Telos(US:TLS)2022-03-16 17:37Financial Data and Key Metrics Changes - The company reported a 43% revenue growth in Q4 2021 and a 35% growth for the full year, or 59% for the year adjusted for the wind down of the 2020 Census program [8][9] - Gross profit increased by 38% for the year, totaling $86 million, with adjusted EBITDA of $8.8 million and a 13.8% adjusted EBITDA margin for Q4 [9][34] - Adjusted EPS for the year was $0.27, an increase of $0.42 year-over-year [9] Business Line Data and Key Metrics Changes - The Security Solutions segment generated $123.5 million in revenue for fiscal 2021, representing 51% of total revenues, with a compounded annual growth rate of approximately 13% over the last three years [13] - The Secure Networks segment generated approximately $118.9 million in revenue for fiscal 2021, or 49% of total revenues, with a remarkable 90% growth in 2021 alone [14] Market Data and Key Metrics Changes - The company ended 2021 with a cash balance of approximately $127 million and repaid all its debt, indicating strong financial flexibility [16] - The company has seen increased federal, state, and commercial market interest for secure, fully integrated, enterprise-class, hybrid, and multi-cloud environments [27] Company Strategy and Development Direction - The company has restructured its reporting business segments into Security Solutions and Secure Networks to better align with its strategic priorities [12] - The company is focused on expanding its sales channel and cloud partnerships, with significant investments in sales and marketing functions [17][20] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over customer delays on large programs but remains optimistic about future growth opportunities, particularly in cybersecurity funding from federal agencies [25][68] - The company anticipates a strong finish to 2022, with a focus on balancing investments in growth while managing costs and cash flows [68] Other Important Information - The company has made two inorganic investments, acquiring the remaining equity interest in Telos ID and Diamond Fortress Technologies [18][19] - The company is undergoing a technical accounting review related to the TSA PreCheck program, which has implications for revenue recognition [54][56] Q&A Session Summary Question: Update on Security Solutions growth outlook - Management indicated that the growth outlook for Security Solutions has been adjusted due to ongoing delays in TSA PreCheck, affecting the expected growth rate [72][74] Question: Insights on Secure Networks guidance - The decline in Secure Networks revenue is primarily due to the wind down of two large programs, with new business expected to partially offset this in the second half of the year [78] Question: Free cash flow generation expectations - Management suggested that free cash flow could improve this year, potentially reaching positive levels, based on adjusted EBITDA guidance and capital expenditures [80] Question: Update on CMS contract - Management remains optimistic about the CMS contract's potential for expansion, despite it not being included in the 2022 plan [86] Question: Sales force expansion and market investment - The sales force has been rounded out, and the focus is now on execution and building a sales pipeline, with results expected in the second half of 2022 [90] Question: TSA PreCheck ATO timeline - Management expressed frustration over the delays in receiving the ATO for TSA PreCheck but remains optimistic about obtaining it in 2022 [95][96]