Telos Corporation

Dan, thank you for standing by. Welcome to the TELUS Corporation second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Christina Mazuz-Vera. Please go ahead.

Good morning. Thank you for joining us to discuss TELUS Corporation's second quarter 2022 financial results. With me today is John Wood, Chairman and CEO of TELUS, and Mark Benda, Executive Vice President and CFO of TELUS. Let me quickly review the format of today's presentation. John will begin with brief remarks on our 2022 second quarter results and TELUS's strategic priorities. will cover the financials and guidance for third quarter and full year 2022. Then we'll open the line for questions and answers where Mark Murphy, Executive Vice President of Security Solutions will also join us. The earnings press release was issued earlier today and is posted on the Telus Investor Relations website where this call is being simultaneously webcast. Additionally, we have provided presentation slides on our investor relations website. Before we begin, we want to emphasize that some of our statements on this call are forward-looking statements and are made under the safe harbor provisions of the federal securities laws. These statements are based on current expectations and assumptions that are subject to risk and uncertainty. Actual results could materially differ for various reasons. including the factors described in today's earnings press release and the comments made during this conference call and in our SEC filing. We do not undertake any duty to update any foreign voting statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental and clarifying measures to help investors understand Pellis' financial performance. These non-GAAP financial measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results and our earnings press release and on the investor relations portion of our website. Please also note that financial comparisons are year over year, unless otherwise specified. The webcast replay of this call will be available for the next year on our company website under the Investor Relations link. With that, I'll turn the call over to John.

Thank you, Christina, and good morning, everyone. Let's begin today on slide three. I'm pleased to report that TELA is over-delivered again on key financial metrics in the second quarter of 2022. Mark will discuss our financial performance later on this call, but at a high level, We delivered $55.8 million of revenue in the second quarter above our guidance range of $50 million to $54 million, up 4% year-over-year and 11% sequentially. Gross margin was 37.5%, above our guidance range of 33% to 35%. Finally, we delivered $4.5 million of adjusted EBITDA above the high end of our guidance range of negative $2 million to positive $2 million, and four cents of adjusted EPS. Now let's turn to slide four to discuss our recent business highlights and updates. This quarter, we announced a new strategic partnership with IBM. TELUS is the launch partner for the new Active Governance Service, or AGS, offering with IBM Security. Telus and IBM are teaming to provide capabilities to address the significant challenges organizations are facing with cybersecurity and risk compliance. AGS is a unique and comprehensive offering, coupling the exact suite of tools with IBM services and security expertise to significantly improve the efficacy and efficiency of clients' approach to cybersecurity risk management in today's increasingly challenging cyber environment. Target customers include large enterprise organizations in global markets such as financial services, healthcare, telecommunications, and energy. We are very excited about this opportunity to partner with IBM, a leading global organization that brings recognized thought leadership and leading capability in the cybersecurity management space. This relationship also enables us to effectively broaden our reach into the global marketplace for sales of our Xacta suite of tools to drive future growth for Telos. Beyond the IBM partnership, we have continued to maintain momentum in the current environment. Within the security solutions business, Telos received Xacta renewals with several key customers, including the Central Intelligence Agency, the U.S. Department of the Interior, the U.S. Environmental Protection Agency, a U.S. Federal Reserve Bank, and the U.S. Department of Energy, as well as Salesforce. The company was also awarded new contracts with a foreign government customer, the U.S. Army Space and Missile Command, the U.S. Department of Homeland Security, Palantir Technologies, and OmniHealth. We continue to focus on the government and commercial space, and in particular, prioritizing regulated industries. The company also received an important ghost renewal with a classified customer to continue providing support. Additionally, we were awarded up to a 10-year contract to continue and expand our aviation security practice with the US Transportation Security Administration. Our ONIX technology won first place in the Mobile Fingerprint Information Challenge hosted by the National Institute of Standards and Technology. Finally, the secure networks business continued to add to its backlog with new wins, including a new contract to support the U.S. Air Force SIPRNET enterprise modernization. Let me turn now to some comments on the industry landscape and a number of recent initiatives in Washington, D.C. that present opportunities for TELOS. There are indications that Congress plans to boost spending above the level called for by President Biden in its proposed FY 2023 budget. The House and Senate versions of the Annual Defense Authorization Bill provide for increasing top line defense spending, respectively, $37 to $45 billion above the level proposed by the President. We still have to see how the appropriations process plays out this fall to know how much funding will actually be provided for our military customers. But signs are there that the FY 2023 defense budget will see a meaningful increase. On the non-defense side, as with defense, we'll have to wait for Congress to agree on appropriations legislation. But so far, the spending bills under consideration reflect a consensus that more funding is needed for cybersecurity throughout the various departments and agencies. A great example of this is with CISA. the Department of Homeland Security's cybersecurity agency. CISA works to detect and mitigate the effects of cyber attacks on federal, state, and local governments and the private sector, and to manage cyber risks to our critical infrastructure. We understand that, recognizing the importance of this mission, the draft Senate Appropriations Bill for DHS seeks to give CISA a 16% increase above last year's funding. Congress clearly recognizes that more resources are needed by federal departments and agencies to combat challenges they face in cyberspace. A major factor in that thinking is the Ukraine situation, which has resulted in continued warnings of potential cyber attacks against U.S. interests, including against U.S. critical infrastructure. So far, the United States has done an excellent job in preventing what had been expected to be widespread impacts from the cyber attacks in retaliation for our support for Ukraine. But policymakers and companies like ours know that the public and private sectors can't let up, and they must continue to follow cybersecurity best practices, including deploying and updating effective cyber defenses. I will now turn the call over to Mark, who will discuss second quarter 2022 financial results and our guidance for the third quarter and full year 2022. Mark?