Financial Data and Key Metrics Changes - Revenue grew 116% in Q3 2025 to $51.4 million, exceeding guidance of $44-$47 million [7] - GAAP gross margin was 39.9%, and cash gross margin was 44.8%, both above guidance and previous quarter margins [7] - Adjusted EBITDA was $10.1 million, surpassing guidance of $4-$5.7 million, with an adjusted EBITDA margin of 19.6% [8][10] - Free cash flow was $6.6 million, representing a 12.8% free cash flow margin [8] Business Line Data and Key Metrics Changes - Telos ID was a significant driver of revenue growth, contributing to the overall performance [5][15] - Adjusted operating expenses were approximately $500,000 better than guidance due to cost discipline [7] Market Data and Key Metrics Changes - The company achieved a cumulative revenue growth of 44% in the first nine months of 2025 [9] - Cash gross margin expanded by 30 basis points to 43% year-over-year [9] Company Strategy and Development Direction - The company plans to continue evolving its Xacta platform with increased automation and new features [11] - The TSA PreCheck program has reached 504 enrollment locations, with plans for further evaluation and improvement [12][13] - The company forecasts existing programs will generate approximately $180 million in revenue for 2026, driven by growth in Telos ID [14] Management's Comments on Operating Environment and Future Outlook - Management noted that the government shutdown has caused delays in awards and administrative processes, but the impact on P&L has been modest [18][19] - The company maintains a robust pipeline of opportunities, with several tens of millions of revenue expected from new business in 2026 [21][41] - Management expressed confidence in continued year-over-year growth into the fourth quarter and 2026 [15][68] Other Important Information - The company has a multi-billion dollar pipeline of new business opportunities, with expectations for significant awards in the coming months [21][41] - The company has deployed $7.6 million to repurchase 2.1 million shares at a weighted average price of $3.69 per share [10] Q&A Session Summary Question: Impact of government shutdown on award decisions - Management indicated that awards are stalled and generally delayed due to the government shutdown, but the impact on P&L has been modest [18][19] Question: Initial feedback on Xacta AI product - Management reported strong initial traction with one major enterprise deployment and positive customer feedback [22][29] Question: Growth plans for TSA PreCheck program - Management stated that they will continue to evaluate and expand the network of enrollment locations to serve travelers better [36][38] Question: Revenue potential from the pipeline for 2026 - Management confirmed that the pipeline remains robust, with several tens of millions of revenue expected from new business opportunities [41][56] Question: Upsell potential for existing Xacta customers - Management noted significant excitement among existing customers for Xacta AI, with plans to target the installed base first [44][45]

Financial Performance - Q3 2025 - Revenue reached $51.4 million, exceeding guidance of $44.0 million to $47.0 million, representing a 116% year-over-year growth[9, 11] - GAAP Gross Margin was 39.9%, surpassing the assumed guidance of approximately 34.0% to 35.5%[9, 11] - Cash Gross Margin was 44.8%, exceeding the assumed guidance range due to strong performance across all business lines[9, 11] - Adjusted EBITDA reached $10.1 million with a 19.6% margin, exceeding the top end of the guidance range[9] - Cash Flow from Operations was $9.1 million, and Free Cash Flow was $6.6 million, marking a year-over-year growth of $16.5 million[9, 11] Financial Performance - 9 Months 2025 - Revenue increased by 44% to $118.0 million from $81.9 million in the same period of the previous year[15] - Adjusted EBITDA increased by $20.3 million to $10.8 million[15] - Free Cash Flow increased by $39.9 million[15] Business Segments - Security Solutions revenue increased by 154% year-over-year to $46.5 million for the nine months ended September 30, 2025, driven by expansion within the Telos ID portfolio[17] - Secure Networks revenue decreased by 9% year-over-year to $5.0 million for the nine months ended September 30, 2025, primarily due to the completion of certain programs[17] Future Outlook - Q4 2025 - The company forecasts revenue growth of 67% to 76% year-over-year, projecting revenue between $44.0 million and $46.3 million[20]

Financial Data and Key Metrics Changes - The company achieved record net revenue and record adjusted EBITDA in Q3 2025, with the Live and Historical Racing segment also reporting record figures [8][28] - The Live and Historical Racing segment grew revenue by 21% and adjusted EBITDA by 25% compared to the prior year quarter, marking the twenty-first consecutive quarter of record growth [29] - Free cash flow generated was $166 million or $2.34 per share, up 13% from the prior year quarter, with a free cash flow yield of approximately 10% [33][34] Business Line Data and Key Metrics Changes - The Wagering Services and Solutions segment delivered record adjusted EBITDA driven by the growth of the Xacta business, benefiting from Kentucky and Virginia properties [32] - Regional gaming properties performed well, with adjusted EBITDA for wholly owned gaming properties increasing over $3 million, excluding the impact of removing HRMs from Louisiana operations [32] Market Data and Key Metrics Changes - The company is expanding its HRM operations in Kentucky and Virginia, with significant growth in gross gaming revenues and customer databases [19][20] - The Virginia market showed strong performance, with GGR per unit per day increasing every month of Q3 2025 [30] Company Strategy and Development Direction - The company plans to invest $280 million to $300 million in a new structure called Victory Run, aimed at enhancing the guest experience during Derby Week [15] - Five key growth catalysts for the Kentucky Derby were identified: ticketing revenue, broadcast rates, wagering, sponsorships, and selective renovations [10][14][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the Kentucky Derby and HRM properties, emphasizing the importance of strategic investments [26][37] - The company is focused on maintaining a disciplined capital allocation strategy while aiming to reduce leverage below four times by 2026 [35][36] Other Important Information - The company announced a 7% increase in dividends, marking the fifteenth consecutive year of increased dividends per share [35] - The federal tax bill signed on July 4 is expected to improve free cash flow through lower cash tax payments [36] Q&A Session Summary Question: ROI targets for Victory Run - The company targets a 20% unlevered IRR, focusing on achieving this within three years [41] Question: Prospective opportunity for ETGs - Management acknowledged the importance of electronic table games as a growth opportunity but noted the need for regulatory progress [45][47] Question: Capital allocation strategy - The company is committed to balancing share repurchases with capital investments, aiming to reduce leverage while maintaining strategic growth [50][51] Question: Benefits of owning properties outright - Owning real estate provides stability and predictability, which management believes is not fully recognized in the market [53][54] Question: M&A environment - There has been a recent pickup in M&A activity, and the company remains opportunistic in both acquisitions and sales [57][59] Question: Virginia illegal machines enforcement - Management reported strong enforcement against illegal machines but acknowledged ongoing challenges, stating it has not significantly impacted business [90][92]

Core Insights - A U.S. federal agency will be the first to deploy Telos' AI-powered cyber governance, risk, and compliance (GRC) platform, Xacta.ai, enterprise-wide, marking a significant milestone for the company [1][2][3] Company Overview - Telos Corporation specializes in cybersecurity, cloud, and enterprise security solutions, serving security-conscious organizations globally [5] - The company offers a range of solutions including IT risk management, cloud security, and enterprise security for identity and access management [5] Product Details - Xacta.ai integrates intelligent workflows, real-time insights, and automated compliance mapping to enhance operational efficiency [2][3] - The platform has demonstrated the ability to reduce compliance tasks from months to days and generate implementation statements in minutes [3] Market Context - The deployment of Xacta.ai comes at a time when regulatory and cybersecurity pressures are increasing, necessitating faster and more effective cyber GRC solutions [4]

Core Insights - Telos Corporation has launched Xacta.ai, an AI capability designed to enhance cyber governance, risk, and compliance (GRC) processes, enabling organizations to transition from reactive compliance to proactive risk management [2][3] - Xacta.ai integrates unique organizational content with existing data to provide real-time, actionable insights, significantly reducing compliance timelines and improving decision-making [3][4] Product Features - Xacta.ai can reduce critical compliance tasks from 4-6 months to just nine days, achieving a 93% overall time savings in generating control implementation statements [5] - The AI is built on 25 years of expertise in GRC, allowing it to provide context-aware responses to complex questions in seconds [6][7] - Key capabilities include instant control implementation, AI-driven control validation, risk remediation, contextual risk insights, and an adaptive prompt library [11] Market Context - Organizations are under increasing pressure to manage compliance obligations efficiently, and Xacta.ai addresses this by embedding regulatory and security expertise into AI-assisted workflows [4] - The trend in the market is shifting towards using AI to empower more effective risk management rather than replacing governance processes [4]

Core Insights - Telos Corporation has secured a $2.2 million contract with a U.S. federal agency to implement its Xacta cyber governance, risk, and compliance platform [1] - The contract emphasizes the growing adoption of Telos solutions by federal agencies aiming to reduce compliance costs and enhance security operations [3][4] Group 1: Contract Details - The federal agency will utilize Xacta's capabilities within the Telos FedRAMP High environment to manage complex compliance requirements [2] - The agency will benefit from premium support services and the full suite of Xacta capabilities, which will help reduce manual workloads and improve security oversight [2] Group 2: Strategic Implications - This contract signifies Telos' expanding presence in the government sector and aligns with the company's strategy to provide scalable compliance solutions to both government and commercial clients [4] - The award reflects the trust federal agencies have in Xacta to fulfill critical compliance and cybersecurity needs, highlighting the increasing demand for automation in compliance processes [4]

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 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]

Financial Data and Key Metrics Changes - Total company revenue grew 16% sequentially to $30.6 million, exceeding guidance [7] - GAAP gross margin was 39.8%, and cash gross margin was 45.3%, both exceeding guidance due to a favorable mix [8] - Adjusted EBITDA was a profit of $362,000 compared to guidance of a loss between $1.8 million to $800,000 [8] - Cash flow from operations was positive at $6.1 million, and free cash flow was positive at $3.8 million [9] Business Line Data and Key Metrics Changes - Security Solutions revenue grew 18% sequentially to $25.8 million, while Secure Networks revenue grew 8% sequentially to $4.8 million [8] - Security Solutions revenue increased from 63% of total company revenue in Q1 2024 to 84% in Q1 2025 [10] - Adjusted operating expenses declined by $1.3 million year over year due to a restructuring and cost reduction plan [11] Market Data and Key Metrics Changes - Revenue grew 3% year over year, driven by a 39% increase in Security Solutions, partially offset by contraction in Secure Networks [9] - Cash flow from operations increased by $6.5 million year over year, and free cash flow increased by $7.4 million [11] Company Strategy and Development Direction - The company is focusing on expanding its TSA PreCheck program, targeting 500 enrollment locations by the end of 2025 [12][13] - The DMDC program is expected to be a major source of revenue growth over the next several quarters [13] - The company anticipates year-over-year growth in revenue, adjusted EBITDA, and cash flow to accelerate in the second half of 2025 [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver mission-critical offerings to government customers and highlighted the robust pipeline of opportunities [19][29] - The company expects cash flow to significantly improve year over year, driven by TSA PreCheck performance [31] - Management acknowledged that the renewal market is expected to contract significantly this year [52] Other Important Information - The company has achieved new orders with several customers, including federal government agencies and a Fortune 100 technology company [14] - The business pipeline remains robust, with over $4 billion in opportunities [29] Q&A Session Summary Question: Any changes on the new business front and margin profile for DMDC? - Management indicated that DMDC will generate substantial revenue but will be dilutive to overall margins as lower margin revenue streams ramp up [25][26] Question: What is the expected cash gross margin by year-end? - Management suggested a potential step down of approximately 600 basis points in cash gross margin from the first half to the second half of the year [37] Question: Performance of existing TSA PreCheck footprint and rollout visibility? - Management expressed confidence in TSA PreCheck as a key driver of financial performance, with significant cash flow expected [31] Question: Expectations for free cash flow in Q2 and full year? - Management did not provide specific guidance for Q2 free cash flow but indicated a significant improvement year over year compared to the previous year [42][48] Question: Which business line was the bigger outperformer in Q1? - Management confirmed that Security Solutions was the bigger outperformer, driven by both TSA PreCheck and DMDC [49][50]

Financial Data and Key Metrics Changes - Total company revenue grew 11% sequentially to $26.4 million in Q4 2024, near the top end of guidance [9] - Adjusted EBITDA improved sequentially by $4 million to a $200,000 loss [34] - 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% [11] Business Line Data and Key Metrics Changes - Security solutions revenue grew 20% sequentially to $21.9 million, representing 83% of total company revenue [9] - Revenue from TSA PreCheck enrollments grew over 30% sequentially [9] - Secure Networks delivered $4.5 million of revenue, representing 17% of total company revenue, but declined sequentially as expected [10] Market Data and Key Metrics Changes - The TSA PreCheck program became the single largest program by revenue during 2024, with significant growth expected in 2025 [18] - The company increased its enrollment centers from 26 to 218 locations across the U.S. [16] Company Strategy and Development Direction - The company is focusing on optimizing performance for customers through automation and is prioritizing task orders from existing contract vehicles due to delays in single awards [40] - The company aims to target 500 TSA PreCheck enrollment locations by the end of 2025 [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the new administration being generally positive for the company, despite delays in single awards [40] - The company expects to generate positive cash flow in Q1 2025 and significant improvements in revenue, profit, and cash flow for the full year [36] Other Important Information - The company anticipates revenue for the full year 2025 to be driven by existing business, TSA PreCheck, and new program wins with DMDC and DHS [29][30] - The company is experiencing delays in the timing of awards from the government but is not seeing similar delays on task orders [23] Q&A Session Summary Question: Impact of the change in administration on single award programs - Management noted that while the new administration is generally positive, single awards are being held back for review, leading to a focus on task orders from existing contracts [40] Question: Details on revenue recognition for DMDC and DHS programs - Management clarified that the mix of third-party content is more weighted to software, affecting revenue recognition timing in the first year [44][45] Question: TSA PreCheck revenue potential based on current rollout - Management confirmed that the framework for estimating TSA PreCheck revenue is correct, with expectations for revenue to ramp as more locations open [51] Question: Cash flow expectations for Q1 and the full year - Management indicated that Q1 cash flow will benefit from working capital buildup and expects positive free cash flow for the full year, with breakeven adjusted EBITDA around $155 million to $160 million in revenue [54][55]