TELOS CORP Q4 FY2025 earnings call

• Strong quarter with revenue growth exceeding guidance, driven by TELUS ID and large program ramp. • Approved company-wide restructuring plan to streamline operations. • Review of intangible assets led to goodwill impairment in secure networks segment. • Focus on expense management translated to strong profitability. • 2025 was exceptional with 52% revenue growth, adjusted EBITDA improvement, and capital returned to shareholders. • 2026 outlook includes continued ramp of large programs, new business driving growth, expense management plan benefits. • Segments like Xacta AI, TELUS ID, and confidential IT security work for federal government are key growth drivers. • Over 90% of revenue from governments, customer base includes various agencies and Five Eyes nations with mission-critical programs.

Fourth quarter revenue increased 77% year over year to $46.8 million, exceeding guidance. For full year 2025, revenue increased 52% to $164.8 million. Secure networks segment had a $14.9 million non-cash goodwill impairment. TELUS ID large programs ramped. GAAP gross margin for quarter was 35%, excluding cost of sales charge was 36%, cash gross margin was 41.9%. Adjusted operating expenses were better than guidance, adjusted EBITDA was $7.3 million, exceeding guidance range. For 2026, forecast revenue to grow 14 - 21% to $187 - $200 million, cash gross margin forecasted 37% - 39.5%, cash operating expenses expected lower, adjusted EBITDA forecasted $20.6 - $28 million.

• Forecast 2026 revenue to grow 14 - 21% to $187 - $200 million. • Forecast cash gross margin 37% - 39.5%. • Forecast cash operating expenses $1.5 - $4 million lower year over year. • Forecast adjusted EBITDA $20.6 - $28 million. • First quarter 2026 forecast revenue 44 - 47% growth to $44 - $45 million, cash gross margin over 39%, adjusted EBITDA $4.5 - $5 million.

• Forward-looking statements subject to risks and uncertainties including factors in financial results summary and SEC filings. • Federal spending environment under scrutiny, though programs supported are generally well-funded and mission critical. • Gross margins fluctuate depending on revenue mix. • Compression in gross margin assumptions for 2026 due to revenue mix, prepaid expense recognition, and lower margin revenue streams like IT Gems program.

Q: Congrats on strong results, talk about pipeline and why gross margin is compressing.

A: Pipeline has significant value with 20% in first half 2026. Gross margin compression driven by low margin IT Gems revenue growth, prepaid expenses on TSA Pre-Check program recognized in 2026, and rest of portfolio accretive otherwise.

Q: How much revenue growth tied to DMDC contract?

A: Roughly a third of improvement from November outlook.

Q: Pipeline in 2026 and strategies for cash gross margin?

A: 64 opportunities in 2026, 34 in first half. Strategies include different revenue streams and mix, with recent IT Gems revenue mix full run rate this year and low 40s cashless margin otherwise.