Good day ladies and gentlemen and thank you for standing by. Welcome to the WidePoint Corporation Fourth Quarter 2012 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. If you have a question, please press the star, followed by the one on your touchtone phone. For our participants using speaker equipment, it may be necessary to pick up the handset before making a selection. This conference is being recorded today, Monday, April 1, 2013. And I would now like to turn the conference over to Brett Maas with Hayden IR. Please go ahead.

Thank you, Operator. Good afternoon all participants joining WidePoint's year end 2012 Financial Results Conference Call. With me today are WidePoint's Chairman and CEO, Steve Komar, and Chief Financial Officer, Jim McCubbin. Steve will provide an overview of 2012 annual results, and Jim will provide additional financial details. Then, we'll open the call to questions from participants. Before I turn the call over to Steve, I'd like to remind all participants that during this conference call any forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, including financial guidance, and similar expressions including, without limitation, expressions using terminology may, will, believe, expect, plans, anticipates, predicts, forecasts, and expressions which reflect something other than historical fact are intended to identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, including factors discussed in the Risk Factor sections of WidePoint's annual report on Form 10-K, and its quarterly reports on Form 10-Q, and in other SEC filings and Company releases. Actual results may differ materially from any forward-looking statements due to such risks and uncertainties. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after this conference call, except as required by law. I would now like to turn the call over to WidePoint's Chairman and CEO, Steve Komar for opening remarks.

Thank you, Brett, and good day to everyone who has joined us late on this post holiday afternoon. As has been our practice in the past, we would like to acknowledge and reaffirm our appreciation to all of you for your continued interest in WidePoint Corporation. During 2012 the company made significant progress in addressing several of its strategic goals relating to the way we do business and our probability for success as we look to the future. These range from diversifying our revenue streams and redefining target markets, to our commitment to add and reposition resources to emphasize the sales driven corporate culture and delivering an optimized services and support environment. Each of these initiatives is directly in support of our goals on intensifying revenue development, building more robust pipelines and backlogs and migrating to higher margin market opportunities in the years ahead. On balance, we were pleased with our 2012 financial performance and feel we are on an accelerating new business trajectory that will have favorable impact throughout 2013 and beyond. Taking a tops down look of 2012 annual results, net revenues increased by roughly 35% to $56 million; from $41 million in last year's comparable period, reflecting increased revenues at each of our business segments. In 2012 income from operations was approximately $1.02 million an increase of $914,000, as compared to $105,000 realized in 2011 and net income totaling $830,000 was dramatically better than the prior year. Also worth mentioning is that non-GAAP adjusted EBITDA, an important yard stick in measuring the net contribution of business operations, was approximately $2.3 million in 2012, an over 100% increase compared to $1.1 million in the prior year. I will leave the more detailed financial reporting and analysis to Jim McCubbin, but I will offer a few comments about business…

Thanks Steve, and hello everyone. Today I'm going to review and discuss our fiscal year end 2012 financial results in a bit more detail than Steve just covered and focus on some of the financial challenges and opportunities we see in 2013 and beyond. Overall the highlights from our 2012 financial results show that we achieved record levels of revenues that further bolstered improvements in our gross profit, income from operations, net income, non-GAAP adjusted EBITDAs, working capital, debt and stockholders’ equity over our prior year that ended in calendar 2011 which is our fiscal year end. We were overall pleased with these results especially given some of the challenges we faced in some of our marketplaces during the year, coupled with the evolutionary changes we initiated during the same period set the stage for our sales and marketing expansion efforts, new MDM and MSM product offerings as well as our push to functionalize our business creating what will be a cohesive WidePoint centric Enterprise. For 2012, our revenues increased by approximately 35% to about $56 million, or an increase of $14.4 million as compared to $41.4 million for a fiscal yearend 2011. We’ve witnessed growth in all of our segments as well as an expansion in both our state and local and commercial areas from our more meaningful entry into these markets in 2011 and 2012. For 2013, our challenge will be to address the results that sequestration may have on some of our federal consulting and reselling work, which we believe could put anywhere from $1 million to $5 million of revenues at risk depending upon the ultimate outcome of the 2013 and 2014 federal budget outcomes. Offsetting these challenges and risks are several corresponding opportunities that we do see. In the federal area, we have already put…

Thank you Jim. Very through. I would like to now arrange to open the call to our listeners for their questions or comments. Operator, can you assist us with that?

Thank you Sir. We will now begin the question and answer session. (Operator Instructions). Our first question comes from the line of Mark Jordan with Noble Financial. Please go ahead.

I was wondering of you could put a little more meat on the comments relative to the investments you are making in marketing, specifically in sort of an aggregate dollar amount, what does it represent incrementally for 2013 and how are those investments split between the government, commercial and international markets?

Mark let me take a shot at that. Recognizing that we need to differentiate between the annualized full load cost and the fact that this is phasing in, in the course of the year, the reality is we’re talking about incremental sales and marketing and related headcount, well in excess of 10 individuals, 10 full-time individuals. The total cost of these assorted investment programs are in the $3 million to $3.5 million range. So, they are not insignificant for a company of our size, but again we feel that they are absolutely critical to our being able to grow in the future. In terms of distribution of headcount, I’m reaching on this Mark because I don’t have the numbers right in front of me; but I believe that in terms of the telecommunication sector, we’re talking six to seven individuals; in terms of cyber sector, we’re talking about three Senior Sales Executives plus a redistribution of some of the technical support resources currently existent in the cyber side and of course we will have a corporate managing infrastructure in terms of a Marketing Director and of course our Chief Sales and Marketing Officers. So again pretty sizeable.

In terms of focus of where you’re turning these folks lose, are you separating it by commercial or governmental, or are they just sort of moving to the area of hottest opportunity?

Well, it is definitely the latter. We’ve been using the terminology of low hanging fruit and opportunities that we haven’t been able to respond to, due to resource limitation. So that’s definitely part of the short term plan. I get to talk about that a lot to our Chief Sales and Marketing Officer. So, we’re definitely doing that. But there is a natural segmentation between the commercial and government market. So, when we array the organizations, we tend to focus individuals primarily on that market segmentation. We’ve talked a lot about synergism and cross marketing and cross selling capabilities and frankly those are about maybe three to four months downstream.

Final question, if I may Jim, you talked about the gross margin profit leverage in swapping out a dollar service of low price minute resale for service type revenue stream. Could you give us an idea of the order of magnitude of that low cost minute revenue stream in ‘11 - in ‘12 versus ’11?

Well I don't think I have that right in front of me right now on the callable minutes. It's single digits, respectively in both areas. Where I address my comments a little bit more on gross margin leveragability looking into 13, we're looking at displacing margins. Again in the single digit levels with margins clearly in the 40% to 60% range. So I mean it's a great swap out. Plus the nice thing about the revenues that we're targeting and actually we're starting to win is that they're multiyear long life arrangements. So you so get to recognize it as a pipeline up front and really grow it over time. So once you win it you kind of get built in sales growth and margin growth year in and year out over a number of years. And you know without growing sales and marketing too much, we're talking about $3 million investment, but that $3 million investment in pipeline, you're talking about tens of millions of dollars of very high margin revenue with a long life. So you could see the leverage in how it drops to the bottom line as well.

Our next question comes from the line of Mike Malouf with Craig-Hallum Group. Please go ahead.

Maybe I missed it but what was the number on the consulting business for the quarter?

We actually didn't report on the quarter. Mike, I'll get you your segmentation on the quarter later. We just reported on the year.

What was it for the year?

So you're talking about just consulting, the consulting services area?

Yes.

$17.1 million.

And then, if you're looking to add $3 million to $3.5 million in costs with this sort of new strategic direction that you're taking and did you say and I thought that you had said this, that you still felt that we could breakeven in 2013 on an operating income basis?

What we’ve said is if we would aggregate all of it and take it all at once. We’re phasing this in over the year. So it’s not happening all at once. So we brought on John and a few core people first in the first quarter. We’re bringing on a number of sales people, actually be started in processing today in the second quarter. So we’re ramping it and timing it okay to increasing revenues streams as well.

So if you took it all at once, you’d be breakeven, which means obviously since costs will be lower, you will be profitable on an operating basis.

Right, Mike, well you know me, I’m trying to use free operating cash flow to do two things; continue to pay down debt and then make the investments because the ROI is just so huge into the infrastructure from that free cash flow, for this year. And then as you get higher margins, as you stagger it in, it starts becoming self-generating and then as you really go into ’14 you have a great recurring financial model that just self-supports itself.

Perfect and then just a little of a follow up. On the $1 million to $5 million on the sequester impact, you’ve been sort of, since we’re in April 1st today we’re through the first quarter. Why is it such a big wide range? Do we get a sense of, what would be the parameters of it being at low end or that being at the high end, if you could just give us a little bit of color on that?

Well, we’ve identified anywhere from $1 million to $5 million at risk, okay. The 2013 budget and continuing resolution passed and that addresses just some of the low end. Right now they’re trying to finish up the next budget and the Senate and the House have to reconcile. We just don’t know the impact of that and then the other thing that we’re seeing, on the reconciliation we’re seeing them give an allowance the agencies to allow them to shift money around interagency, within the organization to take away the impact. So it’s just kind of wait and see and I just wanted everybody to be aware of the size potentially. Mike, just so everybody knows, it’s not huge number based on really book of business and two, that is the range we really see from a risk tolerance of what we can manage around easily as well.

I think I would just add the message that we were trying to send and hopefully we articulate it well is that it is not a doomsday scenario and that to the extent that we can identify any potential risk to our assumed revenue streams, we feel it’s manageable and very frankly based on the experience of the past four to six months, it may not be a risk at all. But we feel the obligation to give you some ballpark sense of like what might be the situation.

We just wanted to answer the question before the question became a question.

Yes, that makes sense. And then if I could just, on the mobile device management side, it looks like based on your yearly number that you grew year-over-year for the quarter at over 70%, make 74% to be exact. Was there any one time things in there?

No. The commercial statement added most of that. Now what’s interesting is, this year we are having a hard time getting our hands around it, because there are several large RPs in existence right now on the government side that could deliver a multitude of different kind of results. And we should hear about that April, May, June, how that plays out. And in the commercial side, we have added sales people, or continue to over the next month, and we know that’s going to drive a greater positive result as well. One of the things that we realized last year, Mike, was everything that we went after and bid on we tended to win. We just had a real problem where we didn’t have enough feet on the ground to get all the opportunities out there. And that was one of the reasons we really had to make these investments and really look at sales and marketing, because we are at a perfect timing as all of this converge and the players get shaken out.

Our next question comes from the line of Sam Donaldson, Private Investor. Please go ahead.

Well gentlemen, once again I want to congratulate you on a very good year. I think going back to 2008, the struggles (inaudible) and the chaos that (inaudible) was in was very difficult (inaudible) and I just would add a comment that, because I don’t really have a question, saying that is, facing money now, and you’re supposed to do it, to add the staff and to expand our reach, exactly the right thing to do. Now is the time to seize those opportunities, expend the money so that next year, the year after that, it’s really going to be a big company and I thank you for that. That’s what I had to say.

Thank you very much Sam. That’s appreciated and it’s nice to hear your thoughts and assessment on that. We kind of believe it and it’s always great to hear someone confirm that for us.

(Operator Instructions). Our next question comes from the line of Mark Foster with Kirr, Marbach & Company. Please go ahead. Mark Foster - Kirr, Marbach & Company: In terms of 2013, in your prepared remarks you talked about the accelerating new business trajectory. Does that imply that you think topline growth in '13 will be at a higher rate than it was in '12?

Well honestly, here is a challenge we are having right now. We believe like every year, as we enter into it that '13 should be better than '12, okay. Now we have also spent the first quarter putting out a lot of RFP's and lining up a lot of new customers. We’re just trying to get our hands wrapped around what is the sensitivity for the range of revenues we could see this year and then we are also doing a shift in the kind of revenues that we are going after, where they tend to be three and five year contract values. So we are really working on building that big pipeline. So we are just not prepared to discuss at what level we see that growth. We know it’s going to be going in the right direction. With our first quarter coming up and reporting in just little over a month, we will have the ability to address it then a little bit better.

I think I would just add that I think we are very hopeful that we are going to have a very strong revenue performance in 2013. We are also assuming in any projections that we make, that that is essentially organic growth. It doesn't deal with acquisition growth at all in terms of our projections. And on the other side of the equation, I would just ask you to keep in mind that in between 2011 and 2012, $8 million of that revenue increase was due to an acquisition. So it’s a pretty substantial challenge for us to equal or better that performance on an organic basis, but absent risks and all the other things we talked about, that is our goal.

And the marketplace right now, we are not going to see a better marketplace for the services that we are going to be rolling out this year. So we are very excited about it; we really are. Mark Foster - Kirr, Marbach & Company: So as you look at some of these new services, I know in the past you’ve had a gross goal, you said the business was capable of doing 35% to 40%. With some of these new services being higher margin services as you look out a couple of years, do you think that you can exceed that 35% to 40%?

Well, like I said, a lot of the new services within MDM, within MSM is recurring in nature. They really are, they’re 40% to 60% gross margin work. So, it just depends on how fast we grow that business but clearly that is where the modeling goes and on some of it it’s even greater than that on some of the device work. So, it’s just - and that’s where the future of where we’re building this. Also on growth please remember, we’re also offsetting potentially low margins, sequestration losses on our blended growth, okay? Mark Foster - Kirr, Marbach & Company: So, if we look at this from a big picture standpoint over the last four or five years, you’ve been able to grow revenues at a pretty good cliff, some of them organics, some of that through acquisitions. Consistent profitability though has been a little illusive and it sounds like with these additional costs, 2013 might be a little bit more of the same. Sort of at what point do you really get to the profitability breakout? Is that ’14, is that a …

Yes. It’s really ’14. It’s a one year or less sales cycle. We are depending on the product sets. We’re seeing anywhere from three month sales cycles to one year sales cycles. We’ve started all this so we really do see a lot of that hitting in ’14. But we also see some incremental benefit deploying itself in 2013 as well. I mean it’s good. It’s all good.

Candidly we’re trying to optimize the 2013 number, recognizing that we’re obviously reinvesting substantially but if one looks to the payoff, candidly it’s probably, the real measurable payoff is going to be in 2014 and beyond.

In Steve’s prepared comments just on some of the credentialing work and that market size, $40 million to $50 million, as an example recurring revenues that generates $20 million to $25 million in really scalable bottom line growth. It’s quite impressive as this all comes together and then as we see the marketplace converge with mobile security, mobile device, telecom expense management and some of it come together, it is really exciting just because of the shared number of devices and handsets that are going to be prevalent just in the government and commercial environments, that are going to be need to managed, optimized and secured. It's a big marketplace and it's big enough for a number of players. Mark Foster - Kirr, Marbach & Company: So one last one, you sort of touched on it earlier. In the past you guys have given guidance for the full year. Do you think after that first quarter that you will do that or is this sort of a change in strategy that you don't want to do that anymore.

Well if you notice, a number of years ago we got stung. So we've tended to be conservative but we're continuing on that path. The marketplace rewarded us negatively with honesty. So we're being extra careful. We're making all the right decisions. We're working within our means and we’re taking a nice balanced approach. Hopefully in the first quarter we'll have the information to give you.

I think it's fair to say we have not adopted a different policy in terms of guidance but as candid as I know how to be, I can’t in good conscience offer any guidance given where we are today, what we're reinvesting, the short term issues in our major marketplace, frankly any guidance probably wouldn't have a whole lot of credibility, but we're just not going to do it. It just doesn't make any sense at this point.

There's no benefit for us to do it at this moment in time.

Our next question comes from the line of Dale Miller with Morgan Stanley. Please go ahead.

I was wondering if one of you could expand on Steve’s comments, I had a couple of questions actually, but about the branding and kind of consolidating some of those brands, from an Investor Relations point of view, I'm sure you have this all the time. It's sometimes difficult to really connect each of these brand names you have out there with a specific line of business and see how the whole fits. It takes a little while to get your head around that. So could you expand a little bit on what that looks like? You also mentioned as a parallel question, growth by acquisition versus kind of intent to foster things organically. I didn't hear you dismiss acquisition out of hand and obviously, especially in the cyber area, that’s a pretty hot growth area. So could you kind of address those?

Sure, I think I'll certainly give it a shot. From the branding side we are very well aware of call it the dissonance, whatever else that one runs into when a good part of the company has been built through acquisition, that there are identities in the marketplace that are in effect, multiple identities sometimes, often in the same markets and candidly we’ve lived with that for a couple of years, but we really believe it’s not the right answer going forward. We believe we have to get the benefits of a consolidated branding strategy and we’re going to be intelligent about the way we transition into that but we launched this new branding strategy literally at yearend and the beginning of this year and we are implanting it on a daily basis, primarily in the most simplistic terms, WidePoint being the dominant brand in all situations and we expect as a subset of that, we will have product identifiers, literally a portfolio of the WidePoint branded products but we will be moving away from subsidiary, corporate identifiers and other marketplace signals that we think conflict with the commonality of brand. So it’s merely one step, but I think an important one as we transition to a unified company. That would be it on branding.

Well, branding also we’re very excited because we also just brought on a new Director of Marketing and Marketing Communications today and she is an extremely talented woman and we’re very excited to just see what she can do with collateral website, a whole lot of other work that we have our plan to do. John Atkinson has also done a tremendous amount of work with Ron Oxley to really make sure that we can deploy this and we can really optimize the messaging to the street, both commercially, state and local and federally.

And then on acquisition, I don’t expect you to comment on that in specific terms, because who knows what’s out there but is that, (inaudible) you’ve prepared or you’re just going stick organic for now?

I think we’ve had a fairly consistent message on that. At least I believe so, which is that we are open to and ready to pursue an acquisition that fits in and definitely represents an enhancement to our existing strategy. We’re not doing rollups. We’re not spreading out for the sake of spreading out and frankly we are very focused this year on our organic building activities. We think it is the right thing to do but I think right the end of your question you said, if an opportunity arises would we be prepared to pursue it. I think the easy answer to that is if it’s a strategic fit, the answer is yes.

But this year we clearly want to stay to our knitting. We are focused. We have been working on this project now since last August when we got it started. We clearly want to get some real head way here. And that’s where our focus is right now.

Okay thanks. And lastly I had two quick questions on, essentially your customer base. The state government contracts really intrigue me, because obviously you are getting a tiny, tiny fraction of what’s out there. So what you have done for Utah and Nevada, very easily, something you could apply elsewhere. Is there something unique in those states and what do those business models look like? Is it a pipeline? Is it a onetime contract that you install something and move on? And so what’s replecatable? And then lastly, you talked international which obviously raised my antenna a little bit. Do you have specific countries you are going to be targeting, specific markets, or at this point are you still following that?

I’ll take number one and we do have to be a little sensitive to what we do say right now, because we are in the midst of some discussions. So please understand we are not trying to be rude either, but we have to balance what we do say. One is it goes to the state. It would be great if it was nice and simple. But with any government contract, federal state, local it never is. Right now we are working within the Western States Alliance kind of infrastructure. It’s much like a GSA schedule but for those 15 states that also allow all the other states to purchase from it. On there, there is a multitude of offerings from a short subset of providers that have been given the okay to actually provide the services. We have done exceptionally well at really getting to work, materially most of the work, and it started with Utah and Nevada, who has really been on point, on demonstrating the cost savings. There is a couple of different components of it. First is really getting your hands around the auditability, and what they have identifying product set, identifying landlines, phone lines, devices and with that seeing what kind of errors, mistakes of kind of inherent problems they have. That’s phase one. Phase two then is really moving it over to a managed service offering, that then takes on a recurring base of savings that they realize upfront. So think of it this way. We get paid on the audit findings and the savings we realize on a performance basis, Phase one. Phase two, then we basically say, you’re going to pay us to maintain and manage these devices for you and or any other services we may do for you on an ongoing basis. So you are not collecting the moneys later, but you are actually collecting the savings as you go along. So, with that, we also have the ability to add services and do different things with these contract vehicles. So, the WSCA states, a lot of people have opted in and they really are looking at our performance and we are extremely pleased at how we performed last year in our demonstration and we are also pleased with some of the expansion work that we are getting because of those results. All that credit really goes to our team, which has just done a magnificent job.

By the way, the way I became aware of your company is through a channel check, where you were mentioned in one of those states, very positive. So….

That’s interesting.

Well hopefully you got some positive feedback through some other channels. That’s outstanding.

I think your second question related to geographic expansion and I think there is a fairly simple answer to that. First priority is probably Europe and we like to think that in Europe, and we're basically following our customers, we have increasing multinational customers that have demands. We also have a presence in Europe associated with providing Cyber type solutions to NATO and other forces. So, I think that's number one and we like to think that we can offer English although the British may not agree with us. And we also have the capability of four additional languages. So we are ready to go in Europe, that’s the first target. Asia obviously follows but has a longer timeline associated with and probably will be done through alliances or channel partners.

Our next question comes from the line of Michael Potter with Monarch Capital Group. Please go ahead.

Just a quick question on the Avalon. I understand 2013 was a transition year and then hopefully this year will be more of an organic growth and execution year, especially with the investments that you're moving forward with. When will we start hearing I guess about some of these contract wins and new relationships that we are developing on the commercial front?

Very soon.

Second quarter.

So over the next 90 days, we are going to start hearing a lot more about our activity on the commercial end of the business?

Yes.

And the investment that we are making basically through our operating cash flow is and the work capital that we may need for large contract wins; I’m assuming that's still going to be on the federal side, not really on the commercial side?

Yes. And right now, as you know we have a line of credit with Cardinal Financial Bank, we have that available to us and one of the reasons we’re phasing in our investments is we are trying to stagger it and manage it around free cash flow.

Sure. Definitely right thing to do, I don’t think anybody really wants any dilution, especially at this point if we can avoid it.

But Mike, if something big happens and there is a huge of reward or something positive, I don’t think anybody is going to have a problem if we had to do something for a $1 million or $2 million that’s going to generate millions and millions. But remember we do think that way because we are large shareholders ourselves and we don’t like to lose share.

Sure. Yeah let’s get it first and then we’ll figure out the problem.

Yes. It’s a good problem to solve when we have it.

Our next question comes from the line of Steve Shaw with Sidoti & Company. Please go ahead. Steve Shaw - Sidoti & Company: I missed it before, how do you are into sales announced or the marketing and sales changes, how does that impact us in 2013 numbers wise, in sales and marketing?

Hey Steve, I need to get you and Mike some breakouts of the quarters and other numbers. I’ll do that and I’ll try to get you a phase in, I’ll work with you so you guys can determine the phase in on the sales of marketing. We’re doing it over a year. So it’s not all at once. It gradually comes into effect. We’re trying to do it where we’re getting sales results out of the few people that kind of start self-funding the new people that keep coming on. And I will reach out for both you and Mike to backfill any of your other questions for your correspondence.

There are no further questions in the queue at this time. I would like to turn the call over to management for closing remarks.

Thank you, Operator. I’d just like to say that I hope we’ve been able to convey our excitement about our opportunities in 2013 and beyond. We believe we’re in a right markets, we got the right products and solutions and the personnel to support them. So we want to aggressively expand our presence in commercial markets, expand our participation in trusted secured solutions marketplace and expand our service profile beyond the national borders. I’d like to thank you all for your time and interest in WidePoint. We appreciate your continued commitment to us and we’ll look forward to briefing you on our progress at our next scheduled conference call in May. Thank you, and have a great evening.