TELOS CORP

For an overview of our business, including our business segments and a discussion of the services and products we provide, see Item 1, "Business" in Part I and Note 16 – Segment Information of the notes to the consolidated financial statements contained within this 10-K.

As discussed under Item 1A, "Risk Factors," we derive a substantial portion of our revenues from contracts and subcontracts with the U.S. federal government. Our revenues are generated from a number of contract vehicle and task orders. The U.S. federal government has increasingly relied on contracts that are subject to a competitive bidding process (including BPA and IDIQ Task Orders, OTAs, and other GSA schedule solicitations), resulting in greater competition and increased pricing pressure. We expect that a majority of the business that we seek in the foreseeable future will be awarded through a competitive bidding process.

Over the past several years we have sought to diversify and improve our operating margins through the evolution of our business from an emphasis on product reselling to an advanced solutions technologies provider. Although we continue to offer resold products through our contract vehicles or our prime partners' contracts, we have focused on the transformation and growth of our software and service solutions offerings, as well as the design and delivery of our manufactured and branded technologies. We emphasize leveraging technology and innovation, specifically in cybersecurity, cloud, and identity solutions, to drive growth and ensure a secure and defendable network. We continue to invest in and develop in AI integration, enhancing automation and improving existing solutions to maintain a competitive edge.

We believe our contract portfolio reflects low to moderate financial risk due to the limited number of long-term fixed-price development contracts, thus minimizing the risk of cost overruns. Our firm-fixed-price activities consist primarily of contracts for products and services at established contract prices that are designed to be repeatable solution offerings. For 2025 and 2024, the Company's revenue derived from firm-fixed-price contracts was 73.3% and 75.3%, respectively; time-and-material contract revenue was 21.8% and 14.6%, respectively; and cost-plus contract revenue was 4.9% and 10.1%, respectively.