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spk02: Good day and thank you for standing by. Welcome to the TELUS Corporation Q1-2033 Earnings Call. At this time, all participants are in the least and only mode. After the speaker's presentation, there will be a question and answer session. And to ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message, advising your hand is raised. To withdraw a question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Allison Phillips.
spk03: Please go ahead. Good morning.
spk04: Thank you for joining us to discuss Telos Corporation's first quarter 2023 financial results. With me today is John Wood, Chairman and CEO of Telos. and Mark Venza, Executive Vice President and CFO of Pellos. Let me quickly review the format of today's presentation. John will begin with brief remarks on our first quarter 2023 results and Pellos' strategic priorities. Then Mark will cover the financials and guidance for second quarter and full year 2023 before turning it back to John to wrap up. Then we'll open the line for Q&A where Mark Griffin Executive Vice President of Security Solutions will also join us. The earnings press release was issued earlier today and is posted on the Telos 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, in the comments made during this conference call, and in our SEC filings. We do not undertake any duty to update any forward-looking 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 Telos' 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 in 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.
spk11: Thank you, Allison, and good morning, everyone. Let's begin today on slide three. Mark Venza will discuss the details of our financial performance later on the call, but overall we executed ahead of plan on the first quarter. We delivered $35.2 million of revenue and our gross margin expanded 66 basis points to 38.3%, both above the top end of our guidance range. Adjusted EBITDA was an $846,000 loss and was also above the top end of our guidance range. We experienced program-specific year-over-year headwinds, as expected, and as communicated on our fourth quarter earnings call, partially offset by the significant cost actions we have taken since the beginning of the year. Now let's turn to slide four. As discussed on our last earnings call, the Board and I are fully aligned on our immediate priorities for the next several quarters, specifically rebuilding and growing our backlog and core revenue base through strong renewal rates on existing business and the cultivation of a centralized and more productive business development capability. Starting with renewal rates, I'm pleased to report that we achieved 100% renewal rates on major customer contracts across the portfolio. We secured renewals on existing exacted contracts with the US Air Force, the Department of Homeland Security, the Department of State, the Department of the Interior, the Department of Energy, Defense Intelligence Agency, Amazon Web Services, Ernst & Young, are a few among others that we also awarded. The AMHS team also continued its outstanding customer service record with the achievement of several major contract renewals with government customers in the quarter. During the new business development, we continue to provide cyber, cloud, and enterprise security solutions to the world's most security-conscious organizations in both the government and commercial end markets. Over the next several quarters, we believe our most productive and direct path to rebuild and grow our backlog and poor revenue base is through the end market we know best, which is the federal government. Numerous mission priority and well-funded federal customers trust and value the solutions that TELOS brings to the fight. We believe our reputation and decades-long track record in the federal market will be the foundation of our return to growth. Our newly centralized business development team is currently focusing their efforts on opportunities in this market segment. We have seen robust activity and opportunity within the government for services and technology improvements in cyber, cloud, and network security. These customer requirements have been the basis for government requests for information, known as RFIs, and requests for proposals, known as RFPs, in recent months which may ultimately lead to new contract awards over the next several quarters. Our business development pipeline has grown meaningfully in size and quality since the end of 2022. Based on the current volume of customers, RFIs, and RFPs, we continue to expect new contract awards to be heavily weighted to the end of 2023 and into 2024. In the meantime, we've won new multi-year contracts with the National Geospatial Intelligence Agency for Xacta products and services and have grown our designated aviation channeling services business with the addition of new airport customers to our existing portfolio. And we continue to transform our newly consolidated business development team through new leadership, talent, operational rigor, and strategies to drive enhanced focus that we believe will improve productivity over time. We have a strong belief in our business, our products, solutions, and services that we provide. Our support of the country's national security and commitment to the mission remains steadfast. Those fundamentals have not and will not change. I'll now turn the call over to Mark Benza, who will discuss the first quarter 2023 financial results and guidance for the second quarter and full year for 2023. Mark?
spk06: Thank you, John, and thank you, everyone, for joining us today. Let's turn to slide five. As John mentioned, we're off to a sound start to the year with revenues, gross margin, and adjusted EBITDA all above the high end of our guidance range. Total revenues were $35.2 million. revenues for our security solutions business declined 27% to $19.8 million, approximately the top end of our first quarter guidance range. Security solutions contributed 56% of total company revenues, up slightly from 54% in the comparable period last year. The year-over-year revenue drivers for security solutions were consistent with our expectations as previously communicated on our fourth quarter earnings call. Growth in our information assurance business was offset by contraction in secure communications and Telos ID as a result of a program loss in secure communications at the end of 2022 and lower revenues on two ongoing programs in Telos ID. Combined, these three programs represented a $7.6 million year-over-year headwind in the quarter. Turning to secure networks, revenues declined 34% to $15.4 million, exceeding the top end of our first quarter guidance range by $2.2 million and representing the entirety of the guidance beat for the company overall. The $2.2 million outperformance was primarily the result of better than expected supply chain performance late in the quarter that resulted in a pull forward of revenue from the second quarter to the first quarter. Elsewhere in the Secure Networks portfolio, the year over year revenue headwinds were consistent with our expectations as previously communicated on our fourth quarter earnings call. Three large programs that primarily came to a successful completion in 2022 and lower revenues on an ongoing program drove a $10.6 million headwind in the quarter. Turning to profitability, gross margin expanded 66 basis points to 38.3% due to margin expansion in secure networks and a slightly more favorable weighting of revenues to our higher margin security solutions business, partially offset by margin contraction in security solutions. Gross margin in both segments benefited from lower share-based compensation and cost of sales year over year. Gross profit exceeded the high end of our guidance range by approximately $2 million, and gross margin exceeded the high end of our guidance range by approximately 380 basis points. Gross margin for our security solutions business contracted 395 basis points to 52% due to lower revenues on higher margin programs partially offset by lower share-based compensation and cost of sales, but exceeded the high end of our guidance range due to better than expected utilization of billable labor and lower than expected labor costs on fixed price programs. Gross margin for our secure networks business expanded 433 basis points to 21% due to lower revenues on lower margin programs and lower share-based compensation and cost of sales, and also exceeded the high end of our guidance range due to a more favorable mix of labor and materials on select programs, and overall excellent program management, including risk mitigation and expense management on fixed price contracts. Adjusted EBITDA, buffered by our expense management actions and ongoing restructuring initiatives, was a loss of $846,000 and exceeded the top end of our guidance range by approximately $3.7 million due to the previously described $2 million of higher gross profit, as well as $1.7 million of lower below-the-line expenses. Below-the-line expenses were lower due to ongoing expense management initiatives and higher capitalization of R&D expenditures. Adjusted EBITDA excludes the impact of two non-recurring items, including a $1.4 million non-cash gain reflected in other income and associated with the wind-down of a customer contract, as well as a $1.2 million charge associated with the implementation of our ongoing restructuring initiatives. The two adjustments approximately netted each other out in the quarter. Now let's turn to free cash flow and liquidity. Cash flow from operations was nearly breakeven in the quarter. Free cash flow was a $4.1 million net outflow down slightly from a $3.1 million net outflow in the comparable period last year. We ended the quarter with over $112 million of cash, no debt, and an undrawn $30 million senior secured revolving credit facility with an additional $30 million expansion feature. Our balance sheet is a competitive advantage and remains well positioned to support the company through a wide range of operating conditions and strategic opportunities. Now let's turn to slide six to discuss our guidance for the second quarter. For the second quarter, we forecast sales in a range of $28 million to $32 million, and an adjusted EBITDA loss of $6 million to $8 million. The midpoint of guidance implies a $5.2 million sequential decline in revenues, primarily due to the previously mentioned pull forward of secure networks revenue from the second quarter to the first quarter. We forecast security solutions revenues to decline high 40% to mid 50% year over year, and secure networks revenues to decline mid 30% to low 40% year over year, both due to the same large program dynamics that will persist throughout the year. Gross margin is expected to contract by approximately 600 to 950 basis points year over year, primarily due to revenue pressure on high margin programs and security solutions, as well as revenue recognition on a short-term low-margin program in secure networks, partially offset by lower share-based compensation and cost of sales. Gross margin is also expected to be down sequentially due to lower revenues on high-margin programs in TELUS ID, a higher proportion of revenues coming from our lower-margin secure networks business, and revenue recognition on the previously mentioned short-term, low-margin program and secure networks. Cash below-the-line expenses, which adjusts for capitalized software development costs, share-based compensation, restructuring costs, and DNA, are forecasted to be approximately $1 million lower year over year, primarily due to lower labor costs. From a free cash flow perspective, we're expecting approximately $6 million of discrete vendor payments in the second quarter that we did not have in the first quarter. So all else held equal, we expect free cash flow to be down sequentially in the second quarter, but in line with our original plan for the year. And lastly, on slide seven, we are reaffirming our full year guidance. With that, I'll pass it back to John, who will wrap up on slide eight. John?
spk11: Thanks, Mark. Let's move to slide eight. In summary, we executed ahead of plan in the first quarter of 2023 with key financial metrics exceeding the high end of our guidance range. We delivered $35.2 million of revenue and expanded gross margins by 66 basis points to 38.3%. We actively managed expenses to buffer adjusted EBITDA in the quarter. We maintain a highly liquid balance sheet with $112 million of cash, no debt, and an undrawn $30 million revolving credit facility. Our balance sheet is a competitive advantage and remains well positioned to support the company through a wide range of operating conditions and strategic opportunities. 2023 will be a transition year focused on rebuilding and growing our backlog and core revenue base through strong renewal rates on existing business and the cultivation of a centralized and more productive business development capability. And with that, we're happy to take questions.
spk06: Operator, please open the line for Q&A, and we ask the call participants to please be mindful of others in the queue by asking only one question. Thank you.
spk02: All right. Thank you. So, as a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press R11 again. Please stand by while we compile the Q&A roster. And for your first question, it comes from the line of Zach Cummins from P. Reilly. If your line is open, please ask your question.
spk07: Good morning, Mark and John. Thanks for taking my questions and congrats on the solid Q1 results. Mark, can you walk me through just kind of the puts and takes of your reaffirmed full year guidance, especially considering the upside that you had on the adjusted EBITDA line here in Q1?
spk06: Yeah, sure, Zach. So in terms of puts and takes between our last earnings call and this earnings call, I really wouldn't say there are any significant puts and takes. I think our outlook for the year It's pretty consistent with where we were in our last earnings call. Yes, first quarter came in above the high end of our guide. A lot of that was a pull forward from the second quarter to the first quarter. So on a first half basis, we're in a similar place to the implied first half on our original full year guide. I'd say as we get to our second quarter earnings call in August, we'll certainly be looking to take a harder scrub at that second half based on a first half of actuals, and we'll be looking to narrow the range at that point in time.
spk08: Got it. Well, thanks for taking my question.
spk06: Thanks, Zach.
spk02: All right, thank you. And for our next question, it comes from the line of Brad Clark from BMO. Brad, your line is open. Please ask your question.
spk05: Hi, thanks for taking my question. I wanted to dive in. I believe in the prepared remarks you mentioned some improvement in business development activity since the beginning of the year. We're just hoping you could perhaps provide some granularity. Where are you seeing some improvement in business development opportunities No, I think it relates to new business more so than renewals.
spk11: Hey, this is John. Generally speaking, what we decided to do is to focus on our core, and our core strength is the federal government. And there are just a bunch of opportunities for us that are enabling us to see the pipeline increasing relatively substantially. And so that's going to be our plan in the near term to round out our revenue to get back to a growth phase.
spk03: Thank you.
spk02: And for the next question, it comes from the line of Gritty Kessinger from Davidson. Gritty, your line is open. Please ask your question.
spk10: Great. Thanks for taking my question. Maybe try to get two into one. I didn't hear a single word about TSA. Any update there? And then secondly, when do you believe you can get this business back to free cash flow, break-even, or positive? Hey, Rudy, it's John.
spk09: I'm going to pass that question over to the first part of the question over to Mark Griffin. Hello, Rudy. Mark Griffin. Yes, we are still in soft launch phase with TSA. However, we fully expect bookings and revenue to begin in the second half of this year, so we're confident things are moving in the right direction.
spk06: Yeah, and then Rudy, on free cash flow, I would say the answer to your question is very much a function of how our business development efforts play out over the course of late 23, early 24. If we see the productivity there that we're working towards, I'd say there's a good probability we can return the free cash flow positives sometime over the course of 2024, especially if a couple of key opportunities in the pipeline work out in our favor.
spk02: All right. Thank you. So at this time, there are no further questions. I would like to turn the conference back to John Wood for closing remarks.
spk11: Well, first of all, I want to thank our shareholders for your ongoing support. You know, our mission remains unchanged. Telos empowers and protects the world's most security-conscious organizations, and that's going to continue to be our mission. We've got robust recession resistance end markets. We have well-funded customers. We have a decade-long track record of serving the world's most security-conscious organizations. And honestly tell us there's a strong foundation for the future. And finally, I'll just say that the board and I are fully committed to taking the necessary actions to capture the opportunity in front of us and rebuild and grow our revenue base for the future. So thank you all very much for your participation today. Have a great day.
spk02: All right. Thank you. And this concludes today's conference call. Thank you for participating.
spk03: You may now disconnect. you Thank you. Thank you. you Bye. Good day and thank you for standing by.
spk02: Welcome to the Telus Corporation Q1 2023 earnings call. At this time, all participants are in the least and only mode. After the speaker's presentation, there will be a question and answer session. And to ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw a question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Allison Fields.
spk03: Please go ahead.
spk04: Good morning. Thank you for joining us to discuss Telus Corporation's first quarter 2023 financial results. With me today is John Wood, Chairman and CEO of Telus, and Mark Benza, 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 first quarter 2023 results and tell us the strategic priorities. Then Mark will cover the financials and guidance for second quarter and full year 2023 before turning it back to John to wrap up. Then we'll open the line for Q&A where Mark Griffin, Executive Vice President of Security Solutions, will also join us. The earnings press release was issued earlier today and is posted on the Telos 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 risks and uncertainty. Actual results could materially differ for various reasons, including the factors described in today's earnings press release, in the comments made during this conference call, and in our SEC filing. We do not undertake any duty to update any forward-looking statement. 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 TELUS's 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 in 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.
spk11: Thank you, Alison, and good morning, everyone. Let's begin today on slide three. Mark Venza will discuss the details of our financial performance later on the call, but overall we executed ahead of plan on the first quarter. We delivered $35.2 million of revenue and our gross margin expanded 66 basis points to 38.3%, both above the top end of our guidance range. Adjusted EBITDA was an $846,000 loss and was also above the top end of our guidance range. We experienced program-specific year-over-year headwinds, as expected and as communicated on our fourth quarter earnings call, partially offset by the significant cost actions we have taken since the beginning of the year. Now let's turn to slide four. As discussed on our last earnings call, the Board and I are fully aligned on our immediate priorities for the next several quarters, specifically rebuilding and growing our backlog and core revenue base. through strong renewal rates on existing business and the cultivation of a centralized and more productive business development capability. Starting with renewal rates, I'm pleased to report that we achieved 100% renewal rates on major customer contracts across the portfolio. We secured renewals on existing EXACA contracts with the US Air Force, the Department of Homeland Security, the Department of State, the Department of the Interior, the Department of Energy, Defense Intelligence Agency, Amazon Web Services, Ernst & Young, are a few among others that we also awarded. The AMHS team also continued its outstanding customer service record with the achievement of several major contract renewals with government customers in the quarter. During the new business development, we continue to provide cyber, cloud, and enterprise security solutions to the world's most security-conscious organizations in both the government and commercial end markets. Over the next several quarters, we believe our most productive and direct path to rebuild and grow our backlog and core revenue base is through the end market we know best, which is the federal government. Numerous mission priority and well-funded federal customers trust and value the solutions that TELOS brings to the fight. We believe our reputation and decades-long track record in the federal market will be the foundation of our return to growth. Our newly centralized business development team is currently focusing their efforts on opportunities in this market segment. We have seen robust activity and opportunity within the government for services and technology improvements in cyber, cloud, and network security. These customer requirements have been the basis for government requests for information, known as RFIs, and requests for proposals, known as RFPs, in recent months which may ultimately lead to new contract awards over the next several quarters. Our business development pipeline has grown meaningfully in size and quality since the end of 2022. Based on the current volume of customers, RFIs, and RFPs, we continue to expect new contract awards to be heavily weighted to the end of 2023 and into 2024. In the meantime, we've won new multi-year contracts with the National Geospatial Intelligence Agency for Xacta products and services and have grown our designated aviation channeling services business with the addition of new airport customers to our existing portfolio. And we continue to transform our newly consolidated business development team through new leadership, talent, operational rigor, and strategies to drive enhanced focus that we believe will improve productivity over time. We have a strong belief in our business, our products, solutions, and services that we provide. Our support of the country's national security and commitment to the mission remain steadfast. Those fundamentals have not and will not change. I'll now turn the call over to Mark Benza, who will discuss the first quarter 2023 financial results and guidance for the second quarter and full year for 2023. Mark?
spk06: Thank you, John, and thank you, everyone, for joining us today. Let's turn to slide five. As John mentioned, we're off to a sound start to the year with revenues, gross margin, and adjusted EBITDA all above the high end of our guidance range. Total revenues were $35.2 million. revenues for our security solutions business declined 27% to $19.8 million, approximately the top end of our first quarter guidance range. Security solutions contributed 56% of total company revenues, up slightly from 54% in the comparable period last year. The year-over-year revenue drivers for security solutions were consistent with our expectations as previously communicated on our fourth quarter earnings call. Growth in our information assurance business was offset by contraction in secure communications and Telos ID as a result of a program loss in secure communications at the end of 2022 and lower revenues on two ongoing programs in Telos ID. Combined, these three programs represented a $7.6 million year-over-year headwind in the quarter. Turning to secure networks, revenues declined 34% to $15.4 million, exceeding the top end of our first quarter guidance range by $2.2 million and representing the entirety of the guidance beat for the company overall. The $2.2 million outperformance was primarily the result of better than expected supply chain performance late in the quarter that resulted in a pull forward of revenue from the second quarter to the first quarter. Elsewhere in the Secure Networks portfolio, the year over year revenue headwinds were consistent with our expectations as previously communicated on our fourth quarter earnings call. Three large programs that primarily came to a successful completion in 2022 and lower revenues on an ongoing program drove a $10.6 million headwind in the quarter. Turning to profitability, gross margin expanded 66 basis points to 38.3% due to margin expansion in secure networks and a slightly more favorable weighting of revenues to our higher margin security solutions business, partially offset by margin contraction in security solutions. Gross margin in both segments benefited from lower share-based compensation and cost of sales year over year. Gross profit exceeded the high end of our guidance range by approximately $2 million, and gross margin exceeded the high end of our guidance range by approximately 380 basis points. Gross margin for our security solutions business contracted 395 basis points to 52% due to lower revenues on higher margin programs partially offset by lower share-based compensation and cost of sales, but exceeded the high end of our guidance range due to better than expected utilization of billable labor and lower than expected labor costs on fixed price programs. Gross margin for our secure networks business expanded 433 basis points to 21% due to lower revenues on lower margin programs and lower share-based compensation and cost of sales, and also exceeded the high end of our guidance range due to a more favorable mix of labor and materials on select programs, and overall excellent program management, including risk mitigation and expense management on fixed price contracts. Adjusted EBITDA, buffered by our expense management actions and ongoing restructuring initiatives, was a loss of $846,000 and exceeded the top end of our guidance range by approximately $3.7 million due to the previously described $2 million of higher gross profit, as well as $1.7 million of lower below-the-line expenses. Below-the-line expenses were lower due to ongoing expense management initiatives and higher capitalization of R&D expenditures. Adjusted EBITDA excludes the impact of two non-recurring items, including a $1.4 million non-cash gain reflected in other income and associated with the wind-down of a customer contract, as well as a $1.2 million charge associated with the implementation of our ongoing restructuring initiatives. The two adjustments approximately netted each other out in the quarters. Now let's turn to free cash flow and liquidity. Cash flow from operations was nearly breakeven in the quarter. Free cash flow was a $4.1 million net outflow down slightly from a $3.1 million net outflow in the comparable period last year. We ended the quarter with over $112 million of cash, no debt, and an undrawn $30 million senior secured revolving credit facility with an additional $30 million expansion future. Our balance sheet is a competitive advantage and remains well positioned to support the company through a wide range of operating conditions and strategic opportunities. Now let's turn to slide six to discuss our guidance for the second quarter. For the second quarter, we forecast sales in a range of $28 million to $32 million, and an adjusted EBITDA loss of $6 million to $8 million. The midpoint of guidance implies a $5.2 million sequential decline in revenues, primarily due to the previously mentioned pull forward of secure networks revenue from the second quarter to the first quarter. We forecast security solutions revenues to decline high 40% to mid 50% year over year, and secure networks revenues to decline mid 30% to low 40% year over year, both due to the same large program dynamics that will persist throughout the year. Gross margin is expected to contract by approximately 600 to 950 basis points year over year, primarily due to revenue pressure on high margin programs and security solutions, as well as revenue recognition on a short-term, low-margin program in secure networks, partially offset by lower share-based compensation and cost of sales. Gross margin is also expected to be down sequentially due to lower revenues on high-margin programs in TELUS ID. A higher proportion of revenues coming from our lower-margin secure networks business and revenue recognition on the previously mentioned short-term, low-margin program and secure networks. Cash below-the-line expenses, which adjust for capitalized software development costs, share-based compensation, restructuring costs, and DNA, are forecasted to be approximately $1 million lower year over year, primarily due to lower labor costs. From a free cash flow perspective, we're expecting approximately $6 million of discrete vendor payments in the second quarter that we did not have in the first quarter. So all else held equal, we expect free cash flow to be down sequentially in the second quarter, but in line with our original plan for the year. And lastly, on slide seven, we are reaffirming our full year guidance. With that, I'll pass it back to John, who will wrap up on slide eight. John?
spk11: Thanks, Mark. Let's move to slide eight. In summary, we executed ahead of plan in the first quarter of 2023 with key financial metrics exceeding the high end of our guidance range. We delivered $35.2 million of revenue and expanded gross margins by 66 basis points to 38.3%. We actively managed expenses to buffer adjusted EBITDA in the quarter. We maintain a highly liquid balance sheet with $112 million of cash, no debt, and an undrawn $30 million revolving credit facility. Our balance sheet is a competitive advantage and remains well positioned to support the company through a wide range of operating conditions and strategic opportunities. 2023 will be a transition year focused on rebuilding and growing our backlog and core revenue base through strong renewal rates on existing business and the cultivation of a centralized and more productive business development capability. And with that, we're happy to take questions.
spk06: Operator, please open the line for Q&A, and we ask the call participants to please be mindful of others in the queue by asking only one question. Thank you.
spk02: All right. Thank you. So as a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. And for your first question, it comes from the line of Zach Cummins from P. Reilly. If your line is open, please ask your question.
spk07: Good morning, Mark and John. Thanks for taking my questions and congrats on the solid Q1 results. Mark, can you walk me through just kind of the puts and takes of your reaffirmed full year guidance, especially considering the upside that you had on the adjusted EBITDA line here in Q1?
spk06: Yeah, sure, Zach. So in terms of puts and takes between our last earnings call and this earnings call, I really wouldn't say there are any significant puts and takes. I think our outlook for the year It's pretty consistent with where we were in our last earnings call. Yes, first quarter came in above the high end of our guide. A lot of that was a pull forward from the second quarter to the first quarter. So on a first half basis, we're in a similar place to the implied first half on our original full year guide. I'd say as we get to our second quarter earnings call in August, we'll certainly be looking to take a harder scrub at that second half based on a first half of actuals, and we'll be looking to narrow the range at that point in time.
spk08: Got it. Well, thanks for taking my question.
spk06: Thanks, Zach.
spk02: Right. Thank you. And for the next question, it comes from the line of Brad Clark from BMO. Brad, your line is open. Please ask your question.
spk05: Hi. Thanks for taking my question. I wanted to dive in. I believe in the prepared remarks you mentioned some improvement in business development activities since the beginning of the year. We're just hoping you could perhaps provide some granularity. Where are you seeing some improvement in business development opportunities? No, I think it relates to new business more so than renewals.
spk11: Hey, this is John. Generally speaking, what we decided to do is to focus on our core, and our core strength is the federal government. And there are just a bunch of opportunities for us that are enabling us to see the pipeline increasing relatively substantially. And so that's going to be our plan in the near term to round out our revenue to get back to a growth phase.
spk03: Thank you.
spk02: And for the next question, it comes from the line of Gritty Kessinger from Davidson. Gritty, your line is open. Please ask your question.
spk10: Great. Thanks for taking my question. Maybe try to get two into one. I didn't hear a single word about TSA. Any update there? And then secondly, when do you believe you can get this business back to free cash flow, break-even, or positive?
spk09: Hey, Rudy, it's John. I'm going to pass that question over to the first part of the question over to Mark Griffin. Hello, Rudy. Mark Griffin. Yes, we are still in soft launch phase with TSA. However, we fully expect bookings and revenue to begin in the second half of this year, so we're confident things are moving in the right directions.
spk06: Yeah, and then Rudy, on free cash flow, I would say the answer to your question is very much a function of how our business development efforts play out over the course of late 23, early 24. If we see the productivity there that we're working towards, I'd say there's a good probability we can return the free cash flow positives sometime over the course of 2024, especially if a couple of key opportunities in the pipeline work out in our favor.
spk02: All right. Thank you. So at this time, there are no further questions. I would like to turn the conference back to John Wood for closing remarks.
spk11: First of all, I want to thank our shareholders for your ongoing support. Our mission remains unchanged. TELUS empowers and protects the world's most security-conscious organizations, and that's going to continue to be our mission. We've got robust recession-resistant end markets. We have well-funded customers. We have a decade-long track record of serving the world's most security-conscious organizations. honestly tell us there's a strong foundation for the future. And finally, I'll just say that the board and I are fully committed to taking the necessary actions to capture the opportunity in front of us and rebuild and grow our revenue base for the future. So thank you all very much for your participation today. Have a great day.
spk02: All right. Thank you. And this concludes today's conference call. Thank you for participating. You may now disconnect.
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