TLS - Earnings call transcript Q4 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and thank you for standing by. Welcome to Telos Corporation's Fourth Quarter and Full Year 2023 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Allison Phillipp, Director of Corporate Communications. Please go ahead.

Allison Phillipp

morning. Good joining XXXX Telos financial for and Fourth to Year Full results. us you Corporation's discuss Quarter Thank

With me and today of Telos; is John Wood. Mark Executive Chairman Bendza, Vice President CFO Telos. and of and CEO

quickly will with Mark me John year-end our begin review today's remarks of Let presentation. format and XXXX on results. the

lastly, that this our provide and were submitted back with an will large up. last John wrap guidance on been call. on the and follow before John portfolio to the for as had of Mark of first quarter Next, financial to update turning new up the earnings And business will proposals insights pending company outlook

join Q&A will Mark Security Vice Griffin, us. open Executive also of line We then for with President will the Solutions,

issued and the today press The simultaneously is where call was earnings Investor Telos is release on webcast. this being website Relations posted earlier

have Additionally, slides website. Investor our we provided presentation Relations on

that and on want to Before under uncertainties. Federal and statements statements and forward-looking of based These provisions emphasize we Securities are that assumptions on expectations we risks are the Laws. some statements begin, are safe of harbor are call our current to the subject made this

for to today's update including call any forward-looking the duty various materially factors described our the SEC in in and Actual could made during results not do earnings any undertake differ and release conference press reasons, comments this filings. We statements.

in non-GAAP from not we financial for financial during non-GAAP Telos' isolation to GAAP which be performance. are understand discuss and addition, as or as we should clarifying measures, financial will measures to substitute supplemental measures investors results. In in considered help today's call, a useful believe and addition These

Relations including comparable regarding of our additional portion these results, Investor our release and non-GAAP disclosures in find on can website. reconciliations the with measures, earnings press GAAP You

the replay year that Investor comparisons call our company year-over-year available webcast of next under the Please website unless on otherwise The also note for are this Relations be link. specified. financial will

With the Mark. over call turn I'll to that,

Mark Bendza

Thank and everyone. good you, Allison, morning,

report today fourth that $X.X the begin Let's above for the million to to on over-delivered again $XX.X fourth pleased $XX in financial or We revenue, our in exceeded guidance profit flow. has key Telos revenue of and quarter million expectations quarter million range of I'm on Slide and cash delivered X. million. metrics $XX

in accelerated to favorable $X.X and of Security XXXX, which end chain revenue the quarter million of of strong driven of Solutions bringing earlier TSA which delivered Networks first $XX.X delivery management supply range, forecasted. a revenue Secure than million quarter weeks a approximately our guidance the exceeded primarily XXXX end top of represents to performance, successful significantly due the PreCheck. a guidance of completion $XX.X of top thereby several delivered to program range customer our by the million instead program fourth and the

to The range $X.X secure in million gross XX.X% million in to the business. GAAP due accelerated XX.X% guidance the our of outperformance drove margin beat revenue networks the XX.X%, delivery below entirety was significant lower-margin $X.X our of revenue quarter.

networks, to gross secure our margins gross combined into XX%. above range slightly GAAP in what guidance gross our adjusted margin forecast only in And Excluding delivery range. resulted below due forecast, incorporated well with EBITDA margin segments. the reporting accelerated product above well both in was above was Revenues outperformance well profit guidance

$X.X to our a Adjusted guidance $X.X was range adjusted top end of EBITDA $X.X EBITDA to range. loss exceeded loss. result, a guidance million million of our loss compared a million also a As the

from flow inflow. for we a from Fourth free a inflow positive operations and flow $X Lastly, million outflow. and cash a $X.X cash flow quarter the a cash in cash delivered was operations was was year. flow flow flow the cash $XX.X free million million $X.X to fourth operations free million returned and cash was positive quarter full inflow, Full from year

to a it XXXX. now John John? for over recap turn on I'll

John Wood

Mark, morning, Thanks, and good everyone.

Let's $XXX million would of loss. in the our turn reoccur revenues challenging not programs, and to Slide large X existing of X. or to than outlook. revenues XX% XXXX XXXX due XXXX facing We programs on successful started a completion lower program More

We outlook. we success. had to and of lower streamlining the a with our end have on overstaffed We history that large core season base, rebuilding backfill were revenue just long be in indicated our XXXX, revenue in government insufficient the in would where our operations a revenue markets the transition to completed our buying we XXXX especially business growing wins year, headwinds government, relative focused and and Federal

XX% of across on month-to-month anticipation approximately lower our smaller employee spending our as by departments we staff resources executive focus among team. and levels indirect stop including year company-wide, of But base reduced direct quarter-to-quarter We revenues winning seniority, a In to in growth. all to and business all as including we well didn't reallocate new and assessed returning to find the ways to there. throughout XXXX,

for the leadership. we a organization resources part, development year. On In side, centralized new consolidated growth as hired progress we throughout the result these guidance of and as outlook we our growth-oriented our business XXXX improved executives actions, and and their under

XXXX. evolution a our the it provide Mark? to of I'll turn back guidance throughout recap Mark on to

Mark Bendza

top we above calls, quarter set To fourth recap raised guidance our and guidance We year final ranges. of We guidance call. and our on third full with our end second earnings on on we original the completed our and John. quarter guidance our first our Thanks, original earnings call. quarter and EBITDA revenue earnings reaffirmed on year XXXX the both guidance adjusted

high-margin drove original of our secure top on gross guidance in the performance assurance midpoint Solutions, contract range. wins and renewal communications program margin of and the information better-than-expected and our within secure communications original rates above our range TSA Security end above businesses, our PreCheck Within strong guidance new revenue

top original disciplined range. EBITDA guidance above million and better-than-expected program program Overall, cost end also of and gross Secure the Within large with revenue expenses of than drove and $X the performance original our cash midpoint Networks, margin expanded million supply a revenues of $XX $XX above favorable lower profit combined chain approximately management of million on guidance. drove forecasted below-the-line gross nearly adjusted

turn new I'll capture. to back will our on John, John? who business progress discuss it substantial Now

John Wood

Mark. Thanks,

X. Let's turn to Slide

First that and with received from absolutely thrilled TME our from over a agreements with are for truly foremost, months. up we of mentioned worth business who place have -- our partners the and has in Solutions Security we our pleased new of have recent earnings awards announce the prime terrific the government business That shareholders. X Telos progress ] [ $XXX pending last million in company to capture on call, to made I'm Federal outcome years. to that we is on XX% $XXX million over proposals Telos

the for is protest customary case currently of not by magnitude finalization period protested provided to subject been post be as here. And awards uncommon award and that's It's of this of a other to the resolution the award by process. These in of incumbents the decisions or award part government. bidders are protests protested, have that

Accountability GAO nearly protests resolution specific are fiscal ultimately value on example, new the our stand These approximately not statistics the merits are executing have delivering begin website. Accountability sustained. on publicly GAO and and prime these ready from these those of Officer's available were of been awards customers any to protests XX,XXX as protest according only and we X context with on years, alongside for Government eagerly Government X% over of the We opine data filed await a to the Office an able that to Although partners. past with the protests to

programs. long-term and continuity service recurring substantial smooth important customers. the revenue Resolution pre-existing of the work our new awards These and the will streams. of high-quality transition of are These to protest be represent ensure for

should tailwinds Assuming and into sequential they of revenue this growth favorable ultimately XXXX. later resolution the in revenue protest annualize significant drive year

to pleased last Beyond since this key call. several other outcomes earnings exciting our report on news, I'm

Our in other [indiscernible] existing and U.S. multiple intelligence agencies, Office, incremental as a Interior on government Department critical with Australian government the as customer the the technology large a of the well Publishing U.S. new agency Government achieved commercial scope from Energy contracts sector. business Federal orders of and large the has and Department the renewals

renewals, message Agency the customers. PreCheck Operations Within and in quarter Command, achieved quarter our X our Systems Defense contract sequentially government Federal transaction and handling last ID the into of Telos TSA the other program our first every Information with several U.S. XXXX. ramped quarters system the business Special Additionally, several volumes XXXX of major automated have including business, for

around preexisting the for accelerating magnitude necessary standards on-site program enrollment closely the with our ensure operating work the national highest absolute We TSA to enrollment before locations additional this centers of in security our continue country. are of a rollout possible to

communication satellite the Secure delivered and U.S. team solution Force. the completed global Networks Air And for a successfully lastly,

quarter the guidance will I'll to for Mark? Mark, over who first and outlook the call 'XX. now turn discuss

Mark Bendza

Thanks, John.

our Let's guidance the first turn to for discuss Slide X to quarter.

first single-digit quarter, driven forecast of revenue to by offset year-over-year, the partially in range an $XX low $XX Telos growth of $X.X in to million For we million significant Security ID percent $X of a Solutions to million loss We EBITDA by and TSA revenue decline adjusted PreCheck. to forecast timing million. teens revenue in high the primarily expected

amortization approximately quarter decline $X.X revenue backlog forecast Cash of that gross XXX approximately of GAAP accelerated solutions. XX% year-over-year software year-over-year. points XX% down be million to the to due to margin higher year-over-year capitalized expected delivery flat Networks development costs margin low lower fourth expected basis gross security to primarily and the is We to Secure high due to into XXXX. be and is

compensation, associated Cash year-over-year be to forecast below-the-line increased stock-based depreciation due expenses, our PreCheck TSA with restructuring slightly and which development and adjust are expenses software costs, program. primarily costs capitalized for amortization, higher to

with year the recent capture absolutely we've outlook. the months. on We're to business Turning in new thrilled made full progress

in Telos' $XXX Solutions X received over we to As up prime place million business partners John agreements to awards years. who have mentioned, teaming worth with have Security

later programs protests, Assuming year. this revenue large starting these favorable of should incremental streams drive new resolution

protest Given from the incumbents, the the revenue of resolving combined with the is transitioning this to point. at magnitude of the pace the and forecast variability potential and difficult contribution work programs,

quarter-to-quarter to but So high-level provide the the going for and time the can tailwinds guide headwinds we year. being, insights into revenue we're for

tens that the that the millions to compared our of earnings our few last said preexisting Let's we revenue We dollars start of revenue would call at of previewed time. call. earnings have last with headwinds XXXX on our headwinds an embedded our in update a XXXX in guidance on revenue programs we in

from then, $X pull of we XXXX. revenue approximately XXXX million Since into had

and locations inclusive So annualization year million of in preexisting that additional the compared platform. our of year-over-year our the full sequentially XXXX our results. quarterly online of headwind or year adds net on and of are an programs final pre-existing based program network our TSA throughout our renewal enrollment headwinds $XX of The increase from will gross to PreCheck

Turning contribution revenue modest starting purposes, the that Provided But new favor, XXXX. to assuming under revenue business. protests program revenue awards some over could the for year estimate from capture some typical full $XXX in and the currently that of we in $XX we're protest should in a revenue modeling XXXX more of million revenue the of new our of We a years. tailwinds to half million $XX of are million generate in portion year. resolved second in

enrollment are dollars In XXXX. TSA network several year growth expansion centers partial growth a of quite of annualization revenue we in will of beyond new millions would expecting drive a of ramped revenue simple from We already of fully we for generate generated tens any of believe the the ultimately meaningful addition, additional revenue. enrollment PreCheck locations our revenue the

XXXX And business growing did win new to in capture maturing we're and we able revenue during upside XXXX, proposals. If may the we our year. contracts new of into as be invest over course this able calendar in continue lastly, to additional to we pipeline

back I'll John. And with that, to turn it

John Wood

Thanks, Mark.

move to X. Slide Let's

business the we've expectations meaningful capture the These beyond. year. business and and that recent above high on end made opportunities year for of high-quality We're So represent provide in months. guidance new very range quarter the with this metrics we exceeded would and the on key summary, results new later recurring financial tailwinds both progress full in the pleased delivered

we're With that, take please. questions. happy to Operator,

Operator

Instructions] [Operator the come our of from And Zach will Cummins line first Riley Securities. with question B.

Zach Cummins

hard the it's in? this, on mean of typically forecast process? sort are protest understanding you how wins. new curious any but this long lasts baked of congrats just that of in and here John, any typical yes, Mark, the I of the just about results past you've kind wanted any your to sort John happening sense to had mean, on have and that and XXXX. assumptions around I focus can I award strong talk the in

John Wood

Sure.

days as have XXX so. -- protests last So they as or can long

it -- and they I'd And but can days. so -- about a be say sometimes can longer. it much But average, little be shorter XXX on also can

Operator

Kessinger Our Instructions] comes next Davidson. line the from question with [Operator of Rudy D.A.

Rudy Kessinger

color like you're know TSA still this revenue of just around Slide more the think provide expected feel centers it going you get I rollout centers. can on in enrollment in all says Any to I enrollment still And year? full just just QX? PreCheck, XX, you QX XX by do to

when So that rollout think do be complete. will you

Mark Bendza

Rudy, and on to take then It's first the Mark question. Yes, I'll of Bendza, the Griffin. I'll it part pass Mark

XXXX. all, of volumes transaction pleased quarters very first we're the X have how So last over of with ramped

XXXX transaction And X-plus volumes so far have and both into the the quite quarter first of revenues ramped first significantly. months

margin program, that or detail. contributing very first a quarter going give that quarter, meaningful I'm portion revenue is level program revenue I program And not in of say our guide. But the can to first

very So of feel point. within program about this And may good is enrollment lion's as at that revenue new the the we know, opportunity that side. on you the share

roll dollars potential of So revenue XXX as upside today. out are locations, several we we tens where millions there are of ultimately of from those

your it So to Mark of to on segue, question. I'll the other with answer Griffin pass that part

Mark Griffin

to Ruby, allow expansion tirelessly measured needs systematic have PSA address since anticipated current along and to faster. and as while This ultimately enrollment on quality-driven been provider, will the first program. we approach, operational has the launch TSA extremely and us security scale worked

the XXX currently sites. expectations. future, and sites is throughput the those through in And meeting still are goal Our

obviously with we're date, pleased to expand. intend the So we progress and to

Operator

Our comes Henderson of line next Alex the question from with Needham.

Alex Henderson

Yes.

question X-part i.e., the around the all So subject, same contract awards.

these ticking conversation aggregating them off, you're don't this XXX starting days it's First but call, when on in clock start today. the think did contracts, I with

start ticking? the So when XXX-day does

kick these Give these contracts of and kick the here margins at these Second, conversation contracts? then can as 'XX. you about margin into the implication there's step-up a bit some part us of gross big point the deals little to talk gross in of that And sense third, then a obviously, for some will is a what structure it is relative in?

little revenues the to of that to my to about bit you look against offset But as what a be there's analysts Can you this 'XX, step-up should a typically So be easily 'XX. out that talk assumption offset could kind so also contract that kicked offsets might significant is that. annually in adding an you we expect just here.

John Wood

last So Alex, it's John. The clock started within month. the

rest why have And the to so I over of as question Mark heading and that's will I'll as would whatever tailwinds who well. we as in 'XX the the into that. Bendza, headwinds might well margins capture turn cover 'XX

Mark Bendza

here. Bendza Mark Alex,

slide level at question good time, a some the to comment I'll while the added same Slide not try we So on you margins. on color appendix to give program directly there, But the XX. we margins.

in there, to model the out overall cash gives XXXX. gross similar And is of one margins to XXXX. things we key point basically are of you components That all the

assumptions that embedded see capture in range similar on of in overall gross revenue a there cash And various So there's around new to are in those that margins slide, you'll XXXX XXXX. programs. potential

of we of revenue with new then on XXXX historically walk I'd year, headwinds. say is -- as so of we would that millions lastly, a a have millions headwinds typical -- of of year tens tens a dollars the typical And to of few in of few what a wins. XXXX said we've have backfill be that think the business walk

million, tens I $XX of say. call let's it, So few millions, a say roughly

out, think our how programs assuming as these more. contribute being or new have potentially programs see million $XX year until year. we're adding modest peak trending revenues belt million some more we the in are for of the $XX these to experience under on programs million you $XXX We full annualization you're could But that, years. these Then time for pointed purposes, and a a to modeling

full get you'll XXXX. the that of year in So annualization

have running rollout today. XXX to of and earlier, up of which, of those mentioned we're several from course, upside generating revenues potential full once still fully the upside millions precheck we I network, then additional that's of the location locations, the tens are compared And our as the

lastly, every next late our have seasonality year business then is usually that go year, this And we -- calendar that results we win through season. new government calendar the time the early year, see around from the will buying

year, So come XXXX any will benefit early additional next well. that as in new business late this wins year

some headwinds high-level are the those and So tailwinds. of

John Wood

us that to I And want that rolling to an programs Mark would are incumbent. again I pre-existing but think over from said this, just mention be these

Operator

Nehal next Markets. our of question comes Capital And line Northland with from the Chokshi

Nehal Chokshi

on that will million ACV the into congrats end roll confidence out of and on $XXX What what's the That's pipeline that on that pipeline? about the further of rest progression tier And Has of pipeline. of of billion rest rest that and awesome. the $X.X that XXXX And level one that XXXX. throughout grown? the

John Wood

grow. So Nehal, continues the to pipeline

it to flywheel, business has only if of think -- And after winning. have you we go think it's that an we a very really going good I ongoing be we will. chance

confident question. company. yield going the have just that is for to To anything be grow, it's continue pipeline going want to Okay. to Mark, you to do to I'm say? So the results answer you your something Nehal, that

Operator

Instructions] a Needham. Alex the I [Operator have from line follow-up with of Henderson

Alex Henderson

Yes.

said to the paraphrase you what margin. just I So think on

are the margin be we that saw the like much So 'XX 'XX. same we same gross we these half gross as sounds if 'XX as the using that go should pretty kicking in as programs back is the in margin And in well. into in,

margin trajectory. statement? Is that gross steady of So kind fair a

that this stream? revenue coming from business? existing your of already had contracts that other in something actually of these is second any there words, In offsetting are you'd And piece is,

Mark Bendza

overall yes, we Alex, and in to gross other cash approximately the comparable be to John let XXXX, So answer XXXX, expect I'll margins part.

John Wood

point These incremental be to would from of revenue. considered be Yes. Telos view contracts

Alex Henderson

All incremental.

Since Can this I you it kicks talk all segments? split in a a as probably and segments whole want lot the or opportunity. behind of a is the to is between isn't the don't between about one Okay. secondary in, people segment of and two the pipeline little split business question, the it, in there bit the miss it

John Wood

Security all the announced of all are all contract the the business. Solutions pipeline somewhere in we've of probably today, is business, So the awards Security Solutions area. And those around of large XX% that

see a of Security So Solutions more time. we towards movement would over

Operator

And call I the now this will for Mr. conclude today's session. John Wood turn remarks. Q&A will over back closing to

John Wood

delivering first of of across proud on Well, for teams testament results a all, customers challenging manage support. results These just demonstrate ongoing to are the our I my shareholders. our thank to focus our there commitment and execution your and to want shareholders team's deliver ability and for board. very I'm our better-than-expected our unwavering to through 'XX a

months. significantly portfolio our revenues the we've also to on financial positively have with beginning predictable the thrilled XXXX. performance impact into and of progress the Telos addition the outcomes We're capture business later potential made new year with high-quality, absolutely These to in and recent this

very the and markets, for record most decades-long the company future serving foundation really track And the organizations. world's outlook with the strong recession-resistant future. robust really, well-funded customers we're I'm just a of and about getting is security-conscious excited Telos started. for a

thank to want say So just I you.

Operator

your Thank you for today's conference participation. call. concludes This

Everyone, a You may have day. wonderful disconnect. now

Telos (TLS) 15 Mar 242023 Q4 Earnings call transcript