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WidePoint Corporation Reports 21% Revenue Growth and More Than Doubles Net Income for the Third Quarter of 2010
Nov 10, 2010 (03:11 PM EST)


Q3 2010 Revenue Growth Driven by CyberSecurity Solutions; Gross Margin Improves 500 basis points to 29%; Operating Margin Improves 350 basis points; and Net Income for Q3 2010 up 115% vs. Prior Year

WASHINGTON, Nov. 10, 2010 /PRNewswire-FirstCall/ -- WidePoint Corporation (NYSE Amex: WYY), a specialist in wireless mobility management and CyberSecurity Solutions, today announced financial results for the three months and nine months ending September 30, 2010.

Third Quarter 2010 Highlights

  • Net revenue for the quarter ended September 30, 2010 increased approximately 21% to $13.8 million from $11.4 million in last year's comparable period.
  • Growth was driven by a 158% year-over-year increase in CyberSecurity Solutions segment revenue.
  • Gross profit increased 47% to $3.9 million (29% gross margin), compared to $2.7 million (24% gross margin) on higher margin revenue during the period.
  • Income from operations was approximately $1.2 million, a 102% increase, compared to approximately $583,000 in last year's comparable period.
  • Net income increased 115% to approximately $1.1 million, or $0.02 per share, compared to net income of approximately $515,000, or $0.01 per share, in last year's comparable period.

Steve Komar, CEO, WidePoint commented, "We are very pleased to be able to report continuing positive operating results as we strengthen our positioning in key growth markets.  WidePoint continues to benefit from its diversified platform for growth, characterized by our CyberSecurity Solutions segment leading the way in the current quarter with strong sequential and year-over-year growth.  Solid performance from our IT Consulting Services and Wireless Mobility segments augmented the CyberSecurity achievement (which was highlighted by a very substantial initial order from the Department of the Navy) during the quarter just ended. Overall, this was a strong, robust quarter for WidePoint Corporation and has set the stage for continued positive performance for the remainder of 2010 and into 2011."

Third Quarter 2010 Financial Results

Net revenue for the three months ended September 30, 2010 increased $2.4 million, or 21%, to $13.8 million from $11.4 million in last year's comparable period. The increase in revenues was primarily attributable to increases in the CyberSecurity Solutions segment, which increased 158% to $4.0 million from $1.6 million in the year-ago period. The growth in CyberSecurity Solutions was primarily the result of a purchase by the Department of the Navy, the continued rollout for the State of Delaware under an award issued during the second quarter of 2010 by Delaware State University, and continued increases in credential sales associated with several initiatives requiring the use of those credentials by government agencies.  

Gross profit for the three month period ended September 30, 2010 was approximately $3.9 million (or 29% of revenues), as compared to gross profit of approximately $2.7 million (or 24% of revenues), for the three month period ended September 30, 2009.  Overall gross margin was higher in the third quarter of 2010 as a result of greater revenues and higher margins associated with improved economies of scale in the CyberSecurity Solutions segment. Gross profit as a percentage of revenues is expected to increase as cost of sales as a percentage of revenues decreases due to a greater mix of higher margin services although there may be periods of variability in margin growth associated with changes in product mix.

Total operating expenses increased 32% to $2.8 million for the quarter ended September 30, 2010 compared to $2.1 million for the year-ago period. Operating expenses as a percentage of sales increased to 20% from 18% in the year-ago period, due to increases in both Sales and Marketing and in General and Administrative expenses.

WidePoint reported income from operations of approximately $1.2 million in the third quarter, up approximately 102% from approximately $583,000 in the third quarter last year. Net income was approximately $1.1 million, up approximately 115% compared to net income of approximately $515,000, in the year-ago period. Earnings per share for the third quarter of 2010 were $0.02 per diluted share, compared to $0.01 in the year-ago period.

Year-To-Date Financial Results

Net revenue for the nine months ended September 30, 2010 increased $5.5 million, or 17%, to $37.4 million from $31.9 million in last year's comparable period. The increase in revenues was primarily attributable to increases in CyberSecurity Solutions and IT Consulting Services and Products segments, which increased from $7.9 million to $8.8 million (or 19%), respectively. Wireless Mobility Management segment revenue increased marginally to $20.7 million.

Gross profit for the nine month period ended September 30, 2010 was approximately $9.4 million (or 25% of revenues), as compared to gross profit of approximately $6.9 million (or 22% of revenues), for the nine month period ended September 30, 2009.

Total operating expenses increased 28% to $7.4 million for the nine months ended September 30, 2010 compared to $5.8 million for the year-ago period. Operating expenses as a percentage of sales increased about 200 basis points to 20% from 18% in the year-ago period, due to increases in both sales and marketing and in general and administrative expenses.

WidePoint reported income from operations of approximately $2.0 million in the nine months ended September 30, 2010, up approximately 75% from approximately $1.1 million in the same period last year. Net income was approximately $1.8 million, up approximately 97% compared to net income of approximately $895,000, in the year-ago period.

WidePoint CFO Jim McCubbin added, "We were pleased with the continued acceleration in our organic growth that we witnessed in the third quarter along with the expansion of our operating margins and profitability.  The positive performance from our CyberSecurity Solutions segment, in particular demonstrates the impact this segment has on driving positive operating results to our margins and bottom line.  The increasing revenues generated from higher margin areas such as our CyberSecurity Solutions segment shows the leverage we can have in our business model in driving a higher and higher portion of each incremental revenue dollar to our bottom line."

Outlook

Management expects FYE 2010 to:

  • Increase consolidated revenues by 17-22%.
  • Expand gross margins and operating margins. Management has targeted gross margins in the range of 22-26% and operating margins in the range of 6-8%.
  • Maintain or decrease selling, general and administrative costs as a percent of total revenue.
  • Accelerate the growth rate of net income.

Conference Call Information

A conference call and live webcast will take place at 4:30 p.m. Eastern Time, on Wednesday, November 10, 2010. Anyone interested in participating should call 1-877-941-8602 if calling within the United States or 1-480-629-9809 if calling internationally. There will be a playback available until November 17, 2010. To listen to the playback, please call 1-877-870-5176 if calling within the United States or 1-858-384-5517 if calling internationally. Please use pin number 4384218 for the replay.

The call will also be accompanied live by webcast over the Internet and accessible at http://viavid.net/dce.aspx?sid=00007DC2 (if necessary, please copy and paste link into browser).

About WidePoint

WidePoint is a specialist in providing wireless mobility management and CyberSecurity Solutions utilizing its advanced information technology products and services. WidePoint has several wholly owned subsidiaries holding major government and commercial contracts including, Operational Research Consultants, Inc., iSYS, LLC, Protexx Technology Corporation, Advanced Response Concepts Corporation, and WidePoint IL, Inc. WidePoint enables organizations to deploy fully compliant IT services in accordance with government-mandated regulations and advanced system requirements. For more information, visit http://www.widepoint.com.

Safe-Harbor Statement under the Private Securities Litigation Reform Act of 1995: This press release may contain forward-looking information within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), including all statements that are not statements of historical fact regarding the intent, belief or current expectations of the company, its directors or its officers with respect to, among other things: (i) the company's financing plans; (ii) trends affecting the company's financial condition or results of operations; (iii) the company's growth strategy and operating strategy; (iv) the declaration and payment of dividends; and (v) the risk factors disclosed in the Company's periodic reports filed with the SEC. The words "may," "would," "will," "expect," "estimate," "anticipate," "believe," "intend" and similar expressions and variations thereof are intended to identify forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond the company's ability to control, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors including the risk factors disclosed in the company's Forms 10-K and 10-Q filed with the SEC.

For More Information:


Jim McCubbin, EVP & CFO

Brett Maas or Dave Fore

WidePoint Corporation

Hayden IR

7926 Jones Branch Drive, Suite 520

(646) 536-7331

McLean, VA 22102

brett@haydenir.com

(703) 349-2577


jmccubbin@widepoint.com





-tables follow-


WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS  


September 30,

December 31,


2010

2009

Assets

(unaudited)

Current assets:



        Cash and cash equivalents

$     3,702,895

$   6,238,788

        Accounts receivable, net of allowance of $156,010 and $52,650, respectively

9,263,580

7,055,525

        Unbilled accounts receivable

2,584,604

1,334,455

        Prepaid expenses and other assets

343,387

359,563

                   Total current assets

15,894,466

14,988,331

Property and equipment, net

472,841

538,811

Goodwill

10,475,513

9,770,647

Other Intangibles, net

1,196,996

1,381,580

Other assets

62,377

75,718

                  Total assets

$   28,102,193

$ 26,755,087




Liabilities and stockholders' equity



Current liabilities:



        Short term note payable

$          25,922

$      102,074

        Accounts payable

6,546,112

7,120,168

        Accrued expenses

2,819,436

2,304,995

        Deferred revenue

393,317

768,504

        Short-term portion of long-term debt

548,195

520,855

        Short-term portion of deferred rent

15,793

54,497

        Short-term portion of capital lease obligation

59,286

112,576

                   Total current liabilities

10,408,061

10,983,669

Deferred income tax liability

431,450

313,782

Long-term debt, net of current portion

192,707

604,048

Fair value of earnout liability

300,000

Deferred rent, net of current portion

102,462

7,312

Capital lease obligation, net of current portion

32,485

67,632

                  Total liabilities

$   11,467,165

$ 11,976,443




Stockholders' equity:



Common stock, $0.001 par value; 110,000,000 shares authorized; 61,380,133 and 61,375,333 shares issued and outstanding, respectively

61,380

61,375

        Stock warrants

24,375

24,375

        Additional paid-in capital

67,963,301

67,874,394

        Accumulated deficit

(51,414,028)

(53,181,500)

                  Total stockholders' equity

16,635,028

14,778,644

                  Total liabilities and stockholders' equity

$   28,102,193

$ 26,755,087




WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


Three Months

Ended September 30,

Nine Months

Ended September 30,


2010

2009

2010

2009


(unaudited)

Revenues, net

$   13,757,098

$    11,378,793

$ 37,372,274

$   31,906,457

Cost of sales (including amortization and depreciation of $201,375, $245,876, $670,937, and $731,767, respectively)

9,824,729

8,704,275

27,985,311

24,986,779






         Gross profit

3,932,369

2,674,518

9,386,963

6,919,678






Sales and marketing

463,846

333,130

1,294,849

827,913

General and administrative (including shared-based compensation expense of $30,007, $20,093, $86,752, and $126,680, respectively)

2,240,189

1,711,688

5,954,721

4,824,670

Depreciation expense

50,857

46,887

149,334

130,999






         Income from operations

1,177,477

582,813

1,988,059

1,136,096






Interest income

2,128

3,548

10,973

22,287

Interest expense

(18,418)

(31,678)

(68,588)

(145,678)

Other expense

-

(49)

-

(49)






Net income before income tax expense

$     1,161,187

$       554,634

$   1,930,444

$        1,012,656






Income tax expense

6,472

-

45,304

-

Deferred income tax expense

39,223

39,223

117,668

117,668






         Income tax expense

45,695

39,223

162,972

117,668






Net income

$     1,115,492

$       515,411

$   1,767,472

$        894,988






Basic earnings per share

$            0.02

$           0.01

$            0.03

$               0.02

Basic weighted average shares outstanding

61,375,698

60,348,616

61,375,456

58,990,406

Diluted earnings per share

$            0.02

$           0.01

$           0.03

$              0.01

Diluted weighted average shares outstanding

63,170,833

62,063,726

63,155,043

61,440,208




WIDEPOINT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


Nine Months

Ended September 30,


2010

2009

Cash flows from operating activities:






   Net income

$      1,767,472

$        894,988

   Adjustments to reconcile net income to net cash provided by operating activities:



       Deferred income tax expense

117,668

117,668

       Depreciation expense

218,674

176,112

       Amortization of intangibles

601,597

686,654

       Amortization of deferred financing costs

5,423

6,665

       Stock options expense

86,752

126,680

       Loss on disposal of equipment

-

49




   Changes in assets and liabilities (net of business combinations):



       Accounts receivable and unbilled accounts receivable

(3,458,204)

(345,903)

       Prepaid expenses and other current assets

58,176

(99,572)

       Other assets

7,918

12,534

       Accounts payable and accrued expenses

(300,303)

817,045

       Deferred revenue

(375,187)

(704,362)

             Net cash (used in) provided by operating activities

$   (1,270,014)

$     1,688,558




   Cash flows from investing activities:



       Purchase of subsidiary, net of cash acquired

(533,701)

13,627

       Purchase of property and equipment

(109,029)

(189,347)

       Software development costs

(35,593)

(26,530)

           Net cash used in investing activities

$      (678,323)

$      (202,250)




   Cash flows from financing activities:



       Borrowings on notes payable

-

400,737

       Principal payments on notes payable

(501,279)

(2,867,593)

       Principal payments under capital lease

       Obligation

(88,437)

(86,120)

       Proceeds from exercise of stock options

2,160

3,750

       Costs related to renewal fee for line of credit

-

(12,000)

           Net cash used in financing activities

$      (587,556)

$   (2,561,226)




   Net decrease in cash

$   (2,535,893)

$   (1,074,918)




   Cash and cash equivalents, beginning of period

$     6,238,788

$     4,375,426




   Cash and cash equivalents, end of period

$     3,702,895

$     3,300,508




Non-cash investing activities:



    Capital leases for acquisition of property and

        Equipment

-

$          94,402




Supplementary Information:



   Cash paid for income tax

$        45,304

$                   -

   Cash paid for interest

$        65,690

$        293,498



SOURCE WidePoint Corporation