SPOK
#Good morning.
Thank you for joining us for our fourth-quarter and 2016 year-end 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 on assumptions that the Company believes to be reasonable, they are subject to risks and uncertainties.
Please review the risk factors section relating to our operation and the business environment in which we compete contained in our 2016 Form 10-K, 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 will turn the call over to <UNK>.
Thanks, <UNK>, and good morning.
We're pleased to speak with you today about our fourth-quarter and full-year 2016 operating results.
We are encouraged by our performance as we met or exceeded the majority of our key operating metrics for both the quarter and the full year.
We achieved these results as we continued to make key strategic investments in our business to enhance and upgrade our operating platforms and sales infrastructure.
And continue our transition from a telecom-based wireless company to an industry-leading software provider with the goal of delivering industry-leading unified critical communications solutions.
We believe that the investments that we have made and will continue to make in our systems and people position us well for the future.
With respect to our fourth quarter of 2016, we saw strong performance in a number of key operating areas.
Noteworthy in the fourth quarter, we continued improvements in wireless retention trends as well as solid software bookings levels.
Spok posted solid results for our wireless products and services in the fourth quarter and for the full year.
Gross disconnects improved on both a quarterly and annual basis.
As a result, annual net pager losses declined to a near historical low for both the quarter and the full year.
While our paging units and wireless revenue continued to decline as expected, we are very pleased by a much slower than anticipated rate of quarterly and year-over-year reductions.
Our performance in the fourth quarter was consistent with our expectations in the trends we typically experience during the year.
We were particularly pleased to see software bookings improved from both the prior year's quarter and prior quarter and our backlog levels remained consistent over the same time period.
Overall, we continue to operate profitably, enhance our product offerings, and further strengthen our balance sheet.
Our ability to continue to generate healthy cash flow has allowed us to execute against our capital allocation strategy and exceed the commitment we made at the beginning of 2016 to return $21 million to our stockholders.
We were able to accomplish this while adding nearly $14.5 million to our cash balance during 2016.
<UNK> and <UNK> will provide details on our financial performance and operating activity shortly, but before that I want to highlight a few key results for the 2016 fourth quarter and full year.
First, wireless subscriber and revenue trends continued to improve in 2016 as we, again, exceeded our expectations for gross additions, net unit churn, revenue, and ARPU, or average revenue per unit.
Our year-over-year rate of paging unit erosion improved to a record low 5.3% for 2016 and in the fourth quarter fell to a quarterly record low of 1.2%.
Our year-over-year rate of wireless revenue erosion was 7.9% for 2016, down from the 10.1% in the prior year.
We were especially pleased to see these positive trends continue in our top-performing healthcare segment which now totals nearly 80% of our direct paging subscriber base.
Healthcare remained our best-performing market segment in the fourth quarter with the highest rate of gross placements and lowest rate of unit disconnects.
Before I move on, let me say we are encouraged by the slower than anticipated rate of wireless paging unit and revenue erosion.
While many physicians want smart devices and secure messaging is a natural fit for them, they also want to keep pagers because they have long trusted them and want to separate their personal smartphone communications from their work communications arriving on a pager.
Also, in a true emergency situation such as severe weather or an event involving rapid deployment of first responders, cellular networks tend to get overloaded and message delivery can fail or be interrupted.
If an organization utilizes only smartphones, communications can be at risk.
Pagers still work in these scenarios because we use a separate simulcast network and multiple satellite control for redundancy.
As a result of these dynamics, we believe migration from wireless pagers will continue to occur at slower pace than in the past.
We've always come at the healthcare sector from the physician and administrative perspective.
Over the years we have seen multiple examples of organizations that have turned in their pagers to go with a smartphone-based application.
When doctors push back at losing their pagers, many of those organizations have had to reinstate that technology.
As we have said in the past, paging is not going to last forever and will continue to erode; however, I believe given the current state of wireless mobile technologies, paging has a long life left.
We at Spok are very fortunate because of that.
In the meantime, it provides a revenue and cash flow stream needed to invest in our future in our software solution development.
Next, continued demand for our software solutions and wireless services resulted in consolidated revenue of $179.6 million for 2016, a decline of approximately 5% from 2015.
Year-over-year performance was driven in large part by consistent levels of annual software revenue.
Software revenues were mostly unchanged from prior-year levels totaling $70 million in 2016 compared to $70.6 million in 2015.
Sustained annual levels of revenue is due in large part to continuing trend of very strong renewal rates on software maintenance contracts which provide a stable recurring and profitable revenue stream.
Total bookings in the fourth quarter were $20 million and were up more than 8% from the fourth quarter of 2015.
In addition, our backlog remains healthy growing to $38.3 million at year end, while our pipeline of marketing qualified leads also remains strong.
Demand for our solutions remained strong in North American markets, specifically among hospitals and other healthcare organizations where we sold solutions to critical smartphone communications, call center management, secure texting, clinical alerting, and emergency notification to both new and existing customers.
However, while domestic performed well, we continued to see sluggishness in our international markets in both EMEA and APAC throughout the year.
Though we are greatly encouraged by the revenue performance we saw in 2016, as we made continued investments in the Spok Care Connect platform and our infrastructure, we expect it will take more time for the Company to grow consistently on an annual basis.
Third, consolidated operating expenses, which exclude depreciation, amortization, accretion, and impairment, declined more than 4% to $144.4 million in 2016 from the prior year.
Annual expenses were below the low end of the guidance range we have provided at the beginning of 2016.
<UNK> will review the details in a few minutes, but essentially the lower year-over-year operating expenses reflected a cost structure that is fully aligned with the demand levels we saw during the year.
We continue to manage operating expenses closely and the efficiencies we have been able to implement across our cost structure provide a solid financial platform as we continue to make investments in areas that support our strategy for long-term growth.
Finally, we again generated healthy levels of free cash flow in 2016, returning a total of $22 million to our stockholders in the form of cash dividends declared in share repurchases.
The Company paid quarterly cash dividends to stockholders totaling $10.3 million and a $5.2 million from a special dividend we declared in December.
In 2016, the Company we purchased 388,255 shares of our common stock under our stock buyback program for approximately $6.5 million.
Also, our Board of Directors yesterday declared our next regular quarterly dividend of $0.125 per share to be paid on March 30.
Over the past decade, we have generated nearly $1 billion in free cash flow, paid nearly $500 million to our stockholders with cash dividends, and repurchased nearly $90 million of our common stock.
In 2017, we continue to remain focused on returning value to our shareholders through our capital allocation strategy, which I will talk about later on today's call.
Overall, we are pleased with our operating performance in the fourth quarter and the Company's substantial progress in 2016.
We met or exceeded our expectations on a number of key operating measures, and we achieved these results as we continued to make key strategic investments in our business.
We are focused on investments to grow our software solutions business while maintaining our valuable wireless revenue stream.
In 2016, we took steps to strengthen our leadership team.
As I previously outlined during the year, we enhanced our employee base by hiring an executive vice president of sales, a chief nursing officer, and a chief medical officer.
We also added 31 product development specialists to the staff.
In 2017, we started the year with our announcement in mid-January of a nearly 45% planned increase in our Eden Prairie, Minnesota based development staff over the next two years.
The majority of those additions will occur this year.
While we have enhanced our human resources, we have also invested in technology to support our operations in the development of our solutions.
We have also invested in our sales support and back office operations.
Our goals have been to increase not only our effectiveness but our efficiency.
Our marketing team has been busy, too.
We've attended numerous trade shows and conferences.
Last week we presented the latest evolution of our suite of integrated healthcare communication and collaboration solutions at the 2017 HIMSS Annual Conference & Exhibition in Orlando.
Spok generated tremendous attention and high approval ratings at the conference.
We intend to carry that momentum throughout 2017 in order to stimulate long-term growth.
We believe that these investments in our systems, people, and marketing programs position us well for the future.
We also move closer to our long-term stated goal of achieving long-term growth.
We are proud of this record of achievement and look forward to continued success in 2017.
I will make additional comments on our 2017 outlook and strategy in a few minutes.
But first, <UNK> <UNK>, our Chief Financial Officer, will review financial highlights for the quarter; then <UNK> <UNK>, President of our operating company, will also comment on our fourth-quarter operational activities.
<UNK>.
Thanks, <UNK>.
Before I review our financial highlights for the fourth quarter and full year 2016, I would again encourage you to review our 2016 Form 10-K, 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 conference call.
As <UNK> noted, we were pleased with our overall operating performance for the fourth quarter and 2016, along with the progress we made toward meeting our long-term business goals.
Revenue contributions from both software and wireless, combined with focused expense management, helped maintain solid operating cash flow, EBITDA, and operating margins for the quarter as we continued to invest in our business for long-term growth.
We also strengthened our balance sheet recording a cash balance of $125.8 million at December 31, 2016, and continued to operate as a debt-free company at year end.
As a result of this performance, we believe we are well-positioned for 2017.
In the interest of time today, I will not review our fourth-quarter and full-year income statement on a line-by-line basis, since much of that information is contained in our news release and federal filings.
However, to the extent you have specific questions about our quarterly financial results, I would be glad to address them during the Q&A portion of this call.
Rather, I want to focus instead this morning on four specific areas.
These include, number one, a review of certain factors that impacted fourth-quarter revenue.
Number two, a review of selected items that impacted fourth-quarter expenses.
Number three, a brief review of deferred tax assets and the status of our valuation allowance, along with other balance sheet items.
Number four, our financial guidance for 2017.
With respect to revenue for the fourth quarter of 2016, total revenue was $44.2 million, compared to $47.3 million in the fourth quarter of 2015, and $45.4 million in the third quarter of 2016.
We were particularly pleased with the year-over-year and sequential performance of wireless revenue, which continues to decline as expected but at slower than anticipated rates.
Total fourth-quarter software revenue reflected increases from the prior quarter and year in maintenance revenue.
Maintenance revenue increased nearly 7% to $9.6 million in the fourth quarter of 2016 versus $9 million in the fourth quarter of 2015.
The increase reflects our continuing maintenance renewal rate, an excess of 99% from our installed software solution base.
Wireless revenue for the fourth quarter remains solid, declining only 1.8% from the third quarter of 2016.
The quarterly rate of wireless revenue erosion was at an historical low and down 40 basis points from the prior-year period.
This solid retention reflected another strong performance by our sales team to again, generate significant wireless growth additions, while minimizing the churn and maintaining stable unit pricing.
Note that we have included an additional schedule detailing the components of our software and wireless revenue in our earnings release.
Turning to operating expenses.
We reported consolidated operating expenses, which excludes the depreciation, amortization, and accretion of $36.3 million for the fourth quarter compared to $37.4 million in the fourth quarter of 2015.
For the full year 2016, operating expenses totaled $144.4 million versus $150.6 million in the prior year.
And were well below the low end of our guidance range of $153 million to $159 million that we have established.
Our operating expenses in the fourth quarter of 2016 decreased approximately $1.1 million or 3% from the fourth quarter of 2015.
For the full year 2016, operating expenses were down approximately $6.1 million or 4% from the prior-year levels.
This was accomplished while we continued to invest in our product research and development to support enhancement to our Spok Care Connect platform.
Full-year 2016 R&D expense totaled $13.5 million, up approximately $3.2 million or nearly a third from the prior year.
As a result of the continued investments that <UNK> has spoken about, we would expect product R&D cost to increase by at least 50% in 2017, with additional increases in 2018.
Offsetting the increase in R&D expense were declines in all other expense categories.
Of the expense reductions, approximately 40% can be attributed to a decline in cost of revenue expense.
Cost of revenue expense reflects the cost of both internal and external implementation services, including travel, as well as third-party hardware and software purchased for customer implementations.
We have focused our expense management initiatives to rebalance the use of these third-party services and have used internal implementation employees to manage this cost.
The remaining expense reduction of approximately $4.9 million in 2016 includes lower general and administrative expenses of $800,000, as we implemented greater efficiencies in our back office.
And approximately $2.7 million in lower sales and marketing expense, due to lower headcount and lower commission expense resulting from lower revenue.
We continue to adjust our employee levels to meet the changing requirements of our business, including investments in our product development staff.
Our full-time equivalent employees, or FTEs, were 587 at December 31, 2016, versus 600 FTEs at year end 2015.
Depreciation, amortization, and accretion decreased in both the fourth quarter and full year 2016 compared to the same period in 2015.
Primarily due to lower amortization expense associated with our intangible assets.
As you may remember, due to our rebranding in 2014, we had revised the amortization period for the intangible assets associated with the Amcom name, which resulted in increased amortization expense in 2014.
Our capital expenses in the fourth quarter of 2016 were approximately $1.9 million and were incurred primarily for the purchase of pagers and infrastructure to support our wireless customers.
For the full year, capital expenses totaled $6.3 million, primarily unchanged from the prior-year level and at the low end of the guidance range of $6 million to $8 million that we had set at the beginning of the year.
We do expect an increase in the level of our capital expense requirements for 2017 as we continue to support the key strategic investments in our business that <UNK> will talk about in a few minutes.
Looking at our deferred tax asset, or DTAs, we had approximately $73.1 million in DTAs at year end.
We no longer have a valuation allowance as we fully expect to realize the benefits associated with our DTAs.
The DTAs primarily consist of net operating losses that will expire in the years 2025 through 2029.
Based on the availability of these DTAs, we do not expect to pay a significant amount in federal income taxes for the foreseeable future, as these DTAs allow us to shelter virtually all of our regular federal taxable income.
However, we are required to pay a minimal amount in federal alternative minimum tax, which we expect to be approximately $700,000 for 2016.
Turning to the balance sheet and other financial items.
The Company generated nearly $38 million of net cash from operating activities during 2016.
Of that $38 million, we returned nearly 45% to our stockholders in the form of cash dividends as well as share repurchases.
This 45% excludes the $5.2 million for the special dividend that was declared in December 2016 but was paid in January 2017.
Over 15% was used to purchase property and equipment, principally pagers.
The remaining 40%, or nearly $15 million, was retained for future use as part of the year-end cash balance of $125.8 million.
As I noted previously, $5.2 million of this cash balance was used to pay the special dividend in January 2017.
We also expect to use a portion of that cash in connection with regular quarterly cash dividend in 2017.
We ended the year with no debt outstanding and continue to operate as a debt-free company.
<UNK> will comment further on our capital allocation strategy shortly.
Finally, with respect to our financial guidance for 2017, we currently expect consolidated total revenue to range from $161 million to $177 million, with wireless revenue between $95 million and $103 million, and software revenue between $66 million to $74 million.
Consolidated operating expenses, excluding depreciation, amortization and accretion, of $153 million to $159 million, and capital expenses to range from $8 million to $12 million.
Finally, I would remind you, once again, that our projections are based on current trends and that those trends are always subject to change.
With that, I will turn the call over to <UNK> <UNK>, who will update you on our fourth-quarter sales and marketing activities.
<UNK>.
Thank you, <UNK>, and good morning.
During the fourth quarter of 2016, our sales and marketing team delivered software bookings of $20 million.
This represents a 7.3% increase over the third quarter and at 8.2% increase over the fourth quarter in 2015.
Our maintenance renewal rate remains in excess of 99%.
We also welcomed four dozen new customers to the Spok family in the fourth quarter, primarily in the healthcare and government sectors.
Healthcare is an important part of our growth and is our largest segment, comprising of 84.5% of overall bookings in the US for fourth quarter and 80.2% for the year.
We are actively pursuing new customer accounts to expand our market presence, and more than a quarter of our fourth-quarter healthcare bookings were hospitals and health systems that have never worked with us before.
For example, among the new customers joining Spok in the fourth quarter was a small regional of health system in the Midwest looking to automate their code call processes for better patient care.
This customer was searching for a comprehensive solution that would integrate with their existing environment.
We will be helping them replace many manual processes around launching and tracking codes, code calls to provide faster care for patients in life-threatening situations where every minute counts.
There is also a lot of activity with our current customers looking to upgrade and expand their systems.
A hospital located on an island in the Atlantic chose us to help them automate a manual environment with integrated technology to streamline their contact center operations, event notifications and mobile communications across the hospital.
This customer's leadership team selected Spok to continue building out their infrastructure because we offer a unified and one technology partnership.
And a final example is a health system in the upper Midwest looking to integrate their critical test results supporting process with the rest of their mobile messaging capabilities.
This long-time customer wants all of their communications including pages, secure text messages, and emergency notifications to be unified and fully integrated.
Their portfolio of Spok solutions is nearly complete.
All of these examples are six-figure deals that demonstrate the strategic enterprise-level investments hospitals are making to capture the value that a truly unified platform makes possible.
After purchasing a Spok solution, our highly skilled professional services group gets to work delivering an exceptional experience and setting our customers up for success from solution design and implementation, to ongoing system improvements after installation.
In 2016, these experts were able to further standardize product implementations and identify key process improvement areas to help customers with mobile communication deployments and faster staff adoption while achieving our customers' objectives.
Looking at customers and prospects outside of the United States, international bookings in fourth quarter were below our expectations.
To reiterate what was previously mentioned in our third-quarter earnings call, we believe we will continue to face economic headwinds in the EMEA and APAC regions and have lowered our expectations for foreign initiatives in the near term.
We are adjusting resources to reflect our emphasis on the US healthcare market and expect that our success with Spok Care Connect, along with a renewed emphasis on partner sales, will provide the initiatives the future for growth plans for international customers.
Before turning things back over to <UNK>, I want to provide an update on our marketing activities.
Our marketing team is responsible for helping us drive leads and build our reputation as a top leader in the industry.
A highly visible example is our new website that launched last month.
This new site was a year-long project for the team and includes changes to improve our web rankings and searches, provide a better experience for visitors on mobile devices, and further promotes our Spok Care Connect story.
Marketing is also responsible for planning and coordinating Spok's presence at a large number of trade shows throughout the year.
In fourth quarter Spok participated in several events for healthcare and public safety with a 20% increase in qualified leads from the same trade shows in 2015.
As <UNK> mentioned, we also just returned from HIMSS, one of our largest events of the year.
I will have more detail to share on our next call but will mention here that our presentations and the discussions with visitors to our booth have reached new levels of strategic vision for enterprise-wide communications at hospitals.
Our social media reach is continuing to grow and our social following has more than doubled over the past year.
In fourth quarter, we also published the results of a survey that asked more than 100 CIOs about their perspective on communications and healthcare.
In addition to helping us generate leads, this paper was cited in 15 prominent healthcare publications and further establishes us as an expert and industry top leader in the healthcare communications space.
Looking forward, we expect strong market demand for integrated critical communications, especially in healthcare.
As <UNK> mentioned, we are making ongoing investments in research and development as well as operational efficiencies.
Over the next two years, we are planning to hire more than 60 new employees in our Minnesota location.
These skilled professionals will help us accelerate product development to meet the demand for Spok Care Connect and enhance our solutions for clinical workflow improvements and better patient care.
With that, I will pass it back over to <UNK>.
Thank you, <UNK>.
With respect to our key goals and business outlook, a little over a year ago we undertook our project catapult plan which marks a shift in our strategic development direction for healthcare, our largest customer segment.
Catapult was initially created as a five-year plan to signal the very intentional move from offering our customers point solutions, or single-product solutions for call center software, alarm management, and secure messaging, to offering them a single integrated platform called Spok Care Connect.
We made the decision to focus on the Spok Care Connect platform for several reasons.
Number one, customer needs.
Our healthcare customers were telling us they needed a more unified approach to communications across their enterprise.
Number two, market opportunity.
Industry analysts confirm to us that there is a multi-billion dollar opportunity for this type of enterprise offering in our largest market, the United States healthcare.
Number three, business simplification.
We have been offering our customers too many different products and multiple versions on several different platforms, and this makes supporting them effectively a challenge.
We needed to develop and simplify our product offerings and to create an efficient way to develop and offer our solutions.
Number four, competitive positioning.
We concluded that a single integrated platform for healthcare communications, Spok Care Connect, would address our customers needs and create a competitive advantage for Spok.
For the past year, we've invested in additional talent, resources, and tools to implement our catapult plan.
We recruited experts for product strategy and development, created additional work teams, and devised a plan to map our existing products to the newly envisioned platform.
We recruited people with experience in enterprise healthcare sales while providing training and certification for our existing teams to increase their focus on the new approach.
We've added clinical expertise to build on our communications legacy.
With the help of our loyal employees, we've made excellent progress.
We also took our Spok Care Connect message to the market.
Our strategy of offering a single platform, single database, single technology that creates an enterprise solution for our healthcare customers has now been validated and endorsed by both customers and industry analysts.
We are confident we are on the right path for our future.
We have many loyal satisfied customers and strengths as an organization.
This is evidenced by our extremely high maintenance renewal rates and positive feedback.
However, our goal is to be the best we can be in a very competitive environment and the only way to do that is to invest in our future and take our solution set to the next level.
As we shared with you last quarter, we've revised our strategic plan for Spok to reflect our commitment to long-term success.
These additional investments beyond what we communicated in late 2015 are reflected in our guidance for 2017.
This will accomplish several key objectives.
Accelerate development, build a stronger infrastructure, align resources and focus where most needed, and increase long-term growth potential.
The linchpin of our strategy is our project catapult 2.0 plan which significantly increases investments in our healthcare platform over the next five years, enabling us to address near-term challenges and to achieve long-term organic growth.
As reflected in our guidance, our plan significantly increases developments and other investments so that we can address the significant market opportunity.
We will continue executing on our vision to build the industry-leading communications platform for healthcare, Spok Care Connect.
Our core foundation of critical communications is strong, and we are proud of the work our employees have done in support of this mission.
We've accomplished so much together since we became Spok.
We are laser focused on making Spok Care Connect the leading communications platform for the healthcare industry.
Now with respect to our 2017 guidance, last year Spok committed to investments that will support our strategy to deliver our industry-leading unified critical communications platform Spok Care Connect, in order to drive long-term stockholder value.
Throughout 2016, our focus was to invest in people, technology, and marketing programs to enable the future success of our strategy.
As a backdrop in 2016, R&D expenses totaled approximately $13.5 million, an increase of nearly one-third from prior-year levels, significantly expanding our research and development staff and spending.
Additional investments included adding the sales leadership, sales representatives, as well as clinical leadership in the form of a CMO and a CNO.
We've continued to increase the level of investment in our planning as reflected in our expense capital expenditure guidance ranges supporting our project catapult 2.0 plan.
For 2017, we anticipate that R&D could increase an excess of 50% from 2016 levels as we will add an additional 47 employees and 15 consultants.
Further in 2018, we will add an additional 16 employees and 6 more consultants.
We will also continue our investment in technology to support our operations and the development of our solutions.
We expect our total incremental cost of this added headcount investment to be approximate $7.9 million in 2017, split between operating expenses of $5.9 million and capital expenditures of $2 million.
These costs will continue to grow in 2018 reflecting the full year of expenses from the 2017 staff additions as well as the incremental costs for our 2018 hires and investments.
We also plan to continue our efforts in marketing and support to increase our efficiency effectiveness and sales opportunities.
Granted, these investments will add current year costs, lower our margins and take time to bear fruit in terms of incremental bookings, sales and revenue growth.
This is not a short-term plan and we do not undertake this commitment lightly.
However, we believe the market is there, and in time we will see significant benefits, opportunities, sales growth, and other business efficiencies as we enhance our platform and bring it fully to market.
We believe that this approach is the right use of our capital and creates sustainable and long-term value for our shareholders as opposed to the short-term financial engineering that we too often see in the marketplace.
However, we understand that a long-term approach is not to be confused with an infinitely patient one.
So we look forward to updating you on our progress along the way.
Now with respect to our capital allocation strategy, our overall goal has been to achieve sustainable business growth while maximizing long-term stockholder value through our multifaceted capital strategy, and is included dividends share repurchases, key strategic investments to improve our operating platform and infrastructure and drive long-term organic growth, and potential acquisitions that could provide additional revenue streams and are accretive to earnings.
We believe the potential in the critical communications market is large and that our best path at creating long-term stockholder value is to exceed in enhancing and accelerating our Care Connect platform.
As we have said before, we spent the last several years evaluating acquisition opportunities in the healthcare information technology space.
We have yet to find an attractive candidate who meets our criteria.
There's a lot of opportunities looking for a sale, most of them are characterized by small scale, negative cash flow, and high valuation expectations.
While some buyers may feel the need to pull the trigger at these levels, we believe that when transaction costs and integration risks are taken into consideration, these opportunities currently do not make sense for creating long-term stockholder value.
We have not closed our mind to acquisitions and will continue to evaluate opportunities, but for now we believe the best use of our capital and management is to invest more aggressively in our own product, research, and development resources in order to accelerate our progress toward creating an industry-leading unified critical communications platform and capability to capitalize on our current solutions portfolio.
In 2015, we returned $29 million to shareholders in the form of dividends and share repurchases.
In 2016, we committed to returning $21 million to shareholders and with the December announcement of our special dividend, we exceeded that commitment.
For 2017, we are committed to continue paying our $0.125 per share quarterly dividend while we aggressively increase our investments in our research and development in order to benefit the future and create long-term shareholder value.
We will continue to evaluate our capital allocation strategy on a quarterly basis and communicate our plans with you with respective to dividends, potential share repurchases, and other uses of capital each quarter when we report earnings.
Wrapping up, we remain committed to our core values of putting the customer first, providing solutions that matter, innovation, and accountability.
We believe our past results and future plans reflect those values and beliefs consistent with the delivery of long-term stockholder value.
At this point, I will ask the operator to open the call for your questions.
We ask you to limit your initial questions to one and a follow up and after that we will take additional questions as time allows.
Operator.
Okay.
Look, folks, thanks for joining us this morning.
We look forward to speaking with you again after we release our first quarter results in April, and everyone have a great day.
