Ladies and gentlemen thank you for standing by. Good day and welcome to the WidePoint Corporation Second Quarter 2016 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to David Fore of Hayden IR. Please go ahead, sir.

Thank you, Operator. Good afternoon to all participants in WidePoint's second quarter 2016 financial results conference call. With me today are WidePoint's Chairman and CEO, Steve Komar; and Chief Financial Officer, Jim McCubbin. Steve will provide a brief overview of the quarter's developments and accomplishments and Jim will provide additional financial and operational review and outlook. Then we will open the call to questions from participants and institutional shareholders. Before I turn the call over to Steve, I would 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 the terminology may, will, believe, expects, plans, anticipates, predicts, forecast, expressions, which reflect something other than historical facts are intended to identify forward-looking statements. These forward-looking statements involve a number of risk factors and uncertainties, including those discussed in the Risk Factors sections of our WidePoint's Annual Report on Form 10-K, its quarterly reports on Form 10-Q and other SEC filings the company releases. Actual results may differ materially from the forward-looking statements due to such risk factors 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. Steve.

Thank you Dave and good afternoon to all of you that have joined us for this WidePoint quarterly earnings and investor call today. As much as I would like to avoid being repetitive, I like to sincerely express our appreciation to all of you for your continued interest and participation in the future of WidePoint. Today we like the opportunity to share with you today our continued progress toward realizing both our tactical and longer term strategic goals and targets and of course our march towards sustainable profitability and soon thereafter attractive investment returns to our stockholders. First, I'd like to confirm our commitment to our longer term strategy of bringing to market an integrated solution set of identity management and telecommunications lifecycle managed services that will bring us a distinctive and perhaps unique cloud based software and services offering and result in competitive advantage. We will articulate and market this differentiator essentially our value proposition both to prospects and industry partners under our adopted tagline WidePoint, Your Trusted Partner, more on this in a few minutes. WidePoint second quarter financial results were marked by the impact of yet another three months of reduction in our net operating and EBITA loss and substantial improvements in our progress towards stable and recurring operational and bottom line profitability. In the second quarter we reported revenues of approximately $17.5 million compared to $17.4 million in the second quarter of 2015 and gross profit was approximately $3.4 million compared to $3.3 million last year. While this represents improvement on a year to year basis, frankly we did not achieve our internal revenue growth goal for the second quarter of 2016. Due to the delayed closing of a couple of large lower margin deals that slipped beyond our June 30 cutoff date. However those transactions…

Thank you, Steve. Hello everyone. Thank you again for joining our call today. Today in my remarks I'm going to review our second quarter results and outlook. The second quarter revenue was approximately $17.5 million compared $17.4 million in the second quarter of 2015 as a result of several factors. A carrier services grew slightly to $10.2 million over our second quarter 2015 revenue of $9.6 six million due to an increase in carrier task orders issued and delivered during the second quarter and first half of 2016. Our second quarter 2016 carrier services revenue was down from our first quarter of 2016 as carrier services revenues declined as a series of technical refreshes occurred in the first quarter and there were several other nonrecurring activities, it was not expected nor did recur in the second quarter of 2016. Our carrier services in the second quarter was a bit down from what we had expected but they were in line where with they should be at this point in our evolution with the DHS BPA. Looking out into our second half of 2016 we believe we could see this number again expand as we continue to make progress in our efforts with the U.S. Coast Guard as Steve has already noted that will drive up our carrier services revenues. However, [indiscernible] managed services did decline slightly to $7.4 million over our second quarter 2015 revenues of $7.8 million predominantly as a result of lower software reselling activities that Steve had mentioned along with the negative effects that we realized as a result of the United Kingdom's vote to exit the European common community commonly referred to as Brexit that we could not fully offset with the growth that we did realize in our higher margin products and services. It should…

Thank you, Jim. I would now like to move to open the call to questions. As outlined by Dave in his opening comments. For clarity we will be taking questions from analysts and institutional investors. In future calls we will accept pre-submitted questions from all investors as part of a modified Investor Relations process recently adopted by our Board of Directors. Operator if you can assist us by opening the line for questions and comments that would be appreciated.

[Operator Instructions]. Our first question will come from Gregg Hillman with First Wiltshire Security Management.

Steve, I wanted to ask you a question about the competition [indiscernible]. I was just wondering how you’re positioning yourself relative to some of the other companies that do similar thing like in-trust, identity trust, cyber trust. How you’re differentiated from those other players in certain space?

I think probably the primary differentiator that I would point out is not only our authorization and acceptance by the Federal government but the perceived strength and breadth of our offering both in terms of historic PIV back through this new generation what we believe is a differentiated new generation of products that's essential the focus on derived certificates and of course the emphasis on mobile utility and what we're working on with our partners in terms of embedding that capability into mobile devices. So I think our strength is our government background and acceptance and I think our pathway to success in adoption not only in the Federal government mobile environment but also in commercial applications as we move forward and there is more acceptance of that than I think our relationships with our large institutional and distribution partners will be a big differentiator for us. Does that do it for you Gregg

Yes that’s a good answer. Thank you.

Thank you, Gregg.

[Operator Instructions]. And next we will go to Mike Malouf with Craig Hallum Capital Group.

I wondered, can you just broaden a little bit and give us a little bit of clarity on the Coast Guard impact as we move throughout the next few quarters?

In all candor, Mike I don't know how much clarity I can give you on that because as you know we've been struggling for nine months or a year trying to get a beachhead. I guess that’s the appropriate term for the Coast Guard but to get initial beachhead we do know that they represent a very substantial population of users. The number and the estimates vary greatly and very frankly we're not even sure at this point that the Coast Guard knows what their total population is. Part of our exercise is to go in there with them and to establish the full inventory of their user base. I would say to you is that we view this as a two to four quarter rollout to get the maximum run rate impact of the ongoing service. The number of devices is not small but I think -- and is probably one of the larger DSA agency or sub agencies. But at this point we do not know the answer to that question. I think we'll get some clarity on it over the next 60 to 90 days but that exercise is just beginning. I'm sorry if I had more I would share it with you.

I mean after four quarters lets you know it's takes you a whole year to ramp. Do you have any kind of range you think that the impact would be for you guys?

I don’t, Jim do you?

Hey, Mike. The U.S. Coast Guard is the largest component of the DHS. You're talking you know from anywhere from 20 to god knows how many thousands of units that this would touch. So I mean that's why it's hard for us because it's just trying to go in and get our hands wrapped around it. We do know that if they deploy everything. You know it will be the major portion of this DHS BPA amount and it's right now -- we are over $300 million are already on the $600 million and we know that with you know the growth outward eat up a good percentage of that both on carrier services as well as on managed services. So I'm sorry but we just won't have that information as we really go through the process working with them over the next 60 to 90 days.

Mike, what I would just add is a footnote to that is that it brings -- it will bring substantial higher margin and managed services to the equation at a fairly sizable volume but it will most probably also bring with it substantial carrier services. We’re literally sitting in conference discussions asking them whether in fact we needed to provide all those services because it goes against everything we're trying to do on focusing on only higher margin business but it is a major customer and you know the reality is, if they want the service provided we will provide it. We will we may not make 50% on it, but we will make something like that percentage on the managed services aspect and I think we're in a position that we need to satisfy the customer

Got it. All right, thanks for that. Appreciate it.

Thanks, Mike.

[Operator Instructions]. Moving on we will go to Mike Crawford with B. Riley & Company.

Thank you. Can you comment on the five new customers in the [indiscernible] space in the quarter?

Well I can. Yes. They are an interesting array of firms across two or three -- I need to stop short of you know specifically naming at this point but they do represent I would say at least a $1.5 million in terms of total contract value and these -- on balance these are two to three year contracts. So you can sort of factor that into your thinking. I think it's meaningful. It's certainly not the U.S. Coast Guard, but I think the most significant thing Mike frankly is that we've been in the doldrums in terms of any new business pipelines and prospects and successes and in the course of this past quarter we've come up with a substantial number of them and the pipeline that we're seeing out there is very broad. So my sense is over a two to three quarter and I'm not trying to put this out there, I'm just saying it's a trend line over a two to three quarter continuation of this kind of success equation. We will make a substantial and meaningful difference to the recurring and ongoing run rates of that particular sector that being specifically the commercial market telecommunications lifecycle management piece.

Thanks, Steve. It sounds like you're having some good progression with AT&T but what about your other channel partners like Kyocera, Spikes, [indiscernible] Samsung, what's going on with those?

That’s fair enough. Actually LG was a little bit dormant for a while but now has sort of come back on gangbusters, pardon the use of the term in terms of a much higher and intensified interest level in moving forward with again embedding our capability into certain markets that they are trying to penetrate. So we're very actively engaged with them right now. Kyocera has been less so and I think that's more a function -- I think that's more a function of the pace of their penetration of their marketplace which is essentially the First Responder Marketplace with its ruggedized handset. So alive, moving more slowly, I can't be any more candid than that. Spikes has the capability to do a little bit of leap frog. We don't really know yet but we've been fairly intensively engaged with them and their people have been working very, very closely with us. We've got this actually a fully integrated capability and we're going to market right now both government and commercial. So it might be interesting to see what develops there. It could be a substantial opportunity. Little early to commit to that.

Okay. Thank you. And then the last question relates to the disclosure in your 10-K regarding the executive committee formed to explore possible transition given a planned retirement. It was written that you have at the end of this year is that something that's still a plan or what's the status of that?

Well I think it's fair to say it's inflexible [ph]. The Board essentially decided that we should extend the timelines associated with that and if you ask me honestly today there is no CEO succession plan specifically in place. However very candidly I expect that to change over some reasonable timeline but the Board's direction to me earlier this year has been very, very clear. It's -- well stop talking about that nonsense, go fix the business, make us profitable, show us that we have a strategic pathway that makes success that has you know has a guaranteed success path and then you know what, Steve will sit down and talk to you about CEO succession. That may not be in my personal best interest, but I'm pretty damn committed to making this happen.

Okay. Thank you very much.

Thank you.

And moving on we'll go to Mark Drucker with B. Riley & Company Riley and Company.

Actually my question was answered. Thank you.

Thank you. And moving, we will return to Gregg Hillman with First Wiltshire Security Management.

Yes. Could you talk about how much you've invested with some of the partners you’ve alluded in call, Samsung, AT&T, Kyosera, LG, you haven't got a return on. Do you know how much you've invested in terms of your time headcount in terms of people that are dedicated to this contracts or is this your money that you haven't got a return on yet. Is there any way you can put a number on that or in terms of the time you’ve put into it?

I know we've put in substantial time. I mean clearly not necessarily third party expenses but certainly time and resources of our people and I think -- you know I don't know honestly but I can give you a really intelligent answer or number on that. I would turn to Jim and see if he has got any feel for it at this point.

Yes. Over the past two years we've invested several millions of dollars in sales and marketing time efforts and literally time and expense into product development and integration with these parties. We don't break them out per party, but when we look at the effort in just the software capitalization that we saw this quarter it was $233,000. So we have in my best estimate invested between time and effort and money that we could've put to the bottom line $2 million to $3 million.

Yes I that hat's fair, Gregg. I don't know if that answers your question.

Over the last two years? Jim.

Yes, I recall the last year and half.

Yes. And still you’re feeling that the investment will be well worth it in terms of [indiscernible] return you're going to get over that over the next two to three years.

Yes, Gregg, we wouldn't be doing it if we didn't believe it, I'll tell you. We've been fairly selective in terms of the partners we've selected. We knew it was going to cost dollars to stay engaged with them and it has. But I do think and I think I referred to something about the maturation of some of those partnerships. I think we've done the investments spending. Sure there will be some ongoing associated with sales and marketing co-efforts but that's all toward near term revenue generation. So I think the longer term investment spending is sort of coming to an end. Most of the integration has been done. Maybe the IoT that we referenced with AT&T in 2017 might generate some additional but that will be a whole new potential revenue stream. From what we've got in place right now, we're looking to harvest and we're looking to cut down the expenses and I think we've referred to that a couple times and if not in this in an earlier quarterly calls where we talked about the fact that we do see a decrease in that ongoing expense to support those initiatives.

But Mike when you get to the end of maturation is that just means you just have a hunting license with those -- I take it they are going to sell a solution, you're not going to be selling it because you're going to have a channel partner to sell the solution to you but I mean have you been -- has there a sales staff being trained, has there a sales people who have been trained or you know the VARs that they with that they've been trained? Because Samsung and AT&T must VARs and system integrators too, right?

Well I think our experience with -- well let's pick Samsung for one because that also has some very large potential for us. The reality of what is going on is that we’re doing multiple demonstrations and multiple presentations to substantial arms of the Federal government and a few selected commercial either large customers or prospects of either Samsung or us and the truth of the matter is yes there are sales organizations and their presentation capabilities certainly dwarf ours and they lead many of these presentations. But on the other side of that equation our technical people are there and they have to be a part of this process in the same way that they invited us, our key technical people to go to San Diego to their Annual Developers Conference to ensure that we remain a part of the process and that also that their developers and their business development people are aware of our capabilities. So there's a real tight hand-holding going on and to me this is sort of call it the culmination or the fruition of the year and a half to two years investments we've had with them. So yes it's a co-sell, they are driving it but the opportunities are really large and we have a presence because we are a differentiator.

Okay. And is it possible that you could get a large contract you would say not do a press announcement it because they don't want to do a press announcement on it?

It's possible. And it's particularly possible in the government market Gregg because we have that problem even when we're trying the deals on our own. The government can be very arbitrary about what it wants released and how it wants and wants it's name used, but we're an advertised component of the Samsung solution and we are the provider of the identity management high quality solution that is embedded in there not security container. That's a significant part of the government decision process. I'm fairly confident that we will get our day in the sun.

Okay. Okay. Thanks your comments.

Thanks a lot Gregg.

And that will conclude our question and answer session for today. I'd like to turn it back to our presenters for any additional or closing comments.

Thanks, Operator. It appears we've addressed all of your questions, hopefully constructively. Operator, thank you for your assistance. As a closing comment we're really very excited about business progress, progress and our prospects for this year and for the years ahead. We thank you very, very much for your continued interest in WidePoint and our progress toward our goals at this very, very important time for the company. We do believe we're on the threshold of some significant success and we look forward to be able to talk to you about that in future quarters. Thank you very much. Again thank you for your time. We wish you all a very pleasant evening.

And once again that will conclude today's conference. We'd like to thank everyone for their participation.