Telos : 4Q22 Earnings Call Presentation

Fourth Quarter 2022 Earnings

and 2023 Outlook

March 16, 2023

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, 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 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 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.

FINANCIAL PERFORMANCE SUMMARY

DELIVERED $47.3M OF REVENUE, 38.6% GROSS MARGIN AND $5.4M

OF ADJUSTED EBITDA IN 4Q

4Q 2022 Summary

• Delivered $47.3M of revenue
• • Security Solutions ("SS") down 11% YoY (vs. guidance of down HSD to high teens); Down 7% sequentially; Results in line with guidance
  • Secure Networks ("SN") down 43% YoY (vs. guidance of down mid to high 40% YoY); Down 45% sequentially; Results slightly exceeded guidance due to favorable timing on pre-existing programs
• Delivered 38.6% gross margin
• • 38.6% vs guidance of 33% to 34.5%
  • Primarily due to favorable revenue mix within SS
  • Revenue mix between SS and SN in line with expectations
• Below the line (BTL) expenses managed lower than projections
• Delivered $5.4M of Adjusted EBITDA and 11.4% Adjusted EBITDA margin, above high end of guidance range, due to better than expected gross profit and lower BTL expenses

Revenue

Revenue

Growth

Gross Profit

(bps are YoY)

Adjusted EBITDA(1)

FY 2022

Actual

$216.9M

-11% YoY

$79.0M

36.4% margin

+96 bps

$19.5M

9.0% Margin

4Q 2022			4Q 2022
Actual			Guidance
$47.3M			$43M to $47M
-26% YoY		-33% to -27% YoY
-26% Sequentially		-32% to -26% Sequentially
$18.3M		33% to 34.5% margin
38.6% margin
+95 bps		-470 to -320 bps
$5.4M			$0M to $2.0M
11.4% Margin			0% to 4% Margin

Adjusted

EPS(1)

$0.19 $0.05

Exceeded High End of Guidance Range on Key Financial Metrics

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

SENIOR LEADERSHIP ANNOUNCEMENTS

Josh Salmanson

SVP, Technology Solutions

• Leading newly established Technology Solutions organization
• Responsible for driving development of innovative technology solutions for our customers
• Nearly 30 years of experience as a senior cyber and information technology executive
• Record of success leading technology and solutions for companies serving commercial and government customers

Lee Canterbury

VP, Corporate Growth

• Leading newly consolidated Growth organization
• Oversees all business generation activities across company
• Over 35 years of experience successfully implementing business development strategies for companies serving commercial and government customers

Successful Track Record of Driving Growth for Technology Companies

4

FINANCIAL PERFORMANCE SUMMARY

4Q AND FY 2022 YEAR-OVER-YEAR COMPARISON

4Q YoY

FY YoY

Revenue

$64.1M

$47.3M

4Q21 4Q22

Revenue

$242.4M

$216.9M

FY21 FY22

Gross Profit

$24.1M

(37.7% margin)	$18.3M
	(38.6% margin)

4Q21 4Q22

Gross Profit

$86.0M

$79.0M

(35.5% margin)

(36.4% margin)

FY21 FY22

Adjusted EBITDA(1)

$8.8M

(13.8% margin)

$5.4M

(11.4% margin)

4Q21 4Q22

Adjusted EBITDA(1)

$24.4M

(10.1% margin)	$19.5M
	(9.0% margin)

FY21 FY22

Free Cash Flow (FCF)(1)

$0.5M

-$7.2M

4Q21 4Q22

Free Cash Flow (FCF)(1)

$11.2M

-$5.9M

FY21 FY22

4Q

Results primarily reflect the wind down of large programs in SN as expected, partially offset by cost reduction actions.

• Revenue: TLS down 26%. SS down 11% due to lower revenues on a single large program and 2021 ramp down of Census program. SN down 43% due to large programs nearing completion.
• Gross Margin: TLS up 95 bps to 38.6%. Higher weighting of revenues to higher margin SS in 4Q22 (64%) compared to 4Q21 (53%).
• Adj. EBITDA: Down $3.4M primarily due to lower revenue, partially offset by lower below the line expenses.
• Free Cash Flow: Up $7.7M due to favorable working capital dynamics.
• Capital Deployment: Deployed $3.6M to repurchase 691K shares.

FY

Results primarily reflect the wind down of large programs in SN as expected, partially offset by cost reduction actions in 2H. Strong FCF deployed to share repurchases.

• Revenue: TLS down 11%, primarily due to the wind down of large programs in SN as expected. SN down 19%. SS down 2% primarily due to a single program renewing at a lower level of revenue.
• Gross Margin: TLS up 96 bps to 36.4%. Higher weighting of revenues to higher margin SS (56%) in 2022 compared to 2021 (51%).
• Adj. EBITDA: Down $4.9M primarily due to lower revenue, partially offset by lower BTL expenses.
• Free Cash Flow: Up $17.1M due to favorable working capital dynamics.
• Capital Deployment: Deployed $11.3M (vs. $11.2M of FCF) to repurchase 1.6M shares.

Strong FCF in 2022; Revenues Primarily Impacted by Wind-Down of Large Programs Nearing Completion

Notes:	5
1. Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. Reconciliations to GAAP financial measures are provided in the appendix.