Telos Corporation Announces Third Quarter Results: Exceeds Guidance on All Metrics, Significantly Expands Gross Margin, Returns to Positive Cash Flow From Operations, and Raises Full-Year Outlook
- Telos Corporation exceeded the high end of its guidance range for the third quarter, reflecting strong performance and risk reduction year-to-date.
- Gross margin expanded by 303 basis points year-over-year to 36.0%, indicating improved operational efficiency and profitability.
- The official launch of the TSA PreCheck® program contributed to the outperformance by Security Solutions, demonstrating successful product launches and market adoption.
- The company raised its full-year outlook on all metrics, indicating confidence in future performance and growth prospects.
- None.
- Reports Third Quarter Results Above High End of Guidance Range on All Metrics
- Delivered
$36.2 Million of Revenue, Reflecting Outperformance by Security Solutions and Official Launch of TSA PreCheck® Program - Expanded Gross Margin by 303 Basis Points Year-over-Year to
36.0% ; Excluding Stock-Based Compensation and Depreciation and Amortization, Non-GAAP Gross Margin Expanded by 684 Basis Points to41.5% - Generated
$0.8 Million of Cash Flow From Operations - Raises Full-Year Outlook on All Metrics
ASHBURN, Va., Nov. 09, 2023 (GLOBE NEWSWIRE) -- Telos Corporation (NASDAQ: TLS), a leading provider of cyber, cloud and enterprise security solutions for the world’s most security-conscious organizations, today announced financial results for the third quarter 2023.
“We executed well in the third quarter, delivering results above the high end of our guidance ranges on all key metrics, expanding gross margin 303 basis points compared to the third quarter of 2022 and returning to positive cash flow from operations,” said John B. Wood, chairman and CEO, Telos. “I am also pleased that we achieved the formal launch of our TSA PreCheck program. Our performance and risk reduction year-to-date, as well as an improved outlook on key programs across the portfolio, have enabled us to again raise our full-year outlook on all metrics.”
| Third Quarter 2023 Financial Highlights | |||||||
| 3Q 2023 | 3Q 2022 | ||||||
| (in millions, except per share data) | |||||||
| Revenue | $ | 36.2 | $ | 63.6 | |||
| Gross Profit | $ | 13.0 | $ | 20.9 | |||
| Gross Margin | 36.0 | % | 32.9 | % | |||
| Non-GAAP Gross Profit 1 | $ | 15.0 | $ | 22.1 | |||
| Non-GAAP Gross Margin 1 | 41.5 | % | 34.7 | % | |||
| GAAP Net Loss | $ | (8.7 | ) | $ | (8.5 | ) | |
| Adjusted Net (Loss)/Income 1 | $ | (4.7 | ) | $ | 6.9 | ||
| EBITDA1 | $ | (6.5 | ) | $ | (7.3 | ) | |
| Adjusted EBITDA1 | $ | (1.3 | ) | $ | 8.6 | ||
| Adjusted EBITDA Margin1 | (3.5 | %) | 13.5 | % | |||
| GAAP EPS | $ | (0.12 | ) | $ | (0.13 | ) | |
| Adjusted EPS 1 | $ | (0.07 | ) | $ | 0.10 | ||
| Weighted-average Shares of Common Stock Outstanding | 69.6 | 67.5 | |||||
| Cash Flow from Operations | $ | 0.8 | $ | 12.0 | |||
| Free Cash Flow 1 | $ | (3.0 | ) | $ | 8.4 | ||
1 Non-GAAP Gross Profit, Non-GAAP Gross Margin, Adjusted Net (Loss)/Income, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EPS, and Free Cash Flow are non-GAAP financial measures. Refer to "Non-GAAP Financial Measures" below.
Selected Third Quarter Business Highlights:
- Achieved formal launch of the TSA PreCheck program.
- Awarded Xacta® renewals with key government and commercial customers:
- Government clients include the National Geospatial-Intelligence Agency, Federal Bureau of Investigation, U.S. State Department, Defense Intelligence Agency, U.S. Social Security Administration, U.S. Environmental Protection Agency, and a classified customer.
- Commercial customers include Zscaler, EY, stackArmor, and a large confidential customer in the technology sector.
- Achieved renewals for cyber services at the Defense Health Agency, General Services Administration, and U.S. Department of Homeland Security.
- Received a new award for the Telos Automated Message Handling System with the Joint Cryptologic Mission Simulation program through the National Security Agency.
- Received a new contract award in Secure Networks for a new network installation with the U.S. Air Force.
| Financial Outlook: | |||||
| 4Q 2023 | Full Year 2023 | ||||
| Prior | Updated | ||||
| Revenue | |||||
| YoY Growth | ( | ( | ( | ||
| Adjusted EBITDA1 | ( | ( | ( | ||
1Adjusted EBITDA is a non-GAAP financial measure. Refer to "Non-GAAP Financial Measures" below.
This guidance consists of forward-looking statements and actual results may differ materially. Refer to the Forward-Looking Statements section below for information on the factors that could cause the Company’s actual results to differ materially from these forward-looking statements. Adjusted EBITDA is a non-GAAP financial measure. The Company has not provided the most directly comparable GAAP measure to this forward-looking non-GAAP financial measure because certain items are out of the Company’s control or cannot be reasonably predicted. Accordingly, a reconciliation for forward-looking Adjusted EBITDA is not available without unreasonable effort.
Webcast Information
Telos will host a live webcast to discuss its third quarter 2023 financial results at 8:30 a.m. Eastern Time today, November 9, 2023. To access the webcast, visit https://register.vevent.com/register/BIa3c1c9fa2f8f4d45a304c1f14550f273. Related presentation materials will be made available on the Investors section of the Company’s website at https://investors.telos.com. In addition, an archived webcast will be available approximately two hours after the conclusion of the live event on the Investors section of the Company’s website.
Forward-Looking Statements
This press release contains forward-looking statements which are made under the safe harbor provisions of the federal securities laws. These statements are based on the Company’s management’s current beliefs, expectations and assumptions about future events, conditions, and results and on information currently available to them. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company believes that these risks and uncertainties include, but are not limited to, those described under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth from time to time in the Company’s filings and reports with the U.S. Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2022 and its Quarterly Reports on Form 10-Q, as well as future filings and reports by the Company, copies of which are available at https://investors.telos.com and on the SEC’s website at www.sec.gov.
Although the Company bases these forward-looking statements on assumptions that its management believes are reasonable when made, the Company cautions the reader that forward-looking statements are not guarantees of future performance and that the Company’s actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this release. Given these risks, uncertainties, and other factors, many of which are beyond its control, the Company cautions the reader not to place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date of such statement and, except as required by law, the Company undertakes no obligation to update any forward-looking statement publicly, or to revise any forward-looking statement to reflect events or developments occurring after the date of the statement, even if new information becomes available in the future. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.
Non-GAAP Financial Measures
In addition to Telos' results determined in accordance with U.S. GAAP, Telos believes the non-GAAP financial measures of EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Income/(Loss), Adjusted Earnings Per Share ("EPS"), Non-GAAP Gross Profit, Non-GAAP Gross Margin, and Free Cash Flow are useful in evaluating operating performance. Telos believes that this non-GAAP financial information, when taken collectively with GAAP results, may be helpful to readers of the financial statements because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. A reconciliation is provided below for each of these non-GAAP financial measures to the most directly comparable financial measure stated in accordance with GAAP.
Telos believes that EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net(Loss)/Income and Adjusted EPS provide the Board, management and investors with a clear representation of the Company’s core operating performance and trends, provide greater visibility into the long-term financial performance of the Company, and eliminate the impact of items that do not relate to the ongoing operating performance of the business. Further, Adjusted EBITDA and Adjusted EBITDA Margin are used by the Board and management to prepare and approve the Company’s annual budget, and to evaluate the performance of certain management personnel when determining incentive compensation. Non-GAAP Gross Profit and Non-GAAP Gross Margin provide management and investors a clear representation of the core economics of gross profit and gross margin without the impact of non-cash expenses and sunk costs expended. Telos uses Free Cash Flow to understand the cash flows that directly correspond with our operations and the investments the Company must make in those operations, using a methodology that combines operating cash flows and capital expenditures. Further, Free Cash Flow may be useful to management and investors in evaluating the Company's operating performance and liquidity. Telos believes these non-GAAP financial measures facilitate the comparison of the Company’s operating performance on a consistent basis between periods by excluding certain items that may, or could, have a disproportionately positive or negative impact on the Company’s results of operations in any particular period. When viewed in combination with the Company’s results prepared in accordance with GAAP, these non-GAAP financial measures help provide a broader picture of factors and trends affecting the Company’s results of operations.
EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Income/(Loss), Adjusted EPS, Non-GAAP Gross Profit, Non-GAAP Gross Margin, and Free Cash Flow are supplemental measures of operating performance that are not made under GAAP and do not represent, and should not be considered as an alternative to, Net Income/(Loss), Net Income/(Loss) Margin, Earnings per Share, Gross Profit, Gross Margin, or Net Cash Flows provided by/(used in) operating activities, as determined by GAAP.
The Company defines EBITDA as net (loss)/income, adjusted for non-operating (income)/expense, interest expense, provision for/(benefit from) income taxes, and depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, adjusted for stock-based compensation expense and restructuring expenses. The Company defines EBITDA Margin, as EBITDA as a percentage of total revenue. The Company defines Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenue. The Company defines Adjusted Net Income/(Loss) as net income/(loss), adjusted for non-operating (income)/expense, stock-based compensation expense and restructuring expenses. The Company defines Adjusted EPS as Adjusted Net Income/(Loss) divided by the weighted-average number of common shares outstanding for the period. The Company defines Non-GAAP Gross Profit as gross profit, adjusted for stock-based compensation expense and depreciation and amortization charged under cost of sales. The Company defines Non-GAAP Gross Margin as Non-GAAP Gross Profit as a percentage of total revenue. Free Cash Flow is defined as net cash provided by/(used in) operating activities, less purchases of property and equipment, and capitalized software development costs.
EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Income/(Loss), Adjusted EPS, Non-GAAP Gross Profit, Non-GAAP Gross Margin, and Free Cash Flow each has limitations as an analytical tool, and you should not consider any of them in isolation, or as a substitute for analysis of results as reported under GAAP. Among other limitations, EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Income/(Loss), Adjusted EPS, Non-GAAP Gross Profit, Non-GAAP Gross Margin, and Free Cash Flow each does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments, does not reflect the impact of certain cash and non-cash charges resulting from matters considered not to be indicative of ongoing operations, and does not reflect income tax expense or benefit. Other companies in the Company’s industry may calculate Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income/(Loss), Adjusted EPS, Non-GAAP Gross Profit, Non-GAAP Gross Margin, and Free Cash Flow differently than Telos does, which limits its usefulness as a comparative measure. Because of these limitations, neither EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Income/(Loss), Adjusted EPS, Non-GAAP Gross Profit, Non-GAAP Gross Margin nor Free Cash Flow should be considered as a replacement for Gross Profit, Gross Margin, Net Income/ (Loss), Net Income/(Loss) Margin, Earnings per Share, or Net Cash Flows Provided by Operating Activities, as determined by GAAP, or as a measure of profitability. Telos compensates for these limitations by relying primarily on the Company’s GAAP results and using non-GAAP measures only for supplemental purposes.
About Telos Corporation
Telos Corporation (NASDAQ: TLS) empowers and protects the world’s most security-conscious organizations with solutions for continuous security assurance of individuals, systems, and information. Telos’ offerings include cybersecurity solutions for IT risk management and information security; cloud security solutions to protect cloud-based assets and enable continuous compliance with industry and government security standards; and enterprise security solutions for identity and access management, secure mobility, organizational messaging, and network management and defense. The Company serves commercial enterprises, regulated industries and government customers around the world.
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TELOS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
| Revenue – services | $ | 34,385 | $ | 55,305 | $ | 94,866 | $ | 153,683 | |||||||
| Revenue – products | 1,801 | $ | 8,288 | 9,453 | 15,861 | ||||||||||
| Total revenue | 36,186 | 63,593 | 104,319 | 169,544 | |||||||||||
| Cost of sales – services (exclusive of depreciation and amortization shown separately below) | 20,683 | 36,555 | 58,613 | 97,311 | |||||||||||
| Cost of sales – products (exclusive of depreciation and amortization shown separately below) | 545 | 5,902 | 4,561 | 10,886 | |||||||||||
| Depreciation and amortization | 1,945 | 191 | 2,291 | 602 | |||||||||||
| Total cost of sales | 23,173 | 42,648 | 65,465 | 108,799 | |||||||||||
| Gross profit | 13,013 | 20,945 | 38,854 | 60,745 | |||||||||||
| Selling, general and administrative expenses | |||||||||||||||
| Sales and marketing | 1,728 | 3,042 | 5,164 | 13,035 | |||||||||||
| Research and development | 3,154 | 3,981 | 8,633 | 13,900 | |||||||||||
| General and administrative | 17,824 | 22,706 | 57,187 | 72,997 | |||||||||||
| Total selling, general and administrative expenses | 22,706 | 29,729 | 70,984 | 99,932 | |||||||||||
| Operating loss | (9,693 | ) | (8,784 | ) | (32,130 | ) | (39,187 | ) | |||||||
| Other income | 1,222 | 518 | 5,367 | 648 | |||||||||||
| Interest expense | (178 | ) | (181 | ) | (611 | ) | (558 | ) | |||||||
| Loss before income taxes | (8,649 | ) | (8,447 | ) | (27,374 | ) | (39,097 | ) | |||||||
| Provision for income taxes | (23 | ) | (8 | ) | (68 | ) | (133 | ) | |||||||
| Net loss | $ | (8,672 | ) | $ | (8,455 | ) | $ | (27,442 | ) | $ | (39,230 | ) | |||
| Net loss per share: | |||||||||||||||
| Basic | $ | (0.12 | ) | $ | (0.13 | ) | $ | (0.40 | ) | $ | (0.58 | ) | |||
| Diluted | $ | (0.12 | ) | $ | (0.13 | ) | $ | (0.40 | ) | $ | (0.58 | ) | |||
| Weighted-average shares outstanding: | |||||||||||||||
| Basic | 69,571 | 67,493 | 69,062 | 67,641 | |||||||||||
| Diluted | 69,571 | 67,493 | 69,062 | 67,641 | |||||||||||
TELOS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, 2023 | December 31, 2022 | ||||||
| (in thousands, except per share and share data) | |||||||
| Assets: | |||||||
| Cash and cash equivalents | $ | 99,953 | $ | 119,305 | |||
| Accounts receivable, net | 25,424 | 40,069 | |||||
| Inventories, net | 984 | 2,877 | |||||
| Prepaid expenses | 8,102 | 4,819 | |||||
| Other current assets | 1,750 | 893 | |||||
| Total current assets | 136,213 | 167,963 | |||||
| Property and equipment, net | 3,390 | 4,787 | |||||
| Finance lease right-of-use assets, net | 6,917 | 7,832 | |||||
| Operating lease right-of-use assets, net | 274 | 341 | |||||
| Goodwill | 17,922 | 17,922 | |||||
| Intangible assets, net | 38,984 | 37,415 | |||||
| Other assets | 1,038 | 1,137 | |||||
| Total assets | $ | 204,738 | $ | 237,397 | |||
| Liabilities and Stockholders' Equity: | |||||||
| Liabilities: | |||||||
| Accounts payable and other accrued liabilities | $ | 7,457 | $ | 22,551 | |||
| Accrued compensation and benefits | 12,593 | 8,388 | |||||
| Contract liabilities | 5,775 | 6,444 | |||||
| Finance lease obligations – current portion | 1,695 | 1,592 | |||||
| Operating lease obligations – current portion | 224 | 361 | |||||
| Other financing obligations – current portion | — | 1,247 | |||||
| Other current liabilities | 1,839 | 4,919 | |||||
| Total current liabilities | 29,583 | 45,502 | |||||
| Finance lease obligations – non-current portion | 9,965 | 11,248 | |||||
| Operating lease liabilities – non-current portion | 65 | 27 | |||||
| Other financing obligations – non-current portion | — | 7,211 | |||||
| Deferred income taxes | 795 | 758 | |||||
| Other liabilities | 309 | 297 | |||||
| Total liabilities | 40,717 | 65,043 | |||||
| Stockholders’ equity: | |||||||
| Common stock, | 108 | 106 | |||||
| Additional paid-in capital | 431,784 | 412,708 | |||||
| Accumulated other comprehensive income | (24 | ) | (55 | ) | |||
| Accumulated deficit | (267,847 | ) | (240,405 | ) | |||
| Total stockholders’ equity | 164,021 | 172,354 | |||||
| Total liabilities and stockholders’ equity | $ | 204,738 | $ | 237,397 | |||
TELOS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||
| (in thousands) | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||
| Net loss | $ | (8,672 | ) | $ | (8,455 | ) | $ | (27,442 | ) | $ | (39,230 | ) | |||
| Adjustments to reconcile net loss to cash flows from operations: | |||||||||||||||
| Stock-based compensation | 5,218 | 15,836 | 22,462 | 48,843 | |||||||||||
| Depreciation and amortization | 3,215 | 1,517 | 6,336 | 4,427 | |||||||||||
| Deferred income tax provision | 13 | — | 37 | 25 | |||||||||||
| Accretion of discount in acquisition holdback | — | 13 | 2 | 36 | |||||||||||
| Loss on disposal of fixed assets | — | 1 | 1 | 2 | |||||||||||
| Provision for doubtful accounts | 11 | 31 | 128 | 97 | |||||||||||
| Amortization of debt issuance costs | 16 | — | 51 | — | |||||||||||
| Gain on early extinguishment of other financing obligations | — | — | (1,427 | ) | — | ||||||||||
| Changes in other operating assets and liabilities: | |||||||||||||||
| Accounts receivable | 8,855 | (339 | ) | 14,517 | 8,763 | ||||||||||
| Inventories | 782 | (1,046 | ) | 1,893 | (3,429 | ) | |||||||||
| Prepaid expenses, other current assets, other assets | (661 | ) | 838 | (4,106 | ) | (2,486 | ) | ||||||||
| Accounts payable and other accrued payables | (8,687 | ) | 2,068 | (14,942 | ) | 2,635 | |||||||||
| Accrued compensation and benefits | 2,731 | (48 | ) | 2,496 | 371 | ||||||||||
| Contract liabilities | (363 | ) | 2,153 | (670 | ) | 571 | |||||||||
| Other current liabilities | (1,612 | ) | (583 | ) | (2,703 | ) | (507 | ) | |||||||
| Net cash provided by/(used in) operating activities | 846 | 11,986 | (3,367 | ) | 20,118 | ||||||||||
| Cash flows from investing activities: | |||||||||||||||
| Capitalized software development costs | (3,762 | ) | (3,446 | ) | (11,960 | ) | (8,580 | ) | |||||||
| Purchases of property and equipment | (80 | ) | (174 | ) | (350 | ) | (815 | ) | |||||||
| Net cash used in investing activities | (3,842 | ) | (3,620 | ) | (12,310 | ) | (9,395 | ) | |||||||
| Cash flows from financing activities: | |||||||||||||||
| Payments under finance lease obligations | (405 | ) | (373 | ) | (1,180 | ) | (1,083 | ) | |||||||
| Payment of tax withholding related to net share settlement of equity awards | (92 | ) | (249 | ) | (1,676 | ) | (3,135 | ) | |||||||
| Repurchase of common stock | — | (5,000 | ) | (139 | ) | (7,603 | ) | ||||||||
| Payment of DFT holdback amount | — | — | (564 | ) | — | ||||||||||
| Payments for debt issuance costs | — | — | (114 | ) | — | ||||||||||
| Net cash used in financing activities | (497 | ) | (5,622 | ) | (3,673 | ) | (11,821 | ) | |||||||
| Net change in cash, cash equivalents, and restricted cash | (3,493 | ) | 2,744 | (19,350 | ) | (1,098 | ) | ||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | 103,581 | 122,720 | 119,438 | 126,562 | |||||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 100,088 | $ | 125,464 | $ | 100,088 | $ | 125,464 | |||||||
NON-GAAP FINANCIAL MEASURES
(Unaudited)
| Reconciliation of Net Loss to EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin | |||||||||||||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||||
| Amount | Margin | Amount | Margin | Amount | Margin | Amount | Margin | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||||||
| Net loss | $ | (8,672 | ) | (24.0)% | $ | (8,455 | ) | (13.3)% | $ | (27,442 | ) | (26.3)% | $ | (39,230 | ) | (23.1)% | |||||||||||
| Other income | (1,222 | ) | (3.4)% | (518 | ) | (0.8)% | (5,367 | ) | (5.1)% | (648 | ) | (0.4)% | |||||||||||||||
| Interest expense | 178 | 0.5 | % | 181 | 0.3 | % | 611 | 0.6 | % | 558 | 0.3 | % | |||||||||||||||
| Provision for income taxes | 23 | 0.1 | % | 8 | — | % | 68 | 0.1 | % | 133 | 0.1 | % | |||||||||||||||
| Depreciation and amortization | 3,215 | 8.9 | % | 1,517 | 2.4 | % | 6,336 | 6.0 | % | 4,427 | 2.6 | % | |||||||||||||||
| EBITDA (Non-GAAP) | (6,478 | ) | (17.9) % | (7,267 | ) | (11.4)% | (25,794 | ) | (24.7)% | (34,760 | ) | (20.5)% | |||||||||||||||
| Stock-based compensation expense (1) | 5,218 | 14.4 | % | 15,836 | 24.9 | % | 22,462 | 21.5 | % | 48,843 | 28.8 | % | |||||||||||||||
| Restructuring expenses (2) | — | — | % | — | — | % | 1,197 | 1.2 | % | — | — | % | |||||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | (1,260 | ) | (3.5)% | $ | 8,569 | 13.5 | % | $ | (2,135 | ) | (2.0)% | $ | 14,083 | 8.3 | % | |||||||||||
(1) The stock-based compensation adjustment to EBITDA is made up of stock-based compensation expense for the awarded restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”) and stock options, and other sources. Stock-based compensation expense for the awarded RSUs, PSUs and stock options was
(2) The restructuring expenses to EBITDA include severance and other related benefit costs (including outplacement services and continuing health insurance coverage), external consulting and advisory fees related to implementing the restructuring plan.
| Reconciliation of Net Loss to Non-GAAP Adjusted Net (Loss)/Income and Adjusted EPS | |||||||||||||||||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||||||||||
| Amount | Earnings Per Share | Amount | Earnings Per Share | Amount | Earnings Per Share | Amount | Earnings Per Share | ||||||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||||||||||
| Net loss | $ | (8,672 | ) | $ | (0.12 | ) | $ | (8,455 | ) | $ | (0.13 | ) | $ | (27,442 | ) | $ | (0.40 | ) | $ | (39,230 | ) | $ | (0.58 | ) | |||||||
| Adjustments: | |||||||||||||||||||||||||||||||
| Other income | (1,222 | ) | (0.02 | ) | (518 | ) | (0.01 | ) | (5,367 | ) | (0.08 | ) | (648 | ) | (0.01 | ) | |||||||||||||||
| Stock-based compensation expense(1) | 5,218 | 0.07 | 15,836 | 0.24 | 22,462 | 0.33 | 48,843 | 0.72 | |||||||||||||||||||||||
| Restructuring expenses(2) | — | — | — | — | 1,197 | 0.02 | — | — | |||||||||||||||||||||||
| Adjusted net (loss)/income, Adjusted EPS (Non-GAAP) | $ | (4,676 | ) | $ | (0.07 | ) | $ | 6,863 | $ | 0.10 | $ | (9,150 | ) | $ | (0.13 | ) | $ | 8,965 | $ | 0.13 | |||||||||||
| Weighted-average shares of common stock outstanding, basic | 69,571 | 67,493 | 69,062 | 67,641 | |||||||||||||||||||||||||||
(1) The stock-based compensation adjustment to net (loss)/income is made up of stock-based compensation expense for the awarded RSUs, PSUs and stock options, and other sources. Stock-based compensation expense for the awarded RSUs, PSUs and stock options was
(2) The restructuring expenses to net loss include severance and other related benefit costs (including outplacement services and continuing health insurance coverage), external consulting and advisory fees related to implementing the restructuring plan.
| Reconciliation of Gross Profit to Non-GAAP Gross Profit; Gross Margin to Non-GAAP Gross Margin | |||||||||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||||||||||
| Amount | Margin | Amount | Margin | Amount | Margin | Amount | Margin | ||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Gross profit | $ | 13,013 | 36.0 | % | $ | 20,945 | 32.9 | % | $ | 38,854 | 37.2 | % | $ | 60,745 | 35.8 | % | |||||||
| Adjustments: | |||||||||||||||||||||||
| Stock-based compensation expense — cost of sales | 73 | 0.2 | % | 929 | 1.5 | % | 624 | 0.6 | % | 2,798 | 1.6 | % | |||||||||||
| Depreciation and amortization — cost of sales | 1,945 | 5.3 | % | 191 | 0.3 | % | 2,291 | 2.2 | % | 602 | 0.4 | % | |||||||||||
| Non-GAAP gross profit | $ | 15,031 | 41.5 | % | $ | 22,065 | 34.7 | % | $ | 41,769 | 40.0 | % | $ | 64,145 | 37.8 | % | |||||||
| Free Cash Flow | |||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||||||
| (in thousands) | |||||||||||||||
| Net cash provided by/(used in) operating activities | $ | 846 | $ | 11,986 | $ | (3,367 | ) | $ | 20,118 | ||||||
| Adjustments: | |||||||||||||||
| Purchases of property and equipment | (80 | ) | (174 | ) | (350 | ) | (815 | ) | |||||||
| Capitalized software development costs | (3,762 | ) | (3,446 | ) | (11,960 | ) | (8,580 | ) | |||||||
| Free cash flow (Non-GAAP) | $ | (2,996 | ) | $ | 8,366 | $ | (15,677 | ) | $ | 10,723 | |||||
FAQ
What are the third quarter financial highlights for Telos Corporation (TLS)?
What are the selected third quarter business highlights for Telos Corporation (TLS)?
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