Telos : 1Q24 Earnings Call Presentation

First Quarter 2024 Earnings

May 10, 2024

DISCLAIMERS

The information contained in this presentation does not constitute or form part of, and should not be construed as, any offer, 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 effective registration statement with the Securities and Exchange Commission (the "SEC") and related prospectus. Before you invest, you should read the Company's filings with the SEC, and in particular the "Risk Factors" contained or incorporated by reference therein, for more complete information about the Company. You may obtain those filings are available at https://investors.telos.comand on the SEC's 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. Moreover, the Company operates in a very competitive and rapidly changing environment, and 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 data, estimates and forecasts. 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 the Company's endorsement of the products or services of the trademark owner, nor as an endorsement by the trademark owner of the Company's products or services.

This presentation also includes certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not 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 measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. The reader is cautioned not to place undue reliance on non-GAAP financial measures and to evaluate them only in conjunction with their nearest GAAP equivalents. 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 measures.

2

FINANCIAL PERFORMANCE SUMMARY

DELIVERED $29.6M OF REVENUE, 37.0% GAAP GROSS MARGIN, AND 42.2% CASH GROSS MARGIN1

1Q 2024 Summary

• Delivered $29.6M of revenue vs. guidance of $28M to $29M
• • Security Solutions ("SS") down 6% YoY (vs. guidance of down low teens to HSD
    %); Down 10% sequentially; Results exceeded guidance due to better than forecasted performance across all lines of business
  • Secure Networks ("SN") down 29% YoY (vs. guidance of down low-30% to high- 20%); Down 46% sequentially; Results in line with high end of guidance
• Delivered 37.0% GAAP gross margin ("GM") vs. guidance of ~34.3%
• • Outperformance in SS primarily due to effective cost management on fixed price contracts
  • Outperformance in SN primarily due to better than forecasted utilization of direct labor
  • Revenue mix was 63% SS, slightly higher than guidance due to revenue dynamics described above
• Below the line ("BTL") expenses, net of stock based compensation ("SBC") approximately $1.7M better than guidance primarily due to timing of spending in several areas and higher than forecasted capitalization of software development
• Adjusted EBITDA1 above high end of guidance range due to better than forecasted gross profit and lower than forecasted BTL expenses

		1Q 2024			1Q 2024
		Actual			Guidance
Revenue		$29.6M			$28M to $29M
Revenue Growth		-16% YoY			-21% to -18% YoY
	-28% Sequential			-32% to -29% Sequential
GAAP		$11.0M
	37.0% GAAP GM			~34.3% GAAP GM
Gross Profit
	- 129 bps YoY			-400 bps YoY
		42.2% Cash GM1
Adjusted		($2.3M)			($5.5M) to ($5.0M)
EBITDA1		-7.9% Adj. EBITDA Margin	1		-19.6% to -17.2% Adj. EBITDA
			Margin1
Adjusted EPS1		($0.08)

Exceeded High End of Guidance Range on Key Financial Metrics

Notes:	3
1. Cash Gross Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EPS are non-GAAP financial measures. Reconciliations to GAAP financial measures are provided in the appendix.

RECENT BUSINESS HIGHLIGHTS

NEW BUSINESS DEVELOPMENT UPDATE

• Last quarter, we announced that Telos' prime partners received awards on new programs worth up to $525M to Telos' Security Solutions business over five years, subject to customary protest periods and favorable resolution of protests.
• Resolution of protests expected in 2Q based on typical protest timetable.

OTHER NOTABLE EVENTS

• Since 2023, Telos has won positions on five new federal contract vehicles, providing market access to compete for new business opportunities that in aggregate represent a $12B addressable market.
• Awarded Xacta® new orders include the U.S. Air Force Services Center, a major technology company, and a federal government customer as well as renewals from the U.S. 16th Air Force, U.S. National Geospatial Intelligence Agency, U.S. Defense Intelligence Agency, U.S. Department of Energy, a professional services company, and a leading cloud computing company.
• Key cyber services renewals include the U.S. Department of Homeland Security, U.S. Office of Naval Intelligence, and a federal executive department.
• Telos AMHS achieved a major contract renewal with a branch of the U.S. Armed Forces.

4

2024 OUTLOOK

2Q 2024

		Guidance
		2Q 2024		2Q 2024
		Low End		High End
Revenue		$25M		$28M
	-24% YoY		-15% YoY
Adjusted		($8M)		($6M)
EBITDA1

Assumptions

• SS revenue assumptions:
• • Down HSD % to up MSD % YoY (down mid teens % to LSD % sequentially)
  • • Primarily driven by the sale of a non-recurring perpetual license in 2Q 2023 offset by growth in TSA PreCheck in 2024
• SN revenue assumptions:
• • Down low-40% to mid-30% YoY (down high teens % to HSD % sequentially)
  • • Primarily driven by ongoing reductions in backlog
• Implied 1H revenue of $54.6M to $57.6M compares favorably with previously provided modelling input of ~$55M
• GAAP gross margin down ~750 bps to ~425 bps YoY (down ~700 bps to ~375 bps sequentially); Cash gross margin1 down ~250 bps to flat YoY:
• • SS GM down primarily due to higher amortization of software development costs and revenue mix
  • SN GM down primarily due to higher impact of fixed costs on lower revenue
  • More favorable mix between SS and SN YoY
  • • SS to contribute approximately 64% (vs. 52% in 2Q 2023)
• Cash BTL expenses (i.e. adjusted for capitalized software, stock based compensation, restructuring costs, and D&A) approximately $1.9M to $2.1M higher YoY primarily due to investment in growth initiatives

Revenues Expected to Return to Sequential Growth in 3Q or 4Q 2024

Notes:

1. Cash Gross Margin and Adjusted EBITDA are non-GAAP financial measures. The Company has not provided a reconciliation to the most directly comparable GAAP measure to these forward-lookingnon-GAAP financial measures because 5 certain items are out of the Company's control or cannot be reasonably predicted. Accordingly, reconciliations of forward-looking Cash Gross Margin and Adjusted EBITDA are not available without unreasonable effort.

SUMMARY

Exceeded High End of Guidance Range on Key Financial Metrics in the First Quarter of 2024

Substantial Progress on New Business Capture in the First Quarter

Resolution of Protests Expected in the Second Quarter Based on Typical Protest Timetable

Revenues Expected to Return to Sequential Growth in the Third or Fourth Quarter, Subject to Favorable Resolution of Protests

6

Appendix

NON-GAAP FINANCIAL MEASURES

In addition to Telos' results determined in accordance with U.S. GAAP, Telos believes the non-GAAP financial measures of EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Income/(Loss), Adjusted Earnings Per Share ("EPS"), Cash Gross Profit, Cash Gross Margin, and Free Cash Flow are useful in evaluating operating performance. Telos believes that this non-GAAP financial information, when taken collectively with GAAP results, may be helpful to readers of the financial statements because it 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-titlednon-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.

Telos believes that EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net(Loss)/Income and Adjusted EPS provide the Board, management and investors with a clear representation of the Company's core operating performance and trends, provide greater visibility into the long-term financial performance of the Company, and eliminate the impact of items that do not relate to the ongoing operating performance of the business. Further, Adjusted EBITDA and Adjusted EBITDA Margin are used by the Board and management to prepare and approve the Company's annual budget and to evaluate the performance of certain management personnel when determining incentive compensation. Cash Gross Profit and Cash Gross Margin provide management and investors a clear representation of the core economics of gross profit and gross margin without the impact of non-cash expenses and sunk costs expended. Telos uses Free Cash Flow to understand the cash flows that directly correspond with our operations and the investments the Company must make in those operations, using a methodology that combines operating cash flows and capital expenditures. Further, Free Cash Flow may be useful to management and investors in evaluating the Company's operating performance and liquidity. Telos believes these non-GAAP financial measures facilitate the comparison of the Company's operating performance on a consistent basis between periods by

excluding certain items that may, or could, have a disproportionately positive or negative impact on the Company's 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.

8

FINANCIAL PERFORMANCE SUMMARY

1Q YEAR-OVER-YEAR COMPARISON

Revenue

GAAP Gross Profit

Adjusted EBITDA1

Adjusted EPS1

Free Cash Flow1

$35.2M

$29.6M

1Q23 1Q24

$13.5M

	$11.0M
38.3% GAAP GM	37.0% GAAP GM
39.7% Cash GM1	42.2% Cash GM1
1Q23	1Q24

($0.8M) ($2.3M)

1Q23 1Q24

($0.04) ($0.08)

1Q23 1Q24

($0.1M) Cash	($0.4M) Cash
Flow from	Flow from
Operations	Operations
($4.1M)	($3.6M)
1Q23	1Q24

• Security Solutions down 6% to $18.6M primarily due to expected timing of revenue in Telos ID, partially offset by growth in TSA PreCheck®
• Secure Networks down 29% to $11.0M, primarily due to ongoing reductions in backlog

• GAAP gross profit down $2.5M; GAAP gross margin down 127 bps
• Cash gross margin1 up 249 bps
• • SS cash gross margin1 approximately flat at 54%
  • SN cash gross margin1 up 87 bps to 22% due to strong program management and mix
  • Favorable sales mix shift between SS and SN
• Significantly higher amortization of software development costs
• BTL expenses, net of SBC, depreciation and amortization, and restructuring flat
• Adjusted EBITDA1 down $1.5M to ($2.3M) due to lower revenue partially offset by higher cash gross margin1

• Lower gross profit and higher depreciation and amortization

• Slightly lower cash flow from operations more than offset by lower capex/capitalized R&D

Cash Gross Margins Up 249 Basis Points Year-Over-Year

Notes:	9
1.	Cash Gross Margin, Adjusted EBITDA, Adjusted EPS, and Free Cash Flow are non-GAAP financial measures. Reconciliations to GAAP financial measures are provided in the appendix.

2024 OUTLOOK

2024 2Q ADDITIONAL MODELING ASSUMPTIONS

2023		2023		2024E
Full Year		2Q		2Q

2024E 2Q Commentary

								• SS down YoY; SN down to flat YoY
GAAP Gross Margin		36.4%		37.6%		~30.0% - 33.3%		•	More favorable revenue mix between SS and SN
								•	Cash gross margin1 down to flat YoY

Stock Based		$24.4M		$7.7M
Compensation (SBC)
Depreciation		$9.4M		$1.7M
& Amortization
Weighted Average		69.3M		69.4M
Share Count
Tax Rate		(0.1%)		(0.1%)
CAPEX & Capitalized		$15.5M		$4.4M
Software
Cash Below The Line		$77.5M		$17.5M
Expenses2
Adjusted Below The		$68.6M		$14.3M
Line Expenses3

~$6.0M - $6.5M

~$3.0M

~72.0M

-

~$3.0M - $3.5M

~$19.4M -

$19.6M

~$18.6M -

$18.8M

• ~$0.2M in COS in 2Q 2024
• Higher amortization YoY due to development initiatives achieving key milestones
• ~55% is included in BTL expenses in 2Q 2024
• Not meaningful
• ~$0.5M of CAPEX in 2Q 2024
• YoY higher primarily due to investment in growth initiatives
• YoY higher due to higher spend described above in addition to slightly higher deprecation and amortization and lower R&D capitalization

Notes:
1.	Cash Gross Margin is a non-GAAP financial measure. The Company has not provided a reconciliation to the most directly comparable GAAP measure to this forward-lookingnon-GAAP financial measure because certain items are out of the Company's control or cannot be reasonably predicted. Accordingly,	10
	reconciliation of forward-looking Cash Gross Margin is not available without unreasonable effort.

1. Cash below the line expenses (adjusted for capitalized software, restructuring costs, stock based compensation and D&A).
2. GAAP below the line expenses excluding stock based compensation and restructuring costs (cash below the line expenses above plus D&A, net of R&D capitalization).