Core Viewpoint - Telos Corporation has released its first quarter financial results for 2025, highlighting its position as a leading provider of security solutions for organizations with high security needs [1][3]. Financial Results - The financial results for the first quarter of 2025 are available on Telos' investor relations website [1]. - A live webcast to discuss these results is scheduled for May 9, 2025, at 9:30 a.m. ET, with an archived version available shortly after [2]. Company Overview - Telos Corporation specializes in cybersecurity, cloud security, and enterprise security solutions, catering to commercial enterprises, regulated industries, and government customers globally [3]. - The company's offerings include IT risk management, information security, cloud-based asset protection, identity and access management, secure mobility, organizational messaging, and network management [3].

Financial Performance - Telos Corporation reported $30.6 million in revenue for Q1 2025, a 16.1% sequential growth from Q4 2024, with 84.3% of revenue from Security Solutions[1][4] - The GAAP gross margin increased to 39.8%, up 278 basis points year-over-year, while cash gross margin rose to 45.3%, an increase of 313 basis points[1][4] - Adjusted EBITDA for Q1 2025 was $0.4 million, a $2.7 million improvement year-over-year, attributed to revenue growth and lower adjusted operating expenses[1][4] - Cash flow from operations was $6.1 million, and free cash flow was $3.8 million, driven by revenue growth and favorable working capital dynamics[1][4] - For Q2 2025, the company forecasts revenue growth of 14% to 21% year-over-year, estimating revenues between $32.5 million and $34.5 million[2] Operational Highlights - The Defense Manpower Data Center (DMDC) program is ramping towards full operational capacity, contributing to revenue growth in Security Solutions[4] - The company expanded its TSA PreCheck enrollment locations to 291, further driving growth in its Security Solutions segment[4] Loss and Expenses - GAAP net loss for Q1 2025 was $8.6 million, compared to a net loss of $7.4 million in Q1 2024[1][5] - Adjusted net loss improved to $2.1 million from $5.7 million year-over-year, reflecting operational improvements[5] - Operating expenses for the three months ended March 31, 2025, were $21,204,000, an increase from $19,399,000 in the same period of 2024[27] - Stock-based compensation expense for the three months ended March 31, 2025, was $7,048,000, compared to $2,984,000 in the same period of 2024[22] Balance Sheet - Total assets as of March 31, 2025, were $158,061,000, a slight decrease from $158,235,000 as of December 31, 2024[19] - The total stockholders' equity decreased to $126,114,000 as of March 31, 2025, from $127,137,000 as of December 31, 2024[19] - Cash and cash equivalents at the end of the period were $57,930,000, up from $54,717,000 at the beginning of the period[21] Profitability Metrics - Adjusted EBITDA for the three months ended March 31, 2025, was $362,000, a significant improvement from an adjusted EBITDA loss of $2,335,000 in the same period of 2024[22] - Gross profit for the three months ended March 31, 2025, was $12,182,000, with a gross margin of 39.8%, compared to a gross profit of $10,961,000 and a margin of 37.0% in the prior year[25] - Free cash flow for the three months ended March 31, 2025, was $3,769,000, a turnaround from a negative free cash flow of $3,649,000 in the same period of 2024[26]

Core Viewpoint - Telos Corporation will report its first quarter 2025 financial results on May 9, 2025, and will host a webcast to discuss these results and the business outlook [1][2]. Group 1: Financial Results Announcement - The financial results for the first quarter of 2025 will be reported on May 9, 2025 [1]. - A webcast will be held at 9:30 a.m. ET to discuss the financial results and business outlook [1][2]. - An on-demand replay of the webcast will be available on the company's investor relations website [2]. Group 2: Company Overview - Telos Corporation provides cybersecurity, cloud, and enterprise security solutions for security-conscious organizations [3]. - The company's offerings include IT risk management, information security, cloud security, identity and access management, secure mobility, organizational messaging, and network management [3]. - Telos serves commercial enterprises, regulated industries, and government customers globally [3].

Core Viewpoint - Telos Corporation has been awarded a $5.8 million contract to provide Field Service Representative support for the U.S. Department of Defense's Microwave Line of Sight program, emphasizing its commitment to delivering secure communication solutions for military operations [1][3]. Group 1: Contract Details - The contract includes a six-month base period from April 2, 2025, to September 30, 2025, with an option for an additional three months extending to December 31, 2025 [1]. - The MLoS program aims to provide high-bandwidth, low-latency communication infrastructure for warfighters, ensuring critical connectivity across the battlefield [2]. Group 2: Technical Capabilities - Telos' MLoS solutions offer high bandwidth of up to 300 Mbps full duplex and support both point-to-point and point-to-multi-point functionality [4]. - The contract allows for up to 95% repurposing of MLoS equipment costs, providing a cost-effective alternative to traditional fiber solutions [3]. Group 3: Company Expertise - Telos has successfully deployed over 500 systems in the Middle East, providing 24/7 global field support in high-threat environments [4]. - The company boasts a diverse team with 75% prior military service and extensive experience in contingency operations, enhancing its operational readiness [6]. Group 4: Industry Position - This contract reinforces Telos Corporation's position as a trusted leader in secure communication solutions, aligning with U.S. national security objectives [4]. - The company offers a range of cybersecurity solutions, cloud security, and enterprise security services to various sectors, including government and regulated industries [5].

Core Points - Telos Corporation has opened a new permanent TSA PreCheck enrollment center at Eastern Iowa Airport (CID) to enhance convenience for travelers in Cedar Rapids, Iowa [1][2] - The new center will serve both airport employees needing identification badges and travelers enrolling in TSA PreCheck [3] - TSA PreCheck offers expedited security screening, allowing members to keep shoes, belts, and light jackets on, with 99% of members waiting less than 10 minutes at checkpoints [6] Company Overview - Telos Corporation (NASDAQ: TLS) specializes in security solutions, including cybersecurity, cloud security, and identity management [10] - The company operates 228 TSA PreCheck enrollment centers across the U.S., with the CID center being a relocation from a temporary site established in July 2024 [2][5] - Telos aims to improve travel efficiency and reduce stress for passengers through its TSA PreCheck services [5] Enrollment Process - New TSA PreCheck applicants can pre-enroll and schedule appointments via the Telos TSA PreCheck website, with existing members able to renew their enrollment online [7] - The enrollment process includes a 10-minute in-person appointment for identity verification, photo capture, and payment collection [8] - Most applicants receive their Known Traveler Number (KTN) within 3-5 days, although some may take up to 60 days for processing [8][9] Airport Information - Eastern Iowa Airport (CID) offers nonstop service to 18 destinations with five airlines and is served by three air cargo carriers [11] - The airport is undergoing modernization, which includes the new TSA PreCheck enrollment center located in the terminal lobby for increased visibility [4][2]

Core Points - Government Acquisitions, Inc. (GAI) and Telos Corporation have been awarded a contract for the third phase of the Wi-Fi network expansion program at the United States Air Force Academy (USAFA) to enhance academic and operational connectivity [1][2] - The project aims to modernize campus connectivity and improve mission-critical digital capabilities by upgrading and expanding the Wi-Fi system across six locations at the academy in Colorado Springs, Colorado [2][3] - Telos has successfully completed the first two phases of the Wi-Fi network expansion program from 2020 to 2023, demonstrating a strong commitment to enhancing the academy's digital infrastructure [3] Company Overview - Telos Corporation specializes in cybersecurity, cloud security, and enterprise security solutions, serving security-conscious organizations globally [5] - Government Acquisitions, Inc. (GAI) focuses on empowering federal agencies through cutting-edge technologies and collaborative partnerships, with expertise in cybersecurity, infrastructure, analytics, automation, and artificial intelligence [6]

Core Points - ItsEasy.com Passport & Visa Services and Telos Corporation have announced pop-up TSA PreCheck enrollment events in New York City from March 25 to March 29, 2025 [1][2] - The events will take place at the MetLife Building and Rockefeller Center, providing convenient access for travelers [2][4] - This partnership aims to enhance customer travel experiences by simplifying the enrollment process for TSA PreCheck [2][4] Company Overview - ItsEasy.com has processed over 2 million passport and visa applications and has been a trusted agent of the US Department of State since 1976 [8] - The company specializes in expediting passport and visa processes, ensuring compliance with governmental requirements [8] - Telos Corporation (NASDAQ:TLS) provides cybersecurity solutions and is an authorized TSA PreCheck enrollment provider [9] Event Details - The TSA PreCheck enrollment event hours are as follows: - March 25: 7:30 a.m. – 5:30 p.m. - March 26: 9:30 a.m. – 7:30 p.m. - March 27: 9:30 a.m. – 7:30 p.m. - March 28: 7:30 a.m. – 5:30 p.m. - March 29: 8:00 a.m. – 5:00 p.m. [2] TSA PreCheck Program - TSA PreCheck is a Trusted Traveler program that allows expedited screening for enrolled travelers at over 200 airports with participation from 90+ airlines [6] - Since its launch in December 2013, the program has grown to over 19 million active members [6]

Company Overview - Telos (TLS) is a US-based company that has been operating for approximately 56 years, specializing in IT and cybersecurity solutions primarily for enterprise and government clients [1]. Clientele - One of the notable clients of Telos is the US Department of Defense (DOD), indicating the company's involvement in high-security and critical infrastructure projects [1].

Revenue Performance - Revenue for the year ended December 31, 2024, was $108,272,000, a decrease of $37,106,000 compared to $145,378,000 in 2023, representing a decline of approximately 25.5%[205] - Revenue for the Security Solutions segment decreased by 1% in 2024 to $76.76 million, while gross profit decreased by 30% to $27.68 million, resulting in a gross margin decline from 51.2% to 36.1%[209][210] - Revenue for the Secure Networks segment decreased by 54% in 2024 to $31.51 million, with gross profit decreasing by 49% to $6.75 million, although gross margin improved from 19.6% to 21.4%[211][212] - Revenue from the federal government was $94,951,000 in 2024, making up 88% of total revenue, compared to $131,143,000 and 90% in 2023[379] - Revenue from state and local government and commercial customers was $13,321,000 in 2024, representing 12% of total revenue, compared to $14,235,000 and 10% in 2023[379] Profitability and Losses - Gross profit for 2024 was $34,429,000, down from $52,942,000 in 2023, resulting in a gross margin of 31.8%, compared to 36.4% in the previous year[205] - The company’s operating loss for 2024 was $55,873,000, compared to a loss of $40,315,000 in 2023, indicating increased operational challenges[205] - The net loss for 2024 was $52.52 million, with a net loss margin of 48.5%, compared to a net loss of $34.42 million and a margin of 23.7% in 2023[218] - Adjusted net loss for 2024 was $22.16 million, with an adjusted earnings per share of $(0.31), compared to an adjusted net loss of $15.61 million and an adjusted earnings per share of $(0.23) in 2023[221] - The company’s EBITDA for 2024 was $(44.01) million, representing an EBITDA margin of (40.6)%, compared to $(30.89) million and (21.3)% in 2023[218] Operating Expenses and Efficiency - The company’s operating expenses as a percentage of revenue increased to 83.4% in 2024 from 64.1% in 2023, indicating a rise in operational inefficiency[205] - Operating expenses decreased by 3% in 2024 compared to 2023, with research and development expenses down by $3.3 million and selling, general and administrative expenses down by $5.5 million[206] - Selling, general and administrative expenses were $75.5 million in 2024, slightly down from $81.0 million in 2023[276] Cash Flow and Liquidity - Net cash used in operating activities for 2024 was $(25.9) million, a decrease of $27.5 million compared to a net cash provided of $1.6 million in 2023[231] - Free cash flow for 2024 was $(39.7) million, compared to $(13.9) million in 2023[227] - As of December 31, 2024, the company had cash and cash equivalents of $54.6 million and working capital of $69.3 million[229] - Cash and cash equivalents dropped from $99,260,000 in 2023 to $54,578,000 in 2024, a decrease of about 45%[282] Backlog and Future Business - The company's backlog as of December 31, 2024, totaled $76,489,000, a decrease from $118,102,000 in 2023, with funded backlog at $51,197,000 and unfunded backlog at $25,292,000[203] - The company continues to face competitive bidding pressures for government contracts, with a majority of future business expected to be awarded through competitive processes[183] Restructuring and Impairments - The company incurred a restructuring charge of $1.3 million and a non-cash impairment of software development costs totaling $11.7 million in 2024[207] - An impairment loss of $6.4 million was recorded due to the abandonment of selected solutions, reported under operating expenses[353] - Total restructuring expenses and impairment loss for the year ended December 31, 2024, amounted to $7.643 million, compared to $1.132 million in 2023[354] Budget and Government Contracts - The proposed FY2025 budget includes $850 billion for the Department of Defense (DoD) base budget, with a focus on cyber investments and modernization of legacy technology[186] - The proposed FY2025 budget allocates $455 million for advancements in artificial intelligence, which aligns with the company's focus on cybersecurity and technology solutions[198] Accounting and Financial Reporting - The Company follows ASC Topic 606 for revenue recognition, utilizing a five-step model to determine performance obligations and transaction prices[361] - The company evaluates goodwill for impairment at least annually, with no significant adverse changes reported that would affect the fair value[319] - The company follows ASC 740 for income tax accounting, recognizing deferred tax assets and liabilities based on enacted statutory tax rates[334]

Financial Data and Key Metrics Changes - Total company revenue grew 11% sequentially to $26.4 million in Q4 2024, near the top end of the guidance range [9] - Adjusted EBITDA improved sequentially from a $4.2 million loss in Q3 to a $200,000 loss in Q4 [13][34] - GAAP gross margin expanded nearly 600 basis points year-over-year to 40.3%, while cash gross margin expanded nearly 900 basis points year-over-year to 47% [11] Business Line Data and Key Metrics Changes - Security solutions revenue grew 20% sequentially to $21.9 million, representing 83% of total company revenue [9] - Revenue from TSA PreCheck enrollments grew over 30% sequentially [9] - Secure Networks delivered $4.5 million of revenue, representing 17% of total company revenue, but declined sequentially as expected [10] Market Data and Key Metrics Changes - The TSA PreCheck program became the single largest program by revenue during 2024, with significant growth expected in 2025 [18] - The company increased its enrollment centers from 26 to 218 locations across the U.S. in 2024 [16] Company Strategy and Development Direction - The company is focusing on optimizing performance for customers and prioritizing task orders from existing contract vehicles due to delays in single awards [40] - The company aims to achieve a pro rata share of the TSA PreCheck enrollment market, targeting 500 locations by the end of 2025 [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the new administration being generally positive for the company, despite delays in single awards [40] - The company expects to generate positive cash flow in Q1 2025 and significant improvements in revenue, profit, and cash flow for the full year [36][61] Other Important Information - The company anticipates revenue for the full year 2025 to be driven by existing business, TSA PreCheck, and new programs with DMDC and DHS [29][30] - The company is experiencing delays in government awards due to changes in administration but is not seeing similar delays on task orders [23] Q&A Session Summary Question: Impact of the change in administration on single award programs - Management noted that while the new administration is generally positive, single awards are being held back for review, leading to a focus on task orders from existing contracts [40] Question: Details on revenue recognition for DMDC and DHS programs - Management clarified that the mix of third-party content is shifting towards software, affecting revenue recognition timing, with a partial year of revenue expected in the first year [44][45] Question: TSA PreCheck revenue projections based on current rollout - Management confirmed that the framework for TSA PreCheck revenue is correct, with expectations for revenue to ramp as more locations open [51] Question: Cash flow expectations for Q1 and the full year - Management indicated that Q1 cash flow will benefit from working capital liquidation and expects positive free cash flow for the year, with breakeven adjusted EBITDA around $155 million to $160 million in revenue [54][55]