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 29, 2028 (as amended), 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 September 30, 2026, we had cash and cash equivalents of $51.8 million and our working capital was $58.0 million.

We place a strong emphasis on liquidity management. This focus gives us the flexibility to deploy capital 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 nine months ended September 30, 2026, was $26.9 million, an increase of $4.7 million compared to the same period in 2025. The change is primarily driven by higher cash earnings (i.e., net income (loss), excluding non-cash items that do not impact cash flows from operating activities), partially offset by unfavorable changes in working capital.

Net cash used in investing activities for the nine months ended September 30, 2026, decreased by $0.7 million, compared to the same period of the prior year, primarily due to the decreases in capital expenditures in 2026.

Net cash used in financing activities for the nine months ended September 30, 2026, increased by $11.3 million, compared to the same period in 2025. This is primarily attributable to the repurchase of common stock for $12.6 million in the first nine months of 2026 under the share repurchase program (See Note 12 – Share Repurchases), compared with $7.6 million in the same period in 2025, and an increase in payments of tax withholding related to net share settlement of equity awards to $7.6 million in 2026, compared with $1.6 million in 2025.