Telos Corporation

Good day. Thank you for standing by. Welcome to TELUS Corporation's third quarter 2023 earnings 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 the session, you will need to press star 1-1 on your telephone. You'll then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Allison Phillips. Please go ahead.

Good morning. Thank you for joining us to discuss Telus Corporation's third 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 third quarter 2023 results and TELUS's strategic priorities. Then Mark will cover the financials in more detail and discuss guidance for the fourth quarter and full year 2023, as well as provide some high-level comments on 2024 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 uncertainties. 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 Talos' financial performance. These non-GAAP financial measures should be considered in addition to and not as a substitute for or an isolation from GAAP results. You can find additional disclosures regarding these non-GAAP financial 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.

Thank you, Alison, and good morning, everyone. Let's begin today on slide three. I'm pleased to report that TELUS has again over-delivered on all key financial metrics in the third quarter. Mark will discuss the details of our financial performance later in the call. At a high level, we delivered $36.2 million of revenue in the third quarter above our guidance range of $30 million to $34 million. Gross margin was 36% above our guidance range of 30.4% to 34.2%. Adjusted EBITDA was a $1.3 million loss and was above the top end of our guidance range of negative $8 million to negative $6 million. Lastly, we returned to positive cash flow from operations this quarter. Many factors enabled our team to achieve these results, including a better than expected performance from key programs and security solutions like TSA PreCheck, strong program management and secure networks to support margin performance, and management of operating expenses to support profitability while also funding growth investments. With three quarters complete, we have successfully managed 2023 to better than originally expected results year to date. Given this performance and our outlook for the remainder of the year, we are again in a position to raise our full year guidance on all metrics. Now let's turn to slide four to discuss our recent business highlights and updates. First and foremost, I'm pleased to announce that TELOS, in close coordination with TSA, achieved the formal launch of our TSA PreCheck program in the third quarter. TELOS' official TSA PreCheck enrollment website is operational, and the website address is in our earnings presentation and press release. Our capability to process TSA PreCheck renewals is fully operational, and our capability to process new enrollments will continue to ramp up as we onboard physical sites across the country over the next several quarters. We look forward to steadily growing this offering in the coming quarters and years into a long-term, steady, value-creating program for telos. Beyond TSA PreCheck, we continue to achieve high renewal rates with our exact customer base, both in government and commercial sectors. Government customers included the National Geospatial Intelligence Agency, the Federal Bureau of Investigation, the US State Department, the Defense Intelligence Agency, the Social Security Administration, the US Environmental Protection Agency, and a classified customer. Commercial customers included Zscaler, Ernst & Young, Stack Armor, and a large confidential customer in the technology sector. We were also awarded renewals for cyber services at the Defense Health Agency, the General Service Administration, and the U.S. Department of Homeland Security. Additionally, we secured a new award for our automated message handling system with the Joint Cryptologic Mission Simulation Program through the National Security Agency. Lastly, the Secure Networks team obtained a new contract with the U.S. Air Force for a new secure network installation, building on our three decades long relationship with the U.S. Air Force. I will now turn the call over to Mark Benza, who will discuss the third quarter 2023 financial results, guidance for the fourth quarter and full year 2023, and a preliminary outlook for 2024.