Widepoint Corp 8-K, filed May 18, 2021
Widepoint Corp (WYY)
8-K
2021-05-18
For: 2021-05-14
View Original
Added on
April 06, 2026
About this 8-K
Widepoint Corp filed this 8-K on May 18, 2021, reporting on events of May 14, 2021.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 14,
2021
_________________
WIDEPOINT CORPORATION
(Exact
Name of Registrant as Specified in Charter)
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Delaware
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001-33035
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52-2040275
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(State
or Other Jurisdiction of Incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification No.)
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11250 Waples Mill Road, South Tower 210, Fairfax,
Virginia
(Address
of Principal Executive Office)
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22030
(Zip
Code)
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Registrant’s
telephone number, including area code: (703) 349-2577
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______________________________________________________________________________
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
[__]
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[__]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[__]
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[__]
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Securities Registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Trading Symbol
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Name of Exchange on Which Registered
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Common Stock, $0.001 par value per share
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WYY
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NYSE
American
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Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter). Emerging growth company
☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
☐
Item
2.02 Results of Operations and Financial
Condition.
On May
14, 2021, WidePoint Corporation (the “Company”)
conducted a conference call to discuss its financial results for
the first quarter ended March 31, 2021. A copy of the transcript of
such conference call is furnished herewith as Exhibit 99.1 to this
Current Report on Form 8-K. In addition, on May 14, 2021, the
Company issued a press release announcing its financial results for
the first quarter ended March 31, 2021. A copy of the
Company’s press release is furnished herewith as Exhibit 99.2
to this Current Report on Form 8-K.
The
information in this item shall not be deemed “filed”
for purposes of Section 18 of the Securities Exchange Act of 1934
(the “Exchange Act”), or otherwise subject to the
liabilities of Section 18, nor shall it be deemed incorporated by
reference in any of the Company’s filings under the
Securities Act of 1933, as amended, or the Exchange Act, except to
the extent, if any, expressly set forth by specific reference in
such filing.
Item
9.01(d) Financial Statements and Exhibits.
Exhibit
99.1 Transcript
of Conference Call
Exhibit
99.2 Earnings
Press Release dated May 14,
2021
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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WIDEPOINT
CORPORATION
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Date: May 18,
2021
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By:
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/s/ Jin
Kang
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Jin
Kang
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Chief Executive
Officer
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Exhibit 99.1
Transcript
of
WidePoint
Corporation
First
Quarter 2021 Earnings Call
May 14,
2021
Participants
Jin
Kang - President & Chief Executive Officer
Jason
Holloway - Executive Vice President & Chief Sales and Marketing
Officer
Kellie
Kim - Executive Vice President & Chief Financial
Officer
Analysts
Barry
Sine - Spartan Capital Securities
Presentation
Operator
Good
afternoon. Welcome to WidePoint’s First Quarter 2021 Earnings
Conference Call. My name is Kate and I will be your operator for
today’s call. Joining us for today’s presentation are
WidePoint’s President and CEO, Jin Kang; Executive Vice
President and Chief Sales and Marketing Officer, Jason Holloway;
and Executive Vice President and CFO, Kellie Kim. Following their
remarks, we will open the call for questions from WidePoint’s
publishing analysts and major investors. If your questions were not
taken today and you would like additional information, please
contact WidePoint’s Investor Relations team at
wyy@gatewayir.com.
Before
we begin the call, I would like to provide WidePoint’s Safe
Harbor statement that includes cautions regarding forward-looking
statements made during this call. The matters discussed in this
conference call may include forward-looking statements regarding
future events and other future performance of WidePoint Corporation
that involve risks and uncertainties that could cause actual
results to differ materially from those anticipated. These risks
and uncertainties are described in the company’s Form 10-K
filed with the Securities and Exchange Commission.
Finally,
I would like to remind everyone that this call will be made
available for replay via a link in the Investor Relations section
of the company’s website at www.widepoint.com.
Now, I
would like to turn the call over to WidePoint’s President and
CEO, Mr. Jin Kang. Sir, please proceed.
Jin Kang - President & Chief Executive Officer, WidePoint
Corporation
Thank
you, operator and good afternoon to everyone. Thank you for joining
us today to review our financial results for the first quarter
ended March 31, 2021. After completing what was by many metrics,
the most successful year in WidePoint’s history, we entered
2021 with solid momentum and with a considerable task ahead of us
to maintain and ultimately to grow our profitability after our work
on the 2020 Census project wind down. Today, I’m pleased to
report that we started the year on the right foot with the first
quarter.
In the
first quarter, despite Census winding down, our high margin managed
services revenue increased sequentially to 9.3 million. Our gross
profit remained fairly steady relative to this time last year at
4.7 million and in line with our projections and expectations. Our
gross margin improved substantially to 22.8%, as carrier services
revenues from Census trickled away. We also earned 585,000 in net
income for the quarter, which on a per share basis was a slight
improvement compared to Q1 of last year. While we all knew that
2021 would be a difficult comparison to last year, the
profitability metrics demonstrate that even without Census, our
core business and our businesses’ fundamental growth drivers
remained intact. Additionally, we finished the quarter with 17.1
million in cash, which provides us with a great deal of
flexibility, as we now have greater opportunity to put capital to
work and to better position our business for success in the coming
quarters.
Our
primary objective for 2021 is to add new high margin sources of
revenue to our business. And one of the ways we intend to do that
is by investing back into our technical infrastructure to make our
services and our solutions even more appealing to a greater number
of prospective clients. We’ve been making several investments
into the business in the past few quarters, a few of which are
worth highlighting today.
To
start, we’ve made enhancements to our flagship delivery
system, our Intelligent Telecommunications Management System or
ITMS. As a reminder, ITMS is our system for delivering our trusted
mobility management solutions to our customers. Our investments in
cybersecurity, cloud enablement and user interface enhancements
will allow us to scale more effectively, implement more quickly and
more securely and improve the user experience.
In
addition to our investments in ITMS, we continued to make
investment into our device recycling program. Device recycling is a
major component of the green initiative program we discussed last
year. Our recycling program is a win-win. It helps our clients
achieve their ESG objectives. And with these objectives being top
of mind for many companies, it serves as a growth driver for our
business. While we only launched this initiative in Q4 of 2020,
we’re already starting to drive profitable revenue from it as
we have implemented that recycling program for select customers in
both public and private sectors. We plan to roll out our recycling
program for all of our customers in the coming
quarters.
To help
accelerate the adoption of our device recycling, we’re
currently pursuing an all R2 or Responsible Recycling certification
through SERI, Sustainable Electronics Recycling International. This
certification will ensure that we meet the industry standards for
responsible testing, repair, reuse, and recycling programs. And if
we can attain this certification, it is likely to open new revenue
streams for us. This certification process is progressing smoothly
and we’re likely to receive results soon, so please stay
tuned.
In
addition, we’re making enhancements to our digital billing
and analytics infrastructure to enhance our Telecommunication Data
Intelligence platform or TDI to meet expanding requirements of the
unified communication and collaboration market. We also continue
our investment in our IdM infrastructure to ensure that we are able
to scale to meet customer demands, and to ensure that our systems
are secure and resilient to withstand the increasing frequency of
cyber-attacks that are being reported in the news.
We’re
also continuing to pursue our FedRAMP certification. As of today,
we have verbal communication that DHS has submitted the sponsorship
applications to the General Services Administration or GSA, and we
are awaiting the approval of the sponsorship application by GSA.
Once approved, we will officially start the FedRAMP certification
process. In the meantime, preparations continue in earnest. We have
engaged cybersecurity subject matter experts to prepare our
systems, work products and documentation to shorten the FedRAMP
certification process. Investing in our technology suite expand our
competitive advantage and our potential total addressable market
but at the end of the day, effective selling is key to profitable
growth.
So with
that in mind, I’m going to turn the call over to Jason to
provide you with some details on the sales momentum we’ve
been building since the start of the year. Then our CFO, Kellie Kim
will walk us through the financial results for the first quarter.
Jason?
Jason Holloway - Executive Vice President & Chief Sales and
Marketing Officer, WidePoint Corporation
Thank
you, Jin. For 2021, our sales strategy is based on the same tactics
we’ve successfully implemented in the past several quarters,
to team with systems integrators and expand our presence with both
prominent players in the commercial and federal sectors. But as Jin
mentioned, we are leaning into this strategy and investing back
into our business more aggressively, which we are able to do thanks
to our strong balance sheet, our high customer retention rate and
the momentum we’ve built over the past several
years.
We
started the year by receiving our first task orders under the
Department of Homeland Security, Cellular Wireless Management
Services 2.0 contract, which were valued at 86 million in
aggregate. The total CWMS 2.0 contract, which we secured last
November, has a $500 million ceiling and a contract period of five
years. Almost immediately after the contract vehicle was put in
place, task orders started to be awarded. For example, the CISA or
Cybersecurity and Infrastructure Security Agency award is new.
It’s important to note that CISA is a relatively new division
within DHS that has been growing, and so there may be opportunities
for us to expand our work with them. When we secure the first CWMS
1.0 contract, we spent the first seven years getting the majority
of the DHS components under the contract vehicle. Now that those
components are already on-boarded, we can focus on expanding
services to bring additional value to DHS, like focusing on the 5G
technologies and helping enable DHS missions through newly expanded
professional services, which we are working diligently to ensure
that every major component of DHS puts in place a one base year
plus four option year contract such that we can maximize the CWMS
2.0 contract.
If
you’ve followed our press releases, you’ll notice that
the IdM business, in particular, performed well in Q1 and has been
building momentum. During our last call, I discussed two major IdM
wins we announced in February. We secured a new contract from a
Fortune Global 500 company through which we are providing them with
professional services, hardware and Personal Identity Verification
or PIV credentials. Along with a strategic partner Intercede, we
completed this deployment in less than 30 days. For reference, the
competition normally takes three times as long. We also secured a
new contract to issue External Certificate Authority or ECA
credentials to a hospital that interacts with the US Department of
Health and Human Services. Then, just before the quarter’s
end, we won to new additional credential deals, both of which are
federal clients whose names we cannot share for security
reasons.
Regarding
our PKI solutions, simplicity and ease of use are exactly what the
industry is looking for today. This gives us an advantage as we
approach prospective customers who may be sensitive to long and
complex PKI deployments. For example, we are positioned to offer
PKI as a service, because we have all of the required
accreditations, the software and a secured network operations
facility to protect PII data along with being a certificate
authority, large commercial businesses do not have to worry about
making the high dollar investments in certifying their own
environment, and hiring highly specialized resources to run the
program. There’s a reason why the Department of Defense has
stuck with PKI for so long and that’s because of its ability
to protect against hacks of both people and hardware.
As more
high profile hacks become publicized, commercial enterprises are
looking for more secure solutions and that’s where WidePoint
comes into the picture. We can deliver DoD grade protection at a
fraction of the cost that would be, if they were to deploy it
themselves. There’s clearly momentum building in our favor
and to help capitalize on that momentum, we’ve applied the
same mentality Jin discussed, investing back into the areas of
business that can drive growth. We’ve applied that to
marketing to improve our branding, and our name
recognition.
We were
recently listed in the 2021 Gartner Magic Quadrant for Managed
Mobility Services. Being included in this particular publication
was a huge win for WidePoint. Over 70% of the Fortune 1000 and over
10,000 midsize and large enterprises rely on Gartner for their
advice and guidance in key technology areas. This research
highlights WidePoint’s strong emphasis on security and our
ability to scale to support the largest enterprises on a global
basis, which reinforces and amplifies our go to market messaging
for both public sector and commercial markets. The listing in last
fall’s TEM Market Guide has already resulted in new
opportunities in our pipeline, which we are aggressively pursuing.
And we expect this year’s write up in the MMS Magic Quadrant
to produce even more.
As I
said on our last call, we strategically recruited a very strong
commercial enterprise sales director who has added to our already
strong pipeline of opportunities. While we had hoped to share more
details on the appointment, the reality is that flaunting the new
hire and discussing new opportunities could jeopardize the hard
work and strategy we’ve put forward to close those potential
deals. Updates [ph] matter, and while we know that the shareholders
are eager for specific updates, it is our hope that you will trust
our discretion and our decision to put the business’ growth
first, as our new hire navigates through some of these new
opportunities. We are excited with how the pipeline is growing and
look forward to sharing specifics and news in the month
ahead.
As the
negative impacts from COVID-19 in the US begin to dwindle,
there’s a sense that normalcy is just on the horizon. This
bodes well for us for two reasons. For one, the mobile landscape is
more complex today than it was before COVID. And we do not see that
complexity, materially diminishing. As a result, there are more
opportunities than ever to help large organizations manage their
mobile assets and ensure they are secure. Second, while the digital
billing and analytics and IdM businesses performed well in Q1,
their growth was somewhat constrained by our inability to travel
and to conduct in person meetings, training sessions, and
demonstrations. It is our belief that as in person meetings become
more prevalent, sales of these high margin business, as well as
other components of TM2 may accelerate. We don’t know the
exact timing, but the trends we see today make us cautiously
optimistic that 2021 will be another productive year for the sales
team and for WidePoint as a whole.
With
that, I will hand the call over to Kellie.
Kellie Kim - Executive Vice President & Chief Financial
Officer, WidePoint Corporation
Thank
you, Jason. Good afternoon, everyone. I’m pleased to share
more details on the first quarter 2021 results. For the first
quarter, our revenue was 20.7 million compared to 39.7 million
reported for the same quarter last year. The year-over-year decline
was primarily driven by a reduction in carrier services revenue,
primarily due to the wind down of a work on the Census project and
the final tranche of carrier credits discussed in our Q4
call.
As a
refresher on these carrier credits, we discovered that the carriers
had overcharged one of our clients, which does happen in our normal
course of business. We filed a dispute with the carriers on behalf
of our client, which the carriers ultimately accepted. As a result,
the carriers issued credits to us and we passed on the credit
directly to our customer. Ultimately, our actions saved our client
money, which is one of many benefits we provide. As a reminder,
these carrier credits have not and will not impact our
profitability.
Looking
at the revenues in more detail, carrier services decreased to 11.3
million from 28.1 million in the first quarter of last year.
Managed services for the first quarter of 2021 were 9.3 million
compared to 11.5 million in the first quarter of last year and 8.9
million in the fourth quarter of last year. The decrease in managed
services compared to last year was primarily due to lower revenue
from reselling third party products and services related to the
timing of sales that slipped into 2020. When we exclude the third
party reselling revenue, the managed services revenues in the first
quarter of 2021 of 9.3 million increased 6% compared to the first
quarter of 2020, and 9% from the fourth quarter of 2020. These
increases demonstrate that our core business is still growing
profitable revenues without Census.
Our
gross profit for the first quarter 2021 was 4.7 million, a 5%
decrease from the 5 million we reported in the first quarter of
2020 and a 2% decrease from Q4 of last year, again, demonstrating
that our fundamental business drivers remain intact. In line with
our projections, gross margin improved significantly to 22.8% in
the first quarter of 2021 from 12.5% in 2020. The increase in gross
profit was due to the decrease in lower margin carrier services and
third-party reselling revenues.
In the
first quarter 2021 operating expenses decreased 4% to 4 million
from 4.2 million in the first quarter of last year. For the first
quarter 2021, GAAP net income was 585,000 or $0.06 per diluted
share, an improvement from net income of 484,000 or $0.06 per
diluted share in the first quarter of 2020. The increased net
income reflects lower income tax expense associated with a
permanent tax benefit booked in the first quarter. Our effective
tax rate remains around 27%. On a non-GAAP basis, EBITDA for the
first quarter of 2021 was 1 million compared to 1.1 million last
year. Our non-GAAP adjusted EBITDA was 1.2 million in the first
quarter compared to 1.4 million in the same period
2020.
Shifting
to cash flow and the balance sheet. We exited the quarter with 17.1
million in cash or $1.87 per diluted share, net working capital of
14.6 million and approximately 5 million available to draw down on
our credit facility. Our operating cash flow was 1 million, capital
expenditures were 0.6 million compared 0.4 million last year and a
0.8 million increase in net cash from financing activities
resulting in a net cash increase of 1.1 million.
This
completes my financial summary. For a more detailed analysis of our
financial results, please reference our Form 10-Q, which was filed
prior to this call. So with that, I would like to turn it back to
Jin.
Jin Kang - President & Chief Executive Officer, WidePoint
Corporation
Thank
you, Kellie and thank you, Jason. As I stated at the outset of this
call, our primary focus for 2021 is profitably growing our business
by adding more high margin sources of revenue. One part of our
strategy to accelerate the development of more profitable revenues
is through strategic acquisitions, which we’ve been very
transparent about on our last few calls. The search continues and
there are several potential opportunities that are currently under
review. Once we have a material update to announce, we will be sure
to share it.
In the
meantime, we’re continuing to meticulously vet targets to
ensure that when we do find the right match, we can act swiftly and
with purpose and for the betterment of our organization and our
shareholders. In the meantime, while the search continues, we are
pushing to organically improve our profitability, and to expand our
revenue streams. But as a reminder, the Census contract was
materially completed in Q4 2020, as anticipated. This contract was
hugely successful and displays our capabilities to deliver on large
scale projects, as well as scale down quickly. As a result, it has
positioned us well, as we endeavor to win new large scale work over
the long run. However, in the near term, it does make for a
difficult comparison for 2021.
To more
objectively evaluate our performance in 2021, we believe it may
help to bear in mind how our expectations for this year compared to
our performance from last year, excluding the short-term bumps from
Census. With that context said, today we are issuing guidance for
the full year 2021. For 2021, we expect our revenues to be
approximately 103 million compared to 180 million in 2020.
Excluding Census, our 2021 revenue projections represent growth of
16% compared to our 2020 results. We expect our adjusted EBITDA to
be approximately 4.3 million for the year versus adjusted EBITDA of
5.7 million in 2020. If you exclude Census, our 2021 adjusted
EBITDA projection would be roughly in line with our 2020 results.
Additionally, we expect earnings per share for 2021 to be
approximately $0.12 on a fully diluted basis compared to $0.25 in
2020 without the tax benefits of 8.2 million. Again, excluding
Census and the large tax benefits, we expect our EPS to be
approximately 10% below our 2020 results due to the investments we
are making in sales and marketing, and our technology platforms to
better position WidePoint for long-term growth, as we discussed at
the outset of this call.
Combined,
these expectations demonstrate that even without the work of
Census, we believe maintaining our core businesses’
profitability and potentially expanding it are within reach for
2021. Bear in mind that our outlook depends on the timing of new
contract awards, and when new customers are on-boarded, as well as
the terms of existing and new partnership arrangements. So
we’ll continue to update these numbers as we gain more
visibility into our progress throughout the year.
With
Census behind us, 2021 has the potential to be a great building
year for WidePoint and we remain incredibly optimistic about our
long-term prospects given the strength of our core business and the
macro tailwinds behind our industry. We believe the future remains
incredibly bright for WidePoint and to ensure that optimism becomes
manifest, we are investing back into the growth areas of our
business. Over the past several years, we have demonstrated that
WidePoint is an adaptable organization run highly efficiently with
a robust roster of core clients, which continues to develop.
We’ve proven that we can expand within our current client
base. We have a highly resilient federal business and in
today’s government spending environment that is an extremely
advantageous position. These core components of our business when
powered by the tailwinds that may pick up as in-person meetings and
demonstrations become more prevalent over the coming year makes us
optimistic that 2021 will be another profitable year for WidePoint
and one with ample opportunities on which to build.
I will
end our prepared remarks by thanking our shareholders for their
continued support and, of course, all of our staff members for all
their hard work in the performance of their duties, especially
during this pandemic.
With
that covered, we are ready to take questions from our analysts and
our major shareholders. Operator, will you please open the call for
questions?
Operator
Thank
you. [Operator Instructions] Our first question today is coming
from Barry Sine at Spartan Capital Securities. Your line is
live.
Q: Hey, good evening. First couple of questions, if you
don’t mind, please.
Jin Kang - President & Chief Executive Officer, WidePoint
Corporation
Hi,
Barry.
Q: Good evening. In your first bullet, the $86 million in
task orders from the Department of Homeland Security, I’m
assuming that that will be recognized into revenue over several
years, that’s not all 2021 revenue?
Jin Kang - President & Chief Executive Officer, WidePoint
Corporation
That is
correct. The period of performance for that contract or the task
order is one base period with four one year option period, so it
will be recognized over the five year period.
Q: Okay. Understood. So, obviously, a very different focus
now versus 2020. You talked about the investments you’re
making in the sales force, as well as technology. On the sales
force, do you have a -- could you give us maybe a hard metric, how
many quota bearing salespeople do you have now versus a year ago?
Is it doubling, 5% increase, how significant is it? And then what
are they going after? In the past, you’ve been able to talk
about on the conference calls, potential very big contracts that
you may or may not win. And obviously, the reopening of DHS was one
such big contract. Are there any big contracts on the horizon or
you just mainly hunting for a large number of smaller contract
wins?
Jin Kang - President & Chief Executive Officer, WidePoint
Corporation
So
there were a couple of questions. So in terms of the size of our
sales force, it’s roughly 14 total. We’ve added I think
around three over the past six months. In terms of large contracts
within our sales pipeline, there are some sizable ones that are
there. There are some with some local -- state and local,
there’s also some with commercial customers. And because we
are a small organization, some of these things, some of these
contracts could have a material impact on our numbers.
Q: Okay. And then, obviously, you mentioned that this is
going to be a bit of a down year revenue wise and I understand
everything around that. But oftentimes the market is not as kind to
companies with declining revenue, they don’t -- the market
doesn’t look beyond that. You mentioned on this call, and
you’ve mentioned in the past that one potential solution to
that might have been M&A, adding an acquisition so that at
least optically, it would look like the company is growing. We are
what three eighths of the way into the year with nothing announced.
I’m kind of reminded of the old country and western song,
looking for love in all the wrong places. There is a $88 trillion
global economy, surely, there’s got to be some companies out
there that would be a fit for you. Why can’t you find
them?
Jin Kang - President & Chief Executive Officer, WidePoint
Corporation
Well,
they are out there, and we’re certainly not looking for love
in the wrong places. I think we’re looking in the right
places but I think that there’s a big headwinds against us on
this. And that’s because of there’s so many spats and
there’s so much liquidity in the market. The multiples that
some of these companies are looking for just seem to be
astronomical. And we know of one software company that received 37
times EBITDA. I mean, so that seems pretty rich to us. And so we
may have to broaden our nets here so that we can look at companies
and potentially pay a higher multiple. But that also comes with
risk, in that we don’t have a whole lot of money to waste.
And that’s the last thing we need to do is to do a bad
acquisition.
Although
we are down in top line revenue, our gross margins are improving,
it went from 17%, 18% to 22% to 23%. So that’s a -- and then
we’re continuing to remain profitable. So I think we have a
little bit of time but yes, we are mindful that we do need to do
some acquisitions and have some organic growth, so that it’ll
ease the decline in top line revenues because of all of this
algorithmic traders that are out there. But as I said, our goal is
to remain profitable and increase our gross margins, and
we’re going to do that this year. That’s our goal. And
so we are looking seriously at a lot of opportunities, a lot of
acquisition targets. We’re right now looking at several of
them right now, and some of them look promising but when you look
under the covers, things change, so we just want to be very
careful. Because we feel that no acquisition is better than a bad
acquisition.
Q: So one of your parameters in the past and correct me if
I’m wrong, if I can kind of characterize what I think
you’ve said in the past is, you were looking for quality
acquisitions and that you were averse to looking at fixer-uppers.
If you found a company that seemed to have a good product
portfolio, but perhaps was mismanaged and you could manage it
better, you might be able to get it for a lot less than 37 times
EBITDA, would you consider loosening some of your parameters and
maybe looking at something like a fixer-upper in order to find an
M&A partner?
Jin Kang - President & Chief Executive Officer, WidePoint
Corporation
Yes, I
mean, we have to look at those. And we are looking at some of
those, I think we are looking at strategic acquisitions, since that
we can cross sell and upsell our solutions too, and so they
don’t have to be exactly in our business area and we are
looking at a couple of those. Yes, perhaps a fixer-upper, as long
as we don’t have to pay such a high multiple that would be
interesting to us something that we could see the light at the end
of the tunnel. In other words, we can look at the opportunity and
if we can eliminate the duplication, and we can eliminate some of
the unprofitable pieces and make them profitable and accretive, we
are considering those as well.
Q: And my last question is kind of a macro question or two
macro questions. So, first of all, we’ve had a very, very
large stimulus bill passed and signed by the President, in effect,
and then also a very large infrastructure bill that’s being
proposed. So are there any goodies in there that would benefit
WidePoint? And then the other macro factor, for the first time
really, since the Reagan administration, people are talking about
inflation again. How does inflation impact your business? Do you
have riders in there, for example, on the big DHS contract, if
inflation hits, are you able to raise your prices?
Jin Kang - President & Chief Executive Officer, WidePoint
Corporation
There
are incremental like COLA adjustments, cost-of-living adjustment
and escalators in there. It depends on what the inflation rate is,
but it’s modest. And so, depending on what the inflation rate
is that would make a determination. But in terms of our costs, I
think our costs are reasonably fixed. Of course, the labor rates
will increase in the case of inflation, so we’d have to
manage that very carefully. And the labor rates on RDHS contract
does have some room. We don’t always hire the people always
at the top level, so we do have some room for increasing salaries
if we need to.
There
was also one -- an executive order that was signed by President
Biden about cybersecurity. I think that that helps. I think people
are starting to realize and companies are starting to realize that
cybersecurity is real and the cyber threat is real with the latest
breaking over at the Colonial Pipeline. I think our solution, our
Identity Management Solution would have potentially thwarted the
cyber-attack. We believe that our Identity Management Solution,
essentially is the first firewall that would mitigate some of those
risks associated with people coming in and locking all your data
files down. And so, if you can identify the endpoints, in which
case you can eliminate the threat of having people break into your
system, if you only allow those people that are recognized by your
system onto your infrastructure. So we feel that that executive
order will help us, it’ll create some tailwinds. Because I
think commercial companies are starting to look at
that.
And so,
in terms of the additional liquidity and the funds that are out
there, I think it would all be helpful. I think that there was
another piece of legislation that were in both of the relief
packages, I think that was in to the tune of like, the first one
had a billion dollars a second and had a billion dollars on
cybersecurity improvements. So, all of those things will create
some tailwind for us.
Q: Alright, thanks for answering all my
questions.
Jin Kang - President & Chief Executive Officer, WidePoint
Corporation
Great.
Thank you, Barry. Always a pleasure to speak with you.
Operator
Thank
you. [Operator Instructions] At this time, this concludes our
question-and-answer session. If your question was not taken, please
contact WidePoint’s IR team at wyy@gatewayir.com. I’d
now like to turn the call back over to Mr. Jin Kang for his closing
remarks.
Jin Kang - President & Chief Executive Officer, WidePoint
Corporation
Thank
you, operator. We appreciate everyone taking the time to join us
today. As the operator mentioned, if there were any questions that
we did not address today, please contact our IR team. You can find
their full contact information at the bottom of today’s
earnings release.
Also,
we will be presenting at the 16th Annual Needham Virtual Technology
& Media Conference on Tuesday, May 18 at 8:45 AM. I hope
you’re all able to listen in on our presentation. Thank you
again and have a great evening.
Operator
Thank
you for joining us today for WidePoint’s first quarter 2021
conference call. You may now disconnect.
Exhibit 99.2
WidePoint Reports First Quarter 2021 Financial Results
Sequential Growth in Managed Services Revenues Helps Drive Gross
Margins to 22.8%
FAIRFAX, VA / ACCESSWIRE / May 14, 2021 / WidePoint
Corporation (NYSE
American:WYY), the leading provider of Trusted Mobility
Management (TM2) specializing in Telecommunications Lifecycle
Management, Identity Management (IdM) and Digital Billing &
Analytics solutions, today reported results for the first quarter
ended March 31, 2021.
First Quarter 2021 and Recent Operational Highlights
●
Received the first
task orders under the Department of Homeland Security Cellular
Wireless Management Services 2.0 contract, which were valued at $86
million in aggregate
●
Successfully
on-boarded the DHS Cybersecurity and Infrastructure Security Agency
(CISA)
●
Recognized by the
International Organization for Standardization (ISO) for quality,
environmental, and occupational health and safety
●
Awarded three new
Identity Management contracts, including a deployment with a
Fortune Global 500 corporation, increasing WidePoint's commercial
footprint as well as the Company's secure digital certificates into
a new U.S. federal agency
●
Number of U.S.
Department of Defense secure digital certificates issued increased
8% sequentially from the fourth quarter of 2020
●
Recognized as
honorable mention vendor in the 2021 Gartner Magic Quadrant for
Managed Mobility Services, Global
First Quarter 2021 Financial Highlights:
●
Revenues were $20.7
million
●
Managed Services
revenue increased sequentially to $9.3 million
●
Gross margin
improved to 22.8%
●
Net income improved
to $585,000, or $0.06 per diluted share
●
EBITDA, a non-GAAP
financial measure, was $1.0 million
●
Adjusted EBITDA, a
non-GAAP financial measure, was $1.2 million
●
As of March 31,
2021, cash increased to $17.1 million
Management Commentary
"After
completing what was, by many metrics, the most successful year in
WidePoint's history, we entered 2021 with solid momentum and with
an intense focus on maintaining and ultimately growing our
profitability," said WidePoint's CEO, Jin Kang. "In the first
quarter, we grew our high margin Managed Services revenues
sequentially to $9.3 million, while our low margin Carrier Services
revenues decreased due to our work on the 2020 Census winding down
as well as the residual effects of a carrier credit from last
quarter. Carrier credits occur frequently in the normal course of
our business as we occasionally find that a carrier has overcharged
one of our clients. In this instance, we found the miscalculation
and were able to save one of our prominent clients $2.6 million in
expenses, which is reflected in our results as a decrease in
Carrier Services, but which has no impact on our profitability.
With Carrier Services revenues decreasing and gross profit staying
fairly stable at $4.7 million, we improved our gross margins to
22.8%. We also increased our cash position to $17.1 million as we
generated positive cash flows from operations and leveraged our
at-the-market offering in January to better prepare WidePoint for
growth opportunities.
"The
financial results of the first quarter demonstrate that WidePoint
has a solid base from which we can continue to build and expand our
profitability. With tailwinds from the increasing complex mobile
landscape, the growing need to secure mobile devices, and the
return to more in person work expanding our pipeline, we are
optimistic that we are in a healthy and strong position to continue
driving the business's profitable growth over the
long-run."
First Quarter 2021 Financial Summary
|
(In millions, except per share amounts)
|
March 31,
2021
|
March 31,
2020
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Revenue
|
$20.7
|
$39.7
|
|
Gross
Profit
|
$4.7
|
$5.0
|
|
Gross
Profit Margin
|
22.8%
|
12.5%
|
|
Operating
Expenses
|
$4.0
|
$4.2
|
|
Income
from Operations
|
$0.7
|
$0.7
|
|
Net
Income
|
$0.6
|
$0.5
|
|
Basic
Earnings per Share (EPS)
|
$0.07
|
$0.06
|
|
Diluted
Earnings per Share (EPS)
|
$0.06
|
$0.06
|
|
Adjusted
EBITDA
|
$1.2
|
$1.4
|
Financial Outlook
Due to
the large, short-term changes in WidePoint's financial performance
from the 2020 Census project, the Company believes comparing 2021
expectations to 2020 results, excluding the 2020 Census project,
may provide a more objective analysis of the Company's anticipated
performance. For the fiscal year 2021, the Company currently
expects revenues of approximately $103 million, adjusted EBITDA of
$4.3 million, and EPS of $0.12 per diluted share, based on
9,128,000 shares outstanding. Excluding WidePoint's work on the
2020 Census project, the Company's expectations reflect revenue
growth of approximately 16% year-over-year and adjusted EBITDA
consistent with fiscal year 2020. The Company's financial outlook
is based on current expectations and actual results could differ
materially depending on market conditions and the factors set forth
under the "Safe Harbor Statement" below.
Conference Call
WidePoint
management will hold a conference call today (May 14, 2021) at 4:30
p.m. Eastern time (1:30 p.m. Pacific time) to discuss these
results.
WidePoint's
President and CEO Jin Kang, Executive Vice President and Chief
Sales and Marketing Officer Jason Holloway, and Executive Vice
President and CFO Kellie Kim will host the conference call,
followed by a question and answer period.
U.S.
dial-in number: 888-506-0062
International
number: 973-528-0011
Passcode:
862059
Please
call the conference telephone number 5-10 minutes prior to the
start time. An operator will register your name and organization.
If you have any difficulty connecting with the conference call,
please contact Gateway Investor Relations at
949-574-3860.
The
conference call will be broadcast live and available for replay
here and via
the investor relations section of the Company's website.
A
replay of the conference call will be available after 7:30 p.m.
Eastern time on the same day through May 28, 2021.
Toll-free
replay number: 877-481-4010
International
replay number: 919-882-2331
Replay
ID: 40863
About WidePoint
WidePoint
Corporation (NYSE American:WYY) is a leading provider of trusted
mobility management (TM2) solutions, including telecom management,
mobile management, identity management, and digital billing and
analytics. For more information, visit widepoint.com.
Non-GAAP Financial Measures
WidePoint
uses a variety of operational and financial metrics, including
non-GAAP financial measures such as EBITDA and Adjusted EBITDA, to
enable it to analyze its performance and financial condition. The
presentation of non-GAAP financial information should not be
considered in isolation or as a substitute for, or superior to, the
financial information prepared and presented in accordance with
GAAP. A reconciliation of GAAP Net income to EBITDA and Adjusted
EBITDA is provided below:
|
|
THREE MONTHS
ENDED
|
|
|
|
MARCH
31,
|
|
|
|
2021
|
2020
|
|
|
|
|
|
NET INCOME
(LOSS)
|
$585,400
|
$483,900
|
|
Adjustments to
reconcile net (loss) income to EBITDA:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
370,000
|
422,800
|
|
Amortization of
deferred financing costs
|
-
|
1,300
|
|
Income tax
provision (benefit)
|
23,500
|
177,200
|
|
Interest
income
|
(2,400)
|
(3,100)
|
|
Interest
expense
|
71,000
|
80,800
|
|
|
|
|
|
EBITDA
|
$1,047,500
|
$1,162,900
|
|
Other adjustments
to reconcile net (loss) income to Adjusted EBITDA:
|
|
|
|
|
|
|
|
Provision for
doubtful accounts
|
(200)
|
-
|
|
Stock-based
compensation expense
|
182,800
|
281,400
|
|
|
|
|
|
Adjusted
EBITDA
|
$1,230,100
|
$1,444,300
|
Safe Harbor Statement
This press release contains forward-looking statements concerning
our business, operations and financial performance and condition as
well as our plans, objectives and expectations for our business
operations and financial performance and condition that are subject
to risks and uncertainties. All statements other than statements of
historical fact included herein are forward-looking statements. You
can identify these statements by words such as "aim," "anticipate,"
"assume," "believe," "could," "due," "estimate," "expect," "goal,"
"intend," "may," "objective," "plan," "potential," "positioned,"
"predict," "should," "target," "will," "would" and other similar
expressions that are predictions of or indicate future events and
future trends. These forward-looking statements are based on
current expectations, estimates, forecasts and projections about
our business and the industry in which we operate and our
management's beliefs and assumptions. These statements are not
guarantees of future performance or development and involve known
and unknown risks, uncertainties and other factors that are in some
cases beyond our control. All forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially from those that we expected, including, the
impact of the COVID-19 pandemic on our business and operations; our
ability to successfully execute our strategy; our ability to
sustain profitability and positive cash flows; our ability to gain
market acceptance for our products; our ability to win new
contracts, execute contract extensions and expansion of services of
existing contracts; our ability to compete with companies that have
greater resources than us; our ability to penetrate the commercial
sector to expand our business; our ability to retain key personnel;
and the risk factors set forth in our Annual Report on Form 10-K
for the year ended December 31, 2020 filed with the SEC on March
24, 2021. The forward-looking statements included herein are made
only as of the date hereof. We undertake no obligation to publicly
update or revise any forward-looking statement as a result of new
information, future events or otherwise, except as otherwise
required by law.
Investor Relations:
Gateway
Investor Relations
Matt
Glover or Charlie Schumacher
949-574-3860
WYY@gatewayir.com
WIDEPOINT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
MARCH
31,
|
DECEMBER
31,
|
|
|
2021
|
2020
|
|
|
|
|
|
ASSETS
|
||
|
CURRENT
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$17,058,363
|
$15,996,749
|
|
Accounts
receivable, net of allowance for doubtful accounts
|
|
|
|
of $111,054 and
$114,169 in 2021 and 2020, respectively
|
19,214,216
|
35,882,661
|
|
Unbilled accounts
receivable
|
10,017,255
|
13,848,726
|
|
Other current
assets
|
1,692,695
|
1,763,633
|
|
|
|
|
|
Total current
assets
|
47,982,529
|
67,491,769
|
|
|
|
|
|
NONCURRENT
ASSETS
|
|
|
|
Property and
equipment, net
|
565,535
|
573,039
|
|
Operating lease
right of use asset, net
|
5,917,435
|
6,095,376
|
|
Intangibles,
net
|
2,134,193
|
2,187,503
|
|
Goodwill
|
18,555,578
|
18,555,578
|
|
Deferred tax
asset
|
5,621,373
|
5,606,079
|
|
Other long-term
assets
|
1,312,402
|
815,007
|
|
|
|
|
|
Total
assets
|
$82,089,045
|
$101,324,351
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
Accounts
payable
|
$19,586,553
|
$36,221,981
|
|
Accrued
expenses
|
11,354,080
|
15,626,313
|
|
Deferred
revenue
|
1,875,353
|
2,016,282
|
|
Current portion of
operating lease liabilities
|
582,058
|
577,855
|
|
Current portion of
other term obligations
|
|
-
|
|
|
|
|
|
Total current
liabilities
|
33,398,044
|
54,442,431
|
|
|
|
|
|
NONCURRENT
LIABILITIES
|
|
|
|
Operating lease
liabilities, net of current portion
|
5,784,592
|
5,931,788
|
|
Other
liabilities
|
246,037
|
-
|
|
Deferred revenue,
net of current portion
|
437,578
|
398,409
|
|
|
|
|
|
Total
liabilities
|
39,866,251
|
60,772,628
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
Preferred stock,
$0.001 par value; 10,000,000 shares
|
|
|
|
authorized;
2,045,714 shares issued and none outstanding
|
-
|
-
|
|
Common stock,
$0.001 par value; 30,000,000 shares
|
|
|
|
authorized;
9,071,352 and 8,876,515
|
|
|
|
shares issued
outstanding, respectively
|
9,071
|
8,876
|
|
Additional paid-in
capital
|
101,645,142
|
100,504,741
|
|
Accumulated other
comprehensive loss
|
(159,564)
|
(104,615)
|
|
Accumulated
deficit
|
(59,271,855)
|
(59,857,279)
|
|
|
|
|
|
Total stockholders'
equity
|
42,222,794
|
40,551,723
|
|
|
|
|
|
Total liabilities
and stockholders' equity
|
$82,089,045
|
$101,324,351
|
|
|
|
|
WIDEPOINT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
THREE MONTHS
ENDED
|
|
|
|
MARCH
31,
|
|
|
|
2021
|
2020
|
|
|
|
|
|
REVENUES
|
$20,650,843
|
$39,665,356
|
|
COST OF REVENUES
(including amortization and depreciation of
|
|
|
|
$119,083 and
$159,618, respectively)
|
15,934,964
|
34,700,024
|
|
|
|
|
|
GROSS
PROFIT
|
4,715,879
|
4,965,332
|
|
|
22.8%
|
12.5%
|
|
OPERATING
EXPENSES
|
|
|
|
Sales and
marketing
|
482,299
|
492,231
|
|
General and
administrative expenses (including share-based
|
|
|
|
compensation of
$182,842 and $281,441, respectively)
|
3,307,662
|
3,470,092
|
|
Depreciation and
amortization
|
250,891
|
263,228
|
|
|
|
|
|
Total operating
expenses
|
4,040,852
|
4,225,551
|
|
|
|
|
|
INCOME (LOSS) FROM
OPERATIONS
|
675,027
|
739,781
|
|
|
|
|
|
OTHER (EXPENSE)
INCOME
|
|
|
|
Interest
income
|
2,375
|
3,093
|
|
Interest
expense
|
(71,016)
|
(82,117)
|
|
Other
income
|
2,496
|
331
|
|
|
|
|
|
Total other
expense
|
(66,145)
|
(78,693)
|
|
|
|
|
|
INCOME (LOSS)
BEFORE INCOME TAX PROVISION
|
608,882
|
661,088
|
|
INCOME TAX
PROVISION
|
23,458
|
177,200
|
|
|
|
|
|
NET
INCOME
|
$585,424
|
$483,888
|
|
|
|
|
|
BASIC EARNINGS PER
SHARE
|
$0.07
|
$0.06
|
|
|
|
|
|
BASIC
WEIGHTED-AVERAGE SHARES OUTSTANDING
|
8,995,103
|
8,384,008
|
|
|
|
|
|
DILUTED EARNINGS
PER SHARE
|
$0.06
|
$0.06
|
|
|
|
|
|
DILUTED
WEIGHTED-AVERAGE SHARES OUTSTANDING
|
9,103,160
|
8,442,807
|