Q1 2022 WidePoint Corp Earnings Call
Thank you for holding ladies and gentlemen, and please remain on the line the White point conference call will begin momentarily.
You for your patience.
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Good afternoon, welcome to white points first quarter 2022 earnings conference call. My name is Holly and I will be your operator for today's call.
Joining us for today's presentation are wide points, President and CEO Jin Kang Executive Vice President and Chief sales and marketing Officer, Jason Holloway, and CFO Robert George.
Following their remarks, we will open up the call for questions from White points publishing analyst and major investors.
If your questions were not taken today and you would like additional information. Please contact wide points Investor relations team at W. Y Y at Gateway IR Dot com.
Before we begin the call I would like to provide white points Safe Harbor statement that includes questions 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 White point Corporation that involve risks and uncertainties that could cause actual results to differ materially from those anticipated.
These risks and uncertainties are described in the company's Form 10-Q filed with the Securities and Exchange Commission.
Finally, I would like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the company's website at Www Dot wide point Dot com.
Now I would like to turn the call over to wide points, President and CEO , Mr. Jin Kang.
Sir Please proceed.
Thank you operator, and good afternoon to everyone. Thank you for joining us today to review our financial results for the first quarter ended March 31 2022.
Our call today will be a bit shorter than normal given that it's only been roughly a month and a half since our last earnings call.
That said it does not at all mean, we haven't been busy here at what point.
We remain committed to making strategic investments internally with the ultimate goal of executing our organic and inorganic growth strategy, which is to grow the topline and operate profitably and stably to maximize our company's potential.
Before I provide you with the additional updates I am once again obliged to share that there are still a macro economic headwinds that are out of our control affecting our business.
Whether it be COVID-19 supply chain disruptions labor market shortages or geopolitical issues why point similar to almost every other corporation in the U S is impacted to some extent.
Nevertheless, we continue to do what we can to implement proactive action that combat these headwinds.
For example, with respect to supply chain issues. One thing. We recently started instituting was proactively looking for alternative sourcing methods within the U S by way of M&A or partnerships.
We currently have various equipment mobile devices accessories, and other supplies that are being provided by offshore companies <unk>.
Limit the number of variables within our supply chain, we are looking to secure sources here in the states.
We will continue to be nimble flexible and resilient in combating uncontrollable macroeconomic headwinds.
Next I'd like to highlight some recent encouraging updates as you might have seen from our latest press release, we successfully stood up the commercial certificate authority infrastructure and are now able to issue. The most secure multi factor authentication or MFA credentials to our commercial customers. We recently implemented.
<unk> and deployed all of the hardware and software necessary to issue. These credentials for our commercial customers in the beverage industry and a large research University.
We also provided the necessary training and drafted the policy documentation for our customers to ensure that the most secure MFA solution is operated and the most secure manner suffice it to say our IDM solution is starting to take root in the commercial sector.
Also we continue to capture additional business on our DHS CW EMS two <unk> contract vehicle.
I am happy to report that DHS has committed a substantial amount of their contract procurement authority under our CW Ams to contract and I am cautiously optimistic that we will successfully capture substantially all of the funding allotted for this contract also there are several large opportunities we are pursuing under this contract.
And once awarded May precipitate a contract modification to increase the ceiling.
I will share more details of these opportunities as they move past inception stage and move into the task order request for quote stage. Additionally, we have submitted our price adjustment request the DHS to help offset the increases in labor costs. We are experiencing from the unprecedented increase in labor rates caused by labor shortages.
And the great resignation.
We remain cautiously optimistic that we can maintain or improve upon our current financial performance through these tough times.
As it relates to our ESG initiatives, we're continuing to find success in our recycling program as we stated in our previous calls our subsidiary wide Mobile Corporation received the <unk> II <unk> III certification from the sustainable electronics international or sorry.
And we have continued to gain traction as we build profitable revenue by responsibly recycling mobile and other smart devices, whether they be at the end of life or those that can be recycled back into inventory. We see this effort to be a win win for our environment and win for our company as we are receiving profitable revenues from these <unk>.
<unk> and keeping these devices out of the landfill I am optimistic that this part of our business will continue to grow as more and more mobile devices are placed into service and reached the technical refresh phase of their lifecycle.
As we stated in our previous call we were in deferred Rev. Ready State I'm happy to report today that we recently received a verbal commitment from one of our customers that they will sponsor us for the full fed ramp certification.
Please stay tuned on our progress on this front.
The fed ramp certification of tests that are intelligent technology management system for <unk>.
Meets all of the cyber security standards.
Scribed by the federal government for protecting our customers' data.
Attaining this full fed ramp certification will place us in rare company as we compete for work within the federal government.
Additionally, this level of security demonstrates to our potential customers, especially those in the commercial sector and those verticals, where security compliance is key that wide point brings a high level of confidence when it comes to protection of their data and systems.
All in all we are still executing our strategy for profitable growth through organic and inorganic means.
We remain in line with our budget expectations, and our encouragingly trending towards our top line forecast.
Our team is certain that the strategic investments, we are making and the company will translate to profitable revenue growth.
With that overview completed I'll now turn the call over to Jason to provide you with some details on the investments we are making on the sales and marketing front Jason.
Thank you Jen and good afternoon, everyone I'd like to start by sharing some of the progress we've made as a result of our acquisition of <unk>.
From a high level I am pleased to share that the onboarding process has been going as planned and we expect to have them fully integrated on the backend and some time here in Q2.
As mentioned on our prior calls we found early success in leveraging synergies whether that be cross selling or up selling our services and solutions to <unk> base of customers and vice versa.
We have seen these joint sales and marketing initiatives continue to expand and are in fact in line with our internal expectations.
<unk> revenues for the first quarter.
We see no signs of slowing down and also expect to see improving results in the quarters going forward.
That said as Bob will further expand on his updates there are some acquisition costs incurred in Q1 as we continue the integration process.
This will impact our operating expenses in the short run, but I am very confident that there will be far greater returns in the long term as a fully becomes a part of white point.
One example of a win we previously shared with a beverage company, who has engaged us for our identity and access management as a service.
This project is also important to wide point strategically as it introduces our new Vod grade PKI identity and access management solution.
The commercial sector.
We are diligently working with them to expand our managed services to potentially add telecom lifecycle management.
The second when we shared on the prior call was with a large marketing the multi media rights holder for some of the most prestigious sports venues across the country.
Due to Ta.
Such a good impression.
We're in the latter stages of expanding our agreement.
More specifically the customer shared that they would like to use white points I T. As a service offering for even more of its subsidiaries throughout its organization.
The third win is with a financial institution that close as a new customer in which they also added our identity and access management as a service option.
Next we continue to maintain our Microsoft co sell certification status and have combined with Ita's, Microsoft Gold partner certification.
Which gives us quite an edge as we continued to push into the commercial markets.
Overall, we continue to reap the benefits of our <unk> acquisition and look forward to maximizing the synergies as we near the completion of the integration process and strive towards profitable growth.
Furthermore, I wanted to share that our identity and access management solution is being implemented at a major research University and a district of Columbia Government Agency.
All in all we are seeing progress on all fronts of the sales and marketing side and are encouraged by what we've been able to accomplish and by our healthy growing pipeline with that I will hand, the call over to Robert.
Thank you Jason Good afternoon, everyone I'm pleased to share more details of our first quarter 2020 to financial results for the first quarter. Our revenue was $22 4 million compared to $20 7 million reported for the same quarter last year.
Carrier services revenues increased by $1 6 million to $12 9 million from $11 3 million in the first quarter of last year. This is largely due to carrier credits carried over from 2020 into Q1 of 2021 that we did not experience in Q1 of 2022.
Managed services revenues increased 2% to $9 5 million from $9 3 million compared to the first quarter of last year. The increase in managed services was primarily due to reselling activities. Our gross profit for the first quarter of 2022 was $3 9 million compared to $4 million in the prior.
Quarter, and $4 7 million in the first quarter of 2021.
The decline in gross profit compared to last year was due to increased labor costs in particular in our <unk> business gross margin decreased to 17% in the first quarter of 2022 from 23% in the first quarter of 2021.
First quarter of 2022 operating expenses increased 13, 5% to $4 6 million from $4 million in the first quarter of last year. The increase in operating expense was primarily due to the inclusion of Iga for the full first quarter of 2022 versus not being a part of our Q1 2021 results.
For the first quarter of 2022, GAAP net loss was 497000 or a loss of <unk> <unk> per diluted share a decrease from net income of 609000 or a gain of <unk> <unk> per share in the first quarter of 2021.
On a non-GAAP basis EBITDA for the first quarter of 2022 was 164000 compared to $1 million last year.
Our non-GAAP adjusted EBITDA was 345000 in the first quarter compared to $1 2 million in the same period in 2021.
Shifting to cash flow and the balance sheet, we exited the quarter was $7 3 million in cash and approximately $5 million available to draw on our credit facility. The approximately 800000 increase in cash from the prior quarter resulted from positive cash flows related to working capital, partially offset by capital investment in our stock repurchase.
This program our balance sheet continues to remain strong and our current ratio at the end of March remains around one two to one compared to one three to one at the end of the previous quarter.
More although we have an ATM out of disposal with no current plans to execute any orders on the ATM and we will be opportunistic and ashwin. The situations are favorable. This completes my financial summary for a more detailed analysis of our financial results. Please reference our Form 10-Q, which was filed prior to this call.
So with that I'll turn the call back over to Jim.
Thank you Bob and thank you Jason now, let me touch upon our M&A strategy.
Our executive team continue to search for and vet M&A targets and are currently reviewing a copious number of exciting opportunities.
With the slowdown of the pandemic, we have begun to meet with prospects in person and have a few strong contenders and we look forward to providing you updates as events unfold. However.
We have nothing definitive to announce at this time. Moreover, I want to share that we have currently paused our repurchase program to preserve our cash balance as we look to invest back into our technology and prepare for potential acquisitions.
Long term, we still intend to leverage the buyback program. When we feel the time is right. Finally as you might have seen in our earnings release, we officially provided guidance figures for the full year 2022.
From a topline perspective, we're forecasting 92 million to $98 million and from the adjusted EBITDA standpoint, we are projecting $2 5 million to $3 5 million the.
The adjusted EBITDA number is a bit lower than what we would have recognized but due to the investments, we're making back into the business and the integration expenses from the <unk> acquisition, we are forecasting those figures.
The investments, we are making into our sales marketing and branding efforts as well as the investments we are making into our technology solutions will translate to greater growth and profitability in the future.
Overall, we are continuing to execute our plan for profitable growth through organic and inorganic means and have an exciting 2022 ahead of us.
We appreciate the dedication from our employees and support from our investors and look forward to providing you all with additional updates when appropriate.
With that said, we are ready to take questions from our analysts and our major shareholders.
Operator will you. Please open the call for questions.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.
We ask while posing your question you. Please pickup your handset is listening on speaker phone to provide optimum sound quality.
Please hold while we poll for questions.
Your first question for today is coming from Barry Sine with Spartan Capital Securities Barry Your line is live.
Hey, Yeah, good evening gentlemen.
Jim I want to start with you if you don't mind and.
Your second last comment was on your M&A strategy, and if I kind of compare what you just said today versus how you phrase that in prior quarters.
Trying to do a little tea leaf reading it sounds like you're a little closer to announcing something than you were previously are you a little more optimistic. The board is obviously I think it was in March paused, the buyback program and I think that leaving flexibility for acquisition was one of the factors that.
They had looked at you said you have a few strong contenders.
One of the things you mentioned as an impediment in the past is while you've seen strong contenders the price wasn't right.
Is are all the stars are aligning now what's different now and am I reading your comments correctly that you're a little bit closer now than you may have been in prior quarters.
Hi, Barry. Thank you. Thank you for that question.
The answer is.
I think that things are getting closer.
And the stars are aligning but I'm also mindful of.
Always these.
Acquire acquisition targets looking for unrealistic valuations and so and there's always room for these.
Opportunities to go sideways and so while I am more optimistic that we will have some opportunities here in 2022.
There is no.
Locke, if you will so.
I am more.
Optimistic than I was a quarter ago, but it's still we have long ways to go.
Okay and then.
Jin your last comment was.
On the guidance, you've just given and by the way. Thank you for that.
I think if I have my math right the midpoint for full year EBITDA guidance is $3 million and you just reported 344000.
EBITDA for the first quarter, which is not even half of that run rate for the full year. So what changes over the next three quarters in terms of profitability I guess some of it maybe I T E.
I think Jason talked about completing the integration during the second quarter presumably.
It eliminates some duplicative costs.
Yes.
We will be removing some of the duplication and redundancies in the the other things. That's happened is is that there has been some opportunities that pushed to the right that we expect it to come in in the first quarter. So we have those elements happening and so we see us getting back into our forecast.
And making up ground over the next several quarters.
Okay. So when you say opportunities pushed to the right that would be on a revenue side.
Not so much on the court.
Correct.
So you had the cost but the revenue may come a little bit later than you were originally thinking.
Yes, okay.
Okay got it.
My I think this is my last question is just the headwinds that you're facing and I wanted to kind of focus in on handset availability and maybe supply chain issues Apple makes their phones in China.
There is a locked down and it's certainly Shanghai and somewhat in Beijing.
If I look at the disclosure in the 10-Q, it talked about managed carrier down a million Ta was positive.
Positive 1.6, so it sounds like a negative two six and I think that was called out to recycling and.
I'm reading that is if you don't sell them a new phone you don't get the revenue for recycling all phone. So if you could talk about what's what specifically are you seeing in terms of handset availability headwinds.
And how that impacted the numbers, we're looking at in the quarter.
We are seeing some slow up in some of the handsets and we're not quite sure what's going to happen with this renewed lockdown in Beijing Beijing.
Beijing I think it is.
And so there are some.
Impacts there and Thats why we are looking for sourcing opportunities in the U S.
Specifically handsets, but there are various add on accessories that we provide that has a fairly good margin for us.
And so we.
We do.
See that there may be some slowdown in the handsets.
But I think so far it has been manageable.
And we're cautiously optimistic that things.
We'll free back up here in the next couple of months and so.
We will either.
If there is a slow up in second quarter that we should be able to catch up on the handsets in the third quarter. A lot of these orders are already placed so far we have been able to make.
Fulfill those orders.
But it remains to be seen what the impact is going to be going forward with this renewed lockdowns over in China.
And if you could speak specifically about what I talked about in the disclosure the managed services.
Disclosure in the 10-Q and down $1 million in the I T E. One six so am I reading that right.
Organically excluding that.
That would have been down to six.
Did you want to cover that but as far as I know I thought our managed services revenue was slightly ahead.
I take that back.
Our revenue.
Excluding the carrier services were slightly ahead.
The <unk> revenue was slightly behind the revenue was.
Probably like 70, K below what we projected it to be what's going to be so we thought that our revenue was.
Fairly consistent or slightly higher than it was Q1 last year.
Isn't that right.
Yes.
We had lower volumes due to the recycling accessory sales and that was offset by the <unk> sales. So there is a negative $1 million.
Recycling and.
SaaS worries, but offset by the positive one six in <unk>.
Okay. So our overall overall revenue was like.
Slightly ahead of 200000 overall within the managed service fee line is $1 million down which is the.
Salaries and recycling.
Okay.
And why is recycling down is that because youre selling presumably you recycle when you also sell a new handset so I'm not quite sure why recycling is down.
Oh the <unk>.
I can explain that the recycling was down.
Because there was one of the.
Our main customers.
The tech refresh pushed to the second quarter. So we should see the.
The recycling revenue catch up in the second quarter.
But it's it's not related to any slow up and hence hence out any new other new handsets.
Got it okay. Thank you for taking my questions.
Sure thing.
Once again, if there are any questions or comments. Please press star one on your phone at this time.
Okay.
At this time. This concludes our question and answer session. If your question was not taken please contact <unk> IR team at W. YY.
IR Dot com.
I'd now like to turn the call back over to Mr. Jin Kang for his closing remarks.
Thank you operator, we appreciate everyone, taking the time to join us today.
As the operator mentioned if 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.
Thank you for joining us today for wide Point's first quarter 2022 conference call.
May now disconnect.