WidePoint Corporation (AMEX:WYY) Q3 2023 Earnings Call Transcript

WidePoint Corporation (AMEX:WYY) Q3 2023 Earnings Call Transcript November 14, 2023

Operator: Good afternoon. Welcome to WidePoint’s Q3 2023 Earnings Conference Call. My name is Paul, and I will be your operator for today’s call. 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. Following the remarks, we will open up the call for questions from WidePoint’s Publishing Analysts and Major Investors. 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. Before we begin the call, I would like to provide WidePoint’s Safe Harbor statement that includes cautions regarding the 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. 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.widepoint.com. Now, I would like to turn the call over to WidePoint’s President and CEO, Mr. Jin Kang. Sir, please proceed.

Jin Kang: Thank you, operator, and good afternoon to everyone. Thank you for joining us today to review our financial results for the third quarter ended September 30, 2023. I am pleased to share the progress we’ve made over the past several months. As we concluded the third quarter on a high note, thanks to the continued dedication and hard work of our entire team. We have experienced consistent sequential improvements quarter-over-quarter underlying our continued growth and resilience, as we also surpassed the results of Q3 2022 and have achieved positive adjusted EBITDA for the 25th consecutive quarter, highlighting our consistent profitability and operational strength. We anticipate this positive trend will persist into the fourth quarter and into 2024, something Bob will go into deeper later in this call.

Our revenue remains within the guidance range of $103 million to $108 million, a reflection of our steady and disciplined approach to managing our business. Although, we do expect that our adjusted EBITDA is trending toward the lower end of the range due to various sales opportunities having pushed into Q4, but I’m happy to report that several of these opportunities have already successfully closed. This bodes well for Q4 and full year 2024. To further quantify our forecast, we expect free cash flow to be approximately $3.5 million more than in 2022. The action that we’ve taken in the past 12 months to be prudent with our capital in conjunction with the overall proactive nature of our team. Another significant catalyst contributing to our strong position is the fact that the majority of our capital investments have been successfully closed.

As a result, we anticipate only minimal capital expenses in the fourth quarter and throughout 2024, reflecting our disciplined approach to managing our resources. Additionally, we believe there will be no material non-cash adjustments for the current year, which will both lead to an optimized adjusted EBITDA and bottom line. An example I wanted to share where all investments have been completed is our Intelligent Technology Management System or ITMS, which is still in the FedRAMP in process status. We anticipate hearing back from General Services Administration in the next couple of months, and I look forward to realizing this important milestone. Beyond that, other capital investment projects that we’ve mentioned before such as our hot COOP site improvements, soft certificate issuance and remote issuance of certificates have all been materially completed.

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Q&A Session

Although, we are encouraged by some of the trends and preliminary results we are seeing, I must shed lights on some of the macroeconomic factors we are witnessing and the way we’re mitigating those uncontrollable variables. Despite the interest rates, as lofty as they are, WidePoint remains well prepared for the foreseeable future, effectively managing our cash balance. We closed Q3 with a healthy reserve of approximately $8.4 million. As you know, the Federal Government is currently embroiled in budget debates and a potential government shutdown is looming. However, we have a long history of successfully navigating such challenging environments, and we’ll continue to mitigate these risks. Next, despite some large tech companies implementing layoffs, the labor market remains extremely competitive.

We are diligently managing this situation, albeit with potential additional staffing costs. However, we intend to offset this risk by focusing on higher margin managed services revenue. All that said, the supply chain challenges that were prevalent have fortunately now largely subsided, and we are all well equipped to manage them effectively. On an operational note, it has been encouraging to witness customers reengaging with us in both the commercial and federal government sectors. A contract with the FCC, an agency within the Department of Transportation, implementation of Cox Communication and MCPC ProMedica are major successful engagements that are going well. Additionally, we successfully signed contracts with The Federal Emergency Management Agency and a major beverage bottling company for telecom and IT as our service solutions, respectively, in Q4.

We will be providing additional updates on these and other awards in press releases soon. We have several material opportunities that we see on the horizon that we hope to win before the end of the year. Some of these opportunities did slip to the right into Q4 due to the previously discussed macroeconomic factors, but we remain keen on doing everything we can to get these deals across the finish line. Again, we continue to garner all this traction in tandem with operating efficiently as a leaner and tight organization, following our reduction in force at the end of 2022, and as evidenced by our ability to renew materially all of our contracts up for renewal, our customers continue to value our solutions and services. In some cases, we have been able to expand the scope of work, which speaks to the robust nature of our offerings, in addition to the relentless efforts from our team to continuously cross sell and up-sell our solutions.

We will maintain focus on scaling the growth of our Federal Government and commercial customers. I will now hand the mic over to Jason, who will further elaborate on these topics and provide some color on the sales and marketing front. Jason?

Jason Holloway: Thanks, Jin, and good afternoon, everyone. As Jin stated, we continue to build momentum and are seeing the results of hard work in closing the higher margin deals. As you may have seen, we had a press release in which we closed an identity and access management deal with an agency within the Department of Transportation totaling $1.7 million. You may have also seen on the Federal Procurement Database System web portal that we closed another deal under our CWMS two contract with Department of Homeland Security, namely Federal Emergency Management Agency or FEMA. The award is approximately $60 million over a three year period of performance with a one-year base period and two one-year option periods. Additional details can be found on our filed SEC Form 8-K.

I am also proud to announce that we also won a new contract with the SEC, with a total contract value of $3.2 million and Soft-ex, our operations in Dublin, Ireland, recently announced a win with CSG as well as an Irish telecom agency. Soft-ex is also targeting opportunities in the B2C market for Cox Communications. Our pipeline remains robust. We look to finish 2023 strong with additional potential material contracts. We continue to make positive progress within the K-through-12 Arena. Jin and I hosted an event in which very influential K-through-12 District IT leaders were in attendance. Along with piloting our soft search solution, we are also exploring wireless PIV-I credential readers in which the user can connect using a Bluetooth connection to the device.

In parallel, IT Authorities continues to build its pipeline as well and is making headway in closing the number of exciting deals. Not only will this immediately benefit our top line, but it presents the broader WidePoint Organization with incremental cross sell and up sell opportunities looking ahead. Please stay tuned for additional IT authority updates in the near term. Additionally, we continue to work closely with our systems integrators, and we believe that our tremendous past performance in both the federal and commercial space will close additional opportunities in which the systems integrators are reaching out to WidePoint for assistance in closing. Our marketing efforts continue to grow with the targeted campaigns with increased social media presence.

Given the remote work environment, we see positive results from the increased social media efforts. We will continue to stay laser focused and continue to close higher margin deals. With that, I will hand the call over to Bob.