WidePoint Corp (WYY) 2017 Q1 法說會逐字稿

Good day, and welcome to the WidePoint Corporation 2017 First Quarter Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jeff Stanlis of Hayden IR. Please go ahead, sir.

Thank you. Good afternoon to all participants on WidePoint's financial results conference call. With me today are WidePoint's CEO and President, Jeff Nyweide; and Chief Financial Officer, Jim McCubbin. Jeff will provide a brief overview of the quarter's developments and accomplishments. Jim will provide additional financial and operational review and outlook. Then we'll open the call to questions from analysts and institutional shareholders.

Before I turn the call over to Jeff, I'd 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, forecasts and 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 Factor section of WidePoint's annual report on Form 10-K, its quarterly reports on Form 10-Q and other SEC filings and the company press releases.

Actual results may differ materially from any 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 any 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 CEO and President, Jeff Nyweide, for opening remarks. Jeff?

Thank you, Jeff, and good afternoon to all of you that are joining us here today. Before opening the floor to questions and answers, Jim and I would like to provide you with some prepared remarks.

The results for the first quarter were in line with our internal expectations and remarks from our last earnings call. For the first quarter of 2017, revenues were approximately $18.6 million compared to approximately $20.6 million in the first quarter of 2016, with net losses of approximately $1.2 million as compared to $600,000 in the same respective periods. There were adjusted EBITDA losses of approximately $700,000 in the first quarter of 2017 as compared to $200,000 in the first quarter of 2016. Jim will provide the additional detailed financial results for the quarter during his remarks.

The current quarter results were in line with our internal expectations. We started to bring the business into a position for profitability by streamlining our operational environment, restructuring our sales and marketing initiatives and working to reduce our redundant processes, platforms and other costs.

We're very pleased to have recently announced approximately $16 million in new and option year contract awards for our public sector TLM services at the end of the first quarter. We believe these awards demonstrate the success we continue to see, particularly within our public sector marketplace. And our strategic goal of expanding our public sector and federal base of business remains a key revenue driver as we work to broaden our existing and new public sector customer base in 2017.

We're continuing our efforts towards capturing other federal department-level and enterprise-wide private sector contract vehicles and are pleased with the initial progress we're making within several of those departmental-level groups. We see significant interest in the solutions that WidePoint offers within our federal customer base and continue to diligently work those opportunities. In some cases, there are administrative delays within these opportunities due to the timing and availability of federal budgets. We continue to work each of these, though the exact timing of when they will occur is an unknown at this time.

Key to this progress with our federal users has been our excellent past performance and our ability to demonstrate secure access and cost savings with the use of our proprietary solutions, both in our TLM and cybersecurity solutions.

We continue to partner with Samsung in targeting a department-level opportunity as part of our efforts to showcase our identity management solutions. We continue to market to the United States Coast Guard while they work through their administrative processes at moving the effort forward in support of our federal TLM DHS BPA. We're expanding our marketing efforts by partnering and focusing our sales efforts with several larger federal government contractors in an effort to expand our reach to other departments and agencies that we believe would benefit from our solutions.

We've seen the administration issue recently and executive order from the White House back last week, which calls for a risk-based approach to cybersecurity, requiring federal IT systems and the nation's critical infrastructure, including utilities and systems supporting financial services and healthcare networks, to use the Cybersecurity framework developed by the National Institute of Standards and Technology.

This executive order is directly in support of our identity management solutions, which are proven and ready for deployment. This is a framework in which we've operated systems since 2006, a framework that was federally assessed and audited successfully for more than 10 years and delivers solutions on a recurring basis.

The executive order addresses 3 critical areas involved in and impacted by cybersecurity: federal networks, critical infrastructure and the nation. The executive order emphasizes a need for these government entities to take a risk management approach to protect against unauthorized access to information technology and data. The executive order also states that agency heads shall show preference in their procurement for shared information technology services to the extent permitted by law, including e-mail, cloud and cybersecurity services.

We at WidePoint are quite pleased with this executive order. And after witnessing a number of critical cybersecurity threats run rampant around the world recently, we're encouraged that this order will help accelerate the use of our identity management solutions in support of entities that require strong credentials.

In addition to the federal government marketplace, we're pleased with the progress we've made in the commercial arena with our sales and marketing initiatives.

We've recently partnered with a major communications company that has brought us into new energy verticals with the introduction to 3 new opportunities and has expanded our reach into 5 new banks and financial institutions.

We continue to work with AT&T and have recently entered into a new expanded level of work for a major airline client that they represent. Our goal with AT&T is to continue to work with their sales team to expand our reach into their customer base in offering our credentialing services. While AT&T has disbanded their Dallas foundry group that was focusing with us on the Internet of Things, we continue to work with them in finding new ways to introduce our solutions to their customers.

We're also pleased to announce that as part of our realignment of our commercial sales and marketing activities, we've launched a new lead generation effort with subject matter experts that have already started to generate a dramatic improvement in opportunities in brand awareness.

We've proactively been developing other new commercial partnerships and pricing strategies for our solutions and have successfully renegotiated them in some existing situations to improve productivity and results. We will contain to grow on these initial efforts and successes. We are addressing our near-term financial goals and setting the stage for longer-term growth and profitability goals with a focus on building a vibrant future WidePoint.

In the near term, our goals are driven by our requirements to improve our financial performance and return the company to profitability through a process of realigning and reducing structural cost. As a company, we need to solidify, improve and expand our proprietary information technology-based solutions and adopt an entrepreneurial sales and marketing focus to succeed.

In support of these goals, we're evaluating roles and responsibilities throughout the company and focusing on eliminating nonvalue-added activities, automating manual processes, recruiting more experienced talent where required and eliminating redundant and expensive legacy resources.

We are reviewing all of our client relationships and commencing corrective actions to improve profitability and, where able, eliminate unprofitable clients. We're considering or have already initiated a number of cost-savings efforts, including the consolidation of our physical locations and technology platforms, and driving cost savings from our largest suppliers.

Longer term, we are reviewing our intellectual property portfolio and identifying where to add to this portfolio in order to grow and prosper. We're pleased to have recently announced the enhancement of our cyber solutions by the acquisition of key technological software assets in the identity management area.

The Probaris Technologies transaction we announced last week brings software assets along with new and future potential customer relationships, all of which will help us expand our information technology solutions and customer reach. The Probaris acquisition brings in-house software that we currently license in some of our cyber solutions. This acquisition provides us the opportunity to support several new federal agency relationships with a new large global system integration partner that could help us generate millions of dollars of additional high-margin revenues for the company.

This initial purchase, together with our longer-term initiatives, will be used to build out a core set of one WidePoint-driven solution. This one WidePoint theme is to group together current and future offerings into one unified product solution rather than supporting multiple solutions across the company. We're reviewing all of our current offerings to determine which ones make sense to group based upon market need, along with which ones that we do not and which types of products we should acquire or purchase in order to fill out this focused core: one WidePoint portfolio.

We have no doubt that the actions I've outlined above will require a significant amount of time and expense and effort to execute, but we believe these actions will and are putting us on the right path towards returning WidePoint to generating positive earnings and cash flow, improving our competitive position in the future, as well as in the overall marketplace.

I'd like to now ask Jim McCubbin, WidePoint's CFO, to provide some additional financial and operations review information and outlook. Jim?

Thank you, Jeff. Hello, everyone.

Today in my remarks, I'm going to review with you our first quarter financial results. For most specific details, please see our form 10-Q filing, which is being filed today with the Securities and Exchange Commission.

Revenues, as Jeff said, for the first quarter were approximately $18.6 million, a decrease of approximately 9% of revenues compared to approximately $20.5 million a year ago. Carrier services were approximately $10 million in the first quarter compared to $12.1 million a year ago, while managed services were $8.6 million compared to $8.4 million a year ago. DHS was the company's largest customer during the first quarter, contributing approximately 59% of revenue compared to 65% a year ago.

Gross profit for the first quarter was approximately $3.4 million or 18% of revenues as compared to approximately $4.2 million or 21% of revenues a year ago. The decrease in gross profit was largely related to a lower ratio of higher-margin device and accessory sales and decreases in billable service arrangements as compared to the same period last year.

Sales and marketing expenses for the first quarter was approximately $0.5 million or 3% of revenues, as compared to approximately $0.7 million or 4% of revenues a year ago. The decrease in sales and marketing was due to planned turnover in our sales team and the elimination of legacy sales lead generation suppliers and channel partners that were not generating sufficient high-quality leads and meaningful revenue pipelines to match our revenue growth goals.

General and administrative expenses for the first quarter were approximately $3.9 million or 21% of revenues as compared to approximately $3.7 million or 18% of revenues in 2016.

General and administrative expenses increased due to duplicate salary, travel and related carrying costs related to our CEO transition period, as well as higher compliance and related professional service costs required to maintain certifications and comply with the public company reporting requirements.

We believe that general and administrative expenses should fall in the short term as certain cost-reduction initiatives are fully deployed during the second half of 2017, with a portion of those starting in the second quarter of 2017.

As we have discussed previously, we plan to see reductions in annualized operating expenses in 2017 commencing in the second quarter of around $0.5 million annualized and growing to around $2.5 million to $3 million in overall annualized savings as we enter 2018. These expense reductions will include reductions in headcount of approximately 10% that will affect both operating and general expense areas and overhead associated with our plans to consolidate physical locations, consolidate help desk groups, as well as consolidating some other general accounting staff and administrative staff that we completed in the first quarter, and we will start realizing the benefit in the second quarter.

Net loss as a result of this for the first quarter was approximately $1.1 million as compared to approximately $700,000 in the same period last year.

Now for a quick comment on liquidity. March 31, 2017, our net working capital was approximately $4.2 million as compared to $5 million December 31, 2016. The decrease in net working capital is primarily due to net losses incurred while we continue to fund product development, infrastructure improvements and business development efforts that have not been fully negatively impacted -- or positively impacted, in this case, by the cost reductions that we'll be realizing starting the second quarter and moving into the second half of 2017.

Our immediate sources of liquidity presently include cash and cash equivalents, accounts receivable, unbilled receivables and access to a working capital credit facility with Cardinal Bank for up to $6 million. We are currently working with lenders to renew or replace a current credit facility which will expire on July 31, 2017.

At this point in time, given a renewed or replaced credit facility, along with the cost reductions that we presently are undertaking, and a new business pipeline of higher-margin services, we currently believe we will have sufficient liquidity to fund the operations of the company for the next year.

So with that, I'd like to turn it back to you, Jeff, so we can move on to questions.

Thanks, Jim. I'd like to now open the call to our listeners' questions. Operator, if you can assist us by opening the lines and take some new questions and comments from our listeners, that would be greatly appreciated.

(Operator Instructions) We'll now take our first question from Mike Crawford with B. Riley & Co.

What, if anything, sets WidePoint apart from a TLM perspective? And what sort of margins should we expect from that aspect of your business given that others offer similar services?

Thanks for the question. The TLM services that we offer are -- have a couple of key identifiers that differentiate us. Number one, we are what's considered carrier-independent in terms of how we approach the business, meaning that we don't defer or partner necessarily with carriers in terms of offering cost savings. What we do is work with the client directly to identify the best potential opportunity, the best potential carriers and the best potential deals to get them the most cost-efficient solution possible.

Number two, we've been doing this for many, many years. And in the federal government space especially, we have an expertise in terms of working with the clients there and providing them a full range of services that they often need, both from the standpoint of -- everything from initial asset acquisition all the way through to help desk through to providing them accessories and other services, especially also on the security side and working with them and helping to make sure that their devices are secure and working with them to replace lost devices.

From a standpoint of ongoing services, we've gotten excellent marks from our clients with regards to our customer service, and we have a very good recurring revenue model that tends to work very well with our clients. And the success is really measured by the repeat sign-up rate from those clients.

Mike, I didn't catch your question, though. This is Jim. So I'm not sure if we answered it specifically.

Sure, yes. That was a great answer to the first half. And the second half of the question is what sort of margins should we expect from that aspect of your business?

Industry revenues range from anywhere from 45% to 65%. Historically, when you back out the carrier services component part, we are in line at about 50%. Our goals are to drive that to the higher range, industry range. And as we bring on more commercial clients and expand our presence within the federal infrastructure, we believe we can attain that.

Towards that gross margin?

Towards that gross margin. Now also, remember, within our communications area, there's 3 component parts as it goes to revenues. One, in our business and analytics area that we're providing straight to the carriers, which we've recently entered the U.S. marketplace for marketing purposes, we're realizing -- that's more of a software support sale, we're realizing gross margins of 90%, okay?

Now on the agnostic area where we're outsourcing directly to clients, we're realizing margins generally in that 50% range. If we are providing them with any extra services for providing accessories, those margins tend to range anywhere from 20% to 35%.

Okay. If you bear with me, I have 3 other questions. So one, is your identity management business still moving toward a monthly recurring revenue service model? Or is that being reassessed?

Well, the identity management piece, Mike, has a couple of different elements to it. It does have a monthly basis. But quite often, the structure, especially on the credentialing side, is based on an annual credentialing. And in some cases it's 2- to 3-year credentialing. So they basically are buying that credential for a period of time that will then last for that and then it basically repeats itself. On a monthly basis, we're obviously supplying ongoing shared service in doing -- providing them with ongoing services for the revocation licenses and activities along those lines.

In some of the other areas where we are providing services, yes, it is a monthly-based service, much as like for the airline carrier that we do work with and a variety of others. So there are monthly charges that do exist as well. So it's a combination of both monthly as well as annuals.

But Mike, to add, as we move more towards a monthly revenue recognition, we'll see a little bit more steadier service in our managed services. Presently in the identity management space, though, we do recognize a lot of our revenues on an annualized basis. So we'll provide credentials that will have a life of either 1 or 3 years. And because of that, if we have a big period of sales, okay, related to identity management credentialing in a quarter, we could have that number not be as high in the next quarter. And we have seen a range of variability in these things happening. Some of it, I believe, is associated with seasonality with the fourth quarter and/or the first or second quarter, depending on the budget cycle federally affecting this.

Okay. And then second to last question is, what's the status, including the contracted remaining duration, of the DHS BPA?

Actually, Mike, I'll have to get that information for you. I haven't done a drawdown on it.

Lots.

Yes. I mean, there's still a lot of space remaining on it because of the allotment to the United States Coast Guard. But I know I'm going to be at your conference next week. Let me prepare that information for Jeff to present next week. And when we meet with you, we can give it to you then. Okay?

Okay, great. And then the last one is, if you could please describe how the Probaris $100,000 contingency payment gets triggered? And what level of royalties should we expect regarding these potential ongoing payments?

Sure. The contingency payment's based upon a performance piece met on a specific contract. And as long as that comes in, then that will trigger that particular payment. If it doesn't come in, it won't trigger it. So it's contingency-based on the success of a contract happening.

We're very pleased with this particular acquisition because it broadens both our technical capability, but as well it also introduces potentially other new clients and as well some significant partners that we can work with in terms of offering our identity product into the market. So that was a very positive result for us.

Mike, real simple. The $100,000 is triggered by an option renewal, okay, of a contract next year. That simple. Once the option has been chosen, which we believe it will be, because there's many option years associated with it, then that payment will be triggered. This was more of an insurance policy to make sure that there was at-risk capital in the event that, if an option didn't happen, we would not -- we would reduce the payment terms.

Sure. And the second part of the question was on these potential royalties...

Yes, Mike, that's based on basically both any existing and new contracts that occur, there would be a royalty that would be paid based on success based. So all of the royalties are based on success based, when cash is received. So it's a sharing. It also keeps their -- Probaris' involvement and their goodwill that they have with prospects and people that they're turning over to us. And we're quite happy with the arrangement that's been put together because we think it's a win-win for everybody.

Mike, again, there's a table within the asset purchase agreement that describes the payment terms. Worst case, I will forward that to you, it's in the public domain, or bring it with me when I see you next week, that describes that. It is front end-loaded, where they're doing support year 1, where they'll get a little bit more, and that it will phase off to nothing. A lot has to do with the transaction of making sure that we have good transition; that we have very, very good support so that the customers that are conveying remain happy as we pick up the work and support for those customers long term.

And we'll now take our next question from Kevin Dede with Rodman.

Just a kind of view on the top line and maybe a little bit into the future given we're halfway through the second quarter, I was wondering if you could talk a little bit to how you see the dynamics to the top line, especially in light of the business segments that Jim outlined. I'm just kind of curious on how you see your business sort of bouncing back a little bit.

Well, first of all, Kevin, thanks for the question. As we're developing the business, we're anticipating that we'll start -- we will start to see some enhancements of the revenues in the TLM side as that moves into some larger periods of use. Often the first quarter is a little bit lighter in that area.

As far as the cyber side, our hope is that that's going to be moving upwards, primarily in the second half of the year, as the addition of the Probaris product line and the solutions that we're going to be introducing into the marketplace start to take hold. So I'd probably say that you're looking at a revenue line that's going to be pretty consistent here and then start to raise into the second half of the year.

Okay, fair enough. So the $16 million in new and option year contract awards for the TLM services, do you expect to see payments in advance on those deals in the current quarter? Or how should -- yes, how should we look at that?

That $16 million will be recognized over a 12-month period or less. And they're actual renewals, options and/or new work that we will -- we expect to do there. As Jeff said, our first and second quarter tend to be our weaker quarters, and our second half of the year tend to be our stronger quarters. So we do kind of look out at our third quarter, and that's because it's tied more to the government purchasing cycle with the third quarter being the year-end government purchase cycle. So a lot of your marketing is done in the first quarter of year on a calendar basis, you start recognizing awards in the second quarter, you see it build in the third quarter, steady state in the fourth quarter, fall-off in the first quarter, in general. Sometimes, depending on the budget cycle, you can see the first and second quarter kind of flattish. When you have events like we've just witnessed, where they couldn't figure out how to tie together a budget, it just slows things down by a little bit of time.

Does that help? I know you're new to the story.

Yes, yes, yes. So just going back or pulling the -- peeling the onion back just a couple more layers, you talked about how you're going to reengineer your financial model a little bit, and I'm wondering if you can give us a read on where your revenue level needs to be in order to get to sort of a breakeven number, both on a, I guess, GAAP and an EBITDA basis.

Kevin, we're doing a couple of key things there. Number one, we're looking at reducing our overhead so that our revenue and gross margins, obviously, are going to net us a profitable number on the bottom. So we're working towards reducing that overhead, which includes both personnel facilities, redundant facilities, as well as redundant IT environment. So we're working on that.

Last earnings call, we talked about the reduction of our staff by approximately 10% during this year and we would start recognizing that improvement in the second half of the year. At the same time, we're working on, as I said, the consolidation of a number of our locations to help move that.

The third thing we're working on is reducing what I'll call legacy systems or legacy environments that can be consolidated to improve bottom line margins in terms of delivering solutions to customers. So we're basically consolidating our efforts onto one platform versus having multiple platforms that we have to support. That'll help grow our gross margin and help give us more room.

So obviously, the goal is to, no matter where the revenue is, we want to be profitable. That's our real positioning at this particular point where we want to be. And we want to see our gross margin numbers increasing over time so we can get more room in our budgets, obviously.

Okay. So last question for me. I just was wondering if you could talk a little bit about the acquisition of Probaris, your current credential and cybersecurity platform in light of the attacks that happened across -- I guess around the world over the weekend and how you might see WidePoint's position in light of an intense look on the cyberspace.

Well, it's -- obviously we live, in some ways, in troubling times. And obviously, these events that occurred demonstrate the exposures that are out there. That plus the executive order that came out made it very, very clear that cybersecurity, risk management comprises a wide range of activities that include things -- not just cyber threats and anomalies and mitigating the impacts, but it also has a very basic requirement, which is to protect the IT and the data from unauthorized access.

And it's that core step, that very first step, the heart of cybersecurity, which is protecting the IT and the data from unauthorized access, which is where WidePoint really focuses its efforts and its credentialing activity, both with the federal government as well as with private contractors.

So the activities that we have, that we currently have, the projects that we have and products that we (inaudible) we provide are, on one level, a complete outsourcing service to the government agencies and to the federal contractors, all the way to -- we will be then offering on a more systemized basis an in-house turnkey system that a client can use, also combined with our services, to really provide a more cost-effective solution in that way that has a much broader and larger opportunity for the company in terms of its margins.

So we look at the Probaris acquisition as being a real key part of our offering. It allows us to both integrate as well as extend our capabilities, adding more biometric capture and identity vetting capabilities. And it also offers us, I'll call it a downcycle or a down -- a smaller or a lighter product as well that we can offer for purposes of doing vetting in other environments. More to come on that in the future. I don't want to go into too much detail. I'll be stealing the thunder of some of the marketing folks there. But I think there's some real potential there as well. So we're really pleased with that acquisition and how that's going to play out.

Okay, fair enough. So your position is that, with full gamut, heavy security to light on the credential side, over the course of time you'd be able to help your customers, both commercial and government, to avoid such a situation as we saw develop over this weekend?

Yes, the specific situation with ransomware, how that works and that piece may not be directly attributed in our situation, whereas more it's just who has access to and can get in and out of, who has authorized access in and out of these systems. Certainly, if the systems are controlled and have the necessary security pieces inside, the one thing you want to do is preclude what I'll call the bad characters from getting into your systems indirectly. And so through having these biometric capture and these identity vetting capabilities along with our credentialing, it really helps to secure it in a much greater level. But it's a combination of stories that have to go together to, I think, address this current one as well.

Please also understand that we do have integrated into our platform solution some appliances that in fact do act as a barrier to address the ransomware issue. Ransomware is almost at epidemic levels and everybody is trying to address it. It is a very real problem. Credentialing is part of solving the access issues of who can and cannot come into a logical and/or physical environment. Coupling it with some of our partnerships in technology, partners that we have, the whole gamut is to, in fact, protect our clients from these kind of malicious attacks, as well as identifying who is capable of gaining access to these environments.

I just kind of wanted to go through that scenario in light of what might be on the forefront of a lot of people's minds.

We'll now take our next question from Sam Donaldson.

Jeff and Jim, I think the tone of your presentation today is very good and most welcome. And I think most of us would agree that streamlining and restructuring and cost cutting is important and appreciate the fact you're making new efforts there. But all of us know that the key to the profitability is still sales, selling, better margins. So I have a couple of questions along that line.

And I'd like to begin with, one, the old dread Coast Guard contract. Now, Jeff, I heard you say it was moving ever forward, we're still working with them. But in light of over 2 years or something and all the things that may have gone wrong, and many of them not the fault of our management, or maybe none the fault of our management, I think under safe harbor you can answer the question, do you still expect that the Coast Guard will sign the contract with us? And if so, can you give us any idea, now that the budget question has been settled, at least through this fiscal year, of when?

Sam, I will tell you, we continue to actively market and work closely with them. We are in contact with them on a very regular basis. We know that they're doing a lot of background work and activity on their end to move forward on putting together a pilot and putting together a longer-term contract. And we know that we are positioned in such a way that makes it very possible for us to be very close to them when they're ready to take that next step.

With regards to the timing on that, as I've already said, I'm not going to try to guess on what that will be because we -- obviously, my predecessors and others have had issues with that. So what I will say is, again, I think that the efforts and the marketing activities appear to be picking up and things appear to be moving ahead with regards to obviously budgets being opened up. They're not fighting for their life now. Their budget was saved. And they, I believe, can recognize that they can save money here with these projects and activities with us. So we remain bullish and optimistic on this one. And obviously, the contract vehicles are already in place, which are always a big impediment.

So we remain very strong and optimistic about that, and we look forward to working with them. And that's -- I think that's about as optimistic of a statement I can give you at this point in time.

Well, that's a fair answer. Well, just to make certain that we're talking about the same thing, that is, moving forward and all of the things you're trying to consider with us? I mean, I assume we're not just in a swarm of competitors and you think maybe we have an upper hand, but I think most of us have been led to believe that, under the award from the government that we were really the company that, if and when the Coast Guard got off the dime, that they'd move with us. So you still think at least we're in a premier position?

That's our understanding. That's correct. What you're thinking is what we're thinking as well.

Okay. Second question, A, who's in charge of our sales program? Do we have the kind of sales team -- Jeff, you've been with us now a few months. I'm sure you've looked over personnel and all of that. And I welcome Jim's view, of course. But do we have a sales team that -- we have big competitors. I understand that. We're a little company trying to get in. So I'm not expecting a miracle overnight from the sales team. But do we have the kind of aggressive, knowledgeable -- and it matters in sales. You two know that. Do the people have the personality to sell our product? End of question.

Well, to answer your question directly, yes, I think we do have an excellent team. And we dismantled it, for the most part here, in the first quarter, as I told you in the last earnings call, because I didn't think we had the right team. The leader is Jason Holloway. He's a seasoned executive and, I think, extremely competent, and he has a very good plan that he's executing on. The first steps, Sam, are to obviously make sure you have just a set of key and core people that can support your activities in sales. But really, the element is you need to do the business development process, and that business development starts with lead generation and the development of finding appropriate targets of opportunity that really have a need for the products that we're selling and the services that we're selling. That's the first step. And Jason has been doing, I think, an excellent job of redefining that and getting that clarified so that we're really going looking at and building a pipeline based on products and services that the market is interested and wants to buy and that we're in a position to provide.

Number two, he's utilizing what, in many cases, are what are the excellent expert people that we have inside of WidePoint to be the experts necessary in order to help facilitate the next stages of sales. In many of these cases where we sell, it's not just opening the door; it's really proving that you have the right people, the right expertise and the right ability to deliver the results that the clients want. At the end of the day, you have to have good, aggressive salespeople to follow up, but you really need that team that can go in there and sell the clients on why WidePoint is the best.

I have to say we do have excellent people in each of these operating areas. And we've reassigned and realigned our operating teams, both in our TLM and in our identity management, to basically expose the leaders in each of those to much more direct sales activities out in the field with our customers.

I would deem it a customer-driven orientation versus an internal orientation. So we're really exposing and directing our team leaders and our people inside that know and are very knowledgeable that can help do this, and then we supplement them with salespeople that can close the business. That's the model.

The third thing we're doing, Sam, that I think is also extremely important is we've identified the key partners that we want to work with that can open the doors for us at a level of -- where we don't have to be knocking on 100 doors to find the right one, but rather we knock on a half dozen of ones that are ready to go, based on our clients -- based on our partners' activities. So we've identified several partners that we're working with, one in the major communications area, another in a federal contractor, areas where we can work closely with them, both to integrate our solutions into their offerings, but also to go in and solve specific problems that their customers have. And we believe that, that will also -- will provide a tremendous jump start for us.

At the same time, Sam, that's happening, the fourth piece is identifying and bringing on, as you put it, hungry, ready-to-go salespeople that want to really drive sales and make things happen. And we're obviously always looking for those -- that talent and looking to bring those folks on here. And we will start bringing on more of those salespeople as our pipeline grows and we have the need to bring them on. So that's a process that's ongoing. And I'm confident that, under Jason, that we're going to hopefully see the sales start to take off here in both the federal as well as the commercial area.

Clearly you've thought this out. I mean, this analysis of what's needed in the sales team I think is exactly right. And the fact that you've really thought about the people and who and how I think is very encouraging, and I appreciate that. So one final question, which is -- it's for Jim, really.

Jim, I'm not sure what it means. You say you're working on the new funding after July. Is there a question in that? Are we still going to be working with Cardinal Bank? Or do you know?

Well, at this point we have a commitment letter in place. We're going through our doc prep with a -- for an additional and new credit facility for the next year, Sam. I just haven't finished the documents, so let us finish...

We shouldn't begin to twitch a little bit? I have confidence built up over a number of years with you, as you well know, but I just wanted to see whether I had to twitch a little bit before July or not.

Sam, let me just be very clear with this. We have a formal commitment letter in place for a new credit facility. We are working on the doc prep side of it. We need to complete that doc prep, and when we do, we'll file an 8-K.

And we'll now take our next question from [Myron Liu].

This is [Myron]. I was wondering, are you able to expand the protection into Internet communication as Google is expanding into that area in the near future? Are you going to be able to support that with your product?

It's Jim. Can you expand upon what you mean by communications in Google and what they're doing? Google is doing a number of things.

It appears to me that Google is actually outselling in the Chromebooks and -- with respect to the Apple platforms, and it allows them to have a communication system with respect to Internet communications, Voice-over-IP, and expand that even greater than standard telecommunication. So is your product compatible to actually secure all that type of new IP?

[Myron], you're talking about a whole level of different things than what we do. While we support VoIP and -- Voice over Internet Protocol and we manage it, remember, on the communications side, we're providing analytics and management tools, and we're optimizing invoices, billing. I mean, we're doing a whole -- we're in a whole different world as it goes to the work that we're doing in communications from this rather intriguing concept that I'm sure Google is working on, as they're working on a number of them. But it doesn't -- you're comparing apples to oranges.

Okay. So as Google is actually going to expand into -- in their new products in the future, you're saying that you're not going to be compatible?

No. What I'm saying is, [Myron], you're probably talking about 2 very different things. The communications companies, the carriers are probably more at risk as Google is attacking their business with VoIP and VoIP replacements. So -- but remember, again, Myron , we're providing management services to manage the lines, manage the services, optimize the billing, provide analytics to carrier end users. So it's 2 different things that you're trying to address and put together into one. On the identity side, we're using strong authentication, we're using strong credentialing, we're using strong capabilities to work in identity access. Again, something very different. I mean...

Well, I think Google is going to be also doing the same thing as a provider, is what I'm saying.

Well...

And so other people...

[Myron], this is just -- take this offline. This is not relevant to anything that we're talking about. Okay?

And with no further questions in the queue at this time, I would like to turn the conference over to Mr. Jeff Nyweide for any additional or closing remarks.

Thank you, operator. I'd like to thank all of you for joining us today on this first quarter call. And we look forward to talking to you next with -- on the next second quarter call.

As a point of interest, WidePoint will be presenting at the B. Riley Conference in Los Angeles at the end of this month. For those attending the conference, we'll be presenting on May 24 at, I believe it's 8:00 a.m., and we will be webcasting our presentation of that event.

Again, I appreciate everyone being here today, and we look forward to your continued interest and support of WidePoint and its future. Thank you very much. Have a good day.

And ladies and gentlemen, that concludes today's conference call. We thank you for your participation.