Cover
Cover - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2023 | Mar. 08, 2024 | Jun. 30, 2023 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2023 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Transition Report | false | ||
Entity File Number | 001-08443 | ||
Entity Registrant Name | TELOS CORPORATION | ||
Entity Incorporation, State or Country Code | MD | ||
Entity Tax Identification Number | 52-0880974 | ||
Entity Address, Address Line One | 19886 Ashburn Road | ||
Entity Address, City or Town | Ashburn | ||
Entity Address, State or Province | VA | ||
Entity Address, Postal Zip Code | 20147-2358 | ||
City Area Code | 703 | ||
Local Phone Number | 724-3800 | ||
Title of 12(b) Security | Common stock, $0.001 par value per share | ||
Trading Symbol | TLS | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | true | ||
Document Financial Statement Error Correction [Flag] | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 134.7 | ||
Entity Common Stock, Shares Outstanding | 70,319,620 | ||
Documents Incorporated by Reference | Portions of the registrant's definitive Proxy Statement for the 2024 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the registrant's fiscal year ended December 31, 2023 are incorporated by reference in Part III of this Annual Report on Form 10-K. | ||
Entity Central Index Key | 0000320121 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2023 | ||
Document Fiscal Period Focus | FY |
Audit Information
Audit Information | 12 Months Ended |
Dec. 31, 2023 | |
Audit Information [Abstract] | |
Auditor Name | PricewaterhouseCoopers LLP |
Auditor Location | Washington, District of Columbia |
Auditor Firm ID | 238 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Total revenue | $ 145,378 | $ 216,887 |
Depreciation and amortization | 3,544 | 793 |
Total cost of sales | 92,436 | 137,844 |
Gross profit | 52,942 | 79,043 |
Selling, general and administrative expenses: | ||
Sales and marketing | 7,122 | 16,582 |
Research and development | 12,247 | 16,918 |
General and administrative | 73,888 | 99,393 |
Total selling, general and administrative expenses | 93,257 | 132,893 |
Operating loss | (40,315) | (53,850) |
Other income | 6,715 | 1,350 |
Interest expense | (786) | (874) |
Loss before income taxes | (34,386) | (53,374) |
Provision for income taxes | (36) | (54) |
Net loss | $ (34,422) | $ (53,428) |
Net loss per share: | ||
Basic (in dollars per share) | $ (0.50) | $ (0.79) |
Net loss per share, diluted (in dollars per share) | $ (0.50) | $ (0.79) |
Weighted-average share outstanding: | ||
Basic (in shares) | 69,256 | 67,559 |
Diluted (in shares) | 69,256 | 67,559 |
Services | ||
Total revenue | $ 135,175 | $ 192,742 |
Cost of sales | 83,159 | 120,541 |
Products | ||
Total revenue | 10,203 | 24,145 |
Cost of sales | $ 5,733 | $ 16,510 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (34,422) | $ (53,428) |
Other comprehensive loss, net of tax: | ||
Foreign currency translation adjustments | (5) | (28) |
Comprehensive loss | $ (34,427) | $ (53,456) |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Assets: | ||
Cash and cash equivalents | $ 99,260 | $ 119,305 |
Accounts receivable, net | 30,424 | 40,069 |
Inventories, net | 1,420 | 2,877 |
Prepaid expenses | 7,520 | 4,819 |
Other current assets | 1,367 | 893 |
Total current assets | 139,991 | 167,963 |
Property and equipment, net | 3,457 | 4,787 |
Finance lease right-of-use assets, net | 6,612 | 7,832 |
Operating lease right-of-use assets | 216 | 341 |
Goodwill | 17,922 | 17,922 |
Intangible assets, net | 39,616 | 37,415 |
Other assets | 885 | 1,137 |
Total assets | 208,699 | 237,397 |
Liabilities: | ||
Accounts payable and other accrued liabilities | 13,750 | 22,551 |
Accrued compensation and benefits | 14,569 | 8,388 |
Contract liabilities | 6,728 | 6,444 |
Finance lease obligations – current portion | 1,730 | 1,592 |
Operating lease obligations – current portion | 97 | 361 |
Other financing obligations – current portion | 0 | 1,247 |
Other current liabilities | 2,324 | 4,919 |
Total current liabilities | 39,198 | 45,502 |
Finance lease obligations – non-current portion | 9,518 | 11,248 |
Operating lease obligations – non-current portion | 123 | 27 |
Other financing obligations – non-current portion | 0 | 7,211 |
Deferred income taxes | 813 | 758 |
Other liabilities | 44 | 297 |
Total liabilities | 49,696 | 65,043 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, $0.001 par value, 250,000,000 shares authorized, 70,239,890 shares and 67,431,632 shares issued and outstanding as of December 31, 2023 and 2022, respectively | 109 | 106 |
Additional paid-in capital | 433,781 | 412,708 |
Accumulated other comprehensive loss | (60) | (55) |
Accumulated deficit | (274,827) | (240,405) |
Total stockholders' equity | 159,003 | 172,354 |
Total liabilities and stockholders' equity | $ 208,699 | $ 237,397 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2023 | Dec. 31, 2022 |
Stockholders' equity: | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 250,000,000 | 250,000,000 |
Common stock, issued (in shares) | 70,239,890 | 67,431,632 |
Common stock, outstanding (in shares) | 70,239,890 | 67,431,632 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Cash flows from operating activities: | ||
Net loss | $ (34,422) | $ (53,428) |
Adjustments to reconcile net loss to cash flows from operations: | ||
Stock-based compensation | 24,396 | 64,660 |
Depreciation and amortization | 9,429 | 5,890 |
Provision for doubtful accounts | 152 | 99 |
Deferred income tax provision | 55 | 35 |
Loss on disposal of fixed assets | 2 | 4 |
Accretion of discount on acquisition holdback | 2 | 48 |
Amortization of debt issuance costs | 69 | 0 |
Gain on early extinguishment of other financing obligations | (1,427) | 0 |
Changes in other operating assets and liabilities: | ||
Accounts receivable | 9,493 | 19,675 |
Inventories | 1,457 | (1,630) |
Intangible assets – software held for resale | 0 | (7,120) |
Prepaid expenses, other current assets and other assets | (3,058) | (1,249) |
Accounts payable and other accrued payables | (8,817) | (12,322) |
Accrued compensation and benefits | 6,602 | (317) |
Contract liabilities | 283 | 63 |
Other current liabilities and other liabilities | (2,629) | 2,100 |
Net cash provided by operating activities | 1,587 | 16,508 |
Cash flows from investing activities: | ||
Capitalized software development costs | (14,552) | (12,708) |
Purchases of property and equipment | (926) | (1,009) |
Net cash used in investing activities | (15,478) | (13,717) |
Cash flows from financing activities: | ||
Payments under finance lease obligations | (1,592) | (1,461) |
Repurchase of common stock | (139) | (11,145) |
Payment of tax withholding related to net share settlement of equity awards | (3,742) | (5,671) |
Payments for debt issuance costs | (114) | (95) |
Payments of DFT holdback amount | (564) | 0 |
Proceeds from other financing obligations | 0 | 9,092 |
Payments of other financing obligations | 0 | (635) |
Net cash used in financing activities | (6,151) | (9,915) |
Net change in cash, cash equivalents, and restricted cash | (20,042) | (7,124) |
Cash, cash equivalents and restricted cash, beginning of period | 119,438 | 126,562 |
Cash, cash equivalents and restricted cash, end of period | $ 99,396 | $ 119,438 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Common Stock | Additional Paid–in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit |
Beginning balance (in shares) at Dec. 31, 2021 | 66,767,000 | ||||
Beginning balance at Dec. 31, 2021 | $ 180,254 | $ 105 | $ 367,153 | $ (27) | $ (186,977) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (53,428) | (53,428) | |||
Foreign currency translation loss | (28) | (28) | |||
Stock-based compensation | 62,511 | 62,511 | |||
Restricted stock unit award vested, net of shares withheld to cover tax withholding (in shares) | 2,214,000 | ||||
Restricted stock unit award vested, net of shares withheld to cover tax withholding | (5,671) | $ 2 | (5,673) | ||
Repurchase of common stock (in shares) | (1,550,000) | ||||
Repurchase of common stock | $ (11,284) | $ (1) | (11,283) | ||
Ending balance (in shares) at Dec. 31, 2022 | 67,431,632 | 67,431,000 | |||
Ending balance at Dec. 31, 2022 | $ 172,354 | $ 106 | 412,708 | (55) | (240,405) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (34,422) | (34,422) | |||
Foreign currency translation loss | (5) | (5) | |||
Stock-based compensation | 22,874 | 22,874 | |||
Restricted stock unit award vested, net of shares withheld to cover tax withholding (in shares) | 2,032,000 | ||||
Restricted stock unit award vested, net of shares withheld to cover tax withholding | (3,741) | $ 2 | (3,743) | ||
Issuance of common stock for 401K match (in shares) | 777,000 | ||||
Issuance of common stock for 401K match | $ 1,943 | $ 1 | 1,942 | ||
Ending balance (in shares) at Dec. 31, 2023 | 70,239,890 | 70,240,000 | |||
Ending balance at Dec. 31, 2023 | $ 159,003 | $ 109 | $ 433,781 | $ (60) | $ (274,827) |
ORGANIZATION
ORGANIZATION | 12 Months Ended |
Dec. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | ORGANIZATION Telos Corporation, together with its subsidiaries, (collectively, the "Company" or "Telos" or "We" or "Our"), a Maryland corporation, is a leading provider of cyber, cloud and enterprise security solutions for the world's most security-conscious organizations. We own all of the issued and outstanding share capital of Xacta Corporation and ubIQuity.com, inc., (a holding company for Xacta Corporation), and 100% ownership interest in Telos Identity Management Solutions, LLC ("Telos ID"), Teloworks, Inc. ("Teloworks") and Telos APAC Pte. Ltd. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principle of Consolidation The accompanying consolidated financial statements include the accounts of Telos and its subsidiaries (see Note 1 – Organization ), all of whose issued and outstanding share capital is wholly-owned directly and indirectly by the Telos Corporation. All intercompany transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Basis of Comparison Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year's presentation. In the current period, we reclassified and presented depreciation and amortization separately from the cost of sales line items. The reclassification had no impact on the statement of operations. Segment Reporting Operating segments are defined as components of an enterprise for which separate discrete financial information is available and evaluated regularly by the chief operating decision maker ("CODM"), or decision-making group, in deciding how to allocate resources and assess performance. We operate our business in two reportable and operating segments: Security Solutions and Secure Networks. These segments enable the alignment of our strategies and objectives and provide a framework for the timely and rational allocation of resources within business lines. We eliminate any inter-segment revenues and expenses upon consolidation. See Note 1 8 – Segment Information for further information. Use of Estimates Preparing consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and disclosure of contingent assets and liabilities. The Company regularly assesses these estimates; however, actual results could differ from those estimates. We base our estimates on historical experience, currently available information, and various other assumptions that we believe are reasonable under the circumstances. Management evaluates these estimates and assumptions on an ongoing basis, including those relating to revenue recognition on cost estimation on certain contracts, allowance for credit losses, inventory obsolescence, valuation allowance for deferred tax assets, income taxes, certain assumptions related to stock-based compensation, valuation of intangible assets and goodwill, restructuring expenses accruals, and contingencies. Actual results could differ from those estimates. The impact of changes in estimates is recorded in the period in which they become known. Concentrations Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents, and accounts receivable. In consideration that a large amount of our working capital and total assets are held in cash and cash equivalents, we are exposed to credit risk in the event of default by the financial institutions to the extent of the amounts held in excess of federal insurance limits. Due to the financial strength and high credit quality of the financial institutions where the accounts are held, we do not believe that this credit risk makes it reasonably possible that a near-term severe impact risk of loss will occur. The Company's receivables are primarily due from the U.S. government, or from prime contractors to whom we are subcontractors and the end customer is the U.S. government, and are generally considered collectable from the perspective of the customer's ability to pay. We believe that the credit risk associated with our receivables is limited due to the creditworthiness of our customers. We maintain an allowance for estimated potential credit losses. Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Restricted cash represents funds that are held in our money market account but precluded from use of general business needs through contractual requirements. We report our restricted cash balance within "Other assets" on the consolidated balance sheets. Contract Balances The timing of revenue recognition may differ from the timing of billing and cash receipts from customers. Amounts are invoiced as work progresses, either at periodic intervals or upon achievement of contractual milestones. We record a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance or when milestone payments from customers exceed revenue earned to date. A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract liabilities include deferred revenue, customer advances and billings in excess of revenue. Contract assets and liabilities are recorded net on a contract-by-contract basis and are classified based on the contract's operating cycle at the end of each reporting period. Accounts Receivable Accounts receivable includes the following: Billed Receivables - Billed receivables are balances where an invoice has been prepared and issued and is collectible under standard contract terms. Where we anticipate that an invoice will be issued within a short period of time and where the funds are considered collectible within standard contract terms, we include this balance as billable accounts receivable. Unbilled Receivables - Unbilled receivables are balances which have not yet been billed due to timing, most commonly just a month delayed from the timing of revenue recognition and the actual bill being presented to the customer. The Company has fulfilled all requirements in order to bill the customer and collect the funds. Contract Assets - Contract assets are receivables for which the right to consideration is conditional upon factors other than the passage of time. The timing of these billings is generally driven by contractual terms, which may have billing milestones that are different from revenue recognition milestones. Both billed and unbilled balances are recorded at their face amount less an allowance for credit losses over the contractual payment terms of the receivable. Collectability of these amounts are periodically reviewed based upon management's knowledge and analysis of available information as of the balance sheet date, including any specific circumstances related to overdue balances, length of time that the receivable has been outstanding, historical bad debts and aging trends, and other general and contract specific factors. The allowance for credit losses is adjusted based on such evaluation. Accounts receivable balances are written off against the allowance when management deems the balances uncollectible. Our contract asset balance is recorded at the net amount expected to be billed for services performed once the objective criteria laid out by the contract has been met. Inventories Inventories are valued at the lower of cost or net realizable value, where cost is determined using the weighted-average method. The value of inventory is adjusted for damaged, obsolete, excess and slowing-moving inventory. Net realizable value of inventory is estimated based on the historical obsolescence experience and planned usage. Inventories are substantially comprised of finished goods purchased for customers, such as off-the-shelf hardware and software, and component computer parts used in connection with system integration services that we perform. Property and Equipment Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation is recorded over the assets' estimated useful lives using the straight-line method, which is three Upon sale or retirement of property and equipment, the costs and related accumulated depreciation and amortization are eliminated from the accounts and any gain or loss on such disposition is reflected in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, such amounts are negligible. Repairs and maintenance costs are expensed as incurred. Major renewals and improvements are capitalized and depreciated over their estimated useful lives. Leases We determine if an arrangement is a lease and we account for leases in accordance with ASC Topic 842, "Leases." We entered into contractual arrangements primarily for the use of real estate facilities, and certain other equipment. We determine the classification of the lease under these arrangements, if any, at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether we have a right to direct the use of the asset. Leased property meeting certain criteria is capitalized at the present value of the related minimum lease payments. Amortization of a finance lease ROU asset is computed using the straight-line method over the lesser of the lease term or the useful life of the related asset. In accordance with ASC 842, we recorded operating lease ROU assets, which represent our right to use an underlying asset for the lease term, and operating lease liabilities which represent our obligation to make lease payments. Generally, we enter into operating lease agreements for facilities. The amount of operating lease liabilities due within 12 months are recorded in other current liabilities, with the remaining operating lease liabilities recorded as non-current liabilities in our consolidated balance sheets based on their contractual due dates. The operating lease ROU assets and liabilities are recognized as of the lease commencement date at the present value of the lease payments over the lease term. Most of our leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate on all operating leases. Some of our operating leases contain lease and non-lease components, which we account for as a single component. Operating lease expense is recognized as rent expense on a straight-line basis over the lease term, and recorded within our consolidated statement of operations. The related lease payments on short-term lease arrangements (leases of one year or less) are recognized as expense on a straight-line basis over the lease term. ROU assets are assessed for potential impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value of the asset may not be recoverable and the carrying amount of the assets exceeds its estimated fair value. Software Development Costs We account for development costs of software in accordance with ASC Topic 985-20 ("ASC 985-20"), "Software – Costs of Software to be Sold, Leased, or Marketed" and ASC Topic 350-40 ("ASC 350-40") "Internal Use Software", depending on the intended use of the software being developed. Under ASC 985-20, all costs of developing software prior to establishing its technological feasibility are research and development costs and are expensed as incurred. Once technological feasibility has been established, subsequent costs should be capitalized until the software begins to be marketed or is released to customers after which the capitalized costs should be amortized and reviewed for impairment. Under ASC 350-40, we capitalize certain software development costs when the preliminary project stage is completed and the software has entered the application development stage. Once substantial testing is complete and the software is ready to be used, capitalization of costs ceases. Capitalized software development costs are amortized on a straight-line basis over the estimated economic life of the application, ranging from two ASC 350-40 also requires hosting arrangements that are service contracts to follow the guidance for internal-use software to determine which implementation costs can be capitalized. In accordance with ASC 350-40, (i) capitalized implementation costs are classified in the same balance sheet line item as the amounts prepaid for the related hosting arrangement, (ii) amortization of capitalized implementation costs is presented in the same income statement line item as the service fees for the related hosting arrangement, and (iii) cash flows related to capitalized implementation costs are presented within the same category of cash flow activity as the cash flow for the related hosting arrangements (i.e. operating activity). As of December 31, 2023 and 2022, the net carrying value of the capitalized implementation costs related to hosting arrangements that were incurred during the application development stage aggregated to $0.2 million and $0.3 million, respectively. These costs are related primarily to the implementation of a new enterprise resource planning system. The Company begins amortizing the capitalized implementation costs after all substantial testing is complete and ready for its intended use, and amortized over the expected term of the arrangement on a straight-line basis. Software costs classified as held for resale are stated at the lower of cost or net realizable value. Software held for resale is amortized into cost of sales on the consolidated statements of operations. The Company reported the software held for resale as part of the Intangible Assets on the consolidated balance sheets. Goodwill and Intangible Assets Goodwill is recorded for the difference between the aggregate consideration paid for an acquisition and the fair value of net tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized, but rather tested for potential impairment. We evaluate the impairment of goodwill in accordance with ASC 350, which requires goodwill to be assessed on at least an annual basis, as of December 31 each year, for impairment using a fair value basis. Between annual evaluations, if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount, then impairment must be evaluated. Such circumstances could include, but are not limited to: (1) a significant adverse change in legal factors or business climate, (2) a loss of key contracts or customers, or (3) negative operating performance indicators. The Company performs its goodwill impairment test at the reporting unit level. We may elect to utilize a qualitative assessment to evaluate whether it is "more-likely-than-not" that the fair value of a reporting unit is less than its carrying value. If an impairment indicator exists based on the qualitative assessment, we perform the quantitative goodwill impairment test. When performing a quantitative impairment test, we calculate the estimated fair value of the reporting unit and compare the results with its respective carrying value, including goodwill. If the estimated fair value is determined to be less than the carrying value, we recognize an impairment loss equal to the difference between the reporting unit's fair value and the reporting unit's carrying value, up to the amount of goodwill associated with the reporting unit. The evaluation is based on the estimation of the fair values at the reporting unit level in comparison to the reporting unit's net asset carrying values. The Company uses industry accepted valuation models and set criteria that are reviewed and approved by management. The methodology used to assess impairment is a combination of the income approach (i.e. discounted cash flow ("DCF") method) and the market approach (i.e. Comparable Public Company ("CPC") method) to determine the fair value. In the application of the income approach, the estimated fair value of the reporting unit is determined using a DCF analysis, which requires management's judgment with respect to forecasted revenue streams and operating margins, capital expenditures and the selection and use of an appropriate discount rate commensurate with the risk inherent in each of our reporting unit's current business model. We utilize the weighted average cost of capital ("WACC") as derived by certain assumptions specific to our facts and circumstances as the discount rate. In the application of the market approach, the CPC method uses value multiples or ratio to the reporting accounting data (such as revenue) in measuring the market's perception of the reporting unit's enterprise value. Value multiples or ratio reflect the trends in growth and performance, and the comparable public companies provide a reasonable basis for comparison to the relative investment characteristic of the business being valued. The Company analyzes the relationship between the comparable companies' performance and applies a control premium based on the multiples of comparable companies. The control premium is management's estimate of how much a market participant would be willing to pay over the fair market value in consideration of benefits that flow from control of the entity. The results of the income and market approaches are weighted to determine the estimated fair value of the reporting unit. The weighting is judgmental and is based on the perceived level of appropriateness of the valuation methodology. Estimating the fair value involves the use of assumptions and significant judgments that are based on a number of factors including actual operating results. A relatively small change in the underlying assumptions may cause a change in the results of the impairment assessment in future periods and as such, could result in goodwill impairment. The Company's goodwill is amortized and deducted over a 15-year period for tax purposes. See Note 7 – Goodwill for additional information. Intangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is computed using the method that best reflects how their economic benefits are utilized or, if a pattern of economic benefits cannot be reliably determined, on a straight-line basis over their estimated useful lives. Impairment of Long-Lived Assets The Company evaluates its long-lived assets, including property and equipment, for potential impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable. If such evaluation indicates that the carrying amount of the asset exceeds its estimated future undiscounted cash flows or its estimated fair value, an impairment loss is recognized to reduce the asset's carrying amount to its estimated fair value. Considerable management judgment is necessary to estimate its fair value. Accordingly, actual results could differ from such estimates. No events have been identified that caused an evaluation of the recoverability of long-lived assets. In addition to the recoverability assessment, the Company routinely reviews the remaining lives of its long-lived assets. Any reduction in the useful life assumptions will result in increased depreciation or amortization expense in the period when such determinations are made, as well as in subsequent periods. There are no changes in the estimated useful lives of long-lived assets for the periods presented. Fair Value Measurements U.S. GAAP provides a framework for measuring fair value and expands disclosures about fair value measurements. The framework requires the valuation of investments using a three-tiered approach. The statement requires fair value measurement to be classified and disclosed in one of the following categories: • Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities; • Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or • Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). As of December 31, 2023 and 2022, we did not have any financial instruments with significant Level 3 inputs and we did not have any financial instruments that are measured at fair value on a recurring basis. For certain of our non-derivative financial instruments, including receivables, accounts payable and other accrued liabilities, the carrying amount approximates fair value due to the short-term maturities of these instruments. Research and Development Research and development expenses consist primarily of employee-related expenses (such as salaries, taxes, benefits and stock-based compensation), allocated overhead costs and outside services costs related to the development and improvement of the Company's software. Research and development costs are generally expensed as incurred, except for costs incurred in connection with the development of software that qualify for the capitalization as described in our software development costs policy. Amortization of capitalized software development costs, not charged under cost of sales, are also reported as part of research and development expenses. Advertising Costs Advertising costs are expensed and included in sales and marketing expense when incurred. Advertising expense was $0.8 million and $1.3 million for the years ended December 31, 2023 and 2022, respectively. Income Taxes We account for income taxes in accordance with ASC 740, "Income Taxes." Under ASC 740, deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences and income tax credits. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates that are applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized for differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Any change in tax rates on deferred tax assets and liabilities is recognized in net income in the period in which the tax rate change is enacted. We record a valuation allowance that reduces deferred tax assets when it is "more likely than not" that deferred tax assets will not be realized. We follow the provisions of ASC 740 related to accounting for uncertainty in income taxes. The accounting estimates related to liabilities for uncertain tax positions require us to make judgments regarding the sustainability of each uncertain tax position based on its technical merits. If we determine it is more likely than not that a tax position will be sustained based on its technical merits, we record the impact of the position in our consolidated financial statements at the largest amount that is greater than fifty percent likely of being realized upon ultimate settlement. These estimates are updated at each reporting date based on the facts, circumstances and information available. We are also required to assess at each reporting date whether it is reasonably possible that any significant increases or decreases to our unrecognized tax benefits will occur during the next 12 months. Business Combinations Acquisitions were accounted for under U.S. GAAP using the acquisition method in accordance with ASC 805, Business Combinations . The Company allocates the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities, if any, is recorded as goodwill. The accounting for business combinations requires management to make judgments and estimates of the fair value of assets acquired, including the identification and valuation of intangible assets, as well as liabilities and contingencies assumed. Such judgments and estimates directly impact the amount of goodwill recognized in connection with an acquisition. Estimating the fair value of acquired assets and assumed liabilities, including intangibles, requires judgment about expected future cash flows, weighted-average cost of capital, discount rates and expected long-term growth rates. Stock-Based Compensation The Company grants stock-based compensation awards under the 2016 Omnibus Long-Term Incentive Plan, as amended (the "2016 LTIP"). Our 2016 LTIP provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock and dividend equivalent rights to our senior executives, directors, employees, and other eligible service providers. The stock options granted under the 2016 LTIP expire no more than 10 years after the date of grant. Awards granted under the 2016 LTIP vest over the periods determined by the Board of Directors or the Compensation Committee of the Board of Directors, who has the discretion to establish the terms, conditions and criteria of the various awards, including the weighting and vesting schedule of Service-Based RSUs and the performance conditions applicable to the Performance-Based RSUs, including the achievement of certain financial performance criteria or price targets for our common stock. The restricted stock units granted are time-based ("Service-Based RSU" or "RSU") and performance-based ("Performance-Based RSU" or "PSU"). The Company issues new shares of common stock upon vesting of the restricted stock units under this plan. • Service-Based RSUs granted to eligible employees as an incentive generally vest in installments over a period of up to three years from the date of grant. The grant date fair value per share is equal to the closing stock price on the date of grant. • Performance-Based RSUs vest upon the achievement of a defined performance target during a defined performance period from the date of grant. The fair value per share of these Performance-Based RSUs is equal to the closing stock price on the date of the grant or the fair value of the award on the grant date as determined through an independent valuation for Performance-Based RSUs with market conditions. Performance-Based RSUs vest upon the achievement of certain price targets or market conditions for the Company's common stock anytime or certain operational milestones over a three-year period from the date of grant. In order to reflect the substantive characteristics of these market condition awards, the Company employs a Monte Carlo simulation valuation model to calculate the grant date fair value and corresponding requisite service period of the award. Monte Carlo approaches are a class of computational algorithms that rely on repeated random sampling to compute their results. This approach allows the calculation of the value of such awards based on a large number of possible stock price path scenarios. The Company estimates the fair value of stock options on the date of the grant using an option pricing model. The option pricing model takes into consideration the current share price of the underlying common stock, exercise price of the option, expected term, risk-free interest rate and the volatility of share price. These considerations directly affect the amount of compensation expense that will ultimately be recognized. We recognize these stock-based payment transactions when services from the employees, directors and other eligible service providers are received and recognize a corresponding increase in additional paid-in capital in our consolidated balance sheets. The measurement objective for these equity awards is the estimated fair value at the date of grant of the equity instruments that we are obligated to issue when employees, directors and other eligible service providers have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. The stock-based compensation expense for an award is recognized ratably over the requisite service period, which is generally the vesting period during which an employee is required to provide service in exchange for an award. Stock-based compensation expense for awards with performance conditions is recognized over the requisite service period if it is probable that the performance condition will be satisfied. If such performance conditions are not or are no longer considered probable, no compensation expense for these awards is recognized, and any previously recognized expense is reversed. If the performance condition is achieved prior to the completion of the requisite service period, any unrecognized compensation expense will be recognized in the period the performance condition is achieved. Compensation expense for awards with market conditions is recognized over the derived service period, or sooner, if the market condition is achieved. Previously recognized expense for awards with market conditions will never be reversed subsequent to completion of the derived service period even if the market conditions are never achieved. We recognize forfeitures of stock-based compensation awards as they occur. Stock-based compensation expense is recognized as part of the cost of sales and selling, general and administrative expenses in our consolidated statements of operations. The stock-based payment transactions are recognized in accordance with ASC 718, "Compensation - Stock Compensation" and ASU 2018-07, "Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting." Net (Loss)/Earnings per Share Basic net (loss)/earnings per share is computed by dividing the net (loss)/earnings by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net (loss)/earnings per share is computed by dividing the net (loss)/earnings by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of unvested restricted common stock and warrants. Other Comprehensive (Loss)/Income For one of our wholly-owned subsidiaries, the functional currency is the local currency. For this subsidiary, the translation of its foreign currency into U.S. dollars is performed for assets and liabilities using current foreign currency exchange rates in effect at the balance sheet date and for revenue and expense accounts using average foreign currency exchange rates during the periods presented. Translation gains and losses are included in stockholders' equity as a component of accumulated other comprehensive (loss)/income. Restructuring Expenses The determination of when the Company accrues for involuntary termination benefits under restructuring plans depends on whether the termination benefits are provided under an on-going benefit arrangement or under a one-time benefit arrangement. The Company accounts for on-going benefit arrangements, such as those documented by employment agreements, in accordance with ASC 712 ("ASC 712"), "Compensation – Nonretirement Postemployment Benefits." Under ASC 712, liabilities for postemployment benefits are recorded at the time of obligations are probable of being incurred and can be reasonably estimated. When applicable, the Company records such costs into operating expenses. In the fourth quarter of 2022, the Company committed to a restructuring plan to streamline its workforce and spending to better align its cost structure with its volume of business. The restructuring plan reduced the Company's workforce, with a majority of the affected employees separating from the business in early 2023. In connection with this restructuring plan, the Company incurred restructuring-related costs, including employees' severance and related benefit costs. Employee severance and related benefit costs include cash payments, outplacement services and continuing health insurance coverage. Severance costs pursuant to ongoing-benefit arrangements are recognized when probable and reasonably estimated. Other related costs include external consulting and advisory fees related to implementing the restructuring plan. These costs are recognized at fair value in the period in which the costs are incurred. In fiscal year 2022, the Company estimated that the expected restructuring expenses were $2.8 million. In fiscal year 2023, the Company upda |
REVENUE RECOGNITION
REVENUE RECOGNITION | 12 Months Ended |
Dec. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGNITION | REVENUE RECOGNITION We recognize revenue in accordance with ASC Topic 606, "Revenue from Contracts with Customers." The unit of account in ASC 606 is a performance obligation, which is a promise in a contract with a customer to transfer a good or service to the customer. The Company follows the five-step model for recognizing revenue that includes identifying the contract with the customer, determining the performance obligation(s), determining the transaction price, allocating the transaction price to the performance obligation(s), and recognizing revenue as the performance obligations are satisfied. Timing of the satisfaction of performance obligations varies across our businesses due to our diverse product and service mix, customer base, and contractual terms. Significant judgment can be required in determining certain performance obligations, and these determinations could change the amount of revenue and profit recorded in a given period. Our contracts may have a single performance obligation or multiple performance obligations. When there are multiple performance obligations within a contract, we allocate the transaction price, net of any discounts, to each performance obligation based on the standalone selling price of the product or service underlying each performance obligation. Our contracts with the U.S. government are generally subject to the Federal Acquisition Regulation ("FAR") and the price is typically based on estimated or actual costs plus a reasonable profit margin. As such, the standalone selling price of products or services in our contracts with the U.S. government are typically equal to the selling price stated in the contract. For non-U.S. government contracts with multiple performance obligations, standalone selling price is the observable price of a good or service when Telos sells that good or service separately in similar circumstances and to similar customers. Contracts are routinely and often modified to account for changes in contract requirements, specifications, quantities, or price. Depending on the nature of the modification, we determine whether to account for the modification as an adjustment to the existing contract or as a new contract. Generally, modifications are not distinct from the existing contract due to the significant interrelatedness of the performance obligations and are therefore accounted for as an adjustment to the existing contract, and recognized as a cumulative adjustment to revenue (as either an increase or reduction of revenue) based on the modification's effect on progress toward completion of a performance obligation. The majority of our revenue is recognized over time, as control is transferred continuously to our customers who receive and consume benefits as we perform. Revenue transferred to customers over time accounted for 84% and 89% of our revenue for the years ended December 31, 2023 and 2022, respectively. All of our business groups earn services revenue under a variety of contract types, including time and materials, firm-fixed price, firm fixed price level of effort, and cost-plus fixed fee contract types, which may include variable consideration. Revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, subcontractor costs and indirect expenses. This continuous transfer of control to the customer is supported by clauses in our contracts with U.S. government customers whereby the customer may terminate a contract for convenience and then pay for costs incurred plus a profit, at which time the customer would take control of any work in process. For non-U.S. government contracts where we perform as a subcontractor and our order includes similar FAR provisions as the prime contractor's order from the U.S. government, continuous transfer of control is likewise supported by such provisions. For other non-U.S. government customers, continuous transfer of control to such customers is also supported due to general terms in our contracts and rights to recover damages which would include, among other potential damages, the right to payment for our work performed to date plus a reasonable profit. For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied. This coincides with the point in time the customer obtains control of the transferred product or service, which typically occurs upon customer acceptance or receipt of the product or service, given that we maintain control of the product or service until that point. Revenue transferred to customers at a point in time accounted for 16% and 11% of our revenue for the years ended December 31, 2023 and 2022, respectively. Orders for the sale of software licenses may contain multiple performance obligations, such as maintenance, training, or consulting services, which are typically delivered over time, consistent with the transfer of control disclosed above for the provision of services. When an order contains multiple performance obligations, we allocate the transaction price to the performance obligations based on the standalone selling price of the product or service underlying each performance obligation. The standalone selling price represents the amount we would sell the product or service to a customer on a standalone basis. For certain performance obligations where we are not primarily responsible for fulfilling the promise to provide the goods or services to the customer, do not have inventory risk and have limited discretion in establishing the price for the goods or services, we recognize revenue on a net basis. Contract Estimates Due to the transfer of control over time, revenue is recognized based on progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the performance obligations. We generally use the cost-to-cost measure of progress on a proportional performance basis for our long-term contracts because it best depicts the transfer of control to the customer, which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation, which includes both the actual costs already incurred and the estimated costs to complete. Revenues are recorded proportionally as costs are incurred. Due to the nature of the work required to be performed on certain of our performance obligations, the estimation of costs at completion is complex, subject to many variables and requires significant judgment. Contract estimates are based on various assumptions, including labor and subcontractor costs, materials and other direct costs and the complexity of the work to be performed. A significant change in one or more of these estimates could affect the profitability of our contracts. We review and update our contract-related estimates regularly and recognize adjustments in estimated profit on contracts on a cumulative catch-up basis, which may result in an adjustment increasing or decreasing revenue to date on a contract in a particular period that the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. Our contracts may include various types of variable consideration, such as claims (for instance, indirect rate or other equitable adjustments) or incentive fees. We include estimated amounts in the transaction price based on all of the information available to us, including historical information and future estimations, and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when any uncertainty associated with the variable consideration is resolved. We have revised and re-submitted several years of incurred cost submissions reflecting certain indirect rate structure changes as a result of regular Defense Contract Audit Agency audits of incurred cost submissions. This resulted in signed final rate agreement letters through fiscal year 2022. We evaluated the resulting changes to revenue under the applicable cost-plus fixed fee contracts, as variable consideration, and determined the most likely amount to which we expect to be entitled, to the extent that no constraint exists that would preclude recognizing this revenue or result in a significant reversal of cumulative revenue recognized. We included these estimated amounts of variable consideration in the transaction price and as performance on these contracts is complete, we adjusted our revenue by $(0.1) million during the year ended December 31, 2023. No revenue adjustment was recorded during fiscal year ended December 31, 2022. We provide for anticipated losses on contracts during the period when the loss is determined by recording an expense for the total expected costs that exceeds the total estimated revenue for a performance obligation. We recorded an immaterial contract loss during the year ended December 31, 2023. No contract loss was recorded during the year ended December 31, 2022. Historically, most of our contracts do not include award or incentive fees. For incentive fees, we would include such fees in the transaction price to the extent we could reasonably estimate the amount of the fee. With limited historical experience, we have not included any revenue related to incentive fees in our estimated transaction prices. We may include in our contract estimates additional revenue for submitted contract modifications or claims against the customer when we believe we have an enforceable right to the modification or claim, the amount can be estimated reliably and its realization is probable. We consider the contractual/legal basis for the claim (in particular FAR provisions), the facts and circumstances around any additional costs incurred, the reasonableness of those costs and the objective evidence available to support such claims. For our contracts that have an original duration of one year or less, we use the practical expedient applicable to such contracts and do not consider the time value of money. We capitalize sales commissions related to proprietary software and related services that are directly tied to sales. We do not elect the practical expedient to expense as incurred the incremental costs of obtaining a contract if the amortization period would have been one year or less. For the sales commissions that are capitalized, we amortize the asset over the expected customer life, which is based on recent and historical data. Disaggregated Revenues In addition to our segment reporting, as further discussed in Note 1 8 – Segment Information , we disaggregate our revenue by customer and contract types. We treat sales to U.S. customers as sales within the U.S. regardless of where the services are performed. Substantially most of our revenues are generated from U.S. customers, while international customers are de minimis, as such the financial information by geographic location is not presented. Table 3.1: Revenue by Customer Type For the Year Ended December 31, 2023 2022 Amount % Amount % (dollars in thousands) Federal government $ 131,143 90% $ 205,538 95% State & local government, and commercial 14,235 10% 11,349 5% Total revenue $ 145,378 $ 216,887 Table 3.2: Revenue by Contract Type For the Year Ended December 31, 2023 2022 Amount % Amount % (dollars in thousands) Firm fixed-price $ 114,188 79% $ 179,803 83% Time-and-materials 13,535 9% 12,963 6% Cost plus fixed-fee 17,655 12% 24,121 11% Total revenue $ 145,378 $ 216,887 Table 3.3: Revenue Concentrations Greater than 10% of Total Revenue For the Year Ended December 31, 2023 2022 U.S. Department of Defense ("DoD") 64 % 74 % Table 3.4: Contract Balances As of December 31, Balance Sheet Presentation 2023 2022 (in thousands) Billed account receivables (1) Accounts receivable, net $ 17,818 $ 13,521 Unbilled account receivables Accounts receivable, net 8,022 11,657 Contract assets Accounts receivable, net 4,584 14,891 Contract liabilities - current Contract liabilities 6,728 6,444 (1) Net of allowance for credit losses The changes in the Company's contract assets and contract liabilities during the current period were primarily the result of the timing differences between the Company's performance, invoicing and customer payments. For the years ended December 31, 2023 and 2022, the amount of revenue recognized during the year that was included in the opening contract liabilities balance was $5.4 million and $5.2 million, respectively. As of December 31, 2023, we had approximately $52.1 million of remaining performance obligations, which we also refer to as funded backlog. We expect to recognize approximately 90% of our remaining performance obligations as revenue in 2024, and approximately 3% by 2025, with the remainder recognized thereafter. |
ACCOUNTS RECEIVABLE, NET
ACCOUNTS RECEIVABLE, NET | 12 Months Ended |
Dec. 31, 2023 | |
Receivables [Abstract] | |
ACCOUNTS RECEIVABLE, NET | ACCOUNTS RECEIVABLE, NET Table 4.1: Details of Accounts Receivable, Net As of December 31, 2023 2022 (in thousands) Billed accounts receivables $ 18,101 $ 13,655 Unbilled accounts receivable 8,022 11,657 Contract assets 4,584 14,891 Allowance for credit losses (283) (134) Accounts receivable, net $ 30,424 $ 40,069 As our primary customer base includes agencies of the U.S. government, we have a concentration of credit risk associated with our accounts receivable, as 91% of our billed and unbilled accounts receivable, as of December 31, 2023, were directly with U.S. government customers. While we acknowledge the potentially material and adverse risk of such a significant concentration of credit risk, our past experience of collecting substantially all of such receivables provides us with an informed basis that such risk, if any, is manageable. We perform ongoing credit evaluations of all of our customers and generally do not require collateral or other guarantees from our customers. We maintain allowances for potential losses. Table 4.2: Allowance for Credit Losses Activities Balance Beginning Bad Debt Expenses (1) Write-Offs / Recoveries (2) Balance (in thousands) For the Year Ended December 31, 2023 $ 134 $ 152 $ (3) $ 283 For the Year Ended December 31, 2022 116 99 (81) 134 (1) Accounts receivable reserves and reversals of allowance for subsequent collection, net (2) Accounts receivable written-off and subsequent recoveries, net On July 15, 2016, the Company entered into an accounts receivable purchase agreement under which the Company could sell certain accounts receivable (balance not to exceed $10.0 million) to a third party, or the "Factor", without recourse to the Company, with an availability period through June 30, 2022, and from year to year thereafter unless terminated in writing by the parties. There were no accounts receivable sold during 2023 and 2022, respectively. As of December 31, 2023 and 2022, there were no outstanding sold accounts receivable. |
INVENTORIES, NET
INVENTORIES, NET | 12 Months Ended |
Dec. 31, 2023 | |
Inventory Disclosure [Abstract] | |
INVENTORIES, NET | INVENTORIES, NET Table 5.1: Details of Inventories, Net As of December 31, 2023 2022 (in thousands) Gross inventory $ 2,179 $ 3,642 Allowance for inventory obsolescence (759) (765) Inventories, net $ 1,420 $ 2,877 |
PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT, NET | 12 Months Ended |
Dec. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT, NET | PROPERTY AND EQUIPMENT, NET Table 6.1: Details of Property and Equipment, Net As of December 31, 2023 As of December 31, 2022 Gross Carrying Amount Accumulated Depreciation and Amortization Net Carrying Value Gross Carrying Amount Accumulated Depreciation and Amortization Net Carrying Value (in thousands) Furniture and equipment $ 16,213 $ (13,363) $ 2,850 $ 16,033 $ (11,900) $ 4,133 Leasehold improvement 3,211 (2,604) 607 $ 3,145 (2,491) 654 Total $ 19,424 $ (15,967) $ 3,457 $ 19,178 $ (14,391) $ 4,787 Table 6.2: Depreciation and Amortization Expense For the year ended December 31, 2023 2022 (in thousands) Depreciation and amortization $ 2,230 $ 2,367 |
GOODWILL
GOODWILL | 12 Months Ended |
Dec. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL | GOODWILL As discussed in Note 2 – Significant Accounting Policies , we reported two operating and reportable segments: Security Solutions and Secure Networks. The two operating and reportable segments represent the reporting units for purposes of testing goodwill. The goodwill balance was $17.9 million as of December 31, 2023 and 2022, of which $3.0 million is allocated to the Security Solutions segment and $14.9 million is allocated to the Secure Networks segment. The net assets attributable to the reporting units are determined based upon the estimated assets and liabilities attributable to the reporting units in deriving its free cash flows. For fiscal year 2023, we performed a qualitative assessment on our reporting units and identified that it is "more-likely-than-not" that the estimated fair value of our Security Solutions reporting unit exceeded its carrying value. In contrast, based on the initial qualitative assessment of our Secure Networks reporting unit, we determined that it is not "more-likely-than-not" that the fair value of this reporting unit exceeds its carrying value, therefore we performed a quantitative impairment test. Based on the quantitative assessment on our Secure Networks reporting unit as of December 31, 2023, the estimated fair value exceeded its carrying value. Based on the results of our annual impairment test of goodwill performed, the estimated fair value of our respective reporting units exceeded their respective carrying value, and no impairment charges were taken during the years ended December 31, 2023 and 2022. |
INTANGIBLE ASSETS, NET
INTANGIBLE ASSETS, NET | 12 Months Ended |
Dec. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS, NET | INTANGIBLE ASSETS, NET Table 8.1: Details of Intangible Assets, Net Estimated useful life As of December 31, 2023 As of December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value (in thousands) Acquired technology 8 years $ 3,630 $ (1,097) $ 2,533 $ 3,630 $ (643) $ 2,987 Customer relationships 3 years 40 (32) 8 40 (19) 21 Software development costs 2 - 5 years 35,312 (12,256) 23,056 26,956 (7,793) 19,163 Subtotal 38,982 (13,385) 25,597 30,626 (8,455) 22,171 In-process software development costs (1) (2) 14,019 — 14,019 8,124 — 8,124 Software held for resale (3) — — — 7,120 — 7,120 Total $ 53,001 $ (13,385) $ 39,616 $ 45,870 $ (8,455) $ 37,415 (1) In-process software development costs are costs for software that is not yet available for its intended use or general release to customers as of balance sheet date, thus not yet amortized. (2) An impairment charge of $0.5 million was recorded against software development costs in fiscal year 2023 related to the write-off of certain software projects. (3) This amount is net of $0.7 million charged into cost of sales in fiscal year 2022. In 2023, as a result of the impairment assessment, the Company identified conditions demonstrating impairment of certain software development costs and an impairment charge of $0.5 million was recorded under " Research and Development The Company did not recognize any impairment charges on other intangible assets for the periods presented. Table 8.2: Amortization Expense For the year ended December 31, 2023 2022 (in thousands) Amortization expense related to: Software development costs - cost of sales (1) $ 2,840 $ — Software development costs - research and development 1,623 1,362 Other intangible assets - general and administrative 467 401 Total $ 4,930 $ 1,763 (1) Amortization expense for software development costs related to assets to be sold, leased, or otherwise marketed are charged under cost of sales on the Consolidated Statements of Operations. Table 8.3: Estimated Future Amortization Expense of Intangible Assets, Net As of December 31, 2023 (in thousands) Year Ending December 31, 2024 $ 8,037 Year Ending December 31, 2025 7,270 Year Ending December 31, 2026 4,864 Year Ending December 31, 2027 3,520 Year Ending December 31, 2028 1,642 Thereafter 264 Total (1) $ 25,597 (1) This does not include amortization of in-process software development costs, as estimation of the timing of future amortization expenses would be impractical. Actual amortization expense in future periods could differ from these estimates as a result of impairments, future releases, future acquisitions, divestitures, and other factors. |
OTHER BALANCE SHEET COMPONENTS
OTHER BALANCE SHEET COMPONENTS | 12 Months Ended |
Dec. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
OTHER BALANCE SHEET COMPONENTS | OTHER BALANCE SHEET COMPONENTS Table 9.1: Details of Accounts Payable and Other Accrued Liabilities As of December 31, 2023 2022 (in thousands) Accounts payable $ 8,307 $ 12,606 Accrued payables 5,443 9,945 Accounts payable and other accrued liabilities $ 13,750 $ 22,551 Table 9.2: Details of Other Current Liabilities As of December 31, 2023 2022 (in thousands) Other accrued liabilities 1,427 1,530 Restructuring expenses accrual 400 2,763 Other 497 626 Other current liabilities $ 2,324 $ 4,919 |
DEBT AND OTHER OBLIGATIONS
DEBT AND OTHER OBLIGATIONS | 12 Months Ended |
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
DEBT AND OTHER OBLIGATIONS | DEBT AND OTHER OBLIGATIONS Revolving Credit Facility On December 30, 2022 (the "Closing Date"), we entered into a Credit Agreement (the "Credit Agreement"), by and among the Company, as borrower, Xacta Corporation, ubIQuity.com,inc, Teloworks, Inc., and Telos Identity Management Solutions, LLC, as guarantors, the lenders party thereto (the "Lenders"), and JPMorgan Chase Bank N.A., as administrative agent for the Lenders (in such capacity, the "Agent"). The Credit Agreement provides for a $30.0 million senior secured revolving credit facility with a maturity date of December 30, 2025, with the option of issuing letters of credit thereunder with a sub-limit of $5.0 million, and with an uncommitted expansion feature of up to $30.0 million of additional revolver capacity (the "Loan"). The Loan is subject to acceleration in the event of customary events of default. The Company has not drawn any amount under the Loan. Borrowings under the Credit Agreement will accrue interest, at our option, at one of three variable rates, plus a specified margin. We can elect to borrow at (i) the Alternative Base Rate, plus 0.9%; (ii) Adjusted Daily Simple Secured Overnight Financing Rate ("SOFR"), plus 1.9%; and (iii) Adjusted Term SOFR, plus 1.9%, as such capitalized terms are defined and calculated in the Credit Agreement. The Company may elect to convert borrowings from one type of borrowing to another type per the terms of the Credit Agreement. After the occurrence and during the continuance of any event of default, the interest rate may increase by an additional 2.0%. We are obligated to pay accrued interest (i) with respect to amounts accruing interest based on the Alternative Base Rate, each calendar quarter and on the maturity date, (ii) with respect to amounts accruing interest based on Adjusted Daily Simple SOFR, on each one month anniversary of the borrowing and on the maturity date, and (iii) with respect to amounts accruing interest based on Adjusted Term SOFR, at the end of the period specified per the Credit Agreement and on the maturity date. Upon five, three, or one days' prior notice, as applicable, we may prepay any portion or the entire amount of the Loan. We paid and could pay costs and customary fees, including a closing fee, commitment fees and letter of credit participation fee, if any, payable to the Agent and Lenders, as applicable, in connection with the Loan. The Loan under the Credit Agreement is collateralized by substantially all of the Company's assets, including the Company's pledge of its domestic and material foreign subsidiary equity interests. The Loan has various covenants that may, among other things, affect our ability to create, incur, assume or suffer any indebtedness, merge into or consolidate with another entity, acquire entity interests, sell or transfer certain assets, enter into certain arrangements (such as sale and leaseback and swap agreements) or restrictive agreements, pay dividends and make certain restricted payments, and amend material documents related to any subordinated indebtedness and corporate agreements. The Credit Agreement also requires certain financial covenants to maintain a Senior Leverage Ratio on the last day of any fiscal quarter, no greater than 3 to 1. We were in compliance with all covenants as of December 31, 2023. The occurrence of an event of default under the Credit Agreement could result in the Loan and other obligations becoming immediately due and payable and allow the Lenders to exercise all rights and remedies available to them under the Credit Agreement. On April 12, 2023, the Credit Agreement was amended to exclude from collateral the (i) amount collectible from a third party related to an Accounts Receivable Purchase Agreement and (ii) receivables generated by the Company from the sale of goods supplied to this third party in an amount not to exceed $25.0 million. Other Financing Obligations We entered into a Master Purchase Agreement ("MPA") with a third-party buyer ("Buyer") for $9.1 million ("Assignment Price") relating to software licenses under a specific delivery order ("DO") with our customer resulting in proceeds from other financing obligations of $9.1 million in November 2022. Under the MPA, we sold, assigned and transferred all of our rights, title and interest in (i) the DO payments from the customer and (ii) the underlying licenses. The DO covers a base period with an option for the customer to exercise three (3) additional 12-month periods through January 2026. The DO payments assigned to the Buyer are billable to the customer at the beginning of the base period and for each option year exercised. The underlying licenses were acquired for resale, see Note 8 – Intangible Assets, net for further details. On February 9, 2023, the customer notified us that it would not exercise the first option period under the DO. The MPA provides that, if the customer terminates the DO for non-renewal and the Buyer reasonably concludes that the customer's actions constitute grounds for filing a claim with the customer's contracting officer, Buyer and Telos will cooperate in preparing such a claim, which would be filed in Telos' name. Buyer has notified Telos of its intent to pursue a claim against the customer. Concurrently, the Company transferred all the rights, title and interest in the underlying licenses in exchange for the extinguishment of the outstanding financing obligations. The Company evaluated the transfer of the underlying licenses as consideration paid for the outstanding financing obligations under ASC 470-10, Debt |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2023 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS' EQUITY Capital Stock Our authorized capital stock consists of 250,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares of preferred stock, $0.01 par value per share. As of December 31, 2023 and 2022, there were 70,239,890 and 67,431,632 shares of common stock issued and outstanding, respectively. There were no shares of preferred stock issued and outstanding on either date. Shares Repurchases On May 24, 2022, the Company announced that the Board of Directors approved a new share repurchase program ("SRP") authorizing the Company to repurchase up to $50.0 million of its common stock. Pursuant to this authorization, the Company may repurchase shares of its common stock on a discretionary basis from time to time through open market purchases. The repurchase program has no expiration date and may be modified, suspended, or terminated at any time. As of December 31, 2023, there was $38.7 million of the remaining authorization for future common stock repurchases under the SRP. Table 11.1: Share Repurchase Program Activity For the Year Ended December 31, 2023 2022 (in thousands, except per share and share data) Amounts paid for shares repurchased (1) (2) $ — $ 11,284 Number of shares repurchased — 1,550,162 Average per share price paid (1) $ — $ 7.28 (1) Includes commission paid for repurchases on the open market. (2) Includes $0.1 million of unpaid common stock repurchased paid in fiscal year 2023. Accumulated Other Comprehensive Loss Table 11.2: Details of Changes in Accumulated Other Comprehensive Loss by Category Foreign currency translation adjustment Actuarial gain on pension liability adjustment Total (in thousands) Balance as of December 31, 2021 $ (134) $ 107 $ (27) Other comprehensive loss before reclassification (28) — (28) Balance as of December 31, 2022 (162) 107 (55) Other comprehensive loss before reclassification (5) — (5) Balance as of December 31, 2023 $ (167) $ 107 $ (60) |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION In October 2020, the Company amended the 2016 LTIP to increase the total number of shares available for issuance from 4,500,000 to 9,400,000 (equivalent to 7,459,913 shares after the stock split in November 2020) and extended the term to September 30, 2030. On May 8, 2023, the Company further amended the 2016 LTIP with an additional 6,000,000 shares available for issuance, increasing the total number of shares available to 13,459,913. As of December 31, 2023, approximately 4.8 million shares of our common stock were reserved for future grants under the 2016 LTIP, as amended. The Company records stock-based compensation related to accrued compensation in which it 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, as it has the right to dictate the form of these payments up until the date they are paid. Stock-based compensation expense recognized for restricted stock units and stock options granted to employees and non-employees is included in the Consolidated Statements of Operations. In addition, stock-based compensation expense includes an immaterial increase of $1.3 million for the year ended December 31, 2022, to correct a prior period error. There were no income tax benefits recognized on the stock-based compensation expense for these periods. Table 12.1: Details of Stock-based Compensation Expense For the Year Ended December 31, 2023 2022 (in thousands) Cost of sales - services $ 900 $ 3,497 Sales and marketing 188 4,668 Research and development 1,989 3,806 General and administrative (1) 21,319 52,689 Total $ 24,396 $ 64,660 (1) Stock-based compensation expense related to stock options was $0.3 million for the year ended December 31, 2023. There was no similar stock-based compensation expense on stock options in fiscal year 2022. Restricted Stock Table 12.2: Restricted Stock Unit Activity Service-Based RSU Performance-Based RSU Total Weighted-Average Grant Date Fair Value Unvested outstanding units as of December 31, 2022 3,570,082 336,785 3,906,867 $ 19.53 Granted 1,888,689 — 1,888,689 2.17 Vested (2,910,645) — (2,910,645) 19.04 Forfeited (415,513) (292,985) (708,498) 19.11 Unvested outstanding units as of December 31, 2023 2,132,613 43,800 2,176,413 $ 5.07 Our key assumptions used to calculate the grant date fair value of the PSU awards include a performance period ranging from 2.45 to 2.92 years, expected volatility between 57.4% - 58.8%, and a risk-free rate of 0.18% - 0.29%. The fair value at the grant date and derived service periods calculated for these market condition PSUs were $19.12 - $30.84 and between 0.38 - 0.76 years, respectively. As of December 31, 2023, the intrinsic value of the RSUs and PSUs outstanding, exercisable, and vested or expected to vest was $7.9 million. There was $3.5 million of total compensation costs related to stock-based awards not yet recognized as of December 31, 2023, which is expected to be recognized on a straight-line basis over a weighted-average remaining vesting period of 0.5 years. Stock Options The Company uses the Black-Scholes option pricing model to calculate the estimated fair value of stock options on the date of grant. Option awards are generally granted with an exercise price equal to the market price of the Company's stock at the date of grant. The following weighted-average assumptions are used in the Black-Scholes valuation model to estimate the fair value of stock option awards, as granted. • Expected term of the option – For options granted to employees and directors, the Company estimates the term over which option holders are expected to hold their stock option by using the "simplified method" in accordance with Staff Accounting Bulletin ("SAB") No. 107, Share-Based Payments , and SAB No. 110, Simplified Method for Plain Vanilla Share Options , to calculate the expected term of stock options determined to be "plain vanilla." The Company's stock option exercise history does not provide a reasonable basis to compute the expected term for stock options. Under this approach, the expected term is presumed to be a midpoint between the vesting date and the contractual end of the stock option grant. For options granted to non-employees, the Company elected to use the contractual term as the expected term. • Risk-free interest rate – Based on the daily yield curve rates for U.S. Treasury obligations with terms that approximate the expected term of the stock options. • Expected volatility – Due to the absence of the Company's historical price volatility for the expected contractual term of the stock options, the Company utilized the historical price volatility of a peer group. • Expected dividend yield – The Company has not declared dividends, nor does it expect to in the foreseeable future. Therefore, a zero value was assumed for the expected dividend yield. Table 12.3: Stock Options Fair Value and Weighted-Average Assumptions For the Year Ended December 31, 2023 2022 Weighted-average fair value of underlying stock options $1.06 $— Expected term (in years) 5.5 - 10 0 Risk-free interest rate 3.5% —% Expected volatility 30.7% - 35.1% —% Expected dividend yield —% —% Table 12.4: Stock Option Activity Stock Options Outstanding Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding option balance as of December 31, 2022 — $ — 0.0 $ — Granted 400,000 1.80 Exercised — — Forfeited, cancelled, or expired — — Outstanding option balance as of December 31, 2023 400,000 $ 1.80 9.4 $ 740,000 Exercisable stock option as of December 31, 2023 — $ — 0.0 $ — The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the quoted closing price of the Company's common stock as of December 31, 2023. The fair value of the stock options is expensed on a straight-line basis over the vesting period of one year, including the stock options granted to directors, as the next annual stockholders meeting is expected to occur at the same approximate time each year. As of December 31, 2023, there were approximately $0.1 million of unrecognized compensation costs related to non-vested stock options. |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2023 | |
Leases [Abstract] | |
LEASES | LEASES We lease office space facilities and equipment under non-cancelable operating and finance leases with various expiration dates, some of which contain renewal options. The Company's lease portfolio is comprised of two major classes. The lease of the Ashburn facility is accounted for as a finance lease. The other office spaces and equipment leased are accounted for as operating leases. We have included options to extend in the operating lease ROU assets and liabilities when we are reasonably certain that we will exercise such options. In May 2014, the Company entered into a new lease arrangement with the new landlord on the Ashburn facility, which expires on May 28, 2029. In accordance with this lease agreement, the basic rent increases by a fixed 2.5% escalation annually. Table 13.1: Details of Lease Costs For the Year Ended December 31, 2023 2022 (in thousands) Operating lease cost $ 541 $ 550 Short-term lease cost (1) 55 49 Finance lease cost Amortization of finance lease assets 1,221 1,221 Interest on finance lease liabilities 611 688 Total finance lease cost 1,832 1,909 Total lease costs $ 2,428 $ 2,508 (1) Leases that have terms of 12 months or less. Table 13.2: Future Minimum Lease Payments Operating Leases Finance Leases (in thousands) Year Ending December 31, 2024 $ 105 $ 2,258 Year Ending December 31, 2025 37 2,314 Year Ending December 31, 2026 37 2,371 Year Ending December 31, 2027 37 2,431 Year Ending December 31, 2028 25 2,492 Thereafter — 1,049 Total minimum lease payments 241 12,915 Less: Imputed interest (21) (1,667) Total lease obligations 220 11,248 Less: Current portion of lease obligations (97) (1,730) Long-term lease obligations $ 123 $ 9,518 Table 13.3: Weighted-Average Remaining Lease Terms and Discount Rates For the Year Ended December 31, 2023 2022 Weighted average remaining lease term (in years): Finance leases 5.3 years 6.3 years Operating leases 3.4 years 1.0 year Weighted average discount rate: Finance leases 5.04% 5.04% Operating leases 5.75% 5.75% Table 13.4: Supplemental Cash Flow Information Related to Leases For the Year Ended December 31, 2023 2022 (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases $ 585 $ 603 Operating cash flows related to finance leases 611 688 Financing cash flows related to finance leases 1,592 1,461 |
LEASES | LEASES We lease office space facilities and equipment under non-cancelable operating and finance leases with various expiration dates, some of which contain renewal options. The Company's lease portfolio is comprised of two major classes. The lease of the Ashburn facility is accounted for as a finance lease. The other office spaces and equipment leased are accounted for as operating leases. We have included options to extend in the operating lease ROU assets and liabilities when we are reasonably certain that we will exercise such options. In May 2014, the Company entered into a new lease arrangement with the new landlord on the Ashburn facility, which expires on May 28, 2029. In accordance with this lease agreement, the basic rent increases by a fixed 2.5% escalation annually. Table 13.1: Details of Lease Costs For the Year Ended December 31, 2023 2022 (in thousands) Operating lease cost $ 541 $ 550 Short-term lease cost (1) 55 49 Finance lease cost Amortization of finance lease assets 1,221 1,221 Interest on finance lease liabilities 611 688 Total finance lease cost 1,832 1,909 Total lease costs $ 2,428 $ 2,508 (1) Leases that have terms of 12 months or less. Table 13.2: Future Minimum Lease Payments Operating Leases Finance Leases (in thousands) Year Ending December 31, 2024 $ 105 $ 2,258 Year Ending December 31, 2025 37 2,314 Year Ending December 31, 2026 37 2,371 Year Ending December 31, 2027 37 2,431 Year Ending December 31, 2028 25 2,492 Thereafter — 1,049 Total minimum lease payments 241 12,915 Less: Imputed interest (21) (1,667) Total lease obligations 220 11,248 Less: Current portion of lease obligations (97) (1,730) Long-term lease obligations $ 123 $ 9,518 Table 13.3: Weighted-Average Remaining Lease Terms and Discount Rates For the Year Ended December 31, 2023 2022 Weighted average remaining lease term (in years): Finance leases 5.3 years 6.3 years Operating leases 3.4 years 1.0 year Weighted average discount rate: Finance leases 5.04% 5.04% Operating leases 5.75% 5.75% Table 13.4: Supplemental Cash Flow Information Related to Leases For the Year Ended December 31, 2023 2022 (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases $ 585 $ 603 Operating cash flows related to finance leases 611 688 Financing cash flows related to finance leases 1,592 1,461 |
EMPLOYEE BENEFIT PLAN
EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Dec. 31, 2023 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLAN | EMPLOYEE BENEFIT PLAN Telos sponsors a defined contribution employee savings plan (the "Plan") under which substantially all full-time employees are eligible to participate. As of December 31, 2023, the Plan held 1,434,464 shares of Telos common stock. Prior to March 2022, we matched one-half of employee contribution to the Plan up to a maximum of 2% of such employee's eligible annual base salary. In March 2022, we increased the maximum employer match up to 4% of the employee's eligible annual base salary. Participant contributions are always fully vested immediately at the time of contribution. Telos' contributions vest at the rate of 20% each year, with full vesting occurring after completion of five years of service. Effective September 1, 2023, we changed our Telos-contributed matching funds to a two Telos intends to fund the employer matching contribution in Telos stock, but will have the discretion to fund the match in cash or a combination of stock and cash. The Telos employer matching contribution is funded in the first quarter of the subsequent year. Our total contributions to the Plan for 2023 and 2022 were $2.1 million and $2.2 million, respectively. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Table 15.1: Components of Provision for/(Benefit from) Income Taxes For the Year Ended December 31, 2023 2022 (in thousands) Current provision Federal $ — $ — State (19) 19 Total current (19) 19 Deferred tax expense Federal 32 37 State 23 (2) Total deferred 55 35 Provision for income taxes $ 36 $ 54 Table 15.2: Reconciliation of Statutory Tax Rate to Actual Tax Rate For the Year Ended December 31, 2023 2022 Computed expected income tax provision 21.0 % 21.0 % State income taxes, net of federal income tax benefit 3.6 3.6 Change in valuation allowance for deferred tax assets 7.5 (3.7) Cumulative deferred adjustments — (0.9) Provision to return adjustments (0.1) 0.1 Other permanent differences (0.2) (0.1) Stock-based compensation (41.2) (20.6) Section 162(m) limitation - covered employees 9.5 (2.0) Uncertain tax positions 0.5 (0.5) R&D credit (0.7) 3.0 Effective tax rate (0.1 %) (0.1 %) Table 15.3: Components of Deferred Tax Assets and Liabilities As of December 31, 2023 2022 (in thousands) Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts $ 70 $ 33 Allowance for inventory obsolescence and amortization 203 210 Accrued liabilities not currently deductible 1,133 1,151 Stock-based compensation 1,352 7,943 Accrued compensation 2,457 915 Lease liabilities 2,906 3,349 Goodwill 30,947 34,009 Capitalized research and development costs 2,992 362 Net operating loss carryforwards - federal 8,402 6,034 Net operating loss carryforwards - state 1,522 1,155 R&D tax credit 3,647 3,760 Amortization and depreciation 252 — Total gross deferred tax assets 55,883 58,921 Less valuation allowance (54,999) (57,559) Total deferred tax assets, net of valuation allowance 884 1,362 Deferred tax liabilities: Right-of-use assets (1,697) (2,034) Amortization and depreciation — (86) Total deferred tax liabilities (1,697) (2,120) Net deferred tax liabilities $ (813) $ (758) Table 15.4: Valuation Allowance Activity For the Year Ended December 31, 2023 2022 (in thousands) Balance at beginning of year $ 57,559 $ 55,588 (Reductions)/additions (2,560) 1,971 Balance at end of year $ 54,999 $ 57,559 We establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income. We considered projected future taxable income, tax planning strategies, and reversal of taxable temporary differences in making this assessment. Based on available evidence, we have determined that a full valuation allowance is required as of December 31, 2023 and 2022. As a result of a full valuation allowance against our deferred tax assets and liabilities, a deferred tax liability related to indefinite-lived goodwill remains on our consolidated balance sheets on December 31, 2023 and 2022. On December 31, 2023, for federal income tax purposes, there was approximately a $40.0 million net operating loss available to be carried forward to offset future taxable income. Approximately $10.6 million of these net operating loss carryforwards expire in 2037, the remaining will be carried forward indefinitely. As of December 31, 2023, there was approximately $4.9 million of R&D credit carryover which begins to expire in 2033. Certain tax attributes of the Company, including net operating losses and credits, would be subject to a limitation should an ownership change as defined under Section 382 of the Internal Revenue Code of 1986, as amended, occur. The limitations resulting from a change in ownership could affect the Company's ability to utilize its tax attributes. A study was completed in 2020 which confirmed that no limitation applies to the Company's tax attributes as of December 31, 2020. We believe that ownership activity since December 31, 2020 would not result in limitation sufficient to result in the expiration of unused attributes. Under the provisions of ASC 740, we determined that there were approximately $1.2 million and $1.4 million of unrecognized tax benefits as of December 31, 2023 and 2022, respectively. Included in the balance of unrecognized tax benefits as of December 31, 2023 and 2022 were $0.01 million and $0.10 million, respectively, of tax benefits that, if recognized, would impact the effective tax rate. Also included in the balance of unrecognized tax benefits as of December 31, 2023 and 2022 were $1.2 million and $1.3 million, respectively, of tax benefits that, if recognized, would not impact the effective tax rate due to the Company's valuation allowance. We report interest and penalties as a component of income tax expense. The Company had accrued interest and penalties related to the unrecognized tax benefits of $0.01 million and $0.10 million, which were recorded in other liabilities as of December 31, 2023 and 2022, respectively. We believe that the total amounts of unrecognized tax benefits will not significantly increase or decrease within the next 12 months. The period for which tax years are open, 2013 to 2023, has not been extended beyond the applicable statute of limitations. As of December 31, 2023, the Company is not under examination by any federal tax jurisdiction, but is currently under examination by a state tax jurisdiction. Table 15.5: Reconciliation of the Beginning and Ending Amounts of Unrecognized Tax Benefit For the Year Ended December 31, 2023 2022 (in thousands) Balance at beginning of year $ 1,357 $ 1,056 Decrease in prior year tax positions (169) (5) Increase related to current year tax positions 131 377 Decrease related to lapse of statutes (91) (71) Balance at end of year $ 1,228 $ 1,357 |
(LOSS)_EARNINGS PER SHARE
(LOSS)/EARNINGS PER SHARE | 12 Months Ended |
Dec. 31, 2023 | |
Earnings Per Share [Abstract] | |
(LOSS)/EARNINGS PER SHARE | (LOSS)/EARNINGS PER SHARE For the period of net loss, potentially dilutive securities are not included in the calculation of diluted net (loss)/earnings per share because to do so would be anti-dilutive. Table 16.1: Potentially Dilutive Securities For the Year Ended December 31, 2023 2022 (in thousands) Unvested restricted stock and restricted stock units 687 529 Total 687 529 As of December 31, 2023 and 2022, performance-based RSUs of 43,800 and 336,785, respectively, have been excluded in the calculation of the potentially dilutive securities above because issuance of such shares are contingent upon the satisfaction of certain conditions which were not satisfied by the end of the reporting period. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2023 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS Emmett J. Wood, the brother of our Chairman and CEO, has been an employee of ours since 1996. In January 2023, he tendered his resignation as an employee effective February 7, 2023. The amounts paid to him as compensation for his remaining tenure in 2023 was $0.2 million, while the amount paid for the year ended December 31, 2022, was $1.3 million. One of the Company's directors serves as a consultant to the Company. On January 1, 2023, the director and the Company amended the consulting agreement under which he provides services ("2023 consulting agreement"), extending his services through June 30, 2023. The Company, at its election, would pay the director's 2023 consultancy fees in a fixed amount, in the form of restricted stock units. Consequently, on January 3, 2023, the Company granted the director 16,859 RSUs, one-half of which vested on March 3, 2023, and the other half vested on May 18, 2023, as compensation for his consultancy services through June 30, 2023. In July 2023, the director and the Company amended the 2023 consulting agreement, extending his services through December 31, 2023. The amended 2023 consulting agreement stipulates a firm-fixed monthly retainer fee, plus additional fees and contingent bonus payments upon achievement of certain contract goals, payable in cash. In February 2022, the director and the Company amended the consulting agreement to provide that the Company would pay the remainder of the director's consulting fees for 2022 in a fixed price amount in the form of restricted stock units. The Company granted the director 26,091 RSUs on February 1, 2022, which vested quarterly in four equal amounts through the end of the fiscal year 2022, subject to the director's continued performance under the consulting agreement. The cash amount paid for his consultancy services were $0.09 million and $0.03 million for the years ended December 31, 2023, and 2022, respectively. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 12 Months Ended |
Dec. 31, 2023 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION As noted in Note 2 – Significant Accounting Policies , we conduct our operations through two operating segments: Security Solutions and Secure Networks. • Our Security Solutions segment is primarily focused on cybersecurity, cloud and identity solutions, and secure messaging through Xacta, Telos Ghost, Telos Advanced Cyber Analytics ("Telos ACA"), Telos Automated Message Handling System ("AMHS") and Telos ID offerings. We recognize revenue on contracts from providing various system platforms in the cloud, on-premises, and in hybrid cloud environments, as well as software sales or software-as-a-service. Revenue associated with the segment's custom solutions is recognized as work progresses or upon delivery of services and products. Fluctuation in revenue from period to period is the result of the volume of software sales, and the progress or completion of cloud and/or cybersecurity solutions during the period. The majority of the operating costs relate to labor, material, and overhead costs. Software sales have immaterial operation costs associated with them, thus yielding higher margins. Gross profit and margin are a function of operational efficiency on security solutions and changes in the volume of software sales. • Our Secure Networks segment provides secure networking architectures and solutions to our customers through secure mobility solutions, and network management and defense services. Revenue is recognized over time as the work progresses on contracts related to managing network services and information delivery. Contract costs include labor, material, and overhead costs. Variances in costs recognized from period to period primarily reflect increases and decreases in activity levels on individual contracts. Table 18.1: Results of Operations by Business Segment For the Year Ended December 31, 2023 2022 (in thousands) Revenues Security Solutions $ 77,416 $ 120,454 Secure Networks 67,962 96,433 Total revenue 145,378 216,887 Gross profit Security Solutions 39,614 61,948 Secure Networks 13,328 17,095 Total gross profit 52,942 79,043 Selling, general and administrative expenses 93,257 132,893 Operating loss (40,315) (53,850) Other income 6,715 1,350 Interest expense (786) (874) Loss before income taxes (34,386) (53,374) Provision for income taxes (36) (54) Net loss $ (34,422) $ (53,428) We measure each segment's profitability based on gross profit. We account for inter-segment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. Interest income, interest expense, other income and expense items, and income taxes, as reported in the consolidated financial statements, are not part of the segment profitability measure and are primarily recorded at the corporate level. Management does not utilize total assets by segment to evaluate segment performance or allocate resources. As a result, assets are not tracked by segment, and therefore, total assets by segment are not disclosed. |
COMMITMENT AND CONTINGENCIES
COMMITMENT AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENT AND CONTINGENCIES | COMMITMENT AND CONTINGENCIES Legal Proceedings From time to time, the Company may be a party to litigation or claims arising in the ordinary course of business, including those relating to employment matters, relationship with clients and contractors, intellectual property disputes, and other business matters. These legal proceedings seek various remedies, including claims for monetary damages in varying amounts, none of which are considered material, or are unspecified as to amount. Although the outcome of any such matter is inherently uncertain and may be materially adverse, based on current information, management believes that the outcome of such known matters will not have a material adverse effect on the Company's financial condition and results of operations. Management does not believe that there are any litigation or claims that would have a material adverse effect on the business, or the consolidated financial statements of the Company as of December 31, 2023. Other - Government Contracts As a U.S. government contractor, we are subject to various audits and investigations by the U.S. government to determine whether our operations are being conducted in accordance with applicable regulatory requirements. U.S. government investigations of our operations, whether relating to government contracts or conducted for other reasons, could result in administrative, civil, or criminal liabilities, including repayments, fines or penalties being imposed upon us, suspension, proposed debarment, debarment from eligibility for future U.S. government contracting, or suspension of export privileges. Suspension or debarment could have a material adverse effect on us because of our dependence on contracts with the U.S. government. U.S. government investigations often take years to complete and many result in no adverse action against us. We also provide products and services to customers outside of the United States, which are subject to U.S. and foreign laws and regulations and foreign procurement policies and practices. Our compliance with local regulations or applicable U.S. government regulations also may be audited or investigated. |
SUPPLEMENTAL CASH FLOW INFORMAT
SUPPLEMENTAL CASH FLOW INFORMATION | 12 Months Ended |
Dec. 31, 2023 | |
Supplemental Cash Flow Elements [Abstract] | |
SUPPLEMENTAL CASH FLOW INFORMATION | SUPPLEMENTAL CASH FLOW INFORMATION Table 20.1: Details of Cash, Cash Equivalent, and Restricted Cash As of December 31, 2023 2022 (in thousands) Cash and cash equivalents $ 99,260 $ 119,305 Restricted cash (1) 136 133 Cash, cash equivalents, and restricted cash $ 99,396 $ 119,438 (1) Restricted cash consists of a commercial money market account held as a deposit on the Ashburn lease and is recorded under "Other assets" on the Consolidated Balance Sheets. Table 20.2: Supplemental Cash Flow Information For the Year Ended December 31, 2023 2022 (in thousands) Cash paid during the year for: Interest $ 693 $ 803 Income taxes 147 188 Non-cash investing and financing activities: Operating lease ROU assets obtained in exchange for operating lease liabilities $ 125 $ 511 Capital expenditure activity in accounts payable and other accrued liabilities 341 211 Issuance of common stock for 401K match 1,943 — Intangible assets transferred to extinguish other financing obligations 7,089 — Common stock repurchase under accounts payable and other accrued liabilities — 139 Deferred financing costs in accounts payable and other accrued liabilities — 114 |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Pay vs Performance Disclosure | ||
Net loss | $ (34,422) | $ (53,428) |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Dec. 31, 2023 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Consolidation | Basis of Presentation and Principle of Consolidation The accompanying consolidated financial statements include the accounts of Telos and its subsidiaries (see Note 1 – Organization ), all of whose issued and outstanding share capital is wholly-owned directly and indirectly by the Telos Corporation. All intercompany transactions have been eliminated in consolidation. |
Basis of Comparison | Basis of Comparison Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year's presentation. In the current period, we reclassified and presented depreciation and amortization separately from the cost of sales line items. The reclassification had no impact on the statement of operations. |
Segment Reporting | Segment Reporting |
Use of Estimates | Use of Estimates Preparing consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and disclosure of contingent assets and liabilities. The Company regularly assesses these estimates; however, actual results could differ from those estimates. We base our estimates on historical experience, currently available information, and various other assumptions that we believe are reasonable under the circumstances. Management evaluates these estimates and assumptions on an ongoing basis, including those relating to revenue recognition on cost estimation on certain contracts, allowance for credit losses, inventory obsolescence, valuation allowance for deferred tax assets, income taxes, certain assumptions related to stock-based compensation, valuation of intangible assets and goodwill, restructuring expenses accruals, and contingencies. Actual results could differ from those estimates. The impact of changes in estimates is recorded in the period in which they become known. |
Concentrations | Concentrations Financial instruments that subject us to concentrations of credit risk consist primarily of cash and cash equivalents, and accounts receivable. In consideration that a large amount of our working capital and total assets are held in cash and cash equivalents, we are exposed to credit risk in the event of default by the financial institutions to the extent of the amounts held in excess of federal insurance limits. Due to the financial strength and high credit quality of the financial institutions where the accounts are held, we do not believe that this credit risk makes it reasonably possible that a near-term severe impact risk of loss will occur. The Company's receivables are primarily due from the U.S. government, or from prime contractors to whom we are subcontractors and the end customer is the U.S. government, and are generally considered collectable from the perspective of the customer's ability to pay. We believe that the credit risk associated with our receivables is limited due to the creditworthiness of our customers. We maintain an allowance for estimated potential credit losses. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Restricted cash represents funds that are held in our money market account but precluded from use of general business needs through contractual requirements. We report our restricted cash balance within "Other assets" on the consolidated balance sheets. |
Contract Balances and Revenue | Contract Balances The timing of revenue recognition may differ from the timing of billing and cash receipts from customers. Amounts are invoiced as work progresses, either at periodic intervals or upon achievement of contractual milestones. We record a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance or when milestone payments from customers exceed revenue earned to date. We recognize revenue in accordance with ASC Topic 606, "Revenue from Contracts with Customers." The unit of account in ASC 606 is a performance obligation, which is a promise in a contract with a customer to transfer a good or service to the customer. The Company follows the five-step model for recognizing revenue that includes identifying the contract with the customer, determining the performance obligation(s), determining the transaction price, allocating the transaction price to the performance obligation(s), and recognizing revenue as the performance obligations are satisfied. Timing of the satisfaction of performance obligations varies across our businesses due to our diverse product and service mix, customer base, and contractual terms. Significant judgment can be required in determining certain performance obligations, and these determinations could change the amount of revenue and profit recorded in a given period. Our contracts may have a single performance obligation or multiple performance obligations. When there are multiple performance obligations within a contract, we allocate the transaction price, net of any discounts, to each performance obligation based on the standalone selling price of the product or service underlying each performance obligation. Our contracts with the U.S. government are generally subject to the Federal Acquisition Regulation ("FAR") and the price is typically based on estimated or actual costs plus a reasonable profit margin. As such, the standalone selling price of products or services in our contracts with the U.S. government are typically equal to the selling price stated in the contract. For non-U.S. government contracts with multiple performance obligations, standalone selling price is the observable price of a good or service when Telos sells that good or service separately in similar circumstances and to similar customers. Contracts are routinely and often modified to account for changes in contract requirements, specifications, quantities, or price. Depending on the nature of the modification, we determine whether to account for the modification as an adjustment to the existing contract or as a new contract. Generally, modifications are not distinct from the existing contract due to the significant interrelatedness of the performance obligations and are therefore accounted for as an adjustment to the existing contract, and recognized as a cumulative adjustment to revenue (as either an increase or reduction of revenue) based on the modification's effect on progress toward completion of a performance obligation. The majority of our revenue is recognized over time, as control is transferred continuously to our customers who receive and consume benefits as we perform. Revenue transferred to customers over time accounted for 84% and 89% of our revenue for the years ended December 31, 2023 and 2022, respectively. All of our business groups earn services revenue under a variety of contract types, including time and materials, firm-fixed price, firm fixed price level of effort, and cost-plus fixed fee contract types, which may include variable consideration. Revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, subcontractor costs and indirect expenses. This continuous transfer of control to the customer is supported by clauses in our contracts with U.S. government customers whereby the customer may terminate a contract for convenience and then pay for costs incurred plus a profit, at which time the customer would take control of any work in process. For non-U.S. government contracts where we perform as a subcontractor and our order includes similar FAR provisions as the prime contractor's order from the U.S. government, continuous transfer of control is likewise supported by such provisions. For other non-U.S. government customers, continuous transfer of control to such customers is also supported due to general terms in our contracts and rights to recover damages which would include, among other potential damages, the right to payment for our work performed to date plus a reasonable profit. For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied. This coincides with the point in time the customer obtains control of the transferred product or service, which typically occurs upon customer acceptance or receipt of the product or service, given that we maintain control of the product or service until that point. Revenue transferred to customers at a point in time accounted for 16% and 11% of our revenue for the years ended December 31, 2023 and 2022, respectively. Orders for the sale of software licenses may contain multiple performance obligations, such as maintenance, training, or consulting services, which are typically delivered over time, consistent with the transfer of control disclosed above for the provision of services. When an order contains multiple performance obligations, we allocate the transaction price to the performance obligations based on the standalone selling price of the product or service underlying each performance obligation. The standalone selling price represents the amount we would sell the product or service to a customer on a standalone basis. For certain performance obligations where we are not primarily responsible for fulfilling the promise to provide the goods or services to the customer, do not have inventory risk and have limited discretion in establishing the price for the goods or services, we recognize revenue on a net basis. Contract Estimates Due to the transfer of control over time, revenue is recognized based on progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the performance obligations. We generally use the cost-to-cost measure of progress on a proportional performance basis for our long-term contracts because it best depicts the transfer of control to the customer, which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation, which includes both the actual costs already incurred and the estimated costs to complete. Revenues are recorded proportionally as costs are incurred. Due to the nature of the work required to be performed on certain of our performance obligations, the estimation of costs at completion is complex, subject to many variables and requires significant judgment. Contract estimates are based on various assumptions, including labor and subcontractor costs, materials and other direct costs and the complexity of the work to be performed. A significant change in one or more of these estimates could affect the profitability of our contracts. We review and update our contract-related estimates regularly and recognize adjustments in estimated profit on contracts on a cumulative catch-up basis, which may result in an adjustment increasing or decreasing revenue to date on a contract in a particular period that the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. Our contracts may include various types of variable consideration, such as claims (for instance, indirect rate or other equitable adjustments) or incentive fees. We include estimated amounts in the transaction price based on all of the information available to us, including historical information and future estimations, and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when any uncertainty associated with the variable consideration is resolved. We have revised and re-submitted several years of incurred cost submissions reflecting certain indirect rate structure changes as a result of regular Defense Contract Audit Agency audits of incurred cost submissions. This resulted in signed final rate agreement letters through fiscal year 2022. We evaluated the resulting changes to revenue under the applicable cost-plus fixed fee contracts, as variable consideration, and determined the most likely amount to which we expect to be entitled, to the extent that no constraint exists that would preclude recognizing this revenue or result in a significant reversal of cumulative revenue recognized. We included these estimated amounts of variable consideration in the transaction price and as performance on these contracts is complete, we adjusted our revenue by $(0.1) million during the year ended December 31, 2023. No revenue adjustment was recorded during fiscal year ended December 31, 2022. We provide for anticipated losses on contracts during the period when the loss is determined by recording an expense for the total expected costs that exceeds the total estimated revenue for a performance obligation. We recorded an immaterial contract loss during the year ended December 31, 2023. No contract loss was recorded during the year ended December 31, 2022. Historically, most of our contracts do not include award or incentive fees. For incentive fees, we would include such fees in the transaction price to the extent we could reasonably estimate the amount of the fee. With limited historical experience, we have not included any revenue related to incentive fees in our estimated transaction prices. We may include in our contract estimates additional revenue for submitted contract modifications or claims against the customer when we believe we have an enforceable right to the modification or claim, the amount can be estimated reliably and its realization is probable. We consider the contractual/legal basis for the claim (in particular FAR provisions), the facts and circumstances around any additional costs incurred, the reasonableness of those costs and the objective evidence available to support such claims. For our contracts that have an original duration of one year or less, we use the practical expedient applicable to such contracts and do not consider the time value of money. We capitalize sales commissions related to proprietary software and related services that are directly tied to sales. We do not elect the practical expedient to expense as incurred the incremental costs of obtaining a contract if the amortization period would have been one year or less. For the sales commissions that are capitalized, we amortize the asset over the expected customer life, which is based on recent and historical data. |
Accounts Receivable | Accounts Receivable Accounts receivable includes the following: Billed Receivables - Billed receivables are balances where an invoice has been prepared and issued and is collectible under standard contract terms. Where we anticipate that an invoice will be issued within a short period of time and where the funds are considered collectible within standard contract terms, we include this balance as billable accounts receivable. Unbilled Receivables - Unbilled receivables are balances which have not yet been billed due to timing, most commonly just a month delayed from the timing of revenue recognition and the actual bill being presented to the customer. The Company has fulfilled all requirements in order to bill the customer and collect the funds. Contract Assets - Contract assets are receivables for which the right to consideration is conditional upon factors other than the passage of time. The timing of these billings is generally driven by contractual terms, which may have billing milestones that are different from revenue recognition milestones. Both billed and unbilled balances are recorded at their face amount less an allowance for credit losses over the contractual payment terms of the receivable. Collectability of these amounts are periodically reviewed based upon management's knowledge and analysis of available information as of the balance sheet date, including any specific circumstances related to overdue balances, length of time that the receivable has been outstanding, historical bad debts and aging trends, and other general and contract specific factors. The allowance for credit losses is adjusted based on such evaluation. Accounts receivable balances are written off against the allowance when management deems the balances uncollectible. Our contract asset balance is recorded at the net amount expected to be billed for services performed once the objective criteria laid out by the contract has been met. |
Inventories | Inventories Inventories are valued at the lower of cost or net realizable value, where cost is determined using the weighted-average method. The value of inventory is adjusted for damaged, obsolete, excess and slowing-moving inventory. Net realizable value of inventory is estimated based on the historical obsolescence experience and planned usage. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation is recorded over the assets' estimated useful lives using the straight-line method, which is three Upon sale or retirement of property and equipment, the costs and related accumulated depreciation and amortization are eliminated from the accounts and any gain or loss on such disposition is reflected in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, such amounts are negligible. Repairs and maintenance costs are expensed as incurred. Major renewals and improvements are capitalized and depreciated over their estimated useful lives. |
Leases | Leases We determine if an arrangement is a lease and we account for leases in accordance with ASC Topic 842, "Leases." We entered into contractual arrangements primarily for the use of real estate facilities, and certain other equipment. We determine the classification of the lease under these arrangements, if any, at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether we have a right to direct the use of the asset. Leased property meeting certain criteria is capitalized at the present value of the related minimum lease payments. Amortization of a finance lease ROU asset is computed using the straight-line method over the lesser of the lease term or the useful life of the related asset. In accordance with ASC 842, we recorded operating lease ROU assets, which represent our right to use an underlying asset for the lease term, and operating lease liabilities which represent our obligation to make lease payments. Generally, we enter into operating lease agreements for facilities. The amount of operating lease liabilities due within 12 months are recorded in other current liabilities, with the remaining operating lease liabilities recorded as non-current liabilities in our consolidated balance sheets based on their contractual due dates. The operating lease ROU assets and liabilities are recognized as of the lease commencement date at the present value of the lease payments over the lease term. Most of our leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate on all operating leases. Some of our operating leases contain lease and non-lease components, which we account for as a single component. Operating lease expense is recognized as rent expense on a straight-line basis over the lease term, and recorded within our consolidated statement of operations. The related lease payments on short-term lease arrangements (leases of one year or less) are recognized as expense on a straight-line basis over the lease term. ROU assets are assessed for potential impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value of the asset may not be recoverable and the carrying amount of the assets exceeds its estimated fair value. |
Software Development Costs | Software Development Costs We account for development costs of software in accordance with ASC Topic 985-20 ("ASC 985-20"), "Software – Costs of Software to be Sold, Leased, or Marketed" and ASC Topic 350-40 ("ASC 350-40") "Internal Use Software", depending on the intended use of the software being developed. Under ASC 985-20, all costs of developing software prior to establishing its technological feasibility are research and development costs and are expensed as incurred. Once technological feasibility has been established, subsequent costs should be capitalized until the software begins to be marketed or is released to customers after which the capitalized costs should be amortized and reviewed for impairment. Under ASC 350-40, we capitalize certain software development costs when the preliminary project stage is completed and the software has entered the application development stage. Once substantial testing is complete and the software is ready to be used, capitalization of costs ceases. Capitalized software development costs are amortized on a straight-line basis over the estimated economic life of the application, ranging from two ASC 350-40 also requires hosting arrangements that are service contracts to follow the guidance for internal-use software to determine which implementation costs can be capitalized. In accordance with ASC 350-40, (i) capitalized implementation costs are classified in the same balance sheet line item as the amounts prepaid for the related hosting arrangement, (ii) amortization of capitalized implementation costs is presented in the same income statement line item as the service fees for the related hosting arrangement, and (iii) cash flows related to capitalized implementation costs are presented within the same category of cash flow activity as the cash flow for the related hosting arrangements (i.e. operating activity). As of December 31, 2023 and 2022, the net carrying value of the capitalized implementation costs related to hosting arrangements that were incurred during the application development stage aggregated to $0.2 million and $0.3 million, respectively. These costs are related primarily to the implementation of a new enterprise resource planning system. The Company begins amortizing the capitalized implementation costs after all substantial testing is complete and ready for its intended use, and amortized over the expected term of the arrangement on a straight-line basis. Software costs classified as held for resale are stated at the lower of cost or net realizable value. Software held for resale is amortized into cost of sales on the consolidated statements of operations. The Company reported the software held for resale as part of the Intangible Assets on the consolidated balance sheets. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill is recorded for the difference between the aggregate consideration paid for an acquisition and the fair value of net tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized, but rather tested for potential impairment. We evaluate the impairment of goodwill in accordance with ASC 350, which requires goodwill to be assessed on at least an annual basis, as of December 31 each year, for impairment using a fair value basis. Between annual evaluations, if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount, then impairment must be evaluated. Such circumstances could include, but are not limited to: (1) a significant adverse change in legal factors or business climate, (2) a loss of key contracts or customers, or (3) negative operating performance indicators. The Company performs its goodwill impairment test at the reporting unit level. We may elect to utilize a qualitative assessment to evaluate whether it is "more-likely-than-not" that the fair value of a reporting unit is less than its carrying value. If an impairment indicator exists based on the qualitative assessment, we perform the quantitative goodwill impairment test. When performing a quantitative impairment test, we calculate the estimated fair value of the reporting unit and compare the results with its respective carrying value, including goodwill. If the estimated fair value is determined to be less than the carrying value, we recognize an impairment loss equal to the difference between the reporting unit's fair value and the reporting unit's carrying value, up to the amount of goodwill associated with the reporting unit. The evaluation is based on the estimation of the fair values at the reporting unit level in comparison to the reporting unit's net asset carrying values. The Company uses industry accepted valuation models and set criteria that are reviewed and approved by management. The methodology used to assess impairment is a combination of the income approach (i.e. discounted cash flow ("DCF") method) and the market approach (i.e. Comparable Public Company ("CPC") method) to determine the fair value. In the application of the income approach, the estimated fair value of the reporting unit is determined using a DCF analysis, which requires management's judgment with respect to forecasted revenue streams and operating margins, capital expenditures and the selection and use of an appropriate discount rate commensurate with the risk inherent in each of our reporting unit's current business model. We utilize the weighted average cost of capital ("WACC") as derived by certain assumptions specific to our facts and circumstances as the discount rate. In the application of the market approach, the CPC method uses value multiples or ratio to the reporting accounting data (such as revenue) in measuring the market's perception of the reporting unit's enterprise value. Value multiples or ratio reflect the trends in growth and performance, and the comparable public companies provide a reasonable basis for comparison to the relative investment characteristic of the business being valued. The Company analyzes the relationship between the comparable companies' performance and applies a control premium based on the multiples of comparable companies. The control premium is management's estimate of how much a market participant would be willing to pay over the fair market value in consideration of benefits that flow from control of the entity. The results of the income and market approaches are weighted to determine the estimated fair value of the reporting unit. The weighting is judgmental and is based on the perceived level of appropriateness of the valuation methodology. Estimating the fair value involves the use of assumptions and significant judgments that are based on a number of factors including actual operating results. A relatively small change in the underlying assumptions may cause a change in the results of the impairment assessment in future periods and as such, could result in goodwill impairment. The Company's goodwill is amortized and deducted over a 15-year period for tax purposes. See Note 7 – Goodwill for additional information. Intangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is computed using the method that best reflects how their economic benefits are utilized or, if a pattern of economic benefits cannot be reliably determined, on a straight-line basis over their estimated useful lives. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company evaluates its long-lived assets, including property and equipment, for potential impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable. If such evaluation indicates that the carrying amount of the asset exceeds its estimated future undiscounted cash flows or its estimated fair value, an impairment loss is recognized to reduce the asset's carrying amount to its estimated fair value. Considerable management judgment is necessary to estimate its fair value. Accordingly, actual results could differ from such estimates. No events have been identified that caused an evaluation of the recoverability of long-lived assets. In addition to the recoverability assessment, the Company routinely reviews the remaining lives of its long-lived assets. Any reduction in the useful life assumptions will result in increased depreciation or amortization expense in the period when such determinations are made, as well as in subsequent periods. There are no changes in the estimated useful lives of long-lived assets for the periods presented. |
Fair Value Measurements | Fair Value Measurements U.S. GAAP provides a framework for measuring fair value and expands disclosures about fair value measurements. The framework requires the valuation of investments using a three-tiered approach. The statement requires fair value measurement to be classified and disclosed in one of the following categories: • Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities; • Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or • Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). As of December 31, 2023 and 2022, we did not have any financial instruments with significant Level 3 inputs and we did not have any financial instruments that are measured at fair value on a recurring basis. For certain of our non-derivative financial instruments, including receivables, accounts payable and other accrued liabilities, the carrying amount approximates fair value due to the short-term maturities of these instruments. |
Research and Development | Research and Development |
Advertising Costs | Advertising Costs |
Income Taxes | Income Taxes We account for income taxes in accordance with ASC 740, "Income Taxes." Under ASC 740, deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences and income tax credits. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates that are applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized for differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Any change in tax rates on deferred tax assets and liabilities is recognized in net income in the period in which the tax rate change is enacted. We record a valuation allowance that reduces deferred tax assets when it is "more likely than not" that deferred tax assets will not be realized. We follow the provisions of ASC 740 related to accounting for uncertainty in income taxes. The accounting estimates related to liabilities for uncertain tax positions require us to make judgments regarding the sustainability of each uncertain tax position based on its technical merits. If we determine it is more likely than not that a tax position will be sustained based on its technical merits, we record the impact of the position in our consolidated financial statements at the largest amount that is greater than fifty percent likely of being realized upon ultimate settlement. These estimates are updated at each reporting date based on the facts, circumstances and information available. We are also required to assess at each reporting date whether it is reasonably possible that any significant increases or decreases to our unrecognized tax benefits will occur during the next 12 months. |
Business Combinations | Business Combinations Acquisitions were accounted for under U.S. GAAP using the acquisition method in accordance with ASC 805, Business Combinations . The Company allocates the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities, if any, is recorded as goodwill. The accounting for business combinations requires management to make judgments and estimates of the fair value of assets acquired, including the identification and valuation of intangible assets, as well as liabilities and contingencies assumed. Such judgments and estimates directly impact the amount of goodwill recognized in connection with an acquisition. Estimating the fair value of acquired assets and assumed liabilities, including intangibles, requires judgment about expected future cash flows, weighted-average cost of capital, discount rates and expected long-term growth rates. |
Stock-Based Compensation | Stock-Based Compensation The Company grants stock-based compensation awards under the 2016 Omnibus Long-Term Incentive Plan, as amended (the "2016 LTIP"). Our 2016 LTIP provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock and dividend equivalent rights to our senior executives, directors, employees, and other eligible service providers. The stock options granted under the 2016 LTIP expire no more than 10 years after the date of grant. Awards granted under the 2016 LTIP vest over the periods determined by the Board of Directors or the Compensation Committee of the Board of Directors, who has the discretion to establish the terms, conditions and criteria of the various awards, including the weighting and vesting schedule of Service-Based RSUs and the performance conditions applicable to the Performance-Based RSUs, including the achievement of certain financial performance criteria or price targets for our common stock. The restricted stock units granted are time-based ("Service-Based RSU" or "RSU") and performance-based ("Performance-Based RSU" or "PSU"). The Company issues new shares of common stock upon vesting of the restricted stock units under this plan. • Service-Based RSUs granted to eligible employees as an incentive generally vest in installments over a period of up to three years from the date of grant. The grant date fair value per share is equal to the closing stock price on the date of grant. • Performance-Based RSUs vest upon the achievement of a defined performance target during a defined performance period from the date of grant. The fair value per share of these Performance-Based RSUs is equal to the closing stock price on the date of the grant or the fair value of the award on the grant date as determined through an independent valuation for Performance-Based RSUs with market conditions. Performance-Based RSUs vest upon the achievement of certain price targets or market conditions for the Company's common stock anytime or certain operational milestones over a three-year period from the date of grant. In order to reflect the substantive characteristics of these market condition awards, the Company employs a Monte Carlo simulation valuation model to calculate the grant date fair value and corresponding requisite service period of the award. Monte Carlo approaches are a class of computational algorithms that rely on repeated random sampling to compute their results. This approach allows the calculation of the value of such awards based on a large number of possible stock price path scenarios. The Company estimates the fair value of stock options on the date of the grant using an option pricing model. The option pricing model takes into consideration the current share price of the underlying common stock, exercise price of the option, expected term, risk-free interest rate and the volatility of share price. These considerations directly affect the amount of compensation expense that will ultimately be recognized. We recognize these stock-based payment transactions when services from the employees, directors and other eligible service providers are received and recognize a corresponding increase in additional paid-in capital in our consolidated balance sheets. The measurement objective for these equity awards is the estimated fair value at the date of grant of the equity instruments that we are obligated to issue when employees, directors and other eligible service providers have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. |
Net (Loss)/Earnings per Share | Net (Loss)/Earnings per Share Basic net (loss)/earnings per share is computed by dividing the net (loss)/earnings by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net (loss)/earnings per share is computed by dividing the net (loss)/earnings by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of unvested restricted common stock and warrants. |
Other Comprehensive (Loss)/Income | Other Comprehensive (Loss)/Income For one of our wholly-owned subsidiaries, the functional currency is the local currency. For this subsidiary, the translation of its foreign currency into U.S. dollars is performed for assets and liabilities using current foreign currency exchange rates in effect at the balance sheet date and for revenue and expense accounts using average foreign currency exchange rates during the periods presented. Translation gains and losses are included in stockholders' equity as a component of accumulated other comprehensive (loss)/income. |
Restructuring Expenses | Restructuring Expenses The determination of when the Company accrues for involuntary termination benefits under restructuring plans depends on whether the termination benefits are provided under an on-going benefit arrangement or under a one-time benefit arrangement. The Company accounts for on-going benefit arrangements, such as those documented by employment agreements, in accordance with ASC 712 ("ASC 712"), "Compensation – Nonretirement Postemployment Benefits." Under ASC 712, liabilities for postemployment benefits are recorded at the time of obligations are probable of being incurred and can be reasonably estimated. When applicable, the Company records such costs into operating expenses. In the fourth quarter of 2022, the Company committed to a restructuring plan to streamline its workforce and spending to better align its cost structure with its volume of business. The restructuring plan reduced the Company's workforce, with a majority of the affected employees separating from the business in early 2023. In connection with this restructuring plan, the Company incurred restructuring-related costs, including employees' severance and related benefit costs. Employee severance and related benefit costs include cash payments, outplacement services and continuing health insurance coverage. Severance costs pursuant to ongoing-benefit arrangements are recognized when probable and reasonably estimated. Other related costs include external consulting and advisory fees related to implementing the restructuring plan. These costs are recognized at fair value in the period in which the costs are incurred. In fiscal year 2022, the Company estimated that the expected restructuring expenses were $2.8 million. In fiscal year 2023, the Company updated its total expected restructuring plan costs to $3.9 million, based on the Company's review of the restructuring plan for the remainder of the fiscal year. The restructuring expenses are recorded under "Selling, general and administrative expenses" on the Consolidated Statements of Operations. At each reporting date, the Company evaluates its restructuring expense accrual to determine if the liabilities reported are still appropriate. Any changes in the estimated costs of executing the approved restructuring plan are reflected in the Company's Consolidated Statements of Operations. Table 1: Summary of Changes in Restructuring Expenses Accrual Severance and related benefit costs (1) Other related costs Total (in thousands) Balance at December 31, 2022 $ 2,763 $ — $ 2,763 (Adjustments)/charges (168) 1,300 1,132 Cash payments (2,195) (1,300) (3,495) Balance at December 31, 2023 $ 400 $ — $ 400 (1) Restructuring-related liabilities are reported as part of "Other current liabilities" in the Company's unaudited consolidated balance sheets, see Note 9 - Other Balance Sheet Components for further details. |
Recent Accounting Pronouncements - Adopted and Not Yet Adopted | Recently Accounting Pronouncements - Adopted In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which provides optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This amendment is effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of this ASU did not have a material impact on our consolidated financial position, results of operations or cash flows. In October 2021, the FASB issued ASU No. 2021-08, "Business Combination (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The ASU improves comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. Entities should apply the amendments prospectively to business combinations that occur after the effective date. This standard is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. This ASU is applied prospectively to business combinations occurring on or after the effective date of the amendment. The adoption of this ASU did not have a material impact on our consolidated financial position, results of operations or cash flows. In September 2022, the FASB issued ASU No. 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations," which requires a company that uses a supplier finance program in connection with the purchase of goods or services to disclose sufficient information about the program to allow a user of the financial statements to understand the program's nature, activity during the period, changes from period to period, and potential magnitude. This standard is effective for reporting periods beginning December 15, 2022, with early adoption permitted. The adoption of this ASU does not have a material impact on our consolidated financial position, results of operations, and cash flows. Recent Accounting Pronouncements - Not Yet Adopted In June 2022, the FASB issued ASU No. 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions," which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This standard will be effective for reporting periods beginning December 15, 2023, with early adoption permitted. While we are currently assessing the impact of the adoption of this ASU, we do not believe the adoption of this ASU will have a material impact on our consolidated financial position, results of operations, and cash flows. In July 2023, the FASB issued ASU 2023-03, "Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718)". This update requires (1) to disclose and present income or loss related to common stock transactions on the face of the income statement, (2) to modify the existing classification and measurement of redeemable preferred shares and redeemable equity-classified shares, and (3) modify accounting treatment for stock-based compensation. The FASB has not set an effective date on this ASU and adoption is permitted. We are currently evaluating the impact of the ASU on our consolidated financial statement disclosures. In August 2023, the FASB issued ASU No. 2023-05, "Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement," which requires that a joint venture apply a new basis of accounting upon formation and would initially measure its assets and liabilities at fair value. Joint ventures should apply the amendments prospectively with the formation date on or after January 1, 2025, with early adoption permitted. While we are currently assessing the impact of the adoption of this ASU, we do not believe the adoption of this ASU will have a material impact on our consolidated financial position, results of operations, and cash flows. In October 2023, the FASB issued ASU No. 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiatives," which modify the disclosure or presentation requirements of a variety of Topics in the Codification, certain of the amendment represent clarifications to or technical corrections of the current requirements. The effective dates for each amendment will be the date on which the SEC's removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all entities within the scope of the affected Codification subtopics, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the associated amendment will be removed from the Codification and will not become effective for any entities. While we are currently assessing the impact of the adoption of this ASU, we do not believe the adoption of this ASU will have a material impact on our consolidated financial position, results of operations, and cash flows. In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure," which requires improvement on reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard will be effective for fiscal year beginning after December 15, 2023 and interim periods within fiscal year beginning after December 15, 2024, with early adoption permitted. We are currently assessing the impact of the adoption of this ASU on our consolidated financial position, results of operations, and cash flows. |
Revenue Recognition | Contract Balances The timing of revenue recognition may differ from the timing of billing and cash receipts from customers. Amounts are invoiced as work progresses, either at periodic intervals or upon achievement of contractual milestones. We record a contract asset when revenue is recognized prior to invoicing, or a contract liability when cash is received in advance or when milestone payments from customers exceed revenue earned to date. We recognize revenue in accordance with ASC Topic 606, "Revenue from Contracts with Customers." The unit of account in ASC 606 is a performance obligation, which is a promise in a contract with a customer to transfer a good or service to the customer. The Company follows the five-step model for recognizing revenue that includes identifying the contract with the customer, determining the performance obligation(s), determining the transaction price, allocating the transaction price to the performance obligation(s), and recognizing revenue as the performance obligations are satisfied. Timing of the satisfaction of performance obligations varies across our businesses due to our diverse product and service mix, customer base, and contractual terms. Significant judgment can be required in determining certain performance obligations, and these determinations could change the amount of revenue and profit recorded in a given period. Our contracts may have a single performance obligation or multiple performance obligations. When there are multiple performance obligations within a contract, we allocate the transaction price, net of any discounts, to each performance obligation based on the standalone selling price of the product or service underlying each performance obligation. Our contracts with the U.S. government are generally subject to the Federal Acquisition Regulation ("FAR") and the price is typically based on estimated or actual costs plus a reasonable profit margin. As such, the standalone selling price of products or services in our contracts with the U.S. government are typically equal to the selling price stated in the contract. For non-U.S. government contracts with multiple performance obligations, standalone selling price is the observable price of a good or service when Telos sells that good or service separately in similar circumstances and to similar customers. Contracts are routinely and often modified to account for changes in contract requirements, specifications, quantities, or price. Depending on the nature of the modification, we determine whether to account for the modification as an adjustment to the existing contract or as a new contract. Generally, modifications are not distinct from the existing contract due to the significant interrelatedness of the performance obligations and are therefore accounted for as an adjustment to the existing contract, and recognized as a cumulative adjustment to revenue (as either an increase or reduction of revenue) based on the modification's effect on progress toward completion of a performance obligation. The majority of our revenue is recognized over time, as control is transferred continuously to our customers who receive and consume benefits as we perform. Revenue transferred to customers over time accounted for 84% and 89% of our revenue for the years ended December 31, 2023 and 2022, respectively. All of our business groups earn services revenue under a variety of contract types, including time and materials, firm-fixed price, firm fixed price level of effort, and cost-plus fixed fee contract types, which may include variable consideration. Revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, subcontractor costs and indirect expenses. This continuous transfer of control to the customer is supported by clauses in our contracts with U.S. government customers whereby the customer may terminate a contract for convenience and then pay for costs incurred plus a profit, at which time the customer would take control of any work in process. For non-U.S. government contracts where we perform as a subcontractor and our order includes similar FAR provisions as the prime contractor's order from the U.S. government, continuous transfer of control is likewise supported by such provisions. For other non-U.S. government customers, continuous transfer of control to such customers is also supported due to general terms in our contracts and rights to recover damages which would include, among other potential damages, the right to payment for our work performed to date plus a reasonable profit. For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied. This coincides with the point in time the customer obtains control of the transferred product or service, which typically occurs upon customer acceptance or receipt of the product or service, given that we maintain control of the product or service until that point. Revenue transferred to customers at a point in time accounted for 16% and 11% of our revenue for the years ended December 31, 2023 and 2022, respectively. Orders for the sale of software licenses may contain multiple performance obligations, such as maintenance, training, or consulting services, which are typically delivered over time, consistent with the transfer of control disclosed above for the provision of services. When an order contains multiple performance obligations, we allocate the transaction price to the performance obligations based on the standalone selling price of the product or service underlying each performance obligation. The standalone selling price represents the amount we would sell the product or service to a customer on a standalone basis. For certain performance obligations where we are not primarily responsible for fulfilling the promise to provide the goods or services to the customer, do not have inventory risk and have limited discretion in establishing the price for the goods or services, we recognize revenue on a net basis. Contract Estimates Due to the transfer of control over time, revenue is recognized based on progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the performance obligations. We generally use the cost-to-cost measure of progress on a proportional performance basis for our long-term contracts because it best depicts the transfer of control to the customer, which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation, which includes both the actual costs already incurred and the estimated costs to complete. Revenues are recorded proportionally as costs are incurred. Due to the nature of the work required to be performed on certain of our performance obligations, the estimation of costs at completion is complex, subject to many variables and requires significant judgment. Contract estimates are based on various assumptions, including labor and subcontractor costs, materials and other direct costs and the complexity of the work to be performed. A significant change in one or more of these estimates could affect the profitability of our contracts. We review and update our contract-related estimates regularly and recognize adjustments in estimated profit on contracts on a cumulative catch-up basis, which may result in an adjustment increasing or decreasing revenue to date on a contract in a particular period that the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. Our contracts may include various types of variable consideration, such as claims (for instance, indirect rate or other equitable adjustments) or incentive fees. We include estimated amounts in the transaction price based on all of the information available to us, including historical information and future estimations, and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when any uncertainty associated with the variable consideration is resolved. We have revised and re-submitted several years of incurred cost submissions reflecting certain indirect rate structure changes as a result of regular Defense Contract Audit Agency audits of incurred cost submissions. This resulted in signed final rate agreement letters through fiscal year 2022. We evaluated the resulting changes to revenue under the applicable cost-plus fixed fee contracts, as variable consideration, and determined the most likely amount to which we expect to be entitled, to the extent that no constraint exists that would preclude recognizing this revenue or result in a significant reversal of cumulative revenue recognized. We included these estimated amounts of variable consideration in the transaction price and as performance on these contracts is complete, we adjusted our revenue by $(0.1) million during the year ended December 31, 2023. No revenue adjustment was recorded during fiscal year ended December 31, 2022. We provide for anticipated losses on contracts during the period when the loss is determined by recording an expense for the total expected costs that exceeds the total estimated revenue for a performance obligation. We recorded an immaterial contract loss during the year ended December 31, 2023. No contract loss was recorded during the year ended December 31, 2022. Historically, most of our contracts do not include award or incentive fees. For incentive fees, we would include such fees in the transaction price to the extent we could reasonably estimate the amount of the fee. With limited historical experience, we have not included any revenue related to incentive fees in our estimated transaction prices. We may include in our contract estimates additional revenue for submitted contract modifications or claims against the customer when we believe we have an enforceable right to the modification or claim, the amount can be estimated reliably and its realization is probable. We consider the contractual/legal basis for the claim (in particular FAR provisions), the facts and circumstances around any additional costs incurred, the reasonableness of those costs and the objective evidence available to support such claims. For our contracts that have an original duration of one year or less, we use the practical expedient applicable to such contracts and do not consider the time value of money. We capitalize sales commissions related to proprietary software and related services that are directly tied to sales. We do not elect the practical expedient to expense as incurred the incremental costs of obtaining a contract if the amortization period would have been one year or less. For the sales commissions that are capitalized, we amortize the asset over the expected customer life, which is based on recent and historical data. |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Schedule of Changes in Restructuring Expenses Accrual | Table 1: Summary of Changes in Restructuring Expenses Accrual Severance and related benefit costs (1) Other related costs Total (in thousands) Balance at December 31, 2022 $ 2,763 $ — $ 2,763 (Adjustments)/charges (168) 1,300 1,132 Cash payments (2,195) (1,300) (3,495) Balance at December 31, 2023 $ 400 $ — $ 400 (1) Restructuring-related liabilities are reported as part of "Other current liabilities" in the Company's unaudited consolidated balance sheets, see Note 9 - Other Balance Sheet Components for further details. |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Revenue by Customer Type | Table 3.1: Revenue by Customer Type For the Year Ended December 31, 2023 2022 Amount % Amount % (dollars in thousands) Federal government $ 131,143 90% $ 205,538 95% State & local government, and commercial 14,235 10% 11,349 5% Total revenue $ 145,378 $ 216,887 Table 3.2: Revenue by Contract Type For the Year Ended December 31, 2023 2022 Amount % Amount % (dollars in thousands) Firm fixed-price $ 114,188 79% $ 179,803 83% Time-and-materials 13,535 9% 12,963 6% Cost plus fixed-fee 17,655 12% 24,121 11% Total revenue $ 145,378 $ 216,887 |
Schedules of Concentration of Risk, by Risk Factor | Table 3.3: Revenue Concentrations Greater than 10% of Total Revenue For the Year Ended December 31, 2023 2022 U.S. Department of Defense ("DoD") 64 % 74 % |
Schedule of Contract Balances | Table 3.4: Contract Balances As of December 31, Balance Sheet Presentation 2023 2022 (in thousands) Billed account receivables (1) Accounts receivable, net $ 17,818 $ 13,521 Unbilled account receivables Accounts receivable, net 8,022 11,657 Contract assets Accounts receivable, net 4,584 14,891 Contract liabilities - current Contract liabilities 6,728 6,444 (1) Net of allowance for credit losses |
ACCOUNTS RECEIVABLE, NET (Table
ACCOUNTS RECEIVABLE, NET (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Receivables [Abstract] | |
Schedule of Accounts, Notes, Loans and Financing Receivable | Table 4.1: Details of Accounts Receivable, Net As of December 31, 2023 2022 (in thousands) Billed accounts receivables $ 18,101 $ 13,655 Unbilled accounts receivable 8,022 11,657 Contract assets 4,584 14,891 Allowance for credit losses (283) (134) Accounts receivable, net $ 30,424 $ 40,069 |
Schedule of Accounts Receivable, Allowance for Credit Loss | Table 4.2: Allowance for Credit Losses Activities Balance Beginning Bad Debt Expenses (1) Write-Offs / Recoveries (2) Balance (in thousands) For the Year Ended December 31, 2023 $ 134 $ 152 $ (3) $ 283 For the Year Ended December 31, 2022 116 99 (81) 134 (1) Accounts receivable reserves and reversals of allowance for subsequent collection, net (2) Accounts receivable written-off and subsequent recoveries, net |
INVENTORIES, NET (Tables)
INVENTORIES, NET (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories, Net | Table 5.1: Details of Inventories, Net As of December 31, 2023 2022 (in thousands) Gross inventory $ 2,179 $ 3,642 Allowance for inventory obsolescence (759) (765) Inventories, net $ 1,420 $ 2,877 |
PROPERTY AND EQUIPMENT, NET (Ta
PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net including Depreciation and Amortization Expense | Table 6.1: Details of Property and Equipment, Net As of December 31, 2023 As of December 31, 2022 Gross Carrying Amount Accumulated Depreciation and Amortization Net Carrying Value Gross Carrying Amount Accumulated Depreciation and Amortization Net Carrying Value (in thousands) Furniture and equipment $ 16,213 $ (13,363) $ 2,850 $ 16,033 $ (11,900) $ 4,133 Leasehold improvement 3,211 (2,604) 607 $ 3,145 (2,491) 654 Total $ 19,424 $ (15,967) $ 3,457 $ 19,178 $ (14,391) $ 4,787 Table 6.2: Depreciation and Amortization Expense For the year ended December 31, 2023 2022 (in thousands) Depreciation and amortization $ 2,230 $ 2,367 |
INTANGIBLE ASSETS, NET (Tables)
INTANGIBLE ASSETS, NET (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets | Table 8.1: Details of Intangible Assets, Net Estimated useful life As of December 31, 2023 As of December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value (in thousands) Acquired technology 8 years $ 3,630 $ (1,097) $ 2,533 $ 3,630 $ (643) $ 2,987 Customer relationships 3 years 40 (32) 8 40 (19) 21 Software development costs 2 - 5 years 35,312 (12,256) 23,056 26,956 (7,793) 19,163 Subtotal 38,982 (13,385) 25,597 30,626 (8,455) 22,171 In-process software development costs (1) (2) 14,019 — 14,019 8,124 — 8,124 Software held for resale (3) — — — 7,120 — 7,120 Total $ 53,001 $ (13,385) $ 39,616 $ 45,870 $ (8,455) $ 37,415 (1) In-process software development costs are costs for software that is not yet available for its intended use or general release to customers as of balance sheet date, thus not yet amortized. (2) An impairment charge of $0.5 million was recorded against software development costs in fiscal year 2023 related to the write-off of certain software projects. (3) This amount is net of $0.7 million charged into cost of sales in fiscal year 2022. |
Schedule of Indefinite-Lived Intangible Assets | Table 8.1: Details of Intangible Assets, Net Estimated useful life As of December 31, 2023 As of December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value (in thousands) Acquired technology 8 years $ 3,630 $ (1,097) $ 2,533 $ 3,630 $ (643) $ 2,987 Customer relationships 3 years 40 (32) 8 40 (19) 21 Software development costs 2 - 5 years 35,312 (12,256) 23,056 26,956 (7,793) 19,163 Subtotal 38,982 (13,385) 25,597 30,626 (8,455) 22,171 In-process software development costs (1) (2) 14,019 — 14,019 8,124 — 8,124 Software held for resale (3) — — — 7,120 — 7,120 Total $ 53,001 $ (13,385) $ 39,616 $ 45,870 $ (8,455) $ 37,415 (1) In-process software development costs are costs for software that is not yet available for its intended use or general release to customers as of balance sheet date, thus not yet amortized. (2) An impairment charge of $0.5 million was recorded against software development costs in fiscal year 2023 related to the write-off of certain software projects. (3) This amount is net of $0.7 million charged into cost of sales in fiscal year 2022. |
Schedule of Amortization Expense | Table 8.2: Amortization Expense For the year ended December 31, 2023 2022 (in thousands) Amortization expense related to: Software development costs - cost of sales (1) $ 2,840 $ — Software development costs - research and development 1,623 1,362 Other intangible assets - general and administrative 467 401 Total $ 4,930 $ 1,763 (1) Amortization expense for software development costs related to assets to be sold, leased, or otherwise marketed are charged under cost of sales on the Consolidated Statements of Operations. |
Schedule of Estimated Future Amortization Expense of Intangible Assets, Net | Table 8.3: Estimated Future Amortization Expense of Intangible Assets, Net As of December 31, 2023 (in thousands) Year Ending December 31, 2024 $ 8,037 Year Ending December 31, 2025 7,270 Year Ending December 31, 2026 4,864 Year Ending December 31, 2027 3,520 Year Ending December 31, 2028 1,642 Thereafter 264 Total (1) $ 25,597 (1) This does not include amortization of in-process software development costs, as estimation of the timing of future amortization expenses would be impractical. |
OTHER BALANCE SHEET COMPONENTS
OTHER BALANCE SHEET COMPONENTS (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Accounts Payable and Other Accrued Liabilities | Table 9.1: Details of Accounts Payable and Other Accrued Liabilities As of December 31, 2023 2022 (in thousands) Accounts payable $ 8,307 $ 12,606 Accrued payables 5,443 9,945 Accounts payable and other accrued liabilities $ 13,750 $ 22,551 |
Schedule of Other Current Liabilities | Table 9.2: Details of Other Current Liabilities As of December 31, 2023 2022 (in thousands) Other accrued liabilities 1,427 1,530 Restructuring expenses accrual 400 2,763 Other 497 626 Other current liabilities $ 2,324 $ 4,919 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Stockholders' Equity Note [Abstract] | |
Schedule of Share Repurchases Activity | Table 11.1: Share Repurchase Program Activity For the Year Ended December 31, 2023 2022 (in thousands, except per share and share data) Amounts paid for shares repurchased (1) (2) $ — $ 11,284 Number of shares repurchased — 1,550,162 Average per share price paid (1) $ — $ 7.28 (1) Includes commission paid for repurchases on the open market. (2) Includes $0.1 million of unpaid common stock repurchased paid in fiscal year 2023. |
Schedule of Accumulated Other Comprehensive Income (Loss) | Table 11.2: Details of Changes in Accumulated Other Comprehensive Loss by Category Foreign currency translation adjustment Actuarial gain on pension liability adjustment Total (in thousands) Balance as of December 31, 2021 $ (134) $ 107 $ (27) Other comprehensive loss before reclassification (28) — (28) Balance as of December 31, 2022 (162) 107 (55) Other comprehensive loss before reclassification (5) — (5) Balance as of December 31, 2023 $ (167) $ 107 $ (60) |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Stock Compensation Expense | Table 12.1: Details of Stock-based Compensation Expense For the Year Ended December 31, 2023 2022 (in thousands) Cost of sales - services $ 900 $ 3,497 Sales and marketing 188 4,668 Research and development 1,989 3,806 General and administrative (1) 21,319 52,689 Total $ 24,396 $ 64,660 (1) Stock-based compensation expense related to stock options was $0.3 million for the year ended December 31, 2023. There was no similar stock-based compensation expense on stock options in fiscal year 2022. |
Schedule of Restricted Stock Unit Activity | Restricted Stock Table 12.2: Restricted Stock Unit Activity Service-Based RSU Performance-Based RSU Total Weighted-Average Grant Date Fair Value Unvested outstanding units as of December 31, 2022 3,570,082 336,785 3,906,867 $ 19.53 Granted 1,888,689 — 1,888,689 2.17 Vested (2,910,645) — (2,910,645) 19.04 Forfeited (415,513) (292,985) (708,498) 19.11 Unvested outstanding units as of December 31, 2023 2,132,613 43,800 2,176,413 $ 5.07 |
Schedule of Stock Options Fair Value and Weighted-Average Assumptions | Table 12.3: Stock Options Fair Value and Weighted-Average Assumptions For the Year Ended December 31, 2023 2022 Weighted-average fair value of underlying stock options $1.06 $— Expected term (in years) 5.5 - 10 0 Risk-free interest rate 3.5% —% Expected volatility 30.7% - 35.1% —% Expected dividend yield —% —% |
Schedule of Stock Option Activity | Table 12.4: Stock Option Activity Stock Options Outstanding Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding option balance as of December 31, 2022 — $ — 0.0 $ — Granted 400,000 1.80 Exercised — — Forfeited, cancelled, or expired — — Outstanding option balance as of December 31, 2023 400,000 $ 1.80 9.4 $ 740,000 Exercisable stock option as of December 31, 2023 — $ — 0.0 $ — |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Leases [Abstract] | |
Schedule of Details of Lease Cost | Table 13.1: Details of Lease Costs For the Year Ended December 31, 2023 2022 (in thousands) Operating lease cost $ 541 $ 550 Short-term lease cost (1) 55 49 Finance lease cost Amortization of finance lease assets 1,221 1,221 Interest on finance lease liabilities 611 688 Total finance lease cost 1,832 1,909 Total lease costs $ 2,428 $ 2,508 (1) Leases that have terms of 12 months or less. Table 13.3: Weighted-Average Remaining Lease Terms and Discount Rates For the Year Ended December 31, 2023 2022 Weighted average remaining lease term (in years): Finance leases 5.3 years 6.3 years Operating leases 3.4 years 1.0 year Weighted average discount rate: Finance leases 5.04% 5.04% Operating leases 5.75% 5.75% Table 13.4: Supplemental Cash Flow Information Related to Leases For the Year Ended December 31, 2023 2022 (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases $ 585 $ 603 Operating cash flows related to finance leases 611 688 Financing cash flows related to finance leases 1,592 1,461 |
Schedule of Future Minimum Lease Payments | Table 13.2: Future Minimum Lease Payments Operating Leases Finance Leases (in thousands) Year Ending December 31, 2024 $ 105 $ 2,258 Year Ending December 31, 2025 37 2,314 Year Ending December 31, 2026 37 2,371 Year Ending December 31, 2027 37 2,431 Year Ending December 31, 2028 25 2,492 Thereafter — 1,049 Total minimum lease payments 241 12,915 Less: Imputed interest (21) (1,667) Total lease obligations 220 11,248 Less: Current portion of lease obligations (97) (1,730) Long-term lease obligations $ 123 $ 9,518 |
Schedule of Future Minimum Lease Payments | Table 13.2: Future Minimum Lease Payments Operating Leases Finance Leases (in thousands) Year Ending December 31, 2024 $ 105 $ 2,258 Year Ending December 31, 2025 37 2,314 Year Ending December 31, 2026 37 2,371 Year Ending December 31, 2027 37 2,431 Year Ending December 31, 2028 25 2,492 Thereafter — 1,049 Total minimum lease payments 241 12,915 Less: Imputed interest (21) (1,667) Total lease obligations 220 11,248 Less: Current portion of lease obligations (97) (1,730) Long-term lease obligations $ 123 $ 9,518 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Expense (Benefit) | Table 15.1: Components of Provision for/(Benefit from) Income Taxes For the Year Ended December 31, 2023 2022 (in thousands) Current provision Federal $ — $ — State (19) 19 Total current (19) 19 Deferred tax expense Federal 32 37 State 23 (2) Total deferred 55 35 Provision for income taxes $ 36 $ 54 |
Schedule of Effective Income Tax Rate Reconciliation | Table 15.2: Reconciliation of Statutory Tax Rate to Actual Tax Rate For the Year Ended December 31, 2023 2022 Computed expected income tax provision 21.0 % 21.0 % State income taxes, net of federal income tax benefit 3.6 3.6 Change in valuation allowance for deferred tax assets 7.5 (3.7) Cumulative deferred adjustments — (0.9) Provision to return adjustments (0.1) 0.1 Other permanent differences (0.2) (0.1) Stock-based compensation (41.2) (20.6) Section 162(m) limitation - covered employees 9.5 (2.0) Uncertain tax positions 0.5 (0.5) R&D credit (0.7) 3.0 Effective tax rate (0.1 %) (0.1 %) |
Schedule of Deferred Tax Assets and Liabilities | Table 15.3: Components of Deferred Tax Assets and Liabilities As of December 31, 2023 2022 (in thousands) Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts $ 70 $ 33 Allowance for inventory obsolescence and amortization 203 210 Accrued liabilities not currently deductible 1,133 1,151 Stock-based compensation 1,352 7,943 Accrued compensation 2,457 915 Lease liabilities 2,906 3,349 Goodwill 30,947 34,009 Capitalized research and development costs 2,992 362 Net operating loss carryforwards - federal 8,402 6,034 Net operating loss carryforwards - state 1,522 1,155 R&D tax credit 3,647 3,760 Amortization and depreciation 252 — Total gross deferred tax assets 55,883 58,921 Less valuation allowance (54,999) (57,559) Total deferred tax assets, net of valuation allowance 884 1,362 Deferred tax liabilities: Right-of-use assets (1,697) (2,034) Amortization and depreciation — (86) Total deferred tax liabilities (1,697) (2,120) Net deferred tax liabilities $ (813) $ (758) |
Components of Valuation Allowance | Table 15.4: Valuation Allowance Activity For the Year Ended December 31, 2023 2022 (in thousands) Balance at beginning of year $ 57,559 $ 55,588 (Reductions)/additions (2,560) 1,971 Balance at end of year $ 54,999 $ 57,559 |
Schedule of Unrecognized Tax Benefits Roll Forward | Table 15.5: Reconciliation of the Beginning and Ending Amounts of Unrecognized Tax Benefit For the Year Ended December 31, 2023 2022 (in thousands) Balance at beginning of year $ 1,357 $ 1,056 Decrease in prior year tax positions (169) (5) Increase related to current year tax positions 131 377 Decrease related to lapse of statutes (91) (71) Balance at end of year $ 1,228 $ 1,357 |
(LOSS)_EARNINGS PER SHARE (Tabl
(LOSS)/EARNINGS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Potentially Dilutive Securities | Table 16.1: Potentially Dilutive Securities For the Year Ended December 31, 2023 2022 (in thousands) Unvested restricted stock and restricted stock units 687 529 Total 687 529 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | Table 18.1: Results of Operations by Business Segment For the Year Ended December 31, 2023 2022 (in thousands) Revenues Security Solutions $ 77,416 $ 120,454 Secure Networks 67,962 96,433 Total revenue 145,378 216,887 Gross profit Security Solutions 39,614 61,948 Secure Networks 13,328 17,095 Total gross profit 52,942 79,043 Selling, general and administrative expenses 93,257 132,893 Operating loss (40,315) (53,850) Other income 6,715 1,350 Interest expense (786) (874) Loss before income taxes (34,386) (53,374) Provision for income taxes (36) (54) Net loss $ (34,422) $ (53,428) |
SUPPLEMENTAL CASH FLOW INFORM_2
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Supplemental Cash Flow Elements [Abstract] | |
Schedule of Cash and Cash Equivalents | Table 20.1: Details of Cash, Cash Equivalent, and Restricted Cash As of December 31, 2023 2022 (in thousands) Cash and cash equivalents $ 99,260 $ 119,305 Restricted cash (1) 136 133 Cash, cash equivalents, and restricted cash $ 99,396 $ 119,438 (1) Restricted cash consists of a commercial money market account held as a deposit on the Ashburn lease and is recorded under "Other assets" on the Consolidated Balance Sheets. |
Schedule of Restrictions on Cash and Cash Equivalents | Table 20.1: Details of Cash, Cash Equivalent, and Restricted Cash As of December 31, 2023 2022 (in thousands) Cash and cash equivalents $ 99,260 $ 119,305 Restricted cash (1) 136 133 Cash, cash equivalents, and restricted cash $ 99,396 $ 119,438 (1) Restricted cash consists of a commercial money market account held as a deposit on the Ashburn lease and is recorded under "Other assets" on the Consolidated Balance Sheets. |
Schedule of Supplemental Cash Flow Information | Table 20.2: Supplemental Cash Flow Information For the Year Ended December 31, 2023 2022 (in thousands) Cash paid during the year for: Interest $ 693 $ 803 Income taxes 147 188 Non-cash investing and financing activities: Operating lease ROU assets obtained in exchange for operating lease liabilities $ 125 $ 511 Capital expenditure activity in accounts payable and other accrued liabilities 341 211 Issuance of common stock for 401K match 1,943 — Intangible assets transferred to extinguish other financing obligations 7,089 — Common stock repurchase under accounts payable and other accrued liabilities — 139 Deferred financing costs in accounts payable and other accrued liabilities — 114 |
ORGANIZATION (Details)
ORGANIZATION (Details) | Dec. 31, 2023 |
Telos ID | |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |
Business acquisition, percentage of voting interests acquired | 100% |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) $ in Millions | 1 Months Ended | 12 Months Ended | ||
Sep. 01, 2023 | Mar. 31, 2022 | Dec. 31, 2023 USD ($) segment | Dec. 31, 2022 USD ($) | |
Business Acquisition [Line Items] | ||||
Number of reportable segments | segment | 2 | |||
Number of operating segments | segment | 2 | |||
Capitalized software development costs | $ 0.2 | $ 0.3 | ||
Amortized and deducted over period | 15 years | |||
Advertising expense | $ 0.8 | 1.3 | ||
Award vesting period | 1 year | 5 years | ||
Severance and related benefit costs | ||||
Business Acquisition [Line Items] | ||||
Restructuring charges | $ 3.9 | $ 2.8 | ||
Stock Options | ||||
Business Acquisition [Line Items] | ||||
Award vesting period | 1 year | |||
Stock Options | 2016 Omnibus Long-Term Incentive Plan | ||||
Business Acquisition [Line Items] | ||||
Share-based compensation arrangement by share-based payment award, expiration period | 10 years | |||
Performance-Based RSU | ||||
Business Acquisition [Line Items] | ||||
Award vesting period | 3 years | |||
Minimum | ||||
Business Acquisition [Line Items] | ||||
Amortization period | 2 years | |||
Minimum | Furniture and Fixtures | ||||
Business Acquisition [Line Items] | ||||
Property, plant and equipment, useful life | 3 years | |||
Maximum | ||||
Business Acquisition [Line Items] | ||||
Amortization period | 5 years | |||
Maximum | Service-Based RSU | ||||
Business Acquisition [Line Items] | ||||
Award vesting period | 3 years | |||
Maximum | Furniture and Fixtures | ||||
Business Acquisition [Line Items] | ||||
Property, plant and equipment, useful life | 5 years |
SIGNIFICANT ACCOUNTING POLICI_5
SIGNIFICANT ACCOUNTING POLICIES - Schedule of Changes in Restructuring Expenses Accrual (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2023 USD ($) | |
Restructuring Reserve [Roll Forward] | |
Beginning Balance | $ 2,763 |
(Adjustments)/charges | 1,132 |
Cash payments | (3,495) |
Ending Balance | 400 |
Severance and related benefit costs | |
Restructuring Reserve [Roll Forward] | |
Beginning Balance | 2,763 |
(Adjustments)/charges | (168) |
Cash payments | (2,195) |
Ending Balance | 400 |
Other related costs | |
Restructuring Reserve [Roll Forward] | |
Beginning Balance | 0 |
(Adjustments)/charges | 1,300 |
Cash payments | (1,300) |
Ending Balance | $ 0 |
REVENUE RECOGNITION - Narrative
REVENUE RECOGNITION - Narrative (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Disaggregation of Revenue [Line Items] | ||
Contract loss | $ 0 | $ 0 |
Contract with customer, liability, revenue recognized | 5,400,000 | 5,200,000 |
Revenue, remaining performance obligation, amount | $ 52,100,000 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue, remaining performance obligation, percentage | 90% | |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue, remaining performance obligation, percentage | 3% | |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 2 years | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue, remaining performance obligation, expected timing of satisfaction, period | ||
Accounting Standards Update 2014-09 | ||
Disaggregation of Revenue [Line Items] | ||
Contract with customer, asset, cumulative catch-up adjustment to revenue, modification of contract | $ (100,000) | $ 0 |
Revenue from Contract with Customer, Product and Service Benchmark | Revenue Timing of Transfer of Goods or Service | Transferred over Time | ||
Disaggregation of Revenue [Line Items] | ||
Concentration risk, percentage | 84% | 89% |
Revenue from Contract with Customer, Product and Service Benchmark | Revenue Timing of Transfer of Goods or Service | Transferred at Point in Time | ||
Disaggregation of Revenue [Line Items] | ||
Concentration risk, percentage | 16% | 11% |
REVENUE RECOGNITION - Disaggreg
REVENUE RECOGNITION - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 145,378 | $ 216,887 |
Revenue from Contract with Customer, Product and Service Benchmark | Customer Concentration Risk | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 145,378 | 216,887 |
Revenue from Contract with Customer, Product and Service Benchmark | Customer Concentration Risk | Firm fixed-price | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 114,188 | $ 179,803 |
Concentration risk, percentage | 79% | 83% |
Revenue from Contract with Customer, Product and Service Benchmark | Customer Concentration Risk | Time-and-materials | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 13,535 | $ 12,963 |
Concentration risk, percentage | 9% | 6% |
Revenue from Contract with Customer, Product and Service Benchmark | Customer Concentration Risk | Cost plus fixed-fee | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 17,655 | $ 24,121 |
Concentration risk, percentage | 12% | 11% |
Federal government | Revenue from Contract with Customer, Product and Service Benchmark | Customer Concentration Risk | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 131,143 | $ 205,538 |
Concentration risk, percentage | 90% | 95% |
State & local government, and commercial | Revenue from Contract with Customer, Product and Service Benchmark | Customer Concentration Risk | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 14,235 | $ 11,349 |
Concentration risk, percentage | 10% | 5% |
U.S. Department of Defense ("DoD") | Revenue from Contract with Customer, Product and Service Benchmark | Customer Concentration Risk | ||
Disaggregation of Revenue [Line Items] | ||
Concentration risk, percentage | 64% | 74% |
REVENUE RECOGNITION - Contract
REVENUE RECOGNITION - Contract with Customer, Contract Asset, Contract Liability, and Receivable (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Revenue from Contract with Customer [Abstract] | ||
Billed accounts receivables | $ 17,818 | $ 13,521 |
Unbilled account receivables | 8,022 | 11,657 |
Contract assets | 4,584 | 14,891 |
Contract liabilities - current | $ 6,728 | $ 6,444 |
ACCOUNTS RECEIVABLE, NET - Acco
ACCOUNTS RECEIVABLE, NET - Accounts, Notes, Loans and Financing Receivable (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
Accounts Receivable, after Allowance for Credit Loss [Abstract] | |||
Billed accounts receivables | $ 18,101 | $ 13,655 | |
Unbilled accounts receivable | 8,022 | 11,657 | |
Contract assets | 4,584 | 14,891 | |
Allowance for credit losses | (283) | (134) | $ (116) |
Accounts receivable, net | $ 30,424 | $ 40,069 |
ACCOUNTS RECEIVABLE, NET - Narr
ACCOUNTS RECEIVABLE, NET - Narrative (Details) - USD ($) | 12 Months Ended | ||
Jul. 15, 2016 | Dec. 31, 2023 | Dec. 31, 2022 | |
Finite-Lived Intangible Assets [Line Items] | |||
Maximum limit of sold receivables | $ 10,000,000 | ||
Sold receivables during the period | $ 0 | $ 0 | |
Federal government | Accounts Receivable | Customer Concentration Risk | |||
Finite-Lived Intangible Assets [Line Items] | |||
Concentration risk, percentage | 91% |
ACCOUNTS RECEIVABLE, NET - Ac_2
ACCOUNTS RECEIVABLE, NET - Accounts Receivable, Allowance for Credit Loss (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Accounts Receivable, Allowance for Credit Loss [Roll Forward] | ||
Balance Beginning of Year | $ 134 | $ 116 |
Bad Debt Expenses | 152 | 99 |
Write-offs/Recoveries | (3) | (81) |
Balance End of Year | $ 283 | $ 134 |
INVENTORIES, NET (Details)
INVENTORIES, NET (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Inventory Disclosure [Abstract] | ||
Gross inventory | $ 2,179 | $ 3,642 |
Allowance for inventory obsolescence | (759) | (765) |
Inventories, net | $ 1,420 | $ 2,877 |
PROPERTY AND EQUIPMENT, NET - P
PROPERTY AND EQUIPMENT, NET - Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Property, Plant and Equipment [Line Items] | ||
Gross Carrying Amount | $ 19,424 | $ 19,178 |
Accumulated Depreciation and Amortization | (15,967) | (14,391) |
Net Carrying Value | 3,457 | 4,787 |
Depreciation and amortization | 2,230 | 2,367 |
Furniture and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Gross Carrying Amount | 16,213 | 16,033 |
Accumulated Depreciation and Amortization | (13,363) | (11,900) |
Net Carrying Value | 2,850 | 4,133 |
Leasehold improvement | ||
Property, Plant and Equipment [Line Items] | ||
Gross Carrying Amount | 3,211 | 3,145 |
Accumulated Depreciation and Amortization | (2,604) | (2,491) |
Net Carrying Value | $ 607 | $ 654 |
GOODWILL (Details)
GOODWILL (Details) | 12 Months Ended | |
Dec. 31, 2023 USD ($) segment reporting_unit | Dec. 31, 2022 USD ($) | |
Goodwill [Line Items] | ||
Number of operating segments | segment | 2 | |
Number of reportable segments | segment | 2 | |
Number of reporting units | reporting_unit | 2 | |
Goodwill | $ 17,922,000 | $ 17,922,000 |
Goodwill, impairment loss | 0 | 0 |
Security Solutions | ||
Goodwill [Line Items] | ||
Goodwill | 3,000,000 | $ 3,000,000 |
Secure Networks | ||
Goodwill [Line Items] | ||
Goodwill | $ 14,900,000 |
INTANGIBLE ASSETS, NET - Finite
INTANGIBLE ASSETS, NET - Finite-Lived Intangible Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 38,982,000 | $ 30,626,000 |
Accumulated Amortization | (13,385,000) | (8,455,000) |
Net Carrying Value | 25,597,000 | 22,171,000 |
Capitalized computer software included in cost of sales | 700,000 | |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
Gross Carrying Amount | 53,001,000 | 45,870,000 |
Accumulated Amortization | (13,385,000) | (8,455,000) |
Net Carrying Value | 39,616,000 | 37,415,000 |
In-Process Software Development Costs | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Indefinite-lived intangible assets | 14,019,000 | 8,124,000 |
Software development costs | Disposal Group, Held-for-sale, Not Discontinued Operations | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Indefinite-lived intangible assets | $ 0 | 7,120,000 |
Acquired technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 8 years | |
Gross Carrying Amount | $ 3,630,000 | 3,630,000 |
Accumulated Amortization | (1,097,000) | (643,000) |
Net Carrying Value | 2,533,000 | 2,987,000 |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
Accumulated Amortization | $ (1,097,000) | (643,000) |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 3 years | |
Gross Carrying Amount | $ 40,000 | 40,000 |
Accumulated Amortization | (32,000) | (19,000) |
Net Carrying Value | 8,000 | 21,000 |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
Accumulated Amortization | (32,000) | (19,000) |
Software development costs | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 35,312,000 | 26,956,000 |
Accumulated Amortization | (12,256,000) | (7,793,000) |
Net Carrying Value | 23,056,000 | 19,163,000 |
Impairment charges | 500,000 | 0 |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
Accumulated Amortization | $ (12,256,000) | $ (7,793,000) |
Software development costs | Minimum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 2 years | |
Software development costs | Maximum | ||
Finite-Lived Intangible Assets [Line Items] | ||
Estimated useful life | 5 years |
INTANGIBLE ASSETS, NET - Narrat
INTANGIBLE ASSETS, NET - Narrative (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Finite-Lived Intangible Assets [Line Items] | ||
Impairment, Intangible Asset, Finite-Lived, Statement of Income or Comprehensive Income [Extensible Enumeration] | Research and development | |
Software development costs | ||
Finite-Lived Intangible Assets [Line Items] | ||
Impairment charges | $ 500,000 | $ 0 |
INTANGIBLE ASSETS, NET - Amorti
INTANGIBLE ASSETS, NET - Amortization Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Finite-Lived Intangible Assets [Line Items] | ||
Software development costs - cost of sales | $ 2,840 | $ 0 |
Total | 4,930 | 1,763 |
Research and Development Netting | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of intangible assets | 1,623 | 1,362 |
General and Administrative Expense | ||
Finite-Lived Intangible Assets [Line Items] | ||
Amortization of intangible assets | $ 467 | $ 401 |
INTANGIBLE ASSETS, NET - Estima
INTANGIBLE ASSETS, NET - Estimated Future Amortization Expense of Intangible Assets, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Year one | $ 8,037 | |
Year two | 7,270 | |
Year three | 4,864 | |
Year four | 3,520 | |
Year five | 1,642 | |
Thereafter | 264 | |
Net Carrying Value | $ 25,597 | $ 22,171 |
OTHER BALANCE SHEET COMPONENT_2
OTHER BALANCE SHEET COMPONENTS - Details of Accounts Payable and Other Accrued Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accounts payable | $ 8,307 | $ 12,606 |
Accrued payables | 5,443 | 9,945 |
Accounts payable and other accrued liabilities | $ 13,750 | $ 22,551 |
OTHER BALANCE SHEET COMPONENT_3
OTHER BALANCE SHEET COMPONENTS - Other Current Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Other accrued liabilities | $ 1,427 | $ 1,530 |
Restructuring expenses accrual | 400 | 2,763 |
Other | 497 | 626 |
Other current liabilities | $ 2,324 | $ 4,919 |
DEBT AND OTHER OBLIGATIONS - Re
DEBT AND OTHER OBLIGATIONS - Revolving Credit Facility (Details) $ in Millions | Dec. 30, 2022 USD ($) variable_rate day | Apr. 12, 2023 USD ($) |
Debt Instrument [Line Items] | ||
Maximum senior leverage ratio covenant | 3 | |
Receivables excluded from collateral | $ 25 | |
Credit Agreement | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Debt instrument, variable rates | variable_rate | 3 | |
Credit Agreement | Alternative Base Rate | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 0.90% | |
Debt instrument, prior notice period | day | 5 | |
Credit Agreement | Adjusted Daily Simple Secured Overnight Financing Rate (SOFR) | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 1.90% | |
Debt instrument, prior notice period | day | 3 | |
Credit Agreement | Adjusted Term Secured Overnight Financing Rate (SOFR) | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 1.90% | |
Debt instrument, prior notice period | day | 1 | |
Line of Credit | Credit Agreement | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 30 | |
Incremental increase in interest rates in the event of default | 2% | |
Line of Credit | Credit Agreement | Letter of Credit | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 5 | |
Expansion feature borrowing limit | $ 30 |
DEBT AND OTHER OBLIGATIONS - Ot
DEBT AND OTHER OBLIGATIONS - Other Financing Obligations (Details) | 1 Months Ended | 12 Months Ended | ||
Aug. 31, 2022 extension_option | Dec. 31, 2023 USD ($) | Dec. 31, 2022 USD ($) | Nov. 30, 2022 USD ($) | |
Debt Instrument [Line Items] | ||||
Other income | $ 1,400,000 | $ 0 | ||
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Software Licenses Under Delivery Order | ||||
Debt Instrument [Line Items] | ||||
Consideration received | $ 9,100,000 | |||
Number of exercisable options | extension_option | 3 | |||
Period of exercisable extension options | 12 months |
STOCKHOLDERS' EQUITY - Narrativ
STOCKHOLDERS' EQUITY - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions | Dec. 31, 2023 | Dec. 31, 2022 | May 24, 2022 |
Stockholders' Equity Note [Abstract] | |||
Common stock, authorized (in shares) | 250,000,000 | 250,000,000 | |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |
Preferred stock, shares authorized (in shares) | 10,000,000 | ||
Preferred stock, par or stated value per share (in dollars per share) | $ 0.01 | ||
Common stock, issued (in shares) | 70,239,890 | 67,431,632 | |
Common stock, outstanding (in shares) | 70,239,890 | 67,431,632 | |
Preferred stock, shares issued (in shares) | 0 | 0 | |
Preferred stock, shares outstanding (in shares) | 0 | 0 | |
Stock repurchase program, authorized amount | $ 50 | ||
Remaining authorized repurchase amount | $ 38.7 |
STOCKHOLDERS' EQUITY - Share Re
STOCKHOLDERS' EQUITY - Share Repurchase Program Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Stockholders' Equity Note [Abstract] | ||
Amounts paid for shares repurchased | $ 0 | $ 11,284 |
Number of shares repurchased (in shares) | 0 | 1,550,162 |
Average per share price paid (in dollars per share) | $ 0 | $ 7.28 |
Unpaid common stock repurchased paid | $ 100 |
STOCKHOLDERS' EQUITY - Details
STOCKHOLDERS' EQUITY - Details of Changes in Accumulated Other Comprehensive Loss by Category (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Beginning balance | $ 172,354 | $ 180,254 |
Other comprehensive loss before reclassification | (5) | (28) |
Ending balance | 159,003 | 172,354 |
Accumulated Other Comprehensive Loss | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Beginning balance | (55) | (27) |
Ending balance | (60) | (55) |
Foreign currency translation adjustment | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Beginning balance | (162) | (134) |
Other comprehensive loss before reclassification | (5) | (28) |
Ending balance | (167) | (162) |
Actuarial gain on pension liability adjustment | ||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||
Beginning balance | 107 | 107 |
Other comprehensive loss before reclassification | 0 | 0 |
Ending balance | $ 107 | $ 107 |
STOCK-BASED COMPENSATION - Narr
STOCK-BASED COMPENSATION - Narrative (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||||||
Sep. 01, 2023 | Mar. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | May 08, 2023 | Nov. 30, 2020 | Oct. 31, 2020 | Sep. 30, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of shares authorized (in shares) | 13,459,913 | |||||||
Stock-based compensation expense | $ 24,396,000 | $ 64,660,000 | ||||||
Income tax benefits | $ 0 | |||||||
Expected term (in years) | 0 years | |||||||
Expected volatility | 0% | |||||||
Weighted average grant date fair value (in dollars per share) | $ 5.07 | $ 19.53 | ||||||
Award requisite service period | 2 years | |||||||
Aggregate intrinsic value, outstanding, exercisable, and vested or expected to vest | $ 7,900,000 | |||||||
Unrecognized stock-based compensation expense | $ 3,500,000 | |||||||
Weighted-average remaining vesting period | 6 months | |||||||
Expected dividend yield | 0% | 0% | ||||||
Award vesting period | 1 year | 5 years | ||||||
Unrecognized compensation costs related to non-vested stock options | $ 100,000 | |||||||
Revision of Prior Period, Error Correction, Adjustment [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Stock-based compensation expense | $ 1,300,000 | |||||||
Minimum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Expected term (in years) | 5 years 6 months | |||||||
Maximum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Expected term (in years) | 10 years | |||||||
2016 Omnibus Long-Term Incentive Plan | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of shares authorized (in shares) | 6,000,000 | 7,459,913 | 9,400,000 | 4,500,000 | ||||
Common stock, capital shares reserved for future issuance (in shares) | 4,800,000 | |||||||
Performance-Based RSU | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Risk free interest rate, minimum | 0.18% | |||||||
Risk free interest rate, maximum | 0.29% | |||||||
Award vesting period | 3 years | |||||||
Performance-Based RSU | Minimum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Expected term (in years) | 2 years 5 months 12 days | |||||||
Expected volatility | 57.40% | |||||||
Weighted average grant date fair value (in dollars per share) | $ 19.12 | |||||||
Award requisite service period | 4 months 17 days | |||||||
Performance-Based RSU | Maximum | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Expected term (in years) | 2 years 11 months 1 day | |||||||
Expected volatility | 58.80% | |||||||
Weighted average grant date fair value (in dollars per share) | $ 30.84 | |||||||
Award requisite service period | 9 months 3 days | |||||||
Stock Options | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Stock-based compensation expense | $ 300,000 | |||||||
Award vesting period | 1 year |
STOCK-BASED COMPENSATION - Stoc
STOCK-BASED COMPENSATION - Stock-Based Compensation Expense Incurred (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Total | $ 24,396 | $ 64,660 |
Cost of sales - services | Cost of sales - services | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Total | 900 | 3,497 |
Sales and marketing | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Total | 188 | 4,668 |
Research and development | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Total | 1,989 | 3,806 |
General and Administrative Expense | ||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||
Total | $ 21,319 | $ 52,689 |
STOCK-BASED COMPENSATION - Sche
STOCK-BASED COMPENSATION - Schedule of Restricted Stock Unit Activity (Details) | 12 Months Ended |
Dec. 31, 2023 $ / shares shares | |
Total | |
Outstanding, beginning balance (in shares) | 3,906,867 |
Granted (in shares) | 1,888,689 |
Vested (in shares) | (2,910,645) |
Forfeited (in shares) | (708,498) |
Outstanding, ending balance (in shares) | 2,176,413 |
Weighted-Average Grant Date Fair Value | |
Outstanding, beginning balance (in dollars per share) | $ / shares | $ 19.53 |
Granted (in dollars per share) | $ / shares | 2.17 |
Vested (in dollars per share) | $ / shares | 19.04 |
Forfeited (in dollars per share) | $ / shares | 19.11 |
Outstanding, ending balance (in dollars per share) | $ / shares | $ 5.07 |
Service-Based RSU | |
Total | |
Outstanding, beginning balance (in shares) | 3,570,082 |
Granted (in shares) | 1,888,689 |
Vested (in shares) | (2,910,645) |
Forfeited (in shares) | (415,513) |
Outstanding, ending balance (in shares) | 2,132,613 |
Performance-Based RSU | |
Total | |
Outstanding, beginning balance (in shares) | 336,785 |
Granted (in shares) | 0 |
Vested (in shares) | 0 |
Forfeited (in shares) | (292,985) |
Outstanding, ending balance (in shares) | 43,800 |
STOCK-BASED COMPENSATION - Sc_2
STOCK-BASED COMPENSATION - Schedule of Stock Options Fair Value and Weighted-Average Assumptions (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted-average fair value of underlying stock options (in dollars per share) | $ 1.06 | $ 0 |
Expected term (in years) | 0 years | |
Risk-free interest rate | 3.50% | 0% |
Expected volatility rate, minimum | 30.70% | |
Expected volatility rate, maximum | 35.10% | |
Expected volatility | 0% | |
Expected dividend yield | 0% | 0% |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term (in years) | 5 years 6 months | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term (in years) | 10 years |
STOCK-BASED COMPENSATION - St_2
STOCK-BASED COMPENSATION - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Stock Options Outstanding | ||
Outstanding option balance at the beginning of period (in shares) | 0 | |
Granted (in shares) | 400,000 | |
Exercised (in shares) | 0 | |
Forfeited, cancelled, or expired (in shares) | 0 | |
Outstanding option balance at the end of period (in shares) | 400,000 | 0 |
Exercisable stock option (in shares) | 0 | |
Weighted-Average Exercise Price | ||
Outstanding option balance at the beginning of period (in dollars per share) | $ 0 | |
Granted (in dollars per share) | 1.80 | |
Exercised (in dollars per share) | 0 | |
Forfeited, cancelled, or expired (in dollars per share) | 0 | |
Outstanding option balance at the end of period (in dollars per share) | 1.80 | $ 0 |
Exercisable stock option (in dollars per share) | $ 0 | |
Stock Options Additional Disclosures | ||
Weighted Average Remaining Contractual Term, Outstanding option balance | 9 years 4 months 24 days | 0 years |
Weighted Average Remaining Contractual Term, Exercisable stock option | 0 years | |
Aggregate Intrinsic Value, Outstanding option balance | $ 740 | $ 0 |
Aggregate Intrinsic Value, Exercisable stock option | $ 0 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) | May 31, 2014 |
Leases [Abstract] | |
Annual rent increase percentage | 2.50% |
LEASES - Components of Lease Ex
LEASES - Components of Lease Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Leases [Abstract] | ||
Operating lease cost | $ 541 | $ 550 |
Short-term lease cost | 55 | 49 |
Finance lease cost | ||
Amortization of finance lease assets | 1,221 | 1,221 |
Interest on finance lease liabilities | 611 | 688 |
Total finance lease cost | 1,832 | 1,909 |
Total lease costs | $ 2,428 | $ 2,508 |
LEASES - Future Minimum Lease C
LEASES - Future Minimum Lease Commitments (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Operating Leases | ||
Operating lease year one | $ 105 | |
Operating lease year two | 37 | |
Operating lease year three | 37 | |
Operating lease year four | 37 | |
Operating lease year five | 25 | |
Thereafter | 0 | |
Total minimum lease payments | 241 | |
Less: Imputed interest | (21) | |
Total lease obligations | 220 | |
Less: Current portion of lease obligations | (97) | $ (361) |
Long-term lease obligations | 123 | 27 |
Finance Leases | ||
Finance lease year one | 2,258 | |
Finance lease year two | 2,314 | |
Finance lease year three | 2,371 | |
Finance lease year four | 2,431 | |
Finance lease year five | 2,492 | |
Thereafter | 1,049 | |
Total minimum lease payments | 12,915 | |
Less: Imputed interest | (1,667) | |
Total lease obligations | 11,248 | |
Less: Current portion of lease obligations | (1,730) | (1,592) |
Long-term lease obligations | $ 9,518 | $ 11,248 |
LEASES - Weighted Average Remai
LEASES - Weighted Average Remaining Lease Term and Discount Rate (Details) | Dec. 31, 2023 | Dec. 31, 2022 |
Weighted average remaining lease term (in years): | ||
Finance lease | 5 years 3 months 18 days | 6 years 3 months 18 days |
Operating lease | 3 years 4 months 24 days | 1 year |
Weighted average discount rate: | ||
Finance lease | 5.04% | 5.04% |
Operating lease | 5.75% | 5.75% |
LEASES - Supplemental Cash Flow
LEASES - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows related to operating leases | $ 585 | $ 603 |
Operating cash flows related to finance leases | 611 | 688 |
Financing cash flows related to finance leases | $ 1,592 | $ 1,461 |
EMPLOYEE BENEFIT PLAN (Details)
EMPLOYEE BENEFIT PLAN (Details) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | |||
Sep. 01, 2023 | Feb. 28, 2022 | Mar. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
Defined Benefit Plan Disclosure [Line Items] | |||||
Stock issued during period, shares, employee benefit plan (in shares) | 1,434,464 | ||||
Defined contribution plan, employer matching contribution, percent of match | 50% | ||||
Defined contribution plan, maximum annual contributions per employee, percent | 2% | 4% | |||
Annual vesting percentage | 20% | 20% | |||
Award vesting period | 1 year | 5 years | |||
Defined benefit plan, plan assets, contributions by employer | $ 2.1 | $ 2.2 | |||
Award requisite service period | 2 years |
INCOME TAXES - Components of Pr
INCOME TAXES - Components of Provision for/(Benefit from) Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Current provision | ||
Federal | $ 0 | $ 0 |
State | (19) | 19 |
Total current | (19) | 19 |
Deferred tax expense | ||
Federal | 32 | 37 |
State | 23 | (2) |
Total deferred | 55 | 35 |
Provision for income taxes | $ 36 | $ 54 |
INCOME TAXES - Effective Income
INCOME TAXES - Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||
Computed expected income tax provision | 21% | 21% |
State income taxes, net of federal income tax benefit | 3.60% | 3.60% |
Change in valuation allowance for deferred tax assets | 7.50% | (3.70%) |
Cumulative deferred adjustments | 0% | (0.90%) |
Provision to return adjustments | (0.10%) | 0.10% |
Other permanent differences | (0.20%) | (0.10%) |
Stock-based compensation | (41.20%) | (20.60%) |
Section 162(m) limitation - covered employees | 9.50% | (2.00%) |
Uncertain tax positions | 0.50% | (0.50%) |
R&D credit | (0.70%) | 3% |
Effective tax rate | (0.10%) | (0.10%) |
INCOME TAXES - Deferred Tax Ass
INCOME TAXES - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Deferred tax assets: | ||
Accounts receivable, principally due to allowance for doubtful accounts | $ 70 | $ 33 |
Allowance for inventory obsolescence and amortization | 203 | 210 |
Accrued liabilities not currently deductible | 1,133 | 1,151 |
Stock-based compensation | 1,352 | 7,943 |
Accrued compensation | 2,457 | 915 |
Lease liabilities | 2,906 | 3,349 |
Goodwill | 30,947 | 34,009 |
Capitalized research and development costs | 2,992 | 362 |
Net operating loss carryforwards - federal | 8,402 | 6,034 |
Net operating loss carryforwards - state | 1,522 | 1,155 |
R&D tax credit | 3,647 | 3,760 |
Amortization and depreciation | 252 | 0 |
Total gross deferred tax assets | 55,883 | 58,921 |
Less valuation allowance | (54,999) | (57,559) |
Total deferred tax assets, net of valuation allowance | 884 | 1,362 |
Deferred tax liabilities: | ||
Right-of-use assets | (1,697) | (2,034) |
Amortization and depreciation | 0 | (86) |
Total deferred tax liabilities | (1,697) | (2,120) |
Net deferred tax liabilities | $ (813) | $ (758) |
INCOME TAXES - Valuation Allowa
INCOME TAXES - Valuation Allowance Activity (Details) - SEC Schedule, 12-09, Valuation Allowance, Deferred Tax Asset - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | ||
Balance at beginning of year | $ 57,559 | $ 55,588 |
(Reductions)/additions | (2,560) | 1,971 |
Balance at end of year | $ 54,999 | $ 57,559 |
INCOME TAXES - Narrative (Detai
INCOME TAXES - Narrative (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
Income Tax Disclosure [Abstract] | |||
Operating loss carryforwards | $ 40,000 | ||
Deferred tax assets, operating loss carryforwards, subject to expiration | 10,600 | ||
Deferred tax assets, tax credit carryforwards, research | 4,900 | ||
Unrecognized tax benefits | 1,228 | $ 1,357 | $ 1,056 |
Unrecognized tax benefits that would impact effective tax rate | 10 | 100 | |
Unrecognized tax benefits that would not impact effective tax rate | 1,200 | 1,300 | |
Unrecognized tax benefits, income tax penalties and interest accrued | $ 10 | $ 100 |
INCOME TAXES - Unrecognized Tax
INCOME TAXES - Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||
Balance at beginning of year | $ 1,357 | $ 1,056 |
Decrease in prior year tax positions | (169) | (5) |
Increase related to current year tax positions | 131 | 377 |
Decrease related to lapse of statutes | (91) | (71) |
Balance at end of year | $ 1,228 | $ 1,357 |
(LOSS)_EARNINGS PER SHARE (Deta
(LOSS)/EARNINGS PER SHARE (Details) - shares | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share, amount (in shares) | 687,000 | 529,000 |
Unvested antidilutive stock units excluded from the dilutive effect (stock units) (in shares) | 43,800 | 336,785 |
Unvested restricted stock and restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share, amount (in shares) | 687,000 | 529,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) | 12 Months Ended | ||||
Feb. 07, 2023 | Jan. 03, 2023 | Feb. 01, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
Related Party Transaction [Line Items] | |||||
Granted (in shares) | 1,888,689 | ||||
Related Party | Restricted Stock | |||||
Related Party Transaction [Line Items] | |||||
Granted (in shares) | 16,859 | ||||
Related Party | Restricted Stock | Share-based Payment Arrangement, Tranche One | |||||
Related Party Transaction [Line Items] | |||||
Award vesting rights, percentage | 25% | ||||
Related Party | Restricted Stock | Share-based Payment Arrangement, Tranche Two | |||||
Related Party Transaction [Line Items] | |||||
Award vesting rights, percentage | 50% | 25% | |||
Related Party | Restricted Stock | Share-based Payment Arrangement, Tranche Three | |||||
Related Party Transaction [Line Items] | |||||
Award vesting rights, percentage | 50% | 25% | |||
Related Party | Restricted Stock | Share-based Payment Arrangement, Tranche Four | |||||
Related Party Transaction [Line Items] | |||||
Award vesting rights, percentage | 25% | ||||
Related Party | Emmett Wood | |||||
Related Party Transaction [Line Items] | |||||
Compensation paid | $ 200,000 | $ 1,300,000 | |||
Director | |||||
Related Party Transaction [Line Items] | |||||
Related party transaction, amounts of transaction | $ 90,000 | $ 30,000 | |||
Director | Restricted Stock | |||||
Related Party Transaction [Line Items] | |||||
Granted (in shares) | 26,091 |
SEGMENT INFORMATION - Narrative
SEGMENT INFORMATION - Narrative (Details) | 12 Months Ended |
Dec. 31, 2023 segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
SEGMENT INFORMATION - Segment R
SEGMENT INFORMATION - Segment Reporting Information, by Segment (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Revenues | ||
Total revenue | $ 145,378 | $ 216,887 |
Gross profit | ||
Total gross profit | 52,942 | 79,043 |
Selling, general and administrative expenses | 93,257 | 132,893 |
Operating loss | (40,315) | (53,850) |
Other income | 6,715 | 1,350 |
Interest expense | (786) | (874) |
Loss before income taxes | (34,386) | (53,374) |
Provision for income taxes | (36) | (54) |
Net loss | (34,422) | (53,428) |
Security Solutions | ||
Revenues | ||
Total revenue | 77,416 | 120,454 |
Gross profit | ||
Total gross profit | 39,614 | 61,948 |
Secure Networks | ||
Revenues | ||
Total revenue | 67,962 | 96,433 |
Gross profit | ||
Total gross profit | $ 13,328 | $ 17,095 |
SUPPLEMENTAL CASH FLOW INFORM_3
SUPPLEMENTAL CASH FLOW INFORMATION - Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 |
Supplemental Cash Flow Elements [Abstract] | |||
Cash and cash equivalents | $ 99,260 | $ 119,305 | |
Restricted cash | 136 | 133 | |
Cash, cash equivalents, and restricted cash | $ 99,396 | $ 119,438 | $ 126,562 |
SUPPLEMENTAL CASH FLOW INFORM_4
SUPPLEMENTAL CASH FLOW INFORMATION - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Cash paid during the year for: | ||
Interest | $ 693 | $ 803 |
Income taxes | 147 | 188 |
Non-cash investing and financing activities: | ||
Operating lease ROU assets obtained in exchange for operating lease liabilities | 125 | 511 |
Capital expenditure activity in accounts payable and other accrued liabilities | 341 | 211 |
Issuance of common stock for 401K match | 1,943 | 0 |
Intangible assets transferred to extinguish other financing obligations | 7,089 | 0 |
Common stock repurchase under accounts payable and other accrued liabilities | 0 | 139 |
Deferred financing costs in accounts payable and other accrued liabilities | $ 0 | $ 114 |