UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
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CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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April 7, 2021
Date of Report (date of earliest event reported):
TELOS CORPORATION
(Exact name of registrant as specified in its charter)
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Maryland
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001-08443
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52-0880974
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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19886 Ashburn Road, Ashburn, Virginia
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20147-2358
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(Address of principle executive offices)
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(Zip Code)
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(703) 724-3800
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(Registrant's telephone number, including area code)
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Not Applicable
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(Former name or former address, if changed since last report)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading symbol
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Name of each exchange on which registered
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Common stock, $0.001 par value per share
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TLS
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The Nasdaq Stock Market LLC
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or
Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected
not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01. Regulation FD Disclosure
On April 7, 2021, Telos Corporation posted the Telos Investor Presentation to its website at https://investors.telos.com/. A copy of that presentation is
furnished as part of this Current Report on Form 8-K as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
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Exhibit No.
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Description
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Telos Investor Presentation, dated April 2021
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: April 7, 2021
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TELOS CORPORATION
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By:
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/s/ Michele Nakazawa
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Michele Nakazawa
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Chief Financial Officer
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Investor Presentation April 2021
2 The information contained in this presentation does not constitute or form part of, and should not be
construed as, any offer or sale or subscription of, or any invitation to offer, buy or subscribe for, any securities, nor shall there be any offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be
unlawful. Telos Corporation (the “Company”) will only make such an offer or sale pursuant to an automatically effective registration statement with the Securities and Exchange Commission (the “SEC”) and related prospectus. Before you invest, you
should read the registration statement, and in particular the “Risk Factors” contained or incorporated by reference therein for more complete information about the Company and the proposed offering. Once it is filed, you may obtain the
registration statement for free by visiting EDGAR on the SEC website at www.sec.gov. Other than statements of historical fact, all information contained in this presentation, including statements regarding the Company’s future operating results
and financial position, its business strategy and plans, product, service, and technology offerings, market growth and trends, and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as “may”, “will”, “should”, “plan”, “predict”, “expect”, “estimate”, “anticipate”, “intend”, “goal”, “strategy”, “believe”, and similar expressions and variations thereof. The Company has based these forward-looking
statements largely on its current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, business strategy, short-term and long-term business operations and
objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the heading “Risk Factors” in the Company’s periodic filings with the SEC and in
the registration statement that the Company will or has filed with the SEC for the offering to which this presentation relates. Moreover, the Company operates in a very competitive and rapidly changing environment, the new risks emerge from time
to time. It is not possible for the Company to predict all risks, nor can it assess the effect of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements it may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this presentation may not occur and actual results could differ materially and adversely
from those anticipated or implied in the forward-looking statements.You should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or
occur. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking
statements will be achieved or occur. These forward-looking statements speak only as of the date of this presentation and the Company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances
after the date hereof.This presentation contains statistical data, estimates, and forecasts that are based on independent industry publications or other publicly available information, as well as other information based on the Company’s internal
sources. While the Company believes the industry and market data included in this presentation are reliable and are based on reasonable assumptions, these data involve many assumptions and limitations, and you are cautioned not to give undue
weight to these estimates. The Company has not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information.The trademarks included herein are the property of
the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of such products or services.This presentation also includes certain non-GAAP financial measures. These non-GAAP financial measures
are in addition to, and not as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP
equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measure to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for
comparison. Please see the appendix for reconciliations of these non-GAAP financial measures to their nearest GAAP equivalents and for the calculation of certain other financial metrics. Disclaimer
John Wood(President, CEO, and Chairman) Joined Telos as EVP and COO in 1992; named President and CEO in
1994 Formerly worked in finance for Dean Witter Reynolds, and UBS Securities Michele Nakazawa(EVP and CFO) Joined Company in 2004 as VP and Controller; named CFO in 2005Former experience includes senior financial leadership roles with Ubizen,
National Security Analysts, and Federal Systems Division of IBM Edward Williams(EVP and COO) Joined Company in 1992 as SVP responsible for finance, pricing, purchasing, and Defense Contract Audit Agency compliance; named COO in 2000; also
served as CFO 2003-2005Formerly served as CFO at US Government contractors Centel Federal Systems and M/A.com Information Systems Richard Tracy(SVP, CSO, and CTO) Joined Company in 1986; appointed SVP and Chief Security Officer in
2005Co-invented Xacta in 2000 and principal inventor named on five issued-patents involving security risk and compliance management 3 Senior Management Team
4 Update and Highlights 4Q 2020 and FY 2020 Earnings4Q 2020 – Revenue of $44.9MM; AEBITDA (loss) of
($2.6MM)FY 2020 – Revenue of $179.9MM; AEBITDA of $11.4MM1FBI — $13.5MM contract for XactaPHL — Background check renewal for Telos IDSSA — Option renewal for XactaOmnilert — Telos GhostJohnson Controls — Partnership with Telos GhostZscaler —
Xacta selected for FedRAMP and DoD authorizationsInvestments in Sales and Marketing — Troy Bertram among 25+ new hires$75MM of New Awards in 1Q 2021First Quarter 2021 GuidanceRevenue in the range of $49 million to $52 million, an improvement of
9%-16% compared to 4Q 2020AEBITDA (loss) in the range of ($1.7) million to ($1.9) millionFull Year 2021 GuidanceRevenue in the range of $283 million to $295 million, an improvement of 57%-64% compared to 2020AEBITDA in the range of $33 million to
$36 million, an improvement of 190%-216% compared to 2020 Adjusted EBITDA is a non-GAAP figure. For reconciliation, see slide 30.
1) Based on Telos management estimates 5 Based on Telos management estimates Premier Provider
of Software-based Solutions for the World’s Most Security Conscious Customers Telos Security Solutions consistently deliver more efficient, more effective, and more secure operating environments Endorsed by marquee intelligence community
customers with growing commercial market penetration Large and fast growing total addressable market (TAM) – $80B+1Driven by ongoing cloud adoption and growing security needs in both government and commercial channels Improving revenue mix and
operating leverage to drive significant margin expansionScalable platform delivers strong free cash flow conversion Clear visibility into rapidly accelerating, 85%+ recurring revenue growthGrowth inflection fueled by key long-term contract wins
for Telos’ identity management and cyber misattribution solutions
Note: Reflects fiscal year ended December 31Based on Telos management estimatesApproximate recurring
revenue for each of the last three years2021 Guidance represents midpoint of management range of $283-$295MM Revenue ($MM) $180 $289 350+ Customers Revenue Profile85% recurring250% sole source / limited competition1 6 Revenue
($MM) Intellectual Property3,000+ man-years of IP160% of employees with Clearance 19% CAGR 61%YoY Telos Snapshot Recently-Awarded, Long-Term Security Solutions Contracts to Accelerate Revenue Growth $108 $138 $159 3
7 81% of 2020 Gross Profit 19% of 2020 Gross Profit Unique Solution Set Addressing Urgent
Customer Needs SecuritySolutions SecureNetworks AMHS Governance risk and compliance solution that facilitates cloud migrationMis-attribution obfuscation solution that protects user information and locationTrusted identity solutionsSecure
message and archive system for the government Operation / defense of networks and cyber ops Secure Networks
8 Telos is at the Forefront of Security Solution
Development 1994 Common Access Card (“CAC”) Largest biometric application in the government 2016 Xacta partnership with Amazon Web Services to provide cloud solution to the CIA 2018 Telos
Ghost launched to shield communications, transactions, and networks 2018 U.S. Census Bureau contract(1MM total enumerators w/in 4 mo. at 1,100 physical service centers) 2019 Microsoft Azure partnershipto optimize Xacta cyber risk
management for sovereign and critical infrastructure clouds 2019 Telos Ghost wins $39MM contract with classified government customer; converting to program of record 2020 TSA PreCheck & Center for
Medicare & Medicaid Services contract wins (10-year contracts) 2021 Zscaler to use Xacta for management and automation of FedRAMP and DoD authorizations
9 Marquee Customers
Land and Expand The Sixteenth Air Force expanded their license from Top Secret to now include SecretThe
U.S. Social Security Administration upgraded to an enterprise-wide license, and as we recently announced, they also exercised the first option year of this contractThe U.S. Department of Energy’s Office of Intelligence and Counterintelligence
moved to full enterprise licensingThe U.S. Environmental Protection Agency expanded to an enterprise-wide license 10
11 4.1B Exposed records from data breaches in 1H19 $8.6MM Average cost of data breach in U.S.
as of 2019 954K Average web attacks blocked per day 280 Average days to identify & contain a breach Sources: Comparitech, Symantec Internet Security Threat Report 2019, Cyber Risk Analytics 2019 MidYear Data Breach Report, IBM 2020
Cost of a Data Breach ReportBased on Telos management estimates Key Security Solutions Expanding TAM ($B)1 14.0%CAGR Demand for Telos’ Security Solutions Has Never Been Greater
Investing in Sales and
Marketing New Hires and Industry Leading Experience Foundations of the Channel 12 Security Solutions Security Solutions
13 Xacta accounts for common, shared, and customer specific controls On-premises Hybrid Cloud /
Multi Cloud Operationalizes complex frameworks and required reporting Compliance Data Sharing Continuous Monitoring GRC Workflow Automates security compliance activities through inheritance & control mapping Delivers constant and
real-time visibility into cyber risks and compliance status Multi-Cloud Capability Industry-Leading Cyber Risk & Compliance Management Xacta solution enables customers’ cloud journeys Security Solutions Security Solutions
14 Reduced Onboarding Time, Continuous Monitoring, and “Referenceability” Drive Customer
Adoption Commercial SaaSCompanies U.S. Governmental Agencies C2S/CIA Secure Networks Security Solutions Security Solutions
15 Sources: Gartner, RightScale Worldwide Public Cloud Service Revenue$ in Billions Public Cloud
Adoption% of All Respondents 14% CAGR Rick Trinidad, Worldwide Public Sector, AWS “With Xacta’s…inheritance and provider project features and capabilities, AWS expects a dramatic increase in efficiencies and effectiveness in completing ATOs,
in some cases up to 90% faster.” AWS and Microsoft Azure Partnerships “We recognize the value of Xacta in addressing the unique compliance needs of our customers, and we’re working with them to accelerate development time and bring this cyber
risk management solution directly to Microsoft Azure users.” Lily Kim, General Manager, Azure Global at Microsoft Security Solutions Security Solutions
Prospective & Pending Current Cloud customers and partners use Xacta to automatically
inherit common compliance data Automated inheritance accelerates cloud adoption and creates incremental demand for Xacta solution Cloud infrastructure owners share control information with partners and customers via Xacta Automated
inheritance accelerates workload migration by operationalizing shared security and enabling reciprocity Cloud provider customer relationships create channel to sell Xacta into new organizations 16 Inheritance Creates Channel Partnerships to
Drive Incremental Revenue Security Solutions Security Solutions
Encrypted communications, storage and applications Private Network Access Private Web Access Cloaked
Services Secure, private network in the cloud Anonymous worldwide internet access 17 Reduce Attack Surface, Hide Digital Exhaust & Disguise Identity You can’t attack what you can’t see Security Solutions Security Solutions
Based on Telos management estimates derived from customer / sponsor contract
assumptions FBIFingerprint Capture SaaS biometric web capture Pre-employment screeningIdentity vetting TSA - AirportsEmployee Vetting Continuous monitoring of airport employees – Security Threat AssessmentFingerprint capture and FBI
records check 100+ significant airports, airlines, general aviation customers DMDCMilitary ID Provider of the largest identity application in the US Government – Military ID (CAC)Biometric captureSmart cards PreCheck & CMS
Wins TSA PreCheck™ Enrollment Provider – 2MM new members per year over 10-year contract1Provider Enrollment & Oversight (PEO) contract holder Background checks for 1.5MM Centers for Medicare & Medicaid (CMS) health providers each
year1 18 Advancing Capabilities & Proven Validation Driving New Customer Wins Security Solutions Security Solutions
Affiliated Service Providers Fully integrated suite of Telos ID and commercial services for identity
verification, enrollment, fingerprinting, insider threat management, biometric matching, and personnel security IDTrust360 has direct interfaces to: The FBI's criminal recordsDHS's terrorist watch listTreasury's pay.govOther government identity
risk management systemsNumerous commercial identity, intelligence, and risk-based data sources 19 IDTrust360 Cloud Business Technology Support Center Customer Service Cloud Apps Cloud Apps Outside ATO NOC/SOC Infrastructure Test &
Staging Adjunction & Onboarding Core Services Customer Applications Enrollment Centers Security Solutions Security Solutions
Productivity — Mobile / remote accessCoverage — Seamless roaming between Wi-Fi and cellular on any
device, anywhereCost Savings — Single integrated enterprise mobility management solutionEfficiency — Simplify the process of updating devices with the most recent version of apps and contentSecurity — Centrally managed security policy Network
Operations — Situational awareness of networks, including users, systems and security postureNetwork Maintenance — Preventive maintenance, troubleshooting and repairsDefensive Cyber Operations — Real-time threat monitoring, analysis and
remediation Secure Mobility Solutions Network Management Solutions 20 Secure Mobility and Network Management / Defense Secure Networks Security Solutions Secure Networks
Financial Highlights & Objectives 21
TSA PreCheck – $1.7B+1 total 10-year contract potentialCMS – $2.0B2 total 10-year contract potentialU.S.
Govt Ghost Customer – $39MM1 with significant upside with program of recordSecurity Solutions / Secure Networks – $34MM new one year contract Key New Contract Wins Note: Reflects fiscal year ended December 31Based on Telos management estimates
derived from customer / sponsor contract assumptionsReflects contract ceiling Note: Reflects fiscal year ended December 31Note: Adj. EBITDA margin reflected on an enterprise basis, before adjustments for the Non-Controlling InterestsBased on
Telos management estimates derived from customer / sponsor contract assumptionsReflects contract ceiling 2018 Adj. EBITDA further adjusted to exclude one-time benefit of $6.8MM associated with increased billing rate for certain government
contracts2021 Guidance represents midpoint of management ranges of $283-$295MM in revenue and $33-$36MM in Adj. EBITDA 6.6%Adj. EBITDA Margin 10.5%Adj. EBITDA Margin 3.7%Adj. EBITDA Margin 6.3%Adj. EBITDA Margin 0.1%Adj. EBITDA
Margin 22 Accelerating Revenue Growth and Expanding Margins $180 $289 19% CAGR 61%YoY $108 $138 $159 4 3
Assets Current1 Pro Forma Cash $106.0 $128.9 Finance
Lease Obligations 15.6 15.6 Total Debt $15.6 $15.6 Common Stock2 $2,138.4 $2,173.4 Total Debt and Equity $2,154.1 $2,189.0 ($in MM) 23 Pro Forma
Capitalization As of 12/31/2020Reflects basic shares outstanding. Share price as of 3/24/2021.
Grow revenue & expand margins by building robust sales channels Target & replace inefficient
legacy products withinorganizations Leverage diverse Security Solutions to expand commercial market presence Extend Security Solutions platform & ecosystem to capitalize on massive scalability Broaden existing reach within U.S. federal
government vertical Exploit increasing demand for NIST and other cybersecurity frameworks Expand international footprint through channel partners Note: Increasing demand for NIST framework identified as a near-term growth opportunity for Xacta
and Ghost 24 Growth Strategies Pursue targeted tuck-in acquisitions to complement organic growth
Revenue $1B Gross Margin 50% Adj. EBITDA Margin 30% Free Cash
Flow $150MM 25 This is a forward-looking statement. Please refer to forward-looking statement disclaimer on page 2. Long-Term Aspirational Goals1
1) Based on Telos management estimates Telos Security Solutions consistently deliver more
efficient, more effective, and more secure operating environments Endorsed by marquee intelligence community customers with growing commercial market penetration Large and fast growing total addressable market (TAM) – $80B+1Driven by ongoing
cloud adoption and growing security needs in both government and commercial channels Clear visibility into rapidly accelerating, 85%+ recurring revenue growthGrowth inflection fueled by key long-term contract wins for Telos’ identity management
and cyber misattribution solutions Improving revenue mix and operating leverage to drive significant margin expansionScalable platform delivers strong free cash flow conversion 26 Investment Highlights Based on Telos management estimates
Premier provider of software-based solutions for the world’s most security conscious customers3,000+1 man-years invested in technology development
Appendix 27
28 Historical Income Statement ($ in thousands) FY 2019 FY 2020 Revenue $159,218
$179,917 Costs and Expenses Cost of Sales 106,874 117,497 Selling, General & Administrative Expenses 47,319 62,123 Operating Income $5,025 $297
Other Income (Expenses) Gain on redemption of public preferred stock – 14,012 Non-Operating Income 201 (255) Interest Expense (7,467) (7,259) (Loss) Income before Taxes ($2,241) $6,795
Benefit (Provision) for Taxes 104 46 Net (Loss) Income ($2,137) $6,841 Less: Non-Controlling Interest (4,264) (5,154) Net Income (Loss) Attributable to Telos
Corporation ($6,401) $1,687
29 Adjusted EBITDA Reconciliation ($ in thousands) FY 2019 FY 2020 Net income
(loss) attributable to Telos Corporation ($6,401) $1,687 Non-controlling interest 4,264 5,154 Non-operating income (201) (20) Interest
Expense 7,467 7,259 (Benefit) provision for income taxes (104) (46) Depreciation and amortization 4,972 5,353 Enterprise
EBITDA $9,997 $19,387 Transaction related gains/losses/expenses (8,007) Stock-based compensation expense 4 Adjusted EBITDA $9,997 $11,384
Customer Need / Pain Point Telos Solution Solution Capabilities Time, cost, effort of cyber risk
and compliance managementCompliance as an obstacle to cloud adoptionAudit fatigue – many standards Automated cyber risk management workflowInheritance and control mappingAutomated continuous monitoring Massive financial, reputational, and
personal consequences for breaches of mobile / digital assets Secure mobile access anywhereSecurity through encryption and obfuscationVirtual obfuscation network-as-a-service with encryption and managed attribution Reliance on inefficient
identity trust applications Identifying fraud and mitigating the impact of fraudulent activitiesProtection of employee and customer identity data Digital risk management platform offering enterprise identity and scalable security
solutionsOmni-channel services leveraging tech partnersIntegrated suite of advanced services modernizing management of threats and privacy of sensitive data Requirement for secure communications with certainty of delivery and non-repudiation
functionality Web-based; full spectrum of messaging systemsRoutes incoming messages and creates archive Continuous need to protect enterprise networks Solutions across and beyond the enterpriseOperation / defense of networks and cyber
ops AMHS Secure Networks 30 Telos Solution Set Detail
31