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WIDEPOINT CORP (WYY)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue of $34.2M missed S&P Global consensus of $38.6M; EPS of $(0.08) was below consensus of $(0.005), driven in part by a one-time out‑of‑period ASC 606 correction that reduced reported revenue by ~$2.7M and cost of revenue by ~$2.5M, modestly lowering gross profit by ~$0.233M .
  • Gross margin held at 14% YoY, while margin excluding carrier services expanded sharply to 40% from 32% YoY, reflecting mix shifts away from lower-margin reselling .
  • FY 2025 guidance initiated: revenue $154–$163M, adjusted EBITDA $2.8–$3.0M, free cash flow $2.4–$2.6M, and a goal of positive EPS; management remains confident with $268M backlog and Spiral 4 momentum .
  • Sequentially softer profitability vs Q4 2024 (adj. EBITDA $92K vs $631K; FCF $66K vs $593K) and lower quarter-end cash ($3.7M vs $6.8M) due to invoicing challenges at a major customer; resolution may take a couple of quarters, with a $4M revolver available as a backstop .

What Went Well and What Went Wrong

What Went Well

  • FedRAMP Authorized status achieved for ITMS; listing on FedRAMP marketplace expands addressable federal agencies and differentiates security credentials .
  • Margin quality improved: gross margin excluding carrier services rose to 40% (from 32% YoY) as lower reselling revenue mix boosted underlying profitability .
  • Spiral 4 contract activity built momentum with three task orders awarded in Q1; first award carries ~$2.5M per year and up to $25M over 10 years if all options are exercised .

What Went Wrong

  • Headline miss vs Street: Q1 revenue came in at $34.2M vs $38.6M consensus and EPS loss widened vs expectations; management cited a one‑time ASC 606 out-of-period revenue correction (~$2.7M) and an accounting change that pushes reselling revenue recognition over 12 months .
  • Sequential profitability softness: adjusted EBITDA fell to $92K (Q4: $631K) and FCF to $66K (Q4: $593K), reflecting lower reselling revenue and the accounting adjustment .
  • Cash declined to $3.7M due to invoice approval challenges with a major customer; management expects resolution could take a couple of quarters, though liquidity is supported by a $4M revolver .

Financial Results

Headline Metrics – Sequential and YoY

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$34.6 $37.7 $34.2
Gross Margin %14% 13% 14%
Gross Margin ex Carrier Services %38% 36% 40%
Net Income ($USD Millions)($0.425) ($0.356) ($0.724)
Diluted EPS ($)($0.04) ($0.04) ($0.08)
Adjusted EBITDA ($USD Millions)$0.574 $0.631 $0.092
Free Cash Flow ($USD Millions)$0.511 $0.593 $0.066
Cash and Equivalents ($USD Millions)$5.6 $6.8 $3.7

Actuals vs S&P Global Consensus – Q1 2025

MetricQ1 2025 ActualQ1 2025 Consensus*# of Estimates*
Revenue ($USD)$34,217,739 $38,563,620*2*
Primary EPS ($)($0.08) ($0.005)*2*

Values retrieved from S&P Global.

Revenue Mix

Revenue Line ($USD Millions)Q3 2024Q4 2024Q1 2025
Carrier Services$22.4 $24.6 $22.4
Managed Services Fees$8.5 $9.4 $9.3
Billable Services Fees$1.7 $1.0 $1.8
Reselling & Other$2.0 $2.7 $0.789

Notes: Q1 2025 reselling decline reflects a one‑time out‑of‑period ASC 606 adjustment ($2.7M) and a change to recognize certain reselling contracts over 12 months .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025Not provided (Q4 indicated guidance to come with Q1) $154M–$163M Initiated
Adjusted EBITDAFY 2025Not provided $2.8M–$3.0M Initiated
Free Cash FlowFY 2025Not provided $2.4M–$2.6M Initiated
EPSFY 2025Goal: positive EPS Goal: positive EPS Maintained (goal)
Capital InvestmentsFY 2025~+$0.2M discussed around facility build-out Increase by ~$0.5M for strategic priorities Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
FedRAMP/ITMSQ3: in‑process finalization; Q4: achieved Authorized status, marketplace listing Reinforced FedRAMP authorization and market access benefits Positive; authorization secured
Spiral 4Q3: early RFQs/admin setup; Q4: first $2.5M base year task order, up to $25M 10‑yr Two additional smaller task orders; more RFQs submitted Building momentum
Device‑as‑a‑Service (DaaS)Q3: new SI partnership; Q4: strong momentum Dedicated facility and hiring to support demand Scaling
CWMS 3.0 (DHS)Q3: high priority; Q4: strong position (ATO, FedRAMP, integration) Timeline optimism; multiple fallback mechanisms if award timing slips Active preparation
Cash/InvoicesQ3: cash improved with reduced unbilled; Q4: invoicing challenges persist, revolver renewed Cash down; admin invoice approvals may take a couple quarters; revolver available Short‑term headwind
Non‑GAAP FocusQ3/Q4: consecutive adj. EBITDA and FCF positive 31st consecutive adj. EBITDA positive; 6th consecutive FCF positive Continued discipline

Management Commentary

  • “Our long awaited FedRAMP Authorization for ITMS and momentum across the Spiral 4 contract vehicle were two major developments that highlighted this past quarter.”
  • “We made a one‑time out‑of‑period accounting adjustment... reduced revenue by approximately $2.7 million and cost of revenues by approximately $2.5 million... not expected to materially affect our full year results, and do not reflect any change in business fundamentals, cash flows, or contract performance.”
  • FY 2025 guidance reiterated: “Revenue, $154 million to $163 million; adjusted EBITDA, $2.8 million to $3 million; free cash flow, $2.4 million to $2.6 million; goal remains achieving positive earnings per share.”

Q&A Highlights

  • Accounting correction: CFO confirmed investors should “gross up revenue by $2.7 million, gross up EBITDA by about $200,000” to understand underlying performance; new reselling accounting pushes revenue recognition over 12 months, slightly degrading 2025 growth optics .
  • CWMS recompete: Period of performance ends Nov 2025; company expects recompete and award this year; if delayed, multiple mechanisms allow continuity (existing task orders through Nov 2026, extensions, cap additions) .
  • Spiral 4 context: Contract cap $2.7B across multiple awardees; initial task order ~$2.5M per year with nine one‑year options; additional modest task orders awarded; ongoing RFQs .
  • Guidance range drivers: Primarily timing of pipeline conversion and potential Spiral 4 task order inflow .
  • Partnerships/commercial pipeline: Expanded DaaS facility and personnel; majority of DaaS opportunities are commercial; exploring satellite partnership leveraging ITMS and PKI IAM .

Estimates Context

  • Q1 2025 revenue of $34.2M missed consensus of $38.6M; EPS of $(0.08) missed $(0.005) consensus. Underlying results absent the out‑of‑period correction would have been closer but still below consensus, implying potential downward near‑term estimate revisions as reselling revenue is recognized ratably over contract terms .
  • Consensus coverage is limited (# of estimates: 2), magnifying the impact of one-time adjustments on reported beats/misses.*

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Headline miss vs consensus driven largely by a one‑time ASC 606 correction and mix shifts; underlying profitability remains intact with strong gross margin excluding carrier services (40%) .
  • Sequential softness vs Q4 2024 in adj. EBITDA/FCF and cash warrants monitoring; management expects invoicing resolution over coming quarters and has $4M revolver capacity .
  • Structural tailwinds: FedRAMP Authorized status for ITMS and Spiral 4 awards expand the federal TAM and should support backlog conversion and margin quality over time .
  • FY 2025 guidance implies growth over 2024’s $142.6M revenue base, with targets for improved non‑GAAP profitability and positive EPS; watch timing of DaaS/commercial pipeline and additional Spiral 4 task orders for upside .
  • Reselling revenue recognition change smooths reported revenue but may dampen near‑term growth optics; Street estimates likely adjust to the new cadence .
  • Contract visibility remains high with $268M backlog; CWMS 3.0 recompete preparation is robust, with continuity mechanisms if award timing slips .
  • Trading lens: Expect shares to react to headline miss, but narrative support from FedRAMP authorization, Spiral 4 momentum, and FY guidance could mitigate downside as investors recalibrate for accounting impacts and watch near‑term contract flow .