Good day, and welcome to the WidePoint Corporation Third Quarter 2016 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to David Fore with Hayden IR. Please go ahead, sir.

Thank you, Operator. Good afternoon to all participants in WidePoint's third quarter 2016 financial results conference call. With me today are WidePoint's Chairman and CEO, Steve Komar; and Chief Financial Officer, Jim McCubbin. Steve will provide a brief overview of the quarter's developments and accomplishments and Jim will provide additional financial and operational review and outlook. We will open the call to questions from today's participants. Before I turn the call over to Steve, I would 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, expects, plans, anticipates, predicts, forecast, expressions, which reflect something other than historical facts are intended to identify forward-looking statements. These forward-looking statements involve a number of risk factors and uncertainties, including those discussed in the Risk Factors sections of our 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 the forward-looking statements due to such risk 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 now like to turn the call over to WidePoint's Chairman and CEO, Steve Komar, for opening remarks. Steve?

Thank you Dave, and good afternoon to all of you that have joined us for today's quarterly earnings and investor call. As always, I would like to express our appreciation to all of you for your continued interest and support of WidePoint Corporation. While I don't think I can talk some of the recent political surprises that occurred much earlier today, I'm pleased that you are giving us the opportunity to share with you some good news about our exciting recent successes, and several of the substantial opportunities we believe will make a continuing difference as we move toward achieving the year end goals and targets we set for 2016. We are confident that we will achieve and perhaps exceed the substantial financial goals that we set, and communicated to you earlier in this calendar year, and that many of the intangible non-financial goals we set will also be delivered and provide a base for continuing revenue growth and accelerating positive financial performance in 2017. So without further ado, let me say that our third quarter's financial results were very strong and serve to confirm our progress and trajectories. We grew our top line revenues by approximately 30% versus both the prior years and most recent 2016 quarters, generally meeting and exceeding our own informal internal expectations. We also established our goal of finally reaching and maintaining operational profitability on an adjusted EBITA basis at some point during the second half of this year, and we have achieved that goal in this third quarter, recording $340,000 positive EBITA performance, somewhat ahead of our own internal tracking and projections, but good news nonetheless. By the way we achieved that financial result in the face of some headwinds associated with the negative foreign exchange rate impact resulting from Britain's vote to --…

Thank you, Steve. Hello everyone. Thank you again for joining our call today. Today in my remarks I'm going to discuss our third quarter results. For more specific details, please see our 10-Q filing which is being filed today with the SEC. Our third quarter revenue was approximately $22.1 million compared to $17 million in the third quarter of 2015 as a result of several factors some which Steve had already covered. Our carrier services grew to $13.5 million over third quarter 2015 revenue of $9.1 million due to an increase in carrier task orders that were issued as a result of additional agencies that came under our management during the nine months of 2016. Our third quarter 2016 carrier services revenue was also up from our second quarter 2016 as a result of increases in federal ERM spending. Our carrier services as we have seen to expanding quarter-to-quarter as a result of spending by the agencies that are not in our complete control especially if they are procuring additional products directly from the carriers that could time drive spend higher. This was partly would occurred in the third quarter with the end of the fiscal year. Looking out we could see our carrier services continue to expand as we have the U.S. Coast Guard in the near term as an additional agency under management. At this point in time and given our visibility we believe that the U.S. Coast Guard could become our largest agency under management. As Steve has discussed with you already, we continue to work diligently with them and are looking forward to reporting hopefully our first revenues in December. Our managed services also increased in the third quarter of 2016 to $8.6 million as compared to $7.9 million over our third quarter 2015 revenues and…

Thank you, Jim, and I appreciate that nice balanced approach. I think probably we'll provide some comforts to our investors. We are not about to go out of business. We are moving our business model and we've got what I consider substantial future revenue opportunities there in this space. Having said that, I would like to now open the call to our listener's questions. Operator, if you can assist us by opening the line for questions and comments that would be appreciated.

Thank you. [Operator Instructions] And we'll take our first question from Mike Crawford with B. Riley & Company.

Thanks. Nice to hear the Coast Guard is finally coming on board next month?

Yes. Mike, we appreciate that comment, believe me, it's one of our highest near-term focal points right now.

And driven that agency, which has been the slow mover within the DHS, it has taken some while, what gives you the confidence that that is the agency that's likely to move beyond just the lower margin wireless services component of service into more managed services that have been much higher by those customer in margin to what point stakeholders versus other DHS component agencies that were more quicker movers?

Mike, more than fair question. I would say that as frustrating as trying to bring the Coast Guard on in the early days was, what we're dealing with now is an energized focus management team within the Coast Guard that has moved this forward from the starting point to where we are today and of course over the last three to four months, still frustrating of course, but when we talk to them, we see a management team, a project implementation team, and a set of criteria that they want to now try and achieve. And that is obviously coming on board Phase 1 with 30 plus thousands units immediately coming on board. They have a number of additional management information type requirements that they want, some of it pushing into the data analytics capability. They are talking to us in addition about Phases 2 and 3 all part of their project plan for this effort that further expanses beyond and allows us to bring in new capabilities that are in essence outside the base pricing criteria of the BPA program. We have been assured that they have the funds and if that is the case I think we are going to have a really excellent growing relationship with the Coast Guard over the next 12 to 18 months and if all goes as planned, I think it will probably be one of the more profitable agency relationships we have under the BPA.

Okay, thank you, Steve, and just to clarify the potential 10 million in revenue from the Coast Guard next year is just in phase one or is that also favoring in these other phases you just mentioned?

That is just phase one. It quickly translates up into the range of a million dollars a month as quickly as we put on that first [indiscernible] of mobile devices.

Great, thank you. And then switching gears slightly, what makes you think that you have a 12 month lead on the two other potential, but not accredited PIV-1 providers and who are those providers again?

It's an internal assessment, so let's go with that and it's based on our own track record and experience of what it takes to move timelines that it takes to move through the government authority to operate process. It can take longer than 12 months. It is conceivable, it could be done in a somewhat more truncated timeframe by our competitors but our estimate is 12 months and when we talk to the authorities and within a GSA and a DOD, the general response we get is yep, 12 months. It's just the reality of the government process. Our competitors, I think you asked for [indiscernible], now Symantec, I lost the old name but it's Symantec.

Okay, great, thanks. And then third question is regarding AT&T accelerating to April launch, what's moving fast forward and what does that mean in terms of potential revenue opportunity for what point?

Well, I think the acceleration forward is simply reflective of the priority that AT&T management is giving to that initiative. It's kind of a development program at this stage of the same that is run out of what AT&T calls the boundary, which seems to be the chrysalis for a lot of these new initiatives going forward. And the fact that they have been able to and have committed to accelerate their process to essentially bring this new capability to new market, I think indicates nothing more than the priority that they are giving to it. So, our reaction is fantastic, that's great, we love it, we are prepared to support the integration and whatever else from our side to keep it on that track. Mike, going forwards in terms of opportunity I do not know, I just know that we think we are in with the right partner, right partner has got the focus on rolling out these capabilities, it would be foolhardy for me to give you a number I just don't know, but I think maybe five to six months from now we might very well be able to start answering that question for you.

Okay, last question in that regard, would the revenue opportunity be one where you are getting some kind of monthly returning service fee or is that model at the window?

No, no, I think what we are talking about is a recurring license model basically if you think in terms of a software subscription scenario that's what we are looking at, at this point.

Okay, great, thank you. And then for Jim, if you could roughly breakout services next from the quarter in terms of at a lower margin career services but you said we are up, the management services, the managed services and then the resale of other managed services, I would appreciate it.

Well, I think we are sitting with like, the cue is out by the way but I think it's 13.5 million on the carrier services and then it's about 8.6 million on the managed services component, as I recall for the total of that 22.1 million.

Great. Thank you very much.

Thank you, Mike.

Thank you, Mike.

[Operator Instructions] We will take our next question from Sam Donaldson, a private investor. Mr. Donaldson, your line is open. If you are on a speaker phone, please press your mute button, we are not hearing you at this time. Are you still there, sir?

I think he must have got cut off.

And we are not able to hear him at this time. [Operator instructions] And we will go back to Sam Donaldson, a Private Investor.

Gentlemen, can you hear me now?

Yes.

Yes, we can, Sam.

Well, I was cut off, I was just about to say congratulations, I mean the critics said you couldn't do it and oh, yes and as the [indiscernible] responded saying I think this is amazing, I mean a bigly achievement, good for you. [Indiscernible] I am overcome, you see, with joy as someone who has been with this company for 15 years as though through good and bad, I am just pleased. And as you expect, you have not only achieved but perhaps exceed financial goals you setup and all of us like that means that you expect that you will I mean net bottom line of profitability in the fourth quarter. Never mind that, I am greedy. Tell me, is it too early for you to look at next year 2017 and give us some rough estimate of what you might think your yearly income is going to be, growth?

Sam, I will refer to Jim on that one but I will give him a little pre guidance, I do think it's a little early for us to talk about that.

I know, but go ahead anyway.

Let's see if you can get Jim to give you an answer there.

Yes.

Hey Sam, it's just one of those days I guess for President Elect Trump and us to get some pride. So everybody should look out for that third surprise in their lives. It's not easy and it hasn't been the easy, we had challenges and we continue to have challenges. So we are doing everything to meet or exceed our goals, but we are balancing them also with the investments and the requirements that these are the parties are asking for. So 2017, one of the reasons that we have a hard time quantifying this is because we know with Coast Guard coming on and with us controlling our SG&A and our operating basis, so there is a high likelihood of course that we are going to clearly be EBITDA profitable and if not profitable, but what really will drive the amount of that will be some of the things that we are working on and as they come on line there is seasonality; our first quarter tends to be weak. So before we can really kind of guess how it's going to roll out, we really have to get a little bit further along into the fourth quarter. That's going to determine how much and how fast some of these things will come along. And then the upside surprise, AT&T and the team is working very closely with them to see how they launch in February and in April this whole IOT initiative. So depending on how that's perceived, a lot can happen. I just think it's too hard right now to quantify it but I do believe we are in the right direction with our financial model.

Okay

I have showed our way through.

Not an answer but I thought it was going to be little early. Finally, can you tell us why Mr. Johnson left the board?

Well, that's a pretty direct question, Sam. I will take a shot at it and my only hesitation is because that decision was taken by our nominating and governance committee which is comprised of all our independent directors of which I am not one, and did participate. But I can tell you that from some informal follow on conversations that it was a very open and above board discussions amongst the independent directors and Paul, and my gut tells me that the underlying issue was that there was a combination of modified roles and assignments that Paul had changed during the year. He had then, and I think we disposed the member of the executive committee associated with working on the CEO transition, and then of course the CEO transition got delayed and pushed out into the future. And I think some of Paul's responsibilities in essence went away, I think perhaps, I can't speak for him but I think perhaps he felt that it was more productive then to move on and spend his time in other areas. I know that the decision that came out was a mutual one and it was unanimous and I think at some point in time we all move on. We have had two board changes in the course of 2016. So these things happen, we will be looking to the future to both build director slots and anything else that we think is appropriate. And let me head you up on your next question about CEO succession.

Exactly, how long you are going to stay.

I will attack that one. As you know, this has been dragging out a while. I think my commitment stays in place, the board has… I have been working with the board pretty proactively in terms of the fact that we want to have an orderly transition process at the right time. And obviously I am fine with that too, but I think, the board has asked me to stay on until we achieve our 2016 goals and that we can demonstrate some stable profitability, so called riding of the ship and with that point in time we will trigger the plan and we will move on to bigger and better things.

Well, for my money you are doing a very fine job and there is an old saying, if it ain't broke don't fix it, so stay as long as you can. Thanks gentlemen, and goodbye.

Thank you very much Sam, appreciate it. Have a good day.

And that concludes our question and answer session. I'd like to turn things back over to management for any closing comments.

Thank you, Operator. It appears we've addressed all the questions, and Operator, thank you for your assistance. As a quick closing comment we believe that we are well on track to beat and surpass the goals we have communicated to our investors during 2016. Perhaps more importantly we have been putting in place the strategies that will enable continuation and acceleration of our current revenue and earnings projections. As a footnote for those of you who have interest or who will be attending, WidePoint will be presenting at the L.D. Micro Investor Conference to be held in Los Angeles in early December and we will be webcasting our presentation as well. Again, thank you for your time and interest today and we wish you all a very pleasant evening.

Thanks everyone. That does conclude today's conference. Thank you for your participation.