Attached files
file | filename |
---|---|
EX-99.2 - PRESS RELEASE - WIDEPOINT CORP | wyy_ex992.htm |
8-K - CURRENT REPORT - WIDEPOINT CORP | wyy_8k.htm |
Exhibit
99.1
WidePoint Corporation
Third Quarter 2018 Earnings Conference Call
November 14, 2018
WidePoint
Corporation – Third Quarter 2018 Earnings Conference Call,
November 14, 2018
CORPORATE PARTICIPANTS
Jin Kang, President and Chief Executive
Officer
Jason Holloway,
Chief Sales and
Marketing Officer
Kito Mussa, Chief Financial
Officer
CONFERENCE CALL PARTICIPANTS
Mike Crawford, B. Riley
FBR
PRESENTATION
Operator:
Good afternoon. Welcome to WidePoint's Third Quarter 2018 Earnings
Conference Call. My name is Kevin, and I'll be your Operator for
today's call.
Joining us for today's presentation is WidePoint's President and
CEO, Jin Kang, Chief Sales and Marketing Officer, Jason Holloway;
and CFO, Kito Mussa. Following their remarks we'll open up the call
for questions from WidePoint's publishing analysts and major
Institutional Investors. If your questions were not taken today,
and you'd like additional information, please contact WidePoint's
Investor Relation’s team at WYY@liolios.com
Before we begin the call, I'd like to provide WidePoint's 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 from those anticipated. These risks
and uncertainties are described in the Company's Form 10-K filed
with the Securities and Exchange Commission.
Finally, I'd 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, www.widepoint.com.
Now I would like to turn the conference over to WidePoint's
President and CEO, Mr. Jin Kang. Sir, please proceed.
Jin Kang:
Thank you, Operator, and good afternoon to you all. Thank you all
for joining us today to review our financial results for the third
quarter of 2018.
ViaVid has made considerable
efforts to provide an accurate transcription. There may be material
errors, omissions, or inaccuracies in the reporting of the
substance of the conference call. This transcript is being made
available for information purposes only.
1-888-562-0262 1-604-929-1352
www.viavid.com
1
WidePoint
Corporation – Third Quarter 2018 Earnings Conference Call,
November 14, 2018
The third quarter was another solid quarter for us at WidePoint.
From a financial perspective, the quarter was highlighted by our
fifth consecutive quarter of positive Adjusted EBITDA, which
totaled a quarterly record of $561,000. This achievement was driven
by a 15% year-over-year increase in revenue to $21.3 million.
Additionally, our GAAP net loss narrowed by more than $200,000 to
$110,000 in Q3 of this year.
The success we achieved in the third quarter is a direct result of
the effective execution of our overall strategy. To fully
understand why that is the case and to gain some insight into what
we believe the future looks like for WidePoint, it is helpful to
understand where we come from. So, with that in mind, I'd like to
give just a brief high-level overview of our recent history to
provide some more context for the quarter.
Since I became CEO in July of 2017, the rest of the management team
and I have been working diligently to improve and scale this
Company. Initially, our mission was to stabilize the business. As
part of that focus, we needed to implement changes to make our
operations run smoother and more efficiently. To that end, we
initiated several internal changes to optimize the business,
including restructuring our differentiated products and
subsidiaries under one umbrella, Trusted Mobility Management, or as
we like to call it, TM2. For those newer to our Company, TM2
consists of our three core service offerings: Telecommunication
Lifecycle Management, Identity Management and Bill Presentment
& Analytics.
This type of robust end-to-end platform is truly unique in the
telecommunications space. In fact, WidePoint is the only Trusted
Mobility Management provider that offers all three solutions. It's
important to keep these differentiators in mind because they are
the foundation of this Company and among our greatest competitive
advantages today. With the necessary structural changes in place,
we shifted our focus to growth and efficiency.
As I have discussed on prior calls, the focus in 2018 has been less
on stability and more on growth. We've been simultaneously focused
on driving revenue growth while continuing to streamline our
business to improve efficiency as we strive towards achieving
consistent GAAP profitability. However, this is a process that
takes time. That being said, the work we've done over the past year
has clearly been effective.
We believe the results we produced this year and particularly this
quarter are strong evidence that our two-pronged approach has been
and continue to be effective. Much of the success we've had in
growing the topline this quarter is a result of large new contracts
and recompetes we recently secured. Jason will come in, in a few
minutes to discuss specifics of these new contracts as well as
provide general updates to our sales and marketing strategy. But I
would like to take a moment to briefly highlight the major
ones.
First of all, we were very pleased to announce in early September
that we secured the much-anticipated contract with the U.S. Coast
Guard. This is a 15-month contract, of $12 million that we
anticipate recognizing over the next several quarters. On top of
this, we also recently announced nearly $20 million of additional
contracts that we expect to recognize over the next 12 months. It
is these large contracts, which consist of both new business and
successful recompetes that have been the growth drivers behind our
topline improvement and bolster our outlook for growth not only in
2018 but in 2019 as well.
Our bottom line has improved for many of the same reasons I have
discussed on previous calls. Internally, we continue to focus on
cutting extraneous costs, streamlining personnel, eliminating low
margin or unsustainable contracts from past years and generally
allocating all resources so that they most effectively support our
TM2 strategy.
Externally, we've been pursuing the most efficient sales channel we
can find, which includes both direct and partnering with large
systems integrators and global technology companies to more rapidly
expand WidePoint's footprint. We have an effective strategy in
place, and we're executing on it efficiently. I will return in a
few moments to provide updates on our outlook for the rest of the
year.
ViaVid has made considerable
efforts to provide an accurate transcription. There may be material
errors, omissions, or inaccuracies in the reporting of the
substance of the conference call. This transcript is being made
available for information purposes only.
1-888-562-0262 1-604-929-1352
www.viavid.com
2
WidePoint
Corporation – Third Quarter 2018 Earnings Conference Call,
November 14, 2018
Before I do, I'd like to turn the call over to Jason, who will
provide an update on our sales and marketing efforts as well as our
sales pipeline. Kito will then follow with details on our financial
performance in his prepared remarks. Please go ahead,
Jason.
Jason Holloway:
Thank you, Jin. As Jin mentioned in his remarks, the third quarter
of 2018 was highlighted by several new contracts that helped drive
improvements in our topline. The most notable single contract we
secured this quarter was with the U.S. Coast Guard. As Jin touched
on, this contract is valued at more than $12 million in revenue. It
is the result of a successful pilot program we implemented that is
now being expanded across the entire service branch. The additional
revenue this contract brings in is obviously
significant.
But equally important are the second order benefits and effects
that a contract of this magnitude can have for WidePoint. Not only
is it another large stamp of approval from a major federal agency,
but also the fact that our solutions were adopted on such a large
scale after a pilot program signals to the rest of the market how
effective and useful our products are to the agencies that
implement them. This serves as a great use case and selling point
for us as we negotiate potential contracts with new federal and
commercial customers.
On our previous earnings call, we received questions about one of
the three large commercial contracts for which we were still in the
running. I am excited to announce that we secured the contract. The
contract is with a large commercial telecommunications integrator
to implement our Bill Presentment & Analytics solution as part
of our Trusted Mobility Management or TM2 solution. Unfortunately,
due to nondisclosure agreements, we cannot name the customer nor
provide specific details regarding the size and scope of the
agreement at this time.
But rest assured, we are already working diligently with our new
customer to demonstrate our capabilities as well as educating them
on the other components of our TM2 solution set in order to upsell
on what is a very exciting win. In addition to the contracts I've
just mentioned, we recently announced that in the third quarter, we
secured nearly $20 million in aggregate of successful new orders
and recompetes from various federal agencies, including the U.S.
Customs and Border Protection, the U.S. Department of Defense and
the Federal Air Marshal Service among others.
As a reminder, one of the reasons we remain a premier provider of
TM2 solutions in the commercial space is due to our long and very
successful history in the federal space. When you couple our
federal accreditations, for example, our ATO or Authority to
Operate; our FISMA compliance, or Federal Information Security
Management Act; and being a Federal Bridge Certificate Authority,
just to name a few, with our tenure, the commercial industry
recognizes WidePoint's ability to deliver our solutions at the
highest level.
What has been very exciting is the success we are seeing regarding
our systems integrator partnerships. Again, our tenure performance
has led them to include WidePoint in their solution sets. WidePoint
has been recently included in a number of large RFPs or requests
for proposal for which we are providing critical components, all of
which are high-margin revenue. We are very proud of the progress
we've made with the systems integrators, and I look forward to
announcing additional wins in the very near term.
As I've stated previously, we operate in a space with an inherently
long sales cycle, but our ability to have a contract vehicle in
place, like the ones I've just described above with the systems
integrators, significantly speeds up the sales close process and
gives us an edge over our competition. By utilizing these
partnerships, we are able to establish a foothold in previously
un-penetrated industries.
ViaVid has made considerable
efforts to provide an accurate transcription. There may be material
errors, omissions, or inaccuracies in the reporting of the
substance of the conference call. This transcript is being made
available for information purposes only.
1-888-562-0262 1-604-929-1352
www.viavid.com
3
WidePoint
Corporation – Third Quarter 2018 Earnings Conference Call,
November 14, 2018
Once we have one TM2 solution in place with a customer, it opens up
the doors to additional sales. These are the cross-selling and
upselling opportunities we've discussed before. This has been very
effective in recent years and continues to be effective.
All-in-all, it's been a successful quarter for the WidePoint team.
I could not be prouder of the contribution and dedication that
every WidePoint employee displays on a daily basis.
In addition to the large contracts we have announced this quarter,
our pipeline remains incredibly robust especially in the commercial
space. We are staying focused on pursuing the sales channels that
are the most cost-effective and that provide us with the greatest
opportunity to push into new markets. It is our intention to
continue to diversify and strengthen the pipeline with new
higher-margin contracts while simultaneously maintaining great
relationships with our current customers so that we cannot only
sustain but also accelerate the type of growth we've seen in recent
quarters.
With that, I will hand the call over to Kito.
Kito Mussa:
Thank you, Jason. Turning to our financial results for the three
months ended September 30, 2018, our revenue increased 15% to $21.3
million from $18.5 million last year. Our improvement in revenue
was driven by increases in both carrier services and managed
services related to the partial recognition of revenue from the
U.S. Coast Guard implementation and new contract awards implemented
during the third quarter.
Gross profit increased 9% to $3.7 million or 17.3% of revenue from
$3.4 million or 18.3% of revenue as compared to last year. Our
improvement in gross profit dollars was primarily due to new
revenues that included a greater mix of higher-margin services and,
to a lesser extent, higher reselling transactions that carried
slightly improved margins as compared to last year. The decrease in
gross profit as a percentage of revenue was due to the size of
reselling transactions as compared to last year.
Operating expense for the third quarter of 2018 increased 2% to
$3.7 million from $3.7 million last year. The slight increase in
operating expense was primarily due to higher stock compensation
expense and higher depreciation and amortization, which were
partially offset by lower sales and marketing and product
development expenses.
Our GAAP net loss narrowed to $110,000 from $315,000 last year. On
a non-GAAP basis, Adjusted EBITDA increased to $561,000 from
$33,000 last year. As Jin mentioned, the third quarter marked our
fifth consecutive quarter of positive Adjusted EBITDA.
Now shifting gears to the balance sheet. We exited the third
quarter with $4 million in cash, net working capital of $2.7
million and approximately $4.8 million available to draw down on
our credit facility. Our cash position remained stable, and we
expect it to improve gradually with each quarter of positive
Adjusted EBITDA. Before I turn it back over to Jin, I'd like to
reiterate that we have made significant progress over the last five
quarters to improve our financial results.
Looking ahead to the fourth quarter, we believe that our topline
and bottom line will continue to improve as we implement
long-awaited government contracts and continue to push more into
the enterprise market. We are excited about the future and we'll
continue to work hard to meet our financial goals.
This completes my financial summary. For more detailed analysis of
our financial results, please reference our Form 10-Q, which we
filed after the market close.
So with that, I'd like to turn it back over to Jin.
ViaVid has made considerable
efforts to provide an accurate transcription. There may be material
errors, omissions, or inaccuracies in the reporting of the
substance of the conference call. This transcript is being made
available for information purposes only.
1-888-562-0262 1-604-929-1352
www.viavid.com
4
WidePoint
Corporation – Third Quarter 2018 Earnings Conference Call,
November 14, 2018
Jin Kang:
Thank you, Kito. Thank you, Jason. As evidenced by our strong
financial performance and new contracts, it's clear that Q3 2018
was a solid quarter for us at WidePoint. It's important to keep in
mind that the success we've achieved this quarter is a result of
the hard work we've been putting in over the past several
quarters.
As Jason mentioned, our business has an inherently long sales
cycle. While we're doing what we can to accelerate deals, we
understand that for growth to persist, we must continue to
diversify and to add the pipeline to ensure that it remains robust.
The awards this quarter highlights the success we've had so far
with that strategy and speaks to WidePoint's position as a premier
provider of Trusted Mobility Management solutions to the public
sector.
It's our intention to continue to capitalize on our growing
reputation as we seek business in new markets particularly in
enterprise end markets. The financial performance this quarter
indicates that our strategy of improving topline growth while
continuing to manage costs has been effective and is a logical and
effective means of driving toward GAAP profitability. Due to our
results for the first nine months of the year, robust pipeline and
our continued ability to execute on our mission, we believe we will
achieve at least $82 million to $83 million in revenue in 2018,
representing growth of approximately 9% over 2017.
We also expect Adjusted EBITDA for 2018 to be $1.6 million, which
will be a significant improvement from the $900,000 we reported the
previous year. Clearly, we are optimistic about the balance of the
year, and we are optimistic that we will see even better growth and
improvements in 2019.
Going forward, it's our intention to continue with our overall
strategy of simultaneously growing the topline and enhancing the
bottom line, which we believe will drive long-term shareholder
value. With that covered, we are ready for questions from our major
Institutional shareholders and analysts.
Operator, will you please open the call for questions?
Operator:
Certainly. We will now be conducting a question and answer session.
If you would like to be placed in the question queue please press
star, one on your telephone keypad. A confirmation tone will
indicate your line is in the question queue. You may press star,
two if you’d like to remove your question from the queue. For
participants who are using speaker equipment, it may be necessary
to pick up the handset before pressing star one. Once again ladies
and gentlemen, that's star, one to ask a question at this time. One
moment, please, while we poll for questions.
Our first question today is coming from Mike Crawford from B. Riley
FBR.
Mike Crawford:
Thank you. Regarding your new large telco integrator communications
client, without going in to the size and scope of that contract
that you can't get into, can you just maybe repeat or expand upon
what you can say? Like, for example, when those revenues start and
whether this is something that is going to be based on the
customer's further successful bids out to its clients? What exactly
is the component that you're providing now before you're starting
to upsell these other TM2 components?
ViaVid has made considerable
efforts to provide an accurate transcription. There may be material
errors, omissions, or inaccuracies in the reporting of the
substance of the conference call. This transcript is being made
available for information purposes only.
1-888-562-0262 1-604-929-1352
www.viavid.com
5
WidePoint
Corporation – Third Quarter 2018 Earnings Conference Call,
November 14, 2018
Jin Kang:
Thank you, Mike, for that question. We do have some late-breaking
news that we'd like to cover for you on that front. So Jason just
recently received this hot-off-the-presses news. So Jason, would
you please do the honors?
Jason Holloway:
Yes. Thanks, Jin. So I was literally just informed and I'm happy to
report that we have been added to our new large customer's website.
Given this new real-time development, I am able to release the name
of our new commercial customer, which is CSG International. Per
their website, CSG International is a trusted partner to the top
global communications service providers for both wireless and
wireline. So for more information, please go to CSG's
website.
With that announcement, Mike, I'll turn it back over to
Jin.
Jin Kang:
Does that answer your question, Mike? Or did you have additional
items that you would like to know?
Mike Crawford:
Sure, so exactly what is it that you're doing for CSG? When do
those revenues kick in? Is this a function of what CSG sells
(phon)—are you just put on its menu? Or how does that
work?
Jin Kang:
Right. So the CSG folks are a telecom aggregator, invoice
aggregator. So the capability that we are introducing to CSG is the
Bill Presentment & Analytics, the software license model that
we use for our Dublin, Ireland operations for Bill Presentment
& Analytics. We have already been out marketing together with
CSG to their end customer. These are customers that CSG already
has. There's a list of wireless and wireline telecom providers like
Cox Communication, DishTV, AT&T and so forth. These are already
customers of CSG. They are taking us out to provide this capability
to their customers.
Currently, they are using a different vendor who we are going to be
displacing. Okay? We see the revenue start to spin up probably
around end of second quarter, beginning of the third
quarter.
Mike Crawford:
Okay, that's helpful. Thank you. Then on your large contract with
the Department of Homeland Security where you'll be working on it
for at least two more years but there also at some point will be
probably a new contract or a recompete or an extension or
something, what's the status of that?
Jin Kang:
So we do have some additional news on that as well. The CWMS BPA,
the Cellular Wireless Management Service’s BPA, blanket
purchase agreement, with DHS, we received modification that
extends—and this is good news—that extends the current
contract until June 16, I believe, of 2019. What that means is that
all of the contracts and all the task orders underneath that BPA
can extend another 12 months beyond that end period, which means
that all of the task orders can go out until June of 2020. So that
preserves our revenue out until then.
ViaVid has made considerable
efforts to provide an accurate transcription. There may be material
errors, omissions, or inaccuracies in the reporting of the
substance of the conference call. This transcript is being made
available for information purposes only.
1-888-562-0262 1-604-929-1352
www.viavid.com
6
WidePoint
Corporation – Third Quarter 2018 Earnings Conference Call,
November 14, 2018
Additionally, they've added additional contract delegated
procurement authority essentially the amount of money that they can
spend. I believe that they have added an additional—don't
quote me on this but because I haven't really looked at it very
closely, like, $60 million additional on top of that. So we foresee
the RFP for that recompete coming out in, I would say, towards the
end of this year and most likely beginning of first
quarter.
Mike Crawford:
Okay. Great. Thanks for that. Just last question from me is
what—if any progress or traction you've had on the
credentialing front which has been a big push and potential service
differentiator that WidePoint has been developing?
Jason Holloway:
Yes, Mike. We have definitely seen an increase on the credentialing
side. I'm actually happy to report that we've had six consecutive
months of increased credentialing sales. So the IDM (phon) team out
of Fairfax has been doing a spectacular job of proactively working
with the various agencies to get more clients through the door. So
specifically, on the DoD side of the house, they've been very
aggressive with them, just getting out there to get the business
increased and we definitely like what we're seeing. So it's
definitely going well for us.
Mike Crawford:
All right. Thank you, Jason. Thanks guys.
Jason Holloway:
Yes.
Operator:
Thank you. Once again, ladies and gentlemen, that is star, one if
you would like to be placed in the question queue. One moment
please while we poll for further questions.
At this time, this concludes our question-and-answer session. If
your question was not taken, please contact WidePoint's IR team at
WYY@liolios.com. I'd now like to turn the call back over to Mr. Jin
Kang for his closing remarks.
Jin Kang:
Thank you, Operator. Just getting back to the last question, Mike,
it was $60 million additional delegated procurement authority that
was added as part of that modification for DHS
contract.
So again, thank you, Operator. But before we end today, I'm happy
to report that we have been added to our customer's website, which
Jason has already reported. I would like to address some additional
questions that we have received from some of our
Investors.
We're often asked about GAAP profitability. Attaining GAAP
profitably remains one of our top goals. As you can see from our
results this quarter, we're close to achieving that
goal.
For those of you who inquired about revenues related to the CDWG,
our census project, we are currently performing on this project and
we see this project continuing to grow in 2019 and into
2020.
ViaVid has made considerable
efforts to provide an accurate transcription. There may be material
errors, omissions, or inaccuracies in the reporting of the
substance of the conference call. This transcript is being made
available for information purposes only.
1-888-562-0262 1-604-929-1352
www.viavid.com
7
WidePoint
Corporation – Third Quarter 2018 Earnings Conference Call,
November 14, 2018
Please note that we have a large number of opportunities of both
commercial and government entities in our sales
pipeline.
To everyone who have submitted additional inquiries regarding our
Board of Directors and specific project updates or details
regarding contracts that we did not discuss today, please note that
we appreciate your feedback and interest in our Company, and we
will provide all pertinent information if and when that information
become material.
Additionally, we, as an effective management team, will be remiss
if we were not considering all strategic options that are available
to us. Again, we will present all pertinent information if and when
that information becomes material.
One last note, we target to have the highest topline revenue in the
Company's history and the highest Adjusted EBITDA in nearly six
years. We are poised to exceed these benchmarks in
2019.
With that said, 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
call.
Thank you again and have a great evening. We look forward to
connecting with you again on our next call.
Operator:
Thank you for joining us today for WidePoint's third quarter of
2018 conference call. You may now disconnect.
ViaVid has made considerable
efforts to provide an accurate transcription. There may be material
errors, omissions, or inaccuracies in the reporting of the
substance of the conference call. This transcript is being made
available for information purposes only.
1-888-562-0262 1-604-929-1352
www.viavid.com
8