Slide 1: Fourth Quarter 2022 Earnings and 2023 Outlook
Fourth Quarter 2022 Earnings and 2023 Outlook March 16, 2023
Slide 2: Disclaimers
DISCLAIMERS The information contained in this presentation does not constitute or form part of, and should not be construed as, any offer, sale or subscription of, or any invitation to offer, buy or subscribe for, any securities, nor shall there be any offer, solicitation or sale in any jurisdiction
Slide 3: Delivered $47.3M of Revenue, 38.6% Gross Margin and $5.4M of Adjusted EBITDA in 4Q
FINANCIAL PERFORMANCE SUMMARY DELIVERED $47.3M OF REVENUE, 38.6% GROSS MARGIN AND $5.4M OF ADJUSTED EBITDA IN 4Q 4Q 2022 Summary FY 2022 4Q 2022 4Q 2022 Actual Actual Guidance • Delivered $47.3M of revenue • Security Solutions (“SS”) down 11% YoY (vs. guidance of down HSD to high teens); Down 7% seq
Slide 4: Senior Leadership Announcements
SENIOR LEADERSHIP ANNOUNCEMENTS Josh Salmanson Lee Canterbury SVP, Technology Solutions VP, Corporate Growth • Leading newly established • Leading newly consolidated Technology Solutions Growth organization organization • Oversees all business generation • Responsible for driving activities across c
Slide 5: 4Q and FY 2022 Year-over-Year Comparison
FINANCIAL PERFORMANCE SUMMARY 4Q AND FY 2022 YEAR-OVER-YEAR COMPARISON Revenue Gross Profit Adjusted EBITDA(1) Free Cash Flow (FCF)(1) 4Q Results primarily reflect the wind down of large programs in SN as expected, partially offset by cost reduction actions. • Revenue: TLS down 26%. SS down 11% due
Slide 6: 2022 to 2023 Revenue Bridge
2023 OUTLOOK 2022 to 2023 REVENUE BRIDGE Bridge to 2023 Revenue Guidance 2023 Preliminary Outlook on 3Q Earnings Call “…there are a number of moving pieces that will become more visible before we provide 2023 guidance on our fourth quarter earnings call in March. In the meantime, the range of potent
Slide 7: Full Year 2023 Guidance Assumptions
2023 OUTLOOK FULL YEAR 2023 Guidance Assumptions • SS revenue assumptions: FY 2023 FY 2023 Low End High End • Down low-30% to high-40% YoY • Expected lower revenues on two ongoing programs (~$40M) and the loss of $115M $140M another program (~$10M), partially offset by initial ramp of TSA PreCheck R
Slide 8: 1Q 2023 Guidance Assumptions
2023 OUTLOOK 1Q 2023 Guidance Assumptions 1Q 2023 1Q 2023 • SS revenue assumptions: Low End High End • Down mid-20% to mid-30% YoY (down mid-30% to low-40% sequentially) • Expected lower revenues (~$5M+) on two programs and the loss of another $30M $33M program (~$2M) Revenue -40% YoY -34% YoY • SN
Slide 9: 2023 Business Development Priorities
2023 BUSINESS DEVELOPMENT PRIORITIES Reorganize internally Add new talent to drive execution of Maximize existing Increase opportunity to eliminate business strategic partnerships portfolio and quality development solution development and business for market expansion of contract vehicles stovepipes
Slide 10: Summary
SUMMARY Delivered $216.9M of revenue, 96 basis points of gross margin expansion, a 9.0% adjusted EBITDA margin, and $11.2M of Free Cash Flow in 2022; Deployed $11.3M to share repurchases With $119M of cash and no debt, our balance sheet is well positioned to support the company through a wide range
Slide 11: Appendix
Appendix Telos
Slide 12: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES In addition to its results determined in accordance with GAAP, the Company believes the non-GAAP financial measures of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss), Adjusted EPS and Free Cash Flow are useful in evaluating its operating perfo
Slide 13: 2023 Additional Modeling Inputs
2023 ADDITIONAL MODELING INPUTS 2022 2023E 2023E Full Year Full Year 1Q 2023E Full Year YoY Commentary • Both SS and SN down YoY due to revenue pressure on high margin Gross Margin 36.4% 31.5% to 36.5% 33.5% to 34.5% programs, partially offset by favorable mix shift between SS and SN Stock Based • F
Slide 14: 2021 GAAP and Adjusted Full Year Results
2021 GAAP AND ADJUSTED FULL YEAR RESULTS (Amounts in thousands, unaudited) 2021 Q1 Q2 Q3 Q4 FY GAAP SBC Other Inc Adjusted GAAP SBC Other Inc Adjusted GAAP SBC Other Inc Adjusted GAAP SBC Other Inc Adjusted GAAP SBC Other Inc Adjusted Revenue Security Solutions 22,829 - - 22,829 32,236 - - 32,236 34
Slide 15: 2022 Revised GAAP and Adjusted Full Year Results
2022 REVISED GAAP AND ADJUSTED FULL YEAR RESULTS (Amounts in thousands, unaudited) NOTE: Quarterly financial data reflects immaterial adjustments to previously reported share based compensation for each of the first three quarters of 2022. Detailed adjustments shown on slide 16. 2022 Q1 Q2 Q3 Q4 FY
Slide 16: 2022 Stock Based Compensation Adjustments
2022 STOCK BASED COMPENSATION ADJUSTMENTS (Amounts in thousands, unaudited) 2022 Q1 Q2 Q3 Q4 FY Prior SBC ADJ Revised SBC Prior SBC ADJ Revised SBC Prior SBC ADJ Revised SBC SBC SBC Cost of Sales Security Solutions 857 - 857 747 - 747 823 - 823 579 3,007 Secure Networks 150 - 150 115 - 115 106 - 106
Slide 17: Reconciliations: EBITDA and Adjusted EBITDA
RECONCILIATIONS EBITDA and Adjusted EBITDA (Unaudited) For the Three Months Ended December 31, For the Year Ended December 31, 2022 2021 2022 2021 Amount Margin Amount Margin Amount Margin Amount Margin (in thousands) Net loss $ (14,198) (30.0)% $ (5,490) (8.6)% $ (53,428) (24.6)% $ (43,134) (17.8)%
Slide 18: Reconciliations: Adjusted Net Income (Loss) and Adjusted EPS
RECONCILIATIONS Adjusted Net Income (Loss) and Adjusted EPS (Unaudited) For the Three Months Ended December 31, For the Year Ended December 31, 2022 2021 2022 2021 Adjusted Adjusted Adjusted Adjusted Adjusted Adjusted Adjusted Adjusted Net Income Earnings Per Net Income Earnings Per Net Income Earni
Slide 19: Reconciliations: Free Cash Flow
RECONCILIATIONS Free Cash Flow (Unaudited) For the Three Months Ended For the Year Ended December 31, December 31, 2022 2021 2022 2021 (in thousands) Net cash flows provided by operating activities $ (3,610) $ (2,375) $ 16,508 $ 7,262 Adjustments: Purchases of property and equipment (194) (1,556) (1