Executive Summary & Highlights Telos Corporation delivered strong Q2 2025 results, exceeding revenue guidance with significant year-over-year growth in Security Solutions, improved operating leverage, robust cash flow, and resumed share repurchases, while forecasting continued growth [Second Quarter 2025 Performance Highlights](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Highlights) Telos Corporation reported strong Q2 2025 results, exceeding revenue guidance with substantial year-over-year growth, particularly in Security Solutions. The company also demonstrated improved operating leverage and robust cash flow, leading to the resumption of share repurchases - Revenue: Delivered **$36.0 million**, above guidance, with **90.3%** from Security Solutions[4](index=4&type=chunk) - Revenue Growth: Grew **26.2%** year-over-year, driven by **81.8%** growth in Security Solutions, primarily due to rapid scaling of the Defense Manpower Data Center (DMDC) program and significant rollout of additional TSA PreCheck enrollment locations (increased from **56 to 357** locations year-over-year)[4](index=4&type=chunk) - GAAP Gross Margin: Was **33.2%**, contracting **89 bps** year-over-year primarily due to revenue mix; Cash Gross Margin was **38.4%**[4](index=4&type=chunk) - Adjusted EBITDA: Increased **$3.3 million** year-over-year to **$0.4 million**, with Incremental Adjusted EBITDA Margin of **44.4%** in Q2 and **71.0%** in the first half[4](index=4&type=chunk) - Cash Flow: Cash Flow from Operations was **$7.0 million** (**19.3%** of Revenue) in Q2 and **$13.1 million** (**19.6%** of Revenue) in H1. Free Cash Flow was **$4.6 million** (**12.9%** of Revenue) in Q2 and **$8.4 million** (**12.6%** of Revenue) in H1[4](index=4&type=chunk) - Share Repurchases: Deployed **$4.0 million** to repurchase approximately **1.5 million shares** at a weighted average price of **$2.69** per share[4](index=4&type=chunk) [Financial Summary Table](index=2&type=section&id=Financial%20Summary%20Table) This table provides a snapshot of key GAAP and non-GAAP financial metrics for Q2 2025 and Q2 2024, highlighting significant improvements in revenue, gross profit, and cash flow, despite an increase in GAAP net loss Financial Summary Table (in millions, except percentages and EPS) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Revenue | $36.0 million | $28.5 million | | Gross Profit | $11.9 million | $9.7 million | | Gross Margin | 33.2 % | 34.1 % | | Cash Gross Profit | $13.8 million | $12.0 million | | Cash Gross Margin | 38.4 % | 42.0 % | | GAAP Net Loss | $(9.5) million | $(7.8) million | | Adjusted EBITDA | $0.4 million | $(2.9) million | | Adjusted EBITDA Margin | 1.1 % | (10.3 %) | | GAAP EPS | $(0.13) | $(0.11) | | Adjusted EPS | $(0.03) | $(0.09) | | Cash Flow from Operations | $7.0 million | $(8.0) million | | Free Cash Flow | $4.6 million | $(11.3) million | | Free Cash Flow Margin | 12.9 % | (39.8 %) | [Outlook](index=1&type=section&id=Outlook) Telos forecasts accelerated growth for Q3 2025 and anticipates significant year-over-year improvements in revenue and Adjusted EBITDA, along with positive cash flow for the full year - Third Quarter Guidance: Forecasts **85% to 98%** year-over-year revenue growth, with Revenues of **$44 million - $47 million**, and Adjusted EBITDA of **$4.0 million to $5.7 million**[4](index=4&type=chunk) - Full Year Outlook: Forecasts significant year-over-year improvements in Revenue and Adjusted EBITDA, and positive cash flow[4](index=4&type=chunk) Forward-Looking Statements This section outlines the inherent uncertainties and risks associated with forward-looking statements, emphasizing that actual results may differ materially from projections and that the company undertakes no obligation to update them [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements based on management's current beliefs and expectations, subject to risks and uncertainties detailed in SEC filings. The company cautions against undue reliance and undertakes no obligation to update these statements publicly - Statements are based on management's current beliefs, expectations, and assumptions about future events, conditions, and results[6](index=6&type=chunk) - Forward-looking statements involve risks and uncertainties, including those described in the Company's filings and reports with the U.S. SEC (e.g., Form 10-K, 10-Q)[6](index=6&type=chunk) - The Company cautions readers not to place undue reliance on these statements as actual results may differ materially, and undertakes no obligation to update them publicly, except as required by law[7](index=7&type=chunk) Non-GAAP Financial Measures This section details Telos's use of non-GAAP financial measures to provide enhanced insight into core operating and cash flow performance, defining each measure and acknowledging their inherent limitations as analytical tools [Purpose and Use of Non-GAAP Measures](index=3&type=section&id=Purpose%20and%20Use%20of%20Non-GAAP%20Measures) Telos uses non-GAAP financial measures like EBITDA, Adjusted EBITDA, and Free Cash Flow to supplement GAAP results, believing they offer better consistency, comparability, and insight into core operating and cash flow performance for management, investors, and the Board of Directors - Non-GAAP measures are used to evaluate operating and cash flow performance, providing consistency and comparability with past financial performance and assisting in comparisons with other companies[8](index=8&type=chunk) - These measures offer a clear representation of the Company's core operating performance and trends, greater visibility into long-term financial performance, and eliminate the impact of items not related to ongoing operations[9](index=9&type=chunk) - Adjusted EBITDA and Free Cash Flow are used by the Board of Directors and management for annual budgeting, evaluating performance, and determining incentive compensation[9](index=9&type=chunk) [Definitions of Non-GAAP Measures](index=3&type=section&id=Definitions%20of%20Non-GAAP%20Measures) This section provides specific definitions for various non-GAAP financial measures used by Telos, including EBITDA, Adjusted EBITDA, Adjusted Net Loss, Adjusted EPS, Adjusted Gross Profit, Cash Gross Profit, Adjusted Operating Expenses, Cash Operating Expenses, and Free Cash Flow, detailing the adjustments made to GAAP figures - **EBITDA:** Net (loss) income, adjusted for non-operating (income) expense, interest expense, provision for (benefit from) income taxes, and depreciation and amortization[11](index=11&type=chunk) - **Adjusted EBITDA:** EBITDA, adjusted for stock-based compensation expense, impairment loss on intangible assets, and restructuring expenses[11](index=11&type=chunk) - **Adjusted Net Loss:** Net (loss) income, adjusted for non-operating (income) expense, stock-based compensation expense, impairment loss on intangible assets, and restructuring expenses[11](index=11&type=chunk) - **Free Cash Flow:** Net cash (used in) provided by operating activities, less net purchases of property and equipment, and capitalized software development costs[11](index=11&type=chunk) [Limitations of Non-GAAP Measures](index=4&type=section&id=Limitations%20of%20Non-GAAP%20Measures) Telos acknowledges that non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as substitutes for GAAP results. They do not reflect cash expenditures, certain charges, or income tax, and may not be comparable to similarly titled measures used by other companies - Non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of results reported under GAAP[12](index=12&type=chunk) - They do not reflect cash expenditures for capital or contractual commitments, the impact of certain cash and non-cash charges not indicative of ongoing operations, or income tax expense or benefit[12](index=12&type=chunk) - Other companies may calculate similarly-titled non-GAAP measures differently, limiting their usefulness as a comparative measure. Telos primarily relies on GAAP results and uses non-GAAP measures only for supplemental purposes[12](index=12&type=chunk) About Telos Corporation Telos Corporation (NASDAQ: TLS) provides continuous security assurance solutions for individuals, systems, and information, serving a global clientele across commercial, regulated, and government sectors [About Telos Corporation](index=4&type=section&id=About%20Telos%20Corporation) Telos Corporation (NASDAQ: TLS) empowers and protects the world's most security-conscious organizations with solutions for continuous security assurance of individuals, systems, and information, serving commercial enterprises, regulated industries, and government customers globally - Telos Corporation (NASDAQ: TLS) provides solutions for continuous security assurance of individuals, systems, and information[13](index=13&type=chunk) - Offerings include cybersecurity solutions for IT risk management and information security, cloud security solutions for asset protection and compliance, and enterprise security solutions for identity and access management, secure mobility, and network management[13](index=13&type=chunk) - The Company serves commercial enterprises, regulated industries, and government customers around the world[13](index=13&type=chunk) Consolidated Financial Statements (GAAP) This section presents Telos Corporation's GAAP financial statements, including statements of operations, balance sheets, and cash flows, detailing the company's financial performance and position for the reported periods [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations show Telos Corporation's financial performance for the three and six months ended June 30, 2025, and 2024. Key figures include total revenue, gross profit, operating expenses, and net loss Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Revenue – Security Solutions | $32,474 | $17,867 | $58,292 | $36,507 | | Revenue – Secure Networks | $3,494 | $10,631 | $8,292 | $21,610 | | Total revenue | $35,968 | $28,498 | $66,584 | $58,117 | | Gross profit | $11,932 | $9,707 | $24,114 | $20,668 | | Total operating expenses | $21,815 | $18,351 | $43,019 | $37,750 | | Operating loss | $(9,883) | $(8,644) | $(18,905) | $(17,082) | | Net loss | $(9,517) | $(7,757) | $(18,121) | $(15,135) | | Basic Net loss per share | $(0.13) | $(0.11) | $(0.25) | $(0.21) | - Total revenue increased by **26.2%** year-over-year in Q2 2025 (**$35.97 million** vs **$28.50 million**)[16](index=16&type=chunk) - Security Solutions revenue grew significantly by **81.8%** year-over-year in Q2 2025 (**$32.47 million** vs **$17.87 million**), while Secure Networks revenue decreased by **67.1%** year-over-year in Q2 2025 (**$3.49 million** vs **$10.63 million**)[16](index=16&type=chunk) - Net loss widened to **$(9.52) million** in Q2 2025 from **$(7.76) million** in Q2 2024[16](index=16&type=chunk) [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets present Telos Corporation's financial position as of June 30, 2025, and December 31, 2024. Total assets increased, driven by higher current assets, while total liabilities also rose significantly, primarily due to increases in accounts payable and contract liabilities Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total assets | $165,042 | $158,235 | | Cash and cash equivalents | $56,998 | $54,578 | | Total current assets | $102,776 | $91,418 | | Total liabilities | $46,629 | $31,098 | | Total current liabilities | $38,733 | $22,135 | | Total stockholders' equity | $118,413 | $127,137 | - Total assets increased by **$6.8 million** from **$158.2 million** at December 31, 2024, to **$165.0 million** at June 30, 2025[18](index=18&type=chunk) - Total liabilities increased by **$15.5 million** from **$31.1 million** at December 31, 2024, to **$46.6 million** at June 30, 2025, primarily due to increases in accounts payable and contract liabilities[18](index=18&type=chunk) - Total stockholders' equity decreased by **$8.7 million** from **$127.1 million** at December 31, 2024, to **$118.4 million** at June 30, 2025[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows detail the cash inflows and outflows for operating, investing, and financing activities for the three and six months ended June 30, 2025, and 2024. The company generated positive cash flow from operations in Q2 2025, a significant improvement from the prior year, but saw increased cash usage in financing activities due to share repurchases Consolidated Statements of Cash Flows (in thousands) | Metric | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net cash provided by (used in) operating activities | $6,950 | $(7,990) | $13,056 | $(8,340) | | Net cash used in investing activities | $(2,321) | $(5,498) | $(4,658) | $(9,647) | | Net cash used in financing activities | $(5,422) | $(322) | $(5,978) | $(1,168) | | Net change in cash, cash equivalents, and restricted cash | $(793) | $(13,810) | $2,420 | $(19,155) | | Cash, cash equivalents, and restricted cash, end of period | $57,137 | $80,241 | $57,137 | $80,241 | - Net cash provided by operating activities swung to a positive **$6.95 million** in Q2 2025 from a negative **$(7.99) million** in Q2 2024[20](index=20&type=chunk) - Net cash used in investing activities decreased to **$(2.32) million** in Q2 2025 from **$(5.50) million** in Q2 2024, primarily due to no purchase of investment in Q2 2025[20](index=20&type=chunk) - Net cash used in financing activities significantly increased to **$(5.42) million** in Q2 2025 from **$(0.32) million** in Q2 2024, largely due to **$4.00 million** in common stock repurchases[20](index=20&type=chunk) Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP financial measures to their non-GAAP counterparts, including EBITDA, Adjusted EBITDA, Adjusted Net Loss, Adjusted EPS, Gross Profit, Cash Gross Profit, Free Cash Flow, and Operating Expenses, to offer a clearer view of underlying performance [Reconciliation of Net Loss to EBITDA and Adjusted EBITDA](index=8&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20EBITDA%20and%20Adjusted%20EBITDA) This reconciliation details the adjustments made to GAAP Net Loss to arrive at EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2025, and 2024. Adjusted EBITDA showed a significant positive swing year-over-year, reflecting improved operational performance excluding non-cash and non-recurring items Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (in thousands) | Metric | Q2 2025 Amount | Q2 2025 Margin | Q2 2024 Amount | Q2 2024 Margin | YoY Change Amount | YoY Change Margin | | :------------------------------------ | :------------- | :------------- | :------------- | :------------- | :---------------- | :---------------- | | Net loss | $(9,517) | (26.5%) | $(7,757) | (27.2%) | $(1,760) | (23.6%) | | EBITDA (Non-GAAP) | $(7,374) | (20.5%) | $(5,153) | (18.1%) | $(2,221) | (29.7%) | | Stock-based compensation expense | $7,757 | 21.6% | $2,219 | 7.8% | $5,538 | 74.1% | | Adjusted EBITDA (Non-GAAP) | $383 | 1.1% | $(2,934) | (10.3%) | $3,317 | 44.4% | - Adjusted EBITDA improved by **$3.32 million**, moving from **$(2.93) million** in Q2 2024 to **$0.38 million** in Q2 2025[22](index=22&type=chunk) - Stock-based compensation expense significantly increased to **$7.76 million** in Q2 2025 from **$2.22 million** in Q2 2024[22](index=22&type=chunk) [Reconciliation of Net Loss to Adjusted Net Loss and EPS to Adjusted EPS](index=9&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20Adjusted%20Net%20Loss%20and%20EPS%20to%20Adjusted%20EPS) This reconciliation adjusts GAAP Net Loss and EPS for non-operating income, stock-based compensation, and restructuring expenses to present Adjusted Net Loss and Adjusted EPS. The adjustments show a reduced net loss and improved EPS on an adjusted basis compared to GAAP Reconciliation of Net Loss to Adjusted Net Loss and EPS to Adjusted EPS (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Net loss | $(9,517) | $(7,757) | $(18,121) | $(15,135) | | Stock-based compensation expense | $7,757 | $2,219 | $14,805 | $5,203 | | Adjusted net loss (Non-GAAP) | $(2,313) | $(6,602) | $(4,430) | $(12,258) | | Adjusted EPS (Non-GAAP) | $(0.03) | $(0.09) | $(0.06) | $(0.17) | - Adjusted net loss significantly narrowed to **$(2.31) million** in Q2 2025 from **$(6.60) million** in Q2 2024[25](index=25&type=chunk) - Adjusted EPS improved to **$(0.03)** in Q2 2025 from **$(0.09)** in Q2 2024[25](index=25&type=chunk) [Reconciliation of Gross Profit to Adjusted and Cash Gross Profit](index=9&type=section&id=Reconciliation%20of%20Gross%20Profit%20to%20Adjusted%20and%20Cash%20Gross%20Profit) This reconciliation shows the adjustments from GAAP Gross Profit to Adjusted Gross Profit and Cash Gross Profit, primarily by adding back stock-based compensation and depreciation/amortization. While GAAP Gross Margin slightly contracted, Cash Gross Margin remained healthy, indicating strong core profitability before non-cash items Reconciliation of Gross Profit to Adjusted and Cash Gross Profit (in thousands) | Metric | Q2 2025 Amount | Q2 2025 Margin | Q2 2024 Amount | Q2 2024 Margin | | :------------------------------------ | :------------- | :------------- | :------------- | :------------- | | Gross profit | $11,932 | 33.2% | $9,707 | 34.1% | | Stock-based compensation expense — cost of sales | $149 | 0.4% | $228 | 0.8% | | Adjusted gross profit (Non-GAAP) | $12,081 | 33.6% | $9,935 | 34.9% | | Depreciation and amortization — cost of sales | $1,715 | 4.8% | $2,039 | 7.1% | | Cash gross profit (Non-GAAP) | $13,796 | 38.4% | $11,974 | 42.0% | - Cash Gross Profit increased to **$13.80 million** in Q2 2025 from **$11.97 million** in Q2 2024[26](index=26&type=chunk) - Cash Gross Margin was **38.4%** in Q2 2025, a decrease from **42.0%** in Q2 2024[26](index=26&type=chunk) [Reconciliation of Cash Flow from Operations to Free Cash Flow](index=10&type=section&id=Reconciliation%20of%20Cash%20Flow%20from%20Operations%20to%20Free%20Cash%20Flow) This reconciliation shows the derivation of Free Cash Flow from Net Cash Provided by (Used in) Operating Activities by subtracting capitalized software development costs and purchases of property and equipment. The company achieved positive Free Cash Flow in Q2 2025, a significant turnaround from the prior year Reconciliation of Cash Flow from Operations to Free Cash Flow (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------------ | :------ | :------ | :------ | :------ | | Net cash provided by (used in) operating activities | $6,950 | $(7,990) | $13,056 | $(8,340) | | Capitalized software development costs | $(2,187) | $(3,113) | $(4,401) | $(6,315) | | Purchases of property and equipment | $(134) | $(235) | $(257) | $(332) | | Free cash flow (Non-GAAP) | $4,629 | $(11,338) | $8,398 | $(14,987) | | Free cash flow margin (Non-GAAP) | 12.9% | (39.8%) | 12.6% | (25.8%) | - Free Cash Flow improved significantly to **$4.63 million** in Q2 2025 from **$(11.34) million** in Q2 2024[27](index=27&type=chunk) - Free Cash Flow Margin was **12.9%** in Q2 2025, a substantial improvement from **(39.8%)** in Q2 2024[27](index=27&type=chunk) [Reconciliation of Operating Expenses to Adjusted and Cash Operating Expenses](index=10&type=section&id=Reconciliation%20of%20Operating%20Expenses%20to%20Adjusted%20and%20Cash%20Operating%20Expenses) This reconciliation adjusts GAAP Operating Expenses to Adjusted Operating Expenses and Cash Operating Expenses by removing stock-based compensation, restructuring adjustments, depreciation/amortization, and adding back capitalized software R&D costs. Adjusted operating expenses decreased year-over-year, contributing to improved operating leverage Reconciliation of Operating Expenses to Adjusted and Cash Operating Expenses (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Operating expenses | $21,815 | $18,351 | $43,019 | $37,750 | | Stock-based compensation expense | $(7,608) | $(1,991) | $(14,466) | $(4,718) | | Adjusted operating expenses (Non-GAAP) | $14,207 | $16,360 | $28,553 | $33,042 | | Cash operating expenses (Non-GAAP) | $15,562 | $18,022 | $31,345 | $35,879 | - Adjusted operating expenses decreased to **$14.21 million** in Q2 2025 from **$16.36 million** in Q2 2024[28](index=28&type=chunk) - Cash operating expenses decreased to **$15.56 million** in Q2 2025 from **$18.02 million** in Q2 2024[28](index=28&type=chunk)

Core Viewpoint - Telos Corporation is set to report its second quarter 2025 financial results on August 11, 2025, and will host a webcast to discuss these results and the business outlook [1][2]. Group 1: Financial Results Announcement - The second quarter 2025 financial results will be reported on August 11, 2025 [1]. - A webcast will be held at 9:30 a.m. ET to discuss the financial results and business outlook [1][2]. Group 2: Company Overview - Telos Corporation provides cybersecurity, cloud, and enterprise security solutions for security-conscious organizations [3]. - The company's offerings include IT risk management, information security, cloud security, identity and access management, secure mobility, organizational messaging, and network management [3]. - Telos serves commercial enterprises, regulated industries, and government customers globally [3].

Core Points - ItsEasy.com Passport & Visa Services and Telos Corporation have launched two permanent TSA PreCheck enrollment centers in Manhattan, specifically at the MetLife Building and Rockefeller Center [1][2] - The partnership aims to enhance customer service by addressing the growing travel needs and streamlining the travel document processes [2] - Telos now operates 387 TSA PreCheck enrollment and renewal locations across the U.S., facilitating easier access for travelers [4] Company Overview - ItsEasy.com has processed over 2 million passport and visa applications and has been a trusted agent of the U.S. Department of State since 1976 [9] - The company specializes in expediting passport and visa services, ensuring compliance with governmental requirements, and providing customer support throughout the application process [9] - Telos Corporation focuses on cybersecurity solutions and serves various sectors, including commercial enterprises and government customers [10] TSA PreCheck Program - TSA PreCheck is a Trusted Traveler program that allows expedited screening for enrolled travelers, with over 22 million active members [8] - Members enjoy benefits such as faster security screening, with 99% of members waiting less than 10 minutes at checkpoints [6] - The program is available at over 200 airports and involves a straightforward enrollment process, including online pre-enrollment and in-person appointments [7]

Core Points - ItsEasy.com and Telos Corporation have launched two permanent TSA PreCheck enrollment centers in Manhattan, New York, enhancing travel convenience for customers [1][2] - The enrollment centers are located at the MetLife Building and Rockefeller Center, following successful pop-up events in March 2025 [1][2] - Telos Corporation now operates 387 TSA PreCheck enrollment locations across the U.S., streamlining travel for millions [4] Company Overview - ItsEasy.com is a leading passport and visa expediting company that has processed over 2 million applications and has been a trusted agent of the U.S. Department of State since 1976 [9] - Telos Corporation (NASDAQ: TLS) provides cybersecurity solutions and services for security-conscious organizations, focusing on continuous security assurance [10] TSA PreCheck Program - TSA PreCheck is a Trusted Traveler program that allows expedited screening for enrolled travelers, with over 22 million active members since its launch in December 2013 [8] - Members enjoy benefits such as faster security screening, with about 99% waiting less than 10 minutes at checkpoints [6] - The program is available at over 200 airports, and applicants can pre-enroll online and schedule in-person appointments [7]

Core Insights - Telos Corporation's Xacta® platform has achieved FedRAMP High authorization, allowing it to operate securely for sensitive government operations [1][2][3] - This designation enhances Xacta's appeal to federal agencies and positions Telos as a leader in cybersecurity and compliance [3][4] - The FedRAMP High authorization is expected to drive growth in the secure SaaS market due to increasing demand for effective cyber risk management solutions [3] Company Overview - Telos Corporation provides cybersecurity, cloud security, and enterprise security solutions for various sectors, including government and regulated industries [6] - The company focuses on continuous security assurance for individuals, systems, and information [6] - Telos aims to empower organizations with tools to manage security risks effectively, especially in the face of sophisticated threats [2][3] Product Features - Xacta offers intelligent workflow, automated control selection, assessment, and continuous compliance monitoring [4] - The platform includes a comprehensive knowledge base of security requirements and test procedures, aligned with government and industry standards [4] - Telos is committed to integrating advanced technologies, including artificial intelligence, into the Xacta environment [4] Market Position - The FedRAMP High designation positions Xacta to support mission-critical operations for federal agencies, safeguarding sensitive information [3] - Earlier in the year, Xacta also received StateRAMP High authorization, establishing Telos as a trusted partner for state and local government agencies [5]

Core Points - Telos Corporation has expanded its TSA PreCheck enrollment network by opening 41 new locations in May and another 41 in June 2025, totaling 350 enrollment centers across 38 states [1][2][3] - The expansion aims to provide greater access and convenience for travelers, allowing them to enroll in TSA PreCheck at various partner locations, including Office Depot [1][2] - TSA PreCheck members enjoy expedited security screening, with 99% of members waiting less than 10 minutes at airport checkpoints [3][5] Company Overview - Telos Corporation (NASDAQ: TLS) specializes in security solutions, including cybersecurity, cloud security, and enterprise security for various sectors, including commercial and government clients [6] - The company is an authorized provider for TSA PreCheck, a program designed to expedite airport security for low-risk travelers, which has grown to over 20 million active members since its launch in December 2013 [5][6] Enrollment Process - New TSA PreCheck applicants can pre-enroll or schedule appointments through the Telos TSA PreCheck website, while existing members can renew their membership online [4] - The TSA PreCheck program is part of the Department of Homeland Security's Trusted Traveler initiative, facilitating faster security checks at over 200 airports with participation from more than 90 airlines [5]

Core Insights - Telos Corporation has secured a $3.7 million contract extension with the U.S. Air Force to provide automation solutions for cyber governance, risk, and compliance through its platform Xacta [2][3] - The contract aims to assist the Air Force Intelligence Community in automating a significant portion of its cyber GRC requirements across various environments, including top secret and secret networks [2][3] - The CEO of Telos expressed pride in continuing to support the Air Force in meeting complex cybersecurity standards and reducing compliance burdens through the efficiency of Xacta [3] Company Overview - Telos Corporation (NASDAQ: TLS) specializes in cybersecurity, cloud security, and enterprise security solutions, catering to security-conscious organizations globally [6] - The company's offerings include IT risk management, information security, cloud-based asset protection, identity and access management, and network defense [6] - Telos serves a diverse clientele, including commercial enterprises, regulated industries, and government customers [6]

Core Points - Telos Corporation has been awarded a $14 million contract over five years by the Defense Information System Agency (DISA) to support the Organizational Messaging Service with its Automated Message Handling System (AMHS) [1] - DISA provides assured messaging and directory services to various military and government entities, facilitating secure information exchange and interoperability [2] - The Telos AMHS solution is utilized by multiple organizations, including the U.S. Army, Marine Corps, and various Defense and Intelligence Agencies, ensuring compliance with official messaging standards [3][4] Company Overview - Telos Corporation specializes in cybersecurity, cloud security, and enterprise security solutions, serving security-conscious organizations globally [4] - The company's offerings include IT risk management, information security, identity and access management, and secure mobility solutions [4]

Revenue Performance - Consolidated revenue for the first quarter of FY 2025 was $30.616 million, a year-over-year increase of 3.4% from $29.619 million in FY 2024[93] - Security Solutions segment revenue increased by 38.5% to $25.818 million, driven by the successful ramp-up of a significant program[98] - Secure Networks segment revenue decreased by 56.3% to $4.798 million, primarily due to the ramp-down of several programs[100] Profitability Metrics - Gross margin improved to 39.8% in Q1 FY 2025 from 37.0% in Q1 FY 2024, attributed to a more favorable program mix[93] - Net loss for Q1 FY 2025 was $8.604 million, compared to a net loss of $7.378 million in Q1 FY 2024, reflecting a year-over-year increase of 16.6%[93] - Adjusted EBITDA for Q1 FY 2025 was $362,000, a significant improvement from an adjusted loss of $2.335 million in Q1 FY 2024[106] - Adjusted net loss for the three months ended March 31, 2025, was $2.1 million, or $0.03 per share, compared to an adjusted net loss of $5.7 million, or $0.08 per share, for the same period in 2024[109] Expenses Overview - Operating expenses rose by $1.8 million, or 9.3%, in Q1 FY 2025 compared to the same period in FY 2024, with selling, general and administrative expenses increasing by 21.0%[95] - Research and development expenses declined by 50.4% in Q1 FY 2025, due to lower amortization costs and discontinued development of selected solutions[95] - The company reported stock-based compensation expense of $7.0 million for the three months ended March 31, 2025, compared to $3.0 million for the same period in 2024[109] Cash Flow and Liquidity - Free cash flow for the three months ended March 31, 2025, was $3.8 million, an increase from a negative free cash flow of $3.6 million for the same period in 2024[115] - Net cash provided by operating activities for the three months ended March 31, 2025, was $6.1 million, an increase of $6.5 million compared to the same period in 2024[120] - Cash and cash equivalents as of March 31, 2025, were $57.8 million, with working capital of $70.6 million[118] - Net cash used in investing activities for the three months ended March 31, 2025, decreased by $1.8 million compared to the same period in 2024, primarily due to reduced capital expenditures[121] - The company has a $30.0 million revolving credit facility with a maturity date of December 30, 2025, providing additional liquidity if needed[117] - The company emphasizes liquidity management to maintain a strong balance sheet and support future opportunities[119] Other Income - Other income decreased by 55.2% in Q1 FY 2025, primarily due to a decrease in dividend income from money market placements[96] Gross Profit - Gross profit for the three months ended March 31, 2025, was $12.2 million, representing a gross margin of 39.8%, compared to a gross profit of $11.0 million and a margin of 37.0% for the same period in 2024[112] - Adjusted gross profit for the three months ended March 31, 2025, was $12.4 million, with an adjusted gross margin of 40.4%, compared to $11.2 million and 37.9% for the same period in 2024[112] Government Contracts - The company generated approximately 89% of total revenues from contracts with U.S. government agencies in Q1 FY 2025[89]

Financial Performance - Telos Corporation reported a quarterly loss of $0.03 per share, better than the Zacks Consensus Estimate of a loss of $0.05, and an improvement from a loss of $0.08 per share a year ago, representing an earnings surprise of 40% [1] - The company posted revenues of $30.62 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 4.73% and showing an increase from $29.62 million in the same quarter last year [2] - Over the last four quarters, Telos has exceeded consensus EPS estimates four times and has also topped consensus revenue estimates four times [2] Stock Performance and Outlook - Telos shares have declined approximately 28.4% since the beginning of the year, compared to a decline of 3.7% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is -$0.05 on revenues of $32.52 million, and for the current fiscal year, it is -$0.16 on revenues of $145.4 million [7] - The estimate revisions trend for Telos is mixed, resulting in a Zacks Rank 3 (Hold), indicating that shares are expected to perform in line with the market in the near future [6] Industry Context - The Computers - IT Services industry, to which Telos belongs, is currently in the top 38% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]