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What changed in TELOS CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of TELOS CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+334 added−351 removedSource: 10-K (2026-03-16) vs 10-K (2025-03-10)

Top changes in TELOS CORP's 2025 10-K

334 paragraphs added · 351 removed · 221 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

41 edited+21 added−34 removed15 unchanged
Biggest changeThis commitment is reflected in our core values: Always with integrity, at Telos we: Build trusted relationships, Work hard together, Design and deliver superior solutions, and Have fun doing it. These values are woven throughout the fabric of Telos; they are reflected in our hiring practices, reinforced regularly, and reviewed during appraisals.
Biggest changeThese values are woven throughout the fabric of Telos; they are reflected in our hiring practices, reinforced regularly, and reviewed during appraisals. Employees are encouraged to challenge themselves and each other to exhibit the core values in all activities. Our employees are provided with multiple reporting channels should they observe activities inconsistent with our core values.
With a pedigree in information and cybersecurity that spans three decades, our multi-certified cybersecurity personnel provide services and solutions that deliver continuous security assurance for business, government, and public sector critical infrastructure. • Telos Automated Message Handling System ("Telos AMHS ™ "): Telos AMHS is a web-based organizational message distribution and management solution for mission-critical communications; the recognized gold standard for organizational messaging in the U.S. government.
With a pedigree in cybersecurity and information assurance that spans three decades, our multi-certified cybersecurity personnel provide services and solutions that deliver continuous security assurance for business, government, and public sector critical infrastructure. • Telos Automated Message Handling System ("Telos AMHS ™ "): Telos AMHS is a web-based organizational message distribution and management solution for mission-critical communications; the recognized gold standard for organizational messaging in the U.S. government.
U.S. government contracts generally are subject to the Federal Acquisition Regulation ("FAR") and Defense Federal Acquisition Regulation Supplement ("DFARS"), which sets forth policies, procedures and requirements for acquiring goods and services by the U.S. government, and agency-specific regulations that implement or supplement the FAR or DFARS.
U.S. federal government contracts generally are subject to the Federal Acquisition Regulation ("FAR") and Defense Federal Acquisition Regulation Supplement ("DFARS"), which sets forth policies, procedures and requirements for acquiring goods and services by the U.S. federal government, and agency-specific regulations that implement or supplement the FAR or DFARS.
These laws and regulations, among other things: • Impose specific and unique cost accounting practices that may differ from Generally Accepted Accounting Principles in the United States of America ("U.S.
Among other things, these laws and regulations: • Impose specific and unique cost accounting practices that may differ from Generally Accepted Accounting Principles in the United States of America ("U.S.
GAAP" or "GAAP") and therefore require reconciliation; • Define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-type U.S. government contracts; • Require compliance with U.S. government Cost Accounting Standards; • Require reviews by the Defense Contract Audit Agency, Defense Contract Management Agency and other U.S. government agencies for compliance with government requirements for a contractor's business system; and • Restrict the use and dissemination of, and require the protection of, unclassified contract-related information and information classified for national security purposes and the export of certain products and technical data.
GAAP" or "GAAP") and therefore require reconciliation; • Define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-type U.S. federal government contracts; • Require compliance with U.S. federal government Cost Accounting Standards; • Require reviews by the Defense Contract Audit Agency, Defense Contract Management Agency and other U.S. federal government agencies for compliance with government requirements for a contractor's business system; and • Restrict the use and dissemination of, and require the protection of, unclassified contract-related information and information classified for national security purposes and the export of certain products and technical data.
Budgetary pressures and reforms in the procurement process have caused many U.S. government customers to increasingly purchase services and products using contracting methods that allow them to select multiple contract winners or pre-qualify certain contractors to provide services or products on established general terms and conditions rather than through single-award contracts.
Budgetary pressures and reforms in the procurement process have caused many U.S. federal government customers to increasingly purchase services and products using contracting methods that allow them to select multiple contract winners or pre-qualify certain contractors to provide services or products on established general terms and conditions rather than through single-award contracts.
Most of our contracts have cancellation terms that permit us to recover all or a portion of our incurred costs and fees for work performed where the U.S. government issues a termination for convenience. A portion of our business is classified by the U.S. government and cannot be specifically described.
Most of our contracts have cancellation terms that permit us to recover all or a portion of our incurred costs and fees for work performed where the U.S. federal government issues a termination for convenience. A portion of our business is classified by the U.S. federal government and cannot be specifically described.
We derive a substantial portion of our revenue from the U.S. government, whose fiscal year ends on September 30 of each year, which may impact our third fiscal quarter. In addition, our quarterly results may be impacted by the number of working days in a given quarter.
We derive a substantial portion of our revenue from the U.S. federal government, whose fiscal year ends on September 30 of each year, which may impact our third fiscal quarter. In addition, our quarterly results may be impacted by the number of working days in a given quarter.
The Board of Directors authorized the Nominating and Corporate Governance Committee to oversee the Company's ESG efforts, which include climate-related risks and opportunities. See Item 1A, " Risk Factors ," for discussion of risks related to global climate and ESG matters.
The Board of Directors authorized the Nominating and Corporate Governance Committee to oversee the Company's ESG efforts, which include climate-related risks and opportunities. See Item 1A, "Risk Factors ," for discussion of risks related to the global climate.
These regulations and risks are described in more detail below under Item 1A, " Risk Factors " in this Annual Report on Form 10-K. 10 Table of Contents Environmental, Social, and Governance Matters We strive to operate our business in an environmentally responsible manner and in support of sustainable long-term financial performance.
These regulations and risks are described in more detail below under Item 1A, "Risk Factors " in this Annual Report on Form 10-K. Environmental, Social, and Governance Matters We strive to operate our business in an environmentally responsible manner and in support of sustainable long-term financial performance.
See "Risk Factors — We are subject to the seasonality of U.S. government spending." Government Contracts and Regulation Our business is heavily regulated, and we must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. government and other contracts.
See "Risk Factors — We are subject to the seasonality of U.S. federal government spending." U.S. Federal Government Contracts, Regulation, and Legislation Our business is heavily regulated, and we must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. federal government and other contracts.
As part of our effort to improve our disclosures around human capital issues, we provided a public report pursuant to the Sustainability Accounting Standards Board ("SASB") Software & IT Service Standard, which addresses, in part, metrics relating to recruiting and managing a global, diverse and skilled workforce. Talent Acquisition and Retention We operate in a very competitive environment for talent.
As part of our effort to improve our disclosures around human capital issues, we provided a public report pursuant to the Sustainability Accounting Standards Board ("SASB") Software & IT Service Standard, which addresses, in part, metrics relating to recruiting and managing a global, diverse and skilled workforce. 8 Table of Contents Talent Acquisition and Retention We operate in a very competitive environment for talent.
U.S. government customers employ several contracting methods to purchase services and products.
U.S. federal government customers employ several contracting methods to purchase services and products.
The SEC also maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including Telos. 11 Table of Contents
The SEC also maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including Telos. 10 Table of Contents
The predominant contracting methods through which U.S. government agencies procure services and products include definitive award contracts, IDIQ contracts, Blanket Purchase Agreements ("BPAs"), U.S. General Service Administration ("GSA") schedule contracts and other transactional agreements ("OTA"). Government contracts are subject to congressional funding.
The predominant contracting methods through which U.S. federal government agencies procure services and products include definitive award contracts, IDIQ contracts, Blanket Purchase Agreements ("BPAs"), U.S. General Service Administration ("GSA") schedule contracts and other transactional agreements ("OTAs"). 9 Table of Contents Government contracts are subject to congressional funding.
We also offer secure mobility professional services, such as consulting and deployment services, to deliver integrated communications solutions that meet even the most complex needs of civilian, defense, and commercial customers. • Network Management and Defense: We provide services for operating, administrating, and defending complex enterprise networks and services for defensive cyber operations.
We also offer secure mobility professional services, such as consulting and deployment services, to deliver integrated communications solutions that meet even the most complex needs of civilian, defense, and commercial customers. • Network Management and Defense: We provide the complete spectrum of managed services and solutions needed for operating, maintaining, and defending complex enterprise networks.
Secure Networks represented 29% and 47% of total revenues for the years ended December 31, 2024 and 2023, respectively. The Security Networks segment offers the following solutions and services: • Secure Mobility: We offer solutions for business and government that enable work off-premise and minimize operational and security concerns across and beyond the enterprise.
Secure Networks represented 9.2% and 29.1% of total revenues for fiscal years ended December 31, 2025, and 2024, respectively. 6 Table of Contents The Secure Networks segment offers the following solutions and services: • Secure Mobility: We offer solutions for business and government that enable work off-premise and minimize operational and security concerns across and beyond the enterprise.
Our sales strategy is to establish a customer foothold with one of our solutions and work to achieve rapid success. We then leverage this customer relationship to generate interest in other solutions from the Telos portfolio. We have a variety of upsell opportunities that allow us to expand our presence within a customer account.
We then leverage this customer relationship to generate interest in other solutions from the Telos portfolio. We have a variety of upsell opportunities that allow us to expand our presence within a customer account.
Department of Energy, the U.S Department of the Treasury, the U.S. Social Security Administration, the U.S. Environment Protection Agency, and more. These customers have a number of subsidiary agencies with separate budgets and procurement functions. Our contracts may be with the highest level of these agencies or with the subsidiary agencies of these customers.
Department of Justice, the U.S. Department of Energy, the U.S. General Services Administration, the U.S. Department of the Interior, the U.S. Social Security Administration, the U.S. Environment Protection Agency, and more. These customers have a number of subsidiary agencies with separate budgets and procurement functions.
Additional information regarding our segments is presented in Note 18 – Segment Information to the consolidated financial statements at Item 8 of this Form 10-K. Security Solutions Segment: The Security Solutions segment focuses on cybersecurity, cloud, identity solutions, and secure messaging.
Additional information regarding our segments is presented in Note 1 6 – Segment Information to the consolidated financial statements at Item 8 of this Annual Report on Form 10-K.
Our consolidated revenues are largely attributable to prime contracts or subcontracts with our contractors engaged in work for the U.S. government, with the remaining attributable to state and local governments, and commercial markets. Our U.S. federal government customers include the DoD, the IC, and multiple civilian and public sector agencies, including DHS, the U.S. Department of Justice, the U.S.
Our Customers Our primary customers include the U.S. federal government, large commercial businesses, state and local governments, and international customers. Our consolidated revenues are largely attributable to prime contracts or subcontracts with our contractors engaged in work for the U.S. federal government.
Item 1. Business Business Overview Telos Corporation is a Maryland corporation headquartered in Ashburn, Virginia. Telos Corporation, together with its subsidiaries (the "Company" or "Telos" or "We"), offers technologically advanced, software-based security solutions that empower and protect the world's most security-conscious organizations against rapidly evolving, sophisticated and pervasive threats.
Item 1. Business Overview Telos Corporation is a Maryland corporation headquartered in Ashburn, Virginia. Telos Corporation, together with its subsidiaries (the "Company" or "Telos" or "We"), offers technology solutions and services that empower and protect the world's most security-conscious organizations. We deliver efficient, adaptable, and secure solutions that protect people, organizations, and information across government and industry.
See Note 2 - Significant Accounting Policies (under the caption "Research and Development") included in our notes to consolidated financial statements. We are leveraging our improved agile innovation and rapid automated development practices to rapidly establish prototypes that we can fully test for suitability and to pre-establish enterprise risk level across a variety of government networks and clouds.
We are leveraging our improved agile innovation and rapid automated development practices to rapidly establish prototypes that we can fully test for suitability and to pre-establish enterprise risk level across a variety of government networks and cloud environments. We are committed to and view our continued investment in research and development as a key factor to our long-term business success.
We consider the foundational value of integrity to be a non-negotiable requirement of employment, and an expectation of suppliers, partners, and our customers. We guard our reputation and will take necessary action to protect it. An essential part of our brand promise is always to engage employees, customers, partners, suppliers, and investors with integrity.
While employees are encouraged first to speak openly about any issues, a 24/7 hotline provides an opportunity to express concerns anonymously. We consider the foundational value of integrity to be a non-negotiable requirement of employment, and an expectation of suppliers, partners, and our customers. We guard our reputation and will take necessary action to protect it.
To ensure we can attract the most well-qualified employees, we employ strategic sourcing methods, innovative recruitment campaigns, and inclusive outreach initiatives to attract a diverse pool of candidates.
To ensure we can attract the most well-qualified employees, we employ strategic sourcing methods, innovative recruitment campaigns, and outreach initiatives to attract a diverse pool of candidates. This involves leveraging various channels, such as job boards, job fairs, social media platforms, and diversity-focused partnerships, to engage with candidates from different backgrounds and experiences.
Approximately 294 of our U.S.-based employees held U.S. security clearances, and 26% self-identified as veterans of U.S. military service as of that date. Our employees are not represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider relations with our employees to be good.
Our employees are not represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider relations with our employees to be good. Telos places a strong emphasis on supporting our people.
Sales We sell our products and services leveraging a direct sales approach, with a small subset being executed through a handful of partner organizations. Our customer acquisition success extends to commercial customers and vendors seeking to do business with the U.S. federal government, however our largest portion of revenue lies with the U.S. government itself.
Our customer acquisition success extends to commercial customers and vendors seeking to do business with the U.S. federal government; however, our largest portion of revenue lies with the U.S. federal government itself. 7 Table of Contents Our sales strategy is to establish a customer foothold with one of our solutions and work to achieve rapid success.
Much of our business is awarded through the submission of formal competitive bids; however, a portion of our revenue is awarded through limited competition or sole-source contracts.
Much of our business is awarded through the submission of formal competitive bids; however, a portion of our revenue is awarded through limited competition or sole-source contracts. Partner Organizations Our sales team works with partner organizations like Amazon Web Services ("AWS") to pursue mutual customers and leverage their marketplace platforms and marketing programs.
Our commercial customers include some of the largest technology, communications, and professional services companies in the U.S. Sales and Marketing As part of our sales and marketing investments, we also make corporate investments in functional areas such as contracts, solution architects, lead generation tools, and operations to ensure our back-office systems and processes scale for business growth.
Sales and Marketing As part of our sales and marketing investments, we make corporate investments in functional areas such as contracts, solution architects, and operations to ensure our back-office systems and processes scale for business growth. Sales We sell our products and services leveraging a direct sales approach, with a small subset being executed through a handful of partner organizations.
Secure Networks Segment: With a focus on enterprise security, the Secure Networks segment provides secure networking architectures and solutions to our customers through secure mobility solutions and network management and defense services. Our net-centric solutions enable collaboration and connectivity to increase efficiency, reduce costs, and improve mission outcomes.
Telos also offers ONYX ® , a proprietary touchless fingerprint biometric technology designed to enable secure and scalable biometric authentication across mobile and enterprise environments. Secure Networks Segment: With a focus on enterprise security, the Secure Networks segment provides secure networking architectures and solutions to our customers through secure mobility solutions and network management and defense services.
Information exchanged at this level and for these purposes requires operational requirements for time-sensitive, guaranteed delivery, precedence, high availability, and reliability. • Digital Identity Solutions: ◦ IDTrust360 ® is an enterprise digital trusted identity risk platform for extending flexible hybrid cloud identity services.
Information exchanged at this level and for these purposes requires operational requirements for time-sensitive, guaranteed delivery, precedence, high availability, and reliability. • Telos Identity Solutions: Telos provides a portfolio of identity solutions that support secure identity verification, biometric enrollment, and trusted identity services for government and commercial customers.
Research and Development We developed proprietary software-based solutions in various platforms related to security and cyber risk management. We invest substantial resources in research and development to innovate new solutions, enhance our offerings and grow opportunities by developing new features and modules for our existing platforms.
We invest substantial resources in research and development to innovate new solutions, enhance our offerings and grow opportunities by developing new features and modules for our existing platforms. See Note 2 - Summary of Significant Accounting Policies (under the caption "Research and Development") included in our notes to consolidated financial statements.
Telos provides an extensive range of wired and wireless, fixed and deployable, classified and unclassified voice, data, and video secure network solutions and services to support defense and civilian missions. Our capabilities include network design, operations and sustainment, system integration and engineering, network security and compliance, deployable comms, service desk, defensive cyber operations, and program management.
Our net-centric solutions enable collaboration and connectivity to increase efficiency, reduce costs, and improve mission outcomes. Telos provides an extensive range of wired and wireless, fixed and deployable, classified and unclassified voice, data, and video secure network solutions and services to support defense and civilian missions.
Telos places a strong emphasis on supporting our people. Our management team is committed to maintaining a corporate culture that fosters mutual respect and job satisfaction for our people while delivering innovation and value to customers and shareholders.
Our management team is committed to maintaining a corporate culture that fosters mutual respect and job satisfaction for our people while delivering innovation and value to customers and shareholders. This commitment is reflected in our core values: Always with integrity, at Telos we: Build trusted relationships, Work hard together, Design and deliver superior solutions, and Have fun doing it.
Partner Organizations Our sales team works with partner organizations like AWS, Microsoft Azure, and IBM to pursue mutual customers and leverage their marketplace platforms and marketing programs. 8 Table of Contents Marketing We build market awareness of Telos and our solutions through a variety of marketing programs, including regular briefings with industry analysts, public relations activities, trade show exhibitions, speaking engagements, and digital marketing.
Marketing We build market awareness of Telos and our solutions through a variety of marketing programs, including briefings with industry analysts, public relations activities, trade show exhibitions, speaking engagements, and digital marketing. We will continue investing in these activities and targeting additional vertical-specific content creation, targeted advertising campaigns, and search engine marketing.
We will continue investing in these activities and targeting additional vertical-specific content creation, targeted advertising and brand awareness campaigns, social media campaigns, and search engine marketing. Our sales team works hand in hand with our marketing team and various subject matter experts to develop targeted awareness campaigns for our various solutions that generate valuable leads and contacts.
Our sales team works hand-in-hand with our marketing team to develop targeted awareness campaigns for our various solutions that generate valuable leads and contacts. Research and Development We developed proprietary software-based solutions in various platforms related to security and cyber risk management.
Security Solutions represented 71% and 53% of total revenues for fiscal years 2024 and 2023, respectively. 5 Table of Contents The Security Solutions segment offers the following solutions and services: • Xacta ® : Xacta ® is a premier platform for enterprise cyber risk management and security compliance automation, delivering security awareness for systems in the cloud, on-premises, and in hybrid and multi-cloud environments.
Xacta is a premier platform delivering automated cyber risk management and continuous compliance processes for systems based in the cloud, on-premises, and in hybrid environments.
The operating results of these classified programs are included in our consolidated financial statements.
The operating results of these classified programs are included in our consolidated financial statements. We also actively monitor legislative initiatives and carefully follow legislative and contracting trends and activities, and evolve our strategies to take these into consideration and respond to opportunities as they develop.
Our diverse network management and defense capabilities address common and uncommon requirements in many industries and disciplines, from military to government agencies. Telos network engineers, security specialists, and program managers are experienced with advanced DoD and federal networks and are certified in the leading tools, technologies, and best practices for network management and administration.
Telos employs a robust group of network engineers, system administrators, help desk, cybersecurity specialists, and program managers who are experienced with advanced DoW and federal networks, and are certified in the leading tools, technologies, and best practices for network management and administration. We ensure the consistency and continuity of network management services required in today's mission-critical network environments.
We are committed to and view our continued investment in research and development as a key factor to our long-term business success. Human Capital Resources As of December 31, 2024, we had 519 employees, of which 504 were full-time employees. As of December 31, 2024, approximately 89% of our workforce was located in the United States.
Human Capital Resources As of December 31, 2025, we had 525 employees, of which 509 were full-time employees. As of December 31, 2025, approximately 90.1% of our workforce was located in the United States. Approximately 309 of our U.S.-based employees held U.S. security clearances, and 23.0% self-identified as veterans of U.S. military service as of that date.
We maintain government certifications and designations that distinguish Telos ID, including TSA PreCheck ® enrollment provider, Aviation Channeling Services provider, FBI-approved Channeler, and Financial Industry Regulatory Authority Electronic Fingerprint Submission provider.
Telos maintains key government certifications and designations, including recognition as a TSA PreCheck enrollment provider, Aviation Channeling Services provider, Federal Bureau of Investigation ("FBI") approved Channeler, and Florida Department of Law Enforcement Registered Live Scan Service Provider.
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Our portfolio of security products, services and expertise endows our customers with capabilities to reach new markets, serve their stakeholders more effectively, and successfully defend the nation or their enterprise with confidence in their security and privacy. Our mission is to protect people, organizations, and information through trusted solutions that proactively manage risk, compliance, and persistent digital identity.
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From cyber governance, risk and compliance ("GRC") with Xacta ® , to identity and biometric solutions, secure networks, and TSA PreCheck ® enrollment, we help customers stay ahead of evolving threats. Our primary customers include the U.S. federal government, large commercial organizations and international customers.
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We do this by developing robust, reliable, and uncompromising solutions for our customers, creating a workplace that engages and inspire our employees, and providing value to our shareholders to ensure a lasting legacy of excellence. In the current global environment, our mission is more critical than ever.
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Our deep domain expertise, cleared workforce, and proven technologies give us a unique position at the intersection of cybersecurity, identity, and network security. Driven by purpose and guided by our core values, we build lasting partnerships, deliver superior solutions, and help create a more secure, interconnected world.
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The emergence of each new information and communications technology ("ICT") introduces new vulnerabilities, as security is still too often overlooked in solution development. Networks and applications meant to enhance productivity and profitability often jeopardize an organization due to poor planning, misconfiguration, or an unknown gap in security.
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Security Solutions Segment: The Security Solutions segment delivers cybersecurity, cloud, identity, and secure messaging solutions that help government and commercial customers protect critical systems, manage cyber risk, and operate securely in complex and regulated environments.
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Ransomware, insider threats, cybercrime, and advanced persistent threats continue to menace public and private enterprises across all industries. Cybersecurity, cloud security, and enterprise security of the modern organization share much in common, yet also call for a diverse range of skills, capabilities, and experience in order to meet the requirements of security-conscious customers.
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This segment combines cyber GRC solutions, secure cloud services, identity and biometric technologies, and secure messaging platforms to support mission-critical requirements for government and commercial customers operating in highly regulated and security-sensitive environments. Security Solutions represented 90.8% and 70.9% of total revenues for fiscal years 2025 and 2024, respectively.
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Our vision is to create a more secure, interconnected world as the trusted leader in innovative digital security solutions that safeguard people, organizations, and information. Decades of experience in developing, orchestrating, and delivering solutions across these three domains give us the vision and the confidence to provide solutions that empower and protect the enterprise at an integrated, holistic level.
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The Security Solutions segment offers the following solutions and services: • Xacta: Deployed at some of the world's most security-conscious organizations, Xacta is a cyber GRC automation platform designed to help its customers meet the complex challenges of managing cyber risk and security compliance by automating processes for assessment and authorization, remediation, and continuous monitoring.
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Our experience in addressing challenges in one area of an enterprise helps us meet requirements in others. We understand that a range of complementary capabilities may be needed to solve a single challenge, and we also recognize when a single solution might address multiple challenges. Our security solutions span these three domains: cybersecurity, cloud security and enterprise network security.
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It supports a wide-range of frameworks and regulatory content, including National Institute of Standards and Technology ("NIST") Risk Management Framework ("RMF"), the Cybersecurity Risk Management Construct for Department of War ("DoW") IT, the NIST Cybersecurity Framework, the Federal Risk and Authorization Management Program ("FedRAMP") and the DoW's Cybersecurity Maturity Model Certification ("CMMC") program, across all industries with no-code customization options for tailoring content to fit the organization's needs.
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Cybersecurity solutions help our customers ensure the ongoing security, integrity and compliance of their on-premises and related cloud-based systems by reducing threats and vulnerabilities to foil cyber adversaries before they can attack. Our security engineers and subject matter experts assess our customers' cybersecurity environments and design, engineer, and operate systems needed to strengthen their cybersecurity postures.
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Recently, Telos launched Xacta.ai TM , the artificial intelligence ("AI") capability at the core of the Xacta cyber GRC platform, dramatically reducing compliance time and effort.
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Our cloud solutions leverage the specialized skills and experience needed to help our customers plan, engineer, execute, and accelerate secure cloud migrations while assuring ongoing management and security of enterprise cloud technology environments.
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Xacta.ai delivers expert-level guidance and real-time insights, empowering organizations to move from reactive compliance to proactive risk management. 5 Table of Contents • Cybersecurity Services: We offer solutions and services for the full cybersecurity lifecycle, including RMF consulting services, security assessment and compliance, engineering and evaluation, operations, penetration testing, and digital forensics.
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Our identity solutions deliver digital identity, biometric, and nationwide enrollment services and address Know Your Customer and identity management challenges for enterprises working within regulated and critical infrastructure environments. Our secure messaging services are used to securely transmit messages that provide direction and establish a formal position, commitment, or responses requiring the authority of an organization.
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These solutions address requirements related to Know Your Customer (“KYC”), identity proofing, access control, insider threat mitigation, and regulatory compliance, and are deployed across large-scale environments supporting millions of identity transactions through workstations, kiosks, laptops, mobile devices, and access control systems.
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Xacta delivers automated cyber risk and compliance management solutions to large commercial and government enterprises. Across the United States ("U.S.") federal government, Xacta is a leading commercial cyber risk and compliance management solution.
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Built on secure, enterprise-grade platforms certified and operational across multiple U.S. federal agencies, these offerings enable organizations to deploy modular, scalable services supporting both business-to-business and business-to-consumer identity use cases. Telos supports major digital identity programs in the U.S., including those serving the military, transportation, healthcare, law enforcement, financial services, and civil service organizations.
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With use cases including cyber risk management, risk remediation management, security authorization, compliance management, audit management, inventory management, vulnerability management, continuous compliance monitoring, and vendor and supply chain risk management, Xacta administers the key elements of more than 100 leading regulations and policies for IT security compliance, including the National Institute of Standards and Technology ("NIST") Risk Management Framework ("RMF"), RMF for Department of Defense ("DoD") IT, Committee on National Security Systems Instruction No. 1253, NIST Cybersecurity Framework, the Federal Risk and Authorization Management Program ("FedRAMP") and the DoD's Cybersecurity Maturity Model Certification ("CMMC") program. • Cybersecurity Services: We offer solutions and services for the full cybersecurity lifecycle, including Risk Management Framework ("RMF") consulting services, assessment and compliance, engineering and evaluation, operations, and penetration testing.
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Telos’ identity offerings include TSA PreCheck enrollment services, IDVetting ® , and Aviation Channeling Services (“ACS”), which provide identity enrollment, FBI background check submission, and biometric services for government agencies, transportation security programs, and regulated industries. Through these services, Telos supports high-assurance identity verification and vetting processes for millions of individuals annually in compliance with federal and industry requirements.
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This platform is enabled for mobile, enterprise environments and custom digital identity services that mitigate threats by integrating advanced technologies that fuse biometrics, credentials, and other identity-centric data used to continuously monitor trust.
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Our capabilities include network design, operations and sustainment, system integration and engineering, network security and compliance, deployable communications, service desk, defensive cyber operations, and program management.
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IDTrust360 is a commercially owned and operated platform with direct interfaces to the Federal Bureau of Investigation's ("FBI") criminal records, Department of Homeland Security's ("DHS") terrorist watch list service, U.S. Department of Treasury's pay.gov, other government identity risk management systems, and numerous commercial identity, intelligence, and risk-based data sources.
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Our managed network services reduce the total cost of ownership while also ensuring system and network availability, information protection and assured information delivery.
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We actively engage with federal customers to integrate vital event records, government identification document records, and other fingerprint-based biometric records hosted across multiple agencies.
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In fiscal year 2025, we generated approximately 91.0% of our revenues from the U.S. federal government, with the remaining attributable to state and local governments, and commercial markets. Our U.S. federal government customers include the DoW, the intelligence community ("IC"), and multiple civilian and public sector agencies, including the U.S. Department of Homeland Security ("DHS"), the U.S.
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This enables Telos to offer NIST-compliant digital identity services aligned with federal security mandates. ◦ ONYX®, a mobile touchless fingerprint software development kit, enables secure biometric authentication by leveraging standard smartphone cameras to capture and process high-quality fingerprint images without physical contact.
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Our contracts may be with the highest level of these agencies or with the subsidiary agencies of these customers. Our commercial customers include some of the largest technology, communications, and professional services companies in the U.S. Competition We operate in a competitive market for cybersecurity, governance, risk and compliance software, secure network solutions, and digital identity services.
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It uses artificial intelligence (“AI”) neural networks for finger detection and automatic acquisition, along with a patented image processing algorithm to generate precise, machine-matchable fingerprints. Targeting markets such as financial services, healthcare, government, and enterprise security, ONYX is ideally suited for use cases including mobile banking, field identification for law enforcement, telemedicine identity verification, secure access control, and remote onboarding.
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The market is fragmented, with no single company or small group of companies holding a dominant position. Our competitors include large defense contractors that offer overlapping capabilities across multiple service areas, as well as smaller specialty firms focused on risk and compliance management, organizational messaging, information security consulting, and secure network solutions.
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Its value proposition lies in delivering a cost-effective, scalable, and user-friendly biometric solution that eliminates the need for specialized hardware, enhances security with liveness detection, and supports seamless integration across iOS and Android platforms, empowering organizations to strengthen identity management and combat fraud efficiently 6 Table of Contents Telos’ sovereign, reusable Identity-as-a-Service Solution ("IDaaS") is designed for the use of government agencies, mobile network operators, banking organizations and others who need to incorporate a zero-trust method of identity verification into existing know-your-customer and onboarding processes, while striving to remain in front of international data protection and privacy regulations.
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Competition for U.S. federal government contracts is particularly intense due to the competitive bidding process that governs both initial contract awards and renewals. Many government contracts require contractors to hold security clearances and employ personnel with specified levels of experience and clearance, which can limit the pool of qualified competitors but may also constrain our ability to scale rapidly.
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This user-controlled system empowers individuals to hold and manage their own identity data, presenting it securely to relying parties or verifiers while ensuring trust through server-side biometric authentication powered by our proprietary ONYX technology.
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The markets in which we operate are characterized by evolving technology requirements and changing customer needs. For example, and without limitation, in the identity and biometric solutions market, industry standards and compatible technologies continue to develop rapidly.
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Organizations leveraging the IDaaS solution offered by Telos save on the cost and effort of onboarding new users without worrying about the complexities of verifying individual identities.
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We compete primarily on the basis of our technical capabilities, our experience serving security-conscious government and commercial customers, our ability to obtain and maintain required security clearances, the quality and reliability of our solutions, and our capacity to anticipate and respond to emerging technological requirements.
Removed
The solution provides fully proofed and vetted reusable identities to reduce risk across all identity-related enterprise events, and fosters trust across markets such as financial services, healthcare, government, and enterprise security for use cases like digital wallets, remote onboarding, and secure access control.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe competitive bidding process presents a number of risks, including the following: • From time to time we expend substantial funds and time to prepare bids and proposals for contracts that are ultimately awarded to one of our competitors; • From time to time we are unable to accurately estimate the resources and costs that will be required to perform any contract we are awarded, which results in substantial cost overruns and decreased margins; • From time to time we encounter expense and delay when our competitors protest or challenge awards of contracts, and any such protest or challenge could result in a requirement to resubmit bids on modified specifications or in the termination, reduction or modification of the awarded contract; • From time to time the protest of contracts awarded to us results in the delay of program performance and the generation of revenue while the protest is pending; and • From time to time we are not given the opportunity to re-compete for U.S. government contracts previously awarded to us, and we may incur expenses to protest such a decision and ultimately may not succeed in competing for or winning such contract renewal. 14 Table of Contents The U.S. government contracts for which we compete typically have multiple option periods, and if, as happens from time to time, we fail to win a contract or a task order, we generally will be unable to compete again for that contract for several years.
Biggest changeFrom time to time, the competitive bidding process presents a number of risks, including the following: • We expend substantial funds and time to prepare bids and proposals for contracts that are ultimately awarded to one of our competitors; • We are unable to accurately estimate the resources and costs that will be required to perform any contract we are awarded, which results in substantial cost overruns and decreased margins; • We encounter expense and delay when our competitors protest or challenge awards of contracts, and any such protest or challenge could result in a requirement to resubmit bids on modified specifications or in the termination, reduction or modification of the awarded contract; and • We are not given the opportunity to re-compete for U.S. federal government contracts previously awarded to us, and we may incur expenses to protest such a decision and ultimately may not succeed in competing for or winning such contract renewal.
To continue to maintain and grow our business, it is important that our existing customers renew their subscriptions or contracts for our solutions and services when existing contract terms expire.
To continue to maintain and grow our business, it is important that our existing customers renew their contracts for our solutions and services or subscriptions when existing contract terms expire.
Our customers have no obligation to renew or extend their subscriptions or contracts for our solutions or services after the expiration of the contractual periods, which vary in length, and in the normal course of business, some customers have elected not to renew or extend. It is difficult to predict attrition rates given the varying needs of our customer base.
Our customers have no obligation to renew or extend their contracts for our solutions or services or subscriptions after the expiration of the contractual periods, which vary in length, and in the normal course of business, some customers have elected not to renew or extend. It is difficult to predict attrition rates given the varying needs of our customer base.
While we have security measures in place to protect our data and the data of our customers or end-users of our services, our services and underlying infrastructure may in the future be materially breached or compromised as a result of the following: • Third-party attempts to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information to gain access to our customers' data, our data or our IT systems; • Efforts by individuals or groups of hackers and sophisticated organizations, including state-sponsored organizations or nation-states; • Cyberattacks on our internally built infrastructure; • Vulnerabilities resulting from enhancements and updates to our existing solutions; • Vulnerabilities in the products or components across the broad ecosystem that our services operate in or are dependent on; • Vulnerabilities existing within newly acquired or integrated technologies and infrastructures; • Vulnerabilities existing within third-party software or services that we employ; • Attacks on, or vulnerabilities in, the many different underlying networks and services that power the Internet that our products depend on, most of which are not under our control or the control of our vendors, partners, or customers; and • Employee or contractor errors or intentional acts that compromise our security systems.
While we have security measures in place to protect our data and the data of our customers or end-users of our services, our services and underlying infrastructure may in the future be materially breached or compromised as a result of the following: • Third-party attempts to fraudulently induce employees, contractors or customers into disclosing sensitive information such as user names, passwords or other information to gain access to our customers' data, our data or our IT systems; • Efforts by individuals or groups of hackers and sophisticated organizations, including state-sponsored organizations or nation-states; • Cyberattacks on our internally built infrastructure; • Vulnerabilities resulting from enhancements and updates to our existing solutions; • Vulnerabilities in the products or components across the broad ecosystem that our services operate in or are dependent on; • Vulnerabilities existing within newly acquired or integrated technologies and infrastructures; • Vulnerabilities existing within third-party software or services that we employ; • Attacks on, or vulnerabilities in, the many different underlying networks and services that power the Internet that our products depend on, most of which are not under our control or the control of our vendors, partners, or customers; and • Employee or contractor errors or intentional acts that compromise our security systems.
Uncertainty exists regarding how future budget and program decisions will unfold, including the spending priorities of the new U.S. presidential administration and Congress, and what challenges budget reductions will present for us and our industry generally. The current administration's efforts to reduce the size and spending of the federal government pose several potential risks to our operations.
Uncertainty exists regarding how future budget and program decisions will unfold, including the spending priorities of the U.S. presidential administration and Congress, and what challenges budget reductions will present for us and our industry generally. The current administration's efforts to reduce the size and spending of the federal government pose several potential risks to our operations.
A decline in the federal budget, changes in spending or budgetary priorities of the U.S. government, a prolonged U.S. government shutdown or delays in contract awards may significantly and adversely affect our future revenues, cash flow and financial results. Our customers are substantially U.S. government agencies. The customer relationship with the U.S. government involves certain unique risks.
A decline in the federal budget, changes in spending or budgetary priorities of the U.S. federal government, a prolonged U.S. federal government shutdown or delays in contract awards may significantly and adversely affect our future revenues, cash flow and financial results. Our customers are substantially U.S. federal government. The customer relationship with the U.S. federal government involves certain unique risks.
As a U.S. government contractor, we are subject to oversight by many agencies and entities of the U.S. government that may investigate and make inquiries about our business practices and conduct audits of contract performance and cost accounting. Depending on the results of any such audits and investigations, the U.S. government may make claims against us.
As a U.S. federal government contractor, we are subject to oversight by many agencies and entities of the U.S. federal government that may investigate and make inquiries about our business practices and conduct audits of contract performance and cost accounting. Depending on the results of any such audits and investigations, the U.S. federal government may make claims against us.
Although sales to a new customer have often led to additional sales to the same customer or similarly situated customers, it is uncertain we will achieve the same penetration and organic growth in the future, and our reputation, business, financial condition, and results of operations could be negatively impacted.
Although sales to a new customer have often led to additional sales to the same customer or similarly situated customers, it is uncertain if we will achieve the same penetration and organic growth in the future, and our reputation, business, financial condition, and results of operations could be negatively impacted.
The attractiveness of our solutions to our customers is impacted by a number of factors, including the willingness of individuals to provide their personal information, including biometric information, to private or governmental entities, the level of confidence that such information can be stored safely and securely, and trust that such information will not be misused or breached.
The attractiveness of some of our solutions to our customers is impacted by a number of factors, including the willingness of individuals to provide their personal information, including biometric information, to private or governmental entities, the level of confidence that such information can be stored safely and securely, and trust that such information will not be misused or breached.
From time to time, we release guidance in our quarterly earnings conference calls, quarterly earnings releases, or otherwise, regarding our future performance that represents our management's estimates as of the date of release. This guidance, which includes forward-looking statements, is based on projections prepared by our management.
From time to time, we release or confirm guidance in our quarterly earnings conference calls, quarterly earnings releases, or otherwise, regarding our future performance that represents our management's estimates as of the date of release. This guidance, which includes forward-looking statements, is based on projections prepared by our management.
In addition, the U.S. government has increasingly relied on IDIQ contracts and other procurement vehicles that are subject to a competitive bidding and funding process even after the award of the basic contract, adding an element of uncertainty to future funding levels.
In addition, the U.S. federal government has increasingly relied on IDIQ contracts and other procurement vehicles that are subject to a competitive bidding and funding process even after the award of the basic contract, adding an element of uncertainty to future funding levels.
In addition, over the last few years, the U.S. government has been unable to complete its budget process before the end of its fiscal year, resulting in a series of continuing resolutions to extend sufficient funds only for U.S. government agencies to continue operating.
In addition, over the last few years, the U.S. federal government has been unable to complete its budget process before the end of its fiscal year, resulting in a series of continuing resolutions to extend sufficient funds only for U.S. federal government agencies to continue operating.
Many of the U.S. government programs in which we participate, both as a contractor or subcontractor, extend for several years and include one or more base years and one or more option years. These programs are typically funded on an annual basis.
Many of the U.S. federal government programs in which we participate, both as a contractor or subcontractor, extend for several years and include one or more base years and one or more option years. These programs are typically funded on an annual basis.
Moreover, as we continue to target selling our solutions and services to larger organizations, these larger organizations may demand substantial price concessions. We may also need to change pricing policies to accommodate government pricing guidelines for our contracts with federal, state, local, and foreign governments and government agencies.
Moreover, as we continue to target selling our solutions and services to larger organizations, these larger organizations may demand substantial price concessions. We may also need to change pricing policies to accommodate government pricing guidelines for our contracts with federal, state, and local governments, and foreign governments.
The U.S. government may terminate, cancel, delay, modify or curtail our contracts at any time prior to completion and, if we do not replace them, this may adversely affect our future revenues and could adversely impact our earnings .
The U.S. federal government may terminate, cancel, delay, modify or curtail our contracts at any time prior to completion and, if we do not replace them, this may adversely affect our future revenues and could adversely impact our earnings .
We rely on the technology, infrastructure, and software applications of certain third parties in order to host or operate certain key platform features or functions of our business. Additionally, we rely on third-party computer hardware and cloud capabilities in order to deliver our solutions and services.
We rely on the technology, infrastructure, and software applications of certain third parties in order to host or operate certain key features or functions of our business. Additionally, we rely on third-party computer hardware and cloud capabilities in order to deliver our solutions and services.
Because the U.S. government fiscal year ends on September 30, it is common for U.S. government agencies to award extra tasks in the weeks immediately prior to the end of its fiscal year in order to avoid the loss of unexpended fiscal year funds.
Because the U.S. federal government fiscal year ends on September 30, it is common for U.S. federal government agencies to award extra tasks in the weeks immediately prior to the end of its fiscal year in order to avoid the loss of unexpended fiscal year funds.
Under U.S. government procurement regulations and practices, an indictment of a U.S. government contractor could result in that contractor being fined and/or suspended for a period of time from eligibility for bidding on, or for the award of, new U.S. government contracts.
Under U.S. federal government procurement regulations and practices, an indictment of a U.S. federal government contractor could result in that contractor being fined and/or suspended for a period of time from eligibility for bidding on, or for the award of, new U.S. federal government contracts.
Partnerships, mergers, joint ventures, acquisitions, and divestitures include a number of risks and present financial, managerial and operational challenges, including but not limited to: • Diversion of management attention from running our existing business; • Possible material weaknesses in internal control over financial reporting; • Increased expenses, including legal, administrative and compensation expenses related to newly hired or terminated employees; • Increased costs to integrate the technology, personnel, customer base and business practices of the acquired company with us; • Potential exposure to material liabilities not discovered in the due diligence process; 18 Table of Contents • Potential adverse effects on reported operating results due to possible write-down of goodwill and other intangible assets associated with acquisitions; and • Unavailability of acquisition financing or unavailability of such financing on reasonable terms.
Partnerships, mergers, joint ventures, acquisitions, and divestitures include a number of risks and present financial, managerial and operational challenges, including but not limited to: diversion of management attention from running our existing business; possible material weaknesses in internal control over financial reporting; increased expenses, including legal, administrative and compensation expenses related to newly hired or terminated employees; increased costs to integrate the technology, personnel, customer base and business practices of the acquired company with us; potential exposure to material liabilities not discovered in the due diligence process; potential adverse effects on reported operating results due to possible write-down of goodwill and other intangible assets associated with acquisitions; and unavailability of acquisition financing or unavailability of such financing on reasonable terms.
Many of these third-party providers attempt to impose limitations on their liability for such errors, disruptions, defects, performance deficiencies, or failures, and if enforceable, we may have additional liability to our customers or third-party providers. 15 Table of Contents Furthermore, our solutions are, in many cases, important or essential to our customers' operations, including, in some cases, their cybersecurity or oversight and compliance programs, and subject to service level agreements.
Many of these third-party providers attempt to impose limitations on their liability for such errors, disruptions, defects, performance deficiencies, or failures, and if enforceable, we may have additional liability to our customers or third-party providers. 14 Table of Contents Furthermore, our solutions are, in many cases, important or essential to our customers' operations, including, in some cases, their cybersecurity or oversight and compliance programs, and subject to service level agreements.
We derive a substantial portion of our revenues from U.S. government contracting, and as a result, we are subject to the annual seasonality of U.S. government purchasing.
We derive a substantial portion of our revenues from U.S. federal government contracting, and as a result, we are subject to the annual seasonality of U.S. federal government purchasing.
Moreover, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, financial condition, and results of operations could be adversely affected. The provisioning of additional cloud hosting capacity requires lead time.
Moreover, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, financial condition, and results of operations could be adversely affected. For example, the provisioning of additional cloud hosting capacity requires lead time.
In addition, our reputation and client relationships may be damaged as a result of our practices related to climate change, including our involvement, or our clients' involvement, in certain industries or projects associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
Further, our reputation and client relationships may be damaged as a result of our practices related to climate change, including our involvement, or our clients' involvement, in certain industries or projects associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
We depend on third parties for certain operational services and components of our products in order to fully perform under our contracts, and the failure or disruption of a third party to perform these services could have an adverse impact on our business.
We depend on third parties for certain operational services and components of our products in order to fully perform under our contracts, and the failure or disruption of a third party to perform these services or provide these goods could have an adverse impact on our business.
Actual results could differ materially from those projected in the forward-looking statements contained in this Form 10-K as a result of the risk factors discussed below and elsewhere in this Form 10-K. Business and Operational Risks Our business could be negatively affected by cyber or other information security breaches, threats or other disruptions.
Actual results could differ materially from those projected in the forward-looking statements contained in this Annual Report on Form 10-K as a result of the risk factors discussed below and elsewhere in this Annual Report on Form 10-K. Business and Operational Risks Our business could be negatively affected by cyber or other information security threats, breaches, or other disruptions.
If these third parties increase pricing terms, terminate or seek to terminate our contractual relationship, establish more favorable relationships with our competitors, or change or interpret their terms of service or policies in a manner that is unfavorable with respect to us, we may be required to transfer to other cloud providers or invest in a private cloud.
If these third parties increase pricing terms, terminate or seek to terminate our contractual relationship, establish more favorable relationships with our competitors, or change or interpret their terms of service or policies in a manner that is unfavorable with respect to us, we may be required to (among other possible consequences) transfer to other cloud providers or invest in a private cloud.
A conviction could result in debarment for a specified period of time, and debarment could materially and negatively affect our business and operating results. We are subject to governmental export and import controls that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
A conviction could result in debarment for a specified period of time, and debarment could materially and negatively affect our business and operating results. 21 Table of Contents We are subject to governmental export and import controls that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
The inability to adequately protect and enforce our intellectual property and other proprietary rights could seriously harm our business, results of operations and financial condition. Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time, and resources accurately.
The inability to adequately protect and enforce our intellectual property and other proprietary rights could seriously harm our business, results of operations and financial condition. 15 Table of Contents Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time, and resources accurately.
If we fail to effectively anticipate, identify and respond to these changes in product or program needs in a timely manner, our business could be negatively impacted. Likewise, if we are unable to develop new products that meet customers' changing needs, future sales and earnings may be adversely affected.
If we fail to effectively anticipate, identify and respond to these changes in product, solutions or program needs in a timely manner, our business could be negatively impacted. Likewise, if we are unable to develop new products that meet customers' changing needs, future sales and earnings may be materially affected.
Any decline or disruption in the travel industry could materially adversely affect our business, results of operations and financial condition. One of our growth strategies is to increase revenue from our TSA PreCheck enrollment offerings. Accordingly, our performance is dependent in part on the strength of the travel industry.
Any decline or disruption in the travel industry or general economic downturn could materially and adversely affect our business, results of operations and financial condition. One of our growth strategies is to increase revenue from our TSA PreCheck enrollment offerings. Accordingly, our performance is dependent in part on the strength of the travel industry.
We routinely experience cybersecurity threats, threats to our information technology infrastructure and attempts to gain access to our sensitive information, as do our customers, suppliers, prime and subcontractors, and joint venture partners. We experience similar security threats at customer sites that we operate and manage as a contractual requirement.
We routinely experience cybersecurity threats, threats to our information technology infrastructure and attempts to gain access to our sensitive information, as do our customers, suppliers, prime and subcontractors, and strategic partners. We experience similar security threats at customer sites that we operate and manage as a contractual requirement.
We depend on these subcontractors and suppliers to fulfill their contractual obligations in a timely and satisfactory manner in full compliance with customer requirements.
From time to time, we depend on these subcontractors and suppliers to fulfill their contractual obligations in a timely and satisfactory manner in full compliance with customer requirements.
If one or more of our suppliers or subcontractors is unable to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-upon services per its contractual obligations, our ability to perform our obligations as a contractor may be adversely affected, and we may be exposed to liability.
If one or more of our subcontractors or suppliers is unable to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-upon services per its contractual obligations, our ability to perform our obligations as a contractor may be adversely affected.
The relationship we have with our partners, and that our partners have with our customers, provides our customers with enhanced value for our solutions and services. Our agreements with our partners are generally non-exclusive; therefore, our partners may offer customer solutions from several companies, including solutions and services that compete with ours.
The relationship we have with our partners, and that our partners have with our customers, provides our customers with enhanced value for our solutions and services. 16 Table of Contents Our agreements with our partners are generally non-exclusive; therefore, our partners may offer customer solutions from several companies, including solutions and services that compete with ours.
For instance, in the third quarter of 2024, we decided to discontinue the development and/or sale of all or part of certain solutions for selected capitalized software projects, and certain projects which we ceased to use before the end of its useful life.
Likewise, in the third quarter of 2024, we decided to discontinue the development and/or sale of all or part of certain solutions for selected capitalized software projects, and certain projects which we ceased to use before the end of their useful life.
Changes in congressional schedules, administration priorities, negotiations for program funding levels or unforeseen world events can interrupt the funding for a program or contract. Second, funds for multi-year contracts can be changed in subsequent years in the appropriations process.
Changes in congressional schedules, administration priorities, negotiations for program funding levels or unforeseen world events can delay or disrupt the funding for a program or contract. Funds for multi-year contracts can be changed in subsequent years in the appropriations process.
In particular, we make certain estimates and assumptions related to the adoption and interpretation of these principles, including the recognition of our revenue and the accounting of our stock-based compensation expense with respect to our consolidated financial statements.
We prepare consolidated financial statements in accordance with U.S. GAAP. In particular, we make certain estimates and assumptions related to the adoption and interpretation of these principles, including the recognition of our revenue and the accounting of our stock-based compensation expense with respect to our consolidated financial statements.
We may be subject to legal proceedings, regulatory disputes and governmental inquiries that could materially harm our business, operating results, and financial condition. From time to time, in the ordinary course of business, we have been involved in legal proceedings and, in the future, may be subject to lawsuits, claims, government investigations and other proceedings.
We may be subject to legal proceedings, regulatory disputes and governmental inquiries that could materially harm our business, operating results, and financial condition. From time to time, in the ordinary course of business, we are subject to a variety of legal proceedings and, in the future, may be subject to lawsuits, claims, government investigations and other proceedings.
Our success depends upon the continued services of our highly qualified and experienced executive officers and other key members of management. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives. Such changes in our executive management team may be disruptive to our business.
Our business relies heavily upon the expertise and services of our employees. Our success depends upon the continued services of our highly qualified and experienced executive officers and other key members of management. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives.
In May 2022, our Board of Directors approved a share repurchase program ("SRP") for the repurchase of up to $50.0 million of our outstanding shares of our common stock. As of December 31, 2024, approximately $38.7 million remained available under the stock repurchase program.
In May 2022, our Board of Directors approved a share repurchase program ("SRP") for the repurchase of up to $50.0 million of our outstanding shares of our common stock. As of December 31, 2025, approximately $25.1 million remained available under the stock repurchase program.
Climate-related events, including the increasing frequency of extreme weather events and their impact on U.S. critical infrastructure, have the potential to disrupt our business, our third-party suppliers, or the operations and business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations.
Climate-related events, including the increasing frequency of extreme weather events and their impact on U.S. critical infrastructure, have the potential to disrupt our business and the businesses of our suppliers, customers, and partners, and may cause us to experience additional costs to maintain or resume operations.
Any failure or perceived failure by us or our solutions to comply with U.S. or applicable foreign laws, regulations, directives, policies, industry standards, or legal obligations relating to privacy, data protection, or information security, or any security incident that results in loss of or the unauthorized access to, or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data or information may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations. 21 Table of Contents We are subject to substantial oversight from federal agencies that have the authority to suspend our ability to bid on contracts .
Any failure or perceived failure by us or our solutions to comply with U.S. or applicable foreign laws, regulations, directives, policies, industry standards, or legal obligations relating to privacy, data protection, or information security, or any security incident that results in loss of or the unauthorized access to, or acquisition, use, release, or transfer of, personal information, personal data, or other customer or sensitive data or information may result in governmental investigations, inquiries, enforcement actions and prosecutions, private claims and litigation, indemnification or other contractual obligations, other remedies, including fines or demands that we modify or cease existing business practices, or adverse publicity, and related costs and liabilities, which could significantly and adversely affect our business and results of operations.
Under these contracts, the U.S. government generally has the right not to exercise options to extend or expand our contracts and may otherwise terminate, cancel, modify or curtail our contracts at its convenience. First, the process may be delayed or disrupted.
Under these contracts, the U.S. federal government generally has the right not to exercise options to extend or expand our contracts and may otherwise terminate, cancel, modify, delay, or curtail our contracts at its convenience.
Our competitive position and future profitability depend, in part, on our ability to develop new technologies . Our ability to increase revenue from existing customers and attract new customers will depend, in part, on our ability to anticipate and respond effectively to rapid technological changes and market developments.
Our ability to increase revenue from existing customers and attract new customers will depend, in part, on our ability to anticipate and respond effectively to rapid technological changes and market developments.
If our costs exceed the contract ceiling and are not authorized by the customer or are not allowable under the contract or applicable regulations, we may not be able to obtain reimbursement for all such costs and our fees may be reduced or eliminated.
In certain cases, cost-reimbursable contracts have a contract ceiling. If our costs exceed the contract ceiling and are not authorized by the customer or are not allowable under the contract or applicable regulations, we may not be able to obtain reimbursement for all such costs and our fees may be reduced or eliminated.
If we are unable to modify or develop pricing models and strategies that are attractive to existing and prospective customers, while enabling us to significantly grow our sales and revenue relative to our associated costs and expenses in a reasonable period of time, our business, financial condition, and results of operations may be adversely impacted.
If we are unable to modify or develop pricing models and strategies that are attractive to existing and prospective customers, while enabling us to significantly grow our sales and revenue relative to our associated costs and expenses in a reasonable period of time, our business, financial condition, and results of operations may be adversely impacted. 17 Table of Contents Artificial Intelligence ("AI") is an emerging technology and we may not be successful in our AI initiatives.
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make judgments, estimates, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
GAAP requires management to make judgments, estimates, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
Significant judgments, estimates, and assumptions used in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition, goodwill and other long-lived assets, and income taxes. Weakened global economic conditions may adversely affect our industry, business, operating results and financial condition. Our overall performance depends in part on worldwide economic and geopolitical conditions.
Significant judgments, estimates, and assumptions used in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition, goodwill and other long-lived assets, and income taxes. 23 Table of Contents Global inflationary pressures and weakened global economic and political conditions may adversely affect our industry, business, operating results and financial condition.
Our operating results could also be adversely affected by spending caps or changes in the budgetary priorities of the U.S. government, as well as delays in program starts or the award of contracts or task orders under contracts. In recent years, U.S. government appropriations have been affected by larger U.S. government budgetary issues and related legislation.
Our operating results could also be adversely affected by spending caps or changes in the budgetary priorities of the U.S. federal government, as well as delays in program starts or the award of contracts or task orders under contracts.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), the rules and regulations of Nasdaq, and other securities rules and regulations that impose various requirements on public companies. Our management and other personnel devote substantial time and resources to comply with these rules and regulations.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), the rules and regulations of Nasdaq, and other securities rules and regulations that impose various requirements on public companies.
Cost overruns or poor cost controls could lower earnings, or may incur a net loss on a contract, and cause a negative impact on our results of operations.
Cost overruns or poor cost controls could lower earnings, or may incur a net loss on a contract, and cause a negative impact on our results of operations. In addition, some of our contracts are under a time-and-material basis.
The sale and implementation of our services to these entities typically involves a lengthy education process and a significant technical evaluation and commitment of capital and other resources, which adds uncertainty to our sales cycle.
We market the majority of our security solutions directly to U.S. federal government customers. The sale and implementation of our services to these entities typically involves a lengthy education process and a significant technical evaluation and commitment of capital and other resources, which adds uncertainty to our sales cycle.
Due to the competitive bidding process to obtain U.S. government contracts, both upon initial issuance and re-competition, and the likelihood of bid protest, we may be unable to achieve or sustain revenue growth and profitability. Many of our U.S. government contracts are awarded through a competitive bidding process upon initial award and renewal, and we expect this will continue.
Due to the competitive bidding process to obtain U.S. federal government contracts, both upon initial issuance and re-competition, and the likelihood of bid protest, we may be unable to achieve or sustain revenue growth and profitability.
If we are unable to assert that our internal control over financial reporting is effective, or if, when required, our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline. 23 Table of Contents General Risk Factors If our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could be adversely affected.
If we are unable to assert that our internal control over financial reporting is effective, or if, when required, our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline.
We are also substantially dependent on the continued service of our existing highly trained and skilled personnel, particularly our business development and operations group, because of the complexity of our services and technologies.
Such changes in our executive management team may be disruptive to our business. We are also substantially dependent on the continued service of our existing highly trained and skilled personnel, particularly our business development and operations groups, because of the complexity of our services and technologies.
Artificial Intelligence is an emerging technology and may involve significant risks and uncertainties. The field of AI is characterized by rapid technological advancements and is subject to significant risks and uncertainties. Our future success is dependent on our ability to develop, integrate, and effectively utilize AI technologies especially in our Xacta solution.
The field of AI is characterized by rapid technological advancements and is subject to significant risks and uncertainties. Our future success may be dependent, in part, on our ability to develop, integrate, and effectively utilize AI technologies in our solutions or offerings.
Due to their nature, fixed-price contracts inherently have more risk than cost-reimbursable contracts, particularly fixed-price development contracts where the costs to complete the development stage of the program can be highly variable, uncertain and difficult to estimate.
Due to their nature, fixed-price contracts inherently have more risk, particularly fixed-price development contracts where the costs to complete the development stage of the program can be highly variable, uncertain and difficult to estimate. Under cost-reimbursable contracts, we are reimbursed for allowable costs and paid a fee, which may be fixed or performance-based.
Furthermore, if we make downward revisions to our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet the expectations of securities analysts, investors or other interested parties, the price of our common stock may decline. 22 Table of Contents Our quarterly operating results fluctuate and may fall short of prior periods, our projections or the expectations of securities analysts or investors, which could adversely affect the trading price of our stock.
Furthermore, if we make downward revisions to our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet the expectations of securities analysts, investors or other interested parties, the price of our common stock may decline.
These economic conditions can arise suddenly and the full impact of such conditions can remain uncertain at any point in time. In addition, geopolitical developments, such as the invasion of Ukraine by Russia and the conflict in Gaza, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.
These economic conditions can arise suddenly and the full impact of such conditions can remain uncertain at any point in time. In addition, the heightened geopolitical risks, stemming from the Administration's foreign policy, Middle East instability, and the Ukraine-Russia war, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.
The programs we participate in must compete with other programs and policy imperatives during the budget and appropriations process. If government funding relating to our contracts with the U.S. government becomes unavailable, or is reduced or delayed, or planned orders are reduced, our contracts or subcontracts may be terminated or adjusted by the U.S. government or the prime contractor.
If government funding relating to our contracts with the U.S. federal government becomes unavailable, or is reduced or delayed, or planned orders are reduced, our contracts or subcontracts may be terminated or adjusted by the U.S. federal government or the prime contractor.
We are also required to have our independent registered public accounting firm attest to, and issue an opinion on, the effectiveness of our internal control over financial reporting.
We are also required to have our independent registered public accounting firm attest to, and issue an opinion on, the effectiveness of our internal control over financial reporting. We may identify weaknesses or deficiencies that we may be unable to remedy before the requisite deadlines on those reports.
In addition, because many of our contracts involve advanced designs and innovative technologies, we may experience unforeseen technological difficulties and cost overruns. 16 Table of Contents Under both types of contracts, we must accurately estimate the likely volume of work that will occur, costs and resource requirements involved, and assess the probability of completing individual transactions or milestones within the contracted time period and amount to maximize or earn profit on these contracts.
Under both types of contracts, we must accurately estimate the likely volume of work that will occur, costs and resource requirements involved, and assess the probability of completing individual transactions or milestones within the contracted time period and amount to maximize profit on these contracts.
The loss of, or our inability to obtain or maintain, any of these technology licenses could delay the introduction of new products or services until equivalent technology, if available, is identified, licensed and integrated. 17 Table of Contents The inability to set optimal pricing structures for our solutions and services could adversely impact our business, financial condition and results of operations.
The loss of, or our inability to obtain or maintain, any of these technology licenses could delay the introduction of new products or services until equivalent technology, if available, is identified, licensed and integrated.
Our attrition rates may increase or fluctuate as a result of a number of factors, including customer dissatisfaction with our services, customers' spending levels, mix of customer base, decreases in the number of users at our customers, competition, pricing increases or changes, and deteriorating general economic conditions or budgetary constraints.
Our attrition rates may increase or fluctuate as a result of a number of factors, including customer dissatisfaction with our solutions or services, customers' spending levels, mix of customer base, decreases in the number of users at our customers, competition, pricing increases or changes, and deteriorating general economic conditions or budgetary constraints. 11 Table of Contents Our future success also depends in part on our ability to expand our relationships with our current customers by selling additional features, solutions and services, more subscriptions or enhanced editions of our solutions and services.
Virtually all of the products we produce and sell are highly engineered and require sophisticated manufacturing and system integration techniques and capabilities. The government market in which we primarily operate is characterized by rapidly changing technologies. The product or program needs of our government and commercial customers change and evolve regularly.
The government market in which we primarily operate is characterized by rapidly changing technologies. The product or program needs of our government and commercial customers change and evolve regularly.
Given that this is a new and complex technology, we may face challenges related to the designing, developing, and implementing AI processes and procedures, including the risk of unforeseen operational failures. Further, this technology is subject to evolving industry standards and regulatory constraints.
Given that this is a new and complex technology, we may face challenges related to the designing, developing, and implementing AI processes and procedures.
In addition, some of our contracts have provisions relating to cost controls and audit rights, and if we fail to meet the terms specified in those contracts, we may not realize their full benefits.
Further, some of our contracts have provisions relating to cost controls and audit rights, and if we fail to meet the terms specified in these contracts, we may incur additional costs or penalties.
We are dependent on a few key customer contracts for a significant portion of our future revenue, and a significant reduction in goods and services or delay in implementation to one or more of these contracts would reduce or delay our future revenue and could materially affect our anticipated operating results.
A significant reduction or delay in implementation to one or more of these contracts would materially affect our anticipated operating results. A small number of our large customer contracts are expected to comprise a significant portion of our future revenue.
As of December 31, 2024, goodwill and intangible assets, net was 31% of our total assets. Goodwill and intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable, and at least annually in the case of goodwill.
Goodwill and intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable, and at least annually in the case of goodwill. The impairment test is based on several factors, estimates and assumptions requiring judgment.
From time to time, we change our pricing model in response to competition, global economic conditions, and general reductions in our customers' spending levels, pricing studies, or changes in how our solutions are broadly consumed.
The inability to set optimal pricing structures for our solutions and services could adversely impact our business, financial condition and results of operations. From time to time, we change our pricing models in response to competition, global economic conditions, and general reductions in our customers' spending levels, pricing studies, or changes in how our solutions are broadly consumed.
Finally, the detection, prevention and remediation of known or potential security vulnerabilities, including those arising from third-party hardware or software, may result in additional financial burdens due to additional direct and indirect costs, such as additional infrastructure capacity spending to mitigate any system degradation. 12 Table of Contents If our customers do not renew their subscriptions or contracts for our solutions and services and expand our relationships with them, our revenue could decline and our results of operations would be adversely impacted.
Finally, the detection, prevention and remediation of known or potential security vulnerabilities, including those arising from third-party hardware or software, may result in additional financial burdens due to additional direct and indirect costs, such as additional infrastructure capacity spending to mitigate any system degradation.
Moreover, the national debt threatened to reach the statutory debt ceiling, and such an event in future years could result in the U.S. government defaulting on its debts. As a result, government spending levels are difficult to predict beyond the near term due to numerous factors, including the external threat environment, future government priorities and the state of government finances.
As a result, government spending levels are difficult to predict beyond the near term due to numerous factors, including the external threat environment, future government priorities and the state of government finances.
Delays in the funding process or changes in funding or funding priorities can impact the timing of available funds or can lead to changes in program content, delay or termination at the government's convenience.
Delays in the funding process or changes in funding or funding priorities can impact the timing of available funds or can lead to changes in program content, delay or termination at the government's convenience. Federal government spending reductions, workforce changes, and policy shifts may impact our existing operations and future opportunities for new contracts.
Any decisions by the U.S. government to not exercise contract options or to terminate, cancel, delay, modify or curtail our major programs or contracts would adversely affect our revenues, revenue growth and profitability. Federal government spending reductions, workforce changes, and policy shifts may impact our existing operations and future opportunities for new contracts.
Any decisions by the U.S. federal government to not exercise contract options or to terminate, cancel, delay, modify or curtail our major programs or contracts (including those on which we serve as a subcontractor) would adversely affect our revenues, revenue growth and profitability.
Continued acceptance of identity platforms and biometric information as a secure and reliable method to identify individuals, mitigate risk and minimize fraud is an important factor in our continued growth. While both identity platforms and biometrics have become more widely adopted, they may not achieve universal acceptance.
Our future profitability will depend, in part, on public confidence in and acceptance of identity platforms and biometrics generally. Continued acceptance of identity platforms and biometric information as a secure and reliable method to identify individuals, mitigate risk and minimize fraud is an important factor in our continued growth.
We rely on subcontractors and other suppliers to provide materials, major components and subsystems for our products or to perform a portion of the services that we provide to our customers. Occasionally, we rely on only one or two sources of supply, which, if disrupted, could have an adverse effect on our ability to meet our commitments to customers.
We rely on subcontractors and other suppliers (or contracting parties) to provide materials, major components and subsystems for our products or to perform a portion of the services that we provide to our customers.
Because we do not carry insurance for all these possible losses, and significant recovery time could be required to resume operations, our financial condition and operating results could be materially adversely affected by such an event outside our control. 24 Table of Contents Increased scrutiny of our environmental, social and governance responsibilities may result in additional costs and risks, and may adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us.
Because we do not carry insurance for all these possible losses, and significant recovery time could be required to resume operations, our financial condition and operating results could be materially adversely affected by such an event outside our control. 24 Table of Contents Changes in accounting principles or their application to us could result in unfavorable accounting charges or effects, which could adversely affect our results of operations and growth prospects.
Adverse events affecting the programs subject to these contracts, such as a significant decline in the traveling public or any significant supply chain delay, could also negatively affect our ability to process transactions under those contracts, which could adversely affect our revenue and the results of operations.
Adverse events affecting the programs subject to these contracts, such as inflation, labor challenges, shortage of materials, market volatility, a significant decline in the traveling public or supply chain disruption or delay, could also negatively affect our ability to process transactions under those contracts, which could adversely affect our revenue and the results of operations. 12 Table of Contents A failure to attract, train, retain and motivate key and skilled employees, including key members of our management team, would adversely affect our ability to execute our strategy and may disrupt our operations.
The impairment test is based on several factors, estimates and assumptions requiring judgment. Adverse changes in macroeconomic conditions, industry and market consideration, overall financial performance, market capitalization and relevant entity-specific events could result in an impairment of goodwill and intangible assets.
Adverse changes in macroeconomic conditions, industry and market consideration, overall financial performance, market capitalization and relevant entity-specific events could result in an impairment of goodwill and intangible assets. In the fourth quarter of 2025, we conducted a quantitative goodwill impairment analysis on the Secure Networks reporting unit.
As a result, DoD funding levels have fluctuated and have been difficult to predict. Future spending levels are subject to a wide range of factors, including Congressional action.
In the past few years, U.S. federal government appropriations have been affected by larger U.S. federal government budgetary issues and related legislation. As a result, federal government funding levels have fluctuated and have been difficult to predict. Future spending levels are subject to a wide range of factors, including Congressional action.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition to our active ISO/IEC 27001 certification, the Company also assesses itself against the National Institute of Standards and Technology Special Publication 800-171 as required by the Defense Federal Acquisition Regulation Supplement.
Biggest changeThe GRC team collaborates closely with risk owners throughout the Company, vendors, and suppliers, working with them in an effort to ensure their risks are identified, documented, and mitigated in a timely fashion. 25 Table of Contents In addition to our active ISO/IEC 27001 certification, the Company assesses itself against the National Institute of Standards and Technology Special Publication 800-171 as required by the Defense Federal Acquisition Regulation Supplement.
The CISO is personally involved in, and responsible for, the risk assessment, identification and management process described above. Board of Director’s oversight of cybersecurity risks The Board of Directors has oversight responsibility with respect to risk management and reviews matters with management as part of management’s regular Board reporting.
The CISO is personally involved in, and responsible for, the risk assessment, identification and management process described above. Board of Directors' oversight of cybersecurity risks The Board of Directors has oversight responsibility with respect to risk management and reviews matters with management as part of management’s regular Board reporting.
These policies cover areas such as requiring secure coding practices and a secure development lifecycle process, monthly information security awareness training for all employees and enhanced training for specialized personnel, review and assessment by external, independent third parties, who certify and report on our weaknesses and internal response preparedness for the entire Company, and the performance of daily vulnerability scanning of our network infrastructure as well as annual third-party penetration testing.
These policies cover areas such as requiring secure coding practices and a secure development lifecycle process, monthly information security awareness training for all employees and enhanced training for specialized personnel, review and assessment by external, independent third parties, who certify and report on our weaknesses and internal response preparedness for the entire Company, and the performance of routine and risk-based vulnerability scanning of our network infrastructure as well as annual third-party penetration testing.
Our CISO’s background includes over 18 years of experience in IT and Information Security. His formal education includes a Master’s degree in Cybersecurity and Information Assurance and a Bachelor’s degree in Computer Forensics.
Our CISO’s background includes over 19 years of experience in IT and Information Security. His formal education includes a Master’s degree in Cybersecurity and Information Assurance and a Bachelor’s degree in Computer Forensics.
The Chair of the Audit Committee, in turn, reports on these topics to the Board of Directors as and when deemed necessary and/or material. Overall, our Board contains two directors with work experience related to cybersecurity issues or oversight.
The Chair of the Audit Committee, in turn, reports on these topics to the Board of Directors as and when deemed necessary and/or material. Overall, our Board contains two directors with work experience related to cybersecurity issues or oversight. 26 Table of Contents
In the last three years, we have not experienced a material information security breach incident or any penalties or settlements related to the same, and the expenses we have incurred from information security breach incidents were immaterial.
In 2025, we did not experience a material information security breach incident or any penalties or settlements related to the same, and the expenses we have incurred from information security breach incidents were immaterial.
Each of our CITO and our CEO have extensive experience in cybersecurity matters. 26 Table of Contents Our CISO provides reports to the Audit Committee of our Board of Directors on a standing basis at each Audit Committee meeting, and as otherwise requested by the Chair of the Audit Committee or as determined necessary by the CISO or other members of senior management.
Our CISO provides reports to the Audit Committee of our Board of Directors on a standing basis at each Audit Committee meeting, and as otherwise requested by the Chair of the Audit Committee or as determined necessary by the CISO or other members of senior management.
Our CISO reports to our Chief Information Technology Officer ("CITO"), who in turn reports to our Chief Executive Officer ("CEO").
Our CISO reports to our Chief Information Technology Officer ("CITO"), who in turn reports to our Chief Executive Officer ("CEO"). Each of our CITO and our CEO have extensive experience in cybersecurity matters.
Removed
The GRC team collaborates closely with risk owners throughout the Company, vendors, and suppliers, working with them in an effort to ensure their risks are identified, documented, and mitigated in a timely fashion.
Added
The Company has also achieved Cybersecurity Maturity Model Certification Level 2 ("CMMC L2"), reflecting an independent assessment against applicable DoW cybersecurity requirements.

Item 2. Properties

Properties — owned and leased real estate

0 edited+1 added−1 removed1 unchanged
Removed
We believe that the current space is substantially adequate to meet our operating requirements. Item 3. Legal Proceedings Information regarding legal proceedings may be found in Note 19 – Commitments and Contingencies to the Consolidated Financial Statements. Item 4. Mine Safety Disclosures Not applicable. 27 Table of Contents PART II
Added
We believe that the current space is substantially adequate to meet our operating requirements.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+2 added−0 removed1 unchanged
Biggest changeThe repurchase program has no expiration date and may be modified, suspended, or terminated at any time. There were no repurchases of common stock in fiscal year 2024, and approximately $38.7 million remained available for future common stock repurchases under the SRP as of December 31, 2024. Item 6. [Reserved] None 28 Table of Contents
Biggest changeThe repurchase program has no expiration date and may be modified, suspended, or terminated at any time.
The number of shareholders of record of our common stock may not be representative of the number of beneficial owners due to shares that may be held by depositories, brokers or nominees. For information regarding securities authorized for issuance under our stock-based compensation plan, see Note 12 – Stock-Based Compensation to the Consolidated Financial Statements contained in Item 8.
The number of shareholders of record of our common stock may not be representative of the number of beneficial owners due to shares that may be held by depositories, brokers or nominees. For information regarding securities authorized for issuance under our stock-based compensation plan, see Note 1 1 – Stock-Based Compensation to the Consolidated Financial Statements contained in Item 8.
Sales of Equity Securities and Use of Proceeds There were no sales of unregistered equity securities during the three months ended December 31, 2024, that were not registered under the Securities Act and were not previously disclosed on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
Sales of Equity Securities and Use of Proceeds There were no sales of unregistered equity securities during the three months ended December 31, 2025, that were not registered under the Securities Act and were not previously disclosed on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the Nasdaq Global Market under the symbol "TLS." As of March 3, 2025, there were approximately 156 holders of record of Telos common stock, par value $0.001 par value.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the Nasdaq Global Market under the symbol "TLS." As of March 9, 2026, there were approximately 154 holders of record of Telos common stock, $0.001 par value.
Added
Common Stock Purchase Activity During the Three Months Ended December 31, 2025 Period Total Number of Shares Purchased (1) Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans (1) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans (1) October 1, 2025 - October 31, 2025 — $ — — $ 31,076,558 November 1, 2025 - November 30, 2025 658,796 $ 5.81 658,796 $ 27,245,870 December 1, 2025 - December 31, 2025 377,261 $ 5.72 377,261 $ 25,088,723 Total 1,036,057 $ 5.78 1,036,057 (1) For the fourth quarter of 2025, the Company repurchased 1,036,057 shares of common stock under the program for an aggregate price of $6.0 million on the open market.
Added
Item 6. [Reserved] None 28 Table of Contents

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeSignificant Accounting Policies 48 3. Revenue Recognition 56 4. Accounts Receivable, Net 60 5. Inventories, Net 60 6. Property and Equipment, Net 60 7. Goodwill 61 8. Intangible Assets, Net 61 9. Other Balance Sheet Components 62 10. Debt and Other Obligations 63 11. Stockholders' Equity 64 12. Stock-Based Compensation 64 13. Leases 67 14. Employee Benefit Plan 68 15.
Biggest changeSummary of Significant Accounting Policies 46 3. Revenue Recognition 54 4. Accounts Receivable, Net 57 5 . Property and Equipment, Net 58 6 . Goodwil l, Net 58 7 . Intangible Assets, Net 59 8 . Other Balance Sheet Components 60 9 . Revolving Credit Facility 61 1 0 . Stockholders' Equity 61 1 1 .
Consolidated Financial Statements and Supplementary Data 41 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 238) 41 Consolidated Statements of Operations 43 Consolidated Statements of Comprehensive Loss 44 Consolidated Balance Sheets 45 Consolidated Statements of Cash Flows 46 Consolidated Statements of Changes in Stockholders' Equity 47 Notes to the Consolidated Financial Statements 48 1. Organization 48 2.
Consolidated Financial Statements and Supplementary Data 39 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 238) 39 Consolidated Statements of Operations 41 Consolidated Statements of Comprehensive Loss 42 Consolidated Balance Sheets 43 Consolidated Statements of Cash Flows 44 Consolidated Statements of Changes in Stockholders' Equity 45 Notes to the Consolidated Financial Statements 46 1. Organization 46 2.
Quantitative and Qualitative Disclosures about Market Risk 40 Item 8.
Quantitative and Qualitative Disclosures about Market Risk 38 Item 8.
Item 6. [Reserved] 28 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 29 Overview 29 Business Environment 29 Key Performance Measure 31 Backlog 31 Financial Highlights 32 Results of Operations 32 Non-GAAP Financial Measures 33 Liquidity and Capital Resources 36 Critical Accounting Policies and Estimates 38 Item 7A.
Item 6. [Reserved] 28 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 29 Overview 29 Business Environment 29 Key Performance Measu res 31 Backlog 31 Financial Highlights 32 Results of Operations 32 Non-GAAP Financial Measur es 34 Liquidity and Capital Resources 35 Critical Accounting Policies and Estimates 36 Item 7A.
Removed
Income Taxes 68 16. Loss Per Share 70 17. Related Party Transactions 70 18. Segment Information 71 19. Commitments and Contingencies 72 20. Supplemental Cash Flow Information 72
Added
Stock-Based Compensation 62 1 2 . Leases 64 1 3 . Employee Benefit Plan 65 1 4 . Income Taxes 66 1 5 . Loss Per Share 68 1 6 . Segment Information 69 1 7 . Supplemental Cash Flow Information 70 1 8 . Commitments , Contingencie s and Subseq uent Events 70 2 Table of Contents Page

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

65 edited+42 added−59 removed29 unchanged
Biggest changeTable MD&A 5: Reconciliation of Net Loss to EBITDA and Adjusted EBITDA; Net Loss Margin to EBITDA Margin and Adjusted EBITDA Margin For the Year Ended December 31, 2024 2023 Amount Margin Amount Margin (dollars in thousands) Net loss $ (52,520) (48.5)% $ (34,422) (23.7)% Other income (4,023) (3.7)% (6,715) (4.6)% Interest expense 644 0.6% 786 0.5% Provision for income taxes 26 —% 36 —% Depreciation and amortization (2) 11,867 11.0% 9,429 6.5% EBITDA (Non-GAAP) (44,006) (40.6)% (30,886) (21.3)% Stock-based compensation expense (1) 21,411 19.8% 24,396 16.8% Impairment loss on intangible assets (2) 11,706 10.8% — —% Restructuring expenses (3) 1,270 1.1% 1,132 0.8% Adjusted EBITDA (Non-GAAP) $ (9,619) (8.9)% $ (5,358) (3.7)% (1) The stock-based compensation adjustment to EBITDA is made up of stock-based compensation expense for the awarded service-based restricted stock units ("RSUs"), performance-based restricted stock units ("PSUs"), stock options, and other sources.
Biggest changeTable MD&A 5: Reconciliation of Net Loss to EBITDA and Adjusted EBITDA; Net Loss Margin to EBITDA Margin and Adjusted EBITDA Margin For the Year Ended December 31, 2025 2024 Amount Margin Amount Margin (dollars in thousands) Net loss $ (36,546) (22.2) % $ (52,520) (48.5) % Other income (3,225) (2.0) % (4,023) (3.7) % Interest expense 553 0.3 % 644 0.6 % (Benefit from) provision for income taxes (663) (0.3) % 26 — % Depreciation and amortization 11,451 6.9 % 11,867 11.0 % EBITDA (Non-GAAP) (28,430) (17.3) % (44,006) (40.6) % Stock-based compensation expense (1) 30,150 18.3 % 21,411 19.8 % Goodwill impairment 14,916 9.1 % — — % Impairment loss on intangible assets — — % 11,706 10.8 % Restructuring expenses (2) 1,501 0.9 % 1,270 1.1 % Adjusted EBITDA (Non-GAAP) $ 18,137 11.0 % $ (9,619) (8.9) % (1) The stock-based compensation expense to EBITDA is made up of stock-based compensation expense for the awarded RSUs, PSUs, and stock options, and other sources.
The discussion of the changes in our net revenue and profitability is covered in greater detail under the section that follows: "Segment Results." We generate revenue from the delivery of products and services to our customers. Cost of sales, for both products and services, consists of labor, materials, subcontracting costs and an allocation of indirect costs.
A discussion of the changes in our net revenue and profitability is covered in greater detail under the section that follows: "Segment Results." We generate revenue from the delivery of products and services to our customers. Cost of sales, for both products and services, consists of labor, materials, subcontracting costs and an allocation of indirect costs.
We define EBITDA as net (loss) income, adjusted for non-operating (income) expense, interest expense, provision for (benefit from) income taxes, and depreciation and amortization. We define Adjusted EBITDA as EBITDA, adjusted for stock-based compensation expense, impairment loss on intangible assets, and restructuring expenses (adjustments). We define EBITDA Margin as EBITDA as a percentage of total revenue.
We define EBITDA as net (loss) income, adjusted for non-operating (income) expense, interest expense, provision for (benefit from) income taxes, and depreciation and amortization. We define Adjusted EBITDA as EBITDA, adjusted for stock-based compensation expense, impairment loss on goodwill and intangible assets, and restructuring expenses (adjustments). We define EBITDA Margin, as EBITDA as a percentage of total revenue.
Funded backlog consists of the aggregate contract revenues remaining to be earned at a given time, which, in the case of U.S. government contracts, means that they have been funded by the procuring agency.
Funded backlog consists of the aggregate contract revenues remaining to be earned at a given time, which, in the case of U.S. federal government contracts, means that they have been funded by the procuring agency.
Over the past several years we have sought to diversify and improve our operating margins through the evolution of our business from an emphasis on product reselling to that of an advanced solutions technologies provider.
Over the past several years we have sought to diversify and improve our operating margins through the evolution of our business from an emphasis on product reselling to an advanced solutions technologies provider.
We have various lease agreements pursuant to ASC 842, "Leases" that require us to record the present value of the minimum lease payments for such lease properties. There were no outstanding commitments that were considered material for capital expenditures on December 31, 2024.
We have various lease agreements pursuant to ASC 842, "Leases" that require us to record the present value of the minimum lease payments for such lease properties. There were no outstanding commitments that were considered material for capital expenditures on December 31, 2025.
Reductions in backlog arise from the completion or the early termination of contracts. See the relevant industry, legal and regulatory risks under Item 1A, "Risk Factors , " of this 10-K. We believe that comparisons of backlog period-to-period are difficult. We also believe that it is difficult to predict future revenue solely based on analysis of backlog.
Reductions in backlog arise from the completion, modification, de-obligation, or the early termination of contracts. See the relevant industry, legal and regulatory risks under Item 1A, "Risk Factors " of this 10-K. We believe that comparisons of backlog period-to-period are difficult. We also believe that it is difficult to predict future revenue solely based on analysis of backlog.
We believe these non-GAAP financial measures facilitate comparison of our operating and cash performance on a consistent basis between periods by excluding certain items that may, or could, have a disproportionately positive or negative impact on our results of operations in any particular period.
We believe these non-GAAP financial measures facilitate the comparison of the Company’s operating and cash 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.
We believe that EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin provide the Board of Directors, management and investors with clear representation of our 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.
We believe that EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin provide the Board of Directors, 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.
In this section, we discuss our financial condition, changes in financial condition and results of operations for the year ended December 31, 2024, compared to the year ended December 31, 2023.
In this section, we discuss our financial condition, changes in financial condition and results of operations for the year ended December 31, 2025, compared to the year ended December 31, 2024.
As discussed under Item 1A, " Risk Factors ," we derive a substantial portion of our revenues from contracts and subcontracts with the U.S. government. Our revenues are generated from a number of contract vehicles and task orders.
As discussed under Item 1A, "Risk Factors ," we derive a substantial portion of our revenues from contracts and subcontracts with the U.S. federal government. Our revenues are generated from a number of contract vehicle and task orders.
Liquidity and Capital Resources Our primary sources of liquidity are cash on hand, future operating cash flows, and, if needed, borrowings under our $30.0 million senior secured revolving credit facility, with an expansion feature of up to $30.0 million of additional revolver capacity.
Liquidity and Capital Resources Our primary sources of liquidity are cash on hand, future operating cash flows, and, if needed, borrowings under our $15.0 million senior secured revolving credit facility, with an expansion feature of up to $15.0 million of additional revolver capacity, maturing on December 30, 2026.
("Credit Agreement") that provides for a $30.0 million senior secured revolving credit facility, with the option of issuing letters of credits thereunder and with an uncommitted expansion feature of up to $30.0 million of additional revolver capacity, maturing on December 30, 2025.
("Credit Agreement") that provided for a $30.0 million senior secured revolving credit facility, with the option of issuing letters of credits thereunder and with an uncommitted expansion feature of up to $30.0 million of additional revolver capacity, with a maturity date on December 30, 2025.
Further, Adjusted EBITDA is used by the Board of Directors and management to prepare and approve our annual budget, and from time to time, to evaluate the performance of certain management personnel when determining incentive compensation.
Further, Adjusted EBITDA is used by the Board of Directors and management to prepare and approve the Company’s annual budget, and to evaluate the performance of certain management personnel when determining incentive compensation.
As of December 31, 2024, we had cash and cash equivalents of $54.6 million and our working capital was $69.3 million. We place a strong emphasis on liquidity management. This focus gives us the flexibility for capital deployment while preserving a strong balance sheet to position us for future opportunities.
As of December 31, 2025, we had cash and cash equivalents of $53.2 million and our working capital was $57.6 million. We place a strong emphasis on liquidity management. This focus gives us the flexibility for capital deployment while preserving a strong balance sheet to position us for future opportunities.
Management evaluates these estimates and assumptions on an ongoing basis. Our estimates and assumptions have been prepared on the basis of the most current reasonably available information, and may change in the future as more current information is available.
Our estimates and assumptions have been prepared on the basis of the most current reasonably available information, and may change in the future as more current information is available.
For further discussion of the methods used and factors considered in our estimates as part of the impairment testing for goodwill and intangible assets, see Note 2 - Significant Accounting Policies on Goodwill and Intangible Assets, Note 7 - Goodwill and Note 8 - Intangible Assets, Net to the consolidated financial statements contained within this Annual Report.
For further discussion of the methods used and factors considered in our estimates as part of the impairment testing for goodwill and intangible assets, see Note 2 - Summary of Significant Accounting Policies on Goodwill and Intangible Assets, Note 6 - Goodwil l, Net and Note 7 - Intangible Assets, Net to the consolidated financial statements contained within this 10-K.
Among other limitations, each of EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Loss, Adjusted EPS, Adjusted Gross Profit, Adjusted Gross Margin, Cash Gross Profit, Cash Gross Margin and Free Cash Flow does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments, does not reflect the impact of certain cash and non-cash charges resulting from matters we consider not to be indicative of our ongoing operations, and does not reflect income tax expense or benefit.
Among other limitations, each of EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments, does not reflect the impact of certain cash and non-cash charges resulting from matters considered not to be indicative of ongoing operations, and does not reflect income tax expense or benefit.
The U.S. government has increasingly relied on contracts that are subject to a competitive bidding process (including IDIQ, GSA schedules, OTA, and other multi-award contracts), resulting in greater competition and increased pricing pressure. We expect that a majority of the business that we seek in the foreseeable future will be awarded through a competitive bidding process.
The U.S. federal government has increasingly relied on contracts that are subject to a competitive bidding process (including BPA and IDIQ Task Orders, OTAs, and other GSA schedule solicitations), resulting in greater competition and increased pricing pressure. We expect that a majority of the business that we seek in the foreseeable future will be awarded through a competitive bidding process.
Although we continue to offer resold products through our contract vehicles or our prime partners' contracts, we focused on the transformation and growth on selling our software and service solutions, as well as designing and delivering Telos manufactured and branded technologies.
Although we continue to offer resold products through our contract vehicles or our prime partners' contracts, we have focused on the transformation and growth of our software and service solutions offerings, as well as the design and delivery of our manufactured and branded technologies.
Stock-based compensation expense for the awarded RSUs, PSUs and stock options was $19.4 million and $22.9 million for fiscal years 2024 and 2023, respectively. Stock-based compensation expense from other sources was $2.1 million and $1.5 million for the fiscal years 2024 and 2023, respectively.
Stock-based compensation expense for the awarded RSUs, PSUs and stock options was $24.0 million and $19.4 million for fiscal years 2025 and 2024, respectively. Stock-based compensation expense from other sources was $6.1 million and $2.1 million for fiscal years 2025 and 2024, respectively.
Adjusted Net Loss and Adjusted EPS Adjusted Net (Loss) Income and Adjusted EPS are supplemental measures of operating and cash flow performance that are not made under GAAP and do not represent, and should not be considered as alternatives to, net (loss) income and earnings per share as determined by GAAP.
EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin are supplemental measures of operating and cash flow performance that are not made under GAAP and do not represent, and should not be considered as an alternative to net (loss) income, as determined by GAAP.
The other source of stock-based compensation consists of accrued compensation, which the Company intends to settle in shares of the Company's common stock. However, it is the Company's discretion whether this compensation will ultimately be paid in stock or cash.
The other sources of stock-based compensation consist of accrued compensation, which the Company intends to settle in shares of the Company's common stock. However, the Company has the discretion to determine whether this compensation will ultimately be paid in stock or cash up until the date at which it is paid.
An impairment charge of $11.7 million and $0.5 million was recorded in the consolidated statements of operations for the years ended December 31, 2024, and 2023, respectively.
An impairment charge of $11.7 million was recorded in the consolidated statements of operations for the year ended December 31, 2024.
From time to time, we may be subject to various audits, reviews, investigations, lawsuits and claims related to our business. See Note 19 - Commitment s and Contingencies to the consolidated financial statements within this Annual Report for further discussion of other commitments and contingencies.
From time to time, we may be subject to various audits, reviews, investigations, lawsuits and claims related to our business. See Note 1 8 - Commitments , C ontingencie s and Su bsequent Event s to the consolidated financial statements within this 10-K for further discussion of other commitments and contingencies.
GAAP, we believe the non-GAAP financial measures of EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Loss, Adjusted Earnings Per Share ("EPS"), Adjusted Gross Profit, Adjusted Gross Margin, Cash Gross Profit, Cash Gross Margin and Free Cash Flow are useful in evaluating our operating and cash flow performance.
GAAP, we believe the non-GAAP financial measures of EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin are useful in evaluating our operating and cash flow performance.
We utilize the weighted average cost of capital as derived by certain assumptions specific to our facts and circumstances as the discount rate. Our estimate of cash flows and discount rate are subject to change due to the economic environment.
We utilize the weighted average cost of capital as derived by certain assumptions specific to our facts and circumstances as the discount rate.
We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes.
Telos compensates for these limitations by relying primarily on the Company’s GAAP results and using non-GAAP measures only for supplemental purposes.
We regularly review our deferred tax assets for recoverability and establish a valuation allowance when management believes it is more likely than not that such asset will not be recovered, taking into consideration historical operating results, expectations of future earnings, tax planning strategies and the expected timing of the reversals of existing temporary differences. 39 Table of Contents Recent Accounting Pronouncements See Note 2 - Significant Accounting Policies of the consolidated financial statements contained within this Annual Report for a discussion of recently issued accounting pronouncements.
We regularly review our deferred tax assets for recoverability and establish a valuation allowance when management believes it is more likely than not that such asset will not be recovered, taking into consideration historical operating results, expectations of future earnings, tax planning strategies and the expected timing of the reversals of existing temporary differences.
Overview For an overview of our business, including our business segments and a discussion of the services and products we provide, see Item 1, " Business " of this 10-K. Additional information regarding our segments is also presented in Note 18 – Segment Information to the consolidated financial statements at Item 8 of this 10-K.
Overview For an overview of our business, including our business segments and a discussion of the services and products we provide, see Item 1, "Business " in Part I and Note 1 6 – Segment Information of the notes to the consolidated financial statements contained within this 10-K.
Net cash used in investing activities for the years ended December 31, 2024, increased by $1.3 million in cash outflow compared to the same period in 2023, primarily due to the cash outflow from the purchase of an investment of $3.0 million in 2024, with no similar transaction in 2023.
Net cash used in investing activities for the year ended December 31, 2025, decreased by $7.8 million in cash outflow compared to the same period in 2024, primarily due to the cash outflow from the purchase of an investment of $3.0 million in 2024, with no similar transaction in 2025, coupled by a decrease of $4.8 million in capital expenditures in 2025.
We believe our contract portfolio is characterized as having low to moderate financial risk due to the limited number of long-term fixed-price development contracts. Our firm-fixed-price activities consist primarily of contracts for products and services at established contract prices.
We believe our contract portfolio reflects low to moderate financial risk due to the limited number of long-term fixed-price development contracts, thus minimizing the risk of cost overruns. Our firm-fixed-price activities consist primarily of contracts for products and services at established contract prices that are designed to be repeatable solution offerings.
We amortize intangible assets over their respective estimated useful lives, and review them for impairment whenever events or changes in business circumstances indicate the carrying value may not be recoverable. We evaluated our intangible assets for potential impairment. As a result of the assessment, we identified conditions demonstrating an impairment of certain software development costs.
We amortize intangible assets over their respective estimated useful lives, and review them for impairment whenever events or changes in business circumstances indicate the carrying value may not be recoverable. We evaluated our intangible assets for potential impairment and no impairment was identified for the year ended December 31, 2025.
We consider backlog, both funded and unfunded (as explained below), other expected annual renewals, and expansion planned by our current customers. Total backlog consists of the aggregate contract revenues remaining to be earned by us at a given time over the life of our contracts, whether funded or unfunded.
Total backlog consists of the aggregate contract revenues remaining to be earned by us at a given time over the life of our contracts, whether funded or unfunded.
Table MD&A 1: Backlog by Segment As of December 31, 2024 2023 (in thousands) Security Solutions Funded $ 44,220 $ 24,538 Unfunded 21,373 41,398 Total Security Solutions backlog 65,593 65,936 Secured Networks Funded 6,977 27,530 Unfunded 3,919 24,636 Total Secure Networks backlog 10,896 52,166 Total Funded 51,197 52,068 Unfunded 25,292 66,034 Total backlog $ 76,489 $ 118,102 Increases in backlog is a result of the award of new contracts and the renewal or extension of existing contracts.
Table MD&A 1: Backlog by Segment As of December 31, 2025 2024 (in thousands) Security Solutions Funded $ 66,480 $ 44,220 Unfunded 55,739 21,373 Total Security Solutions backlog 122,219 65,593 Secured Networks Funded 2,317 6,977 Unfunded 1,537 3,919 Total Secure Networks backlog 3,854 10,896 Total Funded 68,797 51,197 Unfunded 57,276 25,292 Total backlog $ 126,073 $ 76,489 Increases in backlog is a result of the award of new contracts and the renewal or extension of existing contracts.
Table MD&A 10: Contractual Obligations Total Due within one year (in thousands) Finance lease obligations (1) $ 10,658 2,314 Operating lease obligations (1) (2) 692 248 Service agreement obligation 10,000 1,250 Total contract obligations $ 21,350 $ 3,812 (1) Represents interest expense included in this amount. $ 1,201 $ 473 (2) Amount includes operating lease right-of-use obligations and short-term leases with terms of 12 months or less.
Table MD&A 7: Contractual Obligations Total Due within one year (in thousands) Finance lease obligations (1) $ 8,344 2,372 Operating lease obligations (1) (2) 472 280 Service agreement obligation 10,000 6,250 Total contract obligations $ 18,816 $ 8,902 (1) Includes interest expense. $ 728 $ 359 (2) Amount includes operating lease right-of-use obligations and short-term leases with terms of 12 months or less.
Table MD&A 4: Secure Networks Segment - Financial Results Comparison For the Year Ended December 31, 2024 2023 Dollar Change (dollars in thousands) Revenues $ 31,512 $ 67,962 $ (36,450) Cost of sales (excluding impairment loss, depreciation and amortization) 24,754 54,622 (29,868) Depreciation and amortization 8 12 (4) Total cost of sales 24,762 54,634 (29,872) Gross profit $ 6,750 $ 13,328 $ (6,578) Gross margin 21.4 % 19.6 % Secure Networks segment revenue decreased by 54% in 2024, compared to 2023, primarily due to the successful completion of certain programs and ramp-down of certain programs without corresponding new business wins to backfill completed programs.
Table MD&A 4: Secure Networks Segment - Financial Results Comparison For the Year Ended December 31, 2025 2024 Dollar Change (dollars in thousands) Revenues $ 15,205 $ 31,512 $ (16,307) Cost of sales (excluding impairment loss, depreciation and amortization) 11,740 24,754 (13,014) Depreciation and amortization 7 8 (1) Total cost of sales 11,747 24,762 (13,015) Gross profit $ 3,458 $ 6,750 $ (3,292) Gross margin 22.7 % 21.4 % Secure Networks segment revenue decreased by 51.7% in 2025, compared to 2024, primarily due to the ramp down of several programs within the portfolio without corresponding new business wins to backfill completed programs.
The remaining variance is attributable to decreased dividend income from money market placements. 32 Table of Contents Segment Results The accounting policies of each business segment are the same as those followed by the Company as a whole. Management evaluates business segment performance based on gross profit.
Segment Results The accounting policies of each business segment are the same as those followed by the Company as a whole. Management evaluates business segment performance based on gross profit.
The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements in fiscal year 2024 are described below. This is not intended to be a comprehensive list of all significant accounting policies that are more fully described in the notes to consolidated financial statements contained within this report.
The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements in fiscal year 2025 are described below.
The change in cash flow from operating activities is primarily driven by the Company's operating losses, the timing of receipts of customer payments, and the timing of payments to vendors and employees, adjusted for certain non-cash items that do not impact cash flows from operating activities.
The change in cash flow from operating activities is attributable to the favorable changes in working capital, primarily driven by timing of receipts from customer and the timing of payments to vendors, coupled with higher cash earnings (i.e., net loss, excluding non-cash items that do not impact cash flows from operating activities).
This is partially offset by a decrease of $1.7 million in capital expenditures in 2024. For the year ended December 31, 2024, net cash used in financing activities was $2.0 million, compared to $6.2 million in 2023.
For the year ended December 31, 2025, net cash used in financing activities was $22.7 million, compared to $2.0 million in 2024.
Critical Accounting Policies and Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the consolidated financial statements, giving due consideration to materiality.
In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the consolidated financial statements, giving due consideration to materiality. Management evaluates these estimates and assumptions on an ongoing basis.
Results of Operations Consolidated Results Table MD&A 2: Consolidated Financial Results Comparison For the Year Ended December 31, 2024 2023 Dollar Change (dollars in thousands) Revenue $ 108,272 $ 145,378 $ (37,106) Cost of sales 73,843 92,436 (18,593) Gross profit 34,429 52,942 (18,513) Gross margin 31.8 % 36.4 % Operating expenses 90,302 93,257 (2,955) Operating expenses as percentage of revenue 83.4 % 64.1 % Operating loss (55,873) (40,315) (15,558) Other income 4,023 6,715 (2,692) Interest expense (644) (786) 142 Loss before income taxes (52,494) (34,386) (18,108) Provision for income taxes (26) (36) 10 Net loss $ (52,520) $ (34,422) $ (18,098) Our business segments have different factors driving revenue fluctuations and profitability.
Results of Operations Consolidated Results Table MD&A 2: Consolidated Financial Results Comparison For the Year Ended December 31, 2025 2024 Dollar Change (dollars in thousands) Revenue $ 164,805 $ 108,272 $ 56,533 Cost of sales 103,788 73,843 29,945 Gross profit 61,017 34,429 26,588 Gross margin 37.0 % 31.8 % Operating expenses 100,898 90,302 10,596 Operating expenses as percentage of revenue 61.2 % 83.4 % Operating loss (39,881) (55,873) 15,992 Other income 3,225 4,023 (798) Interest expense (553) (644) 91 Loss before income taxes (37,209) (52,494) 15,285 Benefit from (provision for) income taxes 663 (26) 689 Net loss $ (36,546) $ (52,520) $ 15,974 Our business segments have different factors driving revenue fluctuations and profitability.
For 2024 and 2023, the Company's revenue derived from firm-fixed-price contracts was 75% and 79%, respectively; time-and-material contracts was 15% and 9%, respectively; and cost-plus contracts revenue was 10% and 12%, respectively.
For 2025 and 2024, the Company's revenue derived from firm-fixed-price contracts was 73.3% and 75.3%, respectively; time-and-material contract revenue was 21.8% and 14.6%, respectively; and cost-plus contract revenue was 4.9% and 10.1%, respectively. Business Environment U.S.
The actual timing of revenue from projects included in backlog will vary. 31 Table of Contents Financial Highlights A number of factors have affected our fiscal year 2024 results, the most significant of which we have listed below.
The actual timing of revenue from projects included in backlog will vary. 31 Table of Contents Financial Highlights Several key highlights of our financial performance in fiscal year 2025 are described below.
Operating Expenses : Operating expenses decreased by 3% in 2024, compared to 2023. Research and development expenses decreased by $3.3 million in 2024, compared to 2023, primarily due to the discontinued development of selected solutions or parts of solutions associated with the restructuring plan and lower stock-based compensation expenses.
Research and development ("R&D") expenses decreased by $1.4 million, or 16.4% in 2025, compared to 2024. This was due to a $2.2 million reduction in amortization costs from the discontinued development of selected solutions or parts of solutions associated with the restructuring plan in 2024. This reduction was partially offset by an increase of $1.4 million in stock-based compensation.
Commitments from Contractual Obligations The Company does not have any other material cash requirements from contractual obligations. As of December 31, 2024, we had contractual commitments to make payments under existing lease obligations on various office space and equipment under non-cancelable operating and finance leases, and an obligation under a service agreement.
As of December 31, 2025, we had contractual commitments to make payments under existing lease obligations on various office space and equipment under non-cancelable operating and finance leases, and an obligation under a service agreement. We reported current and long-term lease liabilities; see Note 1 2 - Leases in the consolidated financial statements within this 10-K.
For fiscal year 2024, we performed a qualitative assessment of our reporting units and determined that it is more likely than not that the estimated fair value of the reporting units exceeds their carrying value and thus, we did not proceed to the two-step goodwill impairment test.
In fiscal year 2024, we performed a qualitative assessment of our reporting units and determined that it is more likely than not that the estimated fair value of the reporting units exceeds their carrying value and thus, we did not proceed to the quantitative impairment test. 37 Table of Contents Due to the nature of our business and other factors described in Item 1A, "Risk Factors " of this 10-K, the profitability of our individual reporting units may periodically be affected by downturns in customer demand, operational challenges, and other factors.
Secure Networks segment gross profit decreased by 49% in 2024, compared to 2023, primarily due to lower revenues. By contrast, the segment gross margin increased from 19.6% in 2023 to 21.4% in 2024, primarily due to a favorable program mix and strong program management. Non-GAAP Measures In addition to our results determined in accordance with U.S.
Secure Networks segment gross profit decreased by 48.8% in 2025, compared to 2024, due to lower segment revenues. By contrast, the Secure Networks segment gross margin increased from 21.4% in 2024 to 22.7% in 2025, primarily due to program mix.
Security Solutions segment gross profit decreased by 30% in 2024, compared to 2023, and gross margin decreased from 51.2% in 2023 to 36.1% in 2024, primarily due to the impairment loss on intangible assets in 2024, higher amortization of software development costs, and program mix within the portfolio.
Security Solutions segment gross margin increased from 36.1% in 2024 to 38.5% in 2025, primarily due to the impairment loss on intangible assets in 2024 and the lower impact of depreciation and amortization expense on higher revenue.
Revenue Recognition Although most of our revenue is recognized concurrently with billing or with the passage of time, some of our revenue requires us to make estimates. The timing of the satisfaction of performance obligations varies across our businesses due to our diverse product and service mix, customer base, and contractual terms.
The timing of the satisfaction of performance obligations varies across our businesses due to our diverse product and service mix, customer base, and contractual terms. Our contracts may have a single performance obligation or multiple performance obligations.
Although no assurances can be given, we believe the available cash balances and access to our revolving credit facility are sufficient to maintain the liquidity we require to meet our operating, investing and financing needs for the next 12 months. 36 Table of Contents Table MD&A 9: Cash Flows Information For the Year Ended December 31, 2024 2023 (in thousands) Net cash (used in) provided by operating activities $ (25,938) $ 1,587 Net cash used in investing activities (16,757) (15,478) Net cash used in financing activities (1,984) (6,151) Net change in cash, cash equivalents, and restricted cash $ (44,679) $ (20,042) For the year ended December 31, 2024, net cash used in operating activities was $25.9 million, compared with net cash provided by operating activities of $1.6 million in 2023, an increase in cash outflow of $27.5 million compared year over year.
Table MD&A 6: Cash Flows Information For the Year Ended December 31, 2025 2024 (in thousands) Net cash provided by (used in) operating activities $ 30,182 $ (25,938) Net cash used in investing activities (8,915) (16,757) Net cash used in financing activities (22,664) (1,984) Net change in cash, cash equivalents, and restricted cash $ (1,397) $ (44,679) For the year ended December 31, 2025, net cash provided by operating activities was $30.2 million, compared with net cash used in operating activities of $25.9 million in 2024, an increase of $56.1 million compared year over year.
Because of these limitations, neither EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, Adjusted Net Loss, Adjusted EPS, Adjusted Gross Profit, Adjusted Gross Margin, Cash Gross Profit, Cash Gross Margin nor Free Cash Flow should be considered as a replacement for gross profit, gross margin, net (loss) income, earnings per share or net cash flows (used in) provided by operating activities, as determined by GAAP, or as a measure of our profitability.
Other companies in our industry may calculate Adjusted EBITDA and Adjusted EBITDA Margin differently than we do, which limits its usefulness as a comparative measure. Because of these limitations, neither EBITDA, Adjusted EBITDA, EBITDA Margin, nor Adjusted EBITDA Margin should be considered as a replacement for net (loss) income as determined by GAAP, or as a measure of profitability.
We evaluate significant trends and fluctuations in our contract portfolio over time due to contract awards and completions, changes in customer requirements and changes in the volume of product and software sales. Backlog Backlog is also a useful measure in developing our annual budgeted revenue by estimating for the upcoming year our continuing business from existing customers and active contracts.
We evaluate our results of operations by considering the drivers causing changes in these measures. We evaluate significant trends and fluctuations in our contract portfolio over time due to contract awards and completions, changes in customer requirements and changes in the volume of product and software sales.
Our business performance is affected by the overall level of U.S. government spending and the alignment of our offerings and capabilities with the budget priorities of the U.S. government. Approximately 88% of our revenues were generated from U.S. government agencies in fiscal year 2024. In addition, our overall performance depends, in part, on global economic and geopolitical conditions.
Accordingly, our business performance is affected by the overall level of U.S. federal government spending and the alignment of our offerings and capabilities with current and future budget priorities of the U.S. federal government.
We believe we have adequate funds on hand to execute our financial and operating strategy. Our overall financial position and liquidity are strong.
We believe we have adequate funds on hand to execute our financial and operating strategy. Our overall financial position and liquidity are strong. Although no assurances can be given, we believe the available cash balances are sufficient to maintain the liquidity we require to meet our operating, investing and financing needs for the next 12 months.
Table MD&A 3: Security Solutions Segment - Financial Results Comparison For the Year Ended December 31, 2024 2023 Dollar Change (dollars in thousands) Revenues $ 76,760 $ 77,416 $ (656) Cost of sales (excluding impairment loss, depreciation and amortization) 37,352 34,270 3,082 Impairment loss on intangible assets 5,333 — 5,333 Depreciation and amortization 6,396 3,532 2,864 Total cost of sales 49,081 37,802 11,279 Gross profit $ 27,679 $ 39,614 $ (11,935) Gross margin 36.1 % 51.2 % Security Solutions segment revenue decreased by 1% in 2024, compared to 2023, primarily due to the reduction in revenue from a long-term program, the completion of a short-term program in the prior year and the sale of a non-recurring perpetual license in the prior year, partially offset by the growth in the TSA PreCheck program.
Table MD&A 3: Security Solutions Segment - Financial Results Comparison For the Year Ended December 31, 2025 2024 Dollar Change (dollars in thousands) Revenues $ 149,600 $ 76,760 $ 72,840 Cost of sales (excluding impairment loss, depreciation and amortization) 83,868 37,352 46,516 Impairment loss on intangible assets — 5,333 (5,333) Depreciation and amortization 8,173 6,396 1,777 Total cost of sales 92,041 49,081 42,960 Gross profit $ 57,559 $ 27,679 $ 29,880 Gross margin 38.5 % 36.1 % Security Solutions segment revenue increased by 94.9% in 2025, compared to 2024, primarily due to the expansion of multiple large programs in Telos ID.
As a result of the changes in contract estimates, we recorded immaterial catch-up revenue adjustments during the year ended December 31, 2024, and 2023. 38 Table of Contents Goodwill and Other Long-Lived Assets We evaluate the impairment of goodwill and other long-lived assets in accordance with Accounting Standards Codification ("ASC") 350, "Intangibles – Goodwill and Other." Management annually reviews goodwill and other long-lived assets for impairment or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.
Goodwill and Other Long-Lived Assets We evaluate the impairment of goodwill and other long-lived assets in accordance with Accounting Standards Codification ("ASC") 350, "Intangibles – Goodwill and Other." Goodwill is not amortized, but is subject to impairment testing on an annual basis, as of December 31 each year, or more frequently if events or circumstances indicate that the carrying value may not be recoverable.
This is primarily attributable to decreases in payments of tax withholding related to the net share settlement of equity awards of $0.5 million in 2024, compared with $3.7 million in 2023, and a $0.6 million payment for the Diamond Fortress Technologies ("DFT") holdback in February 2023, with no similar payment in 2024.
This is primarily attributable to the repurchases of common stock for $13.6 million in 2025 under the share repurchase program, with no similar activity in 2024, and an increase in payments of tax withholding related to the net share settlement of equity awards of $7.3 million in 2025, compared with $0.5 million in 2024. 35 Table of Contents Commitments from Contractual Obligations The Company does not have any other material cash requirements from contractual obligations.
When viewed in combination with our results prepared in accordance with GAAP, these non-GAAP financial measures help provide a broader picture of factors and trends affecting our results of operations. 33 Table of Contents EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin are supplemental measures of operating and cash flow performance that are not made under GAAP and do not represent, and should not be considered as an alternative to net (loss) income as determined by GAAP.
When viewed in combination with our 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.
The Company has the right to dictate the form of these payments up until the date at which they are paid. Any change to the expected payment form would result in a change in estimate that would add back to Adjusted EBITDA.
Any change to the expected payment form would result in out-of-quarter adjustments to this add back to Adjusted EBITDA.
On April 12, 2023, we amended our Credit Agreement and revised certain provisions on the terms of the covered collateral. See Note 10 - Debt and Other Obligations to the consolidated financial statements contained within this Annual Report for additional information. The Credit Agreement contains customary terms and conditions, including certain covenant requirements.
The amendment also modifies the revolving commitment to $15.0 million, with an expansion feature of up to $15.0 million of additional credit capacity. See Note 9 - Rev o lving Credit Facil ity to the consolidated financial statements contained within this 10-K for additional information. The Credit Agreement contains customary terms and conditions, including certain covenant requirements.
Key Performance Measures The primary financial performance measures we use to manage our business and monitor results of operations are revenue, gross profit, and Adjusted EBITDA. We evaluate our results of operations by considering the drivers causing changes in these measures.
Initiatives to reduce governmental spending, federal budget and debt ceiling action, and U.S. federal government policy positions, including trade policy, tax reform and/or changes to the U.S. federal government priorities, could materially impact federal spending broadly. 30 Table of Contents Key Performance Measures The primary financial performance measures we use to manage our business and monitor results of operations are revenue, gross profit, cash flow, and Adjusted EBITDA (a non-GAAP financial measure).
We define Adjusted Gross Profit as gross profit, plus stock-based compensation expense, impairment loss on intangible assets, and restructuring expenses charged under cost of sales. We define Adjusted Gross Margin as Adjusted Gross Profit as a percentage of total revenue. We define Cash Gross Profit as Adjusted Gross Profit, plus depreciation and amortization.
As expected, segment gross margin, excluding the impact of depreciation and amortization, stock-based compensation, restructuring expenses, and impairment on intangible assets, is down year-over-year due to revenue mix and higher non-cash infrastructure costs.
See Note 10 – Debt and Other Obligations to the consolidated financial statements combined within this Annual Report for a detailed discussion of our debt financing arrangements.
Recent Accounting Pronouncements See Note 2 - Summary of Significant Accounting Policies of the consolidated financial statements contained within this 10-K for a discussion of recently issued accounting pronouncements.
Removed
Adverse changes in fiscal and economic conditions could materially impact our business. Some changes that could adversely impact our business include the implementation of future spending reductions, government shutdown and supply chain challenges.
Added
We emphasize leveraging technology and innovation, specifically in cybersecurity, cloud, and identity solutions, to drive growth and ensure a secure and defendable network. We continue to invest in and develop in AI integration, enhancing automation and improving existing solutions to maintain a competitive edge.
Removed
Despite the budget and competitive pressure affecting the industry, we believe we are well-positioned to expand existing customer relationships and benefit from opportunities that we have not previously pursued. Business Environment U.S. Budget In March 2024, the U.S.
Added
Federal Government Budget In fiscal year ("FY") 2025, we generated approximately 91.0% of our revenues from the U.S. federal government, either as prime contractor or a subcontractor to other contractors engaged in work for the U.S. federal government, including 58.1% of our revenue from the DoW.
Removed
President proposed the annual appropriations for Fiscal Year ("FY") 2025 to fit within the tight caps set as part of the prior year's debt ceiling agreements. The FY2025 budget request included $850 billion for the DoD base budget, in alignment with levels agreed to in the Fiscal Responsibility Act ("FRA") of 2023.
Added
While we view the budget environment as constructive and believe there is bipartisan support for continued investment in the areas of defense and national security, it is uncertain when (and if) in any particular government fiscal year appropriations bills will be passed.
Removed
This proposed budget will enable the DoD to make the investments necessary to execute the Administrations' 2022 National Security Strategy and 2022 National Defense Strategy. The President's FY2025 budget also proposed several increases for new, key cyber programs and initiatives.
Added
During those periods of time when appropriations bills have not been passed and signed into law, U.S. federal government agencies operate under a continuing resolution ("CR"), a temporary measure that allows the government to continue operations at prior year funding levels. 29 Table of Contents The FY2025 U.S. federal government appropriations, which ran through September 30, 2025, were determined by a full-year CR.
Removed
For FY2025, the White House had directed agencies to prioritize cyber investments in "secure by design" technologies and the modernization of legacy technology. In the wake of the President's Executive Order ("EO") on artificial intelligence last fall, the 2025 budget proposal includes plenty of AI-related spending, much of which intersects with cybersecurity and AI safety.
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While the Administration has submitted its FY2026 budget proposal outlining its priorities, partisan disagreements over federal spending levels, among other things, have stalled progress on the required appropriations bills. Recently, on February 3, 2026, Congress passed another full-year CR for FY2026 to end the partial government shutdown.
Removed
Congress was unable to enact any of its annual appropriations bills before the start of FY2025, which began on October 1, 2024. Instead, on December 20, 2024, the U.S. House and Senate passed a second Continuing Resolution ("CR") to extend federal spending and avert a government shutdown through March 14, 2025.
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This enacted bill provides full-year funding for several programs, including defense and national security, through September 30, 2026; and also extended homeland security funding through February 13, 2026. A partial government shutdown began on February 14, 2026 after the lawmakers and the White House failed to reach a deal on legislation to fund DHS through September 2026.
Removed
The CR keeps the government operating at FY2024 funding levels, and ensures the federal government can receive adequate funding to operate for the duration of the CR. The current CR provides $888 billion in base defense funding for 2025, an amount exceeding the $850 billion cap on such funding established under the FRA.
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The impasse affects agencies such as the Transportation Security Administration, the Federal Emergency Management Agency, U.S. Coast Guard, the Secret Service, U.S. Immigration and Custom Enforcement, and U.S. Customs and Border Protection. Congress approved a FY2026 Defense Appropriations Bill that provides $838.7 billion in discretionary funding, including $838.5 billion in defense funding and $180 million in nondefense funding.
Removed
As of January 6, 2025, $12 billion in Defense funding was designated as an emergency requirement, and is not constrained by the caps established by the FRA. 29 Table of Contents Appropriators in both chambers had been hoping to at least reach a topline spending agreement, but the momentum for a deal was derailed after the new Administration issued a slew of EOs since inauguration, including an order to freeze funding on several federal programs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe majority of our business is transacted in U.S. dollars, and the impact of the foreign currency fluctuation as we report for our foreign subsidiary upon translation of its financials into U.S. dollars was insignificant. Further, we do not enter into financial instruments for trading purposes. 40 Table of Contents
Biggest changeThe majority of our business is transacted in U.S. dollars, and the impact of the foreign currency fluctuation as we report for our foreign subsidiary upon translation of its financials into U.S. dollars was insignificant. Further, we do not enter into financial instruments for trading or hedging purposes. 38 Table of Contents

Other TLS 10-K year-over-year comparisons