Telos(TLS) - 2023 Q1 - Quarterly Report

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].