Q4 2019 Earnings Call
Thank you for holding ladies and gentlemen, you are currently on like for Widepoints Conference call. At this time, we are still gathering additional participants who will get started momentarily. We thank you for patients. So you. Please remain on the line.
[music].
Good afternoon, welcome to Widepoints fourth quarter, and full year 2019 earnings conference call.
My name is Josh and I'll be your operator for today's call joining us for today's presentation as Widepoints, President and CEO, John King Chief sales and marketing Officer, Jay said, Hollaway, and executive Vice President and CFO Kelly Kim.
Following their remarks, we will open up the clout call for questions from Widepoints publishing analysts and major institutional investors.
If your questions were not taken today or you would like additional information. Please contact widepoints investor relation team at W., why why I Gateway IR Dot com.
Before we begin the call I would like to provide Widepoint 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 could 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 available for replay viola link in the Investor Relations section of the company's website at Www Dot Widepoint Dot com.
I would now like to turn the call over to Widepoints, President and CEO Mr. Gen. Kang Sir. Please proceed thank.
Thank you operator, and good afternoon to everyone. Thank you for joining us today to review our financial results for the fourth quarter and full year 29 team.
The fourth quarter of 29 teen was a strong finish to what has been a pivotal year for our business.
My financial perspective, the quarter was highlighted by 13% increase in revenues of 28.1 million and adjusted EBITDA of 1 million, which is in line with the same quarter 2018.
Additionally, Q4, 2019 marked our 10th consecutive quarter of positive adjusted EBITDA and the high this fourth quarter revenue in company history.
The positive financial result at the fourth quarter, along with our success throughout the year ensured that we not only matched but in some instances exceeded our financial targets for the year.
For the full year 2019 revenue increased 22% 201.7 million.
Well above our original guidance and above the 95 million in revenue we were targeting in December.
Our adjusted EBITDA came in at three point, Sixmillion, which is right at the top end of our guidance range and 98% hired done or adjusted EBITDA in 2018 a.
Additionally, we recognized net income in 2019, which is a substantial improvement from the 1.5 million net loss, we recognized a year ago.
We're obviously pleased to be exceeding the expectations about revenue.
Which we updated at the end of last year.
But it's worth noting that much of the revenue increases in both the fourth quarter and the full year were driven by carrier services.
This trend is similar to what we witness in the third quarter and which we discussed during our last call. As a reminder, carrier services is low margin business that has a necessary component of mobility management services.
So why these revenues may artificially suppressor margin profile, taking on this type of work does allow us to procure material contracts like the ones, we have with DHS and CDW.
Yeah for reasons, which should be a parent these contracts are beneficial to our business. They help us secured important contracts, which serves as excellent proof points and allow us to market more effectively to prospective clients.
So while we're not actively working to grow the section of our business, we don't shy away from it on principle as the benefit can frequently outweigh the cost.
And 29 team carrier services increased due to our work with the U.S. Coast Guard and the work we're doing with alongside the U.S. Department of Commerce to support the 2020 census, which I'll speak more about in a moment.
Now let me cover the substantial improvements we made to the bottom line.
We've had two priorities for widepoint over the past few years grow the top line and to drive profitability.
When you consider the level of uncertainty that exists in the market today, driving 3.6 million in adjusted EBITDA and achieving our first full year a positive net income in seven years did not be more timely.
And when you couple of this profitability with the fact that we generated 5.9 million in cash from operations. During 2019, it becomes apparent that we've accomplished one of our primary goals of establishing a stable business.
Hey business with opportunities for continued growth.
And one that is well positioned to handle the present and potential obstacles created by the current macro environment.
Much of the world may be on unsure funny, but due to the stability. We've created a wide point. We believe there's good reason to remain optimistic in our future.
So with that in mine, let's take a look at some of the major developments that occurred in the past few months.
Subsequent to our most recent conference call in November of last year DHS released the RFP for the cellular wireless managed services contract.
Fortunately WMS.
This is the RFP, we have all been waiting for since the end of 2018.
When the contract was originally scheduled to come up for Recompete, and which we've discussed at length on each of our recent calls.
Now as you all know the timing of this contract award has been valuable and the multiple extensions have understandably made all of us eager to know the final results.
Those of you saw the press release, which we issued at the beginning of March will already be aware that we have received some clarity on this contract.
However, it was not exactly package the way we originally anticipated.
On March 2nd 2020, after the RFP had already been issued DHS opted to cancel the recompete.
We can discuss the rationale in more detail during the Q1 day for those who are curious, but suffice it to say that there were contractual causes which a department felled needed to be altered.
As a result of these changes DHS is chosen to conduct an open market solicitation and will not adhere to the original schedule announced in the previous RFP releases, instead, DHS will be issuing the new recompete as a small business set aside for those of you I'm familiar with this concept the government occasionally limits competition for certain costs.
I tried to small businesses in an effort to provide them with a more level playing field.
These contracts known as small business set asides helped small businesses compete for and when federal contracts.
That's now the route that DHS opted to take with the C WMS contract.
The good news for US is that why putting currently meets all the solicitation requirements for this new process and for all the reasons, we have discussed on prior calls, including our excellent past performance and deeply integrated solutions, we stand extremely well positioned to re when this contract.
In the meantime, DHS issued a notice of intent to solicit an award and interim sole source indefinite delivery indefinite quantity or I'd like you contract to why point for the procurement of cellular wireless managed services.
The noticed confirmed that the anticipate appear to performance for the sole source award will be 12 months from the award date.
This Q will serve as an interim contract to provide uninterrupted she WMS support for DHS, while the department conducts the acquisition of the replacement contract.
Well this is not exactly the results we anticipated.
The uncertainty regarding this contract has been eliminated for the time being.
We should have a 12 month contract in place by the end of April.
And we remain just as prepared as ever to leverage our strong relationship our high quality deeply integrated solutions and our seasoned staff members to ensure that we have the best chance possible of re securing this business for a longer contract term.
The anticipated award date for the replacement contractors October 10th of this year. However, this is a tenant did they.
And it may change.
Now that we're well into 2020 I'd like to take this opportunity. This year some updates on our biggest project of the year. The 2020 U.S. census.
As I mentioned in November we partner with CDW GE to assist the U.S. census Bureau, and is to send you a survey of the American population.
Role in this project is to manage roughly half a million mobile devices being used to conduct the survey.
So far we have customized configure and tested our intelligent telecommunication management system or I T. M. S to be used for providing device as a service solution to the census Bureau.
We utilize their system to successfully support the address canvassing project.
Where we help activate deploy track and decommission over 60000 devices during the third quarter of 2019.
Additionally, our staff provided training and helped us support throughout the address canvassing project do over 60000 Numerators.
We're currently ramping up our helped us to support the full decennial census project.
It's worth noting that the U.S. census is the largest devices a surface project in the U.S.
It would be difficult for any organization, regardless of size an expertise to adapt their infrastructure to undertake such a large project.
For us it serves as an ideal proof point for one of our core competencies and that is our ability to scale quickly and effectively.
Our organizations flexibility and our ability to deliver high quality service to all of our clients regardless of size of contract is a key differentiator that is often overlooked by those who aren't directly involved in our industry. However, this is something our customers are intimately familiar with and it's one of the reasons.
Able to consistently beat our competition and expand our capabilities, while ensuring our organizations continue to operate efficiently.
As a year progresses, well continue to share updates as they materialize, but for now.
I'd like to turn attention back to some of the other changes we made at why point during the latter part of 2019.
In December of last year, we announced that our CFO search has concluded as we found an excellent addition to our team in Kelly Kim.
Who is with us on the call today.
Kelly has only been within our organization for a few months, but she's done a fantastic job so far.
Our addition has allowed inspiring to return to focusing his full attention on his responsibility at soft acts as a result, our executive leadership has been strengthened and organization is functioning even more efficiently.
I want to take a moment to thank you know for stepping up during a time of transition. Thank you very much in great job well done.
In a few moments Kelly will come on to take us through the financials, but first.
Im going to turn the call over to Jason to give us an overview of our major sales initiatives in 2019, and some of our prospects for 2020, Jason.
Thank you Jim as Jim mentioned, our revenue growth importing 19 was driven predominantly by two factors.
Since its address canvassing support occurring in the second half a year.
And the successful execution of our sales strategy throughout the entire year.
And each quarter of 2019, we announced material contracts, which speaks to our ability to expand deployments with current customers by cross selling and Upselling our services.
And our capacity to leverage the power of our systems integrator partners to expand our footprint and new markets.
During the first quarter.
We received a 1.6 million dollar expansion order from the U.S. customs and border protection or CBP.
With this contract.
GDP, which was already a customer expanded their wireless footprint and increase their work with us by approximately 50%.
Shortly afterwards, we announced that we had partnered with White House and was part of their winning bid on the NASA NASA contract.
This is a major example in 2019 of our ability to successfully leveraged the well capitalized sales teams are they systems integrator partners to win new business for Widepoint and expand our brand awareness.
During Q1, we were also able to expand our service offerings with C.N. I.
A long time identity management customer to include wireless and wireline telecommunications management.
And the second quarter, our subsidiary Softex renewed its contract with a global communication service provider.
Contract is adding 6 million to our topline over a three year period.
As we work in tandem with the C. S P to deliver cloud and onsite telecom and analytic solutions for the CSP client base.
And later in July we announced that we had secured several contract renewals and modifications from current federal government customers, which added 5.3 million to the topline.
In Q3, we received an aggregate of $14.7 million in contract awards.
Which included expansion and extensions with current customers as well as contracts with new clients.
More recently.
We've expanded our work with CSG International.
For the end of 2018, we launched a partnership with Softex and CSG deliberate joint customer Communications management platform for both existing and new CSG clients.
The goal of this project has been to help traditional service providers evolve into digital service providers and improve their customer loyalty and customer retention.
One of the ways, we've done that just by working alongside CSG to convert their customers bill into a marketing tool.
The Bill is one of the few documents are customers almost guaranteed rate.
So it's a perfect item to convert into a lead generation tool with targeted advertising.
[laughter] successfully implementing that program.
We've been expanding our work with CSG clients to tackle several new and exciting digital Billy opportunities.
Traditionally sales lead times and the CSP space tend to be quite long and we remain optimistic what the growing pipeline of opportunities.
In Q4, we finished very strong in the federal market with 7 million.
And 1.3 million in commercial deals totaling 8.3 million.
This is a mix of new awards, upselling and extensions of contracts.
Throughout 2019, RCM to strategy was very well received by both the federal market and the commercial market.
Regarding the identity management group, we continue to set company records with respect to the issuance of art you see a credentials.
We have seen material increases are both darker dentals as well as our PK I searched year over year since the current executive management team took over in 2017.
Obviously, given the volume and the increase in revenues 2019 was a successful year for myself perspective.
However.
There are two particular things among all of these contracts that are worth highlighting.
Many of the large contracts, we announced were expansions with current customers and many of these contracts are long term.
Hey, typically lasts for three to five years, depending on whether the customer is a commercial or a federal client.
Expansions and contract lengths are critical for two reasons first they are a testament to how sticky we are as a business.
Why points customer retention is over 95% and that's because we provide a necessary service that simplifies our clients operations and saves them money in the process.
And because we're very good at this clients don't just stay with wide point, but they frequently expand their work with us.
Okay. These contracts are nearly all long term.
That means the majority of our revenues are essentially recurring.
We felt that sticky business with predictable revenues those are great qualities for any company, but they are especially partner now.
Going forward.
We have every intention of continuing these trends.
Our goals importing 20 are to continue to drive organic growth and to do so by utilizing that strategy that has continued to be effective for us.
We've had great success, expanding through strategic partnerships as evidenced by our work with lighthouse on the NAFTA Master contract and our current work with CDW gene on the census project.
And leveraging the well capitalized sales teams as well established relationships with our systems integrators partners will remain a critical channel for us as it allows widepoint to remain flexible and dynamic by minimizing our overhead.
Also lets not forget about our renewed relationship with Gartner and what's our director of commercial sales and our marketing director had been working very closely with several Gartner analyst.
Good idea.
We've already seen best strategy generating traction for us in the first few months of 2020.
Stay tuned for the next conference call in which we will be discussing a brand new partnership with a major American multinational corporation that provides b to B services.
While no one knows exactly how contracts and sales channels will be affected by the changing landscape.
Brought on by recent macro events.
We believe there is a reason to remain optimistic about widepoints prospects in 2020 and beyond given the nature of our contracts and our client base.
Coupled with the momentum we've been building over the past few months.
Additionally, as much of the world has suddenly ship it to remote working large enterprises are looking for well about it quickly scalable solutions that can help them make the transition and we're ready to help.
The core of T. M is helping large enterprises navigate the complexity of the mobile landscape.
We help organizations I understand where their mobile assets are and how they are being used.
And we help ensure these assets are secure and only accessible by the properly authorized people.
As the world relies more on working remotely and thereby more mobile the number of devices may increase and it stands to reason that the need to secure these devices with end to end encryption could also increase.
So if anything we believe there maybe additional opportunities for us to help large enterprises throughout these trying times.
Overall, it's been an excellent year for our business and we look forward to continuing ourselves initiatives throughout the year with that I will hand, the call over to Kelly.
Thank you Jason as noted in our earnings release, we finished the year with record revenue produced positive adjusted EBITDA for the 10th consecutive quarter end to full year and earned at positive net income for the full year 2019.
Turning to our results for the fourth quarter and full year 2019.
Fourth quarter revenue was 20.1 million up 13% from the 24.8 million reported last year year over year growth was primarily driven by increase in revenue from carrier services.
Gross profit for the fourth quarter increased 6% to 4.8 million from 4.5 million into fourth quarter of 2018.
Gross margin was 16.9% in the fourth quarter compared to 18.1% in the fourth quarter of 2018.
The decrease in gross margin was driven by the increase in carrier services revenues as previously discussed.
Into fourth quarter 2019, operating expenses increased by 19% to 4.5 million from 3.7 million into fourth quarter last year.
As a percentage of revenue operating expenses amounted to 15.9% revenue slightly up as compared to 15.1% into fourth quarter of 2018.
For the fourth quarter 2019, GAAP net loss was $34000 an improvement from a loss of 412000 in the fourth quarter of 2018.
On a non-GAAP basis adjusted EBITDA for the fourth quarter 2019, a 1 million was in line with last year.
Now, let's give you more detailed overview of the full year 2019 financial performance.
We had record revenue of 101.7 million up 22% from 83.7 million for a year ago. This performance was driven by 37% growth in carrier services, which was slightly offset by 2% decline in managed services.
The increase in carrier services was primarily due to the U.S. census project.
The decrease in managed services was primarily due to a decline in honestly sale revenue, which was partially offset by increases in billable services fees.
For the full year 2019, gross profit increased 14% to 17.4 million from 15.3 million in 2018.
Gross margin was 17.1% in 2019 compared to 18.2% in 2018.
The drop in gross margin reflects higher mix of carrier services revenue in 2019.
We consider revenue from carrier services to be very low margin revenue and in 2019 accounted for 68% of revenue compared to 60% in 2018.
Operating expenses increased 7% to 16.5 million from 15.5 million in 2018.
As a percentage of revenue operating expenses amounted to 16.2% of revenue compared to 18.5% in 2018.
The increase in operating expense for full year 2019 relative to 2018 was mainly due to increases in general and administrative expense and depreciation and amortization expense.
For the full year 2019, net income was $226000, which compares to net loss of 1.5 million in the prior year.
Our non-GAAP adjusted EBITDA was 3.6 million or 3.5% of revenue compared to 1.8 billion or 2.2% of revenue in 2018.
Shifting to the balance sheet, we exited the year with 6.9 million in cash net working capital of 5 million and approximately 5 million available to draw down on our credit facility.
In addition adoption of the new accounting policy on leases has led to the generation of a material acid and associated liability within the balance sheet.
The details of which may be found in our 10-K.
Due to our strong cash position, we saw the opportunity to use our excess cash to implement a stock repurchase program in 2019, we repurchased in the open market approximately 864000 shares for a total cash outlay Oh $366000.
We have purchased an additional 24000 shares for approximately $10000 since December 31st 2019.
However on March nine we opted to suspend the stock repurchase program to preserve our cash balance due to the uncertainty caused by the Corona virus and Danny.
This completes my financial summary for a more detailed analysis of our financial results. Please reference our form 10-K, which was filed prior to this call.
So with that I would like to turn it back to Gen.
Thank you Kelly and thank you Jason before we open the call to questions I will address a few more important points about which I know many of our shareholders are curious.
The first is our progress on receiving a fed ramp certification.
The fed ramp certification is currently tied to our exceed WMS Recompete. Once the full award is announced and assuming that we when we anticipate DHS will provide the requires sponsorship to begin the fed ramp certification.
We're also seeking a fed ramp sponsorship through our customer in the department of defense.
While we wait for our sponsorship we are preparing our system and the necessary documentation and work products for the eventual fed ramp certification process. We have engaged with one of our partners who is a subject matter expert in fed ramp certification to help us prepared these documents and work products to get ahead.
On this process one sponsorship has received.
The good news is that we still maintain or authorization to operate or ATM from DHS, which is a testament to the quality of the security posture of our delivery system, I, Tms and our ability to meet the requirements of fed ramp certification.
We have a T cells from both DHS and the department of Commerce.
So overall 2019 was another successful year for why point and we entered 2020.
With a great deal of momentum in large part due to the census, and the NASA nest projects, which are now running at full speed. However, there is obviously great deal of uncertainty in the world at this time.
Covert 19 has had a material impact on all of us.
The second order effects on the global economy had been unprecedented.
For those reasons the management team and the board of directors have concluded that it will be prudent to suspend issuing guidance for the full year until we have more insight into the broader situation.
We understand that investors are eager to learn about EUR expectations for 2020, and it is our intention to provide as much clarity into the situation as we can when weekend.
But due to the extraordinary circumstances, we did not believe providing a financial outlook for the full year 2020 to be constructive.
However, we do currently have more insight into how the first quarter has progressed. So we will be providing guidance for the first quarter of 2020.
For the first quarter, we anticipate revenue to range between 26 million and 31 million and we expect adjusted EBITDA to be between <unk> point 8 million and point 9 million going forward. It is our intention to re institute annual guidance as soon as we have enough clarity to do so.
While we cannot predict what the coming year will look like we believe there's good reason to suspect that our business has been relatively insulated from the broader effects so far.
From a logistical perspective, we run a global organization that is already designed for flexible working conditions.
We're used to working off site from different locations at different times. So there are no major pain points for us as we shift to a more remote work environment.
And as Jason alluded to in his remarks, they may actually be opportunities for us to help those enterprises that are experiencing complications from the rapid transition to working remotely.
We're fortunate to have a stable business, which was profitable in 2019 and that is continuing to generate cash as well as an incredibly robust customer base that should be able to weather the dynamic market conditions relatively well.
Well no industry is immune to the effects of cobot 19, we serve predominantly large federal and commercial enterprises that means there is a lower risk of insolvency and in theory, the demand for our solutions should be impacted less than other industries.
That is at least how we see things based on information we have today.
Obviously, the state of the World is evolving almost daily so all of this is subject to change.
We can see demand for certain products increase but it is also possible that a long protracted downturn in the economy and interruption to the supply chain could affect our performance.
We will continue to monitor the situation closely and adjust accordingly.
But all in all we believe we're well prepared to continue executing on our strategy for the betterment of our customers and our shareholders in 2020.
With that covered we are ready to take questions former major shareholders and analysts operator would you. Please open the call for questions.
Certainly ladies and gentlemen, the floors to open for your question. So if you do you ever question. Please press star one on your telephone keypad like I'm at a star one for any questions or comments, we do ask that you pick up your handset to provide the best sound quality. If you are using your speaker phone.
Again, ladies and gentlemen star one for any question.
Please hold while we assemble the queue.
Well go first to Mike Crawford with B. Riley FBR.
Thank you to that to the extent the last few weeks or any guidance can you just comment on how your operations have changed and or Corona virus and trusted world.
Yes, Hi, Mike. Thank you. Thank you for that question and we had been working diligently to make sure that we cover the bases in terms of making our organization more resilient and more remote all of our a lot of our folks most of our folks are working off site and Luckily we.
We're able to do that we are taking advantages if advantage of various technology, where we are able to take our computers Olympic or handsets sold has to be able to.
Field, all of the questions and and I think were relatively well well place and well insulated as I said you know our customers are large federal agencies or commercial customers.
And we count among some of our customers customers like NIAD for example, National Institute of sub allergies and infectious disease.
CDC centers for disease control and prevention health and human services, USA, I'd I mean us ace.
Corps of Engineers, who is now building some emergency hospital shelters.
DHS and CDP border crossings et cetera, and so I think we are well phase.
But you know.
Because they may be receiving some additional missions.
I think that Theres little risk in the agency shutting down and and on the contrary there maybe some additional relies on these mobile devices and that's what we're doing as well we're relying on our mobile devices are smartphones.
So I think.
Things are you know were relatively well insulated.
But but we have noticed that over the last.
A week or two we have seen or help desk coal volumes go up for some of these customers.
However, we have also seen commercial customers call volume go down.
I think that thats, because a lot of the folks are either working remotely or perhaps they're taking.
Alif.
And also we have seen our order volumes for accessories go down a little bit.
And we are getting a lot of mixed signals because a call volumes are going up orders orders are going down so things are changing almost hourly. So we're keeping a very close eye on the situation. So stay tuned, but but in terms of our ability to manage our mobile workforce to be able to the to work off site.
So far it's been very smooth.
And you know we thank our IP department for making sure that all of our.
Infrastructure as a place for that.
Okay. Thanks for your question, Yes, yes, yeah. Thank you so.
Getting back to the DHS so.
I would imagine the more penetrated you are with Credentialing and other identity management solutions as opposed to just pure cell phone lifecycle management.
I would.
Good and bad you more with the customer and so are there any metrics you can place around that aspect of the work that you're doing for DHS now that you believe we'll continue to be included in this.
Our weighted RFP.
Right. So I think we have you know I wouldn't say a more roll off but I think we've got a pretty good hammerlock on DHS Telecom lifecycle management scope of work, what we have been making a little bit of progress is is that we have been working with the contractor that is handling the issuance of all of the digital certificates for.
Yes, and we are acting as their certificate of authority and what that means is that when they issue. These certificates. They use our certificate of authority and they pay us a fee in order to use that service. So we are making progress we're working with the the credential issuer I won't name to name here.
Today, but but.
Suffices to say, we are making progress on that front.
Okay.
Okay. Thank you and this last question when you talked about this.
Three $6 million three years SAS analytics one.
Is that incremental business, what the carrier or is that the run rate that you have already been doing what's the customer.
I think you're talking about the software as a service via the part that Jason was talking about as much of it is the re win and re upping of our you know our contract with that but with DHS into task orders.
Yes.
Jason did you want to add to that.
Yes, Jim what it is can't do it gets the with Softex and that's where it's renewed with the contract with that CSP.
Lighter so that yeah, sorry go ahead, Jeff.
Okay, sorry about that Mike.
That one is our work with British telecom and Thats for providing our software as a service and it's actually not software as a service for more of a licensing model for that one.
And so that's a renewal of the contract and the actually as a small expansion.
That work and so that's a we just recently resigned British telecom for that and that's a three year contract.
Okay, great. Thank you very much.
Okay. There is one other thing that I would like to mention on.
This is a corona virus and if we could probably all saw the release.
News pieces on the sense is being delayed I believe the fee that the the census responses have been now been delayed for two weeks.
But I like to give you a little more status on that and essentially what's what's happened there is is that.
The census response for the forms that has to be return they gave two weeks extension.
So now.
We are business as usual based upon the latest guidance from census.
We are hiring and we're providing training to all of our customer support staff.
And we are staging devices.
For now we are being asked to prepare the rollout on schedule.
However, you know the situation is changing daily so stay tuned.
We think that a lot of the schedule will be delayed but the numerators will still go out to do the enumeration of collecting of the data I think the schedule will be crop.
Squeezed down during the data and analysis portion of the census, so we feel that B b. The revenue stream should not be interrupted at this point as far as we know, but it could be so.
We will provide you any updates on that.
As they come.
And once again, ladies and gentlemen of this star one if you had a question or comment.
Volume next to Barry sine at Spartan Capital management.
Hey, good afternoon, Jen and.
Kelly.
Thank you very much theory.
With that.
And congratulations forgetting the 10-K out so timely on your first quarter a lot of companies, you're not going to manage that seat.
She spent thank you again. Thank you again it was a flat year any process was fantastic.
I wanted to delve a little bit into the revenue that you just reported for the quarter. The breakdown on page 35 in the 10-K, you have the breakdown between a carrier and managed and issue you called out carrier very low margin manage is really the reason why you're in business, we did see a decline.
Line or for the year and a more significant decline for the quarter in managed and if I look at the 10-K, you do break managed out into three categories and reselling was down could you talk about that break down and why manage.
Services revenue declined for the quarter and for the year.
Certainly very I appreciate the question.
In terms of managed services.
We fill out.
Page 35 in the 10-K.
In three category managed services fee.
Billable service fee and reselling and other services included in managed services. He is also sale of accessories to primarily our existing customers who have managed services with that.
So.
When there is a fluctuation is accessories that does.
Vary from quarter to quarter in year to year.
So.
Although there was a growth and managed services is sort of.
Ah you Dave.
By the tiny and accessories sale so in 2018.
We had pretty good.
The increase in accessories field to several agency all DHS and that's in.
2009.
That's that's primarily the reason is the 10-K.
Fourth quarter, ending December I'm, not able to give out that breakout at this time.
That is something we're considering to breakout.
The 10-Q.
And so stay tuned for that.
Okay. That's helpful.
Jim I really appreciate obviously everybody is struggling how to communicate in this period of uncertainty I really appreciate your candor couple follow up questions on your comments. If you don't line I was going to ask you about some of the government agencies that you serve that might benefit from what you've already done just if you can give.
As a reminder, typically onto your contracts if an agency hey, let's say CDC increases the number of devices, they're using does that increase your revenue where is your revenue fixed regardless the number devices or does it vary by agency.
Its does increase or revenue because our bill our business model or cost model is is that we charge Stanford device per month. So as the number of devices go up that will increase our revenue.
You know relative respectively corresponding increases.
Okay.
And then on on the.
Flipside potential challenges as a result of the current situation.
I'm, particularly interested in commercial enterprises and again on page 36 in the K you did have already habit down here in 2019, I know you've called out American Airlines as an example of commercial HM.
So could you give us a little more sense of what you're looking at in terms of commercial and what drove that decline in 2019 commercial revenue.
Barry I'll I'll take that question.
So in 2000 and.
This goes back to even before 2018 when the current management took over in 2017, they evaluated the businesses lines of businesses.
And where the business was low margin and do not make sense to continue.
Those.
Contrast, we're not.
Crushing continuation.
So.
In 2018, there was still revenue a tail less than in 2019.
Lot of the low margin commercial consulting business.
Yes, so we didn't first in the renewal.
Yes, that's really the drop into into commercial business in 2019.
And then looking forward the prospect for losing additional business a customer like American airline I forget I think you called out what you do with them. If you refresh my memory.
And in terms of you know the commercial what we did with for the American airline was we've provided them all of the infrastructure for their digital's, a sort of gift certificate issuance and maintenance.
So that one went away because the American airlines decided to bring that work in house.
And so it wasn't like we lost it to a competitor, but you know I believe because of the.
The security environment at the time with all of the the Boeing 720 Sevens, having issues that they want it to make sure that this they believed that this they could keep it more secure by bringing it onto their site, we still maintain the certificate of authority business.
But they took the over them piece, which is the hardware and the software piece they will be moving that to their facilities.
This year.
Okay, and then a junior comment on your senses contract.
Theres already talk for example, about doing the election on an all by mail basis. So it sounded like a 10 year over year comments that if they went to a virtual census and eight.
They are eliminated sending census takers out in the field.
To eliminate the rest of exposure there would be a revenue it to you if that happened.
That would definitely be a revenue hit but.
The reason why they send out the numerators is because of the the folks when they get the census floors and now all of the census, actually is sort of conducted online you do have the option of sending in your paper forms for Theres. A website that you can go to to provide that same.
Information.
So it's it's the census is you know.
I think what they're thinking is there going to get the similar response. So they will have to send the numerators door to door. Because you know for several reasons. As one is is that not everyone have they have connection to the internet and not everybody take it so seriously to respond to the census, and so.
It's the census is estimate that they're going to be training up yeah, I think as at the last count they've already have trained up some 600 600000.
Numerators because they feel that some of these folks are going to fall by the wayside because of the virus epidemic.
But they're still on track to rolling out you know.
Half a million plus devices.
So.
We believe that theyre, they're going to roll these devices out, but you're right. If they decide that you know we're going to only go and use the online portal to accept the census data that could be a huge hit to our managed services fees.
Okay. And then you also talked about in terms of an opportunity. There's a lot of folks that are eight either working at home or students.
School at home, so that's a potential opportunity for you one challenge that I want to ask about however, let's say a major school district can't be when said, we want to send I'd add that to all of our students you guys, we well position to take in contract like that on but I'm wondering I'm already hearing shortages.
As a apple had shortages producing phones and.
Spies out of stock on laptops is there an issue getting devices that you're seeing is that your responsibility or is that the customers responsibility.
Well as I said in my remarks is is that.
If there is a protracted downturn in terms of the supply chain, where you know they cannot get these mobile devices.
From China, or other you know developing countries, where they're developing.
But they're producing manufacturing these devices, there that could be a negative impact.
And I don't know you know what the the supply is out there we have not experienced any issues of getting devices and accessories and equipment, yes, but that doesn't mean that there won't be but so the answer is yes, theres, a long protracted downturn and theres a disruption to.
The supply chain it could definitely impact us, but as you said or in your.
First part of your question is.
Good that represents an opportunity before us absolutely we are geared toward putting out the mobile devices and devices that are that allow our workforce to work remotely study remotely.
And also helping them so sure those devices and so thats right in our wheelhouse.
Okay, and one more question if you'll indulge.
Of course indulge me.
Just in terms of that the guidance you issued fully understandably, you're not going to throw out full year guidance, but on the one Q guidance.
Revenue of 26 million to 31 million, where 92% of the way you ended the quarter in terms of business days and that's a very wide range why the wide range. When you know you're going to be close enough quarter next week.
Well, we have one more money.
Oh and.
With the went off of census project.
There is a choose uptake and carrier services.
And.
The.
The carrier services volume.
No one what it is.
We know activation.
Well, we don't know.
The air time involved in though.
And so a job that will continue in terms of huge a variance for gap.
Our revenue projection will vary because of that yeah, but it will it will yes, just yeah I mean, the timing of the the Activations of these devices and when they're going to start using them.
We don't have all of those numbers, yet and so yes, it could be a huge number where you know if.
And it's all has to do with the carrier services portion of the revenue, where we've got a pretty good handle on where the managed services piece is going to be but it's difficult to measure where that you know carrier services.
So you have to wait to get the data back from the carriers to see what kind of usage your customers had weather was heavy or light.
Correct, Yeah, you hit the nail on the head right there yeah exactly okay.
Understood. Thank you for taking all those questions.
You're welcome I didn't get some additional information it looks like so far for the census, there's roughly 11 million people have completed it electronically. So there's still plenty to go and Oh, you know they did extend the due dates for the the census for a couple of weeks so less.
See how that goes but my guess is that there's going to be a a big requirement for the numerators to go out there and collect this information.
At this time there are no other questions. Following that will conclude our question answer session. If your question was not taken please contact widepoint IR team at W., why why that gateway IR Dot com I'd now like to current turn the call back to Mr. Kang for any closing remarks.
Thank you Jess various one other item that I like to cover.
You know this is was the last minute entry here.
There was a contract that that we are currently.
Bidding on we are team with a company called General dynamics.
It was for the Navy.
Marine Corps and Gen. Our contract also known as engine too.
And.
If you were following the award for that contract was is that that contract was announced to be awarded to commit call leidos.
That.
Contract Award is currently under protest.
And we are team with a company as I said general dynamics.
And so we still are hopeful that we may get a part of that.
Award. However, we are working and we are utilizing our relationship with light dose because we have relationship with them on the NASA nest contracting that contract is going very well and so we are trying to get on that team as well and so regardless of how this.
Protests goes we may have an opportunity to provide.
Enterprise mobility management services on the engine to contract. So let me finish with that and so again. Thank you operator, and we appreciate everyone's taking the time to join us today.
The operator mentioned that there were any questions. 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 and please be careful.
Be careful in practice your social distancing and hope to see you all at the next quarterly earnings call. Thank you very much.
Ladies and gentlemen, we thank for joining us today for Widepoints fourth quarter and full year 2019 conference call you may now disconnect.
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