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WidePoint Corp. Reports Operating Results (10-Q)

November 12, 2010 | About:

10qk

18 followers
WidePoint Corp. (WYY) filed Quarterly Report for the period ended 2010-09-30.

Widepoint Corp. has a market cap of $86 million; its shares were traded at around $1.3999 with a P/E ratio of 46.6 and P/S ratio of 2.

Highlight of Business Operations:

Cost of sales. Cost of sales for the three month period ended September 30, 2010 was approximately $9.8 million (or 71% of revenues), as compared to cost of sales of approximately $8.7 million (or 76% of revenues), for the three month period ended September 30, 2009. The decrease in our cost of sales as a percentage of revenues was primarily attributable to margin improvements driven by growth in our Cyber Security Solutions segment. Our Cyber Security Solutions segments realized higher margins from incremental revenue growth, primarily attributable to greater economies of scale. We anticipate continued improvements in our cost of sales as a percentage of Revenue in both our Wireless Mobility Management and Cyber Security Solutions segments, which may at times be partially offset by the fluctuation in our IT Consulting Services and Products segment revenue and net margin performance.

Depreciation. Depreciation expense for the three month period ended September 30, 2010, was approximately $51,000 (or less than 1% of revenues), as compared to approximately $47,000 of such expenses (or less than 1% of revenues) for the three month period ended September 30, 2009. This increase in depreciation expense over such expenses for the three month period ended September 30, 2009 was primarily attributable to recent acquisitions of additional depreciable assets. We do not anticipate any material changes within depreciation expense in the short-term. However, as our revenue base increases within our Wireless Mobility Management and Cyber Security Solutions segments, there may be a need from time to time to increase the purchase of equipment in support of new revenue streams that may then increase our annual depreciation expenses.

Cost of sales. Cost of sales for the nine month period ended September 30, 2010 was approximately $28.0 million (or 75% of revenues), as compared to cost of sales of approximately $25.0 million (or 78% of revenues), for the nine month period ended September 30, 2009. The decrease in our cost of sales as a percentage of revenues was primarily attributable to margin improvements in all three of our segments. Our Wireless Mobility Management and Cyber Security Solutions segments realized greater margins from the benefit of economies of scale with our direct costs centers realizing greater efficiencies, along with reduced revenues from billable calling minutes that we provide in our Wireless Mobility Management segment. Our IT Consulting Services and Products segment realized greater margins as a result of a larger mix of higher margin consulting services, versus a lesser amount of lower margin software reselling that realized during the nine month period. We anticipate improvements in our costs of sales on a percentage basis as our Wireless Mobility Management and Cyber Security Solutions segments continue to add economies of scale, which may be partially offset at times by the fluctuation in our IT Consulting Services and Products segment revenue mix.

Depreciation. Depreciation expense for the nine month period ended September 30, 2010 was approximately $149,000 (or less than 1% of revenues), as compared to approximately $131,000 of such expenses (or less than 1% of revenues) for the nine month period ended September 30, 2009. This increase in depreciation expense over those for the nine month period ended September 30, 2009 was primarily attributable to recent acquisitions of additional depreciable assets. We do not anticipate any material changes within depreciation expense in the short-term. However, as our revenue base increases within our Wireless Mobility Management and Cyber Security Solutions segments, there may be a need from time to time to increase the purchase of equipment in support of new revenue streams that may then increase our depreciation expenses.

Net cash used in operating activities for the nine months ended September 30, 2010 was approximately $1.3 million, as compared to cash provided by operating activities of $1.7 million for the nine months ended September 30, 2009. The increase in net cash used in operating activities were predominately the result of increases in accounts receivable and unbilled accounts receivable as a result of greater revenues generated in the comparative periods. Net cash used in investing activities for the nine months ended September 30, 2010 was approximately $678,000, as compared to $202,000 in cash used in investing activities for the nine months ended September 30, 2009. The increase in net cash used in investing activities was primarily attributable to the establishment of our Advance Response Concepts subsidiary and subsequent purchase of the net assets of Vuance s Government Services business. Net cash used in financing activities amounted to approximately $588,000 in the nine months ended September 30, 2010, as compared to net cash used in financing activities of approximately $2,561,000 in the nine months ended September 30, 2009. This decrease in net cash used in financing activities primarily related to the reduction of debt during the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2010. As a result of the Company s capital raising in 2008 and its profitability in 2009 and in the first nine months of 2010, the Company has had excess liquidity to pay down short-term and long-term debt, while still maintaining sufficient levels of capital resources to fund operations.

As of September 30, 2010, the Company had a net working capital of approximately $5.5 million. The Company s primary source of liquidity consists of approximately $3.7 million in cash and cash equivalents and approximately $11.8 million of accounts receivable and unbilled accounts receivable. Current liabilities include approximately $9.4 million in accounts payable and accrued expenses.

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