Good day and welcome to the WidePoint Corporation Second Quarter 2015 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to David Fore of Hayden IR. Please go ahead, sir.

Great, thank you operator. Good afternoon to all participants in the WidePoint’s second quarter 2015 financial results conference call. With me today are WidePoint’s Chairman and CEO, Steve Komar; and Chief Financial Officer, Jim McCubbin. Steve will provide an overview of the quarter’s developments and accomplishments and Jim will provide additional financial details and operational view and outlook. Then, we’ll open the call to questions from participants. Before I turn the call over to Steve, I’d like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, including financial guidance and similar expressions including without limitation, expressions using the terminology may, will, believe, expect, plans, anticipates, predicts, forecasts, and expressions, which reflects something other than historical facts are intended to identify forward-looking statements. These forward-looking statements involve a number of risks factors and uncertainties, including those discussed in the Risk Factor sections of WidePoint’s Annual Report on Form 10-K, its quarterly reports on Form 10-Q and other SEC filings the company releases. Actual results may differ materially from any forward-looking statements due to such risks factors and uncertainties. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after this conference call, except as required by law. I would like to turn the call over to WidePoint’s Chairman and CEO, Steve Komar for opening remarks. Steve?

Thanks David, and good afternoon to all of you that have joined us here today. I know it’s a busy time for each of you and I wanted to assure you it has been a pretty busy second quarter for us. And at this pace is continue to accelerate into the third quarter. There are several recent developments and accomplishments and I would like to share with you today and of course our team would like to express our continued appreciation to all of you for your interest and support of WidePoint Corporation. First let me point out, that our second quarter results were in line with our overall expectations and year-to-date projections including the second quarter revenues that increased over 40% from the year earlier quarter and going approximate 60% increased over respective year-to-date periods of revenue performance. With year-to-date is now totaling over $35 million serving to act as a springboard and putting us in potential reach of our aggressive full year revenue targets. While this positive revenue result was realized, we consciously continued and even intensified our investment expense spending on several of our development and sales and marketing initiatives, and support of our target market penetration happens. This definitely included our next generation identity management platforms our sales and co-marketing BYOD [ph] programs with our key cyber relationships and deploying added technological capacity to ensure timely responsiveness and support that anticipated new awards and commercial opportunities coming to us during the second half of 2015. As we noted in our previous quarterly call and I’ll reiterating here first quarter revenue growth were slightly better than what we had expected as the result of the timing of certain transactions and when combined with our second quarter performance, the first half of the year was on track and…

Thank you, Steve. Hello, everyone. Thank you again for joining our call today. Today, in my remarks, I’m going to discuss and review our second quarter 2015 financial results and provide an outlook and update at this point in time on our financial goals, targets, and expectations for the second half of 2015. As Steve has commented our first revenues met our expectations with the first quarter being a bit ahead of itself and the second quarter slightly behind as a result of some revenue recognition delay and getting customer acceptances and approvals as well as getting some new cyber product launch with our Samsung partnership and development efforts which ramp slightly longer than we had anticipated. Nonetheless, we’re clearly excited about our recently announced second quarter partnership with Samsung and the integration efforts that we accomplish in this quarter. Revenues for the first half of 2015 rough approximately 59% and 41% over the respective periods in 2014, carrier services continue to drive revenue growth with our onboarding of the respective DHS component agencies. In the second half of 2015 assuming the onboarding of the remaining DHS component agencies, we could see carrier services continue to expand. In regards to our other managed services, we believe that the federal sprint should help accelerate our next generation identity management solutions within the federal marketplace. Our AT&T partnerships should help expand and build out our cyber commercial opportunities, our DHS BPA of course should continue to expand our mobile managed revenues outlook, our partnerships in Europe should drive additional analytics revenue as well as out state local marketing push should deliver new additional revenues in managed mobility services. All in all, our pipeline appears to be expanding on many fronts which should allow us to drive towards achieving our revenue goals in…

Thank you. [Operator Instructions] And we’ll go first to Mike Crawford with B Riley and Company.

Thank you. Steve what are your aggressive full year revenue targets?

That’s a fair question, Mike. But I think I’m going to refer that to Jim, because I know we historically had not given any definitive guidance and regard to future revenues.

Hey Mike, let me start off from the beginning of the year, our goals were to me 50% revenue improvement. We finished last year about 52% that should put us anywhere in that 75% to 80% plus million revenue range. Right now we’re running at approximately 70% plus million revenue run rate with right now a very, very strong pipeline looking into the second half, now while we don’t control that completely things are looking up with the number of the relationships that we’re working with presently.

Thank you, Jim. And then given the delay integrating with Samsung or maybe moving beyond Phase 1 and some of the highlight projects it’s fair to say that you don’t expect dramatic increase in gross margin in the third quarter, and so that would be a quarter that would be unlikely to achieve positive EPS, but perhaps little bit or something like that in the fourth quarter?

Mike, that’s a tricky question to answer right now, because we’re kind of closed an inflection point and we do have a tremendous pipeline of opportunities just right now all about can we get it the revenues recognized can we get the work performed in and that time. So we’re not quite ready to say that could be the case or not, its not because of the pipeline, its just really about getting the work done and performed timely, in fact in the second quarter we had revenues of around $400,000 to $500,000 that we just couldn’t get approvals along for the revenue recognition which you know so – we have little give and take in the quarters and that’s place out right now. Traditionally the third quarter though is very strong as the federal government’s year end. So right now, it’s just the hard halt to make, simply by the way.

It’s moving in the right direction its little hard to tell exactly moving inflection point to reach, thanks. And the with just one or two more if you don’t mind, one the large finance with services client that number between second phase, the second phase does that still actual pilots where you start to recognize monthly recurring revenue, service revenue per impact.

Mike, we’re actually kind of very excited about this. Phase 1 for this large financial institutions was really providing consulting roadmap on how the issue deploy our services, in the third quarter, we should be getting Phase 2 started which is actually the deployment of some of our next generation identity management services which then we will probably take a period of time to get fully deploy. But we are very excited about that. And on top of that we started Phase 1 with two new commercial clients as well. So as we propagate this further we are hoping this really spreads and especially given our AT&T relationship that continues to develop we think that could lay a strong push for us in the commercial world.

And as the expectation that – you will be the customers were will be paying AT&T and then AT&T will be remitting to use some kind of monthly service fee that could range from as well as $1 to as high $5 per device month?

Mike I think the pricing range you should talking about is one that we have acknowledged and we believe to be a valid pricing range as to your – the earlier part of your question as to whether there is going to be a direct bill from the ultimate client to us whether its going to be through AT&T our experience to-date has been that it will be deal specific, it will be depending on the specific terms of the agreement with the customers. So it maybe through AT&T with the pass through to us where we might in some cases be the primary recipient of the government.

Okay, well. Thank you very much. I’ll hop off.

Thanks a lot

And we will now go to Mike Malouf with Craig-Hallum Capital Group.

Great, thanks guys for taking my questions. Jim, I could just drill down a little bit more into the gross margins for the June quarter. I know that the mix in the first quarter was unfavorable, then we went actually down another 120 basis points in the second quarter or so. Can you just help us for that a little bit and you’d mentioned that you had a bunch of extra spending was there extra spending in the gross profit, are the cost of good line.

Mike, we had a full quarter of highs [ph] come in on the carrier services and then which drove down a little bit and then we had about the $400,000 to $500,000 in revenue high margins that slipped into the third quarter. So it was more of a timing of that. And that all that happens it was very simple. So we had more in carrier services because of full three months of highs [ph] and we had some slippage on the revenue recognition that some high margin services.

Okay, got it. And there is no extra spend on the cost of goods at all, correct?

What we – no, no, that’s not correct at all. We did, we have in the second quarter and first quarter, we’ve been building extra capacity.

Okay.

And anticipation of more working revenue in the third quarter and fourth quarter, as far as our investments lot of the investments we’ve made as to make sure that we can handle some business coming in that second half. So we did…

How much has that been?

I don’t have the exact details right now, couple of $100,000, $200,000, $300,000, $400,000. Okay, more about having extra labor – more labor than we need right now. We just are trying to be prepare as we go through this.

Okay, great. And then I’m wondering if you could just share a little bit color on the go-to-market different go-to-market strategy as we look out over the next 12 months specifically what the sense on opportunity. And just as you go through this how things are developing for you do you really curious on the insight on that.

There is two things I want to tell you, lets kind of as you said drill down. One a greatly figure looking forward, digital identity management, okay, okay, there was a study that went out nine of the ten responses by IT professionals in this next year, said they were going to be focusing in their cyber spending issues on digital identity management, okay. A lot of the big push now on defensive cyber security is in identity management right where we’re playing and lot of spendings going to be occurring there, in fact it is one of the number one pushes by the federal government in their sprint to try to lock down their infrastructure that is clearly beneficial to us and what we’ve have been building and deploying. How we’re building and deploying it, is through partners. Right now, we have Samsung really focusing Phase 1 on federal capture and getting devices and tablets within there, try to gather what we’re – what we build in conjunction with them and integrated with their Knox and CellWe, as well as other MDM applications that we support. Why this is important is – there is a lot of programs right now, focused right on this spending area, and some of them are within the DHS and some of them within the DOD and we’re in very good position with them. Samsung more specifically has set up and are demonstrating our mutual solution within their DC offices and it is live. One of the great things about the spending and investments we made in the second quarter is we – get the relationships done, we also fully integrated our ITMS as well as our digital credentialing capabilities into their platforms. So that’s where the marketing is going as we dig further down with Samsung and they’re focused on the federal space first because that’s where the low hanging fruit is. As it goes to LG, more classically looking at the commercial sector as it goes to Kyocera more focused on some of the our fees and spending on the first responders and their hardware devices. We have a full product roadmap over the next two years that is allowing us to do this on all mobile devices, including Apple, HTC, Samsung, Kyocera, LG as well as the tablets and migrating that further along into machine search derived credentialing as well as ultimately the Internet of Things as Steve talked about. So step one is the mobile attack, step two other devices and then ultimately step three, the Internet of Things. If you looked into Samsung’s big push, ultimately their endgame is addressing the Internet of Things, our solutions are supporting that. So does that answered a little bit?

Okay, great. Yes, yes, that’s very helpful. I appreciate the color.

[Operator Instructions] And we will now go to John Harrell with Harrell & Associates.

Yes. So you guys prepared to – earlier in the statements you said that you’re going off or back half of the year outlook. Are you prepared to give revenue guidance as well as earnings per share or are you guys going to once again differ to analyst?

Well, right now we have the only guidance that we’ve given is what our goals are to achieve. Which as we start the year with 50% revenue growth so over the last year as our service well as, be in operational, – meeting operational performance and positive performance by the end of the year. We’ve given at that beginning of the year, we still believe we can attain those goals, that’s where we are right now. We do not at this time because of the size of the company and where we are provide absolute guidance, we don’t have that absolute visibility and when we do and we mature further we will.

Okay. So this quarter’s earnings will miss pretty badly on the EPS side as well as the revenue side, at least this regards to what analyst were forecasting. So next quarter you’re forecasting $0.01 EPS and $20.58 million, you guys think you could beat that, come in line, you’re going to be a little bit under any projections at all?

We are not commenting yet, as I said we have a very strong pipeline, we are not in control absolutely of that pipeline and we are working to meet our goals for the second half that is only the guidance that we are providing at this point.

Yes, it just seems like every quarters, the quarter that shareholders expect the company to finally its going to profit, yet it never happened. But thanks for answering the question.

Thank you.

And we will now go to Michael Needleman with JSAM.

You talked a little bit about the deployment for the financial services being in the commercial side can you share, how is that sale come about was there a partner involved and you also talked a little bit about two new clients and did that come from AT&T?

Easy answer, yes. Yes the financial services, which obviously a giant – a very large company was directly result of our AT&T partnership as our, at least two others that are in the pipeline today. Very similar format, profile and again we are in Phase 1 and limited in how much detail we can discuss. We look forward to be able expand on our near future.

And just a quick follow-up on that, and then I have one other question, when you went to that process, would you actually involved clearly you were with the financial services, because you talked about the deployment. Where were you brought in –in that sales process was it early or did AT&T after having discussions bring you in?

It was quite early now I’ll also share with you that becoming a preferred service provider to AT&T does not in a designated providers its not an easy process. So we were in early in terms of having spent well over a year proving ourselves and our capabilities to AT&T before they put us into their sales challenge. And then when we got involved in this particular transaction with the financial services company, we will bought in very early in the process. And AT&T is quite demanding about the level of comfort, support and credibility that they want from their partners. And that is another reason why we had to have some upfront incremental spending in sales and marketing area to support and launch these initiatives.

Between and what you just talked about and what you expensed in Samsung, is there a range of what you think that that spend was this quarter?

Michael, it’s Jim. Hundreds of thousands of dollars that is embedded in an number of areas because we invested in a number of platforms, a number of optimizations, new developments, number of partners, sales and marketing, it was pervasive throughout the organization.

Okay. And my last question to you is given the outlook or what your perspective outlook for accelerated sales in the second half and given the spend that we watched the first half, are you suggesting or did you suggest I just want to be hearing this correctly that you are expense side of the ledger you should be flat or did you also say that there is a possibility that could be down.

No, I clearly said where we are right now and trying to achieve our goals, we should see a flattening out of our SG&A and as not as slight decline, because some of the real heavy push that we did in the first half has come to an end and we’re moving on to new areas. So there is a little bit of the low as we’ve been start pushing into the rest of our product roadmap which includes really addressing devices and the Internet of Things as we got into 2016.

Thank you.

So you’ve heard correctly Michael.

Thank you.

Thank you, Michael.

And we will now go to Jim Kennedy with Marathon Capital Management.

Hi guys.

Hi, Jim.

Hi Jim, quick questions for you on the commercial enterprise side, can you say what industries your two new clients are involved in?

Pharmacy and I’m not allowed to say anything on the other one.

Okay, so…

Pharmaceutical business.

We’re gag now, we’re pretty much gag, pretty tightly right now, so…

Okay, so….

I know in depth and reference want to pharmacy.

Okay. So you’ve got one in financial, one in pharma, can you confirm that the third one is in neither of those industry?

Yes.

Okay. So you get three different industries.

We’re looking at – we’re looking out in such things with our partners various different industries and we’re building a roadmap that we can try to expand that as we build out the education and training with the AT&T sales force and next up is trying to train and expand our other partner’s sales force.

Good.

So we’re focusing on low hanging fruit, first though because unlike some of our larger well funded competitors we have to kind of optimize our cost so they are just spending uniquely millions and millions of dollars we’re taking a little bit more of a pragmatic view

Okay. And then last question is on the pipeline, can you characterize the pipeline a bit for us in terms of obviously it is growing, can you give us a little more color as to what makes it in the pipeline or these prospects or the alpha, beta or the trials, how do you delineate the various folks in the pipeline.

And that’s a very good question. It broad based number one, within our areas our pipeline we’re expanding in four different areas one the mobile side, for our Telecom Lifecycle management work. Two, our credentialing in cyber side, three our analytic side and then four our consulting side. The – when I take and we talk about pipeline, we take a look at greater than 50%, its not 80% likelihood close. On top of that, on each of the four areas we’re focusing in distinct areas that we’re testing out, we have a big focus on commercial right now, because we want to prove out the ability of taking our services from the federal level to a commercial area, because there is a lot of unique value there to our stakeholders and shareholders. And then two, we’re also have a strong push in state local and hopefully, we will see some strong awards in the state local marketplace as well from the municipality side. On the cyber side.

Yes.

Our focus is more federal for the low hanging fruit though. Okay for things of more size and then smaller engagements with the large enterprises to get them going.

Okay. Of those four areas, can you comment on which are the strongest in terms of pipeline?

Right now the strongest I would have to – I think what you mean is, what have the largest revenue opportunity. I would say federal, okay, because of the sprint and the push that is going on because of the recent hacking that is occurs its really kind of engage them to do things at a higher broader level. After that I would say some of the state and local opportunities are quite large. Because of the need to either save money and get control of their expenses as it concerns mobility and/or cyber as it concerns how they are going to really control some of the access because of all new mobile devices. After that I would then go to commercial, okay, in cyber and analytics, we’re going to – analytics we’re going to we see some strong opportunities that are multi-million dollar opportunities over the next three to five years because of the two new recent relationships abroad. And then finally I would say consulting because we’re starting to build out our cyber consulting practice to address the pipeline of opportunities we think will see – so we can scale there on the commercial side as it addresses how to in fact, take a lot of our identity management services and deploy them in these organizations.

Got you. Okay, and you mentioned the word or you said that there are several, I guess the multi-million dollar opportunities, are there also opportunities in the pipeline that get into the eight figure and up range in terms of potential?

Well, right now we have opportunities ranging all the way from the – six figures into the seven figures. I don’t think I would want to classify any as eight figures at this time. There is a couple opportunities as they grow, that they may grow into that. But I also don’t want to get – the horse in front of the cart either. We’re really focused on our netting right now and just getting things adopted and going. And then we believe it will scale.

Okay, very good. Thank you.

Thanks Jim.

Yes.

And we will now go to Sam Donaldson, Private Investor.

Well, gentlemen, it seems to me that you made – the company has made good progress at the plans where I think the September goal, and of course that trend as we see demonstrated by the losses of these quarters call free increased spending. And so my first question is does the company have in hands enough money as you project spending possibilities for the next several quarters do you have enough money in hand to meet the spending nearly.

We believe so Sam.

Yes, that’s a short answer.

Sam, I’ve no need too long, I’m not going to get on the other end of a phone with and I know you are going to get me down one where the other so I’m just cutting to the chase with you but.

That’s fine.

We do – Sam, we do forecast out through the fourth quarter there is a matter of course in each one of our quarters and we feel that we are adequately funded through a combination of cash availability, our balance sheet net working capital and our standby line of credit. We do not expect to takedown the great bulk of our existing available liquidity. We believe that we will get the profitability well before that happens.

Well. That’s excellent, because I – I think none of us where going to the market as you did over a year ago to get the money to make this expansion and build out the capacity and as a fact that you may not have to do that again is I think various company. Let me just try one more along the lines and others have tried in this call, because you talk about goals Jim and Steve and I think one of the goal first to the year of was that you hope to be profitable but the end of this year, this calendar year, but with the delays you discussed occurred what do you think a reasonable estimate for breaking into profitability might be.

Sam, right now the pipeline is so strong and well, it’s not fully on our control. I don’t think we’re changing our goals right now. Let’s get through the third quarter when we have a better feel for things, then discuss it then. That’s all I think we can say at this point I think is premature to all the sudden start kicking the ball down with the visibility that we have at this time.

Okay.

Sam, thank you for the opportunity for me to back half my earlier conversation with you a quarter ago, but I must tell you, I would go to Jim’s comment and say a true estimate of that will be much more credible at the end of the third quarter when we see how we do against our existing pipelines and opportunities, but our goal is still to be profitable at year end.

No, operationally profitable – cash flow basis we want to see that going in the right direction and moving forward Sam. I mean our goals got to change.

That’s an excellent answers as far as I’m concern, because granted you can’t know until we see the first part of the second half for the year, because that will impact the second by the first quarter. But what you have said to us, as I gathered, is that you see nothing at the moment, that you got to say well, no I think its probably not possible you haven’t said that, you just said yes, that’s still to go and little tough that’s in the fourth – I don’t third quarter conference call.

Hey, Jim, I want to read you something quickly, that really point to the size in the market opportunity. Okay and why we’re building out credentialing, identity management, why we are building out everything to address the Internet of Things. This is recently just came out and its basically our society is progressing to a point where nearly every electronic device whether it would be home appliances, medical devices, vehicles or tools will have some form of embedded connectivity, billions of new unsecured IT enabled endpoint devices will soon be reversing consumer incorporate networks which are highly vulnerable to a tax. That is why people are rising identity management today. Because the future that we look at. Okay is truly going to be affected by this new change and how we work and live because of all of these smart devices and what we do addresses it, that’s why we have product roadmap that goes all the way out to the Internet of Things. Because that’s really where we conduct the endpoint in the dream, for what we can deliver against. That’s where really the investments, that’s where we’re doing this.

That’s very exciting and the key of course that is, how much of that do we get? How much does that WidePoint get, so again, I think you’re on the right track, I think the plan is working and we all wanted it to be profitable tomorrow. But I think most of us depend with you a long time, I know you will rate to more. Thanks very much, gentlemen. Good luck.

Thank you, Sam.

There are currently no further questions at this time. I will now turn call back over to Steve Komar for any additional or closing remarks.

Thanks, operator. I guess we have addressed all of our listener’s questions and comments. And operator, thank you very much for your assistance. As a closing comment we can, I’ll respect the fact that we continue to be very excited about our business outlook for this year. Specifically for meaningful growth and bottom line improvement for the second half of 2015. The management of the company remains focused on continuing to build the business for the future and maximizing shareholder value in the process. Again, we thank you very much for your continued interest in WidePoint and we wish you all a very pleasant evening. Thank you.

Ladies and gentlemen, this does conclude today’s conference. We thank you for your participation.