TELOS CORP

Our primary sources of liquidity are cash on hand, future operating cash flows, and, if needed, sale of receivables under the Factoring Agreement and/or borrowings under our $15.0 million revolving credit facility with a maturity date of December 30, 2026, and with an available expansion feature of up to $15.0 million of additional revolver facility. A variety of factors related to sources and uses of cash, such as timeliness of accounts receivable collections, vendor credit terms, or significant collateral requirements, ultimately impact our liquidity.

As of March 31, 2026, we had cash and cash equivalents of $50.2 million and our working capital was $58.6 million.

We place a strong emphasis on liquidity management. This focus gives us the flexibility for capital deployment while preserving a strong balance sheet to position us for future opportunities. We believe we have adequate funds on hand to execute our financial and operating strategy. Our overall financial position and liquidity are strong. Although no assurances can be given, we believe available cash balances and access to our revolving credit facility and Factoring Agreement are sufficient to maintain the liquidity we require to meet our operating, investing and financing needs for the next 12 months.

Cash Flow

Net cash provided by operating activities for the three months ended March 31, 2026, was $8.7 million, an increase of $2.6 million compared to the same period in 2025. The change is attributable to favorable changes in working capital, primarily driven by the timing of receipts from customers, and the timing of payments to vendors, coupled with higher cash earnings (i.e., net income (loss), excluding non-cash items that do not impact cash flows from operating activities).

Net cash used in investing activities for the three months ended March 31, 2026, slightly decreased by $0.1 million, compared to the same period of the prior year, primarily due to decreases in capital expenditures.

Net cash used in financing activities for the three months ended March 31, 2026, increased by $8.8 million, compared to the same period in 2025. This is primarily attributable to the repurchases of common stock under the share repurchase program (see Note 11 – Share Repurchases) amounting to $2.2 million in the first quarter of 2026 , with no similar activity in 2025, and an increase in payment of tax withholding related to net share settlement of equity awards by $6.5 million in fiscal year 2026.