WYY 8-K
Widepoint Corp (WYY)
8-K
2020-05-19
For: 2020-05-14
View Original
Added on
April 06, 2026
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,
2020
_________________
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.
EmployerIdentification 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, 2020, WidePoint Corporation (the “Company”)
conducted a conference call to discuss its financial results
reported results for the first quarter ended March 31, 2020. 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, 2020, the Company issued a press release announcing its
financial results for the first quarter ended March 31, 2020. 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,
2020
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 15,
2020
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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 Corp
First Quarter 2020 Earnings Call
May 14, 2020
Participants
Jin
Kang - President & Chief Executive Officer
Jason
Holloway - Executive Vice President, Chief Sales & Marketing
Officer
Kellie
Kim - Executive Vice President & Chief Financial
Officer
Analysts
Mike
Crawford - B. Riley FBR
Barry
Sine - Spartan Capital Securities
Presentation
Operator
Good
afternoon. Welcome to WidePoint's First Quarter 2020 Earnings
Conference Call. My name is Christy, and I will be your operator
for today's call. Joining us today's presentation is 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 up 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
[email protected].
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 the 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
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, 2020. I first want to recognize all who are
suffering hardships or loss as we deal with the COVID-19 pandemic,
as well as recognize our first responders, our healthcare workers
and so many others who are on the frontline battling this crisis. I
want to thank our dedicated staff that have been working through
the adverse conditions to continue to deliver for our
customers.
Now
during our last call, we spent a good deal of time outlining why we
were optimistic about our ability to build upon our momentum from
last year despite the enormity of the changes to the economy, to
the workplace and to all of our personal lives caused by the global
pandemic. I'm very pleased to report today, that our optimism has
been corroborated. In fact the first quarter of 2020 in many ways
exceeded our expectations.
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Transcript:
WidePoint Corp
First Quarter 2020 Earnings Call
May 14, 2020
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During
Q1, our revenues increased by 81% year-over-year to a record $39.7
million, which is substantially above the guidance we provided on
our last call of $26 million to $31 million. It's worth noting that
the record revenues were driven predominantly by carrier services,
which nearly doubled from $14.3 million in the first quarter of
last year to $28.3 million this year. This increase was mainly a
result of our ongoing work alongside the US Department of Commerce
to support the 2020 census, which we will discuss in a
moment.
As a
reminder, carrier services are extremely low-margin revenues. They
help our top-line, but they do depress our margin profile. As a
result, when evaluating our performance, we tend to focus more on
our managed services revenue. So while the record revenues are a
high point what's more encouraging is that our managed services
also increased 52% to $11.5 million from $7.6 million last year. We
also earned approximately $484,000 and $384,000 in net income in Q1
2020 and Q1 2019, respectively, an increase of 26%
year-over-year.
As many
of you know, the primary financial objectives of this management
team are to grow the top-line and to drive profitability. Not only
did we achieve both of those goals during the first quarter, we
also increased our cash position by $2.4 million, which exceeded
our expectation and was incredibly encouraging given the current
macro environment.
Going
into the quarter, we had anticipated using working capital to
manage the uniquely large volume of work associated with the 2020
decennial census. However, because our customers were relatively
unimpaired by the effects of COVID-19 during the first quarter, we
were able to process our receivables efficiently and manage our
cash quite effectively. We have not seen any indications so far,
but we may see some deviation from this tendency during the second
quarter and beyond. But the sound nature of our federal government
customers combined with some additional trends we'll discuss today
do give us confidence that our business remains relatively
well-insulated from the broader effects in the market although our
ability to predict when events occur has diminished.
Now
before I go into too many financial details and steal all of
Kellie's thunder, let's review some of the operational highlights
for the quarter. The project that is perhaps most paramount to our
business this quarter and the rest of the year is the US Census. At
the start of the year, all deployments were running smoothly and
work was progressing as planned. However, as the stay-at-home order
and social distancing policies were instituted across the US, our
operating model had to evolve to address the changing
environment.
I know
there have been some questions about how the new normal has
impacted the census. So let me address some of those concerns. The
US Census is constitutionally mandated. It would literally take an
act of Congress for this project to be delayed. So far, we haven't
seen any indication of that and all signs point to the project
being completed before the year's end. However, the time line has
shifted. Originally, the enumerators were supposed to be in the
field from May to July.
Going
door-to-door has become slightly more challenging as I'm sure you
can imagine. So that time line has now extended until October.
Because of the challenges, the Census Bureau has increased their
forecast for the number of devices needed in the field by
approximately 20%. The Department of Commerce must ensure that
there are enough people to complete the survey on what may become a
compressed time line. The Census Bureau also need to ensure that
they have enough personnel should the enumerators fall
ill.
From a
purely business perspective, these trends benefit WidePoint. We are
managing more devices than before and potentially for a longer
period. While we cannot numerically quantify how the changes will
impact our business yet, it's fair to say that we may have
potentially more revenues for longer than we originally
anticipated. Obviously, we're excited to play our part continuing
to support this important project, but please bear in mind that we
will likely only continue to receive meaningful revenues from this
contract into the start of 2021.
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Transcript:
WidePoint Corp
First Quarter 2020 Earnings Call
May 14, 2020
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At that
time, we will see a decline in revenues and potentially declining
margins starting with the third quarter 2020. However, we as a
management team will manage the associated costs to ensure that we
do not see our overall margins profile erode as a result. During
our last call, I mentioned that we expected to have a 12-month IDIQ
contract in place for the Cellular Wireless Managed Services BPA
contract by the end of April. For those of you outside of our
industry, this is the large contract we have with the US Department
of Homeland Security or DHS.
As you
may have seen in your search in the Federal Procurement Database
System or fpds.gov, we fully executed the sole source contract on
April 30. As a result, our work with DHS will officially be
continuing under this contract until the end of April 2021. This
sole source contract can be extended beyond April of next year for
a total duration of 2.5 years, if all options are exercised. As a
reminder, we received the sole source contract in part to ensure
that DHS' wireless services will be uninterrupted, while they
continue to conduct a recompete for the longer-term contract. That
recompete is still underway.
Currently, we
expect the draft solicitation material to be released in May of
this year with the full contract to be awarded by October 2020. We
remain confident in our chances of securing this longer-term
contract for all of the same reasons we've outlined in our prior
calls. We are the incumbents. We have a history of excellent
performance with this customer and we are highly integrated into
their organization. We will continue to keep our investors apprised
of updates on this contract as they are released.
But for
now I'd like to turn the call over to Jason to provide you with an
overview of the major news we announced in a press release on May
4, and that is our work with SYNNEX Corporation. Afterwards, Kellie
will guide you through the financial results for the quarter. And
then I'll come back on, for closing remarks, before we open the
call to questions. Jason?
Jason Holloway - Executive Vice President, Chief Sales &
Marketing Officer
Thank
you, Jin. During our last call, I mentioned that we had been
working on a new partnership with a major American multinational
corporation that provides B2B IT services. Some of you may have
been able to read the tea leaves. But on May 4, we publicly
announced that the name of the partner is SYNNEX Corporation. This
relationship is still in its early days, so I won't be able to
share any metrics on our progress. But I do want to provide, a
little bit of color, so that hopefully, there's more context for
the potential significance of this partnership and why it excites
us.
SYNNEX
is a Fortune 200 company and is one of the largest IT distributors
of OEMs, products and services through a large network of
resellers. Currently, we have a vendor agreement with them in
place, which allows them to distribute our Identity Management
solution through the SYNNEX reseller network. Additionally, we're
currently working with them to develop product sub offerings that
may be attractive to their network.
There
is a great deal of potential for this relationship to be a driver
for WidePoint. But like so many other things in the world right
now, the timing of when this may ramp-up is uncertain. We have been
discussing the parameters of the vendor relationship and educating
SYNNEX on our identity management credentialing offerings, since
December of 2019, and ultimately came to fruition in the first
quarter. However, that was before the US was materially affected by
COVID-19.
As a
result, while we are very excited about the partnership, we do not
have a great deal of insight into when this relationship may start
to bear fruit. And until then, and until we have tangible data
points in case studies, credits as well as competitive
sensitivities, dictate that we remain relatively conservative with
our expectations and with what we disclose. As the relationship
develops, we'll be sure to update our investors
accordingly.
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Transcript:
WidePoint Corp
First Quarter 2020 Earnings Call
May 14, 2020
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While
we're somewhat constrained on what we can share today regarding
SYNNEX, I can share that the sales team had another successful
quarter in Q1. During the quarter, we secured $20 million at
Trusted Mobility Management or TM2 contract awards, which included
new wins, extensions and exercised option periods. Much of this is,
due to the quality of our solutions and the excellent relationships
we maintain with our customers. But we did receive an extra boost
this quarter from some macro tailwinds.
As
we've discussed before, the core of TM2 is helping large enterprise
navigate the complexity of the mobile landscape. We help
organizations understand where their mobile assets are and how they
are being secured and used. That landscape has only become more
complex and more challenging to navigate in the past two months.
For many, suddenly transitioning to work from home was daunting.
Fortunately, for our customers, our products and services
facilitate a more flexible workforce. Our services provide the IT
infrastructure that allows the workforce to work remotely and our
IdM solutions provide the secure communications for these remote
sites.
And I'm
pleased to report that, at the end of the quarter and certainly
subsequent to its end, we've been able to help our clients through
the transition and aid at many, who are involved in COVID-19 relief
efforts.
On the
federal side, we've actually seen expansions with many of our
customers, especially with those who are at the forefront of the
fight against COVID-19. One of the best case studies from the
quarter is the work that we have done with US Army Corp. of
Engineers or USACE.
USACE
has been a WidePoint customer since 2011. When the coronavirus
began impacting the US in earnest USACE was on the front lines
trying to build additional hospital capacity. To meet the increased
needs of their personnel, USACE expanded their work with us by
adding an additional 5,000 lines of service. This particular
expansion actually won't show up in our financials until the second
quarter. But it's an example of a trend we've seen with many of our
federal customers, who have been working around the clock to help
all of us stay healthy and return to normal.
On the
commercial side, the story is slightly different. Priorities have
changed. Communication is perhaps more important than ever, because
the world is more mobile and more distributed than ever. Mobile
devices are being used more frequently and as a result, telecom
costs are increasing. It may not be the most exciting component for
what we do, but one of the most important parts of our business is
how we save customers' money on their mobile and telecom expenses.
And in a world that has suddenly become highly price sensitive,
that's powerful.
Helping
our customers avoid large cost increases from overage fees is
particularly pertinent during this challenging time. And we're very
proud to be able to provide that support. During the first quarter
alone, we have saved our commercial clients approximately
$740,000.
The
start of this year has been anything but conventional, and we're
very fortunate to be positioned to continue pushing forward and
building upon the momentum of last year. There remains a great deal
of uncertainty in the world, but we're proud to play a part no
matter how small it maybe in the solution.
Going
forward, we plan to continue investing in the sales team and
working with systems integrators to ensure that more organizations
are aware of the benefits of working with WidePoint, especially in
the current environment.
We're
looking forward to continuing to help our customers and others
navigate the uncertainty as best as we can and ensure that they
have the necessary means to continue operating
effectively.
With
that, I will hand the call over to Kellie.
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Transcript:
WidePoint Corp
First Quarter 2020 Earnings Call
May 14, 2020
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Kellie Kim - Executive Vice President & Chief Financial
Officer
Thank
you, Jason. As noted in our earnings release, we finished the year
with record revenues, produced positive EBITDA, earned positive net
income and improved our cash position.
Turning
to our results for the first quarter ended March 31, 2020. First
quarter revenue was $39.7 million, up 81% from the $21.9 million
reported last year. Year-over-year growth was primarily driven by
increases in revenue from carrier services.
Looking
at the revenues in more detail, carrier services increased 98% to
$28.3 million from $14.3 million in the first quarter of last year.
The US Census project contributed the majority of the carrier
revenue growth in 2020.
As a
reminder, we consider revenue from carrier services to be very low
margin revenue. And in the first quarter of 2020, it accounted for
71% of revenue compared to 55% in the first quarter of
2019.
I want
to highlight that managed services also increased by 52% to $11.5
million from $7.6 million in the first quarter of last year. The
increase in managed services was primarily due to expansions of
managed services for existing government and commercial customers
as well as increases in sales of accessories to our government
customers as compared to last year.
The
census project contributed to 12% of growth in managed services.
The increase in managed services was also better than expected. In
the second half of March, we had an unexpected increase of customer
demand for devices and accessories. Some portion of the equipment
sale in March is likely attributable to a pull forward of future
demand, but it's difficult to quantify at this point.
Our
gross profit for the first quarter increased 17% to $5 million from
$4.3 million in the first quarter of 2019. Gross margin was 12.5%
in the first quarter, compared to 19.4% in the first quarter of
2019. The decrease in gross margin was driven by the increase in
carrier services revenues previously discussed.
In the
first quarter of 2020, operating expenses increased by 11% to $4.2
million from $3.8 million in the first quarter of last year. As a
percentage of revenue, operating expenses amounted to 10.7% of
revenue as compared to 17.2% in the first quarter of
2019.
The
increase in SG&A expense reflects higher payroll costs
consistent with higher employee count and higher stock-based
compensation. For the first quarter of 2020, GAAP net income was
$484,000, an improvement of 26% from income of $384,000 in the
first quarter of 2019.
On a
non-GAAP basis, EBITDA for the first quarter of 2020 was $1.2
million compared to $958,000 in the same period last year. To
clarify, this is similar to adjusted EBITDA, which we have reported
historically but it excludes stock-based compensation. At this
point, we believe EBITDA is a more objective measure of evaluating
our financial performance. So it is our intention to report this
figure going forward.
Shifting to the
balance sheet. We exited the quarter with $9.3 million in cash, net
working capital of $5.9 million and approximately $5 million
available to draw down on our credit facility. 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.
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Transcript:
WidePoint Corp
First Quarter 2020 Earnings Call
May 14, 2020
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Jin Kang - President & Chief Executive Officer
Thank
you, Kellie and thank you, Jason. There's no doubt that the start
of the year has been volatile. And in large part we've benefited
from that volatility. As we discussed today, we believe that there
are many reasons to suspect those positive drivers will continue.
But at the same time the uncertainty has clouded what visibility we
had into the rest of the year.
We're
confident in our prospects over the long run but not in our ability
to predict when they will come to fruition in the short term. For
those reasons we are not yet prepared to reinstitute full year
guidance nor do we believe it will be constructive at this time to
provide a projection for the second quarter.
Our
last call was on March 24 and with the insight we had into the
quarter at that time, we provided an estimated range of Q1 results.
But even at such a late date in the quarter, our expectations were
still far removed from our actual results.
As
we've discussed, much of the discrepancy stem from how quickly
things can change given the current volatility. From our
perspective, that volatility has not been eradicated. There are
many changes occurring in our industry. And while many are positive
they are not universally so.
For
example, in both federal and commercial space, call volume is down,
which seems to contradict the push we've seen that has driven up
the telecom life cycle management revenues. Call volume is not a
metric that has substantial impact on our revenues but it could be
a harbinger of decline in certain sectors in the
future.
For
example, accessory sales may decrease as a result. But as Jason
mentioned, despite the decrease in volume, we've seen an increase
in activity from some of our government customers and especially
from those heavily involved in battling the pandemic. The National
Institute of Allergy and Infectious Diseases, the CDC, the US Army
Core of Engineers and the Department of Homeland Security are at
the forefront and have continued expanding their work with us and
we have risen to the challenge.
Our
offices and especially our logistics facilities have remained open
the entire time while at the same time observing all social
distancing guidelines. We have never missed a day and we're doing
everything possible to ensure that we can get devices out to those
on the front lines.
So
ultimately, we're receiving some mixed messages. The trends are
positive for the most part but there's still a fair amount of
uncertainty which makes predictions challenging. We're optimistic
about our prospects and our ability to drive profitability in the
long term but the fact remains that we simply do not know what the
world will look like as people attempt to return to some semblance
of normalcy. However, we do know that so far WidePoint has
performed well and we're going to do everything we can to continue
that trend.
Going
forward, we're going to continue expanding our TLM capabilities and
our IdM channel partnership. We're going to keep chasing after the
high-margin managed services revenues. And we're going to keep
working to build our pipeline of new opportunities.
This
past quarter, we grew managed services revenue by 52%, GAAP net
income by 26%. We improved our cash position and we have no debt.
If you combined our financial strength with the resilience of our
customer base and the opportunities ahead of us, we believe that we
are in a strong position to continue executing against our
strategic initiatives, support the critical needs of our customers
and deliver strong results for our shareholders.
With
that covered, we are ready to take questions from our major
shareholders and analysts. Operator, would you please open the call
for questions?
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Transcript:
WidePoint Corp
First Quarter 2020 Earnings Call
May 14, 2020
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Operator
Thank
you. [Operator Instructions] And our first question will come from
Mike Crawford with B. Riley. Please go ahead.
Q: Thank you, and thank you Jin for
explaining the decision to not provide guidance given the mixed
messages you're seeing. What were the primary positives of variance
to get the revenue up closer to $40 million versus the $30 million
top end of the range that you saw just seven days before the end of
the quarter?
Jin Kang - President & Chief Executive Officer
Right.
Thank you Mike for that question, and good afternoon. I hope things
are going well out in California. The—when we had our
earnings call on the 24th, we had clear visibility into the first
month of the year and we have preliminary numbers for February.
What happened was is that there was a significant increase in the
number of devices being activated for the census project. And also
there was a late quarter order from the Federal Air Marshals under
our Department of Homeland Security, which bumped up the revenues
for the last couple of months. And so that's what caused the
variance.
We
should not see the increase from the Federal Air Marshals' work,
but we should see the continuing work from the census project. So
going forward into the second quarter, barring any unknown
circumstances, we should see similar top line revenues slightly
less perhaps than the first quarter.
Q: Okay. Thank you. And I believe the
prior operating assumption was that you might manage 400,000
devices but the census ended up taking 500,000 devices. Is that
correct? And then—well, if that's not correct please
enlighten us to the extent that you can. And then are you getting
paid like a per device per month managed services price that you
can disclose?
Jin Kang - President & Chief Executive Officer
So I'll
answer both of those questions. The first question is the number of
units that we mentioned in the last call was like top 400,000
around 500,000. And because of the enumerator schedule has now been
extended from July to October. They're also estimating that there's
going to be additional device needed and additional enumerators
needed in case some of the enumerators may fall ill, or they may
have to complete this enumeration before the end of the year, so
there'll be more folks on the street. And they are increasing that
number by approximately 20% on top of the 0.5 million,
okay?
And in
terms of the pricing associated with it, it's based upon time and
material and labor hour. So we should have a better estimate come
second quarter. But there should be a corresponding increase in our
managed services because of that. Does that answer your
question?
Q: Yeah, that's helpful. But if I was
just to stipulate that the census wrapped up their work on October
31st or on a-date then past that date, what would be your
expectations regarding ongoing work if any with the Census Bureau
from that point forward in the near-term?
Jin Kang - President & Chief Executive Officer
Right,
right. So what will happen is that right now the current schedule
is that the enumeration will end in October. I think it'll
be—I think it was mid-October. And then there'll be
decommissioning of these devices and reverse logistics associated
with these devices. So we see the revenues coming in towards the
end of this year and beginning of next year. The contract
technically runs out until—I'm going to have to look this up.
I believe it was April of 2022, but a lot of the revenues should
trickle down in the—towards the first quarter of next
year.
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Transcript:
WidePoint Corp
First Quarter 2020 Earnings Call
May 14, 2020
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Q: Okay. Great. Thank you. And then last
question is I thought that maybe the RFP—draft RFP, excuse
me, was due in June. You're saying maybe by the end of May. Is that
based on any updated information you can disclose?
Jin Kang - President & Chief Executive Officer
Yes. So
in terms of the sole source, we did get the—we received that
and on the 30th of April and that has a period of performance of 12
months with a six-month option period. And which can be extended
another 12 months, if they execute a task order right at the end of
that contract period. So conceivably 2.5 years. The full recompete
of the CWMS BPA contract. The schedule was announced and it was
toward the end of May beginning of June is when the RFP, the draft
solicitation material is supposed to come out. My guess is is that
there's a possibility that may slip until June, but they're holding
to their schedule of awarding that contract by October of this
year.
Q: Great. Well, thank you very
much.
Jin Kang - President & Chief Executive Officer
Okay.
Thank you, Mike. And enjoy the surf party out in L.A.
Operator
And our
next questions come from Barry Sine with Spartan Capital
Securities. Please go ahead.
Jin Kang - President & Chief Executive Officer
Hi,
Barry.
Q: Hey. Good afternoon. I guess first
question for Kellie on the change in calculation of EBITDA. Now
you're giving out EBITDA, you're not putting adjusted EBITDA in the
press release. I was able to go in and dig into the Q, because you
guys—how do you file it so timely—and figure out
stock-based compensation. And that's a non-cash charge and that
specifically is something I see other companies exclude. So why the
change in the philosophy? That number was actually pretty
significant this quarter if I look at the Q.
Kellie Kim - Executive Vice President & Chief Financial
Officer
Hi,
Barry. Thank you for that question. I believe after 11 consecutive
quarters of positive adjusted EBITDA and we are beyond turning the
company around and we don't have the one-off expenses in the near
future. And so these stock-based compensations, we consider to be
ongoing expense, and we don't see at least in the first quarter of
2020, we have not seen a decline in our collection
activity.
Cash
inflow is still very strong. And so we wanted to stay with as much
as we can GAAP-based type of financial metrics. I know EBITDA is
non-GAAP, but it's widely used. And so that was really a philosophy
change for the management to be measuring that GAAP net income and
also the non-GAAP EBITDA. But in the press release too, in the
G&A line items, we do specify the amount of stock-based
compensation expense.
Jin Kang - President & Chief Executive Officer
Barry,
does that answer your question?
Q: Yes. Just going back on the
census.
Jin Kang - President & Chief Executive Officer
Yes.
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Transcript:
WidePoint Corp
First Quarter 2020 Earnings Call
May 14, 2020
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Q: So the—bringing back the
devices back in, I guess, there's a fancier term for that. You
mentioned that when you sent the devices out, you were building on
time material labor hours. Would it not be the same thing for
returning the devices? And wouldn't that be perhaps similar revenue
and a similar amount of time? Obviously, there's no material,
because you're getting devices back, but wouldn't the time be
similar to return the devices?
Jin Kang - President & Chief Executive Officer
Not
exactly. It will be far less in terms of the number of folks that's
required to bring the stuff back, because when we roll out the
devices, there's a lot of tasks that have to be performed in terms
of imaging the devices, making sure that they're logged in
properly, making sure that they're activated, and so
forth.
And so
there's a lot of items that we have to handle and install. When the
devices come back, the thing that major tasks are the logistic
piece of it shipping and receiving and wiping the device and which
is done automatically using tools that we have. So the number of
hours will decrease markedly come first quarter.
Q: Okay. And you mentioned the push out
until mid-October on the enumeration period. Conversely, if I were
to read in the press an announcement from the Census Bureau that
things are still at out there and they wanted to push that out
further the math would—how would I interpret that in terms of
looking at your results?
Jin Kang - President & Chief Executive Officer
If they
do have, as I said, an act of Congress and they decide to change
and push the data out to let's say end of this year or first
quarter of next year, we would have continuing revenues a similar
profile out until end of first quarter and then the reverse
logistics will start in the second quarter. So we would have
increased revenues as a result of that, because a lot of the things
that we have to do continues on for example people losing their
passwords and having to reset their passwords, and reimaging their
phones and application support and all of that we do that. And so
the level of effort will continue on as long as the enumerators are
out there.
Q: Okay. And then, I understand you're
not giving formal guidance. You did give some sense of what
year-over-year comparisons would look like after that period of
census revenue works its way through. And I kind of missed that. If
you go back to what you were talking about, I think you said, you
could see a year-over-year decline in overall revenue and I'm
guessing that might work its way through over a period of four
quarters until that anniversaries. Could you kind of repeat what
you said and maybe expand upon it?
Jin Kang - President & Chief Executive Officer
And so
at the end of this year, we'll see the census revenue trickle to an
immaterial amount. And so, we'll see the revenue go back down to
the pre-census work. That's assuming that we don't activate any
additional work going forward. So given everything equal, we would
probably go back down to the run rate of perhaps the third quarter
of last year is kind of my estimate.
Q: And that difficult period of
comparison then would last for several quarters because you'll have
Census Bureau revenue in your results for several quarters,
correct?
Jin Kang - President & Chief Executive Officer
We will
have the census for the next—second quarter, third quarter
and a lot of it in the fourth quarter and a little bit in the first
quarter of next year.
Q: Okay.
Jin Kang - President & Chief Executive Officer
Does
that answer your question?
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WidePoint Corp
First Quarter 2020 Earnings Call
May 14, 2020
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Q: Yes, yes. My last question NGEN-R on
the last earnings call. You talked about two opportunities still to
kind of take another bite at the apple. So the first one was the
contractor General Dynamics who lost out, who you were bidding with
had filed a protest. If you could give us an update on the status
of that protest. And then you also mentioned that the winning
bidder was Leidos. And obviously, you have a very good relationship
with them and there's a possibility that you could involve yourself
in their winning bidding team even after the contract has already
been awarded to them?
Jin Kang - President & Chief Executive Officer
So the
current status of the protest is it's still ongoing. They haven't
settled the protest. We don't have visibility into the current
protest process other than we know that is under protest. The other
part Leidos, yes, we have a fantastic business working relationship
with them. And we are trying to get on the team. However, all of
the things are sort of on hold, because they're waiting for the
settlement of this protest. So they're kind of waiting to make any
kind of decision on teaming or adding additional team members until
the protest is resolved. And I figure you're going to ask, when is
that going to be? I wish I had a crystal ball to be able to answer
that question, but I don't. Sorry.
Q: Yes. You're right. I was going to ask
that. And there is no statutory or regulatory deadline that if they
protest this issue on a certain day they have to make a decision X
number of days later or it can be indefinite?
Jin Kang - President & Chief Executive Officer
No.
There is specific response time of when these protests have to be
responded to by the agency. I have to go back and look at how many
days, but it's usually like a 90 days response time from the
agency. And then, if they do an OMB protest and that's another 60
days. And then I think that they can go through the Federal Court
of Appeals, which can take forever kind of thing. So, my guess is
that they protested within the agency, but that doesn't mean that
they can raise it up to the OMB level. So, it could be a long
drawn-out process. I'll try to find out more information and I'll
try to fill you in on the next earnings call.
Q: Okay. Those are my question. Thank
you very much.
Jin Kang - President & Chief Executive Officer
Great.
Thank you, Barry.
Operator
[Operator
Instructions] And next we'll move to Sam Donaldson, a Private
Investor. Please proceed.
Q: Well, congratulations on the quarter
that I think many of us long-term investors have looked forward to.
Not only is there light at the end of the tunnel there's light in
the tunnel. And I think Jin and Jason and Kellie and all of the
management team have our thanks.
Now
since I should ask a question and not just heap praise on you I'll
do that. You seem to be very happy that you think we'll get the
recompete whether from the new DHS contract for the full contract.
Now, if we do, are our margins going to be better? Is there a way
that they will be better for this particular contract?
Jin Kang - President & Chief Executive Officer
Thank
you, Sam. Thank you for that question. The answer is, yes, we do
feel pretty confident. I think I used the term hammerlock versus a
mortal lock last time and I know Mike Crawford keeps repeating
that. So, I think we have a very good chance of winning the DHS
contract for all of the reasons that we mentioned in the previous
earnings call. And yes we do plan on modifying our prices. I don't
want to go into too much details on that because I think it would
be some competitive information that we don't want to give out, but
that is our goal to improve the margins on the
project.
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WidePoint Corp
First Quarter 2020 Earnings Call
May 14, 2020
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Q: Well actually I asked the question
particularly because one of our long-time investors Gordon Gray
[ph] posts the contracts as they come forward. And then the trolls
on our message board immediately say bet you don't make any money
off it he uses money or what have you. Well never mind the trolls,
they don't control WidePoint. Thank goodness they never have. But
it would be good if our federal contracts provide a better margin
than we've had to have in the past. And that's why I
asked.
Jin Kang - President & Chief Executive Officer
Thank
you. And I want to dispel some rumors out there about that in terms
of the profitability of the DHS contract. The DHS contract is a
profitable contract. Without the DHS contract, we would not be
showing the improvements that we have in our bottom line
profitability.
Q: Understand. All right. Thanks very
much gentlemen and ladies. We appreciate your efforts.
Jin Kang - President & Chief Executive Officer
Thank
you, Sam. Thank you.
Operator
And at
this time, that concludes our question-and-answer session. If your
question was not taken, please contact WidePoint's IR team at
[email protected]. I'd now like to turn the call back over to Mr.
Jin Kang for his closing remarks. And thank you for joining
us.
Jin Kang - President & Chief Executive Officer
Thank
you. Thank you, Christy. Thank you, operator. We appreciate
everyone taking the time to join us today. And 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. Thank you
again and have a great evening.
Operator
Thank
you all for joining us for WidePoint's First Quarter 2020
Conference Call. You may now disconnect your lines.
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Exhibit
99.2
