Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FORM 10-Q Commission file number: 001-08443 x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: June 30, 2023 (703) 724-3800 (Registrant's telephone number, including area code) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Ide ...

| --- | --- | --- | --- | |------------------------------|-------|-------|-------| | | | | | | | | | | | Second Quarter 2023 Earnings | | | | DISCLAIMERS The information contained in this presentation does not constitute or form part of, and should not be construed as, any offer, sale or subscription of, or any invitation to offer, buy or subscribe for, any securities, nor shall there be any offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful. Telos Co ...

Telos Corporation (NASDAQ:TLS) Q2 2023 Earnings Conference Call August 9, 2023 8:30 AM ET Company Participants Allison Phillipp - Public Relations and Engagement Manager John Wood - Chairman and CEO Mark Bendza - Executive Vice President and CFO Mark Griffin - Executive Vice President, Security Solutions Conference Call Participants Zach Cummins - B. Riley Securities Rudy Kessinger - D.A. Davidson & Co. Alex Henderson - Needham Brad Clark - BMO Capital Markets Operator Good day and thank you for standing by ...

Financial Performance - Consolidated revenue for the first quarter of 2023 was $35.222 million, a decrease of 29.8% compared to $50.160 million in the same period of 2022[106]. - Gross profit for the first quarter of 2023 was $13.482 million, down 28.5% from $18.871 million in the first quarter of 2022, with a gross margin of 38.3% compared to 37.6%[106]. - The company reported a net loss of $10.746 million for the first quarter of 2023, an improvement from a net loss of $16.616 million in the same period of 2022[106]. - For the three months ended March 31, 2023, the net loss was $10,746 thousand, representing a margin of (30.5%), compared to a net loss of $16,616 thousand and a margin of (33.1%) for the same period in 2022[119]. - Adjusted EBITDA for the three months ended March 31, 2023, was $(846) thousand, with an adjusted EBITDA margin of (2.4%), compared to $969 thousand and a margin of 1.9% for the same period in 2022[121]. - The company reported free cash flow of $(4,123) thousand for the three months ended March 31, 2023, compared to $(3,092) thousand for the same period in 2022[124]. Revenue Segments - The Security Solutions segment revenue decreased by $7.1 million, or 26.5%, to $19.773 million in the first quarter of 2023, primarily due to the loss of a program[112]. - The Secure Networks segment revenue decreased by $7.8 million, or 33.5%, to $15.449 million in the first quarter of 2023, attributed to the wind-down of large programs[114]. Expenses and Cost Management - Selling, general, and administrative expenses decreased by $8.8 million, or 24.9%, in the first quarter of 2023 compared to the same period in 2022[108]. - The stock-based compensation expense for the three months ended March 31, 2023, was $9,499 thousand, compared to $15,931 thousand for the same period in 2022[122]. Cash Flow and Liquidity - As of March 31, 2023, the company had cash and cash equivalents of $112.5 million and working capital of $116.5 million[127]. - Net cash used in operating activities for the three months ended March 31, 2023, was $(100) thousand, a decrease of $350 thousand compared to the same period in 2022[129]. - Net cash used in investing activities increased by $1.2 million to $(4,587) thousand for the three months ended March 31, 2023, primarily due to software development costs of $3.8 million[130]. - Net cash used in financing activities decreased by $1.1 million to $(2,156) thousand for the three months ended March 31, 2023, mainly due to a reduction in tax withholding payments related to equity awards[131]. - The company emphasizes liquidity management, with a focus on maintaining a strong balance sheet to support future opportunities[128]. - The company has access to a $30.0 million revolving credit facility, with an available expansion feature of up to an additional $30.0 million[126]. Strategic Focus - The fiscal year 2023 is a transition year for the company, focusing on streamlining operations and generating new business wins[94]. - The company plans to reorganize internally, add new talent, maximize strategic partnerships, and increase the quality of contract vehicles for market expansion[97]. - The U.S. federal budget for FY2023 included a $44 billion increase in total defense spending, with a significant focus on cybersecurity funding[94]. Backlog - The backlog consists of aggregate contract revenues remaining to be earned, with funded backlog expected to be earned within one year[103].

Telos Corporation (NASDAQ:TLS) Q1 2023 Earnings Conference Call May 10, 2023 8:30 AM ET Company Participants Allison Phillips - IR John Wood - Chairman, President & CEO Mark Bendza - EVP & CFO Mark Griffin - EVP of Security Solutions Conference Call Participants Zachary Cummins - B. Riley Securities Bradley Clark - BMO Capital Markets Rudy Kessinger - D.A. Davidson & Co. Operator Good day, and thank you for standing by. Welcome to the Telos Corporation Q1 2033 Earnings Call. [Operator Instructions]. I would ...

Financial Data and Key Metrics Changes - The company reported fourth quarter revenue of $47.3 million, a decline of 26% year-over-year, and total revenue for the year was $216.9 million [5][9] - GAAP gross margin expanded by 95 basis points to 38.6% in the fourth quarter and by 96 basis points to 36.4% for the year [6] - Adjusted EBITDA for the fourth quarter was $5.4 million with an 11.4% margin, while for the year it was $19.5 million with a 9% margin [6][12] - Adjusted EPS was $0.05 for the fourth quarter and $0.19 for the year [6] Business Line Data and Key Metrics Changes - Revenue from the security solutions business declined 11% to $30.3 million, primarily due to the ramp down of the U.S. census program and a more than 50% reduction in revenue from the second largest program [9][10] - Revenue from secure networks fell 43% to $17.1 million, driven by the wind down of three large programs [11] Market Data and Key Metrics Changes - The three largest programs in security solutions generated approximately $70 million in revenues in both 2021 and 2022, but are expected to experience revenue declines of approximately 50% to 100% in 2023 [10] - The three largest programs in secure networks generated $69 million in 2021 and $44 million in 2022, with expectations of single-digit revenues in 2023 [11] Company Strategy and Development Direction - The company is focused on rebuilding and growing its revenue base, with immediate priorities including streamlining operations and enhancing business development [7][22] - New senior leaders have been appointed to drive technology solutions and corporate growth [7][8] - The company aims to maximize existing strategic partnerships and increase market awareness of its solutions [23] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with the execution of the long-term growth strategy since the IPO and acknowledged expected revenue contraction in 2023 [5] - The company anticipates 2023 to be a transition year, with significant revenue headwinds from large programs coming to completion [5][17] - Management remains confident in future business development opportunities, citing past performance and strong customer relationships [29] Other Important Information - Free cash flow increased from a $5.9 million net outflow in 2021 to an $11.2 million net inflow in 2022, with cash on the balance sheet exceeding $119 million [13][14] - The company has closed on a $30 million senior secured revolving credit facility, which remains undrawn [14] Q&A Session Summary Question: Insights on new business wins and confidence in growth - The company has won approximately $9 million of new business, but only $1 million to $2 million will be recognized as revenue in 2023 due to timing [27] - Confidence in business development is based on past performance, alignment with government-oriented opportunities, and strong customer knowledge [29] Question: Update on TSA PreCheck launch - The soft launch is ongoing, with final details being worked out to ensure a smooth customer experience, with a national launch expected in 2023 [32] Question: Update on CMS contract - There is currently no update on the CMS contract, and the company is awaiting future order releases [35] Question: Headcount and expense management strategy - Employee reductions were primarily related to billable roles associated with programs experiencing lower operational volume, impacting both billable and non-billable roles [38]

Financial Performance - Total revenue for 2022 was $216.9 million, a decrease of $25.5 million or 11.1% compared to 2021[187]. - Gross profit for 2022 was $79.0 million, down $7.0 million or 8.1% from the previous year, with a gross margin of 36.4%[187]. - The net loss for 2022 was $53.4 million, compared to a net loss of $43.1 million in 2021, representing an increase in loss of $10.3 million[187]. - Adjusted EBITDA for 2022 was $19.5 million, a decrease of $4.9 million or 20.0% from $24.4 million in 2021, with an adjusted EBITDA margin of 9.0%[199]. - Total revenue for 2022 was $216,887,000, a decrease of 10.5% from $242,433,000 in 2021[258]. - The company reported a comprehensive loss attributable to Telos Corporation of $53,456,000 for 2022, compared to a loss of $43,205,000 in 2021[261]. Revenue Sources - Revenue from firm-fixed-price contracts constituted 82.9% of total revenue in 2022, down from 87.6% in 2021, while cost-plus contracts accounted for 11.1% and time-and-material contracts for 6.0%[178]. - Revenue from the Federal government accounted for 95% of total revenue in 2022, down from 96% in 2021[344]. - The U.S. Department of Defense accounted for 74% of total revenue in both 2022 and 2021[346]. - Revenue from the Security Solutions segment decreased by $3.1 million or 2.5% in 2022, primarily due to the end of the Census program[192]. - The Secure Networks segment experienced a revenue decline of $22.5 million or 18.9% in 2022, attributed to the completion of large programs[194]. Cash Flow and Liquidity - Free cash flow for the year ended December 31, 2022, was $11.2 million, a significant improvement from a negative free cash flow of $5.9 million in 2021[203]. - For the year ended December 31, 2022, net cash provided by operating activities was $16.5 million, an increase of 127.5% compared to $7.3 million in 2021[214]. - Cash and cash equivalents as of December 31, 2022, were $119,305,000, a decrease from $126,562,000 in 2021[264]. - The company reported an increase in other income of $2.3 million in 2022, primarily due to dividend income from money market placements[189]. - Net cash used in investing activities for the year ended December 31, 2022, was $13.7 million, a decrease from $19.1 million in 2021[215]. Expenses and Costs - Selling, general and administrative expenses increased by $5.4 million or 4.2% in 2022, primarily due to higher stock-based compensation and labor costs[188]. - Stock-based compensation expense for 2022 amounted to $64.7 million, up from $60.2 million in 2021[201]. - Research and development expenses for 2022 were $16,918,000, down from $19,096,000 in 2021[258]. - The company recorded approximately $2.8 million in involuntary termination benefits during the year ended December 31, 2022, with no similar costs in prior years[323]. Debt and Financing - The company entered a new credit agreement with JPMorgan Chase for a $30 million senior secured revolving facility, which will be used for working capital and general corporate purposes[185]. - The company entered into a $30.0 million senior secured revolving credit facility on December 30, 2022, with no outstanding balances as of December 31, 2022[208][211]. - Net cash used in financing activities was $9.9 million for the year ended December 31, 2022, compared to net cash provided of $32.3 million in 2021[216]. Operational Highlights - Telos anticipates launching its TSA PreCheck enrollment services to the public in 2023 following a successful trial period[185]. - The company’s Xacta offering continues to lead in managing cyber risk and automating compliance across various environments, supporting FedRAMP authorization[169]. - Telos Ghost provides an additional layer of defense against cyber threats by hiding critical resources from visibility, enhancing security architecture[167]. - The company is positioned to expand existing customer relationships despite competitive pressures and potential future spending reductions from the U.S. government[179]. Internal Controls and Compliance - The company did not maintain effective internal control over financial reporting as of December 31, 2022, due to a material weakness identified[238]. - A material weakness in internal control over financial reporting was noted, specifically related to the assessment of accounting for forfeitures of non-standard equity awards[239]. - The company performed its annual goodwill impairment test as of December 31, 2022, resulting in no impairments identified[230]. Assets and Liabilities - Total assets decreased to $237,397,000 in 2022 from $246,081,000 in 2021[264]. - Total liabilities were $65,043,000 as of December 31, 2022, slightly down from $65,827,000 in 2021[264]. - The company reported total contractual obligations of $23.98 million, with $3.82 million due in 2023[218]. - The company capitalized software development costs of $12.7 million in 2022, compared to $10.0 million in 2021[215]. Stockholder Information - The company reported a total stockholders' equity of $172.354 million as of December 31, 2022, an increase from $180.254 million as of December 31, 2021[268]. - The company reported a total of 67,431 shares of common stock outstanding as of December 31, 2022, reflecting an increase from 66,767 shares as of December 31, 2021[268].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: September 30, 2022 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number: 001-08443 TELOS CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Em ...

Call Start: 08:30 January 1, 0000 9:15 AM ET Telos Corporation's (NASDAQ:TLS) Q3 2022 Earnings Conference Call November 9, 2022 08:30 ET Company Participants Christina Mouzavires - Investor Relations John Wood - Chairman & Chief Executive Officer Mark Bendza - Executive Vice President & Chief Financial Officer Mark Griffin - Executive Vice President, Security Solutions Conference Call Participants Dan Ives - Wedbush Zach Cummins - B. Riley Rudy Kessinger - D.A. Davidson Alex Henderson - Needham Nehal Choksh ...

Defense Spending - The final FY 2022 appropriations bill provided $728.5 billion for the Department of Defense (DoD), which is $32.5 billion more than the FY 2021 enacted level[103]. - The proposed FY 2023 budget calls for approximately 4% more in defense spending than was provided for FY 2022, with significant congressional support for boosting defense spending further[106]. - The proposed FY 2023 budget includes an increase in federal civilian agency cybersecurity funding of nearly 10.7%[107]. Cybersecurity Solutions - Xacta is the de facto commercial cyber risk and compliance management solution across the U.S. federal government, delivering automated cyber risk and compliance management solutions[99]. - Telos Ghost provides a virtual obfuscation network-as-a-service, enhancing security by masking user identity and location, and hiding network resources[101]. - The Cyber Incident Reporting for Critical Infrastructure Act of 2022 requires significant cyber incidents to be reported within 72 hours, increasing sensitivity to cybersecurity posture[112]. - The company’s cybersecurity solutions address ransomware threats, with offerings like Telos ACA providing real-time intelligence on known and unknown threats[109]. - The company maintains government certifications for its identity services, including TSA PreCheck enrollment provider and FBI-approved Channeler[104]. - The company’s secure mobility solutions enable remote work while minimizing operational and security concerns across enterprises[105]. Financial Performance - Revenue for the second quarter of 2022 increased by 4.0% to $55.8 million compared to $53.6 million in the same period of 2021[120]. - Services revenue increased by $1.3 million, or 2.6%, while product revenue increased by $0.9 million, or 19.0% in the second quarter of 2022[120]. - Cost of sales increased by 12.1% to $34.9 million for the second quarter of 2022, driven by increased revenue[121]. - Gross profit decreased by 7.1% to $20.9 million for the second quarter of 2022, with a gross margin of 37.5%[122]. - Selling, general, and administrative (SG&A) expenses decreased by 17.3% to $33.1 million for the second quarter of 2022[123]. - Operating loss was $12.2 million for the second quarter of 2022, an improvement from a loss of $17.5 million in the same period of 2021[124]. - Net loss was $12.3 million for the second quarter of 2022, compared to a net loss of $17.6 million in the same period of 2021[126]. - Revenue for the six months ended June 30, 2022 decreased by 3.2% to $106.0 million from $109.4 million in the same period of 2021[127]. - Gross profit for the six months ended June 30, 2022 increased by 7.6% to $39.8 million, with a gross margin of 37.6%[129]. - Secure Networks' revenue for the second quarter of 2022 increased by approximately 17% compared to the same period in 2021[139]. - For the three months ended June 30, 2022, the company reported a net loss of $12.3 million, an improvement from a net loss of $17.6 million for the same period in 2021[146]. - Adjusted EBITDA for the three months ended June 30, 2022, was $4.5 million, compared to $5.3 million for the same period in 2021, reflecting a decrease of approximately 13.7%[146]. - Free cash flow for the three months ended June 30, 2022, was $5.4 million, significantly up from $1.4 million for the same period in 2021[152]. - Cash provided by operating activities was $8.1 million for the six months ended June 30, 2022, compared to cash used of $3.4 million for the same period in 2021[157]. - As of June 30, 2022, the company had a cash and cash equivalent balance of $122.6 million, a slight decrease from $126.6 million at December 31, 2021[156]. - The company’s working capital was $130.4 million as of June 30, 2022, down from $140.8 million as of December 31, 2021[155]. - Stock-based compensation expense for the three months ended June 30, 2022, was $15.2 million, compared to $21.3 million for the same period in 2021[150]. - The company expects that funds generated from operations will be sufficient to meet its liquidity requirements for the next 12 months[155]. - Cash used in investing activities was approximately $5.8 million for the six months ended June 30, 2022, primarily due to software development costs[158]. - Cash used in financing activities was $6.2 million for the six months ended June 30, 2022, compared to cash provided of $33.0 million for the same period in 2021[159]. Internal Control and Remediation - Management identified material weaknesses in internal control over financial reporting, including insufficient qualified resources and ineffective controls[164]. - The company did not maintain appropriately designed controls over revenue recording, software development costs, and stock-based compensation[164]. - Employee turnover contributed to a temporary shortage of qualified personnel for internal controls[165]. - Remediation efforts include hiring additional accounting personnel and enhancing training on control procedures[168]. - The company is enhancing processes around revenue recognition and financial close reporting[168]. - As of June 30, 2022, the identified material weaknesses have not been fully remediated[166]. - There have been no material changes in internal control over financial reporting during the quarter ended June 30, 2022[167]. - The company is monitoring the effectiveness of remediation measures and will make necessary adjustments[166]. - Enhancements to user access provisioning and monitoring controls are being implemented[168]. - The material weaknesses will be considered remediated once effective controls are designed and implemented[165].