              (3.4) %
Depreciation, amortization and accretion         871             2,457            (1,586)             (64.6) %            1,805             5,184            (3,379)             (65.2) %
Severance and restructuring                      450               174               276              158.6  %            4,945               174             4,771            2,742.0  %

Total operating expenses                      31,298            37,332            (6,034)             (16.2) %           73,791            75,108            (1,317)              (1.8) %
Operating income (loss)                        2,412            (1,609)            4,021             (249.9) %           (6,256)           (3,349)           (2,907)              86.8  %
Interest income                                  170                61               109              178.7  %              237               122               115               94.3  %
Other income                                      25                29                (4)             (13.8) %               12                 2                10              500.0  %
Income (loss) before income taxes              2,607            (1,519)            4,126             (271.6) %           (6,007)           (3,225)           (2,782)              86.3  %
(Provision for) benefit from income taxes       (683)              800            (1,483)            (185.4) %              717               209               508              243.1  %
Net income (loss)                         $    1,924          $   (719)         $  2,643             (367.6) %       $   (5,290)         $ (3,016)         $ (2,274)              75.4  %

Supplemental Information
Full-Time Equivalent ("FTE") Employees           401               590              (189)             (32.0) %
Active transmitters                            3,374             3,580              (206)              (5.8) %



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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 Statement of Operations.
Revenue generated by the sale of our software solutions, which includes software
license, professional services (installation, consulting and training),
equipment (to be used in conjunction with the software), and post-contract
support (ongoing maintenance), is presented as software revenue in our Condensed
Consolidated Statement of Operations. Our software is licensed to end users
under an industry standard software license agreement.

Refer to Note 6, “Revenues, Deferred Revenues and Prepaid Commissions” of the Notes to the Summary Consolidated Financial Statements for additional information on our wireless and software revenue streams.

The table below details the revenues for the periods indicated:

                                  For the Three Months Ended June                                            For the Six Months Ended June
                                                30,                                Change                                 30,                                Change
(Dollars in thousands)                2022               2021              Total               %                2022               2021              Total               %

Revenue - wireless:
Paging revenue                    $   18,141          $ 19,135          $   (994)             (5.2) %       $   36,454          $ 38,488          $ (2,034)             (5.3) %
Product and other revenue                559               724              (165)            (22.8) %            1,093             1,491              (398)            (26.7) %
Total wireless revenue                18,700            19,859            (1,159)             (5.8) %           37,547            39,979            (2,432)             (6.1) %

Revenue - software:
License                                1,962               908             1,054             116.1  %            3,786             2,460             1,326              53.9  %
Professional services                  3,331             4,865            (1,534)            (31.5) %            6,667             9,219            (2,552)            (27.7) %
Hardware                                 507               482                25               5.2  %            1,096             1,098                (2)             (0.2) %

Operations revenue                     5,800             6,255              (455)             (7.3) %           11,549            12,777            (1,228)             (9.6) %
Maintenance revenue                    9,210             9,609              (399)             (4.2) %           18,439            19,003              (564)             (3.0) %
Total software revenue                15,010            15,864              (854)             (5.4) %           29,988            31,780            (1,792)             (5.6) %
Total revenue                     $   33,710          $ 35,723          $ (2,013)             (5.6) %       $   67,535          $ 71,759          $ (4,224)             (5.9) %


Wireless Revenue

The decrease in wireless revenue for the three and six months ended June 30,
2022, compared to the same periods in 2021, reflects the secular decrease in
demand for our wireless services. 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.

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ARPU was $7.23 and $7.32 for the three months ended June 30, 2022, and 2021,
respectively. Total units in service were 0.8 million and 0.9 million as of
June 30, 2022, and 2021, respectively. Approximately $0.07 of the decline in
ARPU was related to the decreases in Universal Service Fund ("USF") fees with
the remainder coming primarily from lower variable revenue associated with
overcall fees which are charged to customers when their service usage is greater
than their allotted plan. USF fees are effectively pass-through items that have
corresponding costs associated with them. Excluding these pass-through items,
ARPU would have declined in-line with historical trends.

We believe that demand will continue to decline for the foreseeable future in
line with recent and historical 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:

                                 For the Three Months Ended June 30,                Change Due To:
(in thousands)                                                      2022          2021         Change        ARPU        Units

Paging revenue                                                   $ 18,141      $ 19,135      $   (994)     $ (225)     $   (769)

                                  For the Six Months Ended June 30,                 Change Due To:
(in thousands)                                                      2022          2021         Change        ARPU        Units

Paging revenue                                                   $ 36,454      $ 38,488      $ (2,034)     $ (457)     $ (1,577)


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 and mitigate the decline in our
wireless revenue. We will continue to explore ways to innovate and provide
customers 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 revenues for our
healthcare communications solutions, revenue from the sale of equipment 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 equipment,
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 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.

Operating income

Software operations revenue decreased during the three and six months ended
June 30, 2022, when compared to the same periods in 2021. Services revenue
decreased primarily from having less billable resources which resulted from our
restructuring program. These changes were made in conjunction with our efforts
to better align staffing levels with our backlog as well as to drive greater
profitability through more efficient services delivery. The decline in services
revenue was partially offset by an increase in license revenue, given an
improving economy and selling environment when compared to the same period in
2021.

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Maintenance income

Compared to the same periods in 2021, maintenance revenue decreased for the
three and six months ended June 30, 2022. Current trends in revenue churn rates
remain relatively stable and are in line with historical trends. However, the
deterioration of maintenance revenue from new license bookings has created an
environment where churn is greater than the inflow of new revenue. Historically,
this revenue churn had been offset by the growth in our license sales.

While we have not seen a meaningful increase in our normal customer churn, our
ability to replace this churn with new revenues will not likely replicate what
we have accomplished historically nor do we expect to fully offset this with
annual increases of our existing base. Given these dynamics, we believe annual
maintenance revenue is likely to be relatively flat or slightly down until such
time that we are able to enhance our existing software solutions, which would
provide an avenue for additional maintenance revenue.


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Functionnary costs

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 services expenses, taxes, licenses and
permit expenses, and facility rent expenses.
•Depreciation, Amortization and Accretion. These are expenses that may be
associated with one or more of the aforementioned functional categories. This
classification generally consists of depreciation from capital expenditures or
other assets that are core to our ongoing operations, amortization of intangible
assets, amortization of capitalized software development costs, and accretion of
asset retirement obligations.


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The following is a review of our operating expense categories for the three and
six months ended June 30, 2022, and 2021. Certain prior period amounts have been
reclassified to conform to the current period's presentation.

Revenue cost

The cost of sales mainly includes the following items:

                                             For the Three Months Ended                                            For the Six Months Ended June
                                                      June 30,                            Change                                30,                                Change
(Dollars in thousands)                          2022              2021            Total              %                2022               2021              Total               %

Payroll and related                         $   4,422          $ 4,720     
    $ (298)             (6.3) %       $    9,532          $  9,859          $   (327)             (3.3) %
Cost of sales                                   1,462            1,633            (171)            (10.5) %            3,019             3,018                 1                 -  %
Recoverable taxes and fees                        677              903            (226)            (25.0) %            1,389             1,770              (381)            (21.5) %
Stock-based compensation                           96              263            (167)            (63.5) %              205               554              (349)            (63.0) %
Other                                             323              340             (17)             (5.0) %              639               639                 -                 -  %
Total cost of revenue                       $   6,980          $ 7,859          $ (879)            (11.2) %       $   14,784          $ 15,840          $ (1,056)             (6.7) %

FTE Employees                                     148              183             (35)            (19.1) %


For the three months ended June 30, 2022, cost of revenue decreased compared to
the same period in 2021, driven by decreases in payroll and related, recoverable
taxes and fees, cost of sales and stock-based compensation.

The decrease in payroll and related and stock-based compensation is attributable
to the restructuring activities and the related elimination of positions.
Additionally, stock-based compensation decreased as we discontinued the cash
saving measure to provide a portion of compensation for certain employees in the
form of shares of the Company's common stock in lieu of cash. Recoverable taxes
and fees declined due to general decreases in USF fees, which are pass-through
costs. Cost of sales expenses decreased primarily due to reduced use of
third-party professional services that we utilize to augment company resources
when short-term capacity constraints exist.

For the six months ended June 30, 2022, cost of revenue also decreased compared
to the same period in 2021, driven by decreases in recoverable taxes and fees,
stock-based compensation and payroll and related, as described above.

Research and development

Research and development expenses consist of the following items:

                                          For the Three Months Ended                                              For the Six Months Ended June
                                                   June 30,                              Change                                30,                                Change
(Dollars in thousands)                       2022              2021             Total               %                 2022              2021             Total               %

Payroll and related                      $   1,741          $ 4,333        
 $ (2,592)             (59.8) %       $   6,046          $ 8,808          $ (2,762)             (31.4) %
Outside services                               735            2,060            (1,325)             (64.3) %           2,634            4,337            (1,703)             (39.3) %
Capitalized software development                 -           (2,698)            2,698             (100.0) %               -           (5,618)            5,618             (100.0) %
Stock-based compensation                        32              305              (273)             (89.5) %             162              780              (618)             (79.2) %
Other                                          116              156               (40)             (25.6) %             279              293               (14)              (4.8) %
Total research and development           $   2,624          $ 4,156          $ (1,532)             (36.9) %       $   9,121          $ 8,600          $    521                6.1  %

FTE Employees                                   35              109               (74)             (67.9) %


For the three and six months ended June 30, 2022, research and development
expenses decreased compared to the same periods in 2021, driven by the decision
to discontinue Spok Go and the resulting elimination of positions and associated
outside services.

Although we continue to focus on development efforts for our software solutions, we expect total research and development costs to continue to decrease significantly in 2022 as part of our new strategic business plan and our intention eliminate all costs associated with Spok Go.

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Technological operations

Expenses related to technology operations consisted mainly of the following items:

                                  For the Three Months Ended                                             For the Six Months Ended June
                                           June 30,                             Change                                30,                                Change
(Dollars in thousands)               2022              2021            Total              %                 2022               2021             Total              %

Payroll and related              $   2,389          $ 2,323          $   66                2.8  %       $    4,898          $  4,790          $  108                2.3  %
Site rent                            3,003            3,143            (140)              (4.5) %            6,070             6,339            (269)              (4.2) %
Telecommunications                     741              825             (84)             (10.2) %            1,512             1,662            (150)              (9.0) %
Stock-based compensation                54              130             (76)             (58.5) %              109               267            (158)             (59.2) %
Other                                  693              601              92               15.3  %            1,304             1,168             136               11.6  %
Technology Operations            $   6,880          $ 7,022          $ (142)              (2.0) %       $   13,893          $ 14,226          $ (333)              (2.3) %

FTE Employees                           78               87              (9)             (10.3) %


For the three and six months ended June 30, 2022, technology operations expenses
decreased compared to the same periods in 2021, driven primarily by a decrease
in stock-based compensation as well as lower site rent and telecommunications
costs, which resulted from cost savings initiatives applicable to our wireless
network. Payroll and related expenses largely remained flat as savings from the
reduction of headcount due to restructuring activities was largely offset by the
increase in costs that came from the discontinuation of the aforementioned cash
saving measure of compensation in the form of shares as well as reduced work
schedules.

The number of active transmitters, which directly affects our site rent
expenses, declined 5.8% from June 30, 2021, to June 30, 2022, as a result of our
network rationalization efforts. 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. Stock-based compensation decreased as a result of discontinuing our
plan to provide a portion of compensation for certain employees in the form of
shares of our common stock in lieu of cash. Payroll and related expenses
increased primarily due to increased payroll resulting from the discontinuation
of reduced work schedules as of the third quarter of 2021.

Sales and marketing

Sales and marketing expenses consist of the following items:

                                               For the Three Months Ended                                             For the Six Months Ended June
                                                        June 30,                             Change                                30,                                Change
(Dollars in thousands)                            2022              2021             Total               %                2022              2021              Total               %

Payroll and related                           $   2,382          $ 3,361          $   (979)            (29.1) %       $   5,850          $  6,726          $   (876)            (13.0) %
Commissions                                       1,047            1,244              (197)            (15.8) %           2,071             2,349              (278)            (11.8) %
Stock-based compensation                             93              276              (183)            (66.3) %             172               626              (454)            (72.5) %
Advertising and events                              293              247                46              18.6  %             861               408               453             111.0  %
Other                                                59               56                 3               5.4  %             235               214                21               9.8  %
Total selling and marketing                   $   3,874          $ 5,184          $ (1,310)            (25.3) %       $   9,189          $ 10,323          $ (1,134)            (11.0) %

FTE Employees                                        63              109               (46)            (42.2) %


For the three and six months ended June 30, 2022, selling and marketing expenses
decreased compared to the same periods in 2021, driven primarily by decreases in
payroll and related expenses, and stock-based compensation. These decreases were
offset in the three and six months ended June 30, 2022 by an increase in
advertising and events.

Payroll and related expenses decreased for the quarters and six months ended
June 30, 2022largely due to restructuring activities and related job cuts, partially offset by increased payroll resulting from the discontinuation of reduced working hours beginning in the third quarter of 2021.

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Stock-based compensation for the three and six months ended June 30, 2022
decreased due to the discontinuation of the cash saving measure to provide a
portion of compensation for certain employees in the form of shares of our
common stock in lieu of cash. Additionally, there was a general decrease in
employees compensated with stock-based compensation in 2022, attributable to the
restructuring activities and the related elimination of positions.

The increase in advertising and events for the six months ended June 30, 2022,
largely reflects an increase in trade show participation compared to the same
period last year, which was more heavily impacted by the COVID-19 pandemic.
Nationwide travel and in-person participation in larger marketing events has
improved but continued to remain below pre-pandemic levels.

General and administrative

General and administrative expenses consisted of the following items:

                                          For the Three Months Ended                                            For the Six Months Ended June
                                                   June 30,                            Change                                30,                               Change
(Dollars in thousands)                      2022              2021             Total              %                2022               2021             Total              %

Payroll and related                     $   3,657          $  3,564          $   93               2.6  %       $    7,708          $  7,382          $  326               4.4  %
Stock-based compensation                      686               807            (121)            (15.0) %            1,428             1,793            (365)            (20.4) %
Facility rent, office and technology
costs                                       2,321             2,484            (163)             (6.6) %            5,001             4,964              37               0.7  %
Outside services                            1,770             2,219            (449)            (20.2) %            3,670             4,044            (374)             (9.2) %
Taxes, licenses and permits                   254               214              40              18.7  %              519               428              91              21.3  %
Bad debt                                      170               328            (158)            (48.2) %              156               434            (278)            (64.1) %
Other                                         761               864            (103)            (11.9) %            1,572             1,716            (144)             (8.4) %

General and administrative total $9,619 $10,480

 $ (861)             (8.2) %       $   20,054          $ 20,761          $ (707)             (3.4) %

FTE Employees                                  77               102             (25)            (24.5) %


For the three months ended June 30, 2022, general and administrative expenses
decreased compared to the same period in 2021, driven primarily by decreases in
outside services, facility rent, office and technology costs, stock-based
compensation and bad debt expenses.

External services decreased due to lower legal and other professional services for the quarters and six months ended June 30, 2022.

Stock-based compensation decreased as we discontinued the cash saving measure to
provide a portion of compensation for certain employees in the form of shares of
our common stock in lieu of cash, which ended as of the fourth quarter of 2021.
Additionally, there was an overall decrease in the number of employees
compensated with stock-based compensation in 2022, attributable to the
restructuring activities and related expenses.

Payroll and related expenses largely remained flat as savings from the reduction
of headcount due to restructuring activities was largely offset by the increase
in costs that came from the discontinuation of the aforementioned cash saving
measure of compensation in the form of shares as well as reduced work schedules.

The decrease in facility rent, office and technology costs for the three months
ended June 30, 2022 was primarily due to the closing of the Minnesota office in
February 2022.

Bad debts decreased due to improved collection efforts with a corresponding reduction in the amount reserved for credit losses.

For the six months ended June 30, 2022, general and administrative expenses also
decreased compared to the same period in 2021, driven by decreases in outside
services, stock-based compensation and bad debt expenses. This was partially
offset by increases in payroll and related, as described above in the quarterly
discussion.

                                       29
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Depreciation, amortization and accretion

For the three months ended June 30, 2022, and 2021, depreciation, amortization
and accretion expenses were $0.9 million and $2.5 million, respectively. For the
six months ended June 30, 2022, and 2021, depreciation, amortization and
accretion expenses were $1.8 million and $5.2 million, respectively. These
expenses decreased for the three and six months ended June 30, 2022, compared to
the same periods in 2021, primarily due to amortization of software development
costs ending in the fourth quarter of 2021 as a result of discontinuation of
Spok Go. Depreciation, amortization and accretion expenses also decreased due to
lower depreciation for certain computer hardware and software assets that became
fully depreciated in 2021.

Dismissal and restructuring

For the three and six months ended June 30, 2022, severance and restructuring
expenses were $0.5 million and 4.9 million, respectively . Expenses increased
for the three and six months ended June 30, 2022, primarily due to an increase
in severance and personnel related costs and costs related to contractual
terminations, resulting from the implementation of the new strategic business
plan. Further details can be found in Note 5 "Restructuring" in the Notes to
Condensed Consolidated Financial Statements.

Income taxes

(Provision for) benefit from income taxes was $(0.7) million and $0.8 million
for the three months ended June 30, 2022, and 2021, respectively. (Provision
for) benefit from income taxes was $0.7 million and $0.2 million for the six
months ended June 30, 2022, and 2021, respectively. (Provision for) benefit from
income taxes changed for the three and six months ended June 30, 2022, compared
to the same periods in 2021 due to the difference in the anticipated annual
effective tax rate as a result of 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 12, "Income Taxes"
in the Notes to Condensed Consolidated Financial Statements.

Cash and capital resources

Cash and cash equivalents

As of June 30, 2022, we held cash, cash equivalents and short-term investments
of $38.4 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. These funds invest in U.S. Treasury
securities and are therefore classified as held-to-maturity and are reported at
amortized cost in our Condensed Consolidated Balance Sheets. To date, we have
experienced no loss or lack of access to our invested cash or cash equivalents;
however, we can provide no assurance that access to our invested cash and cash
equivalents will not be impacted by adverse market conditions. Our short-term
investments consist entirely of U.S. Treasury securities, which are classified
as held-to-maturity and are measured at amortized cost on our Condensed
Consolidated Balance Sheets.

Sources of cash

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
that are with 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. As a result of our discontinuation of Spok
Go, we will no longer invest heavily in its development, and, as a result, we
anticipate that we will have more cash available for other uses than in prior
years.

                                       30
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On February 16, 2022, the Board authorized a share repurchase program for up to
$10 million of the Company's common stock. Under the repurchase program,
repurchases can be made from time to time using a variety of methods, which may
include open market purchases, privately negotiated transactions or otherwise,
all in accordance with the rules of the SEC and other applicable legal
requirements. The specific timing, price and size of purchases will depend on
prevailing stock prices, general economic and market conditions, legal
requirements and other considerations. The repurchase program does not obligate
the Company to acquire any particular amount of common stock, and the repurchase
program may be suspended or discontinued at any time at the Company's
discretion.

As part of the restructuring program in connection with our new strategic
business plan, we expect to record one-time pre-tax restructuring charges of
approximately $6.0 million to $6.5 million, comprised of approximately
$5.5 million to $5.8 million in severance and personnel related costs and
approximately $0.5 million to $0.7 million in contractual terminations. Future
cash payments related to these charges are expected to generally be within the
same range. The restructuring actions associated with these charges are expected
to be substantially complete in 2022. Because of these cash payments related to
the restructuring program, we anticipate that our cash on hand will decrease
during 2022. However, our restructuring efforts are meant to refocus our
operational efforts towards cash flow generation and the return of capital to
our stockholders. Should our restructuring efforts be successful, we anticipate
future operating periods will return to historically positive cash flow
generation.

Cash flow overview

In response to the COVID-19 pandemic, management enacted certain temporary cost
mitigation measures in 2020 and 2021, as previously discussed. While we have
previously discussed the impact on our revenues from the pandemic, we do not
expect COVID-19 will have a material impact on our liquidity given our ability
to reduce costs further, if necessary. 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 June 30, 2022, 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 presents information about our net cash flows from operating, investing and financing activities for the periods indicated:

                                                          Six Months Ended June 30,
(Dollars in thousands)                                   2022                   2021                  Change

Net cash (used in) provided by operating
activities                                         $       (5,895)         $      3,866          $      (9,761)
Net cash used in investing activities                      (1,159)               (7,809)                 6,650
Net cash used in financing activities                     (13,888)               (6,676)                (7,212)


                                       31
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Operational 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 six months ended June 30, 2022, net cash used by operating activities
was $5.9 million due primarily to the net loss of $5.3 million, changes in
accounts payable, accrued liabilities and other of $3.6 million, accounts
receivable of $0.6 million, deferred revenue of $0.2 million and in prepaid
expenses and other assets of $0.4 million, and a deferred income tax benefit of
$0.5 million. This was partially offset by changes in stock-based compensation
of $2.1 million, depreciation, amortization and accretion of $1.8 million, and
provision for credit losses, service credits and other of $0.9 million.

For the six months ended June 30, 2021, net cash provided by operating
activities was $3.9 million due primarily to non-cash items such as
depreciation, amortization and accretion of $5.2 million, stock-based
compensation of $4.0 million, changes in accounts receivable of $1.8 million,
change in prepaid expenses and other assets of $1.0 million, changes in lease
liability $0.6 million and other non-cash items of $0.4 million. This was
partially offset by a net loss of $3.0 million, a change in accounts payable,
accrued liabilities and other of $3.5 million and deferred revenue of $2.5
million.

Investing activities

For the six months ended June 30, 2022, and 2021, net cash used in investing
activities was $1.2 million and $7.8 million. Our 2021 investing activities
reflected the capitalization of software development costs, however with the
discontinuation of Spok Go, we did not incur such costs in 2022. Net cash used
in investing activities also reflects purchases of property and equipment, and
the purchase and maturity of short-term investments in both periods.

Fundraising activities

For the six months ended June 30, 2022, and 2021, net cash used in financing
activities was $13.9 million and $6.7 million, respectively, due primarily to
cash distributions to stockholders and the purchase of common stock for tax
withholding purposes on vested equity awards.

On July 27, 2022, our Board of Directors declared a regular quarterly cash
dividend of $0.3125 per share of common stock with a record date of August 17,
2022, and a payment date of September 9, 2022. This cash dividend of
approximately $6.2 million, applicable to our common stock outstanding, will be
paid from available cash on hand. We expect to continue paying dividends of
$0.3125 per share of common stock each quarter for the remainder of 2022,
subject to declaration by the Board of Directors.

Commitments and contingencies

In the normal course of our business, we enter into certain contractual obligations. These obligations include data processing services, operating leases for premises and equipment, agreements regarding borrowed funds and deposits.

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. In
March 2021, we relocated our corporate headquarters to office space located in
Alexandria, Virginia, consisting of approximately 26,000 square feet of space
under a lease that will expire on September 30, 2026. Over the life of this
lease, cash payments are expected to total approximately $4.9 million.

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.

                                       32
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The following table presents the main commitments and contractual obligations of the Company as of June 30, 2022:

Payments due by period

                                                                  Less than 1                                                       More than 5
(Dollars in thousands)                            Total              year              1 to 3 years           3 to 5 years             years

Operating lease obligations                    $ 17,278                 

3,298 $8,060 $3,595 $2,325
Unconditional purchase obligations

                6,811                  3,585               3,198                     28                   -
Total contractual obligations                  $ 24,089          $    6,883          $      11,258          $       3,623          $    2,325


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.

We have operating leases for office 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, that 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.

Refer to Note 7, "Leases," and Note 13, "Commitments and Contingencies" in the
Notes to Condensed Consolidated Financial Statements for further discussion on
our commitments and contingencies.

Related party transactions

See Note 14, “Related parties” in the notes to the condensed consolidated financial statements for a discussion regarding our related party transactions.

Significant 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 intangible assets subject to amortization and goodwill,
accounts receivable, revenue recognition, 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
2021 Annual Report that affect our significant judgments and estimates used in
the preparation of our Condensed Consolidated Financial Statements.

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