Good afternoon and welcome to WidePoint’s Fourth Quarter and Full Year 2018 Earnings Conference Call. My name is Hector and I will 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. [Operator Instructions] Before we begin the call, I would like to provide WidePoint’s Safe Harbor statement that includes cautions regarding 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-K 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.

Thank you, operator and good afternoon to you all. Thank you all for joining us today to review our financial results for the fourth quarter and full year 2018. The fourth quarter was a strong finish to what was a pivotal year for our business. From a financial perspective, the quarter was highlighted by a 24% increase in revenues to $24.8 million and a 25% increase in gross profit to a $4.5 million. Additionally, our adjusted EBITDA improved from $0.3 million in Q4 of last year to $1 million in Q4 of this year, marking our sixth consecutive quarter of positive adjusted EBITDA. For the full year, revenue increased by 10% to a record $83.7 million. Our GAAP net loss for the year narrowed from $3.5 million to $1.5 million and our adjusted EBITDA improved from a loss of $0.9 million in 2017 to positive $1.8 million in 2018. As you may remember from our last earnings call, we projected $82 million to $83 million in revenues and $1.6 million in adjusted EBITDA. So we exceeded our projections that were fairly accurate. The success we achieved in the fourth quarter and in the full year is a direct result of the effective execution of our overall strategy in 2018. I am encouraged to report that we achieved our two key goals for 2018. First, we successfully completed the stabilization of the business and we began to drive strong, sustainable and profitable growth. And secondly, as I have discussed on prior calls, we completed much of the internal restructuring of the company and re-branding of our products in the first half of the year and combined our solutions offerings into a single cohesive offering called Trusted Mobility Management, or TM2. As we look into 2019, we will be focusing more of…

Thank you, Jin. As Jin mentioned in his remarks, it’s been a busy year for us and the fourth quarter of 2018 was no exception. As we announced at the end of our Q3 call, we were very pleased to have secured a contract with CSG International as a new commercial customer in the third quarter and began implementing this work in Q4. For those of you less familiar with the organization, CSG is considered a trusted partner to the top global communication services providers for both wireless and wireline. As a reminder, we are integrating our Bill Presentment & Analytics Solutions, along with CSG to deliver a joint customer communications management market proposition platform to both existing and new CSG clients. We have been working in tandem with our partner to deliver an omni-channel digital billing communications and analytics solution to both enhance the customer experience and reduce customer care costs. I am pleased to report that this implementation has been going extremely well and we expect it to continue to be fruitful for the duration of the contract. As you will have noticed from our press releases, many of the contracts we were working on in the fourth quarter actually came to fruition at the start of the new year. The most notable of these contracts, include our partnership with Leidos on the NASA’s Nest contract, our recent expansion with the U.S. Customs and Border Protection and our work with the Center for Naval Analyses. Given the timing of when these contracts manifested, many of the effects on our top line will not be visible until Q1 2019 and later. However, I would like to take a few moments to discuss how they tie into our broader growth strategy. As we have discussed on previous calls, a major…

Thank you, Jason. As outlined in our press release, we finished the year with record revenues, improved gross profit margins, narrow our net losses and produce positive adjusted EBITDA. It remains a goal of ours to eventually deliver positive GAAP earnings in future and we are continuing to make progress towards receiving that goal. Let’s now discuss our 3 month results and full year results for the full year ended December 31, 2018. For the fourth quarter of 2018, our revenue increased 24% to $24.8 million from $19.9 million last year driven by 53% growth in managed services and 8% growth in carrier services. Our managed services rose on strong end of year sales of accessories to our customers as part of our up-selling and cross-selling strategies. And carrier services increased due to the U.S. Coast Guard on-boarding. Our gross profit increased 25% to $4.5 million or 18% of total revenue in 2018 from $3.6 million or 18% of total revenue last year. Operating expense for the fourth quarter of 2018 decreased 14% to $3.7 million from $4.3 million last year driven by savings realized from our 2017 restructuring actions. GAAP net loss in the fourth quarter narrowed to $0.4 million from $0.8 million in the fourth quarter of last year. We would have been GAAP positive if not for non-recurring deferred tax expense charge of $1.2 million related to our tax basis amortization of goodwill. For the full year, our revenues increased 10% to $83.7 million from $75.9 million last year driven by 9% growth in managed services and 11% growth in carrier services. This was a direct result of current year customer implementations and expansion of managed services as mentioned by both Jason and Jin. Our gross profit increased 12% to $15.3 million or 18% of total revenue…

Thank you, Kito. Thank you, Jason. As our financial results clearly demonstrates the entire WidePoint team delivered strong financial performance retained and expanded key customer relationships and closed and implemented new customer contracts in 2018. The combination of these actions, ensure that we met our 2018 goals and positioned us for continued success in 2019. As many of our long-term investors know, we started 2018 in relatively good financial position relative to the previous year. While we still have significant amount of work to do to stabilize the business and ensure that we continue to deliver high-quality solution to our valued customers. I’m incredibly proud of the work this team has done to turn the company around in such short order. It’s taken incredible effort by even more remarkable people, many of whom are not on the call with us today. It’s worth taking some time to reflect on the efforts and achievement of our team, and I’d like to extend our thanks and gratitude to everyone at WidePoint for achieving what seemed initially like mission impossible. That said, with the successful completion of our goals in 2018, we are ready to close this chapter in our story and move on to the next chapter of our growth and profitability. WidePoint is now much stronger, more efficient and more capable company than it was almost 2 years ago. So, while we’re proud of what we’ve accomplished so far, it’s worth stating that we are far from satisfied with merely running a stable business. Your senior leadership team has personally invested a significant amount of time, effort and personal capital into this company and we have no intention of becoming complacent. We firmly believe that we’re finally in a good position to consider various long-term strategic options that are geared towards…

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Mike Crawford with B. Riley FBR. Please proceed with your question.

Thanks. Hey, Jin, given the $6 million to $9 million revenue growth guidance for 2019 combined with the improving revenue mix with greater amount of managed services including ramping up the Coast Guard at the end of the year and replacing certain contracts and then looking at these potential wins that Jason was talking about that you’re chasing early in 2019, I’m a little unclear what the sales and marketing investments are that you’re making that’s preventing the company from enjoying any operating leverage in fact having negative operating leverage in 2019 based on your guidance?

Hi, hi, Mike, this is Kito. To answer your question, one of the things that we’ve talked about on a few of the earnings calls was that, our first goal is to get to stabilize the company. As Jin mentioned in his remarks, in order to move the company forward, we do have to spend some money on sales and marketing and we’re trying to do it as effectively as we can. That means targeting people that definitely have a network and as in our business, it’s a really relationship business to get some of these long-term contracts. We’ve done a great job up to this point, but we definitely need to inject some fresh people into the mix here to try to be able to grow our sales. So, that’s one of the reasons that we’re trying to make that effort this year to get that investment and it pays off. We’ll have other ways to continue to work on growing our EBITDA and our net margin.

Okay. So, it sounds like it’s primarily increased sales and marketing personnel plus have you hired people yet so far in 2019?

Yes, as Jason – hey Mike, this is Jin, as Jason has mentioned that we did hire two senior level sales resources, but we’re also investing not only in the sales resource, we’re also looking at rebranding around our Trusted Mobility Management, our TM2. We’re also looking at revamping our website. We’re also looking at some product development as I mentioned earlier about the GovCloud. We’re looking at putting our solutions into what they call FedRAMP certified facility. So, all of these things we’re going to be investing, but we’re not going to be spending money like drunken sailors, we are going to do it very carefully, and so that we don’t hurt our performance going forward.

Okay. Thanks, Jin. And then can you provide us an update on your thoughts on when we might see an RFI and RFP for the Department of Homeland Security?

Sure. For the CWMS BPA for the Department of Homeland Security, I think we have mentioned in previous press releases that the contract was extended to June of 2019. What that does allow us to do is to sign contracts that will go out until June of 2020. With that said, the government shutdown did slow up the RFP and RFI process, so it’s – it is likely that the contract again will be extended and modified to the extent perhaps till the end of the year, but we think that the – we believe that the RFP will come out this year with an award probably towards the end of either the third quarter or the fourth quarter.

Okay, great. Thank you very much.

You’re welcome. Thank you.

Thank you, Mike.

Our next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question.

Great, thanks so much. I’m curious what total bookings were in 2018 and then with the increased investments in sales and marketing, can you quantify the value of the proposals you plan to submit in ‘19 versus submissions in 2018?

In terms of our 2018 bookings we – I think it was probably somewhere around – I want to go back and take a look, but there is a slide in our presentation deck in our investor slide and you can see that on our website, the logos that we added and it’s roughly $43 million in total contract revenue. In terms of recurring revenues, it was approximately $20 million. So, if you add roughly $20 million to our 2017 numbers, it’s kind of what you get for our 2019 projected top-line revenues. In terms of our 2019 pipeline, we have a lot of opportunities in the works. We haven’t offered any guidance in terms of what we think we’re going to close, but we’re comfortable in the forecast of $90 million to $93 million and likely we may top that mark.

Yes, very sorry, maybe I misunderstood, of course, I wouldn’t ask you to tell me how much you’re going to close. I’m more interested in how much you plan to actually bid in 2019 and how much more is it in 2018 with your increased resources?

Yes, one – this is Kito. One of the things we – in the past we haven’t really gone over our pipeline. It’s something that I know it’s definitely a very strong sticking point of our investors, but I’d like to reiterate what Jin mentioned, one of the reasons we gave guidance was to kind of give you an idea of what we think potentially might come from that. At this point in time that’s all we’re saying as far as guidance.

Okay. And then my last question is, if we look at the low-end of your revenue guidance, how much of that is coming from what’s already in signed backlog?

Well, pretty much all of it.

Yes.

So, but I mean, one of the things with our business that you look at is when Jin mentioned, when we do close these deals, a lot of these deals are long-term recurring – is recurring business for us. When we close these, we know these are – the additional win will add to our run rate as we refer to it. So, if we had – we close the year at $83 million, $84 million plus, every time we add on these deals, we just continue to add that to our annual run rate. So, that’s kind of the way we look at it on this.

So, just to be clear the $90 million represents your base of business plus the contracts you’ve already won that are ramping over the year, but you don’t need to go sign new contracts to achieve the $90 million. Is that right?

I think that’s – I think that’s a fair statement, I think the $90 million the low watermark is a – we’re very confident on that number.

Great, okay, thanks so much.

Okay, thank you, thank you, Brian.

Thank you.

[Operator Instructions] Our next question comes from the line of William Gibson with ROTH Capital Partners. Please proceed with your question.

Thank you. You commented briefly on going after a diverse array of industries and commercial opportunities. Could you give us a little more color there as specifically what industries and is it the security side that gives you a leg-up in going after these, I mean, most industries are pretty well covered?

Thank you for that question. And the answer is, we don’t have any particular affinity to any particular industry, but we do have a large footprint in industries such as healthcare, aviation, and transportation, logistics, governments, state, local. So, we do have customer base in these areas. Our applicability of our Trusted Mobility Management goes across the board, because every one of our customers and every one of these large enterprises needs to be able to say that they could provide Trusted Mobility Management. And what we mean by that is, is that we’re talking about managing our customers’ mobility assets, securing those mobility assets and providing visibility for the usage of those assets. And when we say mobility assets, as you know, there’s more and more of these computers are going mobile, there’s some 31.1 billion devices that is going to be hooking up to the Internet. So, what we do is, we provide the manageability, security and visibility for those devices, whether they’d be smartphones or machine-to-machine devices, okay. And so, yes, the security is a very important item and you will see a few press releases coming out, which in the next couple of weeks or so that puts us square in that market. And there are things that we are working with the transportation community, there are things that we are working with the healthcare community, that is a huge move for us to go into those markets and we’re leveraging our current customers in those markets. And then we’re going to continue to leverage those customers and also leverage our TM2 platform to do that. And Jason, do you want to add anything to that?

Yes, sure. Hey, Bill, it was nice seeing you the other day. But I also wanted to add to – add a little bit to that, because – so when you said going out to the commercial industry and that the industry itself pretty much has the security covered, don’t forget as we discussed the other day, there’s always different levels of security and WidePoint providing essentially the highest level of security to those commercial enterprise spaces that are specifically in the regulatory-driven environment, that’s where WidePoint has a very strong leg-up in those areas. So, for all of those commercial enterprise clients, who are going to be interacting or either interacting at the federal or the DoD level is going to require the types of Trusted Mobility Services that we bring to the table and then others who may not be directly interacting with the federal government or DoD, such as healthcare or maybe finance, they’re still going to want that PKI-enabled type security. So, I just wanted to add that as well.

Okay, thank you. And then just one follow-up, could you share some general thoughts or comments on seasonality in the business?

Sure. So, in terms of our seasonality because we do have a large portion of our business a little over 50% of our business is in the federal government. And if you’re familiar with the federal government spending, there’s a lot of spending as it heads into the new fiscal year for the government, which is usually corresponds to the fourth quarter. And so you’ll see a lot of spending towards the end of September, beginning of October and then the first quarter is a little flatter, however, this year we’ll see our first quarter will be a strong quarter not as strong as the fourth quarter, but we’ll continue to make progress, but there is definitely seasonality in our revenue and that’s because of our large government customer base.

Good, thank you.

Thank you. 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.

Thank you, operator. 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 – earnings release, excuse me and thank you again and have a great evening. We look forward to connecting with you all again on our next earnings call.