WidePoint's Q3 2025 Earnings Call: Contradictions Emerge on Backlog, M&A Valuations, and Sales Strategy

Date of Call: September 30, 2025

Financials Results

• Revenue: $36.1M, up $1.5M or 4% YOY from $34.6M
• EPS: Net loss of $0.06 per share in Q3 vs. $0.04 loss per share prior year; 9-month net loss $0.20 vs. $0.17 prior year
• Gross Margin: 15% of revenues in Q3 compared with 14% in the same period last year (gross profit $5.3M vs $4.7M)

Guidance:

• Full-year revenue now expected to be slightly below prior guidance due to timing delays of certain contracts.
• Full-year adjusted EBITDA and free cash flow expected to be positive but modestly below prior guidance (timing-driven).
• CWMS 3.0 RFP proposals due Dec 17, 2025; award targeted ~30 days after with optimistic award by late Q1/early Q2 2026 (plus potential 30–60 day protest).
• Recent carrier SaaS contract estimated to generate $40M–$45M over initial 3-year term; recognition expected beginning in H2 2026.
• Company expects Q4 momentum to continue into 2026 given backlog and pipeline.

Business Commentary:

• Revenue and Financial Performance:
• WidePoint reported revenue of $36.1 million for Q3 2025, a 4% increase from the previous year.
• The company saw a sequential increase of 88% and 260% in adjusted EBITDA and free cash flow, respectively.

• The growth was driven by a stabilization in cost structure, continued investment in business, and delayed pipeline opportunities.

• ITMS Platform and Contract Wins:

• WidePoint secured a multiyear SaaS contract with a major mobile telecommunication carrier, expected to generate $40 million to $45 million in margin-accretive SaaS revenue over the initial 3-year term.

• The contract's success is attributed to WidePoint's ITMS platform having FedRAMP authorization, positioning it as a pioneer in the market.

• Government Contract Opportunities:

• The final DHS CWMS 3.0 RFP was released, with the proposal due by December 17, 2025, and an expected decision by January 2026.

• WidePoint's FedRAMP authorized status is anticipated to strengthen its position in the upcoming recompete.

• DaaS Solution Expansion:

• WidePoint is investing in its DaaS solution, aiming to manage large-scale opportunities and position for future growth.
• The company is in discussions with major Fortune 100 companies, expecting significant potential from these opportunities.
  
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management emphasized returning to a growth trajectory: “adjusted EBITDA was $344,000 and free cash flow was $324,000… 88% and 260% sequential increase.” CEO: “positions WidePoint for a strong finish to the second half of 2025” and highlighted a $40M–$45M margin‑accretive SaaS contract and a federal backlog of ~$269M, underlining confidence in future growth.

Q&A:

• Question from Barry Sine (Litchfield Hills Research): So huge news on this $40 million to $45 million contract during the quarter. And we'll see what additional information we can get from you. You did provide some incremental information. It will be about over 3 years and start about the middle of next year. And Bob gave the backlog, I think it was $269 million. How much of that $45 million is in the $269 million? And did I get those data points right in terms of the timing?
  Response: The $45M carrier SaaS contract is not included in the federal backlog (~$269M) and is expected to be implemented around Q3 next year, though the schedule remains in flux.

• Question from Barry Sine (Litchfield Hills Research): And then you're obviously not at liberty to name the customer, but there's 3 major U.S. wireless carriers: AT&T, Verizon, and T-Mobile, so it's presumably one of those. How are you doing with the other 2? And would this preclude you from selling this solution to the other 2?
  Response: There is no exclusivity with the carrier; WidePoint can pursue conversations, licensing or white‑labeling with the other carriers.

• Question from Barry Sine (Litchfield Hills Research): So that's even bigger. CWMS is looking good. I can't believe they issued the RFP during the shutdown. You've got Spiral 4 contracts coming in and other potential contracts plus the census and the Olympics. So it looks like you've got almost too much cash. How -- so my question is, how is -- how does the M&A market look? Are you building the cash for acquisitions? Are you seeing anything? Are there opportunities out there? Do the valuations look okay?
  Response: They ended the quarter with $12.1M cash, preserved via treasury timing; management is quietly evaluating M&A but sees valuations as high and has not found material targets.

• Question from Casey Ryan (WestPark Capital): I'm curious about the MobileAnchor opportunity that you referenced is exciting as a proof point. I'm just curious about kind of implementation time and deployment time and sort of how long it takes until that gets up and running. More importantly, does that serve as a proof point and a selling point to other potential customers once that's live and going?
  Response: Typical implementation is ~60 days (customer participation dependent); once live it serves as a demonstrable proof point to sell to others.

• Question from Casey Ryan (WestPark Capital): And so when MobileAnchor is being put in, does it need to interface with any other security systems, and I'm asking out of ignorance, but identity management systems or other type of things? Or is it separate from those and doesn't need to sort of interface with those types of things?
  Response: MobileAnchor does not require external system dependencies; it issues digital identity certificates that are accepted by existing systems (Active Directory/LDAP) without needing integrations.

• Question from Casey Ryan (WestPark Capital): Help me understand what the opportunity is with the Olympics again. I feel underinformed about how big and what the opportunity might look like. And if you guys have been involved in Olympics before in some previous version.
  Response: Working with partner CDW on a DaaS opportunity for LA '28; estimate ~95,000–135,000 athletes/support personnel (and similar device counts); solution will be delivered via FedRAMP‑authorized ITMS and is scalable based on prior Census work.

Contradiction Point 1

Contract Inclusion in Backlog

It involves the inclusion of a significant contract in the backlog, which impacts the company's financial outlook and investor expectations.

What details can you share about the $40–45 million Q1 contract? Is this contract in the current backlog? What is the status with other major U.S. wireless carriers? - Barry Sine(Litchfield Hills Research)

20251114-2025 Q3: The $260 million only includes our federal government backlog. So this $45 million would add to that. - Jin Kang(CEO)

Can you provide more details on the $40M–$45M contract signed this quarter? Is it included in current backlog? Additionally, how are negotiations proceeding with other major U.S. wireless carriers? - Barry Sine(Litchfield Hills Research)

2025Q3: The $45 million is not included in the backlog yet. - Jin Kang(CEO)

Contradiction Point 2

M&A Market and Valuations

It relates to the company's stance on mergers and acquisitions, which is crucial for strategic growth and financial planning.

Given the strong cash balance and potential opportunities, are you considering M&A activity? How does the M&A market look? - Barry Sine(Litchfield Hills Research)

20251114-2025 Q3: We are quietly looking around for acquisition targets. We haven't run across any material opportunities out there. I think the multiples and the valuations are still pretty high. So we're patient, and we have plenty of runway, and we're going to continue to generate cash and build our balance sheet. - Jin Kang(CEO)

With strong cash reserves and potential opportunities, are you considering M&A, and how does the M&A market look? - Barry Sine(Litchfield Hills Research)

2025Q3: We are quietly looking into potential acquisition targets, but valuations are currently high. Our focus is on maintaining a strong balance sheet and treasury management. While we have opportunities, we are patient and open to pursuing acquisitions if the right opportunities arise. - Jin Kang(CEO)

Contradiction Point 3

Sales and Marketing Strategy

It involves changes in the company's approach to sales and marketing spend, which can impact revenue growth and customer acquisition.

Are sales and marketing expenses expected to increase temporarily before stabilizing? Why wouldn’t increased commercial opportunities in greenfield areas drive higher sales and marketing spending? - Casey Ryan (WestPark Capital)

20251114-2025 Q3: We expect that the dollar amounts of sales and marketing will go up. It's just a matter of as a percent of revenue, it will be constant relatively constant to where it is. - Robert George(CFO)

Could you elaborate on the plans to increase sales and marketing spending in Q1 and again in the second half of the year? - Jason R. Ader (William Blair & Company)

2025Q2: We are looking to increase sales and marketing spending in the back half of the year. - Jason Holloway(CRO)

Contradiction Point 4

Cash on Hand and M&A Strategy

It involves the company's liquidity management and M&A strategy, which are critical for growth and financial health.

How does the M&A market look given your $12.1M cash balance, $40M–$45M government backlog, CWMS progress, Spiral 4 contracts, and potential census/olympics contracts? Are you building cash reserves for acquisitions, and are valuations reasonable? - Barry Sine (Litchfield Hills Research)

20251114-2025 Q3: Yes, we are looking around. We are quietly looking around for acquisition targets. We haven't run across any material opportunities out there. I think the multiples and the valuations are still pretty high. So we're patient, and we have plenty of runway, and we're going to continue to generate cash and build our balance sheet. - Jin Kang(CEO)

How can we reconcile the positive cash flow in the quarter with the expectation of negative annual cash flow, and is there a key factor we're missing in the cash flow analysis? - Stacy Rasgon (Bernstein Research)

2025Q2: We are focused on building cash flow as we continue to execute on our strategic growth plan, which includes expansion into new verticals and targeted M&A opportunities. - Jin Kang(CEO)

Contradiction Point 5

Government Backlog and Revenue Recognition

It involves the understanding of government backlog and revenue recognition, which are crucial factors for assessing the company's financial health and future revenue prospects.

Can you hear me? - Barry Sine(Litchfield Hills Research)

20251114-2025 Q3: You are correct. The $260 million only includes our federal government backlog. So this $45 million would add to that. - Jin Kang(CEO)

Will this impact year-end results, and will the revenue recover by year-end? - Barry Sine(Litchfield Hills Research)

2025Q1: The out-of-period adjustment reduced revenue by approximately $2.7 million. - Robert George(CFO)