WIDEPOINT CORP

Previous 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:

Current wording

Revenues. Revenues for the three month period ended March 31, 2025 were $34.2 million, which was in line with $34.2 million in the same period in 2024. Our mix of revenues for the periods presented is set forth below:

Previous 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.

Current wording

We also procure, process and pay communications carrier invoices on behalf of customers. Under many of our carrier services arrangements, we recognize revenues and related costs on a gross basis. A significant portion of our overall reported revenue consists of revenue from carrier services; however, it represents an insignificant portion of our overall reported gross profit. This is a commodity type service and margins are nominal, but this is a necessary service to deliver to federal government customers that engage us to provide a full-service solution. Our carrier services revenue was $22.4 million, an increase of $3.0 million, as compared with the same period in 2024. The increase in carrier services revenues over the same period last year is a result of the growth in the number of phone lines under management during 2024 for our DHS customer.

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 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.

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 March 31, 2025 were $29.4 million (or 86% of revenues), which is consistent as a percentage of revenues (or 86% of revenues) in 2024. Included in cost of revenues is carrier costs paid on behalf of our federal government customers of approximately $22.4 million and $19.4 million for the three month periods ended March 31, 2025 and 2024, respectively.

Previous 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.

Current wording

Gross Profit. Gross profit for the three month period ended March 31, 2025 increased by $0.1 million to $4.7 million (or 14% of revenues), compared to $4.6 million (or 14% of revenues) in 2024.

Previous 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.

Current wording

Gross profit as a percentage of managed services revenue (excluding carrier services) for the three month period ended March 31, 2025 was 40.4% compared to 31.5% in the same period last year due to lower reselling revenues, compared to the same period last year, which have a lower gross margin.

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 September 30, 2024 was $0.5 million and remained relatively constant at 2% of revenues, as compared to $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 March 31, 2025 was $0.6 million and remained relatively constant at 2% of revenues to 2024.

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 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.

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 March 31, 2025 were $4.7 million (or 13% of revenues), as compared to $4.4 million (or 13% of revenues) in 2024. The dollar increase during 2025 primarily relates to general inflationary pressures, which were partially offset by $218,000 less share-based compensation expense in the first quarter of 2025 compared to the same period in 2024.

Previous 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.

Current wording

Depreciation and Amortization. Depreciation and amortization expense for the three month period ended March 31, 2025 was $223,700 as compared to $256,500 in 2024. The slight decrease in depreciation expense is due to certain assets reaching their fully depreciated life during 2024.

Previous wording

**Other Income (Expense).**Other income, net for the three month period ended September 30, 2024 was $7,100 compared to other expense, net of $75,100 in 2023. The increase in other income is due to higher interest earned on cash balances and a lower level of borrowing in 2024 compared to the same period last year.

Current wording

**Other Income (Expense).**Other expense, net for the three month period ended March 31, 2025 was $1,600 compared to other expense, net of $44,200 in 2024.

Previous 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.

Current wording

Income Taxes. Income tax benefit for the three month period ended March 31, 2025 was $94,000 as compared to income tax benefit of $42,100 in 2024. Income taxes were accrued at an estimated effective tax rate of 11.5% for the three month period ended March 31, 2025 compared to 6.1% for the three month period ended March 31, 2024.

Previous 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.

Current wording

Net Loss.* *As a result of the cumulative factors described above, net loss for the three month period ended March 31, 2025 increased by $71,000 to $724,100 compared to net loss of $653,100 for the three month period ended March 31, 2024.

Previous 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.

Current wording

At March 31, 2025, our net working capital, excluding restricted cash, was approximately $1.6 million compared to $2.4 million at December 31, 2024. We believe that our existing cash balances and our anticipated cash flows from operations and interim access to our credit facility through its maturity on February 28, 2026, 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

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.

Current wording

For the three months ended March 31, 2025, net cash used in operations was approximately $3.2 million driven by delayed billing and collections of accounts receivables with a federal government customer and is partially offset by temporary payable timing differences. The delays on billing and collections relate to administrative contract actions that the Company continues to work toward resolving; however, there is no guarantee that the process for billing these receivables will be enhanced. In the same period in 2024, $1.6 million net cash was used in operations.

Previous 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.

Current wording

For the three months ended March 31, 2024, cash provided by investing activities was approximately $0.3 million and consisted of receipt of deferred portion of proceeds from factoring arrangement offset by purchases of property and equipment.

Previous 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.

Current wording

For the three months ended March 31, 2025, cash used in financing activities was approximately $0.2 million and reflects line of credit advances and payments of $2.8 million, finance lease principal repayments of approximately $120,000, and withholding taxes paid on behalf of employees on net settled restricted stock awards of approximately $115,200.

Previous 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.

Current wording

For the three months ended March 31, 2024, cash used in financing activities was approximately $0.3 million and reflects line of credit advances and payments of $1.0 million, lease principal repayments of approximately $137,500, and withholding taxes paid on behalf of employees on net settled restricted stock awards of approximately $218,800.

Previous 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.

Current wording

For the three months ended March 31, 2025 and 2024, minor fluctuations in the Euro and U.S. dollar exchange rate decreased the translated value of our foreign cash balances by approximately $27,600 as compared to last year.