Telos (TLS) AI Stock Analysis

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Telos

(NASDAQ:TLS)

44Neutral

Telos faces substantial financial difficulties, including declining revenues and persistent losses, which are the most significant factors impacting its overall score. Despite positive future guidance from the earnings call and potential growth in high-margin areas, the stock's technical and valuation metrics remain weak, limiting its attractiveness. Investors should be cautious and closely monitor financial performance improvements.

Positive Factors

Business Expansion

TLS ended 4Q24 with 218 PreCheck locations, adding 15 so far in CY25 while reiterating their target for 500 by year-end.

Contract Execution

TLS resolved the protest on the Defense Manpower Data Center (DMDC) which is worth up to $485 million over five years and is currently generating revenue as the program ramps.

Revenue Performance

TLS results beat 4Q Revenue and Adj. EBITDA expectations.

Negative Factors

Administration Risks

New business carries risk in the government due to the new administration.

Margins Impact

Margins on the large contract are expected to be dilutive to cash gross margins, and cash gross margins could be down y/y in FY25.

Revenue Guidance

1Q Revenue guidance came in slightly below consensus.

Telos (TLS) vs. S&P 500 (SPY)

Market Cap

$202.90M

Dividend YieldN/A

Average Volume (3M)375.84K

Price to Earnings (P/E)―

Beta (1Y)2.27

Revenue Growth-25.52%

EPS Growth-46.44%

CountryUS

Employees504

SectorTechnology

Sector Strength57

IndustryInformation Technology Services

Share Statistics

EPS (TTM)-0.73

Shares Outstanding74,870,155

10 Day Avg. Volume447,858

30 Day Avg. Volume375,843

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.83

Price to Cash Flow (P/CF)-4.70

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$4.88

Price Target Upside80.07% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering5

Telos Business Overview & Revenue Model

Company DescriptionTelos Corporation (TLS) is a leading provider of cyber, cloud, and enterprise security solutions. The company is headquartered in Ashburn, Virginia, and serves a diverse clientele including government agencies, commercial enterprises, and various sectors requiring stringent security measures. Telos offers a range of services including cybersecurity, identity management, secure mobility, and cloud security solutions, primarily designed to safeguard critical information and infrastructure.

How the Company Makes MoneyTelos Corporation generates revenue through a mix of product sales, software licensing, and professional services. The company's revenue streams are primarily driven by long-term contracts with government agencies and commercial clients who require advanced security solutions. Telos also earns money through recurring subscription fees for its software-as-a-service (SaaS) offerings, particularly in cloud security and identity management. Additionally, the company forms strategic partnerships with technology providers and systems integrators, which help expand its market reach and contribute to its revenue growth. Major factors contributing to Telos' earnings include its reputation for providing reliable, high-security solutions and its ability to adapt to the evolving cybersecurity landscape.

Telos Financial Statement Overview

Summary

Telos faces significant financial challenges, with declining revenue, persistent losses, and negative cash flows. While the balance sheet shows a strong equity position, the company's inability to generate positive earnings and cash flow raises concerns about its financial sustainability and operational efficiency.

Income Statement

Negative

Telos has faced declining revenues over recent years, with a notable decrease from $242.4 million in 2021 to $108.3 million in 2024. The company is experiencing persistent losses, with a net income of -$52.5 million for 2024, indicating significant challenges in achieving profitability. Gross profit margins have declined, reflecting increased cost pressures or reduced pricing power. The negative EBIT and EBITDA margins further highlight operational inefficiencies or high fixed costs.

Balance Sheet

Neutral

Telos maintains a relatively strong equity position, with a positive stockholders' equity of $127.1 million in 2024. However, the debt-to-equity ratio remains low, indicating manageable leverage. The equity ratio reflects a healthy asset base supported by equity, but declining total assets and stockholders’ equity over the years signal potential long-term sustainability concerns.

Cash Flow

Negative

The company has shown negative free cash flow in recent periods, with a notable decline to -$28.2 million in 2024. Operating cash flow has also turned negative, indicating challenges in generating cash from core operations. This trend is concerning as it suggests difficulties in funding operations without external financing.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
108.27M	145.38M	216.89M	242.43M	179.92M
	Gross Profit
34.43M	52.94M	79.04M	86.03M	62.42M
	EBIT
-49.50M	-40.31M	-53.85M	-41.46M	14.05M
	EBITDA
-46.79M	-24.17M	-46.61M	-36.76M	19.41M
	Net Income Common Stockholders
-52.52M	-34.42M	-53.43M	-43.13M	6.84M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
54.58M	99.26M	119.31M	126.56M	106.05M
	Total Assets
158.24M	208.70M	237.40M	246.08M	183.82M
	Total Debt
8.06M	11.47M	21.69M	15.25M	17.26M
	Net Debt
-46.52M	-87.79M	-97.62M	-111.31M	-88.79M
	Total Liabilities
31.10M	49.70M	65.04M	65.83M	56.71M
	Stockholders Equity
127.14M	159.00M	172.35M	180.25M	127.10M
Cash Flow		Free Cash Flow
-28.19M	-13.89M	2.79M	-5.91M	-9.56M
	Operating Cash Flow
-25.94M	1.59M	16.51M	7.26M	-2.10M
	Investing Cash Flow
-16.76M	-15.48M	-13.72M	-19.09M	-7.46M
	Financing Cash Flow
-1.98M	-6.15M	-9.91M	32.35M	108.86M

Telos Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price2.71

Price Trends

50DMA

2.74

Negative

100DMA

3.05

Negative

200DMA

3.32

Negative

Market Momentum

MACD

-0.01

Negative

RSI

56.37

Neutral

STOCH

61.67

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TLS, the sentiment is Neutral. The current price of 2.71 is above the 20-day moving average (MA) of 2.46, below the 50-day MA of 2.74, and below the 200-day MA of 3.32, indicating a neutral trend. The MACD of -0.01 indicates Negative momentum. The RSI at 56.37 is Neutral, neither overbought nor oversold. The STOCH value of 61.67 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TLS.

Telos Risk Analysis

Telos disclosed 44 risk factors in its most recent earnings report. Telos reported the most risks in the “Ability to Sell” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Telos Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TSSI	68 Neutral	$188.47M	31.30	111.84%	―	172.33%	8237.50%
III	61 Neutral	$177.10M	64.73	2.86%	4.90%	-14.93%	-54.76%
Sector *	59 Neutral	$10.74B	10.21	-6.69%	3.04%	7.44%	-10.92%
CSPI	54 Neutral	$158.28M	40,050.00	0.17%	0.75%	-9.99%	-97.85%
TTEC	49 Neutral	$208.90M	―	-75.62%	1.37%	-10.32%	-3860.81%
TLS	44 Neutral	$202.90M	―	-36.71%	―	-25.52%	-46.44%
DMRC	38 Underperform	$279.69M	―	-63.28%	―	10.24%	19.28%

* Technology Sector Average

Performance Comparison

TLS

Telos

2.68

-0.89

-24.93%

DMRC

Digimarc

12.98

-9.40

-42.00%

III

Information Services Group

3.63

0.36

11.01%

TTEC

TTEC Holdings

4.23

-3.49

-45.21%

CSPI

CSP

16.45

3.02

22.49%

TSSI

TSS

7.53

6.73

841.25%

Telos Earnings Call Summary

Earnings Call Date: Mar 10, 2025 | % Change Since: -5.57% | Next Earnings Date: May 8, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted significant sequential revenue growth, especially in the Security Solutions segment and TSA PreCheck program expansion. However, cash flow challenges and delays in government awards presented concerns. The company remains optimistic about future growth, with a focus on existing and new business pipelines.

Highlights

Significant Revenue Growth and Margins

Telos delivered fourth-quarter revenue near the top end of the guidance range and adjusted EBITDA above the top end. Total company revenue grew 11% sequentially to $26.4 million. GAAP gross margin expanded nearly 600 basis points year-over-year to 40.3%, and cash gross margin expanded nearly 900 basis points year-over-year to 47%, the highest since the IPO in 2020.

Security Solutions Segment Success

Security solutions revenue grew 20% sequentially to $21.9 million or 83% of total company revenue. The transition from the incumbent contractor to the Defense Manpower Data Center (DMDC) program generated significant revenue, and TSA PreCheck enrollments grew over 30% sequentially.

Expansion of TSA PreCheck Program

The TSA PreCheck program expanded its network of enrollment centers from 26 to 218 locations in 2024. The program became the single largest by revenue during 2024 and is expected to deliver significant growth in 2025, with a target of 500 locations by year-end.

Strong Business Pipeline and New Orders

New orders were achieved with several customers, including the Office of Naval Intelligence, the U.S. Department of Energy, and a key renewal with the U.S. Federal government customer in the intelligence community. The automated message handling system (AMHS) business achieved key renewals as well.

Lowlights

Cash Flow Challenges

Cash flow from operations was a $10.5 million outflow, and free cash flow was a $14.8 million outflow, reflecting a short-term buildup of working capital associated with high growth programs and one-time CapEx investments.

Impact of Administrative Changes on New Awards

The change in administration has caused delays in the timing of awards from the government on single awards, affecting the company's ability to secure new contracts.

Revenue Recognition Adjustment

The revenue estimate for the DMDC and DHS programs was adjusted from $60 million to $85 million down to $50 million to $75 million due to the time phasing of revenue recognition during the first year, impacted by the mix of third-party solutions.

Company Guidance

In the Telos Corporation's fourth-quarter 2024 earnings call, the company provided guidance indicating positive momentum for 2025. The first quarter is expected to see a revenue increase of 7% to 15%, reaching $28.2 million to $30.2 million, driven primarily by security solutions. Adjusted EBITDA is forecasted to be a loss between $1.8 million and $800,000, with cash flow expected to be positive. For the full year 2025, Telos anticipates a return to revenue growth, with existing business projected to generate around $70 million, and the DMDC and DHS programs expected to contribute $50 million to $75 million. The TSA PreCheck program is positioned to expand significantly, targeting a market share in a $200 million market, supported by a planned increase in enrollment centers. The company also aims for improved gross margins due to a favorable shift towards higher-margin security solutions.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.