WIDEPOINT CORP

Previous wording

Revenues. Revenues for the three month period ended June 30, 2024 were approximately $36.0 million, an increase of approximately $9.3 million (or 35%), compared to approximately $26.8 million in the same period in 2023. Our mix of revenues for the periods presented is set forth below:

Current wording

Revenues. Revenues for the three month period ended September 30, 2024 were $34.6 million, an increase of $8.9 million (or 35%), compared to $25.7 million in the same period in 2023. Our mix of revenues for the periods presented is set forth below:

Previous wording

Our carrier services revenue was $20.4 million, an increase of approximately $6.2 million, as compared with the same period in 2023. The increase in carrier services revenues over the same period last year is a result of new US government contracts, that were signed in the second half of 2023, which provide for WidePoint to pay for carrier services on the US government’s behalf, which are reflected in the three-months ended June 30 2024 results.

Current wording

Our carrier services revenue was $22.4 million, an increase of approximately $7.7 million, as compared with the same period in 2023. The increase in carrier services revenues over the same period last year is a result of the recognition of revenue from new federal government contracts signed at the end of 2023.

Previous wording

The increase in managed service fees was primarily due to new federal and commercial customers signed in the third and fourth quarter of 2023.

Current wording

The increase in managed service fees was primarily due to new federal and commercial customers signed in the fourth quarter of 2023.

Previous wording

Reselling and other services increased by approximately $1.5 million from the same period last year primarily due to increased demand and activity for items we resell to our customers. Reselling and other services are transactional in nature, and the amount and timing of revenue will vary significantly from quarter to quarter.

Current wording

Reselling and other services were $2 million and increased by $0.6 million from the same period last year primarily due to increased demand and activity for items we resell to our customers. Reselling and other services are transactional in nature, and the amount and timing of revenue varies from quarter to quarter.

Previous wording

Cost of Revenues. Our cost of revenues include employee labor, excluding fringe benefit costs, and subcontractors directly associated with satisfying customer performance obligations, and the associated cost of products and third-party software that we resell to our end customers. Cost of revenues also includes depreciation and amortization of capitalized software related to delivering our solutions. Cost of revenues for the three month period ended June 30, 2024 were $31.1 million (or 86% of revenues), which is consistent as a percentage of revenues with $22.8 million (or 85% of revenues) in 2023. Included in cost of revenues is carrier costs paid on behalf of our DHS customer of approximately $20.4 million and $14.2 million for the three month periods ended June 30, 2024 and 2023, respectively.

Current wording

Cost of Revenues. Our cost of revenues include employee labor, excluding fringe benefit costs, and subcontractors directly associated with satisfying customer performance obligations, and the associated cost of products and third-party software that we resell to our end customers. Cost of revenues also includes depreciation and amortization of capitalized software related to delivering our solutions. Cost of revenues for the three month period ended September 30, 2024 were $29.9 million (or 86% of revenues), which is consistent as a percentage of revenues of $21.8 million (or 85% of revenues) in 2023. Included in cost of revenues is carrier costs paid on behalf of our federal government customers of approximately $22.4 million and $14.6 million for the three month periods ended September 30, 2024 and 2023, respectively.

Previous wording

Gross Profit. Gross profit for the three month period ended June 30, 2024 was $4.9 million (or 14% of revenues), as compared to approximately $3.9 million (or 15% of revenues) in 2023. The slight decline in gross margin as a percentage of revenues in the second quarter of 2024 compared to the same period last year was related to increased amortization expenses as our delivery platforms are placed into service.

Current wording

Gross Profit. Gross profit for the three month period ended September 30, 2024 increased by $0.8 million to $4.7 million (or 14% of revenues), compared to $3.9 million (or 15% of revenues) in 2023. The slight decline in gross profit as a percentage of revenues in the third quarter of 2024 compared to the same period last year was related to increased Reselling and other services, which have lower gross margins and to a lesser extent increased amortization expenses as our delivery platforms are placed into service.

Previous wording

Gross profit excluding carrier services for the three month period ended June 30, 2024 was 31% compared to 31% in the same period last year.

Current wording

Gross profit as a percentage of revenue excluding carrier services for the three month period ended September 30, 2024 was 38.4% compared to 35.1% in the same period last year.

Previous wording

**Sales and Marketing.Sales and marketing expenses include employee labor, excluding fringe benefit costs, and sales commissions associated with our sales force, commission fees paid non-employee sales agents and partners, and costs associated with travel and trade shows.**Sales and marketing expense for the three month period ended June 30, 2024 was approximately $0.6 million and remained relatively constant at 2% of revenues, as compared to approximately $0.5 million to 2023.

Current wording

**Sales and Marketing.Sales and marketing expenses include employee labor, excluding fringe benefit costs, and sales commissions associated with our sales force, commission fees paid non-employee sales agents and partners, and costs associated with travel and trade shows.**Sales and marketing expense for the three month period ended September 30, 2024 was $0.5 million and remained relatively constant at 2% of revenues, as compared to $0.5 million to 2023.

Previous wording

General and Administrative. General and administrative expenses include employees in finance, human resources, information technology, and other administrative support functions; employee labor not associated with any single revenue producing activity, all company fringe benefits, including paid time off, employee health and medical insurance, 401k matching contributions, and payroll taxes. General and administrative expenses also include professional services to include audit, consulting, outside legal, and outsourcing services. Certain of these expenses, including those associated with the operation of our technical infrastructure as well as components of our operating expenses, are generally less variable in nature and may not correlate to the changes in revenue. General and administrative expenses for the three month period ended June 30, 2024 were approximately $4.5 million (or 12% of revenues), as compared to approximately $3.8 million (or 16% of revenues) in 2023. The dollar increase during 2024 primarily relates to an increase in share based compensation expense compared to the same period last year.

Current wording

**General and Administrative.**General and administrative expenses include employees in finance, human resources, information technology, and other administrative support functions; employee labor not associated with any single revenue producing activity, all company fringe benefits, including paid time off, employee health and medical insurance, 401k matching contributions, and payroll taxes. General and administrative expenses also include professional services to include audit, consulting, outside legal, and outsourcing services. Certain of these expenses, including those associated with the operation of our technical infrastructure as well as components of our operating expenses, are generally less variable in nature and may not correlate to the changes in revenue. General and administrative expenses for the three month period ended September 30, 2024 were $4.3 million (or 12% of revenues), as compared to $3.9 million (or 16% of revenues) in 2023. The dollar increase during 2024 primarily relates to general inflationary pressures, which were partially offset by $120,000 less share based compensation expense in the third quarter of 2024 compared to the same period in 2023.

Previous wording

Depreciation and Amortization. Depreciation and amortization expense for the three month period ended June 30, 2024 was $252,100 as compared to $263,700 in 2023.

Current wording

**Depreciation and Amortization.**Depreciation and amortization expense for the three month period ended September 30, 2024 was $260,000 as compared to $259,800 in 2023.

Previous wording

Income Taxes. Income tax provision for the three month period ended June 30, 2024 was $15,800 as compared to $48,800 in 2023. Income taxes were accrued at an estimated effective tax rate of (3.3)% for the three month period ended June 30, 2024 compared to (6.2)% for the three month period ended June 30, 2023.

Current wording

Income Taxes. Income tax benefit for the three month period ended September 30, 2024 was $18,700 as compared to income tax provision of $13,300 in 2023. Income taxes were accrued at an estimated effective tax rate of 4.2% for the three month period ended September 30, 2024 compared to (1.5)% for the three month period ended September 30, 2023.

Previous wording

Net Loss.* *As a result of the cumulative factors described above, net loss for the three month period ended June 30, 2024 decreased by $342,500 to $499,600 compared to net loss of $842,100 for the three month period ended June 30, 2023.

Current wording

**Net Loss.**As a result of the cumulative factors described above, net loss for the three month period ended September 30, 2024 decreased by $495,900 to $425,200 compared to net loss of $921,100 for the three month period ended September 30, 2023.

Previous wording

Revenues. Revenues for the six month period ended June 30, 2024 were approximately $70.4 million, an increase of approximately $18.4 million (or 35%), as compared to approximately $52.1 million in 2023. Our mix of revenues for the periods presented is set forth below:

Current wording

Revenues. Revenues for the nine month period ended September 30, 2024 were $104.9 million, an increase of $27.1 million (or 35%), as compared to approximately $77.7 million in 2023. Our mix of revenues for the periods presented is set forth below:

Previous wording

Our carrier services revenue was $39.7 million, an increase of approximately $11.9 million, compared with the same period in 2023. The increase in carrier services revenues over the same period last year is a result of new US government contracts, that were signed in the second half of 2023, which provide for WidePoint to pay for carrier services on the US government’s behalf, which are reflected in the six month period ended June 30 2024 results.

Current wording

Our carrier services revenue was $62.2 million, an increase of $19.7 million, compared with the same period in 2023. The increase in carrier services revenues over the same period last year is a result of the recognition of revenue from new federal government contracts signed at the end of 2023.

Previous wording

Our managed service fees were $17.8 million for the six-month period ended June 30, 2024 an increase of $4.1 million as a result of increased new awards activity in the second half of 2023. The increase in both carrier services revenues and managed service fees was primarily due to new federal customers signed in the third and fourth quarter of 2023.

Current wording

Our managed service fees were $26.4 million for the nine-month period ended September 30, 2024 an increase of $4.5 million, compared with the same period in 2023, primarily due to new federal customers signed in the fourth quarter of 2023.

Previous wording

Billable service fees were $2.4 million, a decrease of approximately $678,000 from the same period last year. The decrease is due to less project work a one of our U.S. Government customers, and lower fees in Europe.

Current wording

Billable service fees were $4.1 million, a decrease of $564,400 from the same period last year. The decrease is primarily due to less project work a one of our federal government customers, and lower fees in Europe.

Previous wording

Reselling and other services increased by $2.8 million from the same period last year primarily due to increased demand and activity for items we resell to our customers. Reselling and other services are transactional in nature, and the amount and timing of revenue will vary significantly from period to period.

Current wording

Reselling and other services increased by $3.4 million from the same period last year primarily due to increased demand and activity for items we resell to our customers. Reselling and other services are transactional in nature, and the amount and timing of revenue will vary significantly from period to period.

Previous wording

Cost of Revenues. Our cost of revenues include employee labor, excluding fringe benefit costs, and subcontractors directly associated with satisfying customer performance obligations, and the associated cost of products and third-party software that we resell to our end customers. Cost of revenues also includes amortization of capitalized software related to delivering our solutions. Cost of revenues for the six month period ended June 30, 2024 were approximately $60.6 million (or 86% of revenues), as compared to approximately $44.3 million (or 85% of revenues) in 2023. The dollar increase in cost of revenues was a result of the corresponding costs related to the resale of the new capabilities provided by a third-party partner for two large federal contracts.

Current wording

Cost of Revenues. Our cost of revenues include employee labor, excluding fringe benefit costs, and subcontractors directly associated with satisfying customer performance obligations, and the associated cost of products and third-party software that we resell to our end customers. Cost of revenues also includes amortization of capitalized software related to delivering our solutions. Cost of revenues for the nine month period ended September 30, 2024 were $90.6 million (or 86% of revenues), as compared to $66.2 million (or 85% of revenues) in 2023. The dollar increase in cost of revenues was a result of the corresponding costs related to the resale of the new capabilities provided by a third-party partner for two large federal contracts and labor associated with the new contracts awarded in the fourth quarter of 2023.

Previous wording

Gross Profit. Gross profit for the six month period ended June 30, 2024 was approximately $9.5 million (or 14% of revenues), as compared to approximately $7.7 million (or 15% of revenues) in 2023.

Current wording

Gross Profit. Gross profit for the nine month periods ended September 30, 2024 was approximately $14.3 million (or 14% of revenues), as compared to approximately $11.6 million (or 15% of revenues) in 2023.

Previous wording

The Gross Profit percentage excluding carrier services was 31% for the six-month period ended June 30, 2024 compared to 32% in the same period last year. The lower gross margin percentage excluding carrier services is related to the corresponding costs related to the resale of the new capabilities provided by a third-party partner and increased depreciation and amortization related to capital investments in our delivery platforms reaching completion and beginning to be amortized. Our gross profit percentage will vary from period to period due to our revenue mix.

Current wording

The Gross Profit percentage excluding carrier services was 33% for the nine-month periods ended September 30, 2024 and 2023. Our gross profit percentage will vary from period to period due to our revenue mix.

Previous wording

**Sales and Marketing.Sales and marketing expenses include employee labor, excluding fringe benefit costs, and sales commissions associated with our sales force, commission fees paid non-employee sales agents and partners, and costs associated with travel and trade shows.**Sales and marketing expense for the six month period ended June 30, 2024 remained constant at approximately $1.2 million (or 2% of revenues), as compared to approximately $1.1 million (or 2% of revenues) in 2023.

Current wording

**Sales and Marketing.Sales and marketing expenses include employee labor, excluding fringe benefit costs, and sales commissions associated with our sales force, commission fees paid non-employee sales agents and partners, and costs associated with travel and trade shows.**Sales and marketing expense for the nine month period ended September 30, 2024 remained constant at $1.7 million (or 2% of revenues), compared to $1.5 million (or 2% of revenues) in 2023.

Previous wording

General and Administrative. General and administrative expenses include employees in finance, human resources, information technology, and other administrative support functions; employee labor not associated with any single revenue producing activity, all company fringe benefits, including paid time off, employee health and medical insurance, 401k matching contributions, and payroll taxes. General and administrative expenses also include professional services to include audit, consulting, outside legal, and outsourcing services. Certain of these expenses, including those associated with the operation of our technical infrastructure as well as components of our operating expenses, are generally less variable in nature and may not correlate to the changes in revenue. General and administrative expenses for the six month period ended June 30, 2024 were approximately $8.9 million (or 13% of revenues), as compared to approximately $7.8 million (or 15% of revenues) in 2023. The dollar increase during 2024 primarily relates to an increase in share based compensation expense compared to the same period last year.

Current wording

General and Administrative. General and administrative expenses include employees in finance, human resources, information technology, and other administrative support functions; employee labor not associated with any single revenue producing activity, all company fringe benefits, including paid time off, employee health and medical insurance, 401k matching contributions, and payroll taxes. General and administrative expenses also include professional services to include audit, consulting, outside legal, and outsourcing services. Certain of these expenses, including those associated with the operation of our technical infrastructure as well as components of our operating expenses, are generally less variable in nature and may not correlate to the changes in revenue. General and administrative expenses for the nine month period ended September 30, 2024 were $13.3 million (or 13% of revenues), as compared to $11.7 million (or 15% of revenues) in 2023. The dollar increase during 2024 primarily relates to an increased compensation expense compared to the same period last year. We expect General and administrative expenses to increase as our business grows, but to remain constant or lower as a percentage of revenues.

Previous wording

Depreciation and Amortization. Depreciation and amortization expense for the six month period ended June 30, 2024 was $508,600 compared to $529,500 in 2023.

Current wording

Depreciation and Amortization. Depreciation and amortization expense for the nine month period ended September 30, 2024 was $768,600 compared to $789,300 in 2023.

Previous wording

**Other Income (Expense).Other income (expense) for the six month period ended June 30, 2024 was an expense of $(66,300) compared to expense of $(123,300) in 2023. **

Current wording

**Other Income (Expense).**Other income (expense) for the nine month period ended September 30, 2024 was an expense of $(59,200) compared to expense of $(198,400) in 2023. The difference relates to lower interest income from cash accounts in 2023 compared to 2024.

Previous wording

Income Taxes. Income tax benefit for the six month period ended June 30, 2024 was $26,300 compared to income tax provision of $55,100 in 2023. Income taxes were accrued at an estimated effective tax rate of 2.2% for the six month period ended June 30, 2024 compared to (3.2)% for the six month period ended June 30, 2023.

Current wording

Income Taxes. Income tax benefit for the nine month period ended September 30, 2024 was $45,000 compared to income tax provision of $68,400 in 2023. Income taxes were accrued at an estimated effective tax rate of 2.8% for the nine month period ended September 30, 2024 compared to (2.6)% for the nine month period ended September 30, 2023.

Previous wording

Net Loss.* *As a result of the cumulative factors described above, net loss for the six month period ended June 30, 2024 improved to $1.1 million compared to net loss of $1.8 million in the same period last year.

Current wording

**Net Loss.**As a result of the cumulative factors described above, net loss for the nine month period ended September 30, 2024 improved by $1.1 million to $1.6 million compared to a net loss of $2.7 million in the same period last year.

Previous wording

At June 30, 2024, our net working capital was approximately $2.4 million compared to $1.4 million at December 31, 2023. The increase in net working capital was primarily driven by a decrease in investments in computer hardware and software purchases and capitalized internally developed software costs during the six month period of 2024 compared to the prior period. We believe that our existing cash on hand, our anticipated cash flows from operations, funds available under the Old Dominion Credit Facility, through its maturity on February 28, 2025, and our access to alternative financing sources will be sufficient to meet our working capital, expenditure, and contractual obligation requirements for the next 12 months. The Company is currently in compliance with its covenants that do not become effective until December 31, 2024.

Current wording

At September 30, 2024, our net working capital was approximately $2.6 million compared to $1.4 million at December 31, 2023. The increase in net working capital was primarily driven by a decrease in investments in computer hardware and software purchases and capitalized internally developed software costs during the first nine months of 2024 compared to the prior period. We believe that our existing cash on hand, our anticipated cash flows from operations, funds available under the Old Dominion Credit Facility, through its maturity on February 28, 2025, and our access to alternative financing sources will be sufficient to meet our working capital, expenditure, and contractual obligation requirements for the next 12 months. The Company is currently in compliance with its covenants although the covenants do not become effective until December 31, 2024.

Previous wording

For the six months ended June 30, 2024, net cash used in operations was approximately $2.4 million driven by delayed billing and collections of accounts receivables with predominately four (4) U.S. government customers and is partially offset by temporary payable timing differences. The delays on billing and collections relate to administrative contract actions that the Company expects to resolve in the next three to six months. In the same period in 2023, $1 million net cash was provided by operations.

Current wording

For the nine months ended September 30, 2024, net cash used in operations was approximately $0.8 million driven by delayed billing and collections of accounts receivables with predominately four (4) federal government customers and is partially offset by temporary payable timing differences. The delays on billing and collections relate to administrative contract actions that the Company expects to resolve in the next three to six months. In the same period in 2023, $1.8 million net cash was provided by operations.

Previous wording

Cash used in investing activities provides an indication of our long term infrastructure investments. We maintain our own technology infrastructure and may need to make additional purchases of computer hardware, software and other fixed infrastructure assets to ensure our environment is properly maintained and can support our customer obligations. We typically fund purchases of long term infrastructure assets with available cash or capital lease financing agreements.

Current wording

Cash used in investing activities provides an indication of our long term infrastructure investments. We maintain our own technology infrastructure and may need to make additional purchases of computer hardware, software and other fixed infrastructure assets to ensure our Information Technology environment is properly maintained and can support our customer obligations. We typically fund purchases of long term infrastructure assets with available cash or capital lease financing agreements.

Previous wording

For the six months ended June 30, 2024, cash provided by investing activities was approximately $0.2 million and consisted of receipt of deferred portion of proceeds from factoring arrangement offset by purchases of property and equipment.

Current wording

For the nine months ended September 30, 2024, cash provided by investing activities was approximately $0.2 million and consisted of receipt of deferred portion of proceeds from factoring arrangement offset by purchases of property and equipment.

Previous wording

For the six months ended June 30, 2023, cash used in investing activities was approximately $0.6 million and consisted of computer hardware and software purchases and capitalized internally developed software costs, primarily associated with upgrading our ITMS™ platform, secure identity management technology and network operations center.

Current wording

For the nine months ended September 30, 2023, cash used in investing activities was approximately $0.5 million and consisted of computer hardware and software purchases and capitalized internally developed software costs, primarily associated with upgrading our ITMS™ platform, secure identity management technology and network operations center.

Previous wording

For the six months ended June 30, 2024, cash used in financing activities was approximately $0.5 million and reflects line of credit advances and payments of $4.6 million, finance lease principal repayments of approximately $278,600, and withholding taxes paid on behalf of employees on net settled restricted stock awards of approximately $258,400.

Current wording

For the nine months ended September 30, 2024, cash used in financing activities was approximately $0.7 million and reflects line of credit advances and payments of $4.6 million, finance lease principal repayments of approximately $456,800, and withholding taxes paid on behalf of employees on net settled restricted stock awards of approximately $258,400.

Previous wording

For the six months ended June 30, 2023, cash used in financing activities was approximately $0.3 million and reflects line of credit advances and payments of approximately $6.4 million, finance lease principal repayments of approximately $255,400, and withholding taxes paid on behalf of employees on net settled restricted stock awards of approximately $3,600.

Current wording

For the nine months ended September 30, 2023, cash used in financing activities was approximately $0.4 million and reflects line of credit advances and payments of approximately $6.4 million, finance lease principal repayments of approximately $420,100, and withholding taxes paid on behalf of employees on net settled restricted stock awards of approximately $3,600.

Previous wording

For the six months ended June 30, 2024 and 2023, minor fluctuations in the Euro and U.S. dollar exchange rate increased the translated value of our foreign cash balances by approximately $13,000 as compared to last year.

Current wording

For the nine months ended September 30, 2024 and 2023, minor fluctuations in the Euro and U.S. dollar exchange rate increased the translated value of our foreign cash balances by approximately $4,700 as compared to last year.