WidePoint Corp (WYY) 2008 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome top the WidePoint Corporation 2008's year-end conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). Now I would like to turn the conference over to Mr. Frank Hawkins of Hawk Associates. Please go ahead.

Thanks, David. Good afternoon. This is Frank Hawkins. I'm the CEO of Hawk Associates, WidePoint's IR firm. Welcome to the fourth quarter and year end 2008 conference call. On the phone today are Steve Komar, Chief Executive Officer, Jim McCubbin, the Chief Financial Officer, and Executive Vice President, Sales and Marketing, Ron Oxley. I would like to begin by reading the Company's Safe Harbor statement, and then we will hear from Steve, Jim, and Ron before they take your questions.

This afternoon's discussion contains forward-looking statements that involve known and unknown risks, uncertainties, or other factors not under the Company's control. Those risks may cause actual results, performance, or achievements of the Company to be materially different from the results, performance, or other expectations implied by these forward-looking statements. These factors include but are not limited to those detailed in the Company's periodic filings with the Securities and Exchange Commission.

And now here's Steve with his opening remarks.

Thank you, Frank. Appreciate the intro. I would like to say good afternoon to all the attendees on behalf of the WidePoint management team, and welcome you to our fourth quarter and full-year 2008 investor call.

During our last quarterly call, which occurred back in mid-November of 2008, we referred to the difficult financial and economic times that we were all experiencing. But advised you that the Company was financially solid and well positioned as a provider of niche products and services to its target government market sector. Although we did not forecast, nor anticipate the serious and continuing economic decline that has occurred since November of 2008, I am pleased to report that WidePoint still experienced a robust fourth quarter, which we believe with appropriately cautious optimism as a trend that will continue into 2009 and beyond.

The Company's fourth quarter revenues were up over 150% versus the prior year quarter, to a total of $10.2 million. With gross profits up almost 50% to $2 million, all of which resulted in fully diluted bottom line net income of over $400,000 for the quarter. From a full-year perspective, this result was not sufficient to off set quarterly losses earlier in the year. However, we do believe that it speaks well to our target of meaningful bottom line earnings in 2009.

During 2008 we completed two acquisitions. iSYS LLC and Protexx, Inc., which represented additional market penetration opportunities in the mobile telecommunications management sector and wireless Internet security areas. Partly as a result our 2008 full year revenues exceeded $35 million versus $14 million for the prior year. And each of our three business segments recorded increased revenues, although iSYS was clearly the largest contributor.

While we consciously continue to invest in sales and marketing resources and related capabilities to accelerate our growth opportunities, we are very committed and focused on delivering the key priority business opportunities on our short list for 2009. Also, we very carefully manage our expense base to minimize loss exposures and to optimize our overall operating cost environment. From a stability standpoint, our balance sheet, cash generation, bank relationships and overall liquidity remain quite solid and are not an obstacle to our continued growth initiatives. Jim McCubbin will take you through some additional data and information in regard to this area.

As we look forward further into 2009, we see continued strong growth in mobile telecom managed services, the coming of age of many of the multiyear PKI-based security and access programs in the government sector, and a resurgence of consulting services opportunities, at least partly tied to economic stimulus packages and programs.

Ron Oxley will expand on a few of these market opportunities in his comments to the group. And with that, I will turn this over to Ron for his ongoing comments. Ron?

Thank you, Steve. Good afternoon, everyone. For sales and marketing, I would like to address two areas of concentration that we're going to be focused on.

The first area is, we're going to stay focused on the key areas that made us successful in 2008, as to wireless and the identity management areas. For the wireless, in 2008, we were one of three awardees of GSA's government wide contract which is called the Federal Strategic Sourcing Initiative, I will call it FSSI, and it's valued at $90 million. The first two competitions to come out we have won both of those competitions. One for the Centers for Disease Control and the other one for the Customs and Border Protection Agency. There's a pipeline of other agencies that are lining up that kind of amount to another 200,000 units of opportunity for us to chase. We continue to market and maintain a good relationship with our GSA sponsor who is pushing all the government agencies to use this contract.

We're also marketing to the large systems integrators and the carriers, such as AT&T, Sprint, and Qwest. We're growing our current contract base at the same time. Every renewal we have won. And we have also increased scope at the TSA and Washington head quarter service and the City of San Diego for our wireless business. We're working with the Congress also to kind of push federal agencies into accelerating their use of the FSSI contract.

The next area of concentration that we're focusing on is the identity management. Although the rollout and the adoption of PKI has been very frustrating, policy and infrastructure is moving forward and interest is growing. We're continuing our FICCS initiatives. FICCS is the Federation of Identity and Cross-Credentialing System. A not for profit organization. It is currently the only non-DOD entity that's delegated the authority to approve the issuance and credential to contractors and others requiring access to military installations and systems.

As a member of FICCS, along with other members which are contractors, commercial companies, and industry associations doing business with the DOD, we're the only member thus far to receive certification and accreditation to issue a FICCS-approved credential. So in a nutshell, the department of defense has given FICCS the authority to issue these credentials, and we are the only one that has been approved within the body of FICCS to make that issuance.

We've also completed and won a FICCS contract to host and maintain back office capability for all credential transactions that will come through FICCS by its members and interface with the DOD. We continue to grow our contract base as a sub to Lockheed Martin on the TWIC program. TWIC is the Transportation Workers Identity Credential. We have just surpassed major milestone of issuing one million credentials. Lockheed is working with a customer on remaining and future issuances. The universe for that, and these are people getting access to our water ports and airports is six million credentials.

In addition to that, we've also provided certificates where the VPN, Virtual Private Network connection, to more than 150 fixed enrollment centers and 450 mobile centers that Lockheed has put in place. For our military base initiative, the proof of concept has been approved, and the pilot has been expanded to the entire DOD.

We've also received additional increases from the Federal Elections Commission and the Federal Housing and Finance Agency which has over sight now of Fannie Mae and Freddie Mac. Hopefully there will be more opportunities because of that. We are using the [Gartner] Group here also, to find new channels to reach commercial and state and local customers. Working with Congress, pressure the military bases to quickly adopt and implement current policy to strengthen identity credentials.

Those are the two things we've been focused on; we're growing them. We're also -- the other area kind of looking outward, we're trying to move to enhance our WidePoint capabilities in the forensic informatics, the area, the data in motion security, and our consulting services. We're strengthening and growing our relationships with Northrop Grumman, Unisys, IBM, CSC, Computer Sciences Corporation, L1 Identity, SI International and American Systems as well as the large communication carriers, I mentioned earlier.

With that, I will turn it back over to Steve.

Thank you, Ron. That was excellent. Appreciate your comments. I would like to pass the baton over to Jim McCubbin to give us a little bit of assessment and analysis on our financial results and our outlook. Jim?

Hello, everyone. Thank you for joining our call today. We realize you do have other investment options, and we want to tell that you we appreciate your sponsorship of WidePoint. And thank you for making time for this call today. With that said, during my financial review I'm going to briefly discuss our overall financial performance in 2008, as well as take a look at each of our segments, and wrap up with some of our thoughts we have in regard to 2009.

Revenues for 2008 were approximately $35.4 million compared with approximately $14 million for 2007. We recorded growth in all three of our primary operating segments and he we attributed most of this growth materially to our acquisition of iSYS in January 2008. Our gross profit for the year also grew and was approximately $6.6 million, an increase of approximately $2.8 million over gross profit of approximately $3.8 million in 2007. SG&A for the year was also approximately $7.1 million compared to approximately $4.4 million in 2007. Our loss from operations for the year was approximately $.7 million, or $700,000 compared to approximately $0.6 million or $600,000 in '07.

In looking at these numbers, though, I do want to bring everybody's attention to the loss from operations also had approximately $1.6 million in noncash expenses. These expenses were associated with amortization and depreciation for purchase accounting. They were associated with stock options expense, all noncash items. And kind of backing that $1.6 million out, it gives a little bit better of a comparison on the performance, in which case we actually have a pro forma gain from operations of approximately $0.9 million or $900,000 as compared to pro forma gain of $0.1 million or $100,000 in 2007. This just gives you a better picture of what really happened from the operational performance of the business.

While on a fully diluted, including -- basis, including noncash expenses, yes, it went from $0.6 million to $0.7 million on respective losses. On a pro forma basis, adjusting out these noncash items it really went from $0.1 million of a gain in '07 to $.9 million of a gain respectively in 2008. So that should give you a little bit better feel for how we actually performed on a cash basis and not just a noncash basis. And I'm bringing everybody's attention to this from operations and not to the bottom of the line. Because this really profiles how we're operating as a business entity, and how come we're a going concern and we're moving forward with what we're doing.

So with that, we are pleased with that demonstrated performance and that positive performance between '07 and '08. Okay. In looking at our interest expense in this last year, it was $0.2 million, compared to interest income of $0.1 million. We also had some deferred income taxes for the year of approximately $0.2 million compared to nothing in 2007.

I was a little bit disturbed with this accounting charge that we were forced to take in 2008, because it really waters down the financial performance to our bottom line in the fourth quarter and for the whole year on an expense that we will never have to pay. This deferred income tax revenue is associated with a difference between our tax books and our books, book-books. And because of of an accounting rule they're making us take this and place this charge on our books until such time as we're profitable enough to extinguish that liability or expense. But nevertheless, it is there, but I wanted everybody to know that it's there for a reason that doesn't make some of the best business sense, and it's not a real expense.

But even given this, we did see our full year have a net loss of $1.1 million, or $0.02 per share, compared to $0.5 million or $0.01 per share in 2007. We also do want to point out, though, on an adjusted EBITDA position, these losses quickly turned positive as those noncash charges of $1.6 million plus this deferred tax liability, which makes it closer to $1.9 million, really reduces that loss that we're seeing on the books quickly on a cash basis show a profit. So we just wanted to make you aware of that, so it doesn't appear as negative as it really did for the year, because we believe we did much better, especially when we looked at it from a cash basis.

Also looking at the fourth quarter, we're also pleased with how we left 2008. We saw revenues grow from when we entered the first quarter with approximately $7 million, to grow to over $10 million in the fourth quarter. We also witnessed a loss in the first quarter of approximately $300,000, turn into a gain of approximately $300,000 in the fourth quarter. So again, the momentum of the financial momentum from first quarter to fourth quarter, we just wanted to make sure all of you were aware of that positive event.

Looking at our segments and delving a little deeper, I want to first talk about our mobile telecom expense management segment. This segment added approximately $21 million to the Company's total revenues in 2008. The MTEM segment recorded revenue growth of approximately 38% with revenues increasing $5.8 million from $15.2 million for 2007. Now, I'm using the $15.2 million and the 2007 numbers because I think it draws an appropriate parallel, because these numbers occur prior to our acquisition. We can't show it in our segment tables, so we show our segment tables as zero. But that doesn't give you a realistic look. You can't go from zero to $21 million; because it's just not real. What is real, though, is we did see real growth grow from $15 million to $21 million. In that, we're extremely pleased with that, especially since this is just the beginning of what we're doing to penetrate the federal segment -- sector in this area.

We won the FSSI contract, as Ron discussed. In the beginning of January 2008. During 2008 we saw the first two awards go to us. We also saw our contract base of approximately 40,000 units grow to approximately 65,000 units. We also saw all of our clients renew at 100% rate. And we left 2008 with six government agencies or departments in heavy conversations or discussions with us on RFQ's. And those agencies, just by themselves, okay, represent, we believe, somewhere between 150,000 and 200,000 units that we believe are going to be put under contract between now and mid-summer.

We also believe that we're in a very strong position to compete competitively, if not for all, most of those units this year. And that's without really penetrating the local or state government agencies in which case we're just starting to look into that area without looking into the commercial area, and without looking at the rest of the government segment in whole, which we believe represents millions of units. So the mobile telecom segment was a hit for us this last year. Each quarter we saw revenue growth grow quarter in/quarter out. Looking into 2009, we see this happening further as we expand our customer base and we win these awards.

Now, like anything, the government spending kind of is seasonal and has some changes where it goes up and down from the first quarter to the second quarter, third quarter, fourth quarter, most to do with their procurement cycle. So while we may not see a huge gain in the first quarter, we do tend to see awards in the second quarter and a lot of that revenue start coming on-line in the third and fourth. We pretty much anticipate something like that happening again this year, pretty much like we recognized in 2007 and prior years. So with that, we feel very good about this mobile TEM segment.

Looking at our PKI credentialing and managed services segment we saw revenue growth of approximately 5% this past year, increasing from basically $200,000 from $3.6 million to approximately $3.8 million. A lot of this holdup, as Ron already addressed, had to do with policy issues, had to do with moving things from a pilot phase, into more of a fully adopted phase. There was some things that hung us up and didn't just hung us up as a Company but hung our partners up as well as the entire segment.

What we have done is we focused a lot on infrastructure, a lot on support in 2008, and entering into 2009 a lot of those policy issues we are seeing kind of get taken care of. We're also seeing a lot of advanced movement with the TWIC program, which we're very pleased with. Which in many ways is ahead of everybody else. Our base alignment program is just now coming online with the FICCS card, as Ron already mentioned. And we're also seeing some endeavors develop in many other programs that are following suit.

So given that while we've all been disappointed with PKI in 2008, in 2009 we do believe that we're getting some of the things out of the way that we need to for some meaningful growth in this area. So does it happen in the first quarter? I'm not sure. But in 2009, we really are anticipating some major improvements, and not just this flat-line growth. With that, of course, time will tell, but we're feeling very good about it at this time.

Looking at our consulting services segment, we also experienced slight revenue growth, $10.7 million from $10.6 million. This had a lot to do with the government consulting business did expand, okay? And part of that was iSYS' consulting business that came online, but it was also slightly offset by the WidePoint consulting business and the commercial segment having a bit of a fall-off because of the economic environment. There wasn't a whole lot we could do about that except for make sure that we rationalized the business from a P&L perspective and size it appropriate to the marketplace. We have done that and we do believe we're going to see that market space recover as the economy recovers. But we also did not put the Company in a position where we have a lot of risk at this time. So that's where we really are with the consulting services segment.

So in looking towards 2009, there's every reason to believe that we should continue to see improvements from our operations, both as our segments further evolve along the product lifecycle, as well as some of these programs take flight. Now, looking forward to 2009, there are challenges, but there's also tremendous opportunities. Given our management of how we approach both of these, we feel that we have a financial wherewithal to be positioned to take advantage of it.

With that, Steve.

Thank, Jim. Great. Appreciate that. Thank you both Ron and Jim for your comments. I think before opening the call to questions and answers, I'd like to take a moment and just summarize the key points that we're trying to communicate, hopefully effectively, to you today.

Number one, the Company is financially stable, with adequate liquidity to meet its growth needs. Number two, we're expecting strong growth in the mobile telecom arena in terms of revenue growth. Number three, we're expecting a breakout year in the PKI identity assurance marketplace. Number four, which we didn't really talk about too much, but I think is worthy of a footnote, is that the bulk of our new business revenue opportunities consist of what I call attractive multiyear annuity revenue streams. And number 5, your management team and this Company is committed to meaningful bottom line profitability in 2009. Hopefully some of that message has gotten across.

And with that, I will ask our facilitator, David, to open the lines for any questions or comments that you may have.

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions). One moment, please. And our first question comes from the line of [Sam Donaldson] as a Private Investor. Please go ahead.

Well, I want to congratulate all of you, Steve and Jim and Ron and everybody else. This glass is filling up quite clearly. When we had our last conference, I asked whether you could characterize the fourth quarter and the answer was, Steve, it was strong and expenses and Jim had leveled off, and that clearly is what has happened. So I have a question, not having to do with this coming year, you've characterized how you see the growth there. But I hope you don't think this is frivolous, but when companies that have been struggling start doing well, of course, other larger companies say, well, maybe we can acquire them, this would be a good deal. And I would like to hear your views as WidePoint begins to break out, of whether you think that you might put the Company up for sale? Let's say if someone offers, $2, $3, pick a number, because I must tell from you my standpoint, I hope the answer is no, but please.

Well, hi, Sam. Thank you. Always appreciate hearing from you. And I know I speak for all of us here. That is a hard question to answer, because there are a lot of different agendas, if you will, but I go back to the simple basic, which is that we have said from the very beginning, when we launched our little effort here, that it was our goal and our intent to build a quality entrepreneurial organization of significant size that could stand alone as an operating entity that would be a very attractive investment to investors and to others. That is still our goal and our intent, and we don't think that we are anywhere near what we would believe fruition, if you will, or fruitful return for our efforts, and we do see that just down the road.

The other side of that equation is, if somebody does offer an outlandish amount what we would consider an outlandish amount, we would in all good faith for everybody have to consider that. However, that is clearly not our desire, intent, or our goal, at this time, and, frankly, I'll let the other guys speak as well on this topic as well if they'd like. Okay, I'm getting nothing back.

I just wanted to say I appreciate the answer, and obviously the word outlandish, we would all lick our lips, if we have a definition of that. But just the steady growth and the breakout possibilities that you all see down the road that may very well be there suggests that investors who have stayed the course with you may very well profit handsomely. Again, let's not define the word "handsomely" And as one who has stayed with you quite a long time, Jim you know this and Steve, I'd just as soon stay with you awhile longer if it's going to really pay off.

Sam, all we can do is say thank you for the support you've had with us for a long time. We've been working so hard, just not us, but everybody that works at WidePoint, at making this successful. We still have challenges ahead of us, but we really are getting closer to realizing the market opportunities that these programs offer. We would certainly like to relish in getting there before anything happens.

Okay, thanks very much, gentlemen. And again, congratulations. Thanks.

Thank you, Sam. Appreciate it.

Thank you, sir. And our next question comes from the line of David Jordan with Axiom Capital Management. Please go ahead.

hello, gentlemen. This is a great call, and great year. I just wanted to refer Mr. Donaldson to the fact that the stock was $3 in 2006, so as we get up to where we were that would be terrific. But I have a question in terms of the iSYS business, whether the revenue $24 million and $21 million is unimportant to me now because I'm looking as we talk, at the income statement, and I was wondering, just for my own benefit of my little brain, if the -- on iSYS's revenues, whatever operating income there was, what part of the sales and marketing and the G&A, which added up to about $7 million, if it were a stand-alone Company, what part of that $7 million of SG&A would be assigned to iSYS? Just to try and give me an -- and incidentally, in the year of 2008, everybody did deals, but you've got to get a golden award for buying iSYS the way did you and to continuing let it develop and grow, and the outlook is even more than the past. It's just one of the great merits of all time. I think it's just a fabulous thing, but that's what I would like to know.

Hi, David this is Jim. Well, one, I mean, the iSYS guys and team at iSYS we're thrilled with. And we can't say enough about it. And again, we agree with you that it's been a wonderful opportunity for us to team with them. Two, as it goes to your SG&A number, the difference in SG&A growth was materially made up of the SG&A that was brought over by iSYS, as well as some stock compensation expense that was awarded early 2008 which represented around 400,000 of that stock compensation expense. OKay? And that was just because of a push-up in stock compensation expense because of the vetting of those options to those the key people at iSYS that we want to make sure that we keep part of our family and we want to make sure that we make them as happy as possible.

So was the operating income of the segment for iSYS after the SG&A?

The operating -- you mean on the segment report in the 10-K for the mobile TEM's?

Yes.

For 2008, the mobile TEM's segment on approximately $21 million in revenue generated approximately $1.4 million.

Was that before SG&A?

That was an operational income. No, G&A is in that number.

That's in that number.

SG&A.

So theoretically, if it were a stand along Company, it would should, what did you say, $1.4 million. I'm sorry I forgot what you

Yes, the mobile TEM's segment at iSYS stood by itself, it would show, okay not counting noncash charges for taxes, okay. it would show approximately $1.4 million.

Well, I think you're doing so great in every area. I tell you, it's just terrific to be on board right now as the ship leaves the port. Just terrific. Thank you very much.

Thank you, David.

Thank you, sir. (Operator Instructions). And our next question comes from the line of [John Seabott] as a Private Investor. Please go ahead.

Hello, I want to also want to offer my congratulations to the Company for their financial and operating report. I have been an investor since going back before Y2K. So, I've been hanging around for a long time, but what crossed my mind, I think you had some sort of a statement that -- a PR release earlier in the year relative to the political climate and that you thought it would be favorable for WidePoint. Do you have any comments on that issue?

Well, we believe -- candidly, I don't recall the press release statement, but I think -- I'll take a little bit of a gamble here and say that sometimes we feel that matters such as administration change and other transitions can cause negative events for us or some kind of slowdown. Our perception today is that the political transition process has moved through extremely smoothly. That, in fact, the new administration is pushing seriously several of the initiatives that are dead on into our target sector. And we really believe that this will translate into an excellent opportunity for us as 2009 progresses. I hope that answers your question. I'm not exactly sure.

It does, and I do thank you for that.

You are very welcome, John. Thank you.

Thank you, sir. And our next question comes from the line of [Steve Mazur with Mazur Capital]. Please go ahead.

Gentlemen, an observation with a question followed. I notice basically that looking at your Company on a quarterly basis I notice that your corporate overhead has been pretty much static or flat for the last four quarters. I've also noticed that basically -- and that basically in light of the fact that your MTEM's business increased by $2 million from first quarter to fourth quarter about 45%. And them I'm -- I basically saw in your K that basically consulting and PKI are at least break-even. So assuming that is all correct, and the MTEM's is a annuity business with 100% renewal. We have no -- more contracts pending, is it a safe assumption to say that every quarter going here on forward should be profitable? And not only that but, of course, EBITDA positive but profitable? Maybe with the only adjustment might be your tax situation here.

I think -- I would just make one comment to that, Steve. And, by the way, hi. And that is that, we are -- we are not confident enough to make -- to agree with the statement that would say that every quarter is going to be profitable in the year term. However, I will defer to Jim on that and see what his thoughts are. We are kind of looking at 2009 as a year, given there is some government seasonality from quarter to quarter. But clearly our goal is consistent with what you're talking about, but our level of confidence is much higher that 209 will in fact be solidly profitable. So that's the management comment, but I will defer to the financial comment on that one.

Hi, Steve. Thanks for calling in.

Hi, Jimmy.

One, again we do tend to look at all of '09 and on a comparison basis, our goal, our view, is the first quarter of this year will be greater than the first quarter of last year. We are going to have some seasonality. So our goal is to make sure that we're EBITDA positive quarter in/quarter out, okay. As it goes to profitability, we can't control some changes and fluxes between one quarter to another quarter, because we are subcontractors in some of these programs. So we could have some timing differences. Quite possibly it could be correct and quite possibly we could have some slippage from one quarter to another. For the year overall, that's where we have a higher level of comfort.

And what's your comfort with year overall?

That we will be profitable.

Okay, great.

So we can compare year to year, quarter to quarter. We're just not quite in position because we are not in control -- .

I just see corporate overhead being pretty static, and it looks like MTEM's could continue growing at let's say $1 million a quarter or something like that. And there is a high contribution to that business, again --

No, but that may not be the truth, either. It has grown quarter in/quarter out, but you have slower growth usually quarter in/quarter out, first quarter, second quarter. Just because you're waiting for contract awards.

Got you.

Okay. Because the government doesn't really issue a lot of contracts in the first quarter. They're putting their budgets together and doing things like that. That is the only reason there is some seasonality and we're really trying to be conservative, Steve, and not do anything that's going to mislead anyone. We feel very comfortable for the year. Okay quarter to quarter, who knows, it could happen. I just would rather just not bet anything on it yet.

Right.

Just because the first quarter tends to be weak.

Jimmy, when is the related party note payable due?

The related party note was due March 31st and the related party note was paid.

Okay, got you.

So we did reduce our debt. That's a subsequent event. You will see that in the first quarter.

Okay, great. Thanks a it lot, guys.

Thank you.

Thank you, Steve

Thank you, sir. And our next question comes from the line of [Allan Cohen with Special K Capital]. Please go ahead.

Hi, guys, I guess I should congratulate you because everybody else has so I feel compelled to. I just had a couple of questions. In the beginning of the call you referenced a contract valued at $90 million, I think Steve did that. Can you define what this means to WidePoint and over what period of time?

I can address it.

Do you want to take it?

Hi, how are you doing, it's Jim? The FSSI contract -- we call it FSSI it because it's easier than saying federal strategic sourcing initiative contract vehicle. The FSSI contract vehicle was basically awarded last year by the general services administration. This is indefinite IDIQ contract. It is a contract vehicle that allows the federal agencies to procure straight to us without going through competitive bidding. And --

I understand the nature of that.

I'm sorry?

I said, I understand the nature of indefinite.

Okay, it has a ceiling of $93 million and that ceiling can be expanded. That was the GSA's initial estimate.

When was that contract put in place with the GSA?

That contract was awarded and put into place and we won the first two contracts against that contract vehicle last year. We are also now looking at additional awards with a number of federal agencies and departments presently in which case we're in advanced discussions with those agencies and departments already.

Okay. So there's no way to gauge what that would mean in '09 or going forward?

Well, will you he see it as contract awards.

No, I understand. But you don't control how much they award over a given period of time.

Well no, and those IDIQ contract awards can also be expanded in size. Right.

Are you guys giving any ideas as to '09 revenue?

Well we hope it to be greater than '08.

Okay.

But we're not giving guidance at this point.

Okay. Any comments on the first quarter, now that it's over? Preliminarily.

The first quarter we are hoping to be stronger than our first quarter comparatives of last year. We do anticipate them being a little weaker than the fourth quarter, because the fourth quarter tends to --

Is your stronger quarter, right.

It's strong quarters. So what we are doing is we've budgeted around a slightly weaker quarter that is -- has positive EBITDA at the minimum.

That's great. And my last question I guess refers to that but Steve used the term twice, meaningful bottom line income?

That's correct, I did.

Okay. Can you define what you would -- I'm not asking for a number, because I understand you're not giving guidance, but what does meaningful mean?

Well, David, boy, I really wish I could be specific with you, because I think we -- but I can't, and I think we've said we're not going to give guidance on these things.

No, I understand that. But is meaningful a number that's higher than last year, or is it meaningful -- it's just a --

Meaningful is a number that is substantially higher than last year.

Okay, great. Looking forward to '09.

Thanks, David. Appreciate it.

Thank you, sir. And our next question comes from the line of [Tim Ewing with Ewing & Partners]. Please go ahead.

Hello, Steve and Jim and Ron.

Hi, Tim.

Hi, Tim.

Tim, can you speak up a bit? We're having a hard time hearing you.

Can you hear me now?

Yes, better.

Okay. This begins with the bit of a comment, and I'm happy to hear your comments. First thing, I'm very appreciative of the bottom line closer to economic earnings which were positive in the fourth quarter. And my comments relate to that as well as the long term bottom line earnings, with respect to the options programs that the Company has, the current one that's underway. I see that the outstanding options total that have already been issued equal almost 15% of your common stock outstanding, that's fully paid for. And if we include what is remaining for future award, it's equal to 22.6 of the outstanding common stock which I would regard as an unusually large percentage for a Company -- for any Company, and certainly a Company with this history.

And, of course, there's a cost to that, that's always been there, economically, but now as companies to have record, and it was -- had a material impact on your recent year's numbers, which would have been closer to break even had you not had $600,000, roughly, dollars in options expense for the year. I guess my comment is, you did obtain recent approval of the increase and some of them have already been awarded of this 2008 stock incentive plan. But it was not an overwhelming endorsement given that of really those that did not vote for it, but rather withheld or abstained or voted against it were 2.6 to one against the votes that approved it. So my comment is that as an investor and one that's helped fund the Company and remained loyal to it for a number of years, that I would like to see when the remainder of these options are awarded, that they're awarded at strikes substantially higher than the level of the stock price now, which is very depressed, even though it's had a little bit of resilience recently.

And with a term of no greater than seven years, so that as you continue to award options, that it's done in a way that does not increase very materially the economic expense to the Company. Because although the end of the dates a true economic expense and an accounting expense. And while it's not a cash flow expense, it is what's going to affect our ultimate value. So I would be happy to hear. You're all directors, what your thoughts are on the options plan, the size of it, and the remaining awards and you plans for that.

Well, Tim, that's a pretty intuitive analysis, number one, and I don't disagree with any of it. I will just say as a general comment that we're being today extremely negatively about doing anything in the way of substantial option awards at this time. And we are not [unfeeling] of the pain to our bottom line as you have mentioned in regard to the stock option expense. There is a factor, obviously of motivating staff, and we have to balance that as well, but we're not unaware of the impact and the perceived bottom line deterioration and dilution, per se. So we're working very carefully with that. But what I would really like to do is ask Jim to share some of his thoughts and comments with you on this as well.

Hi, Tim, it's Jim. Just as an FYI for point of clarification, the 2008 plan that just was awarded, all that really did is replace the 1997 plan. We didn't expand the options at all. We just basically swapped out one plan for the other.

Which is fine, but I'm dealing with a total amount outstanding and available. The numbers that I'm reading take that into account.

Right, it was just a point of clarification. Also, last year the options that were issued were almost all attributable to key individuals at iSYS. And most of those, the charges that we saw, were associated with that. And I feel that that was a very important thing that we did to reward and incentivize those people at iSYS, because I believe they're key to our future. And then three, we really haven't been issuing or coming up with any reasons to expand the options that are in place, okay, without a meaningful reason or purpose, in which case there's a return for us as shareholders as well. So I think we're in tune with your feelings.

Well, thank you very much. Yes, my concern mainly is with not what's been done. I understand the things that you mentioned and appreciate them, but with the remainder. Because in general it is an enormous plan in relation to the paid for common stock that's outstanding and so I just -- and there are ways to make stock awards in the future that are less of a gift and more of a true incentive by placing the strike price higher than the market, significantly higher, and shortening the time to expiration.

And so I hope these are things that the Board will consider, but I am delighted that also in Steve's comments that you are being cautious with the award of stock that's remaining in the plan. And hope you continue to be so and at the time you do award them, do it on a basis that's logical for the shareholders. Thank you.

Thank you, Tim.

Thank you, sir. (Operator Instructions). Our next question is a follow-up from the line of David Jordan with Axiom Capital Management. Please go ahead, sir.

Yes, I wondering if the payment that went to, I guess Mr. [Kang] from iSYS, the $2 million, that was to him?

That's correct.

A year ago he would have, if he took stock, he would have been a lot under water. Now that at the's getting all this cash and the stock is half the price it was, at least half the price it was a year if he's going to take a significant part of that money and I would the stock in the open market to make another killing.

Well, David, I don't know that I can comment on that. I think that's a topic for Mr. Kang, who I'm sure will act quite independently on that matter, which is a personal finance issue. I would point out that he took a substantial amount of stock a year ago too at a market price higher than today substantially. So I'm not sure about killings, but I do think that he's an invested senior manager in our Company. We're looking forward to long and fruitful relationship with him.

Okay, thank you very much.

Thank you, sir. And our next question comes from the line of [Lawrence Hugo] with Wachovia Securities. Please go ahead.

Hi. I'd like to just ask you if you could elaborate a little bit more on your pipeline,? And another comment is have you seen any change in the patterns since the administration has changed?

Okay, that's a good one. I think, in terms of changing the patterns, since the administration, I would just say that my earlier comment was that we've seen positive signs, but I don't know that there's enough experience track record out there for us to make an effective statement about that. I think time will have to tell on that. On pipelines, I don't know, does anybody want to -- I'm trying to figure out who can help with you that.

Well, on the wireless business and --

Well, we measure -- Are you talking the about backlog, pipeline, bookings?

Yes, I mean, backlog and the potential backlog.

Well, on all of the segments right now, we're living off of our backlog from last year. And a lot of that is going through renewals right now, so we are seeing a number of positive events. It looks like there's going to be a lot of renewals of contracts or current contracts. Number two, we are starting to see a lot of contract activity, future contract activity, so our pipeline of opportunities has dramatically grown, both with PKI and with mobile TEM's.

I guess it's much harder to sort of pin-point the PKI part of the business. Could you describer more -- go into a little more detail on the wireless or mobile area?

Well, the mobile -- PKI is difficult because it's spread over many different places, and some of is it not contract vehicle driven specifically. On the mobile telecom segment we continue to see backlog, okay and potential backlog grow. We were looking at greater than -- I think this time last year, $90 million in backlog opportunity, okay? And we've been drawing that backlog down as we've been producing revenue, but the backlog that we're bidding on to replace it is either equal to or greater than that, because of the expansion in revenues. Is that what you are talking about?

Yes and then also the -- and then the renewals, right, have you lost any does any -- have you seen any people that don't renew?

Right now on the mobile temp side, we have been very fortunate, as you probably are aware, we actually save these agencies and departments money.

Right.

So we have seen, to date, 100% renewal across the board, and we've seen expansion, as we've penetrated into these various agencies and departments. As they've handed themselves off to other groups within the agencies and departments, that's where the growth has been coming from. So we've been adding a couple of agencies, we've been expanding our agencies and our relationships with those agencies.

And within those agencies, there is growth internally also?

That's what we've been witnessing over the past year.

Okay. Thank you.

All right, thank you.

Thank you, sir. And I have no further questions in the queue. I would like to turn the call back over to management for any closing remarks.

Thank you, David. And thank you all for participating in our call. And we appreciate the questions and hopefully we gave you halfway decent answers. I think in closing I would just say that the management team here believes that it is accomplished another threshold, if you will, call it profitability, during the fourth quarter. And we believe we're really well positioned to grow this Company and generate significant earnings and return on investment for all our shareholders. In the interim, we do truly appreciate your patience, commitment and support as we work to realize these corporate goals. So again, thank you, very much, and wish you all a pleasant evening.

And ladies and gentlemen, this concludes the WidePoint Corporation 2008 year-end conference call. We thank you for your participation, and you may now disconnect.