TELOS CORP

A number of factors have affected our fiscal year 2024 results, the most significant of which we have listed below. More details on these changes are presented below within our "Results of Operations" section.

•The decline in year-over-year revenue was primarily driven by the successful completion of certain programs and ramp-down of programs in Secure Networks without corresponding new business wins to backfill completed programs.

•Growth in TSA PreCheck revenue partially offset the year-over-year revenue decline and was driven by the increase in our enrollment locations and a full year of renewal operations as compared to only a partial year in fiscal year 2023.

•The reduction in gross margin was mainly driven by the impact of an impairment loss on intangible assets of $5.3 million and higher amortization of software development costs. This was partially offset by a more favorable program mix.

•The assessment of our cost structure and investment priorities in fiscal year 2024 led to restructuring actions and the discontinued development and/or sale of selected solutions or parts of solutions that were not generating acceptable returns. These initiatives resulted in a $1.3 million restructuring charge and a $11.7 million of non-cash impairment of software development costs.

•Lower year-over-year gross profit was partially offset by reduced operating expenses.