WidePoint Corporation (NYSE American: WYY) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited consolidated results. WidePoint provides technology management-as-a-service, including communications and identity management, primarily to government customers.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $22.44 million | $20.65 million |
| Gross profit / margin | $3.90 million / 17% | $4.72 million / 23% |
| Operating income (loss) | ($0.69) million | $0.68 million |
| Net income (loss) | ($0.39) million; EPS ($0.04) | $0.59 million; EPS $0.07 |
| Operating cash flow | $2.83 million | $0.95 million |
| Cash and cash equivalents | $7.27 million at March 31 | $17.06 million at March 31, 2021 |
Revenue increased 9% year over year. Carrier services rose about $1.58 million and managed services about $0.20 million, including approximately $1.6 million of IT Authorities (ITA) revenue. Gross margin contracted as prior-year carrier credits did not recur and ITA had a lower margin mix. Operating expenses increased to $4.58 million from $4.04 million.
Operating cash flow benefited from receivable collections and payable timing. Investing used $0.98 million, principally for equipment and capitalized software; financing used $1.01 million, including $0.82 million of share repurchases. Total liabilities were $30.53 million, including lease liabilities; the filing reports no line-of-credit borrowing balance. Current assets were $29.10 million and current liabilities $24.38 million.
Material changes and notable items
- Other income included a $301,000 noncash gain from remeasuring ITA contingent consideration, contributing to $244,000 of total other income versus $66,000 of other expense a year earlier.
- Q1 2021 included approximately $1.7 million of carrier credits reflected in both revenue and cost of revenue; these did not recur in Q1 2022.
- WidePoint repurchased 196,586 shares for approximately $818,200, then suspended the repurchase plan in March to direct excess funds toward the business. No ATM shares were sold in the quarter; remaining ATM capacity was $18.2 million.
- ITA contingent consideration is tied to EBITDA performance through 2024. In Q1, the company paid approximately $171,000 and issued 75,000 warrants for 2021 performance; contingent consideration liabilities totaled $1.125 million at quarter-end.
Liquidity, outlook, and risks
Management reported approximately $5.0 million of net working capital at March 31, down from $7.1 million at year-end. The $5.0 million revolving credit facility had a June 15, 2022 maturity; the company was eligible to borrow up to $4.9 million under its borrowing base. The filing does not state whether the facility was subsequently renewed. The ATM program offers an additional potential funding source, but management cautioned that capital may not be available on acceptable terms or at all.
No quantitative earnings or revenue guidance was provided. 2022 priorities include pursuing full FedRAMP certification, growing recurring managed-services and SaaS revenue, expanding commercial business, pursuing ITA cross-selling, and investing in technology and sales capabilities. Management cited risks including customer and revenue mix variability, contract wins and renewals, supply-chain constraints, inflation, fixed labor and facility costs, key-personnel retention, acquisition integration, and the ability to sustain profitability and positive cash flow. U.S. federal customers accounted for 77.7% of Q1 revenue.
The company reported no material litigation, no material change in risk factors from its 2021 Form 10-K, and effective disclosure controls at quarter-end.
Key facts for investors to verify
- Whether the revolving credit facility was extended beyond its June 15, 2022 maturity and whether covenant requirements were met.
- Whether the lower gross margin and Q1 operating loss persisted, separating recurring performance from prior-year carrier credits and ITA effects.
- ITA earn-out results, remaining cash and warrant obligations, and the employment-agreement provisions that can accelerate uncompleted earn-outs.
- Conversion of unbilled receivables and the sustainability of operating cash flow, given government-customer concentration.
- Progress toward FedRAMP certification and the company’s ability to fund planned technology and growth investment while maintaining liquidity.