Q1 2025 WidePoint Corp Earnings Call
Operator: Good afternoon, everyone. Please remain on the line. Your conference will begin in roughly five minutes. Please remain on the line. Your conference will begin shortly.
Good afternoon, everyone. Please remain on the line your conference will begin in roughly five minutes. Please remain on the line. Your conference will begin shortly thank you.
Unnamed: Thank you.
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Kelly: Good afternoon, welcome to wide 0.1st quarter 'twenty 25 earnings Conference call. My name is Kelly and I will be your operator for today's call.
Unnamed: Welcome to WidePoint's first quarter 2025 earnings conference call.
Operator: My name is Kelly and I will be your operator for today's call.
Operator: Joining us for today's presentation are WidePoint's President and CEO, Jin Kang. Chief Revenue Officer Jason Holloway and Chief Financial Officer Robert George.
Jin Kang: Joining us for today's presentation are wide points, President and CEO Jin Kang Chief revenue Officer, Jason Holloway, and Chief Financial Officer, Robert George.
Operator: Following their remarks, we will open up the call for questions from WidePoint's publishing analysts and major investors.
Jin Kang: Following their remarks, we will open up the call for questions from wide points publishing analyst and major investors.
Operator: If your questions were not taken today and you would like additional information, please contact WidePoint's Investor Relations Team at wyy.gateway-grp.com.
Jin Kang: If your questions were not taken today and you would like additional information. Please contact a wide point to Investor relations team at W. Y Y I Gateway Dash G. R. P dot com.
Operator: Before we begin the call, I would like to provide WidePoint's safe harbor statement that includes cautions regarding forward-looking statements made during this call. The matters discussed in this conference call may include forward-looking statements regarding future events and the future performance of WidePoint Corporation that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the company's form 10-Q, filed with the Securities and Exchange Commission.
Jin Kang: Before we begin the call I would like to provide wide points safe Harbor statement that includes cautions regarding forward looking statements made during this call.
Jin Kang: The matters discussed in this conference call May include forward looking statements regarding future events and the future performance of wide point Corporation that involve risks and uncertainties that could cause actual results to differ materially from those anticipated.
Jin Kang: These risks and uncertainties are described in the company's Form 10-Q filed with the Securities and Exchange Commission.
Operator: Finally, I would like to remind everyone that this call will be made available for a replay via the link in the Investor Relations section of the company's website at www.widepoint.com.
Jin Kang: Finally, I would like to remind everyone that this call will be made available for replay via the link in the Investor Relations section of the company's website at Www Dot wide point dotcom.
Jin Kang: Now, I would like to turn the call over to WidePoint's President and CEO, Mr. Jin Kang. Please go ahead. Thank you, operator. Good afternoon, everyone. We appreciate you joining us today to review WidePoint's financial and operational results for the first quarter ended March 31, 2025.
Jin Kang: Now I would like to turn the call over to wide points, President and CEO. Mr. Jin Kang. Please go ahead.
Jin Kang: Thank you operator, and good afternoon, everyone.
Jin Kang: We appreciate you joining us today to review <unk> financial and operational results for the first quarter ended March 31 2025.
Jin Kang: Given that we recently held our full-year earnings call, today's discussion will be more concise.
Jin Kang: Given that we recently held our full year earnings call today's discussion will be more concise.
Jin Kang: Before we dive into the quarterly highlights, I want to briefly address a one-time out-of-period accounting adjustment recorded this quarter. During our first quarter review, we identified and corrected an error related to the timing of revenue recognition on certain reselling contracts. As a result, we recorded an out-of-period adjustment, which reduced revenue by approximately $2.7 million and cost of revenue by approximately $2.5 million. After a thorough evaluation, we concluded that this adjustment is not material to any previously reported periods and is not expected to be material for the full year 2025.
Jin Kang: Before we dive into the quarterly highlights I want to briefly address a onetime out of period accounting adjustment recorded this quarter.
Jin Kang: During our first quarter review, we identified and corrected an error related to the timing of revenue recognition on certain reseller contracts.
Jin Kang: As a result, we recorded an out of period adjustment, which reduced revenue by approximately $2 7 million and cost of revenue by approximately $2 5 million.
Jin Kang: After a thorough evaluation we concluded that this adjustment is not material to any previously reported periods and is not expected to be material for the full year 2025.
Jin Kang: Bob will provide further details on this adjustment, along with a broader financial overview, later in the call.
Jin Kang: Bob will provide further details on this adjustment along with a broader financial overview later in the call.
Jin Kang: Turning to operational highlights, as we shared during our recent earnings Q1 was marked by two major milestones. First, we achieved FedRAMP-authorized status for our ITMS solution, a long-anticipated accomplishment. While I won't go into the technical specifics here, I want to emphasize the significance of this milestone. It reflects our continued commitment to delivering secure, compliant solutions and clearly differentiates us in the market. With ITMS Now listed on the FedRAMP Marketplace, our solution is more visible and accessible to a broader range of federal agencies, expanding our pipeline of opportunity.
Jin Kang: Turning to operational highlights as we shared during our recent earnings call Q1 was marked by two major milestones.
Jin Kang: First we achieved fed ramp authorized status for our <unk> solution, a long anticipated accomplishment.
Jin Kang: While I won't go into the technical specifics here I want to emphasize the significance of this milestone that reflects our continued commitment to deliver a secure compliant solutions and clearly differentiates us in the marketplace.
Jin Kang: With the Atms now listed on the federal marketplace. Our solution is more visible and accessible to a broader range of federal agencies, expanding our pipeline of opportunities with.
Jin Kang: The second milestone was a new task order we were awarded under the Spiral 4 contract to provide managed mobility services to a combat support agency within the U.S. Department of Defense. As we mentioned previously, this award is a strong indicator of growing momentum under the Spiral 4 contract. Building on that, we're pleased to report that we received two additional task orders under the SPIRO-4 this quarter. Although combined value of these two awards is less than the initial task order, the increasing level of activity is a positive sign. With many Spiral 3 task orders set to expire at the end of this month, we expect a continued uptick in new awards under Spiral 4.
Jin Kang: The second milestone was a new task order, we were awarded under the spiral for a contract to provide managed mobility services to a combat support agency within the U S Department of defense.
Jin Kang: As we mentioned previously this award is a strong indicator of growing momentum under the spiral for contract.
Jin Kang: Building on that we are pleased to report that we received two additional task orders under the aspire for this quarter.
Jin Kang: Although combined value of these two awards.
Jin Kang: Less than the initial task order the increasing level of activity is a positive side.
Jin Kang: With many spiral III task order is set to expire at the end of this month, we expect a continued uptick in new awards under spiral for.
Jin Kang: Our team remains laser focused on capturing these opportunities, and we are confident we'll have more to report by the next earnings call. I'll turn things over to Jason shortly for a deeper dive into the sales pipeline, but I want to reiterate how encouraged we are by our year-to-date progress. Our device-as-a-service offerings is gaining real traction, Spire 4 momentum is building, and we are actively pursuing a strong pipeline of opportunities across multiple stages.
Jin Kang: Our team remains laser focused on capturing these opportunities and we are confident we'll have more to report by the next earnings call.
Speaker Change: Well I'll turn things over to Jason shortly for a deeper dive into the sales pipeline, but I want to reiterate how encouraged we are by our year to date progress.
Speaker Change: Our device as a service offerings is gaining real traction spire for momentum is building and we are actively pursuing a strong pipeline of opportunities across multiple stages to position ourselves for success, we plan to invest strategically, including new hires to ensure we are fully resourced to execute.
Jin Kang: To position ourselves for success, we plan to invest strategically, including new hires, to ensure we are fully resourced to execute as these opportunities materialize.
Jin Kang: As these opportunities materialize.
Jin Kang: Bob will provide more details on our planned capital investments shortly.
Jin Kang: Bob will provide more details on our planned capital investments shortly.
Jin Kang: Amid today's political dynamics and ongoing economic uncertainty, WidePoint remains aligned with federal government's current focus on reducing waste, fraud, and abuse. Our mission, helping agency lower costs while improving efficiency, is well matched with these priorities. We are actively working with key stakeholders to increase awareness of our solutions within the current administration, including efforts with those. While we remain cautiously optimistic, we see this alignment as a potential tailwind for our vision.
Jin Kang: Amid today's political dynamics that ongoing economic uncertainty why point remains aligned with federal government's current focus on reducing waste fraud and abuse.
Jin Kang: Our mission, helping agency lower costs, while improving efficiency is well matched with these priorities. We are actively working with key stakeholders to increase awareness of our solutions within the current administration, including efforts with those.
Jin Kang: While we remain cautiously optimistic we see this alignment as a potential tailwind for our business.
Jin Kang: It's worth noting that while some government agencies have faced budget constraints, others, such as DHS and DoD, have received increases with DoD securing its largest budget to date. WidePoint's value proposition has consistently resonated with these agencies, and we believe our offerings will remain essential, even in today's environment.
Jin Kang: It's worth noting that while some government agencies have base budget constraints, others, such as DHS and D. O D have received increases with Dod securing its largest budget to date Wi points value proposition has consistently resonated with these agencies and we believe our offerings will remain essential.
Jin Kang: Even in today's environment.
Jin Kang: Before we get into our guidance, I'd like to revisit our four strategic priorities we outlined last quarter. 1. Deepen our relationship with existing partners while building new ones. Our device-as-a-service initiative is a strong example of this action. to prepare for the upcoming DHS CWMS 3.0 recommendation. we continue to believe we're best positioned to win this contract again.
Jin Kang: Before we get into our guidance I'd like to revisit our four strategic priorities, we outlined last quarter.
Jin Kang: What deepen our relationship with existing partners, while building new ones.
Jin Kang: Our device as a service initiative is a strong example of this action to prepare for the upcoming DHS Cwm's three point or Recompete. We continue to believe we're best positioned to win this contract again.
Jin Kang: 3. Commercialize our new solutions, MobileAnchor and M365 Analyzer. and four, deliver positive earnings per share for 2025, which remains a key focus given our current momentum.
Jin Kang: Three commercialize our new solutions mobile acre and M 365 analyzer.
Jin Kang: And four deliver positive earnings per share for 2025, which remains a key focus given our current momentum.
Jin Kang: With that in mind, here is our guidance for 2025. Revenue, $154 million to $163 million. Adjusted EBITDA, $2.8 million to $3 million. Free cash flow, $2.4 million to $2.6 million. And as noted, our goal remains achieving positive earnings per share this year. We remain confident in our outlook and are fully committed to delivering long-term value for our shareholders.
Jin Kang: With that in mind here is our guidance for 2025 revenue $154 million to 163 million.
Jin Kang: Adjusted EBITDA $2 8 million to $3 million free cash flow $2 4 million to $2 6 million and as noted our goal remains achieving positive earnings per share this year.
Jin Kang: We remain confident in our outlook and are fully committed to delivering long term value for our shareholders.
Jin Kang: With that, I'll now turn the call over to Jason to walk you through our sales pipeline and upcoming opportunities.
Jin Kang: With that I'll now turn the call over to Jason to walk you through our sales pipeline and upcoming opportunities Jason.
Jason Holloway: Thanks, Jin, and good afternoon, everyone. Despite the ongoing economic uncertainty, our sales pipeline continues to remain robust with many exciting opportunities in development. As Jin noted, we were awarded two additional task orders under the Spiral 4 contract this quarter, a positive indicator of continued momentum across this contract vehicle. Beyond these recent wins, we currently have several task orders in development and have already submitted multiple responses to active RFQs. I remain confident that we'll have more task order announcements to share throughout the second and third quarters. To support this anticipated momentum, we are strategically expanding our internal team dedicated to the Spiral 4 initiative.
Jason: Thanks, Jen and good afternoon, everyone.
Jason: Despite the ongoing economic uncertainty our sales pipeline continues to remain robust with many exciting opportunities in development.
Jason: As Jim noted we were awarded two additional task orders under the spiral for contract this quarter a positive indicator of continued momentum across this contract vehicle.
Beyond these recent wins, we currently have several task orders in development and have already submitted multiple responses to active RF Skus I'll.
Jason: I remain confident that we'll have more task order announcements to share throughout the second and third quarters.
Jason: To support this anticipated momentum we are strategically expanding our internal team dedicated to this viral four initiatives.
Jason Holloway: These hires reflect our ongoing commitment and strong confidence in our ability to secure and execute meaningful work through this contract vehicle in the years ahead. We are also actively engaging with key political insiders to raise awareness of WidePoint's capabilities and service offerings, which are closely aligned with the priorities and mission of DOJ. These efforts are part of a broader strategy to position WidePoint as a valuable partner in advancing the current administration's objectives, which we began over a decade ago. We continue to remain cautiously optimistic that these relationships will generate positive momentum and strategic advantage for WidePoint over the long term.
Jason: These hires reflect our ongoing commitment and strong confidence in our ability to secure and execute meaningful work through this contract vehicle in the years ahead.
Jason: We are also actively engaging with key political insiders to raise awareness of white points capabilities and service offerings, which are closely aligned with the priorities and mission of dose.
Jason: These efforts are part of a broader strategy to position wide point as a valuable partner and advancing the current administration's objectives, which we began over a decade ago.
Jason: We continue to remain cautiously optimistic that these relationships will generate positive momentum and strategic advantage for wide point over the long term.
Jason Holloway: Shifting to our device-as-a-service program, we continue to see strong and sustained momentum as interest and engagement continue to grow. In preparation for this opportunity, similar to Spiral 4, We are strategically investing additional resources to ensure we are well positioned for success. This includes the establishment of the dedicated DAS facility and the onboarding of new personnel to support anticipated demand. In parallel, we are working closely with our strategic partners to actively advance the opportunities that are currently in our pipeline. Together, we are focused on converting these prospects into tangible outcomes and accelerating progress toward full program execution.
Jason: Shifting to our devices and service program, we continue to see strong and sustained momentum as the interest and engagement continue to grow in preparation for this opportunity similar to spiral core.
We are strategically investing additional resources to ensure we are well positioned for success.
Jason: This includes the establishment of the dedicated das facility and the Onboarding of new personnel to support anticipated demand in.
Jason: In parallel we are working closely with our strategic partners to actively advance the opportunities that are currently in our pipeline.
Jason: Together, we are focused on converting these prospects into tangible outcomes and accelerating progress towards full program execution.
Jason Holloway: Across our Smart City initiative, we are seeing several promising developments beginning to take shape. This opportunity originated from one of our key governmental partners. Our ongoing work in the Smart City Initiative with 22 Vets to deliver non-federal smart card credentials demonstrates strong alignment with broader global efforts. On this front, we have already been awarded a contract for a pilot project with a global energy conglomerate to provide credentialing support for their internal elevated privileged users. The synergies between our approach and the priorities of other countries and entities clearly show the relevance and scalability of our solution.
Jason: Across our smart city initiatives, we're seeing several promising developments beginning to take shape.
Jason: This opportunity originated from one of our key governmental partners.
Jason: Our ongoing work and the Smart City initiative with 22 bets to deliver Nonfederal smart card credentials demonstrates strong alignment with broader global efforts.
Jason: On this front, we have already been awarded a contract for a pilot project with a global energy conglomerate to provide credentialing support for their internal elevated privileged users.
Jason: The synergies between our approach and the priorities of other countries and entities clearly show the relevance and scalability of our solution.
Jason Holloway: While we are not in a position to disclose specific details at this time, we are encouraged by the direction of these discussions and anticipate having meaningful updates to share later this year.
Jason: While we are not in a position to disclose specific details at this time, we are encouraged by the direction of these discussions and anticipate having meaningful updates to share later this year.
Jason Holloway: Another major initiative on the horizon for WidePoint is an upcoming partnership opportunity with a prominent satellite company in support of a global initiative. This effort represents a multifaceted engagement that leverages several of our key offerings. At the core of this opportunity is our Intelligent Technology Management System, or ITMS, which will provide advanced capabilities for managing deployed satellite-related assets, while also integrating our PKI-based Identity and Access Management. We are actively working alongside our Chief Strategist of Government Efficiency and Cybersecurity to cultivate new strategic partnerships to bring this initiative to fruition. I look forward to providing further.
Jason: Another major initiative on the horizon for wide point is an upcoming partnership opportunity with a prominent satellite company in support of a global initiative.
Jason: This effort represents a multifaceted engagement that leverages several of our key offerings at the core of this opportunity is our intelligent technology management system, or Tms, which will provide advanced capabilities for managing deployed satellite related assets.
Jason: While also integrating our PKI based identity and access management.
Jason: We are actively working alongside our chief strategist, a government efficiency and cyber security to cultivate new strategic partnerships to bring this initiative to fruition.
Jason: I look forward to providing further.
Jason Holloway: substantive updates on this scalable opportunity in the months ahead.
Jason: Substantive updates on this scalable opportunity in the months ahead.
Jason Holloway: As we highlighted during last quarter's call, leveraging strategic partnerships has been a core priority for us in 2025. The opportunities I've mentioned thus far represent just a portion of the broader potential we are seeing across the board. WidePoint's strong reputation, built on a track record of successful execution and trusted relationships with many of our valued clients, continues to open doors for new engagements. This demonstrated credibility continues to encourage our partners to pursue additional collaborative ventures with us. This is precisely why we've made it a priority to deepen our engagement with existing partners while also cultivating new partnerships that can further expand our reach and output.
Jason: As we highlighted during last quarter's call leveraging strategic partnerships has been a core priority for us in 2025.
Jason: The opportunities Ive mentioned, thus far represent just a portion of the broader potential we are seeing across the board Wi <unk> strong reputation built on a track record of successful execution and trusted relationships with many of our valued clients continues to open doors for new engagements.
Jason: This demonstrated credibility continues to encourage our partners to pursue additional collaborative ventures with us.
Jason: This is precisely why we've made it a priority to deepen our engagement with existing partners. While also cultivating new partnerships that can further expand our reach and output. These partnerships remain critical to our long term growth strategy and our ability to deliver innovative solutions that.
Jason Holloway: These partnerships remain critical to our long term growth strategy and our ability to deliver innovative solutions at scale.
Jason: Oh yeah.
Jason Holloway: WidePoint will continue to invest in our sales and marketing capabilities to build on the measurable success we've achieved since making this a strategic focus. These investments have proven to be instrumental in driving visibility, engagement, and growth across our core markets.
Jason: <unk> point, we'll continue to invest in our sales and marketing capabilities to build on the measurable success, we've achieved since making this a strategic focus.
Jason: These investments have proven to be instrumental in driving visibility engagement and growth across our core markets.
Jason Holloway: Looking ahead, we see a bright future filled with compelling opportunities on the horizon. Strategic partnerships will continue to play a central role in our forward momentum, and we are already beginning to see meaningful early returns from these collaborative efforts. As these initiatives mature, I look forward to sharing more substantive updates in the months ahead.
Jason: Looking ahead, we see a bright future filled with compelling opportunities on the horizon strategic partnerships will continue to play a central role in our forward momentum and we are already beginning to see meaningful early returns from these collaborative efforts.
Jason: As these initiatives mature I look forward to sharing more substantive updates in the months ahead with that I will now turn the call over to Bob to discuss our financial results Bob.
Robert George: With that, I will now turn the call over to Bob to discuss our financial results. Thanks, Jason, and thanks to everyone for joining us today. Before I share the details of our financial results for the first quarter, I will add some color to the out-of-period adjustment Jin mentioned earlier. During the quarter ended March 31st, 2025, we recorded an out-of-period adjustment related to a correction in our revenue accounting for some of our reselling contracts. Specifically, the adjustment resulted in a decrease to revenues of $2.7 million and a corresponding decrease to cost of revenues of $2.5 million.
Bob: Thanks, Jason and thanks to everyone for joining us today before I share the details of our financial results for the first quarter I'll add some color to the out of period adjustment Jim mentioned earlier.
Bob: During the quarter ended March 31, 2025, we recorded an out of period adjustment related to a correction and a revenue accounting for some of our reselling contracts.
Bob: Specifically the adjustment resulted in a decrease to revenues of $2 7 million.
Bob: A corresponding decrease to cost of revenues of $2 5 million. The net impact of gross profit was modest at 233000.
Robert George: The net impact to gross profit was modest at $233,000. The error stemmed from the timing of revenue recognition under the requirements of Accounting Standards Codification No. 606, or ASC-606, for certain reselling transactions that were incorrectly recognized as revenue in a prior period. Upon discovery, we conducted a comprehensive quantitative and qualitative materiality analysis in accordance with SEC guidance. and concluded that the error was not material to any previously issued interim or annual financial statement. Further, we do not expect this correction to be material to our full year 25 results either. It's important to note that this adjustment does not reflect any change in business fundamentals, cash flows, or contract performance.
Bob: The air stemmed from the timing of revenue recognition under the requirements of accounting standards codification number 606, or ASC 606, where certain refund transactions that were incorrectly recognized as revenue in the prior period.
Bob: Upon discovery, we conducted a comprehensive quantitative and qualitative materiality analysis in accordance with SEC guidance in.
Bob: And concluded that the error was not material to any previously issued interim or annual financial statements.
Bob: Further we do not expect this correction to be material to our full year 2005 results either.
Bob: It is important to note that this adjustment does not reflect any change in business fundamentals cash flows well contract performance.
Robert George: We remain confident in the integrity of our revenue recognition processes and have implemented additional controls to prevent future recurrences.
Bob: We remain confident in the integrity of our revenue recognition processes.
Bob: And have implemented additional controls to prevent future occurrences.
Robert George: With that, I'll now move on to the broader financial performance for the quarter. Total revenue for the quarter was $34.2 million, remaining in line compared to the same quarter of last year. I'll now provide a further breakdown of our first quarter revenue. Our carrier services revenue for the quarter was $22.4 million, an increase of $3 million compared to the same period in 2024. The increase is a result of growth in the number of lines under management for our DHS customers. Our manned services fees for the quarter were $9.3 million, an increase of $564,000 compared to the same period last year.
Bob: With that I'll now move on to the broader financial performance for the quarter.
Bob: Total revenue for the quarter was $34 2 million remaining in line compared to the same quarter of last year.
Bob: I will provide a further breakdown of our first quarter revenue our carrier services revenue for the quarter was $22 4 million, an increase of $3 million compared to the same period in 2024. The increase is a result of growth in the number of lives under management, where our DHS customer.
Bob: Our managed services fees for the quarter were $9 3 million an increase of 564000 <unk>.
Bob: Compared to the same period last year.
Robert George: The increase was primarily due to a new federal end customer, which began in September 2024. Billable services fees for the quarter were $1.8 million, an increase of $591,000 compared with the same period in 2024. Reselling and other services in the first quarter was $789,000, a decrease of $4.2 million in the same period last year. $2.7 million of the decrease was due to the out-of-period adjustment. and the remainder of that decrease was due to the new accounting treatment of certain reselling transactions I mentioned earlier. Our federal contract backlog as of March 31st, 2025 stood at $268 million.
Bob: The increase was primarily due to a new federal end customer, which began in September 2024.
Bob: Billable services fees for the quarter were $1 8 million, an increase of 591000 compared with the same period in 2024.
Bob: Reselling and other services in the first quarter was 789000, a decrease of $4 2 million in the same period last year.
Bob: <unk> was $7 million of the decrease was due to the out of period adjustment.
Bob: And the remainder of that decrease was due to the new accounting treatment of certain reselling transactions I mentioned earlier.
Bob: Our contract backlog as of March 31, 2025 stood at $268 million.
Robert George: Gross profit for the first quarter was $4.8 million, or 14% of revenues, compared to $4.7 million, or 14% of revenues in the same period in 2024. The more meaningful metric of gross profit percentage excluding carrier services increased to 40% in the first quarter, compared to 32% in the same period last year. The increase was driven by lower reselling revenues, which have relatively lower gross margins. Our gross profit percentage will vary from period to period based on our revenue. Sales and marketing expense for the first quarter was $600,000 or 2% of revenues and remained relatively constant with the same period last year.
Bob: Gross profit for the first quarter was $4 8 million or 14% of revenues compared to $4 7 million or 14% of revenues in the same period in 2020 core more meaningful metric of gross profit percentage, excluding carrier services increased to 40% in the first quarter compared to 32% in the St.
Bob: Last year, the increase was driven by lower <unk> revenues, which have relatively lower gross margins. Our gross profit percentage will vary from period to period based on our revenue mix.
Bob: Sales and marketing expense for the first quarter was 600000 or 2% of revenues remained relatively constant with the same period last year.
Robert George: We expect to see further dollar increases here as we continue to invest in sales and marketing efforts, so we expect sales and marketing to be lower as a percentage of revenue in the future. General administrative expenses in the first quarter were $4.7 million, or 13% of revenues, compared to $4.4 million, or 13% of revenues in the same period last year. The dollar increase primarily relates to inflationary pressures, which were partially offset by less share based compensation expense in the quarter. We expect general administrative expenses to increase as our business grows, but remain constant or lower as a percentage of revenue.
Bob: To see further dollar increases here as we continue to invest in sales and marketing efforts. So we expect sales and marketing to be lower as a percentage of revenue in the future.
Bob: General and administrative expenses in the first quarter were $4 7 million or 13% of revenues compared to $4 4 million or 13% of revenues in the same period last year.
Bob: The dollar increase primarily relates to inflationary pressures, which were partially offset by less share based compensation expense in the quarter.
Bob: We expect general and administrative expenses to increase as our business grows but remain constant or lower as a percentage of revenue.
Robert George: Net loss for the first quarter was $724,000, or a loss of $0.08 per share, compared to a net loss of $653,000, or a loss of $0.07 per share for the same period last year. Adjusted EBITDA, a non-gap measure, for the first quarter was $92,400. And free cash flow for the quarter, which we define as adjusted EBITDA minus capital investments, was $65,700, representing our 31st consecutive quarter of adjusted EBITDA positive and 6th consecutive quarter of positive free cash.
Bob: Net loss for the first quarter was 724000 or a loss of <unk> <unk> per share.
Bob: Compared to a net loss of 633000 or a loss of seven cents per share for the same period last year.
Bob: Adjusted EBITDA, a non-GAAP measure for the first quarter was 92400 and free cash flow for the quarter, which we define as adjusted EBITDA minus capital investments with 65700, representing our 30 <unk> consecutive quarter.
Adjusted EBITDA positive.
Bob: Sixth consecutive quarter of positive free cash flow.
Robert George: In Northern CapEx, we plan to increase our capital investments by approximately $500,000 for the year to support strategic priorities. This includes funding for our device in the service program, which includes the lease of our new dedicated facility and associated infrastructure. A phased technical refresh of portions of WidePoint's IT environment to strengthen our cybersecurity posture, and lastly, we are allocating capital to enhance our product development environment to ensure continued innovation. Moving to the balance sheet, we ended the quarter with $3.7 million in cash. The difference in our cash balance compared to year-end is primarily due to an issue with one of our major customers who has presented administrative challenges in improving our invoice.
Bob: A note on Capex, we plan to increase our capital investments by approximately 500000 per year to support strategic priorities.
Bob: This includes funding for our device as a service program, which includes the lease of our new dedicated facility and associated infrastructure.
Bob: <unk> technical refresh of portions of <unk> environment.
Bob: Our cyber security posture, and lastly, we are allocating capital to enhance our product development environment to ensure continued innovation.
Bob: Moving to the balance sheet, we ended the quarter with $3 7 million in cash the difference in our cash balance compared to year end is primarily due to an issue with one of our major customers, who have presented administrative challenges and improving our invoices.
Robert George: We're continuing to work through the issue to allow us to build timelier and increase our cash generating operations, but it could be a couple of quarters to reach resolution. We also have additional liquidity options available with our revolving line of credit facility, which provides us 4 million of potential borrowing capacity, although we do not anticipate having to rely on this facility.
Bob: We're continuing to work through the issue to allow us to build timelier and increase our cash generated from operations, but it could be a couple of quarters to reach resolution.
Bob: We also have additional liquidity options available with our revolving line of credit facility, which provides US 4 million potential borrowing capacity, although we do not anticipate having to rely on this facility.
Robert George: This completes my financial summary.
Bob: This completes my financial summary for a more detailed analysis of our financial results. Please refer to our Form 10-Q, which was filed prior to this call.
Robert George: For a more detailed analysis of our financial results, please refer to our Form 10-Q, which was filed prior to this call.
Operator: We will now take questions from our analysts and major shareholders.
Bob: We will now take questions from our analysts and major shareholders. Operator will you. Please open the line for questions.
Operator: Operator, will you please open the line for questions? Certainly. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset, if listening on a speakerphone, to provide optimum sound quality.
Bob: Certainly 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 also are posing a question here. Please pick up your handset. If this thing on a speaker phone to provide optimum sound party. Please hold just a few moments while we poll for any questions.
Operator: Please hold just a few moments while we poll for any questions.
Barry Sine: Your first question is coming from Barry Sine with Litchfield Hills Research. Please pose your question, your line. Good afternoon everybody.
Speaker Change: Your first question is coming from Barry Sine with Litchfield Hills Research. Please pose your question your line is live.
Speaker Change: Good afternoon everybody.
Robert George: First question I guess for Bob on that accounting adjustment. So am I correct that if we look at the reported numbers for the quarter we should gross up revenue by 2.7, gross up EBITDA by about 200k to understand what you actually did in the quarter? Is that fair? That's correct, yeah. And because this is an out-of-period adjustment, I'm assuming you've earned the money, but you recognized it in the wrong period. So it was recognized last year, and you're just reversing it in the first quarter, but you're not restating last year. Is that correct? That's correct.
Speaker Change: First of all I should I guess for Bob on that accounting adjustment. So am I correct that if I, we look at the reported numbers for the quarter, we should gross revenue by $2 seven gross up EBITDA by about 200 K to understand.
Speaker Change: I understand what you actually did in the quarter or is that fair.
Speaker Change: That's correct yes.
Speaker Change: And because this is a out of period adjustment.
Speaker Change: Assuming.
Speaker Change: You've earned the money, but you recognize it in the wrong period. So so it was recognized last year and you just were reversing it.
Speaker Change: In the first quarter, but you're not restating last year is that is that correct.
Speaker Change: Correct.
Robert George: Yep. And will that have any impact on results for the rest of this year? Does that revenue show back up in the rest of this year? No, the adjustment, out-of-period adjustment is only in this period. The change in how we accounted for some of our reselling contracts will have an effect of recognizing revenue over the full term, which is 12 months. So there's a slight degrading of revenue in 2025 based on the fact that we won't be able to get all of that revenue in 2025. And then it'll also impact the growth rate for this year, because last year the revenue was effectively too high.
Speaker Change: Yes.
Speaker Change: And will that have any impact on our results for the rest of this year does that read anything show back up in the rest of it no.
Speaker Change: The adjust with out of period adjustment is only in this period the change in how we accounted for some of our re signed contracts will heavily affect of.
Speaker Change: Recognizing revenue over the full term, which is 12 months, so theres a slight.
Speaker Change: Degrading of revenue.
Speaker Change: In 2025 based on the fact that we won't be able to get all of that revenue in 2025.
Speaker Change: And then it'll also impact the growth rate for this year because last year. The revenue was effectively to why this year, you're lowering it. So if I just if I just look at the growth rate in GAAP revenue from last year or whenever you report. This year that number is gonna be artificially low because of the adjustment is that correct.
Robert George: This year you're lowering it, so if I just look at the growth rates and gap revenue from last year, or whenever you report this year, that number's going to be artificially low because of the adjustment. Is that correct? Slightly, yeah. There's a spillover effect from last year's correction, and then of course there's this push-out, I'll call it a push-out effect, of accounting for it the new way. Yeah, but it will be slightly lower.
Speaker Change: Slightly yes.
Speaker Change: There's a spillover effect from last year's correction and then of course, there is this push out I'll call. It a push out effect of accounting for its a new way, but it will be slightly lower.
Barry Sine: And then, shifting gears, in terms of your major contracts, so CWMS is going well. The big news there, obviously, is going to be the re-compete. You're very optimistic about that.
Speaker Change: And then shifting gears in terms of your major contracts.
Speaker Change: CDW M S.
Speaker Change: Well and the Big news there, obviously is going to be the recompete, you're very optimistic about that.
Robert George: Any news on the timeline on the re-compete? Yeah, thank you for that, you know, Barry, it's always a pleasure to speak with you. We can't, we can't say for sure when the recompete will happen, but we did receive and responded to an RFI in July of last year, as you know, the CWMS period of performance ends at the end of November of this year. So we think that the recompete will be conducted this year with the award to be made prior to the expiration of the current contract in November. That's kind of what we're, you know, seeing.
Speaker Change: Any news on the timeline on the Recompete.
Speaker Change: Yes, thank you for that.
Speaker Change: There is always a pleasure to speak with you.
Speaker Change: <unk>.
Speaker Change: We can't we can't say for sure when the Recompete will happen.
Speaker Change: We did receive and respond to an RFID in July of last year as you know.
Speaker Change: The CW M. S period of performance ends at the end of November of this year.
Speaker Change: So we think that the Recompete and will be conducted this year with the award to be made prior to the expiration of the current contract in November that's kind of what we're seeing.
Robert George: And we still strongly believe that we are in the best position to rewind this contract because our past performance, we received, you know, high marks on all of our CPARS rating, which is the Contractor's Performance Assessment Reporting System. Our capabilities and subject matter expertise, our processes and procedures that have been customized to meet DHS's requirements, DHS workflows have all been, you know, configured into our system, so, you know, there isn't, you know, any rework there that needs to happen. You know, our systems are integrated in with all of their systems, so in order to replicate all of that, that will be very difficult to do and expensive.
Speaker Change: And we still strongly believe that we are in the best position to re win this contract because our past performance. We received high marks on all of our <unk> rating, which is the contractor performance assessment reporting system.
Speaker Change: Our capabilities and subject matter expertise, our processes and procedures that had been customized to meet the DHS as requirements DHS workflows have all been configured into our system. So you know there isn't any rework there that needs to happen.
Speaker Change: Our systems are integrated in with all of their system. So in order to replicate all of that that will be very difficult to do and expensive and you know of course our authorization.
Robert George: And you know, of course, our, you know, authorization to operate and our FedRAMP authorized status now that ensures that we meet all of the federal cybersecurity requirements for data protection. So we feel, you know, pretty strong. We feel good, but, you know, this is all hands on deck and we're not resting on our laurels. We're going to continue to, you know, execute on our contracts and continue to get good ratings on our CPAR rating. And if they fail to get the recompete done by November 2025, they have multiple ways to continue to use you and pay you.
Speaker Change: Authorization to operate in our fed ramp authorized status now.
Speaker Change: That ensures that we meet all of the federal cyber security requirements for data protection. So we feel pretty strong and we feel good but you know this is all hands on deck and we're not resting on our laurels, we're going to continue to execute.
Speaker Change: On our contracts and continue to get good ratings on our <unk> ratings.
Speaker Change: And if.
Speaker Change: They fail to get the Recompete done by November 2025, and they have multiple ways to continue to use you and tell you and I think they've use those in the past so investors shouldn't expect that the revenue just drops off on that correct that is absolutely correct I mean right now.
Robert George: And I think they've used those in the past. So investors shouldn't expect that the revenue just drops off on that, correct? That is absolutely correct. I mean, right now, as it stands, we have contracts that go out until, task orders that go out until end of 2026, November of 2026. So even if they fail to make an award this year, we have contracts that go out 12 months from the end of the current contract, which is November 2026. They could also extend the contract for another period of time, another 12 months, another 24 months. They've done that before.
Speaker Change: As it stands.
Speaker Change: We have contracts that go out until task orders that go out until end of 2026 November of 2026, so even if they failed to make an award this year.
Speaker Change: We have contracts that go out 12 months from the end of the current contract which is November 2026, they could also extend the contract.
Speaker Change: For another period of time, another 12 months, another 24 months, they've done that before and they can also add money to the contract cap. So that they don't run out of money under the contract. So there are many ways to do this.
Robert George: And they can also add money to the contract cap so that they don't run out of money under the contract. So there are many ways to do this. So we won't fall off a cliff or the revenues won't fall off a cliff because they didn't award the contract when the contract ends in November.
Speaker Change: So you know we won't fall off a cliff for the revenues won't fall off a cliff because of the because they didnt reward award the contract win.
Speaker Change: When the contract ends in November of this year.
Robert George: And on Spiral 4, there's a lot of moving pieces, all good. But I'm having a hard time keeping my scorecard straight. So is that your second largest contract? And what has been the total amount of orders that you or task orders you've received to date on Spiral? Spiral 4 has a $2.7 billion contract value. I'm not saying that we're going to capture all of it, but that by contract cap is the largest that we've won. But DHS is still the lion's share of our revenues. In terms of task orders that we captured under Spiral 4 is that we announced the first one, which was a $2.5 million base year contract with nine options, which ends up a total of 10 years with a total contract value of roughly $25 million.
Speaker Change: And on spiral for Theres, a lot of moving pieces all good but.
Speaker Change: Having a hard time, keeping my scorecard straight so is that your second largest contract and what what has been the total amount of orders that yeah or task orders you've received to date on spiral for.
Speaker Change: Sure.
Speaker Change: <unk> has a.
Speaker Change: 2.71 billion dollar contract.
Speaker Change: Value.
Speaker Change: I'm, not saying that we're going to capture all of it but that by contract. The cap is the largest that we've won.
Speaker Change: But DHS is still you know the lion's share of our revenues in terms of you know task orders that we captured under spiral for US is that we announced the first one which was a $2 5 million.
Speaker Change: Base year contract with nine options, which ends up a total of 10 years.
Speaker Change: With a total contract value of roughly 250.
Speaker Change: $25 million and then we want to additional contracts.
Robert George: And then we won two additional contracts with modest value. And both of these if all of the options are exercised would amount to something like $500K for a contract period of roughly five years. And so these are relatively small and modest task orders. But the good news is that it shows our supposition that our capabilities and our product sets are differentiated from our competitors who are all carriers. And so we feel pretty good. And the contracts are Spiral 3 task orders are expiring. A lot of them are expiring in May and June. So we should see more activities as we head into June.
Speaker Change: With you know modest value and and each both of these contracts totaled.
Speaker Change: If all of the options are exercised would amount to something like 500 K a.
Speaker Change: For a contract period of roughly five years and so these are you know relatively small and modest task orders, but the good news is is that it shows you know our.
Speaker Change: Our supposition that our our capabilities and our product sets are a differentiator from our competitors, who are all carriers and so we feel pretty good and.
Speaker Change: The contracts are a spiral III task orders are expiring a lot of them are expiring at the in May and June so we should see more activities.
Speaker Change: As we head into June and we already have several RF queues responses that we've responded to.
Robert George: And we already have several RFQs responses that we've responded to.
Robert George: So hopefully we'll be able to announce more awards in the coming months. And just my last question, just to clarify on one of the numbers you gave out there, Jin, 2.7 billion value. I think you were one of, what, six winners for that contract in total. So if anything, that 2.7 would be divvied up among all the winners of that contract platform? You know, yes. I mean, if you just looked across it, but it's hard to say who's going to get what task orders underneath the contract. So at the end of the contract period, there will be a sort of a tally and they'll announce how much of the contract was captured by what contractor.
Speaker Change: So hopefully we'll be able to announce more awards in the coming months.
Speaker Change: And just my last question just to clarify on one of the numbers you gave out their gen.
Speaker Change: $2 7 billion in value I think you were one of one six.
Speaker Change: Winners for that contract in total so if anything that $2 seven would be divvied up among all the winners of that contract platform.
Speaker Change: Yes, I mean, if you just looked across it but it's just.
Speaker Change: It's hard to say who's going to get what task orders underneath the contract.
Speaker Change: So at the end of the contract period, there'll be a sort of a tally and they'll announce how much of the contract was captured by what.
Speaker Change: Contract or so hopefully were you know on the top of that list, but we can't say right now whether you are dividing that equally with up.
Barry Sine: So hopefully we're on the top of that list, but we can't say right now whether you would divide that equally with all of the investors, I mean all of the winners. Well, $2.7 billion, even if you're on the bottom of the list, that's pretty darn good. Yes, I agree. I agree.
Speaker Change: With all of the investment I mean, all of the winners.
Speaker Change: Well the $2 7 billion, even if you're on the bottom a list that's pretty darn good.
Speaker Change: Yes, I agree I agree.
Barry Sine: All right. Thank you very much. Thank you, Barry.
Speaker Change: Thank you very much thank.
Barry: Thank you Barry.
Scott Buck: Your next question is coming from Scott Buck with HC Rainwright. Please put your question, your line. Hi, good afternoon, guys. Thanks for taking my questions and apologies if I missed this earlier. I've been jumping back and forth between calls.
Speaker Change: Your next question is coming from Scott Buck with H C. Wainwright. Please pose your question your line of sight.
Scott Buck: Hi, Good afternoon, guys. Thanks for taking my questions and apologies if I missed this earlier I've been jumping back and forth between calls.
Speaker Change: Yeah.
Jin Kang: Jin, the difference between the high end and the low end of the guidance range for the year, does that just come down to timing? And are there, you know, some additional Spiral 4 task orders in the guidance? I would say it is definitely on the timing issue because we have, you know, our sales pipeline and then we have, you know, P wins. Certainly, there's the potential for us to do better like we did in 2024. You know, of course, the reverse is true, but we're pretty confident in the guidance that we're, you know, providing that we will be within the range and potentially, you know, do better.
Speaker Change: Jim the difference between the high end and the low end of the guidance range for the year does that just come down to timing.
Speaker Change: And our and are there some additional spiral for task orders in the guide.
I would say it is definitely on the timing issue because we have you know our sales pipeline and then we have P wins, certainly there's a potential for us to do better like we did in 2020 for you know of course, the the reverse is true, but we're we're pretty confident in the guidance.
Speaker Change: Were providing that we will be within the range and potentially.
Jin Kang: We hope to do better, but we don't want to mislead our, you know, investors by putting some, you know, a large target up. Yeah, no, that makes sense.
Speaker Change: Do better we hope to do better, but we don't want to mislead our investors by putting some.
Speaker Change: A large target out there.
Speaker Change: Yes, no that makes sense and then I wanted to ask about the <unk>.
Jin Kang: And then I wanted to ask about the partnership effort, you know, she brought it up on the fourth quarter call, and it's, you know, a priority point, I guess, again, on this call. Can you help me understand how long it takes to kind of put those partnerships together and maybe timing around, you know, when some of the information exchange actually happens? Just trying to get a sense of when, you know, when we could see the benefits of these actions. Yeah, so a lot of the strategic relationship, we've already consummated with our strategic partners and systems integrators, partners.
Speaker Change: The partnership effort.
Speaker Change: You brought it up on the fourth quarter call in it.
Speaker Change: A priority point I guess I get in on this call can you help me understand how long it takes to get them.
Speaker Change: Put those partnerships together and maybe timing around when some of the information exchange actually happens just trying to get a sense of when you know when we could see the benefits of these actions.
Speaker Change: Yes, so a lot of the strategic relationship we've already consummated with our strategic partners and systems integrators partners.
Jin Kang: I think the big thing is, is that we are going after, you know, large opportunities with these partners. You may recall that we had partnered with CDW to win the decennial census for 2020 and we're probably going to be doing the same thing in 2030. And so, very similar to those type of relationship, we have already consummated, you know, relationship with a partnership with these large integrators. And we have a number of material contracts in our sales pipeline and specifically in the device as a service. And these are fairly large opportunities and depending on, you know, when those opportunities happen could, you know, push our Our financial performance either higher.
Speaker Change: I think the big thing is is that we are going after large opportunities with these partners.
Speaker Change: May recall that we had partnered with CDW to win the decennial census for 2020, and we're probably going to be doing the same thing in 2030.
Speaker Change: And so very similar to those type of relationship we have already consummated a relationship with a partnership with these large integrators and we have a number of material contracts in our sales pipeline.
Speaker Change: And specifically in the device as a service and these are fairly large opportunities and depending on when those opportunities happen.
Speaker Change: Push our.
Speaker Change: Our financial performance either higher.
Jin Kang: The longer it takes us to close those deals, you know, will, you know, make our guidance, our performance deteriorate. Great. I appreciate the color there.
Speaker Change: The longer it takes us to close those deals.
Speaker Change: Make our guidance our performance deteriorate.
Speaker Change: Great appreciate the color there and then obviously you guys got guys have a tremendous amount of momentum on the government side, but just kind of curious if I get a little more color on where the opportunities are where the commercial opportunities are.
Jin Kang: And then, you know, obviously you guys have a tremendous amount of momentum on the government side, but just kind of curious if I could get a little more color on where the opportunities are, where the commercial opportunities are, and, you know, maybe what kind of resources you have to allocate towards those opportunities. Sure. There's a lot of opportunities on the commercial side. For the device as a service, where we're making some capital investments in terms of our device as a service and the warehouse and the logistics centers that we are setting up, there's some material opportunities there, and they are all commercial opportunities.
Speaker Change: And you know, maybe what kind of resources you have to allocate towards those opportunities.
Speaker Change: Sure there's a lot of opportunities on the commercial side for the device as a service, where we're making some capital investments in terms of our device as a service in the warehouse and the logistics centers that we are setting up there is some material opportunities there and they are all commercial opportunities.
Jin Kang: And then, of course, you heard Jason talk a little bit about the opportunities we have in the direct-to-consumer and in the mobility and the satellite sectors. And those are all opportunities in the commercial side. And I would say the opportunities that we currently have in the sales pipeline, a majority of it is our commercial opportunities that we're chasing. Perfect, that's helpful. Appreciate the added color, guys. Thank you very much.
Speaker Change: <unk>.
Speaker Change: And then of course, you heard Jason talk a little bit about.
Speaker Change: The opportunities we have in the direct to consumer and in the mobility satellite sectors and those are all opportunities in the commercial side.
Speaker Change: And I would say the opportunities that we currently have in the sales pipeline.
Speaker Change: A majority of it is our commercial opportunities that are that we're chasing.
Speaker Change: Perfect. That's helpful. I appreciate the added color guys. Thank you very much.
Scott Buck: Thank you, Scott.
Scott Buck: Thank you Scott.
Operator: At this time, this concludes our question and answer session.
Speaker Change: At this time. This concludes our question and answer session. If your question was not taken please contact white plains IR team at <unk>.
Operator: If your question was not taken, please contact WidePoint's IR team at wyy.gateway-grp.com.
Speaker Change: W Y Y Gateway Dash TRP Dot com I would now like to turn the call back over to Mr. Jin Kang for his closing remarks.
Jin Kang: 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 that we did not address today, please contact our IR team. You can find their full contact information at the bottom of today's earnings release.
Speaker Change: Thank you operator, we appreciate everyone, taking the time to join US today as the operator mentioned if there were any questions that we did not address today. Please contact our IR team you can find their full contact information at the bottom of today's earnings release. Thank you again and have a great evening.
Jin Kang: Thank you again, and have a great evening. Thank you.
Thank you. This concludes today's conference call you may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
Operator: This concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.