Good afternoon. Welcome to WidePoint's Fourth Quarter and Full-Year 2019 Earnings Conference Call. My name is Jess 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 Executive Vice President and CFO, Kellie Kim. Following their remarks we will open up the call for questions from WidePoint's publishing analysts and major institutional investors. If your questions are not taken today or you would like additional information, please contact WidePoint's Investor Relations team at wyy@gatewayir.com. Before we begin the call, I would like to provide WidePoint's Safe Harbor statement that includes cautions regarded 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 available for replay via a link in the Investor Relations section of the company's website at www.widepoint.com. I would now 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 everyone. Thank you for joining us today to review our financial results for the fourth quarter and full-year 2019. The fourth quarter of 2019 was a strong finish to what has been a pivotal year for our business. From a financial perspective, the quarter was highlighted by 13% increase in revenues with $28.1 million and adjusted EBITDA of $1 million, which is in line with the same quarter 2018. Additionally, Q4 2019 marked our 10th consecutive quarter of positive adjusted EBITDA and the highest fourth quarter revenue in company history. The positive financial results of the fourth quarter along with our success throughout the year, ensure that we not only matched, but in some instances exceeded our financial targets for the year. For the full-year 2019, revenue increased 22% to $101.7 million, well above our original guidance and above the $95 million in revenue we were targeting in December. Our adjusted EBITDA came in at $3.6 million which is right at the top end of our guidance range and 98% higher than our adjusted EBITDA in 2018. Additionally, we recognize net income in 2019, which is a substantial improvement from the $1.5 million net loss we recognized a year-ago. We're obviously pleased to be exceeding the expectations of our revenue, which we updated at the end of last year. But it's worth noting that much of the revenue increases in both the fourth quarter and the full-year were driven by carrier services. This trend is similar to what we witnessed in the third quarter and which we discussed during our last call. As a reminder, carrier services is low margin business that is a necessary component of mobility management services. So while these revenues may artificially suppress our margin profile, taking on this…

Thank you, Jin. As Jin mentioned, our revenue growth in 2019 was driven predominantly by two factors: the census address canvassing support occurring in the second half of the year and the successful execution of our sales strategy throughout the entire year. In each quarter of 2019, we announced material contracts which speak to our ability to expand deployments with current customers by cross-selling and up-selling our services and our capacity to leverage the power of our systems integrator partners to expand our footprint in new markets. During the first quarter, we received a $1.6 million expansion order from the U.S. Customs and Border Protection or CBP. With this contract, CBP, which was already a customer, expanded their wireless footprint and increased their work with us by approximately 50%. Shortly afterwards, we announced that we had partnered with Leidos and was part of their winning bid on the NASA NEST contract. This is a major example in 2019 of our ability to successfully leverage the well-capitalized sales teams of a systems integrator partner to win new business for WidePoint and expand our brand awareness. During Q1, we were also able to expand our service offerings with CNA, a longtime identity management customer, to include wireless and wireline telecommunications management. In the second quarter, our subsidiary Soft-ex renewed its contract with a global communications service provider. This contract is adding $6 million to our top line over a 3-year period. As we work in tandem with the CSP to deliver cloud and onsite telecom and analytics solutions for the CSP's client base. And later in July, we announced that we had secured several contract renewals and modifications from current federal government customers, which added $5.3 million to the top line. In Q3, we received an aggregate of $14.7 million in contract…

Thank you, Jason. As noted in our earnings release, we finished the year with record revenues, produced positive adjusted EBITDA for the 10th consecutive quarter and the full-year and earned a positive net income for the full-year 2019. Turning to our results for the fourth quarter and full-year of 2019. Fourth quarter revenue was $28.1 million, up 13% from the $24.8 million reported last year. Year-over-year growth was primarily driven by increase in revenue from carrier services. Our gross profit for the fourth quarter increased 6% to $4.8 million from $4.5 million in the fourth quarter of 2018. Gross margin was 16.9% in the fourth quarter, compared to 18.1% in the fourth quarter of 2018. The decrease in gross margin was driven by the increase in carrier services revenues previously discussed. In the fourth quarter 2019, operating expenses increased by 19% to $4.5 million from $3.7 million in the fourth quarter of last year. As a percentage of revenue, operating expenses amounted to 15.9% of revenue, slightly up as compared to 15.1% in the fourth quarter of 2018. For the fourth quarter 2019, GAAP net loss was $34,000, an improvement from a loss of $412,000 in the fourth quarter of 2018. On a non-GAAP basis, adjusted EBITDA for the fourth quarter 2019 of $1 million was in line with last year. Now let's give you a more detailed overview of the full-year 2019 financial performance. We had record revenue of $101.7 million, up 22% from $83.7 million a year-ago. This performance was driven by 37% growth in carrier services, which was slightly offset by 2% decline in managed services. The increase in carrier services was primarily due to the U.S Census Project. The decrease in managed services was primarily due to a decline in products resale revenue, which was partially…

Thank you, Kellie, and thank you, Jason. Before we open the call to questions, I will address a few more important points about which I know many of our shareholders are curious. The first is our progress on receiving a FedRAMP certification. The FedRAMP certification is currently tied to our CWMS recompete. Once the full award is announced and assuming that we win, we anticipate DHS will provide the required sponsorship to begin the FedRAMP certification. We are also seeking a Fed sponsorship through our customer and the Department of Defense. While we wait for our sponsorship, we are preparing our system and the necessary documentation and work products for the eventual FedRAMP certification process. We have engaged with one of our partners who is a subject matter expert in FedRAMP certification to help us prepare these documents and work products to get ahead. On the process, one sponsorship has received. The good news is that we still maintain our authorization to operate or ATO from DHS, which is a testament to the quality of the security posture of our delivery system ITMS and our ability to meet the requirements of FedRAMP certification. We have ATOs from both DHS and the Department of Commerce. So overall, 2019 was another successful year for WidePoint, and we enter 2020 with a great deal of momentum. In large part due to the census and the NASA NEST projects, which are now running at full speed. However, there's obviously a great deal of uncertainty in the world at this time. COVID-19, has had a material impact on all of us. And the second order effects on the global economy have been unprecedented. For those reasons, the management team and the Board of Directors have concluded that it will be prudent to suspend issuing guidance…

Certainly. [Operator Instructions] We'll go first to Mike Crawford with B. Riley FBR.

Thank you. To the extent in the last few weeks or any guide, can you just comment on how your operations have changed in the coronavirus infested world?

Yes. Hi, Mike. Thank you. Thank you for that question. And you know we have been working diligently to make sure that we cover the basis in terms of making our organization more resilient and more remote. All of our -- a lot of our folks -- most of our folks are working off-site, and luckily we're able to do that. We are taking advantages -- advantage of various technology where we are able to take our computers home, take our handsets home and to be able to field all of the questions. And I think we're relatively well-placed and well insulated. As I said, our customers are large federal agencies and commercial customers. And we count among some of our customers, customers like NIAID, for example, National Institute of Allergy and Infectious Disease; CDC, Centers for Disease Control and Prevention; Health and Human Services; USAID -- I mean, USACE Army Corps of Engineers, who is now building some emergency hospital shelters; DHS and CBP, Border Crossings, et cetera. And so I think we are well placed, but because they may be receiving some additional missions, I think that there's little risk in the agency shutting down and on the contrary, there may be some additional reliance on these mobile devices. And that's what we're doing as well, we're relying on our mobile devices or smartphones. And so I think things are -- we're relatively well insulated, but we have noticed that over the last, a week or two we’ve seen our help desk call volumes go up for some of these customers. However, we have also seen commercial customers call volume go down. I think that that's because a lot of the folks are either working remotely or perhaps they're taking a leave. And also we have seen our order volumes for accessories go down a little bit and we are getting a lot of mixed signals because the call volumes are going up, orders are going down. So things are changing, almost hourly. So we are keeping a very close eye on the situation. So stay tuned. But in terms of our ability to manage our mobile workforce to be able to work off-site, so far it's been very smooth. And we thank our IT department for making sure that all of our infrastructure is in place for that.

Okay. Thank you.

Does that answer your question?

Yes, yes. Thank you. So getting back to the DHS. So I would imagine the more penetrated you are with credentialing and other identity management solutions as opposed to just pure phone life cycle management, that you would -- that would embed you more with the customer. And so are there any metrics you can place around that aspect of the work that you're doing for DHS now that you believe will continue to be included in this awaited RFPs?

Right. So, I think we have -- I wouldn't say a motor [ph] lock, but I think we’ve got a pretty good, hammerlock on the DHS, telecom lifecycle management scope of work. What we have been making a little bit of progress is, is that we have been working with a contractor that is handling the issuance of all of the digital certificates for DHS. And we are acting as their certificate authority. And what that means is, is that when they issue these certificates, they use our certificate authority and they pay us a fee in order to use that service. So we are making progress, we're working with the credential issuer. I won't name the name here today, but suffice it to say, we are making progress on that front.

Okay. Thank you. And just a last question. When you talked about this the 3 -- $6 million, 3-year SaaS analytics win, is that incremental business with the carrier or is that the run rate that you're already doing with the customer?

I think you're talking about the software-as-a-service the part that Jason was talking about is, much of it is the rewin and reupping of our contract with DHS and to task orders. Jason, did you want to add to that?

Yes, Jin, what it is, it's with Soft-ex and that's where it's renewed with the contract with that CSP provider.

Okay.

So that -- yes -- sorry go ahead, Jin.

Okay. Sorry about that, Mike. That one is our work with British Telecom. And that's for -- providing our software-as-a-service. And it's actually not software-as-a-service, but more of a licensing model for that one. And so that's a renewal of the contract and actually it's a small expansion of that work. And so that's -- we just recently resigned British Telecom for that and that's a 3-year contract.

Okay, great. Thank you very much.

Okay. There is one other thing that I would like to mention on the coronavirus, and you probably all saw the release news pieces on the census being delayed. I believe the census responses have now been delayed for two weeks, but I'd like to give it a little more status on that. And essentially, what's happened there is that the census response for the forms then has to be returned they gave two weeks extension for now. We are business as usual based upon the latest guidance from census. We are hiring and we're providing training to all of our customer support staff and we are staging devices. For now, we are being asked to prepare to roll out on schedule. However, the situation is changing daily, so stay tuned. We think that a lot of the schedule will be delayed, but the enumerators will still go out to do the enumeration and collecting of the data. I think the schedule will be squeezed down during the data analysis portion of the census. So we feel that the revenue stream should not be interrupted at this point as far as we know. But it could be. So, we will provide you any updates on that as they come.

[Operator Instructions] We will move next to Barry Sine at Spartan Capital Management.

Hey, good afternoon, Jin and welcome aboard, Kellie.

Well, thank you very much, Barry. Appreciate that.

And congratulations for getting the 10-K out so timely in your first quarter, a lot of companies are not going to manage that feet.

Thank you.

Thank you again. It was a pleasure. The process was fantastic.

I want to delve a little bit into the revenue that you just reported for the quarter. The breakdown on page 35 in the 10-K, you have the breakdown between carrier and managed. And as you called out carrier, very low margin, managed is really the reason why you're in business. We did see a decline for the year and a more significant decline for the quarter in managed. And if I look at the 10-K, you do break managed out into three categories and reselling was down. Could you talk about that break down, and why managed services revenue declined for the quarter and for the year?

Certainly. Barry, I appreciate the questions. In terms of managed services, we spell out in page 35 in the 10-K in three categories: managed services fees, billable service fees and reselling and other services. Included in managed services fees is also sale of accessories to primarily for existing customers who have managed services with us. So when there is a fluctuation in accessories that does vary from quarter-to-quarter and year-to-year. And so, although there was a growth in managed services its sort of muted by the timing in the accessory sale. So in two 2018 we had a pretty good increase in accessory sales to several agency of DHS and that's in repeat in 2019. So that -- that's primarily the reason with the 10-K. In the fourth quarter ending December, I'm not able to give out that breakout at this time. That is something we're considering to break out in the 10-Q. And so stay tuned for that.

Okay. That's helpful. Jin, I really appreciate obviously everybody is struggling how to communicate in this period of uncertainty. I really appreciate your candor. Couple follow-up questions on your comments, if you don't mind. I was going to ask you about some of the government agencies that you serve that might benefit what you've already done. So if you can give us a reminder, typically on your contracts if an agency, say, let's say CDC increases the number of devices they're using. Does that increase your revenue, or is your revenue fixed regardless the number of devices or does it vary by agency?

It does increase our revenue because our build -- our business model, our cost model is that we charge them per device per month. So as the number of devices go up, that will increase our revenue respectively, corresponding increases.

Okay. And then on the flip side, potential challenges as a result of the current situation, I'm particularly interested in commercial enterprises. And again, on page 36 in the K, you did have -- already have a down year in 2019. I know you've called out American Airlines as an example of commercial. So could you give us a little more sense of what you're looking at, in terms of commercial and what drove that decline in 2019 in commercial revenue?

Barry I will take that question. So in -- it goes back to even before 2018 when the current management took over in 2017, they evaluated the businesses, lines of businesses and where the business was low margin and did not make sense to continue, those contracts were not pursued for continuation. So in 2018 there was still revenue tail left and in 2019 a lot of the low margin commercial consulting business was discontinued. So we didn't pursue the renewal. And so that's really the drop in the commercial business in 2019.

And then looking forward, the prospect for losing additional business, the customer like American Airlines, I think you've called out what you do with them, if you can refresh our memory.

In terms of the commercial, what we did for the American Airlines was we provided them all of the infrastructure for their digital certificate issuance and maintenance. And so that one went away because the American Airlines decided to bring that work in-house. And so it wasn't like we lost it to a competitor, but -- I believe because of the security environment at the time with all of the Boeing 727s having issues, they wanted to make sure that this -- they believed that this they could keep it more secure by bringing it on to their side. We still maintain the certificate authority business, but they took the O&M piece, which is the hardware and the software piece. They will be moving that to their facilities this year.

Okay. And then, Jin, your comment on your census contract. There's already talk, for example, about during the election on an all by mail basis. So it sounded like the 10-year of your comment that if they went to a virtual centers and they -- they eliminated sending census takers out in the field to eliminate the risk of exposure, there would be a revenue hit to you if that happened?

That would definitely be a revenue hit. But the reason why they send out the enumerators is because the folks, when they get these census forms and now all of the census actually is sort of conducted online. You do have the option of sending in your paper forms or there's a website that you can go to, to provide that same information. So it's -- the census is, I think what they're thinking is they're going to get a similar response, so they will have to send the enumerators door-to-door because for several reasons. One is, is that not everyone have -- they have connection to the Internet and not everybody take it so seriously to respond to the census. And so it's the census estimate that they're going to be training up -- I think, at the last count, they've already trained up some 600,000 enumerators because they feel that some of these folks are going to fall by the wayside because of the virus pandemic. But they're still on track to rolling out -- half a million plus devices. So, we believe that they're going to roll these devices out. But you're right, if they decide that, we're going to only go and use the online portal to accept the census data, that could be a huge hit to our managed services fees.

Okay. And then you also talked about in terms of an opportunity, there's a lot of folks that are either working at home or students, in school, at home. So that's a potential opportunity for you. One challenge that I want to ask about, however, let's say a major school district came to you and said, we want to send iPads out to all of our students. You guys will be well positioned to take a contract like that on. But I'm wondering, I'm already hearing shortages of -- Apple had shortages producing phones and got BestBuys out of stock on laptops. Is there an issue getting devices that you're seeing? Is that your responsibility, or is that the customer's responsibility?

Well, as I said in my remarks is that if there is a protracted downturn in terms of the supply chain where they cannot get these mobile devices from China or other developing countries where they're developed, but they're producing manufacturing these devices, that could be a negative impact. And I don't know what the supply is out there. We have not experienced any issues of getting devices and accessories and equipment, yes. But that doesn't mean that there won't be. But so the answer is, if there is a long, protracted downturn and there's a disruption to the supply chain, it could definitely impact us. But as you said in your first part of your question is, could that represent an opportunity for us? Absolutely. We are geared towards putting out the mobile devices and devices that are -- that allow our workforce to work remotely, study remotely, and also helping them secure those devices. And so that's right in our wheelhouse.

Okay. And one more question, if you'll indulge me.

Of course.

Just in terms of the guidance you issued, fully understandable you're not going to throw out full-year guidance. But on the 1Q guidance, revenue of $26 million to $31 million where 92% of it weigh into the quarter in terms of business days. And that's a very wide range. Why the wide range when you're going to be closing that quarter next week?

Well, we have one more month, March and with the ramping up of census projects, there is a huge uptake in carrier services. And the carrier services volume, we know what it is. We know estimations, but we don't know the airtime involved in them. And so that will continue in terms of the huge variance or gap and our revenue projection will vary because of that. But it will, yes just …

Yes, I mean, the timing of the activations of these devices and when they're going to start using them, we don't have all of those numbers yet. And so it could be a huge number where -- and it all has to do with the carrier services portion of the revenue where we've got a pretty good handle on where the managed services piece is going to be. But it's difficult to measure where that carrier service is going to be.

So you have to wait to get the data back from the carriers to see what kind of usage your customers had, whether it was heavy or light?

Correct. You hit the nail on the head right there, yes, exactly.

Okay. Understood. Thank you for taking all those questions.

You're welcome. I did get some additional information. It looks like so far for the census, there's roughly 11 million people have completed it electronically. So there's still plenty to go. And they did extend the due dates for the census for a couple of weeks. So let's see how that goes. But my guess is that there's going to be a big requirement for the enumerators to go out there and collect this information.

At this time, there are no other questions holding, that will conclude our question-and-answer session. If your question was not taken, please contact WidePoint's IR team at wyy@gatewayir.com.. I now like to turn the call back to Mr. Kang for any closing remarks.

Thank you, Jess. There is one other item that I like to cover. And this is -- was a last minute entry here. There was a contract that we are currently bidding on. We are a team with a company called General Dynamics. It was for the Navy, Marine Corp. NGEN-R contract, also known as NGEN II. And if you are following the award for that contract was is that, that contract was announced to be awarded to a company called Leidos. That contract award is currently under protest and we are teamed with the company, as I said, General Dynamics. And so we still are hopeful that we may get a part of that award. However, we are working and we are utilizing our relationship with Leidos because we have relationships with them on the NASA NEST Contract and that contract is going very well. And so we are trying to get on that team as well. And so regardless of how this protest goes, we may have an opportunity to provide enterprise mobility management services on the NGEN II contract. So let me finish with that. And so, again, thank you, operator, and we appreciate everyone taking the time to join us today. As the operator mentioned, that 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 release. Thank you again and have a great evening. And please be careful and practice your social distancing and hope to see you all at the next quarterly earnings call. Thank you very much.

Ladies and gentlemen, we thank you for joining us today for WidePoint's fourth quarter and full-year 2019 conference call. You may now disconnect.