Telos Corporation Reports Strong Second Quarter Results Driven by Growth in Xacta, Telos Ghost and Secure Networks; Delivers Gross Margin Expansion and Positive Cash Flow; Reaffirms Full Year Guidance
- Delivers Revenues of
$52.6 million ; Up 8% Reported; Up 48% Excluding Contract withU.S. Census Bureau ; Reports Double Digit Growth in Xacta,Telos Ghost , and Secure Networks - Increases Gross Profit 17% to
$20.6 Million ; Expands Gross Margin290 Basis Points to 39.1% - Generates
$3.5 Million of Cash Flow from Operations - Reaffirms 2021 Sales Guidance of
$283 million -$295 million and Adjusted EBITDA Guidance of$33 million -$36 million
“We delivered a solid second quarter, as we continued to deliver revenue growth and win meaningful, large-scale contracts such as a task order for our Xacta solution from the
Second Quarter 2021 Financial Highlights (in millions, except per share data)
2Q 2021 | 2Q 2020 | ||
Revenue1 | |||
Gross Profit | |||
Gross Margin | 39.1% | 36.2% | |
GAAP Net Income (Loss) | |||
Adjusted Net Income (Loss)2, 3 | |||
Enterprise EBITDA2 | |||
Adjusted EBITDA2, 3 | |||
GAAP Net Income (Loss) per Share Attributable to |
|||
Adjusted EPS2, 3 | |||
Weighted-average Shares of Common Stock Outstanding, Diluted | 66.6 | 39.9 | |
Cash Flow from Operations |
1 Includes
2 Adjusted EBITDA, Enterprise EBITDA, Adjusted Net Income (Loss) and Adjusted EPS are non-GAAP financial measures. Refer to “Non-GAAP Financial Measures” below.
3 After adjustment for stock compensation expense of
Selected Second Quarter and Recent 2021 Business Highlights:
New Business Activities
- Telos added a third cloud service provider to our roster of cloud customers using Xacta®. This is in addition to the strong relationships the company has with
Amazon Web Services and Microsoft Azure. - Xacta continued to provide significant value to the financial services market, as evidenced by a software license and support renewal by a major Fortune 50 insurance company.
- Telos saw increased commercial adoption of their security solutions, with new and renewed contracts from AT&T,
Collins Aerospace , Accenture,Northrop Grumman ,Vibrent Health ,IronNet Cybersecurity and Comtech Telecommunications Corp.
Partner Enhancements
- Telos launched the Telos CyberProtect Partner Program, with launch partners DLT, a Tech Data company, and Presidio Federal. By formalizing the channel program, Telos will drive accelerated growth, generate new revenue streams and deliver on the mission of providing world-class security solutions.
Solution Enhancements
- On
June 30 , Telos announced a new version of cyber risk management platform Xacta.io, which expands the control mapping capability needed by regulated industries to address audit fatigue. OnJuly 30 , Telos released a new version of Xacta 360, which enables more efficient collaboration, regulatory reporting and reciprocity. These new capabilities increase commercial and international opportunities for Xacta where there is increasing demand for automation. - The Cybersecurity Maturity Model Certification Accreditation Body (
CMMC-AB ) authorized Telos as aRegistered Provider Organization (RPO). As aCMMC-AB RPO, Telos is able to offer assistance to more than 300,000 organizations seeking CMMC compliance to be eligible for contract awards by theDepartment of Defense .
Notable Transactions
- Telos acquired the assets of Diamond Fortress Technologies, including all patents, and will integrate the ONYX® touchless fingerprinting software with the IDTrust360® platform. This integration will eliminate much of the friction involved in biometric data gathering for identity and access management and will better serve the company’s growing customer base at both the enterprise and consumer levels.
- Telos completed a follow-on offering of 9.1 million shares of common stock, resulting in net proceeds to Telos of
$64.3 million , of which$28.1 million was utilized to repurchase 39,682 shares of common stock and 900,970 outstanding warrants. The remaining net proceeds will be used to further invest in their sales force and growth opportunities.
Organizational Updates and Highlights
- Telos expanded its leadership team, appointing
Mark Bendza as the new chief financial officer. Mark brings with him over 20 years of experience in investor relations, business development, financial planning and analysis, financial strategy, mergers and acquisitions and capital markets. The Washington Post named Telos a 2021 Top Workplace in theWashington D.C. area, acknowledging the positive work environment that will continue to attract top talent.- The
Business Intelligence Group namedTelos Ghost ® a winner of the 2021 Fortress Cyber Security Awards in the Network Security category.
Financial Outlook
Full Year Guidance | |
Revenue | |
YoY Organic Growth | 57% - 64% |
Adjusted EBITDA1 | |
YoY Adjusted EBITDA Growth | 190% - 216% |
1 Adjusted EBITDA, Enterprise EBITDA, Adjusted Net Income (Loss) and Adjusted EPS are non-GAAP financial measures. 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.
Conference Call Information
Telos will host a conference call and live webcast to discuss its second quarter 2021 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, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS 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.
Enterprise EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS 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) or earnings per share as determined by GAAP. The Company defines Enterprise EBITDA as net income (loss) attributable to
Each of Enterprise EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss), and Adjusted EPS 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, Adjusted EBITDA, Adjusted Net Income (Loss), and Adjusted EPS 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, Adjusted Net Income (Loss), and Adjusted EPS differently than the Company does, which limits its usefulness as a comparative measure. Because of these limitations, each of Enterprise EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss), and Adjusted EPS should not be considered as a replacement for net income (loss) or earnings per share, 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:
media@telos.com
(610) 564-6773
Investors:
Brinlea Johnson
brinlea@blueshirtgroup.com
(415) 269-2645
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(amounts in thousands, except per share data)
Three Months Ended |
Six Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Revenue | |||||||||||||||
Services | $ | 47,618 | $ | 45,486 | $ | 99,676 | $ | 80,044 | |||||||
Products | 4,941 | 3,124 | 8,641 | 7,545 | |||||||||||
52,559 | 48,610 | 108,317 | 87,589 | ||||||||||||
Costs and expenses | |||||||||||||||
Cost of sales - Services | 29,501 | 29,378 | 69,103 | 54,243 | |||||||||||
Cost of sales - Products | 2,501 | 1,659 | 4,299 | 3,531 | |||||||||||
32,002 | 31,037 | 73,402 | 57,774 | ||||||||||||
Selling, general and administrative expenses | |||||||||||||||
Sales and marketing | 5,043 | 1,473 | 8,869 | 3,065 | |||||||||||
Research and development | 5,327 | 3,815 | 9,388 | 7,472 | |||||||||||
General and administrative | 28,743 | 7,219 | 48,708 | 13,809 | |||||||||||
39,113 | 12,507 | 66,965 | 24,346 | ||||||||||||
Operating (loss) income | (18,556 | ) | 5,066 | (32,050 | ) | 5,469 | |||||||||
Other income (expense) | |||||||||||||||
Other income (expense) | 32 | 4 | (1,022 | ) | 12 | ||||||||||
Interest expense | (192 | ) | (1,996 | ) | (388 | ) | (4,013 | ) | |||||||
(Loss) income before income taxes | (18,716 | ) | 3,074 | (33,460 | ) | 1,468 | |||||||||
(Provision for) benefit from income taxes | (13 | ) | (2 | ) | (47 | ) | 144 | ||||||||
Net (loss) income | (18,729 | ) | 3,072 | (33,507 | ) | 1,612 | |||||||||
Less: Net income attributable to non-controlling interest | — | (2,806 | ) | — | (3,590 | ) | |||||||||
Net (loss) income attributable to |
$ | (18,729 | ) | $ | 266 | $ | (33,507 | ) | $ | (1,978 | ) | ||||
Net (loss) income per share attributable to |
$ | (0.28 | ) | $ | 0.01 | $ | (0.51 | ) | $ | (0.05 | ) | ||||
Net (loss) income per share attributable to |
$ | (0.28 | ) | $ | 0.01 | $ | (0.51 | ) | $ | (0.05 | ) | ||||
Weighted-average shares of common stock outstanding, basic | 66,616 | 38,583 | 65,621 | 38,328 | |||||||||||
Weighted-average shares of common stock outstanding, diluted | 66,616 | 39,927 | 65,621 | 38,328 | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(Unaudited) | |||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 130,996 | $ | 106,045 | |||
Accounts receivable, net of reserve of |
39,412 | 30,913 | |||||
Inventories, net of obsolescence reserve of |
1,784 | 3,311 | |||||
Prepaid expenses | 5,451 | 3,059 | |||||
Other current assets | 760 | 786 | |||||
Total current assets | 178,403 | 144,114 | |||||
Property and equipment, including capitalized software development costs, net of accumulated depreciation and amortization of |
24,725 | 22,397 | |||||
Operating lease right-of-use assets | 1,168 | 1,464 | |||||
14,916 | 14,916 | ||||||
Other assets | 882 | 926 | |||||
Total assets | $ | 220,094 | $ | 183,817 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities | |||||||
Accounts payable and other accrued liabilities | $ | 21,036 | $ | 20,899 | |||
Accrued compensation and benefits | 7,811 | 8,474 | |||||
Contract liabilities | 5,925 | 5,654 | |||||
Finance lease obligations – short-term | 1,399 | 1,339 | |||||
Operating lease obligations – short-term | 656 | 677 | |||||
Other current liabilities | 1,831 | 1,903 | |||||
Total current liabilities | 38,658 | 38,946 | |||||
Finance lease obligations – long-term | 13,591 | 14,301 | |||||
Operating lease liabilities – long-term | 642 | 941 | |||||
Deferred income taxes | 670 | 652 | |||||
Other liabilities | 1,833 | 1,873 | |||||
Total liabilities | 55,394 | 56,713 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity | |||||||
Common stock, |
105 | 103 | |||||
Additional paid-in capital | 341,928 | 270,800 | |||||
Accumulated other comprehensive income | 17 | 44 | |||||
Accumulated deficit | (177,350 | ) | (143,843 | ) | |||
Total stockholders’ equity | 164,700 | 127,104 | |||||
Total liabilities and stockholders’ equity | $ | 220,094 | $ | 183,817 | |||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(amounts in thousands)
Six Months Ended |
|||||||
2021 | 2020 | ||||||
Operating activities: | |||||||
Net (loss) income | $ | (33,507 | ) | $ | 1,612 | ||
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: | |||||||
Stock-based compensation | 35,006 | — | |||||
Dividends from preferred stock recorded as interest expense | — | 1,911 | |||||
Depreciation and amortization | 2,764 | 2,734 | |||||
Amortization of debt issuance costs | — | 453 | |||||
Deferred income tax provision | 18 | 19 | |||||
Loss on disposal of fixed assets | 5 | — | |||||
Other noncash items | (2 | ) | (17 | ) | |||
Changes in other operating assets and liabilities | (10,074 | ) | (5,873 | ) | |||
Cash (used in) provided by operating activities | (5,790 | ) | 839 | ||||
Investing activities: | |||||||
Capitalized software development costs | (3,663 | ) | (3,159 | ) | |||
Purchases of property and equipment | (1,070 | ) | (332 | ) | |||
Cash used in investing activities | (4,733 | ) | (3,491 | ) | |||
Financing activities: | |||||||
Proceeds from issuance of common stock, net of issuance costs | 64,269 | — | |||||
Repurchase of outstanding warrants | (26,894 | ) | — | ||||
Repurchase of common stock | (1,251 | ) | — | ||||
Payments under finance lease obligations | (650 | ) | (594 | ) | |||
Amendment fee paid to lender | — | (100 | ) | ||||
Distributions to Telos ID Class B member - non-controlling interest | — | (1,000 | ) | ||||
Cash provided by (used in) financing activities | 35,474 | (1,694 | ) | ||||
Increase (decrease) in cash and cash equivalents | 24,951 | (4,346 | ) | ||||
Cash and cash equivalents, beginning of period | 106,045 | 6,751 | |||||
Cash and cash equivalents, end of period | $ | 130,996 | $ | 2,405 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 388 | $ | 1,474 | |||
Income taxes | $ | 54 | $ | 50 | |||
Noncash: | |||||||
Dividends from preferred stock recorded as interest expense | $ | — | $ | 1,911 | |||
Enterprise EBITDA and Adjusted EBITDA (Unaudited, amounts in thousands)
Three Months Ended |
Six Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Net (loss) income attributable to |
$ | (18,729 | ) | $ | 266 | $ | (33,507 | ) | $ | (1,978 | ) | ||||
Adjustments: | |||||||||||||||
Net income attributable to non-controlling interest | — | 2,806 | — | 3,590 | |||||||||||
Non-operating (income) expense | (32 | ) | (4 | ) | 1,022 | (12 | ) | ||||||||
Interest expense | 192 | 1,996 | 388 | 4,013 | |||||||||||
Provision for (benefit from) income taxes | 13 | 2 | 47 | (144 | ) | ||||||||||
Depreciation and amortization | 1,404 | 1,345 | 2,764 | 2,734 | |||||||||||
Enterprise EBITDA | (17,152 | ) | 6,411 | (29,286 | ) | 8,203 | |||||||||
Stock-based compensation expense | 21,336 | — | 35,006 | — | |||||||||||
Adjusted EBITDA | $ | 4,184 | $ | 6,411 | $ | 5,720 | $ | 8,203 |
Adjusted Net Income (Loss) and Adjusted EPS (Unaudited)
Three Months Ended |
2021 | 2020 | |||||||||||||
Adjusted Net Income (Loss) |
Adjusted Earnings Per Share |
Adjusted Net Income (Loss) |
Adjusted Earnings Per Share |
||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
Reported GAAP measure | $ | (18,729 | ) | $ | (0.28 | ) | $ | 266 | $ | 0.01 | |||||
Adjustments: | |||||||||||||||
Non-operating income | (32 | ) | — | (4 | ) | $ | — | ||||||||
Stock-based compensation expense | 21,336 | 0.32 | — | $ | — | ||||||||||
Adjusted non-GAAP measure | $ | 2,575 | $ | 0.04 | $ | 262 | $ | 0.01 | |||||||
Weighted-average shares of common stock outstanding | 66,616 | 38,583 | |||||||||||||
Six Months Ended |
2021 | 2020 | |||||||||||||
Adjusted Net Income (Loss) |
Adjusted Earnings Per Share |
Adjusted Net Income (Loss) |
Adjusted Earnings Per Share |
||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
Reported GAAP measure | $ | (33,507 | ) | $ | (0.51 | ) | $ | (1,978 | ) | $ | (0.05 | ) | |||
Adjustments: | |||||||||||||||
Non-operating expense (income) | 1,022 | 0.02 | (12 | ) | $ | — | |||||||||
Stock-based compensation expense | 35,006 | 0.53 | — | $ | — | ||||||||||
Adjusted non-GAAP measure | $ | 2,521 | $ | 0.04 | $ | (1,990 | ) | $ | (0.05 | ) | |||||
Weighted-average shares of common stock outstanding | 65,621 | 38,328 | |||||||||||||
Source: Telos Corporation