WIDEPOINT CORP Q1 FY2026 earnings call

• Core Strategic Priorities
  • The top corporate priority is securing the CWMS 3.0 contract award from DHS. Recent congressional approval of partial DHS funding ended prolonged industry uncertainty, and the CWMS 2.0 ordering period has been extended to June 24, 2026, which management expects aligns with the expected 3.0 award timeline. There is $100 million in remaining ceiling on CWMS 2.0 to cover any necessary extensions after a 3.0 award to account for a mandatory protest period.
  • The second core priority is completing initial implementation of the large SaaS carrier contract with one of the Big Three U.S. carriers, with revenue recognition expected to begin in H2 2026.
• Operational Updates
  • Functionality testing for the big three carrier contract is progressing on schedule, and the carrier has requested additional functionality that will not change the overall go-live timeline. Initial implementation will be completed first, and testing for the new requested functionality will run simultaneously. The carrier's existing legacy platform will no longer be compliant after Q2 2026, creating urgency for on-time deployment. By the end of 2026, management expects approximately one-third of the total covered devices to be managed on WidePoint's ITMS platform, with full revenue recognition ramping over three years.
  • WidePoint secured a new managed services engagement with a leading national beverage bottler, where WidePoint personnel will now exclusively oversee the bottler's procurement and inventory systems (a function previously handled internally), creating new opportunities for operational improvement and future expansion.
  • The company is advancing its as-a-service offerings, clarifying that IT as a Service is an end-to-end on-demand IT delivery model, while Device as a Service (DAS) is a device-focused subscription offering that can be a component of broader IT as a Service engagements. The company's ITMSP group is actively adding DAS to commercial client engagements in partnership with CDW, building a pipeline of Fortune 100 opportunities.
  • Mobile Anchor, WidePoint's derived credential solution for mobile devices, continues to gain traction with U.S. government agencies: HUD OIG is in its second year of deployment, FAA deployment is progressing, and other agencies including the Department of Energy and Department of the Treasury are in early discussions or pilot stages.
• Financial Performance
  • Q1 2026 adjusted EBITDA was $752,000, up from $92,000 YoY; free cash flow was $674,000, up from $65,000 YoY. Gross margin held steady at 14% of total revenue (equal to Q1 2025), and gross margin excluding carrier services was 34% (down from 37% YoY due to a higher mix of lower-margin reselling revenue).
  • Q1 2026 marked the first quarter of positive net income ($77,000, or $0.01 EPS) since 2021, compared to a net loss of $724,000 ($0.08 loss per share) in Q1 2025. Federal contract backlog totaled $218 million as of March 31, 2026, and the company held $10.9 million in unrestricted cash at quarter end.

For Q1 2026, WidePoint reported total revenue of $40.6 million, 21% higher than the $33.5 million reported in Q1 2025:

• Carrier Services: Revenue was $25.8 million, an increase of $3.4 million year-over-year (YoY), representing 63.5% of total Q1 2026 revenue. Growth was driven by an additional 30,000 line CBP task order awarded in late 2025.
• Managed Services: Revenue was $9.3 million, an increase of $0.8 million YoY, representing 22.9% of total Q1 2026 revenue. Growth was also driven by the additional CBP task order.
• Billable Services: Revenue was $1.3 million, down from $1.8 million YoY, representing 3.2% of total Q1 2026 revenue. The decline was caused by reduced activity during the partial DHS shutdown that began in February 2026.
• Reselling and Other Services: Revenue was $4.2 million, an increase of $3.4 million YoY, representing 10.3% of total Q1 2026 revenue. Growth was primarily due to an out-of-period $2.7 million revenue reduction in Q1 2025 that did not repeat, plus continued normalization of revenue recognition for reselling and SaaS-type contracts.

• Management is holding off on full-year 2026 concrete guidance until there is clarity on the CWMS 3.0 award and full implementation progress for the large carrier SaaS contract, to avoid providing premature or artificially conservative projections.
• Management maintains that WidePoint is well-positioned to deliver double-digit revenue growth from 2025's full-year results, and expects to maintain positive adjusted EBITDA and positive free cash flow throughout 2026.
• If the large carrier contract is implemented as planned, 70%+ gross margins are expected for the SaaS revenue stream, and DAS revenue is forecast to deliver 60%+ gross margins, with a long-term corporate target of 50%+ total gross margin as the revenue mix shifts to higher-margin as-a-service offerings.
• Approximately 75-80% of the current $218 million federal contract backlog is expected to be monetized within the next 12 months, with new task orders expected to replenish the backlog as existing task orders are completed.

• Timing of the CWMS 3.0 award remains uncertain: while most of DHS is now funded, full funding for CBP and ICE has not yet been finalized, and DHS could delay the award until full agency funding is approved. A post-award protest period could also require extending the CWMS 2.0 contract after an award is made.
• Revenue and margin growth are heavily dependent on securing two large high-impact opportunities (CWMS 3.0 and the full ramp of the carrier SaaS contract), as well as closing large Fortune 100 DAS engagements, so results are dependent on external timing that is not fully within WidePoint's control.
• Near-term continued positive EPS is not guaranteed, and depends on the timing of the carrier contract go-live, securing paid additional implementation scope for the contract, and initial activity levels after go-live.
• As WidePoint's market capitalization grows, the company will become an accelerated filer, requiring additional investments in finance, accounting, and cybersecurity systems to meet new SEC reporting requirements, which will increase near-term expenses.
• DAS sales cycles are longer than originally expected, as the company is dependent on the schedules of partner CDW and large enterprise customers, pushing deal timelines to the right.

Q: Why has the DAS sales cycle been slower than expected, and what is the P&L impact timeline if a large Fortune 100 deal is signed? / A: DAS deal timing is dependent on partner CDW and large customer schedules, so timelines have shifted right, but customer interest remains strong and meaningful announcements are expected in H2 2026. WidePoint's FedRAMP-authorized ITMS platform is fully ready to deploy on day one of contract signing, with CDW handling large device capital expenditures. Full deployment can start within 30 days of signing, though ramp-up will be gradual dependent on device sourcing and enterprise rollout logistics.

Q: How seamless will the transition be from CWMS 2.0 to CWMS 3.0 if WidePoint wins the full award, and is there any risk of payment disruption? / A: The transition will be seamless, as existing task orders under CWMS 2.0 run through April 2027. DHS typically runs new and old contracts in parallel, moving expired 2.0 task orders to 3.0 incrementally, with new scope of work under CWMS 3.0's expanded ceiling able to be awarded even before all 2.0 task orders expire. Invoicing and operations will be largely unchanged for WidePoint, and a competitor win would require a costly, disruptive rip-and-replace of WidePoint's 20 years of existing implementation, giving WidePoint a strong competitive edge.

Q: What is the timeline and expected revenue for the large carrier SaaS contract, including the recently added functionality? / A: The original contract called for $40-45 million in total revenue over a 5-year term, for a ~$10 million annual run rate once fully ramped. The new additional functionality requested by the carrier adds ~$2 million in implementation revenue, bringing total expected revenue to $42-47 million over 5 years. All implementation revenue and costs are currently deferred and will be amortized over the full contract term. The carrier plans to go-live in tranches, with ~30% of devices expected to be managed on the ITMS platform by the end of 2026, and full ramp completed after that.

Q: What is driving the recent increase in capital expenditures, and what is the expected annual run rate going forward? / A: Capital expenditures increased primarily due to investments in compliance software, security upgrades, and initial work on post-quantum security capabilities for identity management, after coming in below the average run rate at the start of 2025. The expected annual run rate was originally ~$250,000, but may tick up slightly as the company approaches accelerated filer status and must meet new SEC cybersecurity and reporting requirements, though any increase is not expected to be material.