Telos Corporation Reports Fourth Quarter and Fiscal Year 2020 Results
- Full Year 2020 Revenue Increases 13% Year-Over-Year to
$179.9 Million - Company Signs Multiple Contracts in 2020, Including 10-Year, Billion Dollar + Contracts with TSA PreCheck and
Centers for Medicare and Medicaid Services - Strengthens Balance Sheet with
$292.6 Million in IPO Gross Proceeds and Elimination of Debt in the Fourth Quarter - Company Issues Full Year and First Quarter 2021 Guidance
“2020 was a momentous year for the Company – we delivered strong revenue growth, continued to expand our customer relationships, and closed our public offering in November,” said
“2021 is off to a strong start, as we continue to execute on our growth strategy and significantly expand our sales and marketing capabilities with an emphasis on establishing a world-class channel organization. We have already been able to attract a team of seasoned channel professionals to lead the effort. We recently announced our partnership with Zscaler, a leading cloud security provider, to integrate our enterprise risk management solution, Xacta®, into their offering. We also announced two important new partnerships involving the integration of our
“We have also been successful in securing over
Fourth Quarter 2020 Financial Highlights
- Revenue: Total revenue was $44.9 million, compared to $46.5 million in the fourth quarter of 2019. The expected decline in revenue was due to the ramping down of the
U.S. Census contract during the fourth quarter of 2020. - Gross Profit: Gross profit was
$16.0 million , compared to$17.0 million in the fourth quarter of 2019. - Net Income (Loss): Net income (loss) was
$3.9 million , compared to$(3.5) million in the fourth quarter of 2019. - Enterprise EBITDA: Enterprise EBITDA was $5.4 million, compared to $2.5 million in the fourth quarter of 2019.
- Adjusted EBITDA: Adjusted EBITDA was $(2.6) million, compared to $2.5 million in the fourth quarter of 2019.
- Net earnings per share attributable to
Telos Corporation , diluted:$0.08 . - Weighted-average shares of common stock outstanding: 51.3 million (which reflects reverse stock split and the IPO).
Full Year 2020 Financial Highlights
- Revenue: Total revenue increased 13% to
$179.9 million , compared to $159.2 million in 2019. - Gross Profit: Gross profit increased 19% to
$62.4 million , compared to$52.3 million in 2019. - Net Income (Loss): Net income was
$1.7 million , compared to net loss of$(6.4) million in 2019. - Enterprise EBITDA: Enterprise EBITDA was $19.4 million, compared to $10.0 million in 2019.
- Adjusted EBITDA: Adjusted EBITDA was $11.4 million, compared to $10.0 million in 2019.
- Cash and Cash Equivalents: Cash and cash equivalents were
$106.0 million as ofDecember 31, 2020 , compared to$6.8 million as ofDecember 31, 2019 . - Net earnings per share attributable to
Telos Corporation , diluted:$0.04 . - Weighted-average shares of common stock outstanding: 42.9 million (which reflects reverse stock split and the IPO).
- Outstanding shares of Common Stock as of
December 31, 2020 : 64,625,071.
Enterprise EBITDA and Adjusted EBITDA are non-GAAP financial measures. Refer to “Non-GAAP Financial Measures” below.
Selected Full Year 2020 Business Highlights:
- The
Federal Bureau of Investigation (FBI) awarded Telos a contract for enterprise-wide risk management valued at$13.5 million . Xacta has been successfully deployed across the federal government including the Intelligence Community, multiple civilian agencies and theDepartment of Defense , and the Company is proud to extend this work to the FBI. - Under a contract with the
U.S. Census Bureau to vet 2020 Census enumerators, in partnership with Office Depot, Telos quickly established a network of 1,100 processing centers, supporting the objectives of theCensus Bureau with the Company’s IDTrust360® solution on a national scale. As a result, the Company was able to process over 1 million enumerators over four months during the height of COVID-19. - The
Transportation Security Administration (TSA) selected Telos to provide TSA PreCheck™ enrollment services. Under the terms of the 10-year contract anticipated to generate revenue in excess of$1.5 billion over time, IDTrust360 will collect application materials, biometric data, and fees from each applicant, and will provide all necessary information toTSA for adjudication. - The
Centers for Medicare and Medicaid Services awarded Telos a 10-year contract in 2020. Under this$2 billion ceiling contract, one of the task orders provides for the use of IDTrust360 to vet approximately 1.5 million healthcare providers annually. Telos Ghost was awarded a classified contract to provide the underlying security enabling the customer to complete their missions on the public internet and dark web through misattribution.- Other significant contracts in 2020 include a
$66.4 million award with theU.S. Air Force and a$26.6 million award with theU.S. Army , both within the Company’s Secure Networks business. Telos also received a$15.6 million award with DISA for their official messaging solution, AMHS. - Telos has formed strategic partnerships and alliances over the year both domestically and globally, including a partnership with ST Engineering, a global technology, defense and engineering leader from
Singapore that extends the availability ofTelos Ghost and Xacta intoAsia and theMiddle East . - Xacta has integrated with leading security solutions like Splunk, which is used to import security data into Xacta to enable critical security risk and compliance management functions.
- The Company continued to advance Xacta’s multi-cloud focus by integrating with Microsoft® Azure and expanding support for
Amazon Web Services (AWS). - To usher in a new era of growth and expansion, Telos welcomed new members to the Company’s board of directors and advisory board, including noted entrepreneur and investment guru
Fred Schaufeld ; Presidential Medal of Freedom recipient andTragedy Assistance Program for Survivors Founder and President ,Bonnie Carroll ; and the longest-serving Director of theNSA and the first commander of USCYBERCOM, GEN (retired)Keith Alexander .
“In the fourth quarter, we completed an initial public offering of our common stock, raising
Financial Outlook
Based on information available as of
First Quarter 2021
- Revenue in the range of
$49 million to$52 million . - Adjusted EBITDA in the range of
$(1.7) million to$(1.9) million .
Full year 2021
- Revenue in the range of
$283 million to$295 million , an improvement of 57% to 64% compared to 2020. - Adjusted EBITDA in the range of
$33 million to$36 million , an improvement of 190% to 216% compared to 2020.
As the Company is approaching the end of the first quarter of 2021, Telos has chosen to provide guidance on Revenue and Adjusted EBITDA for the quarter in addition to the full year of 2021. These statements are forward-looking 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.
Conference Call Information
Telos will host a conference call and live webcast to discuss its fourth quarter and full year 2020 financial results at
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
Although the Company bases these forward-looking statements on assumptions that they believe are reasonable when made, they caution 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 their 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 its results determined in accordance with GAAP, the Company believes the non-GAAP financial measures of Enterprise EBITDA and Adjusted EBITDA are useful in evaluating its operating performance. The Company believes that this non-GAAP financial information, when taken collectively with the Company’s GAAP results, may be helpful to readers of its financial statements because that information 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.
The Company uses these non-GAAP financial measures to understand and evaluate its core operating performance and trends, to prepare and approve its annual budget, to develop short-term and long-term operating plans, and to evaluate the performance of certain management personnel when determining incentive compensation. The Company believes these non-GAAP financial measures facilitate comparison of its operating performance on a consistent basis between periods by excluding certain items that may, or could, have a disproportionate positive or negative impact on its 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.
Both Enterprise EBITDA and Adjusted EBITDA 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) as determined by GAAP. The Company defines Enterprise EBITDA as net income (loss) attributable to
Each of Enterprise EBITDA and Adjusted EBITDA has limitations as an analytical tool, and the reader should not consider it in isolation, or as a substitute for analysis of the Company’s results as reported under GAAP. Among other limitations, each of Enterprise EBITDA and Adjusted EBITDA does not reflect the Company’s cash expenditures, or future requirements for capital expenditures, or contractual commitments, does not reflect the impact of certain cash charges resulting from matters the Company considers not to be indicative of its ongoing operations, and does not reflect income tax expense or benefit. Other companies in the Company’s industry may calculate Adjusted EBITDA differently than the Company does, which limits its usefulness as a comparative measure. Because of these limitations, neither Enterprise EBITDA nor Adjusted EBITDA should be considered as a replacement for net income (loss), as determined by GAAP, or as a measure of the Company’s profitability. The Company compensates for these limitations by relying primarily on its GAAP results and using non-GAAP measures only for supplemental purposes.
About
Media:
Email: wilcox@merrittgrp.com
Phone: (610) 564-6773
Investors:
Brinlea Johnson
Email: brinlea@blueshirtgroup.com
Phone: (415) 269-2645
TELOS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except earnings per share data) (unaudited) |
|||||||||||
Years Ended |
|||||||||||
2020 | 2019 | 2018 | |||||||||
Revenue | |||||||||||
Services | $ | 161,180 | $ | 143,581 | $ | 120,990 | |||||
Products | 18,737 | 15,637 | 17,026 | ||||||||
179,917 | 159,218 | 138,016 | |||||||||
Costs and expenses | |||||||||||
Cost of sales – Services | 106,969 | 98,772 | 76,857 | ||||||||
Cost of sales – Products | 10,528 | 8,102 | 8,097 | ||||||||
117,497 | 106,874 | 84,954 | |||||||||
Selling, general and administrative expenses | |||||||||||
Sales and marketing | 6,176 | 5,951 | 6,014 | ||||||||
Research and development | 14,243 | 10,647 | 8,755 | ||||||||
General and administrative | 41,704 | 30,721 | 29,279 | ||||||||
62,123 | 47,319 | 44,048 | |||||||||
Operating income | 297 | 5,025 | 9,014 | ||||||||
Other income (expenses) | |||||||||||
Gain on redemption of public preferred stock | 14,012 | ---- | ---- | ||||||||
Non-operating (expense) income | (255 | ) | 201 | 12 | |||||||
Interest expense | (7,259 | ) | (7,467 | ) | (7,258 | ) | |||||
Income (loss) before income taxes | 6,795 | (2,241 | ) | 1,768 | |||||||
Benefit from (provision for) income taxes | 46 | 104 | (31 | ) | |||||||
Net income (loss) | 6,841 | (2,137 | ) | 1,737 | |||||||
Less: Net income attributable to non-controlling interest | (5,154 | ) | (4,264 | ) | (3,377 | ) | |||||
Net income (loss) attributable to |
$ | 1,687 | $ | (6,401 | ) | $ | (1,640 | ) | |||
Net earnings (loss) per share attributable to |
$ | 0.04 | $ | (0.17 | ) | $ | (0.04 | ) | |||
Net earnings (loss) per share attributable to |
$ | 0.04 | $ | (0.17 | ) | $ | (0.04 | ) | |||
Weighted-average shares of common stock outstanding, basic | 41,642 | 37,729 | 36,762 | ||||||||
Weighted-average shares of common stock outstanding, diluted | 42,877 | 37,729 | 36,762 | ||||||||
TELOS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (amounts in thousands) (unaudited) |
||||||||
ASSETS | ||||||||
2020 | 2019 | |||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 106,045 | $ | 6,751 | ||||
Accounts receivable, net of reserve of |
30,913 | 27,942 | ||||||
Inventories, net of obsolescence reserve of |
3,311 | 1,965 | ||||||
Prepaid expenses | 3,059 | 1,717 | ||||||
Deferred program expenses | 5 | 673 | ||||||
Other current assets | 781 | 1,197 | ||||||
Total current assets | 144,114 | 40,245 | ||||||
Property and equipment | ||||||||
Furniture, equipment and capitalized software development costs | 25,827 | 18,709 | ||||||
Leasehold improvements | 2,669 | 2,536 | ||||||
Property and equipment under finance leases | 30,792 | 30,792 | ||||||
59,288 | 52,037 | |||||||
Accumulated depreciation and amortization | (36,891 | ) | (32,470 | ) | ||||
22,397 | 19,567 | |||||||
Operating lease right-of-use assets | 1,464 | 1,979 | ||||||
14,916 | 14,916 | |||||||
Other assets | 926 | 985 | ||||||
Total assets | $ | 183,817 | $ | 77,692 | ||||
TELOS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (amounts in thousands, except share data) (unaudited) |
||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
2020 | 2019 | |||||||
Current liabilities | ||||||||
Accounts payable and other accrued liabilities | $ | 20,899 | $ | 15,050 | ||||
Accrued compensation and benefits | 8,474 | 12,187 | ||||||
Contract liabilities | 5,654 | 6,337 | ||||||
Finance lease obligations – short-term | 1,339 | 1,224 | ||||||
Operating lease obligations – short-term | 677 | 602 | ||||||
Other current liabilities | 1,903 | 1,903 | ||||||
Total current liabilities | 38,946 | 37,303 | ||||||
Senior term loan, net of unamortized discount and issuance costs | ---- | 16,335 | ||||||
Subordinated debt | ---- | 2,927 | ||||||
Finance lease obligations – long-term | 14,301 | 15,641 | ||||||
Operating lease obligations – long-term | 941 | 1,553 | ||||||
Deferred income taxes | 652 | 621 | ||||||
Public preferred stock | ---- | 139,210 | ||||||
Other liabilities | 1,873 | 724 | ||||||
Total liabilities | 56,713 | 214,314 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity (deficit) | ||||||||
Telos stockholders’ equity (deficit) | ||||||||
Common stock, |
103 | ---- | ||||||
Class A common stock, no par value, 50,000,000 shares authorized, 35,826,200 shares issued and outstanding as of |
---- | 65 | ||||||
Class B common stock, no par value, 5,000,000 shares authorized, 3,204,293 shares issued and outstanding as of |
---- | 13 | ||||||
Additional paid-in capital | 270,800 | 4,310 | ||||||
Accumulated other comprehensive income | 44 | 6 | ||||||
Accumulated deficit | (143,843 | ) | (145,530 | ) | ||||
Total Telos stockholders’ equity (deficit) | 127,104 | (141,136 | ) | |||||
Non-controlling interest in subsidiary | ---- | 4,514 | ||||||
Total stockholders’ equity (deficit) | 127,104 | (136,622 | ) | |||||
Total liabilities and stockholders’ equity (deficit) | $ | 183,817 | $ | 77,692 |
TELOS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) (unaudited) |
|||||||||||
Years Ended |
|||||||||||
2020 |
2019 | 2018 | |||||||||
Operating activities: | |||||||||||
Net income (loss) | $ | 6,841 | $ | (2,137 | ) | $ | 1,737 | ||||
Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities: | |||||||||||
Gain on redemption of public preferred stock | (14,012 | ) | ---- | ---- | |||||||
Net loss on early extinguishment of debt and other transactions | 275 | ---- | ---- | ||||||||
Stock-based compensation | 4 | ---- | ---- | ||||||||
Dividends from preferred stock recorded as interest expense | 3,384 | 3,823 | 3,822 | ||||||||
Depreciation and amortization | 5,353 | 4,972 | 3,028 | ||||||||
Provision for inventory obsolescence | (1 | ) | 376 | 30 | |||||||
(Benefit) provision for doubtful accounts receivable | (412 | ) | 414 | (105 | ) | ||||||
Provision for doubtful non-trade receivables | 569 | ---- | ---- | ||||||||
Amortization of debt issuance costs | 978 | 461 | 198 | ||||||||
Deferred income tax provision (benefit) | 31 | (197 | ) | 77 | |||||||
Loss on disposal of fixed assets | 1 | 15 | 3 | ||||||||
Changes in assets and liabilities: | |||||||||||
(Increase) decrease in accounts receivable | (2,559 | ) | 6,186 | (9,917 | ) | ||||||
(Increase) decrease in inventories | (1,345 | ) | 2,048 | 9,101 | |||||||
Decrease (increase) in deferred program expenses | 668 | (429 | ) | 1,828 | |||||||
Increase in prepaid expenses, other current assets and other assets | (1,606 | ) | (3,576 | ) | (465 | ) | |||||
Increase (decrease) in accounts payable and other accrued payables | 3,413 | (6,730 | ) | (3,914 | ) | ||||||
(Decrease) increase in accrued compensation and benefits | (3,713 | ) | 3,105 | 1,626 | |||||||
(Decrease) increase in contract liabilities | (683 | ) | 1,106 | (960 | ) | ||||||
Increase in other current liabilities and other liabilities | 710 | 2,379 | 179 | ||||||||
Cash (used in) provided by operating activities | (2,104 | ) | 11,816 | 6,268 | |||||||
Investing activities: | |||||||||||
Capitalized software development costs | (6,681 | ) | (2,442 | ) | (1,649 | ) | |||||
Purchases of property and equipment | (780 | ) | (4,090 | ) | (2,465 | ) | |||||
Cash used in investing activities | (7,461 | ) | (6,532 | ) | (4,114 | ) | |||||
Financing activities: | |||||||||||
Proceeds from initial public offering | 272,813 | ---- | ---- | ||||||||
Redemption of public preferred stock | (108,878 | ) | ---- | ---- | |||||||
Purchase of Telos ID membership interest | (30,000 | ) | ---- | ---- | |||||||
Payment of senior term loan | (17,351 | ) | ---- | ---- | |||||||
Payment of subordinated debt | (3,657 | ) | ---- | ---- | |||||||
Proceeds from senior term loan | ---- | 4,881 | ---- | ||||||||
Payments under finance lease obligations | (1,225 | ) | (1,115 | ) | (1,013 | ) | |||||
Amendment fee paid to lender | (100 | ) | ---- | ---- | |||||||
Distributions to Telos ID Class B member – non-controlling interest | (2,743 | ) | (2,371 | ) | (1,669 | ) | |||||
Cash provided by (used in) financing activities | 108,859 | 1,395 | (2,682 | ) | |||||||
Increase (decrease) in cash and cash equivalents | 99,294 | 6,679 | (528 | ) | |||||||
Cash and cash equivalents, beginning of the year | 6,751 | 72 | 600 | ||||||||
Cash and cash equivalents, end of year | $ | 106,045 | $ | 6,751 | $ | 72 |
Enterprise EBITDA and Adjusted EBITDA (Unaudited) | Three Months Ended |
Years Ended |
|||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(amounts in thousands) | |||||||||||||||
Net income (loss) attributable to |
$ | 3,865 | $ | (3,480 | ) | $ | 1,687 | $ | (6,401 | ) | |||||
Net (loss) income attributable to non-controlling interest | (1,130 | ) | 2,559 | 5,154 | 4,264 | ||||||||||
Non-operating (expense) income | (6 | ) | (6 | ) | (20 | ) | (201 | ) | |||||||
Interest expense | 1,233 | 1,997 | 7,259 | 7,467 | |||||||||||
Provision (benefit) for income taxes | 90 | 83 | (46 | ) | (104 | ) | |||||||||
Depreciation and amortization | 1,335 | 1,363 | 5,353 | 4,972 | |||||||||||
Enterprise EBITDA | 5,387 | 2,516 | 19,387 | 9,997 | |||||||||||
Transaction related gains/losses/expenses (1) | (8,007 | ) | ---- | (8,007 | ) | ---- | |||||||||
Stock-based compensation expense | ---- | ---- | 4 | ---- | |||||||||||
Adjusted EBITDA | $ | (2,620 | ) | $ | 2,516 | $ | 11,384 | $ | 9,997 | ||||||
(1) Includes transaction-related legal and accounting expenses of |
Source: Telos Corporation