Good afternoon, and welcome to the WidePoint First Quarter 204 Conference Call. My name is Kelly, and I will be your operator for today's call. Joining us for today's presentation are WidePoint's President and CEO, Jin Kang; Chief Revenue Officer, Jason Holloway; and Chief Financial Officer, Robert George. Following their remarks, we will open up the call for questions from WidePoint's publishing analysts and major investors. If your questions were not taken today and you would like additional information, please contact WidePoint's Investor Relations team at wyy@gateway-grp.com. 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-Q 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, everyone. Thank you for joining us today to review our financial results for the first quarter ended March 31, 2024. Before I begin, I wanted to share that this earnings call will be relatively brief given that we provided an extensive overview just 1.5 months ago. Nonetheless, our team has been very busy executing our corporate mission, and we're excited to share some of the recent development with you all. With that said, let's dive in. We concluded the first quarter on a strong note, slightly ahead of our forecasts with encouraging sequential quarter-over-quarter and year-over-year improvements across revenue, adjusted EBITDA and free cash flow. Our revenue, adjusted EBITDA and free cash flow were $34.2 million, $573,000 and $566,000, respectively. Bob will provide additional details on these remarkable improved financials in his financial summary. Additionally, we achieved our 27th consecutive quarter of positive adjusted EBITDA. These achievements are largely attributed to the success of our sales and marketing initiatives, which we outlined in the previous earnings call and intend to aggressively continue pursuing throughout 2024. In the first quarter, we saw over 18 contractual actions totaling approximately $22.7 million in contract value. A majority of these contracts consisted of federal government agencies, including the U.S. Department of Homeland Security, U.S. Customs and Border Protection, the National Science Foundation and the Transportation Security Administration. This success underscores our commitment to delivering integrated solutions tailored to the unique needs of our customers. We have strategically positioned each of our solutions to complement and enhance one and other, while leveraging our as a service business model to ensure a seamless approach to secure mobility management. As a result of our laser-focused approach of a more proactive sales and marketing strategy, we have more recently conducted advanced talks…

Thank you, Jin, and thanks to everyone for joining us today. I'm pleased to share the details of our first quarter 2024 financial results. As Jin mentioned earlier, we delivered a strong quarter, being slightly ahead of our general forecast, recording the second consecutive quarter being free cash flow positive, a trend we anticipate carrying across 2024 and beyond. With that, I'll now give a breakdown of our first quarter 2024 results compared to the first quarter of 2023. Total revenues for the quarter were $34.2 million, up 35% from the same quarter last year. Our carrier services revenue for the quarter was $19.3 million, an increase of 44%. Our managed services revenue for the quarter were $8.7 million, an increase of 27%. The increase in both carrier and managed services revenue was due to new federal contracts signed in the third and fourth quarter of 2023, which recorded a full quarter of revenue in 2024, but did not have any revenues in the first quarter of 2023. Billable services fees for the quarter were $1.2 million and remained relatively constant period to period. Our reselling and other services revenue for the first quarter were $5 million, an increase of 38%, primarily due to an increased variety of products we offer for sale. I do want to highlight that reselling and other services are transactional in nature and the amount and timing of revenue could vary significantly from period to period. Gross profit in the first quarter was $4.6 million or 14% of revenues compared to $3.8 million or 15% of revenues in 2023. The slight decrease in gross profit margin percentage is related to increased amortization expenses as our delivery platforms are placed into service and increased reselling revenues, which carry lower margins. The more significant metric of gross…

Thank you, Bob. As evidenced by our remarkable improvements in our financial performance, our healthy contract backlog, new contract awards and a growing sales pipeline, our future is very bright. I look forward to providing additional contract award announcements and other positive news about our company going forward. That concludes our prepared remarks, and now we'll take questions from our analysts and major shareholders. Operator, will you please open the call for questions?

[Operator Instructions] Your first question is coming from Barry Sine with Litchfield Hills Research.

First of all, on Spiral 4, congratulations on winning that contract. A number of questions about that. Obviously, government contracts are not as straightforward for investors to understand, and you can't really take them at face value. So here's what we know, $2.7 billion over 10 years. So does that equate to $270 million a year and then you're 1 of 77 participants. So does that mean you get 1/7 of that? Or how does that work? And then finally, on that contract, would that include any carrier services, 0 margin pass-through? Or is that all managed services?

Very good question, Barry. So the answer to your first question is at $270 million per year. The first base year is funded at $270 million. But I think that, that could change depending on how many task orders that can come out. Your second question is about there are 7 winners on the contract. Does that mean you will end up being -- you'll get 1/7 of the revenue? No. It depends on how successful we are on the various task orders that will be coming out. So the way the contract works in these IDIQ situations is that they will be issuing little tiny sort of small task order RFPs as the contract period of performance continues. And each vendor -- each of the 7 vendors will be able to bid on these little task order RFQs that come out. And whoever has the best solution for that particular task order will be awarded the task order. I think I answered your questions. Does that answer your questions?

To what extent does it include 0 gross margin pass-through carrier services in that contract? Or is it all managed services?

Right. For us, we will be bidding on all of the managed services task order. And sometimes the customers may wrap in the carrier services and merge in the managed services with the carrier services. But this contract is a little bit different than the DHS contract where the carrier services must be all pass-through. This contract will allow for some fee on top of the carrier services. So it will depend on how the task orders are structured. We don't know as of yet. We -- there's been a lot of speculation around this contract. And we will provide some additional color as some of these task orders come out, and we will know a little bit more. But it will be very difficult for us to gauge that at this point. But we believe that this contract will be more profitable because the managed services is merged in with the carrier services.

Okay. And last question on this contract. You mentioned that there were 7 winners of which you're 1, and that included the 3 big wireless services companies. I don't know if this has been publicly announced by the Navy or not. But who are the other managed services companies that you'd be likely competing with on each of these task orders?

Yes. There's AT&T, T-Mobile, Verizon, a company called MedTel who we partnered with from time to time. There was Hughes Telecommunication. And there was one, a small mobile device management provider. And I don't quite recall the other one, but it is published along, it's in the Navy release. So you could just do a quick Google and you should be able to find who the other vendor wise.

Okay. The next question is you announced $350 million backlog at this point. Could you kind of define or give us a definition of how you include that? I assume that's not just 1 year, that's over multiple years. And then you talked about some things like FEMA is already out there with $60 million. I assume that's in there. What -- when you say $350 million, can you better understand what that means?

Sure, sure. The $350 million does not include any of the Spiral 4 task order that is contemplated. Our contract backlog includes contracts that are signed and some of them are multiyear contracts. And so these are contracts that we -- the $350 million includes only the contracts that we've already executed with the customer and that's what's included in our contract backlog.

Is the FEMA that you mentioned $60 million over 3 years, is that fully included or not included? Or how does that work in...

FEMA, the $60 million is included in our contract backlog, yes. I just did a quick look up on the Navy release. It's the 3 main wireless carriers, Hughes Network Systems, Real Mobile and us, WidePoint. So there's -- that's all of the 7 carriers.

Okay. And then shifting gears again. Over the last year, you've made a number of significant investments in both people and technology, and it's starting to show in terms of new contract wins. Could you tell us where we are in that process of those investments starting to bear fruit new revenue. You just had a very good quarter, but I assume there's a lot more as a result of those investments in the pipeline.

Yes. We made some significant investment in capital and refurbishing and enhancing our delivery system, our IT system, and all of those are materially completed, as you've seen the improvement in our profitability. And so in terms of our investment in sales and marketing, we made some key hires, and we're continuing to hire. Especially, we're looking for resources in the D.C. area. We have several folks that we are quoting right now that have some significant network and Rolodex to use an old terminology. And so we're looking to hire some additional folks, but we have higher sales and marketing and account management ranks, and those are the folks that are filling our sales pipeline, and that's going well.

And on the same topic, but maybe for Bob. On the new hires, sales and marketing expense went up about $90,000 year-over-year. Is that a result of the -- some of the new hires Jin just talked about, do they show up in that line item or are they also in the G&A expense?

They're in the sales and marketing line. And there's a tick up of $100,000 roughly. It will be higher when you get a full year of salaries in there.

Okay. And then the impact on capital spending. If I look at the delta between your EBITDA guidance and your free cash flow guidance, CapEx looks like it's to be pretty minimal this year. So it looks like the capital spending part of those investments is largely complete, correct?

Yes, that's absolutely correct. And it rounds to $100,000. I think it's maybe a little higher than that, like $120,000, but that's what we plan to spend on just regular IT items and refresh.

And then my last question, again, for Bob. You've given guidance on several key line items. How does that translate into the impact on GAAP net income, EPS? I know you still have parentheses around EPS numbers. And I know it's a lot less relevant than EBITDA or free cash flow. But what -- how might that translate into the march towards positive bottom line net income?

It translates pretty linearly in terms of whatever the delta is on D&A and stock-based comp subtracted from EBITDA to get to net income. We're not booking tax expense for all intents and purposes. So it's -- if you look at D&A and stock-based comps, that's really the difference to get into net income.

And you're not comfortable giving EPS guidance at this point? Or you're not giving EPS guidance at this point, correct?

Not at this point, but I just don't -- I don't have it right in front of me, so I don't want to just go off the cuff.

Okay. I just want to make sure I have my numbers right. Those are my questions.

[Operator Instructions] While we for any additional questions, there were some previously submitted questions that I will read out loud for WidePoint management. There have been a lot of speculation around your new contract with the U.S. Navy, namely Spiral 4 contract. Can you provide any additional color on this new contract and what it could mean to WidePoint?

Thank you, operator. I think we covered this question, but I'll cover it again. It's been approximately a week since the award was made to 7 winners. We are the new kid on the block. However, that gives credence to the quality of our solution and business model to be among the awardees, amongst some of these larger competitors. We are busy putting together a program management office for a full core press so that we can put a full core press to capture work under this contract vehicle. This is a $2.7 billion contract. So capturing even a small portion of the contract would have a large impact on our business.

The next question, can you give us any additional status on your cybersecurity solutions, one that is quantum computing resistant?

Thank you, operator. This is Jason Holloway, and I'll provide that answer. So I'm excited to say that WidePoint continues to make progress with our cybersecurity solutions. For example, WidePoint recently began issuing derived digital certificates on the smartphones for a major federal agency that will no longer require a mobile device management or as known as an MDM solution. So the MDM solution was not secured because the credentials were issued over the air on to the MDM container on the smartphones. So although we are in the early stages of adoption, this is still a testimonial that WidePoint is progressing and eliminating the good enough solutions. So I encourage everybody to stay tuned for additional information.

Your next question. On your last call, you mentioned in your remarks that you have won another contract with the federal government that may grow into one of your largest government contracts. Can you please provide additional details?

Thank you, operator. We can't mention any end customers name at this time, this particular one anyway. However, we can mention that this award was obtained through one of our strategic partners, and our strategic partner program is going well. And we displaced one of our main competitors. I won't give out the names, but it's within the telecom life cycle management. I don't want to give them any credit or credence, so I won't mention their name here. The implementation is ongoing, and we are optimistic that this contract will grow beyond this initial award of contract value, and we'll rival our DHS contract in managed services revenue, hopefully in the near future.

And the final question is, you mentioned in our comments that your sales pipeline is large and growing. Can quantify or provide some additional color on this front?

Sure. At a high level, the sales pipeline is absolutely growing. And it's at a level that we haven't seen in recent memory if at all. I will not comment on specific opportunities. However, suffice it to say there are material opportunities in the pipeline, and we look forward to providing updates of awards through our press releases. I cannot be more definitive because as you can imagine, it is difficult to predict, excuse me, when or if we will receive contract awards or any particular opportunity. But again, stay tuned.

At this time, this does conclude our question-and-answer session. If your question was not taken, please contact WidePoint's IR team at wyy@gateway-grp.com. I'd now like to turn the call back over to Mr. Jin Kang for any closing remarks.

Thank you, operator. We appreciate everyone taking the time to join us today. As the operator mentioned, if there were any questions that 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.

Thank you for joining us today for WidePoint's First Quarter 2024 Conference Call. You may disconnect.