Q4 2020 Telos Corp Earnings Call

The US Department of the energy of Energy's Office of Intelligence and counterintelligence moved to full Enterprise licensing and the US Environmental Protection Agency expanded to an Enterprise wage license in 2020. We also saw the large-scale adoption of our exact offering buy a new customer the Federal Bureau of Investigation or FBI, the FBI awarded tell us a contractor prize wide risk management valued at approximately 13.5 million dollars exact has been successfully deployed across the federal government including the intelligence Community civilian agencies in the Department of Defense and we are proud to extend this work to the FBI.

We continue to see increased commercial adoption of our offerings including the purchase of the Exacta for internal use at places like Microsoft zscaler in for Accenture and others off largely based in our success in airport employee vetting we competed for and were awarded the US Census Bureau contract to vet 2020 census enumerators or census takers in place with the Office Depot. We quickly developed a network of 1,100 physical processing centers supporting the objectives of the Census Bureau with an integrated digital and physical infrastructure Solution on a national scale month. We take great pride that we were able to process more than 1 million applicants over four months during the height of Covent. Thereby keeping the decennial census on track.

We also received multiple large long-term contract wins. Tell us is one of three awardees chosen by the Transportation Security Administration to provide TSA PreCheck Enrollment Services Under the terms of this ten year contract ID trust 360 will will collect application materials biometric data and fees from from each applicant and we'll provide all the necessary information to TSA for adjudication. Tell us was also awarded a 10-year multi-billion-dollar contract by the centers for Medicaid and Medicare Services office in 2020 using ID trust 362 vet approximately 1.5 million Health Care Providers annually among other tasks.

Tell us is also where the classified.

My contract for telescopes is providing the underlying security for our customers so that they can complete their missions on the public internet and the dark web through misattribution several additional government customers are planning to use this contract to access these capabilities. We anticipate a long-term relationship with this customer, you know, we and other significant deals as well in 2012, including a sixty six point four million dollar contract with the Air Force and a twenty six point six million dollar contract with the Army. Both of these contracts are with our secure networks business. We all received a 15.6 million dollar agreement with disa for our amhs solution.

Over the past year tell us form strategic Partnerships and alliances that helped expand our footprint both domestically and globally for example our relationship with st engineering technology defense and Engineering Group will extend the availability of telescopes and exact into Asia and the Middle East. We also have continued and strengthened our relationships with leading cloud service providers like Amazon web services and Microsoft Azure and we expect other Cloud providers as well over time. We also bolstered our board of directors and Advisory Board in 2028 to usher in a new era of growth and expansion for the company. Tell us welcomes illustrious new members to our board of directors and Advisory Board, including noted entrepreneur and investment Guru thousand presidential medal of freedom recipient and tragedy assistance program for survivors founder and president Bonnie Carroll and four-star Army General the longest-serving director of the NSA and yep.

first commander of us cyber command retired General Keith Alexander

and as we look to 20 21, the company is off to a strong start by creating new foundational Partnerships, which I will discuss in more detail. We've also been successful in securing over $75 off new orders so far this year. This includes a recently awarded one year contract with a customer that is using both of our Security Solutions and our secure networks capabilities. And and this is over. This is valid up to about 34 million dollars.

If this overall solution is proven successful, this could be repeated in several locations around the United States.

So now let's talk a little about Innovation. If you look towards our product portfolio in twenty-twenty. We made a number of very important enhancements to our exact offering to include support for multiple environments. This functionality allows customers to manage cyber risk and compliance for complex. It environments that's been Cloud multi-cloud on premises and hybrid system. It's these enhancements also accelerate Cloud adoption and digital transformation by reducing Regulatory Compliance efforts. These capabilities will benefit government organizations off regulated Industries, globally.

Cyber, threats continue to escalate especially since the beginning of the pandemic the solutions. We provide must evolve and grow.

In 2020, we added enhancements to the telescopes offering that included a collaboration capability to the private unified communications platform that allows the ultimate cloaking voice video and chat services.

With a secure collaboration repository this enhancement provides the ability for worldwide collaboration of mission-critical information while ensuring cyber-attacks services are eliminated.

As privacy and security of connected devices continue to be threatened twenty-twenty initiatives included not only adding new capabilities for device based users. But development to embed the telescope access technology into network devices and application software these enhancements expand potential use cases for tell us ghost into markets like education internet things or iot banking Healthcare and other critical infrastructure markets.

So turning to strategic initiatives we see significant opportunity to expand the sales Channel and margins for Exacta and telescopes when sold through the channel the gross margin exact increases to approximately 90% And the gross margin for telescopes expands to approximately 85%

to accelerate the actualization of that expanded gross. Margin. We began formalizing our sales Channel program in late 2020 and are continuing that effort in 2021 by bolstering the sales and marketing team with the proceeds from the IPO. We now have the additional resources necessary to fund expanded sales and marketing efforts in the last three months. We've ramped up our overall sales investment clubs including hiring new senior Channel leaders senior sales reps a senior sales leader and a vertical subject matter expert these sales professionals bring with them a broad swath of experience, but we're Innovations such as a drop box code 42 DocuSign EMC and more in a relatively short period of time we've made good progress executing against our plan to increase our sales organization from 14 people that will be a quota carrying sales people in six support staff to approximately 60 people before the end of June.

Half of this investment is to build out a robust Channel organization.

In total we expect to increase our sales and marketing expense to approximately 20 million in 2021 and almost 178% increase over 20 20 spend. We expect to see the benefits of these Investments with incremental Revenue growth beginning to rent in the second half of 2021.

Over the next several years we plan on increasing our sales and marketing spend as we see the results of our investments. We expect this new funding will allow us to increase margins as well as see significant expansion both new customer acquisition and vertical markets.

the effort to reach

Structure and build the Telos partner ecosystem will be a key growth driver for the company. We look forward to strengthening and forming new relationships with partner companies who share in our unwavering commitment to integrity and Excellence for our customers. We have already seen success in this area fostering new Partnerships that will make a big impact next next. I'd like to highlight just a couple of these Partners first. I'd like to talk about our newly-formed relationship with Johnson Controls or jci. They are the global leader enabling smart healthy and Sustainable Building JC. I am also known among other things for their very sophisticated cameras and security systems and tell us came together to integrate the Telus Coast virtual obfuscation Network into jci's Club Gateway the cloud view Gateway allows multiple security cameras to connect to a cloud-based repository and a video analytics platform which supports a worldwide cloud-based video net wage.

used for surveillance and physical security

by embedding telescoped into the product is able to hide the cameras Source location and the destination information repositories from adversaries. Thereby protecting their customers walk in addition to the product integration have formed a partnership to jointly market and sell the combined solution to various markets including education military bases Home Health Care organizations and other campus environments around the United States.

We're also working with Omni alert a Pioneer in emergency communications to integrate telescoped into the Omni alert emergency communication system and a high-powered gun detection software package adding Network obfuscation and misattribution capabilities to Omni alerts gun detection and emergency alert software and hanse's the solutions ability to prevent loss of life in the event of an active shooter situation mission is incredibly important to us to tell us and we couldn't be more gratified that our cyber security technology will be leveraged by Ami alert gun detection and emergency alert software to keep camps as safe and ultimately save lives integrating telescopes into the Omni alerts Innovative gun detect offering will ensure all on campus remains safe and secure.

We also recently announced our partnership with zscaler a leading Cloud security provider to integrate our Enterprise risk management solution for exact into their offering this integration willing to automate and streamline the complex fedramp and security requirements, which will enable them to better serve their Federal and Department of Defense customers. We see that's a starting point of this relationship between tell us and zscaler and expect more to come in the future.

Additionally we are in discussions to develop a partnership with a leading K12 online safety and Effectiveness Solutions provider to integrate the telescope's capabilities with their online learning Solutions. We're working on a pilot project of this integration for grades K to twelve across all public schools in a Virginia County through this integration telescopes will protect the students device off privacy and identity while working online or accessing School resources remotely.

We also see huge.

Channel opportunity with the cloud service providers or csps. The cloud providers see exact as a great way to accelerate their own customers to the cloud and they're using it not just in the government but in highly-regulated commercial Industries around the world cloud provider customers also take comfort that exact a continuously updates their own security posture in multiple clouds on premises and in hybrid wage. It's all in near real-time in addition to fostering our existing strong relationships with a w s and Microsoft Azure. We are looking to expand our Cloud Partnerships with other Cloud providers in 2061.

Another strategic priority for 2021 is our focus on Commercial and international expansion for example working with our partner St. Engineering. We have recently begun to exact Palm Pilot program for a Singaporean government agency that allows them to perform security Audits and assessments on their systems to determine the level of risk and manage the remediation process associated with rep mitigation.

Once completed exactly would be adopted by multiple agencies across Singapore's government at which point we would expand to other regulated Industries like Financial Services in that region.

In addition St. Engineering is conducting a telescope pilot with a Singaporean government agency.

We are well-positioned to sell our capabilities into a dynamic and growing commercial market. For example, we have leverage core exact functionality to meet the needs of large financial services and cups relationship management firms. We've also leveraged our US federal government identity management qualifications to improve the speed and accuracy of employee vetting at over a hundred airports carriers and general aviation across the country as a result of our focus on Channel commercial and international expansion. Our addressable Market has grown dramatically affect the growth trajectory of our exact and Telescope Solutions driven by increased direct sales and channel Partnerships coupled with the multibillion-dollar TSA PreCheck and CMS contracts. We believed visibility to almost a billion dollars of annual revenue within five years.

In addition about 85% of our Revenue has been recurring and we anticipate that will continue going going forward despite our growth accelerating very rapidly moving forward with this growth in our company should be driven by our Security Solutions business and so in conclusion 2020 was a record year for tello's despite the economic uncertainty despite pandemic and everything else happening around the world. We're very pleased that we continue to win big contracts and expand our product portfolio to close out the year strong. The future is bright for the Cyber page security industry and Fratellos. We're proud about what we've achieved and we're very excited about what the future holds so now I'd like to pass it over to our CFO Michelle nakasawa who will discuss that the faith in more details, Michelle.

Thank you, John.

And thank you all for joining us today on our first earnings call as a public company. I am very pleased with our 2020 Financial results and I am extremely excited about our future revenue and earnings growth for 2021 and subsequent years during our fourth quarter of 2020. We successfully completed our IPO which resulted in a transformation of our balance sheet our financial performance for the fourth quarter was revenue of 44.9 million dollars. Net income of 3.9 million dollars and diluted earnings per share of eight cents per share are weighted average diluted shares for Q4. We're 51288000 shares our full-year financial performance for 2020 is as follows revenue of 179.9 million month.

Which is a 13% increase from 2019.

Enterprise ibadah was Nineteen point four million dollars compared to ten million dollars in 2019 adjusted ebitda of eleven point four million dollars, which is a 14% increase from 2019 diluted earnings per share of $0.04 per share are weighted average diluted shares for 20 28. We're 42877000 which reflects the reverse stock split and the IPO as of twelve-thirty 12020. The outstanding account was 64625071 shares there are a number of financial results for this year that I would like to highlight Revenue off. Our Security Solutions business was 117.3 million dollars, which is a 15% increase from 2019.

Revenue for our secure networks business was 62.6 Million, which is a 9% increase from 2019. Gross profit was sixty two point four million dollars, which is a 19% increase from 2019 year end funded backlog was 127.7 million dollars, which is a 14% increase from 2019 and finally working capital finished the year at a hundred and five point three million dollars, which is a 102.3 million dollar increase from 2019.

Moving on to our financial outlook for the first quarter of 2021. We currently expect Revenue in the range of forty nine million dollars and $52 million dollars and adjusted ebitda in the range of -1.7 million dollars and -1.9 million dollars for the full year of 2021. We currently expect Revenue in the range of 283 million dollars and $295 million dollars and Improvement of 57% to 64% compared to twenty twenty and adjusted ebitda in the range of 33 million dollars and thirty six million dollars and Improvement of 190% to 216% compared to twenty $20. We remain extremely confident in our Market opportunities and look forward to providing updates on our progress on a quarterly basis with that. I will turn the call over to the operator for Club.

operator

Thank you. As a reminder to ask a question. You will need to press star one on your telephone to withdraw your question. Press the pound key. Please stand by while we compiled the Q&A Ross. Our first question comes from Zak Cummings would be Riley Securities hairline is now open good afternoon. Thanks for taking my questions and congrats on the strong results. First quarter of the gate here. Exactly. Yeah, John, I guess you're starting off with key for I mean, can you go a little bit of a deeper dive into the gross margin line? I think it was a little bit better than what was in our model there and come back of the factors driving that better performance there in queue for sure and it's also contained in our md&a in our 10-K where we break out the gross margin for Security Solutions and secure networks in both cases. We were had a plan without having the numbers directly in front of me. Let me just see here.

in the case of

in the case of

In the case of Security Solutions, I think we ended up at 43% and in the case of secure networks. We ended up at around 19% So in both cases we were ahead of time. We're going to be which I think is a reflection of a better mix of business and opportunities for us.

Understood and and can you provide us an update on the expected launch time for both the TSA in the CMS contracts as you make your way through those authorization processes?

Sure, I think that right now we we are we are on our plan obviously with the Kobe and rolling out that's kind of put the healthcare industry wage, you know in a in a sort of a tizzy but we still see very strong results for us for the second half of the year as we had expected through the IPO process.

Understood in the in the same in the same goes with TSA PreCheck, you know, if you think about it, we just discussed with one of our operations people inside of a PreCheck. You know, when you think about it from a travel point of view we're at about about this time last year travel was about 30% of the previous year. We're now at about 60% of from where we were, you know, the previous year. So we see travel picking up obviously with the vaccination taking place and with texting taking place. I think people have become more more comfortable with the notion of getting on a plane and and seeing friends or or just just visiting.

Understood and since the beginning of the year, I guess a little bit towards the end of last year as well. I mean we've had the solarwinds heck as well as the Microsoft Exchange hack as well. I mean with those coming to the Forefront and with the stimulus package, including two billion dollars of incremental technology modernization in cyber security funding you anticipate any sort of Tailwind off from these events or or kind of how have you seen these impact your overall Outlook

So I think it put it does put win and everybody who's in the cyber security industry's sales, you know, obviously there's a profound Focus now with solarwinds and and exchange which is really I think long overdue. So yeah, I do think there'll be some benefit that will derive as an industry.

Understood and just final question for me around your guidance. I mean, can you give us a little more insight into kind of what's baked into there for your assumptions and maybe some areas where I guess maybe you haven't really baked into your guidance at this point. You know only thing I could say is our guidance is the most prudent forecast for our business at this time. And I think it's got home. We think it has a you know, we're very pleased with it. We think it's going to be a great year for the company, but without getting into a lots of you know, specific details Zack, I think that's probably where I leave it off.

Understood well, thanks for taking my questions and and congrats again on on the solid first-quarter out the gate. Thank you Zack.

Is there an operator?

No, I don't think it's off.

I'm currently experiencing technical difficulties and operator will be with you momentarily. Okay. Thank you.

Thank you. Our next question comes from the line of Alex Henderson for your line is now open.

Great. Thank you very much. I was hoping you could give us a couple of indications of your your guidance for the year is a little bit better than I think off the street or we were forecasting and I was hoping maybe you could give us an indication of where that was better than you know, where where they upside variances coming from between you know, is it just is it coming from Ghost? Is it coming from you know, uh any other part of your business, but which piece is driving the upside down in the Outlook? Thanks for your question Alex. What's driving your outlook is really the increase in demand on our Security Solutions business. I referenced am an award recently that was made to us that was up to thirty four million dollars and I think we'll be seeing more of that kind of activity which is helping Drive our optimism and faith.

And it's for 2021.

Can you give any indication whether it's ID trust or whether it's a good ghost a ghost exactly products that are driving it sure. It's really across the board. It doesn't include the automated message handling system Alex But it includes Telus Coast exact and ID trust 360. So all three are running ahead of your off. The street expectations is what you're saying. I think so. Yes relative to the recent tax. Can you talk about whether you're exactly product executed better than the industry as a whole in some of the barely visible penetrations of a variety of cakes agencies as well as Microsoft and some Cloud players. How did you your software in your customers perform relative to the broader industry dead.

against that environment so in

General if you think about what exact is doing is it's it's it's it's helping to assure good cyber hygiene. So in there are three specific cases where I think our solution helps with regard to our customers and therefore avoiding things like solarwinds one is in the area of strong password the sharing of strong passwords. The other is in is in user access control make sure that users are not able to increase their own privileges without getting uh, either of its system administrator and or an IT security professional to offset. And and okay those off in the last is ensuring, you know, multi-factor authentication, which if those things had happened it would be it would be our customers would be safe because exactly is constantly assessing those kinds of those kinds of issues for our customers.

And if I go back to you know, the some of the announcements recently like the announcement was that in the forecast or was that you know to the forecast.

So JC, I as a as an entity is something that we talked about in generic terms during the IPO process, but Jack and the market opportunity is really a channel play for future revenues late in 21.

Okay, so it's so it was not in the expectation to at the time of the IPO that that's correct.

Okay, and then if I could during the IPO process, I believe that there's a there was a change in the federal mandate relative to what needed to be done. In order to bring Federal workloads to the cloud that increased the requirements to use exact same on a site-wide license that any Cloud taking those Technologies on is that is that a in fact accurate or it can just give us a call on some of that detail sure. So essentially when the intelligence Community decided to move to multiple Cloud environment with lexicon that they wanted to make sure that everybody used was the exact format. So that gives us an opportunity. It's it's a really kind of significant opportunity for us.

Not just in the intelligence Community, but also, you know throughout the government I think and and remember most of our customers are going to be not just quote in the cloud but most of them are going to be hybrid wage were all very large organizations. So there that's also presents an opportunity for Exacta.

So it has they in fact required all clouds that are using that are to take on workloads that they now must have exactly is that right?

within the

Intelligence community that that is the understanding that everything will be put into the Exacta format.

I see. Okay. So are you now effectively the de facto standard with that product across all clouds as a result. I think at the end of the day for the intelligence Community. I think you can say that page with with with comfort, you know, overall. We are still working to make that happen, you know government-wide and so that is a that is on our objectives to make happen.

And then one last question then I'll see the floor. Can you talk about to what extent you're seeing any traction from either AWS off Microsoft Azure Salesforce selling Exacta to Enterprise customers. And when do you think that that actually kicks in as a meaningful driver and thanks, you're welcome from our from our standpoint. We see the Azure relationship driving revenues in the second half of the Year towards the later part of Twenty-One. Although as far as your name is also just purchase more licenses and they're doing a lot of stuff internally to make sure the testing Works further clouds. So I think it's it's a it's a kind of a fourth-quarter activity.

and anything on Microsoft any thoughts

Yeah, I'm sorry. What did you say sir?

So you answer a question related to Microsoft. The question was to Microsoft or AWS, and I should have been more clear. I should have been more clear. We are dead. We see the same opportunity with both those organizations and and it happening roughly at the same time Alex. Thank you very much. Thank you.

Thank you. Our next question comes from the line of Daniel Ives from wedbush. Your line is now open. Thanks. So give me a chance to talk about strategically in conversations that you're having with a lot of these true letter intelligence agencies. I mean how how the conversations changed if I think about the birth three months versus even the last year I mean is it is it really now a different strategic conversation especially just given the shift to the cloud and all those threats. Everything across the board. Yeah. That's a great question Dan. There are two big swing thoughts in general and it's not really just in the intelligence Community. It's real nice. Most of our customers want is, you know COVID-19.

How can we work with exact and with our remote Workforce and how can we do classified work on a remote basis? We haven't gotten there yet nor will be for any period of time that I can see in front of us soon.

Where you're going to be able to classified work in a remote environment, but they may be doing things where they're D classifying some elements of the workload so you can get some work done remote the other big strategic change in general across. Our customer base is multiple clouds, you know, everybody really understand. It doesn't doesn't want to get you know, so invested in one cloud provider. So I think that's why having a a multiple Cloud capability like we do inside of Exacta is very, you know relevant.

Great, and then just on the Paw touring look obviously Izzie scour, you know you sign which they continue to be. So focused on Thursdays. Are you seeing that more? You know, those are you starting to get more calls for some of these top-tier potential strategic Partners? Just giving where you guys sit down, you know within the Beltway

Yes, and I think part of the reason for that is you know, the the public offering process really gave us a a forum to you know, sort of share what we do as a company and that I think has helped us, you know quite a bit in terms of incoming interest. The other thing that's happened is by hiring out additional, uhh, you know, sales and and change the sales and channel organization. They bring with them their own relationships as well. So we see that you've got, you know new technology companies coming our way New Jersey new isps. You've got white labeling as a part of a of our offering that we do with things like Johnson Controls where you can embed, you know, ghost inside of the inside of their own now, so you're not actually selling they're selling their own thing and you're getting paid as a as a part of that as you will if you will so we are seeing an increase relatively significant increase in in business development.

sales activity

Awesome. Thanks. You're welcome.

Thank you. Our next question comes from the line of Keith from Bank of Montreal. Your line is now open. Hi. Thank you very much and congratulations on completing IPO and your first public conference call. I have a few number one is you talked about the ramp in both sales and marketing and I wonder stand the objectives. And so if you think about a what's the product orientation or solution orientation and what I mean by that is that going to be mostly exact and goes off or the focus is or orientation, or is it broader than that, and then be if you could talk about the Target customers, so in other words are you will you continue to go after the government agencies International targets and or corporates to spread your customer base a bit if you could talk about both of those vectors, please. Thank you.

Yes. Keep thank you.

So our initial Focus for our sales and marketing investment is really focused around exact and ghosts as we as we build out our offerings, We absolutely are are going to forward to you know commercial, you know, Federal International, you know, we're not trying to shy away from our from our our government customers, but you know, we want to be able to sell through to get to the commercial Marketplace much better than having to build our own direct sales force. So, uh, you know, we've got will have Channel Partners helping them wage that getting us to customers. We're not going to turn away from the government because we feel like it's a it's a it's a great place to you know, have a steady-state business if you will, but we're absolutely going to augment into those areas.

Okay, primarily corporate through the indirect means though rather than Direct.

Well, we're going to have to do both right so we'll have to sell direct to establish that we actually can that we have a a referenceable account there, but the primary focus needs to be through channel. So when we when we when we sell direct will bring with us a partner who will help us do the implementation services and they're there for preserving that uh that off that gross margin that we have for exact and for ghosts. Whereas in the government. We've had to wrap our own subject matter experts around it. Which dilutes the gross margins down Okay. Okay, then my second question is on the TSA side. Can you give us some indication? Are you essentially on track here and what I mean by that is there's a couple of em that have the opportunity to participate in the growth as travel comes back to you still feel like you're in a leadership position because of your technology and generally speaking off.

With you know, where we are in the cycle here in March. Do you feel like the second half of ramp assuming that COVID-19, you know gets more widespread that you're you're right on track that I will tell you if I travelled on cross-country this weekend in the airports were pretty darn visiting. Yeah, so that that's a great question. We are on track we do think off with the customer wants to certify and get the authority to operate through the use of Exacta that that does give us a leg up over the other competitors who have to use exact same as well. And so we do think we're on track and I think what we share during the IPO is still an appropriate metric in terms of the growth path. Okay in the second half and my final. Okay great many thanks. My final question is you called out an opportunity for a billion dollars some some time down the road given what you have in front page.

You and we're on its now March 25th in your reporting your December.

Order and so am just curious why the conference call report date was delayed and just if you could talk about you have this opportunity for pretty formidable an interesting growth from an investor perspective. And do you feel that you're in a position to manage this growth? In other words from the operations side from the fiber inside, you know, do you feel like you have the pieces in place to not only manage the next quarter, but you know the next number of quarters as you have this job opportunity in front of you and if you could just speak again as part of that why we're having to call on the 25th.

Absolutely, and and thank you for your question. The reason the the call got pushed to the 25th was because there were some very complicated accounting things that had to happen via the the IPO. So if you think about it, we had to buy back the interest and tell us ID that we didn't own we had to deal with the conversion of the public preferred shares we had to deal with Redeeming the the dead that we are paying back the debt that we had all those things caused the accountants to basically say they wanted to hold off until they got proved that those wickets and so while it was regrettable that it happened we're going to make very sure it doesn't happen again because it's it's a it's it's something that no company wants to have to go through so your other question is around long. Do we have the pieces in place? And the and I think the answer is yes. We we made the investment in our plan to grow and it's built into the forecast already dead.

And we have a very significant growth in terms of investment in terms of sales marketing and support. So I think the answer is yes your question Keith. Okay. All right. I will see the fog any. Thanks and congratulations. Thank you.

Thank you. Our next question comes from the line of Andrew Nowinski from d a Davidson your line is now open great. Thanks. I grab the next quarter. You you said the channel helps you expand your gross margin on on the exact in ghosts products when they when they are sold to the channel. So, can you just give us any color as to how many Channel Partners you have now and Thursday how many you're targeting by the end of the year?

Yes, so your question is why does it why does the channel enable that higher gross? Margin? Is that your question Eddie? Well, I think I understand why I'm just wondering impactful. It'll be so I'm wondering how many Channel Partners do you have now and how many you are adding or if you're recruiting more now, it will not become a bigger piece of your business or driver of your business. Yes. It's going to be a relative or significant driver of our business. So so we have a dozen in play currently at various stages and then we're adding another 15 to 20 so our modules internally we modeled that each individual salesperson. We would sell one two, three million dollars worth of of our software and then a channel partner would sell somewhere between 2 to 6 million dollars of our software.

so we

Are we are making a significant investment there? And we do believe we'll see a a significant return that we really will see as incremental to our play our plan for this year off and I will say this the the official Channel program launched is coming very soon. So, you know stay tuned for that. So so from our point of view, we're actually pretty ahead of where we thought we would be from a standpoint of where we would be as a channel organization. So I think we're doing pretty well there. That's great. Thanks John and then shifting gears. I want to talk about I guess two of the Winds. So first the FBI win that you called out, I think you said it was a 13 and 1/2 million dollar deal. Was that one in Q4 or is that something that was one prior to age? And and how long what is the duration on a contract like like that? Just wondering when you when you give us examples like this? How should we think about it in terms of is it in the court or is it a a 3 or Thursday?

Thank you. It was one in the fourth quarter. It's over four years, but just like the rest of our business. We have a month a philosophy of you know, getting the business and then expanding. So I think that there's an opportunity to do more with FBI, but this is what they've committed to now and I it's a it's a significant wage for us which will record over that for years.

Okay, that's great. And then last one for me I wanted to ask about zscaler which was wondering. I know you said there a partner you're selling into their solution which they in turn will sell to their I assume their telephone global Service Providers customers of their own. I'm just wondering if you could just put a finer point on you know, how that partnership works and and just curious. You know, why did you call that one specific life in bought a press release it on the call today? Absolutely. So there is very interesting to us for a lot of different reasons. But we're we're we're starting with them is on the offer what's called fedramp and DOD authorizations through a capability called oscal and what oscal does without getting into all the the the technical details. Is it basically automate all the various controls in a machine language format which enables much faster inheritance from Exacta. So what that means from? Yep.

Kill, his point of view is as zscaler is seeking to get its own authorizations and then getting their customers to get authorizations. It helps accelerate that process and then from our point of view them again. This is a it's the sort of the nose Under the Tent strategy if you will and this is something that we expect to see expanding, you know, beyond the four walls of the government, but it's a it's a strong place for us to start.

That's great. Thanks guys. Thank you.

Thank you. Our next question comes from the line of nehal chokshi from Northland Capital. Your line is now open. Thank you and congrats on what seems the really strong start to the year as decided that there's seventy-five million orders year to date. Did you give us a sense as to how to compare? So your year ago. And what's the annual contract value within those orders as well?

It's about double I think.

And and your second question was what again? What's the annual contract value of that five seventy-five million orders? Is that all in the one year duration or is that I you know, some of that's more than one year duration. It's it's all one year or less.

Wow, okay, that's that's fantastic and then did split out within that 25 million. You had a one year contract Security Solutions to secure networks up to $34 million and tire that there's that's basically the max but what's the minimum associated with that order that you have off? So I'd say the minimum is and this is a this is an educated guess but I think the minimum is $25 and but I believe it's also possible that it could be quite a bit larger over time. So but I think to be conservative I see I think it being twenty-five million kind of the floor.

Okay, great. And what kind of customer would you categorize this as?

This is I can what I can say is it is a government customer.

Okay. All right, very good. And then finally on on some of the questions earlier and today's call where we talked about the four winds attack with one of the things that's being talked about whether the cyber security Community is accountability and part of accountability potentially involves enforcement or basically taking some of these cyber security tools that typically have been utilized in a defensive posture and moving it towards an offensive posture and it just seemed to me that ghosts may fit the bill of that sort of change in posture. Is that is that a true statement there?

Ghost has many attributes that adversaries would find, you know valuable. I think the way to think of goes though in the confines of what's legal is wage goes can do a good job of what I call Active defense where we can understand better. You know who the adversaries are. And so I think it's a you know, while the US government will probably never allow industry to you know, actually, you know counter, you know, you know counter-offensive someone's coming after them. I think there is a a very active dialogue between industry and government now about how we can work much more closely together and and dealing with adversaries as a as a as a team vs as you know stovepipes.

Yes.

Okay, the final question is is that so you have material GM gross profit upside and gross margin outside as well and walk through all the whole business. But what was the reason for it? I first margin outside is it is it because you are further along in the Channel program that you have expected or is it? Yeah, I think what's happening is the Security Solutions margins are just growing and they're growing in some part because of Channel mostly though. It's also a mix issue inside the the business. So I think it's a combination.

Okay, great. Thank you very much for taking my questions.

Thank you. Our next question comes from the line of Alex Henderson from your line is now open.

Great. I just wanted to go back very quickly to the issue of why the the Rings release was delayed and just make sure to clarify one question on that. So the reasons you cited were specifically around changes in ownership structure and and things of that sort. Was there any issues whatsoever relative to the operational performance of the company the the way your accounting for for revenues or anything along those lines that that the accountants had any issues with?

It was absolutely no issue relating with operations and operational performance or revenues. The issue is the real issue guys. If you get to it. We're not an accelerated Filer and and and what that basically means is that in the past when we filed our 10-K was typically right around the end of March March 31st. So now that we're public company, you know by the end of the year. We're we will become we think an accelerated Filer and so we will find ourselves in a position where we'll have to you know, accelerator filings may be able to call out our our earnings sooner. But as of this year, we're just not an accelerated filer. So we we absolutely want to you know, we once once we get the IPO, we we knew we needed to yeah, we're not saying that this way we're not going to have any complex transactions like an IPO with all these various accounting changes that had to happen with regard to that dead.

So as a result, I expect us to be having a our earnings out at a more of a more of a timely Pace if you will.

Great. So nothing having to do with operations. There is all transitional issues. I'm going back to the the operations for second. So I had a question actually sent to me from one of our you know customers asking are you saying that the indirect sales partners are not modeled into the guidance for the year and and how many of the 60 are going to be quoted current month?

Yes.

So, uh, if you recall what I think we said during the IPO is that we were not expecting a significant increase in revenue from our sales and marketing new investment wage for I think we said 15 months post-ipo. So to answer your question. We really haven't modeled any significant sales from that investment in 2020-21.

Like we have all the all these we have all the expenses in in there, but we haven't we haven't modeled in additional revenues and then I just want to go ahead ma'am, please. I just want to go back to the jci transaction was that model into your guidance or was because it had that contract closed after the close of the Dow closed this quarter that that was not in the the expectations for the year.

Yeah, JC. I was not modeled into our 2021.

And when do you think that that actually kicks in as a revenue contribution to the company? I guess there's racism some complexity around I think the way to think about it from a revenue point of view cuz you know, it's a massive company, you know, and they have to do a whole bunch of you know, configuration testing and so forth from my perspective. I think it would be to be most, you know conservative. I would say, you know, Q4.12 Q1 of twenty-two

right and then going back to the Microsoft tech for a second Exchange Server you involved with anything that has to do with exchange server or is that a dependent of your relationship with is your

That's independent of the relationship that we have with Microsoft.

Great and just one last question on the ID trust business. Have you seen any reason to change your expectation of I think it was June eleven percent penetration of you know, in in 2021 of renewals any reason to believe that it's going to be that low. It seems like an awfully low number and quite a bit of upside there you you know, like I mentioned to Alex we we try and be as conservative as we can. I I think the guidance were given everybody is dead, you know is is a prudent forecast, you know for what we know at at this time, you know as as things change as we actually actually see the ramp and so forth, you know, we'll come back to maybe a dog once that happens. But as of right now, I think our guidance is good.

Okay, I'll take the floor. Thank you very much. Thank you.

Thank you at this time. I am showing no further questions. I would like to turn the call back over to John Wood for closing remarks.

Well, you know, I just wanted to say obviously we're very very pleased with our 2020 performance. Just as we're pleased about our 2020 performance package really excited about our 2021 prospects and for all of you who decided to invest in the company and support the company. I just want to say we really appreciate it, and we look forward to a great year. So, thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect phone.