WIDEPOINT CORP

Previous wording

During 2023, we obtained FedRAMP “In Process” status for ITMS™ and completed the integration of the acquired assets of ITA. In addition, we focused on increasing our customer base and our sales pipeline and leveraging our strategic relationships with key system integrators and strategic partners to capture additional market share. In fiscal 2023, we will continue to focus on the following key goals:

Current wording

During 2024, we completed the integration of the acquired assets of ITA. In addition, we focused on increasing our customer base and our sales pipeline and leveraging our strategic relationships with key system integrators and strategic partners to capture additional market share. On February 19, 2025 WidePoint’s Intelligent Technology Management System (ITMS) achieved FedRAMP Authorized status from the Federal Risk and Authorization Management Program (FedRAMP) Program Management Office (PMO). In fiscal 2025, we will continue to focus on the following key goals:

Previous wording

We operate in one segment based on the consolidated information used by our CODM in evaluating the financial performance of our business and allocation resources. This single segment represents our Company’s business, which is providing managed services for government and commercial clients that include Identity Management (IdM), secure Mobility Managed Services (MMS), Telecom Lifecycle Management, Digital Billing & Analytics and IT as a service (ITaaS).

Current wording

We operate in one segment based on the consolidated information used by our CODM in evaluating the financial performance of our business and allocation resources. This single segment represents our Company’s business, which is providing managed services for government and commercial clients under the umbrella of Technology Management as a Service (TMaaS), that includes Identity Management (IdM), secure Mobility Managed Services (MMS), Telecom Lifecycle Management, Digital Billing & Analytics and IT as a service (ITaaS).

Previous wording

Our managed services solutions may require a combination of labor, third party products and services. Our managed services are generally not interdependent and our contract performance obligations are delivered consistently on a monthly basis. We do not typically have undelivered performance obligations in these arrangements that would require us to spread our revenue over a longer period of time. In the event there are undelivered performance obligations our practice is to recognize the revenue when the performance obligation has been satisfied.

Current wording

Our managed services solutions may require a combination of labor, third party products and services. Our managed services are generally not interdependent and our contract performance obligations are delivered consistently on a monthly basis. In the event there are undelivered performance obligations our practice is to recognize the revenue when the performance obligation has been satisfied.

Previous wording

Goodwill represents the excess of acquisition cost of an acquired company over the fair value of assets acquired and liabilities assumed. In accordance with GAAP, goodwill is not amortized but is tested for impairment at the reporting unit level annually at December 31 and between annual tests if events or circumstances arise, such as adverse changes in the business climate, that would more likely than not reduce the fair value of the reporting unit below its carrying value.

Current wording

Goodwill represents the excess of acquisition cost of an acquired company over the fair value of assets acquired and liabilities assumed. In accordance with GAAP, goodwill is not amortized but is tested for impairment at the reporting unit level annually and between annual tests if events or circumstances arise, such as adverse changes in the business climate, that would more likely than not reduce the fair value of the reporting unit below its carrying value.

Previous wording

Revenues for the year ended December 31, 2023 were $106.0 million, an increase of $11.9 million (or 13%), as compared to approximately $94.1 million in 2022. Our mix of revenues for the periods presented is set forth below:

Current wording

Revenues for the year ended December 31, 2024 were $142.6 million, an increase of $36.5 million (or 34%), compared to approximately $106.0 million in 2023. Our mix of revenues for the periods presented is set forth below:

Previous wording

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.

Current wording

Our cost of revenues includes employee labor, excluding fringe benefit costs, and subcontractors directly associated with satisfying customer performance obligations, and the associated cost of accessory 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.

Previous wording

Cost of revenues for the year ended December 31, 2023 were $90.4 million (or 85% of revenues) as compared to $79.5 million (or 85% of revenues) in 2022. Increased carrier services costs as well as increased depreciation and amortization expense included in cost of revenues contributed to the increase. Our cost of revenues will fluctuate due to our revenue mix.

Current wording

Cost of revenues for the year ended December 31, 2024 were $123.5 million (or 87% of revenues) compared to $90.4 million (or 85% of revenues) in 2023. Increased carrier services costs as well as costs related to reselling contributed to the increase. Our cost of revenues will fluctuate due to our revenue mix.

Previous wording

Gross profit for the year ended was $15.6 million (or 15% of revenues), as compared to $14.6 million (or 15% of revenues) in 2022. The percentage of gross profit to revenues is consistent from year to year.

Current wording

Gross profit for the year ended December 31, 2024 was $19.0 million (or 13% of revenues), compared to $15.6 million (or 15% of revenues) in 2023. The lower gross margin as a percentage of revenues is related to increased carrier services in 2024 compared to 2023.

Previous wording

Gross profit percentage for the year ended December 2023 excluding carrier services was 33% as compared to 36% in 2022 due to increased depreciation and amortization expense, an increase in reselling and other services which are lower margin revenues.

Current wording

Gross profit percentage for the year ended December 31, 2024, excluding carrier services was 33% and consistent with the prior period.

Previous wording

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 were consistent between the year ended December 31, 2023 and 2022.

Current wording

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 year ended December 31, 2024 were $2.3 million (or 2% of revenues), compared to $1.7 million (or 2% of revenues) in 2023.

Previous wording

General and administrative expenses for the year ended December 31, 2023 were approximately $15.9 million (or 15% of revenues), as compared to approximately $14.7 million (or 16% of revenues) in 2022. The increase primarily relates to an increase in share-based compensation expense compared to the same period last year.

Current wording

General and administrative expenses for the year ended December 31, 2024 were $17.6 million (or 12% of revenues), as compared to $15.9 million (or 15% of revenues) in 2023. The dollar increase primarily relates to an increase in employee compensation, including compensation expense, and increased health insurance costs compared to the same period last year.

Previous wording

Definite-lived intangible asset impairment charge for the year ended December 31, 2023 was $0.2 million following impairment testing on definite-lived intangible assets performed during the year. There was no definite-lived intangible asset impairment during 2022.

Current wording

There was no definite-lived intangible asset impairment during 2024. Definite-lived intangible asset impairment charge for the year ended December 31, 2023 was $0.2 million following impairment testing on definite-lived intangible assets performed during the year.

Previous wording

Net other expense for the year ended December 31, 2023 was $(0.2) million as compared to net other income of $1.1 million in 2022. The net other income in 2022 included the fair value adjustments of contingent consideration. There were no adjustments to contingent consideration in 2023.

Current wording

Net other expense for the year ended December 31, 2024 was $(0.1) million as compared to net other expense of $(0.2) million in 2023.

Previous wording

As a result of the factors above, net loss for the year ended December 31, 2023 was $4.0 million or negative $0.46 per share as compared to a net loss of $23.6 million in 2022 or negative $2.70 per share.

Current wording

As a result of the factors above, net loss for the year ended December 31, 2024 was $1.9 million or $0.21 loss per share as compared to a net loss of $4.0 million in 2023 or $0.46 loss per share.

Previous wording

At December 31, 2023, our net working capital was approximately $1.4 million as compared to $1.8 million at December 31, 2022. The decrease in net working capital was primarily driven by investments in computer hardware and software purchases and capitalized internally developed software costs, which was partially offset by temporary receivable/payable timing differences.

Current wording

Our sources of liquidity include cash on hand, our anticipated cash flows from operations, and funds available under the Old Dominion Credit Facility, through its maturity on February 28, 2026. At December 31, 2024, our net working capital was approximately $2.4 million as compared to $1.4 million at December 31, 2023. The increase in net working capital was primarily driven by reduced investments in computer hardware and software purchases and capitalized internally developed software costs, as well as, an increase in unbilled receivables primarily drive by administrative delays in billing. We believe that our existing cash balances and our anticipated cash flows from operations and access to our credit facility will be sufficient to meet our working capital, expenditure, and contractual obligation requirements for the next 12 months. There is no assurance that, if needed, we will be able to borrow or raise capital on favorable terms or at all.

Previous wording

Cash provided by operating activities provides an indication of our ability to generate sufficient cash flow from our recurring business activities. Our single largest cash operating expense is labor and company sponsored benefits. Our second largest cash operating expense is our facility costs and related technology communication costs to support delivery of our services to our customers. We lease our facilities under non-cancellable long-term contracts. Any changes to our fixed labor and/or infrastructure costs may require a significant amount of time to take effect depending on the nature of the change made and cash payments to terminate any agreements that have not yet expired. We experience temporary collection timing differences from time to time due to customer invoice processing delays that are often beyond our control, including intermittent U.S. federal government shutdowns related to budgetary funding issues.

Current wording

Cash provided by operating activities provides an indication of our ability to generate sufficient cash flow from our recurring business activities. Our single largest cash operating expense is labor and company sponsored benefits. Our second largest cash operating expense is our facility costs and related technology communication costs to support delivery of our services to our customers. We lease our facilities under non-cancellable long-term contracts. Any changes to our fixed labor and/or infrastructure costs may require a significant amount of time to take effect depending on the nature of the change made and cash payments to terminate any agreements that have not yet expired. We experience temporary collection timing differences from time to time due to customer invoice processing delays that are often beyond our control. One US government agency, under the Department of Homeland Security, accounted for $14.4 million and $1.4 million of our unbilled receivables at December 31, 2024 and 2023, respectively.

Previous wording

For the year ended December 31, 2023, net cash provided by operations was approximately $0.6 million driven by collections of accounts receivable and temporary payable timing difference, as compared to approximately $6.1 million net cash provided by operations for the year ended December 31, 2022.

Current wording

For the year ended December 31, 2024, net cash provided by operations was approximately $1.6 million driven by collections of accounts receivable and temporary payable timing difference, as compared to approximately $0.6 million net cash provided by operations for the year ended December 31, 2023.

Previous wording

For the year ended December 31, 2023, cash used in investing activities was approximately $0.6 million and consisted of $0.5 million in proceeds from factoring arrangement offset by $1.1 million of computer hardware and software purchases and capitalized internally developed software costs primarily associated with upgrading our ITMS™ and Soft-ex platform, secure identity management technology and network operations center. The decrease in amounts capitalized for the year ended December 31, 2023 reflects the capital investments in our delivery platforms beginning to reach completion.

Current wording

For the year ended December 31, 2023, cash used in investing activities was approximately $0.6 million and consisted of $0.5 million in proceeds from factoring arrangement offset by $1.1 million of computer hardware and software purchases and capitalized internally developed software costs primarily associated with upgrading our ITMS™ and Soft-ex platform, secure identity management technology and network operations center.

Previous wording

For the year ended December 31, 2022, cash used in financing activities was approximately $1.5 million and reflects line of credit advances and payments of approximately $15.3 million, payments of approximately $1.5 million finance lease principal repayments of approximately $600,400, repurchases of common stock of $818,200 and withholding taxes paid on behalf of employees on net settled restricted stock awards of approximately $49,200.

Current wording

For the year ended December 31, 2024, cash used in financing activities was approximately $0.9 million and reflects line of credit advances and payments of approximately $5.6 million, finance lease principal repayments of approximately $636,500 and withholding taxes paid on behalf of employees on net settled restricted stock awards of approximately $258,400.

Previous wording

For the year ended December 31, 2023, the gradual depreciation of the Euro relative to the US dollar decreased the translated value of our foreign cash balances by approximately $23,800 as compared to last year. For the year ended December 31, 2022, the depreciation of the Euro relative to the US dollar decreased the translated value of our foreign cash balances by approximately $140,800.

Current wording

For the year ended December 31, 2024, the gradual depreciation of the Euro relative to the US dollar decreased the translated value of our foreign cash balances by approximately $31,900 compared to last year. For the year ended December 31, 2023, the depreciation of the Euro relative to the US dollar decreased the translated value of our foreign cash balances by approximately $23,800.

Previous wording

On April 28, 2023, the Company entered into an Accounts Receivable Purchase Agreement (the “Purchase Agreement”) with Republic Capital Access, LLC (the “Buyer”) for the non-recourse sale of eligible accounts receivable relating to U.S. Government prime contracts or subcontracts of the Company (collectively, the “Purchased Receivables”) to replace the Company’s matured Loan Agreement with Atlantic Union Bank. Upon purchase, Buyer becomes the absolute owner of any such Purchased Receivables, which are payable directly to the Buyer. The total amount of Purchased Receivables is subject to a maximum limit of $4 million outstanding Purchased Receivables at any time, with an available increase to $14 million, subject to adequate receivables. The Purchase Agreement contains customary fees, covenants and representations.

Current wording

On April 28, 2023, the Company entered into an Accounts Receivable Purchase Agreement (the “Purchase Agreement”) with Republic Capital Access, LLC (the “Buyer”) for the non-recourse sale of eligible accounts receivable relating to U.S. Government prime contracts or subcontracts of the Company (collectively, the “Purchased Receivables”). The Purchase Agreement terminated in April of 2024 and was not renewed. Prior to the 2024 termination, we sold a total of $2.9 million of receivables for $2.8 million in proceeds net of fees.

Previous wording

On February 29, 2024, we entered into a Loan and Security Agreement (the “Loan”) and Promissory Note (the “Note,” and, together with the Loan, the “Agreements”) with Old Dominion National Bank. The Agreements provide for a new $4,000,000 revolving line of credit facility (the “Credit Facility”).

Current wording

On February 29, 2024, we entered into a Loan and Security Agreement (the “Loan”) and Promissory Note (the “Note,” and, together with the Loan, the “Agreements”) with Old Dominion National Bank. The Agreements provide for a $4,000,000 revolving line of credit facility (the “Credit Facility”). On February 18, 2025, the Company renewed its line of credit for an additional year through February 28, 2026. See Note 21.

Previous wording

Advances under the Credit Facility are subject to a borrowing base equal to the lesser of (i) $4,000,000 or (ii) 80% of eligible accounts receivable. Interest accrues on the outstanding principal balance of the Credit Facility at an annual rate equal to the Prime Rate published in The Wall Street Journal, subject to a floor rate of 7.25%. Outstanding interest on the amount borrowed is payable monthly and all outstanding interest and principal is due on the maturity date of February 28, 2025. The Credit Facility includes customary covenants and events of default, including the following items that are measured annually commencing December 31, 2024: (i) a minimum tangible net worth of $2.0 million; (ii) a minimum annual EBITDA of $1.0 million and (iii) a ratio of current assets to current liabilities of not less than 1.0 to 1.0. The terms of new Credit Facility prohibit the use of our Factoring Arrangement.

Current wording

Advances under the Credit Facility are subject to a borrowing base equal to the lesser of (i) $4,000,000 or (ii) 80% of eligible accounts receivable. Interest accrues on the outstanding principal balance of the Credit Facility at an annual rate equal to the Prime Rate published in The Wall Street Journal, subject to a floor rate of 7.25%. Outstanding interest on the amount borrowed is payable monthly and all outstanding interest and principal is due on the maturity date of February 28, 2026. The Credit Facility includes customary covenants and events of default, including the following items that are measured: (i) a minimum tangible net worth of $2.0 million; (ii) a minimum annual EBITDA of $1.0 million and (iii) a ratio of current assets to current liabilities of not less than 1.0 to 1.0. We are in compliance with the covenants at December 31, 2024.