Telos Corp’s Earnings Call Highlights Robust Growth

Telos Corporation ((TLS)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for Telos Corporation painted a picture of robust growth and optimism for the future. The company reported strong revenue growth, particularly in its Security Solutions segment, and positive cash flow, despite some concerns about gross margin variability and a contraction in the secure networks segment. Overall, the sentiment was positive, with highlights significantly outweighing any lowlights, indicating a strong performance and a hopeful outlook for future growth.

Significant Revenue Growth

Telos Corporation reported a remarkable revenue growth of 26% year-over-year, reaching $36 million. This figure not only represents a significant increase but also exceeds the company’s guidance range of $32.5 million to $34.5 million, showcasing the company’s ability to surpass its financial targets.

Strong Performance in Security Solutions

The Security Solutions segment was a major contributor to Telos’ success, delivering approximately 90% of the total company revenue. This segment achieved an impressive 82% growth year-over-year, underlining its critical role in the company’s overall financial performance.

Positive Cash Flow and Share Repurchases

Telos reported an operating cash flow of $7 million and a free cash flow of $4.6 million. In a show of confidence in its financial health, the company resumed share repurchases, buying back 1.5 million shares, which reflects its strong cash flow performance.

Expansion of TSA PreCheck Program

The company expanded its TSA PreCheck enrollment centers by 43% since May, reaching 415 locations across 40 states. This expansion is a testament to Telos’ commitment to enhancing its services and growing its market presence.

FedRAMP High Authorization for Xacta Software

Telos’ Xacta platform received FedRAMP High Authorization, a significant achievement that recognizes its capability to protect highly sensitive government data in cloud environments. This authorization is expected to bolster the platform’s credibility and attract more government clients.

Positive Third Quarter Forecast

Looking ahead, Telos forecasts a promising third quarter with revenue growth expected to be between 85% and 98% year-over-year, targeting a range of $44 million to $47 million. The adjusted EBITDA is projected to be between $4 million to $5.7 million, indicating a strong financial outlook.

Gross Margin Variability

Despite the positive revenue growth, Telos experienced some gross margin variability. The GAAP gross margin was 33.2%, and the cash gross margin was 38.4%, both lower year-over-year due to revenue mix changes. This is an area the company will need to monitor closely.

Contraction in Secure Networks

The earnings call also highlighted a contraction in the secure networks segment, which partially offset the year-over-year revenue growth. This contraction is a concern that the company will need to address moving forward.

Forward-Looking Guidance

Telos Corporation provided optimistic guidance for the upcoming quarter, forecasting revenue growth between 85% and 98% year-over-year for Q3 2025. The company expects an adjusted EBITDA margin of 9.1% to 12.1% and anticipates cash gross margins to increase to approximately 40% to 41%. Additionally, adjusted operating expenses are projected to decrease, and the company plans to continue its share repurchase program, reflecting confidence in its financial outlook.

In conclusion, Telos Corporation’s earnings call conveyed a strong performance with significant revenue growth and a positive outlook for the future. Despite some concerns about gross margin variability and a contraction in the secure networks segment, the company’s achievements in the Security Solutions segment and its optimistic guidance for the next quarter highlight its potential for continued success.