Good afternoon. Welcome to WidePoint 's Second Quarter 2021 Earnings Conference Call. My name is Rich, and I will be your Operator for today's call. Joining us for today's presentation are WidePoint's President and CEO, Jin Kang; Executive Vice President and Chief Sales and Marketing Officer, Jason Holloway; and Executive Vice President and CFO, Kellie Kim. Following their remarks, we will open up the call for questions from WidePoint 's publishing analysts and major investors. If your questions were not taken today, and you would like additional information, please contact WidePoint's Investor Relations team at wyy@gatewayir.com. Before we begin the call, I would like to provide a wide point Safe harbor statement that includes cautions regarding Forward-looking statements made during this call. The matters discussed in this Conference call may include forward-looking statements regarding future events and the future performance of Wide point corporation that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the Company's Form10-K filed with the Securities and Exchange Commission. Finally, I would like to remind everyone that this call will be made available for replay via a link in the Investor Relations section of the Company's website at www.widepoint.com. Now, I would like to turn the call over to WidePoint 's President and CEO, Mr. Jin Kang. Sir, please proceed.

Thank you, Operator, and good afternoon to everyone. Thank you for joining us today to review the financial results for the second quarter ended June 30, 2021. The second quarter marked a period of steady operational progress for WidePoint. Over the last few months, we have continued to make focused and judicious investments in our technology, as well as further enhance our sales and marketing resources and processes. Over time, these efforts will extend WidePoint 's competitive advantages while driving greater efficiencies and new sources of high-margin revenue for our Company. We made consistent progress on our strategic plan during Q2, but our financial performance in the period was impacted by certain timing issues with customers' orders as well as the lingering effects of the pandemic. Kelly will provide the specifics of the timing issues later in our presentation. With that in mind, if you Exclude the timing issues in Q2 and the census project revenue recognized in the year-ago period. Our underlying business grew 5% on a year-over-year basis, which is encouraging, especially given that Q2 is historically a soft period for our Company. Our initiative to drive efficiencies and build our base of higher-margin managed services revenue continued as demonstrated by the 11% increase in gross margin compared to Q2 of last year. While we knew 2021 would be a difficult comparison to last year, our gross margin expansion and solid adjusted EBITDA demonstrate that even without census, our core business fundamentals and growth drivers remain intact. At a high level, the mobile landscape continues to become more complex on a daily basis, thereby increasing the need for our trusted mobility management solutions that help enterprises to secure their mobile workforce. As a result, we are moving full steam ahead with strengthening our product portfolio and are already…

Thank you, Jin. And good afternoon, everyone. In aggregate, we secured more than $36 million in identity management and manageable services deals spread across 48 contractual actions, renewals, and extensions with partners we can't name at this time for security purposes. These contractual actions included DHS headquarters, FPS, or federal protective services, TSA, or transportation security administration, science and technology, office of biometrics identity. management, [Indiscernible] office or countering the weapons of mass destruction. And flat C, or federal law enforcement training, etc. These are task orders awarded under CWM 2.0 contract vehicle for long-term contracts, and they range up to five years. Specifically focusing on the higher-margin identity management solution customers, we were able to add new credentialing sales for a major public research university, a global aerospace manufacturer, a major IT provider to the federal government, and numerous defense contractors. As we look to expand our footprint, we continue to explore sole sourcing opportunities via the protected class, such as American native corporations, service-disabled veteran-owned small businesses, as well as other [Indiscernible]. This strategy is a win-win because it allows WidePoint to not only partner but mentor these protected class businesses and ultimately expand our contractual footprint. Our sales strategy continues to be based on the same tactics we've successfully implemented in the past several quarters, to team with large entrenched systems integrators and expand our teaming relationships with both prominent players in the commercial and federal sectors. Due to the very nature of systems integration, we're able to capitalize on the promising leads we collaborate with other companies who provide solutions that are accretive to ours. We foresee this business model further deepening and expanding, and we look forward to capturing the greatest amount of market share possible. This also ties into why we're so focused on…

Thank you, Jason. Good afternoon, everyone. I'm pleased to share more details on the Second Quarter of 2021 results. But before I get started, I'd like to talk about the second quarter as a whole. In this past period, our managed services revenue declined sequentially to 8.1 million. If it were not for the delay of a large order from one of our government customers, our managed services revenue would have been 9.4 million, a slight increase of 1% compared to the first quarter of 2021. The order experienced a supply chain delay caused by the COVID -19 pandemic. This larger award was received and processed by our staff, and the revenue will appear in the next quarter. Our gross margin at 20% remained fairly steady relative to the first quarter. And in line with our projections and expectations. As a reminder, in order to objectively evaluate our performance in 2021, we must exclude the one-time bonus that we have experienced since this project. With that said, I will move on to our financial results. For the second quarter, our revenue was 20 million compared to 54.8 million reported for the same quarter last year. The year-over-year decline was primarily driven by a reduction in carrier services revenue, mainly due to the wind-down overwork on the census project. The final tranche of carrier credits was discussed in our Q1 call and the timing of revenue recognition on accessory sales. For the six months ended June 30th, 2021, revenue decreased to 40.6 million from 94.4 million in the same period last year. Again, the decline was primarily due to the wind-down of our work on the census projects pass-through of carrier credits and timing of accessories sale discussed above. Looking at the revenues in more detail, carrier services decreased to 11.9…

Thank you, Kelly. And thank you, Jason. To reiterate, our end goal for 2021 and beyond is to profitably grow the business by adding higher-margin sources of revenue. Not only are we approaching this plan of attack through organic growth means, as you've heard throughout this call, but we are also planning to do so through strategic acquisitions. Our criteria for acquisition targets consist of companies with profitability, cross-sell, and upsell opportunities with our solutions and potential vertical and horizontal integration synergies. We continue to be extremely diligent with the vetting process as we want to be absolutely sure that the target we choose will be immediately accretive to our operations. We are receiving assistance from a handful of investment banks at this time and look forward to providing further updates through the appropriate Reg FD channels. Reflecting back at this past quarter, I am encouraged by the progress we've made and the trajectory we're headed in. As Jason already mentioned, we have many irons in the fire, indicated by the significant number of RFPs that have been submitted and the increase in customer demos that have been and are slated to be conducted. This is not only attributable to the constant stellar work from our team, but it's also partially due to the massive success garnered from the Census project. We've been fortunate in having more and more partners and customers express interest in collaborating with us due to our proven ability to tackle massive projects successfully. Although much of the progress we've made isn't directly reflected on our financial statements, we truly do have promising partnerships and opportunities in our pipeline. To more effectively evaluate our performance in 2021, we believe it may help to bear in mind that our expectations for this year compared to our performance…

Thank you. If you have a question. [Operators Instructions] One moment while we poll for questions. And our first question is from Barry Sine of Spartan Capital Securities. Please proceed.

Good afternoon, lady and gentlemen. A couple of questions if you don't mind.

Good afternoon, Barry.

The first several are all on revenue. So in -- so you gave a lot of information on technology upgrade. I wanted to ask about human resources, investments changes, additions that you made a couple of quarters ago. I guess you mentioned a gentleman from IBM joining you. I don't recall seeing the press release on that; maybe I missed it. What exactly have you done, what -- how much have you increased the headcount in and sales by, and then what is the sales cycle? Obviously, if you hire a salesperson today, they're not going to generate revenue tomorrow. There is a fairly long lead time in your business.

Right. And so, thank you for that question, Barry. The answer is, we're still not prepared to release his name because we're going through a sensitive procurement. Yes, it is -- it takes a long time for us to close the deal. We do have some additional information that we will share shortly following this earnings call with the press release. I don't want to go into too much detail on that as soon as. We're able to do so, we will. But we are making an investment not only just in our sales staff resources, but we're also looking at the opportunities to put in a campaign together for media, social media, drive time, radios, talk shows. We have been looking seriously, and we have been making investments into those. In terms of the length of our sales cycle, that depends on a particular opportunity. Sometimes opportunities hit our desk out of the blue. Others we worked on for years, and finally, we will see some fruits of that. So very difficult for us to gauge. But I will tell you that we have some fairly strong opportunities with our pipeline, and I don't want to go into too many details on specific opportunities, but I will tell you that we have a very strong pipeline, and to add to that, Jason Holloway will jump in here to help me out a little.

Hey, Barry. Internal headcount on the sales cycle side does remain the same. Because again, as you noted, the sales cycle internally does tend to be anywhere from optimistically on the 6-month side but maybe closer to 9 to 12. So again, what we continue to do externally is a partner with different systems integrators. We are continuously looking for new partners to sign up, and that's why we have a heavy push with our existing partners to even do more lunch and learns, educational stuff because, within their ecosystem, they also have additional partners. So for us, we have found that we can shorten the sales cycle by, again, supplementing boots on the ground by going through a systems integrator to help us bring this in on a deal that's already a lot farther down the road versus bringing somebody in, trying to get them trained, get the black book going, and then having to catch up to that long sales process.

Okay. Jason, I'm glad you popped in because my next question is one of your comments. You mentioned higher demand for demos and RFPs, and just using the word higher, that's pretty big. Did you do it one more year ago? Was it three times as many? Can you give us any quantification to help us understand how much stronger than demand is?

Well, I can't go into actual specific numbers, Barry. But what I can say is, again, through our systems integrators like Synnex and others that we have discussed in the past, as well as others that I just -- I don't want to bring up, and you're going to have to trust me because we don't want to get ourselves into a situation where we potentially disqualify ourself on some opportunities that we have in the pipeline. But I can tell you that again with our focus, also, including more of the IT, as service type partners, we see a lot of increased demos on that side of the house because, again, the commercial enterprise space, we continuously look for avenues to expand our TM2 offerings within the commercial enterprise space. And though some of these new partners, they're introducing us to their partner base, and it's given us an opportunity, at least virtually, to conduct a lot of these demonstrations. And again, there has been an increase in RFPs, but again, we just got to be really careful how we address that because again, I just don't want to say anything that could get us disqualified, so hopefully, that helps.

Okay. I have another question on sales, but before I do that, I want to ask Kellie, if you don't mind, a question. So I understand kind of the baseline normalized revenue for the quarter. And I may have missed some points, but let me tell you what I think I heard. So the GAAP reported revenue numbers 19 million, 983-K. In the press release, you talked about a 1.1 million carrier credit, and then you also talked about a delayed order, which sounds like about 1.3 million. So if I add those all together, that's about 22.4 million to think about versus expectations, what you would have reported without those items. Did I miss anything, and I'm doing the math right?

No. You're right. We have the last tranche of the carrier credit, and we had the revenue rec -- timing of the revenue rec. And so when you add up those two, you're right, it's above the 22 million for the quarter.

Okay. And so -- that's helpful. I kind of have a set of what the normalized revenue would be. My last question, if we go back to prior guidance, and correct me if I'm wrong, I think what you had given out in 1Q was about 103 million for the full year. If I look at what you've reported for the first 6 months, that implies about a 15% jump from the first half of the year to the second half of the year, which is a big jump. Part of that, Kellie, just to give me, you get that 1.3 million order has already been booked now, so that's already in the box. But help me understand how you're going to make that big of a jump sequentially.

Hey, Barry, this is Jin. I'll take a shot at answering that question. And the guidance that we provided is correct. 103 on the top line and adjusted EBITDA at 4.3 million. I believe that's -- that's right, Kellie, right. And the answer is yes. We are looking at the topline revenue seriously, and we see it's within the margin of error and that we will be making that up in the second half. But I think the more important thing is that we want to improve our bottom line and so that's what we've been managing to. And so that's what we're going to be concentrating on to increase the higher-margin revenue for the second half. We do have some catch-up things that will be happening in the third quarter, things that slipped from the second to the third. So we'll be catching up on that. And we'll be concentrating on higher-margin revenues. And so -- and that's what we've been stressing. And as I said in my prepared remarks about the carrier services being low margin, and so it is a little lumpy, and I think you already mentioned the carriers services credit that was -- that one-time -- one piece that was leftover from the first quarter that pushed into the second. So we -- as I said, we are managing to the bottom line, and whatever the lumpiness that is on the top line, we'll manage that too as best we can.

Okay. Thank you very much, folks.

At this time, this concludes our question and answer session. If your question was not taken, please contact WidePoint 's IR team at wyy@gatewayir.com. I'd now like to turn the call back over to Mr. Jin Kang for his closing remarks.

Thank you, Operator. We appreciate everyone taking the time to join us today. As the Operator mentioned, if there were any questions we did not address today, please contact our IR team. You can find their full contact information at the bottom of today's earnings release. Please. Thank you again. And have a great evening.

Thank you for joining us today for WidePoint 's second-quarter 2021 conference call. You may now disconnect.