Telos(US:TLS)2019-08-14 16:07Financial Performance - Revenue for the second quarter of 2019 increased by 3.2% to $36.0 million, up from $34.9 million in the same period of 2018[148] - Services revenue rose to $34.4 million in Q2 2019, primarily driven by increases in Cyber Security deliverables ($3.4 million) and Identity Management solutions ($1.7 million)[148] - Revenue decreased by 0.2% to $67.2 million for the six months ended June 30, 2019, compared to $67.3 million in the same period in 2018[156] - Services revenue increased to $62.4 million for the six months ended June 30, 2019, from $59.7 million for the same period in 2018, driven by increases in Cyber Security deliverables by $4.9 million[156] Profitability - Gross profit decreased by 17.1% to $10.0 million in Q2 2019, with a gross margin of 27.8%, down from 34.6% in Q2 2018[151] - Gross profit decreased by 14.9% to $19.0 million for the six months ended June 30, 2019, from $22.3 million in the same period in 2018, with gross margin decreasing to 28.2%[159] - Operating loss for Q2 2019 was $0.4 million, compared to an operating income of $2.2 million in Q2 2018[152] - Operating loss was $1.8 million for the six months ended June 30, 2019, compared to operating income of $2.1 million for the same period in 2018[160] - Net loss attributable to Telos Corporation was $1.7 million for Q2 2019, compared to a net loss of $87,000 in the same period of 2018[155] - Net loss attributable to Telos Corporation was $5.2 million for the six months ended June 30, 2019, compared to $2.1 million for the same period in 2018[163] Expenses - Cost of sales for Q2 2019 increased to $26.0 million, with a cost of sales percentage of 72.2%, up from 65.4% in Q2 2018[147] - Selling, general, and administrative expenses increased by 5.2% to $10.4 million in Q2 2019, primarily due to higher labor costs and legal fees[152] - SG&A expense increased by 3.1% to $20.8 million for the six months ended June 30, 2019, from $20.2 million for the same period in 2018[160] Cash Flow and Working Capital - Cash provided by operating activities was $5.9 million for the six months ended June 30, 2019, compared to $3.5 million for the same period in 2018[169] - Cash used in investing activities was approximately $3.7 million for the six months ended June 30, 2019, compared to $1.8 million for the same period in 2018[170] - Working capital was $(4.5) million as of June 30, 2019, compared to $2.1 million as of December 31, 2018[168] Backlog - Total backlog as of June 30, 2019, was approximately $255.0 million, a decrease from $261.4 million in 2018 and $290.8 million at December 31, 2018[137] - Funded backlog as of June 30, 2019, was $74.1 million, compared to $70.2 million in 2018 and $79.3 million at December 31, 2018[138] Debt and Financing - The Company borrowed an additional $5 million, increasing total principal to $16 million, with the maturity date of the Credit Agreement amended to January 15, 2021[187] - The exit fee for the Credit Agreement was increased from $825,000 to $1,200,000[187] - Interest expense increased by 3.4% to $3.5 million for the six months ended June 30, 2019, from $3.4 million for the same period in 2018[161] Preferred Stock - The Company has accrued dividends on the Public Preferred Stock amounting to $105.4 million as of June 30, 2019[200] - The Public Preferred Stock accrues a semi-annual dividend at an annual rate of 12% based on a liquidation preference of $10 per share[200] - The Public Preferred Stock is classified as a noncurrent liability due to restrictions on redemption and dividend payments[197] Lease Accounting - The adoption of the new lease accounting standard (ASU 2016-02) resulted in the recognition of right-of-use assets of $2.0 million and additional lease liabilities of $2.0 million as of January 1, 2019[203] - The company adopted the new lease requirements using the Effective Date Method for all leases with terms greater than 12 months[203] - The adoption of the lease standard did not have a material impact on the company's operating results or cash flows[203] Government Spending - The U.S. Government's discretionary spending limits for FY 2020 and 2021 were raised to $738 billion and $740.5 billion, respectively, representing an increase over the FY 2019 amount of $716 billion[145]