STOCKHOLDERS' EQUITY

General

Our authorized capital stock consists of 75 million shares of common stock, par value $0.0001 per share, and 25 million shares of preferred stock, par value $0.0001 per share.

At December 31, 2016 and 2015, we had no stock options outstanding.

At December 31, 2016 and 2015, there were 20,525,614 and 20,886,261 shares of common stock outstanding, respectively, and no shares of preferred stock outstanding.

Dividends

For the three years ending December 31, 2016, 2015 and 2014 our Board of Directors declared cash dividends of $0.75, $0.625 and $0.50 per share of our outstanding common stock, respectively. An immaterial amount of dividends declared were related to unvested RSUs and unvested shares of restricted stock which are accrued for and paid when the applicable vesting conditions are met. Accrued cash dividends on forfeited RSUs and restricted stock are also forfeited. Cash dividends paid as disclosed in the statements of cash flows for the years ended December 31, 2016, 2015 and 2014 included previously declared cash dividends on vested RSUs and on shares of vested restricted stock issued to non-executive members of our Board of Directors.

On March 1, 2017, our Board of Directors declared a regular quarterly cash dividend of $0.125 per share of common stock, with a record date of March 17, 2017, and a payment date of March 30, 2017. This cash dividend of approximately $2.6 million will be paid from available cash on hand.

Common Stock Repurchase Program

On July 31, 2008, our Board of Directors approved a program to repurchase up to $50.0 million of our common stock in the open market during the twelve-month period commencing on or about August 5, 2008. As discussed below, this program has been extended at various times, most recently through December 31, 2016, with a repurchase authority of $10.0 million as of January 4, 2016.

We use available cash on hand and net cash provided by operating activities to fund the common stock repurchase program. This repurchase authority allows us, at management’s discretion, to selectively repurchase shares of our common stock from time to time in the open market depending upon market price and other factors.

For the year ended December 31, 2016, we purchased 388,255 shares of our common stock under the repurchase program for approximately $6.5 million (excluding commissions). From the inception of the program in August 2008 through December 31, 2016, we have repurchased a total of 7,817,708 shares of our common stock for approximately $85.5 million (excluding commissions).

Repurchased shares of our common stock were accounted for as a reduction to common stock and additional paid-in-capital in the period in which the repurchase occurred. All repurchased shares of common stock are returned to the status of authorized, but unissued, shares of the Company.

Common stock purchased in 2016, 2015 and 2014 (including the purchase of common stock for tax withholdings) was as follows:



For the Three Months Ended	Total Number of Shares Purchased		Average Price Paid Per Share⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Plans or Programs(Dollars in thousands)
2014
March 31,	—		$	—	—	$	15,000
June 30,	—		—		—	15,000
September 30,	—		—		—	15,000
December 31,	263,772		16.36		263,772	10,685
Total for 2014	263,772		$	16.36	263,772
2015
March 31,	247,797	⁽²⁾	$	17.31	27,467	$	14,536
June 30,	177,330		16.93		177,330	11,531
September 30,	502,942		16.52		502,942	3,224
December 31,	189,438		16.87		189,438	—
Total for 2015	1,117,507		$	16.82	897,177
2016
March 31,	291,861		$	16.76	291,861	$	5,106
June 30,	65,791		16.38		65,791	4,028
September 30,	13,884		16.46		13,884	3,800
December 31,	16,719		16.43		16,719	3,525
Total for 2016	388,255		$	16.67	388,255
Total	1,769,534		$	16.72	1,549,204


⁽¹⁾	Average price paid per share excludes commissions of approximately $15,410.


⁽²⁾	On March 6, 2015, we purchased a total of 220,330 shares of common stock from our CEO and other eligible employees at a price of $17.36 per share in payment of required tax withholdings for the common stock awarded under the 2011 LTIP.

Net Income per Common Share

Basic net income per common share is computed on the basis of the weighted average common shares outstanding. Diluted net income per common share is computed on the basis of the weighted average common shares outstanding plus the effect of all potentially dilutive common shares including unvested and outstanding equity awards. Diluted net income per share was equal to basic net income per share for the year ended December 31, 2016, 2015 and 2014 respectively.



	For the Year Ended December 31,
(in thousands, except for share and per share amounts)	2016		2015		2014
Numerator:
Net income	$	13,979	$	80,246	$	20,745

Denominator:
Weighted average shares used to compute net income per common share - basic and diluted	20,586,066		21,471,041		21,644,163
Basic and diluted net income per common share	$	0.68	$	3.74	$	0.96

Spok Holdings, Inc. Equity Incentive Award Plan

We established the Spok Holdings, Inc. Equity Incentive Award Plan (the “2004 Equity Plan”) in connection with and prior to the November 2004 establishment of the Company. Under the 2004 Equity Plan, we had the ability to issue up to 1,878,976 shares of our common stock to eligible employees and non-executive members of the Board of Directors in the form of shares of common stock, stock options, restricted stock, RSUs or stock grants. Restricted stock granted under the 2004 Equity Plan entitled the stockholder to all rights of common stock ownership except that the restricted stock could not be sold, transferred, exchanged, or otherwise disposed of during the restriction period, which was to be determined by the Compensation Committee of the Board of Directors. RSUs are generally convertible into shares of common stock pursuant to a Restricted Stock Unit Agreement when the appropriate vesting conditions have been satisfied. The fair value of each RSU is the market price of our common stock on the date of grant.

On March 23, 2012, our Board of Directors adopted the Spok Holdings, Inc. 2012 Equity Incentive Award Plan (the “2012 Equity Plan”) that was subsequently approved by our stockholders on May 16, 2012. A total of 1,300,000 shares of common stock have been reserved for issuance under this plan. The 2012 Equity Plan replaced the 2004 Equity Plan. As of May 16, 2012, 894,986 shares available under the 2004 Equity Plan were available for grant under the 2012 Equity Plan. At inception, the total shares of common stock available for issuance under the 2012 Equity Plan was 2,194,986. No further grants will be made under the 2004 Equity Plan. However, the 2004 Equity Plan continued to govern all outstanding awards thereunder. As of December 31, 2016, there were no RSUs outstanding subject to the provisions of the 2004 Equity Plan. Any shares which were available for grant under the 2004 Equity Plan including awards that were forfeited or lapsed unexercised as of the date of stockholders’ approval will be available for grant under the 2012 Equity Plan.

Awards under the 2012 Equity Plan may be in the form of stock options, restricted stock, RSUs, performance awards (a cash bonus award, a stock bonus award, a performance award or an incentive award that is paid in cash), dividend equivalents, stock payment awards, deferred stock, deferred stock units, or stock appreciation rights.

The following table summarizes the activities under the 2012 Equity Plan from January 1, 2014 through December 31, 2016:



	Activity
Total equity securities available at January 1, 2014	1,720,752
Add: LTIP RSUs forfeited by eligible employees	57,338
Less: Common stock awarded to eligible employees	(5,820	)
Less: Restricted stock awarded to non-executive members of the Board of Directors	(24,684	)
Total equity securities available at December 31, 2014	1,747,586
Less: LTIP RSUs awarded to eligible employees, net of forfeitures	(242,468	)
Less: Restricted stock awarded to non-executive members of the Board of Directors	(21,887	)
Total equity securities available at December 31, 2015	1,483,231
Less: LTIP RSUs awarded to eligible employees, net of forfeitures and other	(212,643	)
Less: Restricted stock awarded to non-executive members of the Board of Directors	(23,649	)
Total equity securities available at December 31, 2016	1,246,939

Common Stock

On July 8, 2014, our Board of Directors granted 5,820 shares of common stock to certain eligible employees under the 2012 Equity Plan. The grant date fair value was $0.1 million based upon the closing price per share of our common stock of $15.74.

2011 Long Term Incentive Plan

On March 15, 2011, our Board of Directors adopted a long-term incentive program (over a 45 month vesting period) that included a stock component in the form of RSUs. The 2011 LTIP provided eligible employees the opportunity to earn RSUs based upon achievement of performance goals established by our Board of Directors for our revenue and operating cash flows during the period from January 1, 2011 through December 31, 2014 (the “performance period”), and continued employment with the Company. As it relates to eligible employees from Amcom, the performance period was considered as April 1, 2011, through December 31, 2014. Our Board of Directors approved that future cash dividends related to the existing RSUs will be set aside and paid in cash to each eligible employee when the RSUs are converted into shares of common stock. Existing RSUs would be converted into shares of common stock on the earlier of a change in control of the Company (as defined in the 2004 Equity Plan for RSUs granted before May 16, 2012, or the 2012 Equity Plan for grants on or after May 16, 2012) or on or after the third business day following the day that we file our 2014 Annual Report on Form 10-K (“2014 Annual Report”) with the SEC but in no event later than December 31, 2015. Any unvested RSUs awarded under the 2011 LTIP and the related cash dividends were forfeited if the participant terminates employment with Spok.

On April 7, 2011, our Board of Directors granted 211,587 RSUs to eligible employees under the 2004 Equity Plan pursuant to a Restricted Stock Unit Agreement. The grant date fair value was $3.0 million (net of estimated forfeitures) based upon the closing price per share of our common stock of $15.68. In 2012, our Board of Directors awarded 122,673 RSUs to eligible employees with a grant date fair value of $1.3 million (net of estimated forfeitures). During 2012, 101,294 RSUs and the related cash dividends were forfeited with a related fair value of $1.4 million. There were 232,966 outstanding RSUs under the 2011 LTIP as of December 31, 2012.

On December 27, 2012, our Board of Directors approved a modification to the 2011 LTIP performance goals for revenue and operating cash flows during the performance period as the original award was not expected to vest. This modification affected 18 eligible employees. As a result of reversing previously recognized compensation expense and recording compensation for the modified award, the Company recognized a benefit to stock based compensation expense of $0.2 million. We used the fair-value based method of accounting for the 2011 LTIP and amortized the remaining $1.6 million of the grant date fair value (net of estimated forfeitures) over the remaining vesting period.

In 2013, our Board of Directors awarded 434,811 RSUs to eligible employees under the 2012 Equity Plan for the 2011 LTIP pursuant to a Restricted Stock Unit Agreement with a grant date fair value of $5.2 million (net of estimated forfeitures). During 2013, 50,750 RSUs and the related cash dividends were forfeited with a related fair value of $0.5 million. As of December 31, 2013 there were 617,027 RSUs outstanding relating to the 2011 LTIP.

A total of $3.4 million, $2.8 million and $0.1 million was included in stock based compensation expense for the years ended December 31, 2014, 2013 and 2012, respectively, in relation to the 2011 LTIP. In addition to the benefit for the modification of $0.2 million, stock based compensation expense for the year ended December 31, 2012, included a net benefit of $0.4 million for forfeitures under the 2011 LTIP associated with the departure of two former executives.

On December 13, 2013, our Board of Directors approved a modification to the 2011 LTIP performance goals for operating cash flows during the performance period. The original award was expected to vest, therefore, the modification had no impact on the grant date fair value. This modification affected 51 eligible employees.

During 2014, 57,338 RSUs and the related cash dividends were forfeited with a related fair value of $0.6 million. As of December 31, 2014 there were 559,689 RSUs outstanding relating to the 2011 LTIP.

On December 31, 2014, the RSUs under the 2011 LTIP satisfied the vesting requirements. The Company converted 559,689 RSUs into shares of common stock and issued the common stock and paid the cumulative cash dividends earned on the RSUs to the participants in March 2015 after filing the 2014 Annual Report with the SEC. In March 2015, 217,211 shares of common stock, net of other activity, were sold to the Company for required income tax withholding on the vested RSUs under the 2011 LTIP.

2015 Long Term Incentive Plan

On December 9, 2014, our Board of Directors adopted the 2015 LTIP (which provides for a 36 month vesting period) that included a stock component in the form of RSUs. Under this incentive program, RSUs will be granted to eligible employees annually and each annual grant will generally vest over a three year service period. Each annual grant includes performance metrics required to be met for vesting purposes, as established by the Board of Directors. Our Board of Directors also approved that future cash dividends related to the RSUs will be set aside and paid in cash to each eligible employee when the RSUs are converted into shares of common stock. RSUs would be converted into shares of common stock on the earlier of a change in control of the Company (as defined in the 2015 LTIP) or on or after the third business day following the day that we file the Annual Report on Form 10-K with the SEC for the grant's final vesting year, but in no event later than December 31 of the year following the vesting date if the pre-established performance conditions are achieved. Any unvested RSUs awarded under the 2015 LTIP and the related cash dividends are forfeited if the participant terminates employment with the Company.

On January 2, 2015, our Board of Directors granted 254,777 RSUs with a grant date fair value of $4.4 million. An additional 6,123 RSUs were granted to eligible employees who were promoted or joined the Company during the twelve months ended December 31, 2015. On January 28, 2016 our Board of Directors issued a second grant of 227,082 RSUs with a grant date fair value of $3.8 million. An additional 7,629 RSUs were granted to eligible employees who were promoted or joined the Company during the twelve months ended December 31, 2016. All issuances were made to eligible employees under the 2012 Equity Plan for the 2015 LTIP pursuant to a Restricted Stock Unit Agreement. Eligible employees have the opportunity to earn RSUs based upon continued employment with the Company and the achievement of performance goals established by our Board of Directors for our consolidated revenue and operating cash flows (as defined by the Company) during the period of January 1, 2015 through December 31, 2017 (“the 2015-2017 performance period”) for the 2015 grant and the period of January 1, 2016 through December 31, 2018 ("the 2016-2018 performance period") for the 2016 grant, respectively. (For additional details regarding stock compensation refer to Note 9, "Stock Based Compensation")

The following table details activities with respect to outstanding RSUs under the 2015 LTIP for the year ended December 31, 2016:



	Shares		Weighted- Average Grant Date Fair Value		Total Unrecognized Compensation Cost (net of estimated forfeitures) (In thousands)		Weighted-Average Period Over Which Cost is Expected to be Recognized (In months)
Non-vested RSUs at January 1, 2015	—		$	—
Granted	260,900		$	17.35
Vested	—		—
Forfeited	(18,432	)	17.36
Non-vested RSUs at December 31, 2015	242,468		$	17.35	$	2,708	24
Granted	234,711		$	16.83
Vested	—		—
Forfeited	(25,686	)	17.05
Non-vested RSUs at December 31, 2016	451,493		$	17.10	$	1,882	18

Employee Stock Purchase Plan

On July 25, 2016, our stockholders approved the registration with the SEC of 250,000 shares of common stock, to be issued from time to time in connection with purchases under the Spok Holdings, Inc. 2016 Employee Stock Purchase Plan ("2016 ESPP"). Shares were first offered for purchase under the 2016 ESPP during the third quarter of 2016. Under the 2016 ESPP, eligible participants can voluntarily elect to have contributions withheld from their pay for the duration of an offering period, subject to the 2016 ESPP limits. At the end of an offering period, contributions will be used to purchase the Company's common stock at a discount to the market price based on the first or last day of the offering period, whichever is lower. Participants are required to hold common stock for a minimum period of two years from the grant date. Participants will begin earning dividends on shares after the purchase date. Each offering period will generally last for no longer than six months. Once an offering period begins, participants cannot adjust their withholding amount. If a participant chooses to withdraw, any previously withheld funds will be returned to the participant, with no stock purchased, and that participant will be eligible to participate in the 2016 ESPP at the next offering period. If the participant terminates employment with the Company during the offering period, all contributions will be returned to the employee and no stock will be purchased at a discounted rate.

We use the Black-Scholes model to calculate the fair value of the options to purchase common stock, under the 2016 ESPP, at the grant date due to the look back feature included in the 2016 ESPP. The look back feature allows for the purchase of common stock at a discount based on the price at the time of grant or purchase date, whichever is lower. The Black-Scholes model requires the use of estimates for the expected term, the expected volatility of the underlying common stock over the expected term, the risk-free interest rate and the expected dividend payment. The fair value of the discount is the difference between the fair value of the underlying stock price at grant date and the discounted purchase price at grant date. The fair value of the look back feature is estimated to be a call option at the discounted rate combined with a put option on one minus the discounted rate where the discounted rate is equal to the discount being offered to participants under the 2016 ESPP. The fair value of the options to purchase common stock under the 2016 ESPP is the combination of the fair value of the discount and the fair value of the look back feature.

We base the risk-free rate for the expected term on the U.S. Treasury Rate as of the grant date. The expected term is equal to the required holding period of two years. The volatility for our common stock was estimated based on the standard deviation of monthly variances in stock price using a rolling three year history of the Company's stock price. Because the expected term includes a period for which a participant earns (the two year holding period less the offering period) and does not earn dividends (the offering period) our fair value is equal to the sum of the Black-Scholes model amount, run for the non-dividend yielding period, plus the Black Scholes model amount, run for the dividend yielding period (for which the total period is equal to the expected term). We use the discrete dividend yield method due to our consistent and routine history of paying dividends. The following assumptions were used for each respective period for employee stock-based compensation related to the 2016 ESPP:



	For the Year Ended December 31,
	2016	2015
Expected term (in years)	2.00	—
Volatility	7.89% - 8.03%	—
Risk-free interest rate	0.34% - 0.80%	—
Dividend payment	$0.125 - 0.250	$	—

For the year ended December 31, 2016, 3,961 shares of common stock were purchased by employees under the plan. The following table summarizes the activities under the ESPP from January 1, 2016 through December 31, 2016:



	Activity
Total ESPP equity securities available at January 1, 2016	—
Plus: Registration of 2016 ESPP	250,000
Less: 2016 ESPP common stock purchased by eligible employees, net	(3,961	)
Total 2016 ESPP securities available at December 31, 2016	246,039

Amounts withheld from participants will be classified as a liability on the balance sheet until funds are used to purchase shares. This liability amount is immaterial to the overall financial statements.

Board of Directors Compensation

On August 1, 2007, for periods of service beginning on July 1, 2007, and subsequently updated on July 23, 2013, our Board of Directors approved that, in lieu of RSUs, each non-executive director will be granted in arrears on the first business day following the quarter of service, restricted stock under the 2012 Equity Plan for their service on the Board of Directors and committees thereof. The restricted stock will be granted quarterly based upon the closing price per share of our common stock at the end of each quarter, such that each non-executive director will receive $60,000 per year of restricted stock ($70,000 for the Chair of the Audit Committee). The restricted stock will vest on the earlier of a change in control of the Company (as defined in the 2012 Equity Plan for grants on or after May 16, 2012) or one year from the date of grant, provided, in each case, that the non-executive director maintains continuous service on the Board of Directors. Future cash dividends related to the restricted stock will be set aside and paid in cash to each non-executive director on the date the restricted stock vests. In addition to the quarterly restricted stock grants, the non-executive directors will be entitled to cash compensation of $45,000 per year ($55,000 for the Chair of the Audit Committee), also payable quarterly. These sums are payable, at the election of the non-executive director, in the form of cash, shares of common stock or any combination thereof. No directors have elected common stock in lieu of cash payments for their services during the years ended December 31, 2016, 2015 and 2014. The non-executive directors are required to hold shares of common stock and/or restricted stock equal to three times their annual cash compensation ($135,000 for each non-executive director and $165,000 for the Chair of the Audit Committee) as measured on June 30^th of each year. Should the value of the non-executive director’s holdings fall below the established minimum, the non-executive director will be deemed in compliance with the requirement provided that the non-executive director retained shares equal to the total number of restricted stock granted during the preceding three years. All non-executive directors will have a three year grace period to reach this ownership threshold.

The following table details information on the restricted stock awarded to our non-executive directors during the three years ended December 31, 2016:



Service for The Three Months Ended	Grant Date	Price Per Share⁽¹⁾		Restricted Stock Awarded
December 31, 2013	January 1, 2014	$	14.28	6,475
March 31, 2014	April 1, 2014	18.17		5,093
June 30, 2014	July 1, 2014	15.40		6,006
September 30, 2014	October 1, 2014	13.01		7,110
December 31, 2014	January 1, 2015	17.36		5,328
March 31, 2015	April 1, 2015	19.17		4,823
June 30, 2015	July 1, 2015	16.84		5,494
September 30, 2015	October 1, 2015	16.46		6,242
December 31, 2015⁽²⁾	January 1, 2016	18.32		5,869
March 31, 2016⁽²⁾	April 1, 2016	17.51		6,141
June 30, 2016⁽²⁾	July 1, 2016	19.17		5,605
September 30, 2016⁽²⁾	October 1, 2016	17.82		6,034
Total				70,220


⁽¹⁾	The quarterly restricted stock awarded is based on the price per share of our common stock on the last trading day prior to the quarterly award date.


⁽²⁾	The Board of Directors voted to grant a full award for services provided during the fourth quarter of 2016 and fully vest all unvested restricted stock for the Company's former Chairman of the Audit Committee who died on November 14, 2016.

The shares of restricted stock will vest one year from the date of grant and the related cash dividends on the vested restricted stock will be paid to our non-executive directors at vesting.