Telos(TLS) - 2022 Q4 - Annual Report

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$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$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$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$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].