Q2 2020 WidePoint Corp Earnings Call
Ladies and gentlemen, thank you for your patience you are holding for today's Widepoints second quarter 2020 earnings call.
This time, we are gathering additional participants and we'll be getting momentarily. We appreciate your patience and ask that you. Please continue to hold.
[music].
Ladies and gentlemen, thank you for your patience you are holding for today's White Plains second quarter 2020 earnings call. At this time, we are still gathering additional participants and hope to be getting momentarily. We appreciate your patience and ask that you. Please continue to hold.
[music].
Good afternoon, well come to Widepoint second quarter 2020 earnings Conference call. My name is tear it at all but I will be your operator for today's call joining us for today's presentation, our widepoints president and CEO with Gen.
Executive Vice President and Chief sales, and marketing Officer, Jason Hollaway, and executive Vice President and CFO Kelly can following their remarks, we will open up the call for questions from Widepoint publishing analysts and major investors. If your questions were not taken today and he would like additional information please contact widepoints investor real.
Patients team at W., why why at Gateway <unk>, our 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 the 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 some those anticipated.
These risks and uncertainties are describing 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 you link in the Investor Relations section of the company's website at Www Dot Widepoint Dot com.
Now I would like to turn the call over to White Plains, President and CEO Mr., Jim King Sir. Please proceed.
Thank you operator, and good afternoon to everyone. Thank you for joining us today to review our financial results for the second quarter ended June Thirtyth 2020.
As you all know from our last call. We started off 2020 with a bank.
Q1 was an extremely successful quarter in which we grew revenue substantially and drove positive net income.
Today I'm very pleased to report that those positive trends continue throughout the second quarter.
As a result, the second quarter of 2020, and certainly be classified as one of the most successful quarter in White Plains history.
For the second quarter of 2020 by revenue increased to 54.8 million. This is a record for white point.
It is an increase from the 22.1 million, we reported in the second quarter of last year.
And it's also a sequential improvement from the 39.7 million, we reported last quarter.
Obviously, the substantial increase in revenues is a highlight for the quarter.
Before we get too far ahead of ourselves. It is worth reminding everyone that there are two components to our revenues.
There are carrier services, which is very low margin and there are many services, which are closer to 50% margin.
Due to our ongoing work with the U.S. Department of Commerce to support the 2020 census carrier services revenue constitute and uncharacteristically large percentage other revenues this year to be sure. They are driving the topline.
But their contribution to our bottom line, it's not add substantial.
As you all know the goal of this team since we took over the business in 2017 has always been to grow profitably.
For that reason, what's perhaps more encouraging is that our managed services revenues, which do drive profitability because of their high margins also increased year over year.
During the second quarter of 2020 or managed services revenues were 9.8 million, which is a 22% increase from the 8.1 million reported in the second quarter of last year.
The increase in many services helped drive a 230% increase in EBITDA from 311000 in Q2 of last year to 1 million in Q2 of this year.
And where we had a net loss of 308000 last year. We earned 489000 in net income this year.
Topline growth with Bottomline profitability.
That's been our objective and by that center. It is evident that the second quarter at 2020, what they success for wide point.
In a few moments I'll pass the microphone over to our CFO Kelly Kim to further elucidate our financial performance, but first let's go over some of the operational highlights so that there's more context, the why why point, it's performing so well in an environment that is challenging where so many.
Let's start with a project that is having the most material impact on our business today, and which serve as an excellent case study for us going forward.
The 2020 cents it.
Despite the current resurgence of Corona virus cases, everything with census remains on schedule and is moving forward.
Entered August 4th the census Bureau shifted back milestone dates to his original schedule.
I mentioned on our last call that there had been some delays with census, due to cope in 19.
And those delays had elongated the amount of time numerators would need to be in the field.
On our last call I'd say that that we expected the numerators to be in the field through November. However, you'll also recall that U.S. department of Commerce had been working diligently to ensure the census will be completed on time.
The hard deadline caused them to increase the number of devices. They forecasted they would need in the field by approximately 20%.
Like so many other organizations and enterprises that we work with the U.S. Department of Commerce realize that's a function effectively into coping 19 environment they needed more mobile devices not fewer.
I think result, the number of devices, we were managing under this project increased from approximately 400000 devices. The nearly 700000 devices.
We also expanded our offerings like logistics and inventory management services.
Just the project end up being completed at the end of September and in line with pre pandemic expectations. We did not believe that they will be any material changes to our expectations for 2020.
Regardless of the exact timing it is worth reiterating that while the increased number of devices. We are managing bodes well for us in the near term. We do expect revenues from this project the mostly trickle away during the first portion of 2021.
As the name implies and as I mentioned on our last call. The 2020 cents is it's mostly a 2020 event.
Therefore, we are working hard to plug to hold that this contract is likely to leave when we phase out of our work.
Replacing the revenues from this project may seem like a somewhat.
Daunting task, but as I mentioned that the outside of this call. This contract contains a substantial amount of carrier services revenues.
And because carrier services actually suppress our margin profile, replacing all of them is not a large priority for us.
The priority is replacing the managed services revenues tied to this contract.
If we can do that we won't necessarily see consistent top line performance year over year, when we get into 2021, but we will see an improvement in our margin profile.
And she is growing profitably, it's our priority, replacing managed services revenues from this contract remains our focus.
Also on our last call we provided some updates regarding the timing of our other major contract.
And that is our contract with the U.S. Department of Homeland Security.
Well. This partnership is fully intact until at least April 2021, it remains top of mind for us.
And I'm sure for many of our investors.
As a reminder for those of you want to follow along with any government updates related to this contract there real time. The full name is the cellular wireless management services B P a contract.
We've discussed multiple times why we remain confident in our ability to re secured this business. So I'll keep today's discussion brief.
Just last week and August fit DHS issued a draft RFP for comments and questions from potential vendors.
Hey vendors to when they session was held on Tuesday August 11.
Based upon these updates the new protected tied for contract award is late November 2020.
We will continue to monitor and provide status updates related to the RFP and award date.
But in the meantime, I work with DHS has progressed uninterrupted as a reminder, our current contract Endatus April 30, 2021, with an option period of six month.
And that all options are exercised the contract can be extended until October 31 2022.
So at the time being this partnership remains extremely positive worldwide point and for our customers.
As always we'll keep you all the price.
A new developments as they materialize.
Now obviously these two projects are far from the only drivers for Widepoint.
During Q1, there was a particularly large increase in spending from federal customers, who were on the front lines battling against Coven 19 on the commercial side. The story was a little different initially many commercial customers became price sensitive and were reluctant to spend the way federal state and local governments we're spending.
However that behavior began to change during Q2 as both sectors realize that their mobile workforce has grown and that workforce will likely be remote for longer than originally anticipated.
And that Widepoint can help then reduce their expenses, while giving them peace of mind that their mobile assets were secured and effectively manage and since saving money can equate to saving jobs, we've seen multiple expansions in Q2 with government and commercial enterprises.
But before I go into any further detail about what's driving the business for the rest of 2020 and into 2021 I like to turn the call over to Jason to provide you with in overview of some of our more recent sales initiative afterwards, Kelly will walk you through the financial results for the quarter.
And then I'll come back on for closing remarks, before we open the call into question Jason.
Thank you Jim before I talk about some of our sales progress from the quarter I do want to piggyback on some of Gen comments about census, and how it relates to the sales team.
As discussed this it is an incredibly important contract for us this year and although the financially material work with census will only last through the started next year. This contract will continue to benefit widepoint beyond its intended life span.
'cause it serves as an excellent case study for us as we work to land new business.
This is one of the largest and highest profile managed mobility services contract in the country.
I would like to take the second and say that every executive at Widepoint is working extremely diligently to replace the revenue. After the census project has been completed.
It's not why we're just sitting on our hands complacent and satisfied that we want census.
We know that replacing the revenue will be a challenge, but we're certainly up to it.
Yeah, it's that they mentality that allowed us to win the census contract in the first place.
Those of you familiar with our industry will know that Widepoint has some excellent customer logos.
But we're always looking to improve this collection.
There remains a great deal of room for us to run in the federal state and local space as well as in the commercial space.
And as we chase after increasingly larger contracts and as we work to build new relationships with systems integrators.
It's extremely helpful to have a prominent case study, we can point to that clearly demonstrate our organization salability and flexibility.
When we approach new customers not only can we say that we're one of only two companies authorized by the federal government that hasn't 18 or authority to operate the issue external certification authority or you see a certificate.
But now we can also say that in a matter about.
We scaled the manage over 400000 devices that are critical to a constitutionally mandated project.
Which has major implications on the country and then we added an additional 280000 devices.
The mix.
And we did all of that scaling without a hitch.
Sorry, a pandemic.
And that's powerful selling point and hopefully it helps explain why we believe census, while mostly a 2020 financially bad is a much bigger strategically Beth.
Each quarter, we discuss the progress, we're making with systems integrators, which is critical to winning new business.
The since its project by the way is one of many examples of a positive relationship with the systems integrator paying dividends for Widepoint <unk>.
Another such relationship which were continuing to work on his with Synnex Corporation.
Last quarter, we announced that we had a vendor agreement with them in place to distribute our identity management solution, including the credentials I mentioned a moment ago.
Now for the most part.
Business effects of cobot by team have been positive for Widepoint.
As Jim mentioned.
With people working remotely enterprises have only increase their mobile assets.
The mobile and I see landscape is becoming increasingly more complex and that's helping drive our business.
But the Cynics partnership is an instance for Widepoint, where the business effects of cobot 19 have slowed some of our progress instead of accelerating that.
To be sure the discussions are progressing well, but they're not moving at quite a pace that would have it we had not been struck by a pandemic.
The timing may not be our preference, but it does prove that widepoints growth opportunities are much broader than census, and that they extend far beyond trends related to cobot 19.
From our perspective.
There's plenty of growth opportunity in addition to what help.
Generate positive results in 2020.
Subsequent to the quarters, then we announced that we had received 42 million interested mobility management contract awards from extension renewal and exercised the option periods during the second quarter.
Multiple components of the DHS exercise extensions in renewals.
Which is a testament to the strength of the relationship we maintained with those organizations.
The centers for disease control and prevention or C. D. C also exercised the option contracts.
Which indicates that we remain a integral component that helps them with their critical work battling kobin 19.
But we also had success on the commercial side.
Due to non disclosure agreements.
We're frequently limited in what we can discuss about our commercial customers, but I can say, we expanded contracts with multiple fortune 500 companies this past quarter.
Several of Widepoints customers had contracts that were coming up for renewal this year.
During the second quarter.
Many of them not only renewed but expanded their work with us.
Again much of the demand here is driven by a combination of expanding mobile space, coupled with uncertainty about the future.
Customer retention and expansions are certainly things to be proud out.
But adding new customers is also obviously critical to growth.
During Q2, we secured a new contract from the Virginia alcoholic beverage control authority or Virginia, a B C.
This is a one year contract with four additional one year renewal period.
It is the largest contracts we won.
But it is in our backyard.
And it's of course encouraging to see organization not letting the challenges of this year impede their progress.
The current macro environment is certainly helping current and perspective customers recognize widepoints value.
But at the end of the date.
That's fully engaging customers regardless of whether they are in the government or commercial stage.
Comes down to trust and comfort.
Our customers really like the model we built.
Where account managers, our on site and integrated into their team.
They don't see if there's another vendor.
As an extension to their team members.
For those reasons, we continued to land new business and to expand the relationships we already have in place.
With macro Tailwinds you only the fire we remain confident that we can continue expanding our footprint over the coming quarters and years with that I will hand, the call over to Kelly.
Thank you Jason.
As noted in our earnings release, we continued to many of the major trends from last quarter producing record revenues positive EBITDA and earnings positive net income turning to our results for the second quarter ended June 30, 2022nd quarter revenue was 54.8 million up 148%.
From 22.1 million reported for the same quarter last year.
Carrier services revenues increased 220% to 44.9 million from 14 million into second quarter of last year. As a reminder, revenue from carrier services are very low margin revenue and into second quarter 2028 accounted for 82% of revenue comes.
Paired to 53% in the second quota of 29 team.
Want to highlight that many services also increased by 22% to 9.8 million from 8.1 million in the second quota of last year. The increase in managed services was primarily due to expansion with existing government and commercial customers increases in sales of excess three.
The government customers and increases in billable service fee revenue delivered through our partnership with large system integrators.
These increases were partially offset by a decrease in reselling and other services due to the timing of product resales in the in the prior year.
The six months ended June 30, 2020, or total revenue was 94.1 million up hundred 15% from the 44 million. We recorded in the first six months of last year.
The first six months of 2020 carrier services revenues, well worth 72.1 million or 77% of total revenue and managed services revenues were 21.4 million or 23% of total revenue.
This compares to carrier services of 28.4 million or 64% of total revenue in managed services revenues of 15.6 million worth 36% of total revenue in first six months of last year, that's the numbers demonstrate year over year crews for both the core.
Sure and six month period was primarily driven by increases in revenue from carrier services related to our work with the U.S. since this project.
Our gross profit for the second quarter increased 25% to 5.1 million from 4.1 million in the second quota of 29 team gross margin was 9.2% in the second quarter compared to 18.4% into second quarter of 29 team for the first six months.
70 year old gross profit increased 21% to 10 million were 10.6% of total revenue from 8.3 million or 18.9% of total revenue.
In both periods. The decrease in gross margin was driven by the increase in carrier services.
Kevin just previously discussed.
In the second quarter 2020, operating expenses increased by 5% to 4.1 million from 4.2 million in the second quarter last year.
As a percentage of revenue operating expenses amounted to 8% of revenue as compared to 19% in the second quarter of 29 team.
For the first six months of the year operating expenses increased by 8% to 8.7 million an 8 million in.
In both periods the increase in S. DNA expense reflects higher payroll costs consistent with higher employee count to support the increase business and higher stock based compensation.
Additionally, during the first six months of the year, we invested approximately 1.1 million in product development to enhance our platform and porno integrations.
In the same period last year similar product development expenses totaled 1.2 million going forward, we intend to continue working with our strategic partners to improve our product development efforts and client integration.
But the second quarter 2020, GAAP net income was $489000 an improvement from net loss of $308000 into second quarter of 2019.
Well the six months ended June 30, 2020, net income was $973000 an improvement from net income of 76000, but the same period last year.
On a non-GAAP basis EBITDA for the second quarter of 2020 was 1 million compared to $311000 into same period last year.
For six months ended June 30, 2020, EBITDA was 2.2 million, which compares to 1.3 million in the first six months of last year. As a reminder, we have historically reported adjusted EBITDA, which include stock based compensation, our non-GAAP adjusted EBITDA.
1.2 million in the second quarter compared to $599000 in the same period to 29 team.
For the six months ended June 30, 2020, adjusted EBITDA was 2.7 million, which compares to 1.7 million in the six months of last year.
Shifting to the balance sheet, we exited the quarter with 7.5 million in cash net working capital of six point Sixmillion and approximately 5 million available to drill down on her credit facility.
This completes my financial summary for a more detailed analysis over 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 Gen.
Thank you Kelly and Jason.
And then last quarter, we were very optimistic about our prospects for 2020.
But because we and the rest of the world, where just adapting to the pandemic, we didn't have enough visibility the issue full year guidance.
Essentially we didn't know what we didn't know however, with more insight into how people are functioning independently. We gained a clarity we needed to provide well we believed to be an accurate forecast of our financial performance.
On June 18, we issued financial guidance for full year 2020.
We were projecting revenues to range between 185, and 195 million, which would represent and 87% growth year over year at the midpoint.
EBITDA of 3.0 to 3.4 million, which would be a 13% increase at the midpoint relative to last year.
The substantial improvement in topline coupled with modest growth in the bottom line, mainly reflects the increase in carrier services related to the census project.
As I mentioned at the start up the call when that contract then we should see our margin profile pick back up, especially if we're able to offset some of the census attrition with managed services revenues from new contract.
It is our goal to increase managed services revenues and we are actively striving towards that during the second half of this year.
Given how well the first half of this year has progressed and the indication that these trends will likely continue into the back half of 2020, we remain on track to meet our previously issued guidance.
Sure the situation change, we will provide updates when available but for now we believe these estimates are squarely within the realm a possibility.
It's taken us sometimes to get here, but I believe we can safely say that lifepoint has never been and a stronger financial position than it is today.
Growing the top line well consistently generating positive EBITDA and net income.
We have no long term debt and we are supported by 7.5 million in cash.
We have positive operational momentum and clear indication that momentum will continue throughout the rest of the year.
We are proud of our accomplishments to date.
But our appetite for this business to reach this potential remains on satiated. Therefore, as most of you know from our shareholders' meeting several weeks ago. The board of directors and the management team are considering various options to help accelerate widepoints development, including potentially pursuing a reverse split.
And M&A opportunities that would be complimentary to lifeways core competencies.
Very aware of the varying perceptions, an opinion is related to companies that effectuate reverse splits.
And my than many do so and they last ditch effort to retain listing requirements or to up let's say different exchange.
They are done from positions of weakness, our financial position and operational progress demonstrate that is clearly not our situation.
Today Widepoint is in one of its strongest position ever as a company. We believe strongly in widely in the company's prospects and and the potential for those prospects to come to fruition.
We also recognize it because of our progress there are many who would be interested in becoming fellow owners of lifeway.
But who are prevented from doing so due to investment policies.
A reverse split is one way to remove the barriers to entry for those new potential investors.
Since 2017, we focus intently on growing the business organically.
I won't get into specifics of what our appetite for M&A looks like on this call.
But I can share that we are actively considering options that would of course be strategically complementary and bring new customers too wide fun.
We're being very selective and will only consider opportunities that will be accretive immediately or shortly after acquisition.
We will first leverage our cash on hand, and debt to execute any acquisition and only utilize equity financing if necessary.
We received a great deal of feedback from investors over the past few weeks regarding our various strategic options.
And we're very grateful for that feedback.
As individuals who are personally and financially heavily invested in this company. We're always seeking to do what is best for all shareholders in the long run.
Please keep in mind that while we have been considering various options no decisions have been made at this point.
So we welcome your questions and suggestions.
We would like to keep the dialog going and we certainly encourage all of you devote before our special meeting of investors, which is scheduled for August 24.
As we turn our attention at full to the second half of 2020, we believe the future remains bright for wide point.
As a number of mobile and I don't see devices has been expanding the space has become increasingly complex.
And the need for effective management and top tier security has also increased.
Coven 19, maybe adding a layer of complexity through negotiations.
But it also appears to have accelerated this trend.
For those reasons and for other reasons. We've discussed today, we remain optimistic about our ability to continue helping and increasingly large number of enterprises navigate the mobile landscape.
With that covered we are ready to pay questions from our major shareholders and analysts operator would you. Please open the call for questions.
Thank you ladies and gentlemen, the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time, if you're using a speaker phone, yes, well posing your question you pick up your handset to provide the best sound quality again, ladies and gentlemen, if you do have a question or.
Comments, Please press star one on your telephone keypad at this time.
Well take our first question from Mike Crawford with B. Riley. Please go ahead.
Thank you and thank you for providing both EBITDA and adjusted EBITDA numbers in the press release and then the a the EBITDA guidance for the year. So given that there was nearly 500000 stock based comp in the first half of the year.
If I is it correct to assume that's about the number for the second half of the year. So I could translate your EBITDA guidance for 2020 into adjusted EBITDA guidance, just sort of 4.4 million.
Correct correct.
Hello, Mike Yes, you are correct [laughter] this is Jay.
All right excellent and as far as these.
Investments in marketing.
That's you're making in the second after the years this primarily in terms of accounts or or otherwise.
You know, we're gonna be making in.
A number of investments and we're looking at those things that's good to have the biggest paying for the Buck.
One of the things is that were investing it is obviously some of our marketing and sales, including Gardner and some of the lead generation services. That's that's out there called funnel. We're also looking at you know investment and you know like fed ramp certification moving to the cloud environments infrastructure upgrades for.
Energy management solutions, you know I CMS portal enhancements that you know just to make sure that our system is up to date state of the art.
Digital building, an analytic software, we're talking about our Ireland operations, there and you know additional business lines development were looked working on solutions that will be bring into the market and we're close to it will have you know press releases coming out describing some of the new things that are happening within why please.
Okay. Thank you and then on the federal side, obviously, a sense as big as from your 10-Q, we can see that's probably the next two biggest active.
Customers would be [noise].
Hi.
NASA.
Is that something that you expect to bounce around or is there something additional that you're doing for those <unk>.
Customers.
For immigration and customs enforcement ice and also NASA.
Those contracts are pretty steady they're going to continue on Oh, we have a NASA for the next I believe the contract term was a five year base with five when your options.
And I believe ice is part of the CW MSP P.A.
Which will make it you know.
All options are exercised makes it could go out until October of 2022, and so you know it is part of that CWM SPP a recompete.
And you know again, we feel optimistic about our chances to win that we went it and that contract should continue.
Okay. I mentioned me the best part about this report was the growth in managed services revenues from 8 million to 10 million year over year <unk> is there.
Even as a as census tails off next year or sort of the carrier services. One is as managed services.
Revenue or something you would expect she need to grow and 2021.
It's going to be a challenge for US you know because some of the sensus revenue is a managed services. Although we do have a various things in our pipeline that will backfill that revenue source. So we have a very good chance of at least being flat and and a good chance of being.
You know a increased we'll see an increase in managed services.
Okay, Great. Thanks, and then last question is just on the on the commercial side I mean working with.
CDW is government.
The next.
Other system integrators.
Huh.
At what point.
Two.
We get some large commercial enterprise work that that really you know turns the needle mover like like what we've seen with some of your federal customers.
Yes, so so the the systems integrators I relationship with these systems integrators is bearing fruit.
We are close on a couple of things, but again because of our non disclosure we can't talk too much about it but we are speeding up our identity management relationship.
With Synnex, we're having some success with our CDW G partner and you know when we are allowed to put out a press release, we will but I wouldn't Jason to you know just highlights some of our other opportunities that we have Jason can you go.
Sure Hey, Mike are you doing I hope, you're staying safe man.
So as it relates to Synnex, even though that you know is primarily on the credentialing side that has a really heavy emphasis within the commercial enterprise.
Space.
So it'll be you know, we're actually target targeting.
You know the regulated industries, such as health transportation.
Finance or you know and alike. So that is you know going really well cobot, you know has slowed it down a little bit, but it pertains more to just getting a.
Oh clickable contracts in place and the one thing I did want to say when you brought up CDW G. As an example, where actually I'm happy to say that we have slipped.
To the commercial enterprise side, I'm CDW and we are.
Actively working a another deal with CDW on the commercial enterprise side. So it's it's too early to talk about it we are cautiously optimistic so you know stating brother.
Alright, Thanks, a lot guys.
Okay. Thank you.
We'll take our next question from Barry Sine Spartan capital. Please go ahead.
Hey, good afternoon folks.
First question I note that you're reiterating your guidance, but subsequent to first putting those numbers out I believe we had the announcement out of the census Bureau, where they're going back to their original.
Schedule, which should be a reduction in revenue so could you square those two facts for please.
Sure. The the original schedule was that the numerator is gonna be out there until end of October.
That brings now and what they did what they pulled that schedule back to now the numerators will be out there until September and as of September of this year.
But our work continues on.
Because.
And Numerators is part of that all of the device that they need to be out there. The other part of it is all of the reverse logistics center associated with that so that's going to continue on until the first quarter. So still there will be no material impact to our revenues for this year.
Okay.
So could be an impact next year is resolved or the timing.
Correct.
Got it.
Second question I wanted to understand better you've talked about some new contract wins and extensions and I'm trying to understand how much of these are new wins that will drive revenue growth and how much of these are just extensions that will drive continued recurring revenue and on the.
One of the press release, you talk to you break out three items 42 million in federal contract wins, you have in Hebei see Virginia contract you don't size that Im Wonder if you have any metrics. How many employees are they have that many field employees <unk> and then thirdly, you have a a 1.5 million in.
T M. Two commercial contracts. So you can talk to that all three of those ways.
Sure that we've put out three press releases covering the federal awards, the new win with the state and local Virginia alcohol Beverage Commission and one for the commercial side I can tell you that for both federal and the commercial side. There were lots of really awards of the contract and also.
So some expansions associated with customers couple of small.
You are customers, so, but the to the largest a piece that we got was that Virginia, a b C, which we approximately put a tag on that at a 1.5 million if all of the.
At 1.2, <unk>, our CFO says is 1.2 1.2 million.
In revenues if all of the options are exercised and that's a five year contract. They gave us a three year base purchase order.
And then they have some additional and has been an optional services that they may take and so we're looking at right now 1.2 could be higher.
Seven years, Kelly as corrected me as it so we got the contract for the first three years and then there are four additional years. So we see that relationship continuing to grow there so I.
I hope I answered your question.
Kelly answered the questions great yes.
[laughter] next question on DHS, you mentioned the Q in a period was.
This.
Yes. This week on Tuesday August 11, I'm not sure how that works.
Is that a I assume that the web based or phone based something like that are you in the listened in on the other questions and.
You know who else is on there were there any surprise participant asking questions and what can we learn and fund the tenor of the questions.
Its so so the Q and a was a BTC video teleconference. They took the questions early meaning by in in writing and then what they did was they went over those questions you know based upon that and and so there was a very long.
But in terms of you know who attended because a lot of times you know the the real players will not submit the questions. So that they can remain anonymous.
And and but there were a couple that side, then and using the chat function.
They put in and these were a small us systems integrators government contractors that it came in I do have the names of the two two of two of them I don't have it available right now, but I can send that to you but.
They try not to give away too much information about you know their understanding of the contract.
Or who they are because they want to remain anonymous, but there wasn't any surprises in terms of the questions that they that was asked usually you know is there to come is there to come and you know, what's the peer performance and things like that the general very administrative questions were asked and so.
We did learn anything from it we didn't learn you know who else was going to be coming into the the did you know the bidding of the under contract.
We still remain focused on our solution.
And and I think a lot of the the requirements that they put forward in the RFP you know plays to our hand.
And the engine appeal process, where do we stand on that and your optimism level for that contract.
So the engine or are there were two they're actually there were three protests to buy a company called Perspecta one by.
General dynamics, Judy I T.
And they were both dismissed.
By the only be office amended drilling budget.
There is one other stuff that the contractors can take the protester can take and that's through the federal courts.
No no if that's going to happen or not.
But we're not we're not waiting that long, we have been I'm talking with our.
Context that lie dose in IBCM, who happens to be the team that one that contract.
We do have relationship with lie dose.
Working with them on several of our contracts one with a you know we are sub to lie those on the NASA contract. We're also subcontractor to lie dose on our H.T.F. contract.
So we have a you know long working relationship with them, we're working with them on another customer, which I will not name here with IDN and so you know we have been having you know conversation with both Leidos and I'd be EM.
And Oh, we feel that are you know chances are continuing to improve.
Okay, Great News Kelly a couple of numbers questions. If you don't mind.
Breaking down depreciation and amortization.
It looks like there's been a pretty significant downtrend in amortization of intangibles and that's driving the combined DNA line did I get a lot of that is embedded in the cost of goods sold line could you talk about what's going on there.
And then what what the future trend is for that amortization line.
Certainly.
[noise] Decapitalize assets.
Will increase in the near term.
So we have ended certain amortization in a certain assets.
And it's just a timing when we're going to.
Good.
Certain have lies related to software development into service and the increase will kick in shortly it's just timing wise in the second quarter. It was a little bit significantly less than previous.
Quarters, but it will come back up again.
We are making investments in that area as Jim stated earlier.
And I didn't know if this is related to that but your GAAP reported tax rate looks like it jumped up maybe that was because you didnt have maybe that act that amortization that tax deductible I don't know and you're talking about that.
There certainly is a difference between GAAP and tax amortization, but it is really related to the taxable income for the year.
So when we do the provision for the quarter, we're looking at on annual basis, and I'm calculating the effective tax rate. So it's really related to the would we expect you know the profit before tax for the year [noise].
Okay and last question Kelly on the balance sheet.
Despite the very very strong.
EBITDA adjusted EBITDA number for the quarter your cash balance declined sequentially and I notice on a related level. Both your unbilled accounts receivable and your cancers Unbilled billings and your accounts receivable had jumped up very significantly and you have a breakout of who's a major customers are in those items indeed.
You could you talk about.
That in a relationship and was that because the leap builds going out or builds going out at the beginning of this current quarter.
[noise] you know actually we are doing very well in terms of reducing cycle. It to the number of days it takes to build customer but are.
Right.
I didn't build the accrued continues to increase in rise due to the growth in the revenue based you know when we talked about.
What is contributing to the group so all along I had expected.
To have some decline.
The collection in the second quarter was very strong. It's just we did have alluded that is the increase in DSL.
Matt and to that.
Hey, Barry I like to add a little bit to that is and but there has been a little bit of timing.
Issue here.
We announced last quarter, we had put in our sole source contract with DHS and as part of that we're in the process and moving over from the old contract vehicle the new contract vehicle and you know when whenever you do that there's a little bit of you know timing associated with it and so lot of the invoices that we had you know put in.
For the for the Feds for the DHS sole source contracts.
Look a little bit longer to get paid it. So some of that cash was used to fund those carrier services and so we should catch up into third quarter.
Okay, and so presumably that means that a lot of the unbilled.
Yes Hello.
I got cut off yes.
Okay, Hey high barrier coming in now.
Okay. That's fine because those are all my questions. Thank you.
Okay. Thank you.
We'll take our next question from Sam Donaldson private Investor. Please go ahead.
Well gentleman Lady once again, I mean, the happy position that congratulations.
One more than that.
Energy to seek out new opportunities to capitalize on them, but this management has displayed for more than two years now.
Is really encouraging as it investor we look at.
Price per share went on December 31st of last year.
We closed at 40 cents this year.
Today to close the regular Bakken it.
Yeah.
Good morning people will be taking the profits.
[laughter] and for the future you cautious this that the census money that is going to come due in but you've also.
Reiterated year, which means you expect it to contracts that you had been the new wins that you see in the pipeline may well make up what would have been a continuing census money.
But again I come back you most central time.
It team the men and women of glide led by June.
Jason and Kelly that have produced such expectations now when it comes to the reverse split I've got a little experience in other companies, but that if I were now a great investor in Tesla.
Yeah.
Apple.
And I know it has.
Pluses and minuses, but my view is that my trusted this management team is such that whatever.
<unk>.
I'm going to go along with and I guess my only question today after laying on happens once again, thank Lee is it.
No what you're going to do.
All right. So I I think I understood you as for some reason you know we're getting like it's starting it goes up and it goes down there's some issue with their phone here, but in terms of the reverse split I think you know I think Tesla is doing a 541, new meaning they're actually doing a sled not a reverse.
Split right and and I think thats good off.
As I said and you know in my prepared remarks is is that the reason why we're doing the reverse split is not because we were trying to high you know a sliding stock price as you mentioned you know our shop has now almost doubled or doubled you know as a closing.
The today and you know, we're not trying to uplist or stock or anything like that and we're not doing anything to hide or poor performance. You know you know under contrary our financial performance is strong our share prices are continuing to climb.
And but we're doing it because you know we want us to be more attractive to institutional investors and and and attract new investors.
And and certain a you know institutional investors have internal policies, preventing the purchase of low price stop and variety of brokers dealers broker dealers discourage individual brokers within those firms from dealing and low stop.
You know look price stock and so by you know potentially you know doing a reverse split and and getting our stock price above the a the you know the price itself you know, sometimes one sometimes $5, we can get removed that barrier for some of these institutional investors.
And and you know whenever we go out on these you know investor conferences, and and many of the potential investors at express dismay, because they cannot invest in stocks at or below you know dollar or two or $5 and and and they also you know express their <unk> dismay in terms of how much flow.
We have and how many shares that we have outstanding for a company our size and I think whereas somewhere around 84 shares and that seem to be a lot of you know shares and so by limiting the number of shares perhaps it will decrease to liquidity, a little bit, but and say.
Oh.
More buyers to come in a new set of buyers and institutional investors that will be in here for the long term and so I think these these these are all good things that could happen, but as I said you know in my prepared remarks.
Do you know the the proxy is seeking permission to do that the board has not decided one way or the other whether we are going to execute a reverse not and there's a lot of things are still in slots. The price of stock continues to improve and so based upon that.
You know into future will make that decision.
Well I have just.
Yeah, that's when we'll be no and as you pointed out you're seeking proxies now.
So listening it nice sterile due to this matter and the board will decide.
And do you think assuming that most of the shareholders will say.
Okay No back remission when do you think the board will decide on this question.
The bid the deadline was the 24th of August for the proxy votes and based upon the votes. We would have we would consider you know the the percentage both and so forth and based upon that we would first have to decide whether we are going to execute a reverse or not and then you know once that decision.
Is.
Makerbot based upon the responses that we get back from the votes. Then we can set up a schedule as to when we want to effectuate that reverse.
Yes, because you're not thank you for that and I press you only one more time, it's Mike [laughter], because my old news and I was worried sweaty sweaty [laughter].
Robert.
But it appears to me what did you mean I'd have to comment on your for reverse split.
Yes, and I'm for the reverse split because you know of the that you know the various things that we stayed in the proxy and those items that I covered in our call.
I do believe that bye.
I'm, having a higher stock price I will benefit us in the long run of course, there's no guarantee that that would happen, but you know I personally believe that that is the case.
Thank you gentlemen, it Lady.
And don't get me with all this time.
And again congratulations on continuing.
The in visibility and the ability of this corporation.
Hey, good great just for.
The stuff that stockholders, who is the situated thanks.
Great. Thank you Sam for those strictly questions.
Sam.
At this time. This concludes our question and answer session. If your question was not taken please contact Widepoints IR team W. Why why <unk> IR Dotcom I'd now like to turn the call back over to Mr., Jim King for his closing remarks.
Thank you operator.
We appreciate everyone, taking the time to join us today.
The operator mentioned if there were any questions that we did not addressed today. Please contact our IR team you can find their full contact information at the bottom of todays earnings call.
Thank you again and have a great evening.
Thank you for joining us today for White Plains second quarter 2020 Conference call. You may now disconnect and have a great day.
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