Telos (TLS) FY2025 10-K Risk Factors: 6 New, 5 Dropped

What the changes say

Telos added specific risks around January 2025 tariffs on IT hardware and fourth quarter 2025 restructuring actions.

What changed since the prior 10-K

New

NewBusiness and Operational Risks
Although we have developed systems and processes designed to assess, identify, and manage material cybersecurity risks, we can provide no assurances that such systems and processes will provide absolute security. In the normal course of business, we are the target of malicious cyberattack attempts
Cybersecurity threats and attacks could compromise Telos or customer IT systems, resulting in financial loss and reputational damage.
NewBusiness and Operational Risks
Occasionally, we rely on only one or two sources of supply, which, if disrupted, could have an adverse effect on our ability to meet our commitments to customers, and could adversely affect our business, results of operations and financial condition
Relying on one or two subcontractors or suppliers could lead to performance delays, cost overruns, and contract defaults.
NewBusiness and Operational Risks
Artificial Intelligence ("AI") is an emerging technology and we may not be successful in our AI initiatives
AI is an emerging technology, and Telos may fail to successfully develop, integrate, or profit from its AI initiatives.
NewIndustry, Legal and Regulatory Risks
The Administration's actions, such as tariffs and other changes in international trade policies, could adversely and unexpectedly impact our business
Tariffs and international trade policies initiated in January 2025 could increase procurement costs for IT hardware and disrupt the supply chain.
NewRisks Related to Our Financial Reporting and Common Stock
Certain of our U.S. federal government contracts involve work of a confidential nature, which may limit investor insight into portions of our business
Confidentiality and security restrictions on certain U.S. federal government contracts limit investor insight into portions of the business.
NewRisks Related to Our Financial Reporting and Common Stock
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), the rules and regulations of Nasdaq, and other securities rules and regulations that impose various requirements on public companies
Complying with Sarbanes-Oxley internal control reporting requirements will increase administrative complexity and costs as the business grows.

Dropped

DroppedBusiness and Operational Risks
Sales to customers outside the United States expose us to risks inherent in international operations
DroppedBusiness and Operational Risks
We are subject to payment processing risk
DroppedBusiness and Operational Risks
Artificial Intelligence is an emerging technology and may involve significant risks and uncertainties
DroppedRisks Related to Our Financial Reporting and Common Stock
If we fail to maintain an effective system of internal control, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired
DroppedRisks Related to Our Financial Reporting and Common Stock
Increased scrutiny of our environmental, social and governance responsibilities may result in additional costs and risks, and may adversely impact our reputation, employee retention, and willingness of customers and suppliers to do business with us

Reworded

89% rewrittenBusiness and Operational Risks
Actions that we are taking to restructure our business to improve profitability may not be as effective as anticipated
Added a reference to implementing additional restructuring actions in the fourth quarter of 2025 alongside the 2023 and Q3 2024 actions.
85% rewrittenBusiness and Operational Risks
We depend on third parties for certain operational services and components of our products in order to fully perform under our contracts, and the failure or disruption of a third party to perform these services or provide these goods could have an adverse impact on our business
Expanded supplier dependency language to include contracting parties and the risk of failing to perform on a cost-effective basis.
Was: We depend on third parties for certain operational services and components of our products in order to fully perform under our contracts, and the failure or disruption of a third party to perform these services could have an adverse impact on our business
70% rewrittenRisks Related to Our Financial Reporting and Common Stock
Our quarterly operating results fluctuate and may fall short of prior periods, our projections or the expectations of securities analysts or investors, which could adversely affect the trading price of our stock
Added explicit mention that quarterly variability and unpredictability could cause Telos to miss analyst or investor expectations.
62% rewrittenRisks Related to Our Financial Reporting and Common Stock
Global clim a te-related risks could negatively affect our business
Added new regulatory compliance risks regarding climate change that could increase capital expenditures and reduce margins.
Was: Global climate-related risks could negatively affect our business
52% rewrittenBusiness and Operational Risks
Our business could be negatively affected by cyber or other information security threats, breaches, or other disruptions
Replaced joint venture partners with strategic partners in the description of entities facing cybersecurity threats.
Was: Our business could be negatively affected by cyber or other information security breaches, threats or other disruptions
51% rewrittenBusiness and Operational Risks
Our competitive position and future profitability depend, in part, on our ability to develop new technologies
Added a specific focus on the ability to successfully implement strategies to increase solution adoption and develop new offerings.
50% rewrittenRisks Related to Our Financial Reporting and Common Stock
Global inflationary pressures and weakened global economic and political conditions may adversely affect our industry, business, operating results and financial condition
Added that modest price escalations in bids for multi-year U.S. federal government contracts may be insufficient to offset inflationary pressures.
Was: Weakened global economic conditions may adversely affect our industry, business, operating results and financial condition
50% rewrittenBusiness and Operational Risks
Goodwill and intangible assets represent significant assets on our balance sheet and any impairment on these assets could negatively impact our results of operations, and shareholders' equity
Updated goodwill and intangible assets percentage of total assets from 31% to 23.8% and added a Q4 2025 quantitative impairment analysis on the Secure Networks reporting unit.
49% rewrittenBusiness and Operational Risks
Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time, and resources accurately
45% rewrittenBusiness and Operational Risks
Due to the competitive bidding process to obtain U.S. federal government contracts, both upon initial issuance and re-competition, and the likelihood of bid protest, we may be unable to achieve or sustain revenue growth and profitability
Was: Due to the competitive bidding process to obtain U.S. government contracts, both upon initial issuance and re-competition, and the likelihood of bid protest, we may be unable to achieve or sustain revenue growth and profitability
36% rewrittenBusiness and Operational Risks
We rely on third-party technology that is used in our products and services to perform key functions. If we are unable to license third-party technology or the technology is subject to a security breach, without an alternative, it may negatively impact our business and results of operations
Was: If we are unable to license third-party technology that is used in our products and services to perform key functions, the loss could have an adverse effect on our revenues
36% rewrittenBusiness and Operational Risks
The U.S. federal government may terminate, cancel, delay, modify or curtail our contracts at any time prior to completion and, if we do not replace them, this may adversely affect our future revenues and could adversely impact our earnings
Was: The U.S. government may terminate, cancel, delay, modify or curtail our contracts at any time prior to completion and, if we do not replace them, this may adversely affect our future revenues and could adversely impact our earnings
34% rewrittenIndustry, Legal and Regulatory Risks
The business environment in which we operate is highly competitive, and we may not be able to compete successfully against existing or future competitors
33% rewrittenIndustry, Legal and Regulatory Risks
We are subject to substantial oversight from federal agencies that have the authority to suspend our ability to bid on contracts
33% rewrittenBusiness and Operational Risks
A failure to attract, train, retain and motivate key and skilled employees, including key members of our management team, would adversely affect our ability to execute our strategy and may disrupt our operations
27% rewrittenBusiness and Operational Risks
Public confidence in, and acceptance of, identity platforms and biometrics generally, and our solutions and services specifically, will be a key factor in our business’s continued growth
Was: Public confidence in, and acceptance of, identity platforms and biometrics generally, and our solutions specifically, will be a key factor in our business’s continued growth
27% rewrittenBusiness and Operational Risks
Federal government spending reductions, workforce changes, and policy shifts may impact our existing operations and future opportunities for new contracts
26% rewrittenBusiness and Operational Risks
We rely on a few key customer contracts for a significant portion of our future revenue. A significant reduction or delay in implementation to one or more of these contracts would materially affect our anticipated operating results
Was: We are dependent on a few key customer contracts for a significant portion of our future revenue, and a significant reduction in goods and services or delay in implementation to one or more of these contracts would reduce or delay our future revenue and could materially affect our anticipated operating results
23% rewrittenRisks Related to Our Financial Reporting and Common Stock
We cannot guarantee that our share repurchase program will be fully implemented or that it will enhance long-term stockholder value
23% rewrittenBusiness and Operational Risks
Any decline or disruption in the travel industry or general economic downturn could materially and adversely affect our business, results of operations and financial condition
Was: Any decline or disruption in the travel industry could materially adversely affect our business, results of operations and financial condition

All 42 risk factors

Headings as the filing states them, in filing order.

Business and Operational Risks

01Our business could be negatively affected by cyber or other information security threats, breaches, or other disruptions52% rewritten
02Although we have developed systems and processes designed to assess, identify, and manage material cybersecurity risks, we can provide no assurances that such systems and processes will provide absolute security. In the normal course of business, we are the target of malicious cyberattack attemptsNew
03If our customers do not renew their contracts for our solutions and services, or subscriptions, and expand our relationships with them, our revenue could decline and our results of operations would be adversely impacted
04The U.S. federal government may terminate, cancel, delay, modify or curtail our contracts at any time prior to completion and, if we do not replace them, this may adversely affect our future revenues and could adversely impact our earnings 36% rewritten
05Federal government spending reductions, workforce changes, and policy shifts may impact our existing operations and future opportunities for new contracts27% rewritten
06We rely on a few key customer contracts for a significant portion of our future revenue. A significant reduction or delay in implementation to one or more of these contracts would materially affect our anticipated operating results26% rewritten
07A failure to attract, train, retain and motivate key and skilled employees, including key members of our management team, would adversely affect our ability to execute our strategy and may disrupt our operations33% rewritten
08Due to the competitive bidding process to obtain U.S. federal government contracts, both upon initial issuance and re-competition, and the likelihood of bid protest, we may be unable to achieve or sustain revenue growth and profitability45% rewritten
09Our competitive position and future profitability depend, in part, on our ability to develop new technologies 51% rewritten
10Our financial results may fluctuate due to increasing variability in our security solutions' sales and implementation cycles
11Failure to effectively develop and execute our sales and business development capabilities will harm our ability to grow our business
12We depend on third parties for certain operational services and components of our products in order to fully perform under our contracts, and the failure or disruption of a third party to perform these services or provide these goods could have an adverse impact on our business85% rewritten
13Occasionally, we rely on only one or two sources of supply, which, if disrupted, could have an adverse effect on our ability to meet our commitments to customers, and could adversely affect our business, results of operations and financial conditionNew
14Failure to adequately protect our intellectual property, technologies and proprietary rights could harm our business, competitive position, financial condition, and results of operations
15Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time, and resources accurately49% rewritten
16We will face risks associated with the growth of our business in new commercial markets and with new customer verticals, and we may not be able to achieve organic growth nor have the necessary resources to dedicate to the overall growth of our business
17Failure to deliver high-quality technical support services may adversely affect our relationships with our customers and our financial results
18Our growth depends, in part, on the success of our strategic relationship with our partner organizations
19We rely on third-party technology that is used in our products and services to perform key functions. If we are unable to license third-party technology or the technology is subject to a security breach, without an alternative, it may negatively impact our business and results of operations36% rewritten
20The inability to set optimal pricing structures for our solutions and services could adversely impact our business, financial condition and results of operations
21Artificial Intelligence ("AI") is an emerging technology and we may not be successful in our AI initiativesNew
22We may be subject to legal proceedings, regulatory disputes and governmental inquiries that could materially harm our business, operating results, and financial condition
23We have in the past acquired, and may in the future seek to acquire or invest in, complementary businesses, products or technologies to enhance our technical capabilities or otherwise capture growth opportunities
24Public confidence in, and acceptance of, identity platforms and biometrics generally, and our solutions and services specifically, will be a key factor in our business’s continued growth27% rewritten
25Any decline or disruption in the travel industry or general economic downturn could materially and adversely affect our business, results of operations and financial condition23% rewritten
26Actions that we are taking to restructure our business to improve profitability may not be as effective as anticipated89% rewritten
27Goodwill and intangible assets represent significant assets on our balance sheet and any impairment on these assets could negatively impact our results of operations, and shareholders' equity50% rewritten

Industry, Legal and Regulatory Risks

28The business environment in which we operate is highly competitive, and we may not be able to compete successfully against existing or future competitors34% rewritten
29The Administration's actions, such as tariffs and other changes in international trade policies, could adversely and unexpectedly impact our businessNew
30We are subject to the seasonality of U.S. federal government spending
31We are subject to substantial oversight from federal agencies that have the authority to suspend our ability to bid on contracts 33% rewritten
32We are subject to governmental export and import controls that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws

Risks Related to Our Financial Reporting and Common Stock

33We may fail to meet our publicly announced guidance and other expectations about our business and operating results, which may cause our stock price to decline
34Our quarterly operating results fluctuate and may fall short of prior periods, our projections or the expectations of securities analysts or investors, which could adversely affect the trading price of our stock70% rewritten
35Certain of our U.S. federal government contracts involve work of a confidential nature, which may limit investor insight into portions of our businessNew
36We cannot guarantee that our share repurchase program will be fully implemented or that it will enhance long-term stockholder value23% rewritten
37We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), the rules and regulations of Nasdaq, and other securities rules and regulations that impose various requirements on public companiesNew
38If our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could be adversely affected
39Global inflationary pressures and weakened global economic and political conditions may adversely affect our industry, business, operating results and financial condition50% rewritten
40Our systems and the third-party systems upon which we and our customers rely are also vulnerable to damage or interruption from catastrophic occurrences or events outside our control
41Changes in accounting principles or their application to us could result in unfavorable accounting charges or effects, which could adversely affect our results of operations and growth prospects
42Global clim a te-related risks could negatively affect our business62% rewritten

Other Telos 10-Ks

FY2024 10-K risk factors
41 risks
Heavy reliance on U.S. government contracts subject to funding shifts, cancellations, and competitive bidding protests. Vulnerability to cost overruns under firm-fixed-price contracts representing 75% of 2024 revenue. Key customer concentration and dependence on renewal of subscriptions and key contracts.
Filed Mar 10, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.