WidePoint Corporation (NYSE:WYY) is a leading provider of Technology Management as a Service (TMaaS) solutions, enabling its customers to efficiently secure, manage, and analyze their mobile communications assets. The company's comprehensive platform, Intelligent Technology Management System (ITMS™), delivers federally compliant identity management, interactive bill presentment and analytics, and IT as a Service offerings.
Business Overview
WidePoint's TMaaS solutions are designed to provide customers with a flexible, scalable, and secure platform to manage their mobility requirements. The company's proprietary technology allows for simple configuration to accommodate a wide range of customer needs, enabling rapid expansion or contraction of services as required. WidePoint's offerings are delivered through a managed services model, providing customers with a comprehensive set of functional capabilities to meet their mobility management, information technology management, and cybersecurity objectives.The company's revenue mix fluctuates due to various customer-driven factors, including the timing of technology and accessory refresh requirements, onboarding of new customers, optimization of data and voice usage, and changes in customer leadership or funding. As a result, WidePoint's quarterly revenue can vary significantly.
Financials
For the fiscal year ended December 31, 2023, WidePoint reported annual revenue of $106,026,360, a net loss of $4,046,472, annual operating cash flow of $625,248, and annual free cash flow of -$464,841. The company's revenue mix consisted of $59,342,789 in Carrier Services and $46,683,571 in Managed Services.In the first quarter of 2024, WidePoint generated revenue of $34,207,279, a 35% increase compared to the same period in 2023. Carrier Services revenue was $19,342,789, up 44% year-over-year, while Managed Services revenue was $14,864,490, up 27% year-over-year. The increase in both Carrier Services and Managed Services revenue was primarily due to new federal government contracts signed in the third and fourth quarters of 2023.
Gross profit for the first quarter of 2024 was $4,665,891, or 14% of revenue, compared to $3,809,940, or 15% of revenue, in the same period of 2023. The slight decrease in gross profit margin percentage was related to increased amortization expenses as the company's delivery platforms were placed into service and an increase in lower-margin reselling revenue. Excluding Carrier Services, the gross profit margin was 31% in the first quarter of 2024, compared to 33% in the same period last year.
Operating expenses for the first quarter of 2024 were $5,316,910, compared to $4,698,341 in the same period of 2023. The increase was primarily due to higher sales and marketing expenses, as well as increased share-based and other compensation expenses in general and administrative expenses.
Net loss for the first quarter of 2024 was $653,110, or $0.07 per share, compared to a net loss of $951,479, or $0.11 per share, in the same period of 2023. The decrease in net loss was due to the higher gross profit dollars, partially offset by the increase in operating expenses.
WidePoint's non-GAAP measures of adjusted EBITDA and free cash flow also showed significant improvement. Adjusted EBITDA for the first quarter of 2024 was $573,000, compared to $20,000 in the same period of 2023. Free cash flow, defined as adjusted EBITDA minus capitalized items, was $566,000 in the first quarter of 2024, compared to a negative $340,000 in the same period of 2023.
Liquidity
As of March 31, 2024, WidePoint had $5,267,934 in cash, compared to $6,921,160 as of December 31, 2023. The decrease in cash was primarily due to the typical delays in invoicing activities related to new contract implementations. The company believes its forecast for positive free cash flow and refinements to its invoicing processes will provide sufficient liquidity for its operations.Significant Contracts and Opportunities
In the first quarter of 2024, WidePoint was awarded the Spiral 4 contract by the U.S. Navy to provide wireless and telecommunication services. The indefinite-delivery, indefinite-quantity (IDIQ) contract has a 1-year base period valued at approximately $267 million and 9 1-year option periods, with a total contract value worth approximately $2.7 billion if all options are exercised. WidePoint was selected alongside 6 other companies, including the U.S. Big 3 wireless carriers, to provide a full range of wireless and telecommunication services.The company is also in active negotiations with a California city to provide managed services, though specific details cannot be disclosed at this time. WidePoint's management is optimistic about the direction of these discussions and anticipates sharing further details when appropriate.
In addition to these new contract opportunities, WidePoint's $350 million contract backlog serves as a strong catalyst for its future financial performance. The company is well-positioned to potentially increase this contract backlog total with additional deals currently in the pipeline.
Outlook
WidePoint is reiterating its guidance for fiscal year 2024, expecting revenues to range between $120 million and $133 million, adjusted EBITDA to range between $2.1 million and $2.4 million, and free cash flow to range between $2 million and $2.3 million.The company's strategic focus for 2024 includes capturing new sales opportunities, providing unmatched service to its current customer base, attaining full FedRAMP certification, growing its recurring high-margin managed services revenues, adding new capabilities to its TMaaS solution set, and expanding its customer base organically, among other initiatives.
Risks and Challenges
WidePoint's revenue mix can fluctuate due to various customer-driven factors, which may create pressure on pricing and/or costs to deliver its services. The company also has periodic capital expense requirements to maintain and upgrade its internal technology infrastructure, which can be significant when incurred in any given quarter.Additionally, the company's fixed labor and infrastructure costs may be difficult to modify in the short term, and temporary collection timing differences from customers could negatively impact its cash flows from operations.