Telos Corporation

Total company revenue increased 33% year over year to $47.7 million, above guidance of $44 million to $46 million. GAAP gross margin was 35% and cash gross margin was 40.6%; adjusted operating expenses declined by more than $800 thousand year over year but were about $500 thousand above assumptions. Adjusted EBITDA was $6.9 million versus guidance of $5 million to $6 million, with adjusted EBITDA margin at 14.4% versus 1.1% in the prior year. Operating cash flow was $8.8 million and free cash flow was $6.6 million, a 13.9% margin. For Q3, revenue is guided to $49.2 million to $50.6 million, cash gross margin to 37.5% to 38.5%, adjusted operating expenses about $400 thousand lower than the prior year, and adjusted EBITDA to $6 million to $6.8 million. Full-year revenue outlook is $187 million to $195 million; adjusted EBITDA is raised to $23.6 million to $28.6 million from $20.6 million to $28 million; adjusted EBITDA margin is raised to 12.6% to 14.7%; and cash gross margin is raised to 39% to 40% from 38.2% to 39.5%.

John Wood said the quarter showed Telos is becoming a more profitable, cash-generative, and scalable business. He emphasized the company’s focus on solving mission-critical security problems for customers through cybersecurity, digital identity, and secure networking, and said management remains confident in the strategy and pipeline. His tone was constructive and shareholder-oriented, including a willingness to consider a change-of-control transaction if it clearly created superior value.

Mark Bendza highlighted strong execution across revenue, margins, and cash flow, noting that results exceeded the high end of guidance and that cash generation remains a core strength. He cited $47.7 million of revenue, 35% GAAP gross margin, 40.6% cash gross margin, $6.9 million of adjusted EBITDA, and $6.6 million of free cash flow, plus $4.7 million spent to repurchase more than 1 million shares at an average price of $4.50. He also walked through the guidance raise, explaining that better first-half gross margin, lower OpEx, and the phaseout of low-margin third-party software support a higher full-year EBITDA and cash gross margin outlook even as revenue is trimmed by about $2.5 million at the midpoint.

Analysts focused on TSA PreCheck momentum, the new post office pilot, the upcoming government award cycle, and the phasing out of low-margin software revenue. Management said TSA PreCheck is doing well, with market share up significantly year over year and normal second-half seasonality expected, while the post office pilot is expanding with a couple additional sites coming soon. On the pipeline, they said there is now a little over $500 million in proposals outstanding, with award decisions expected in the second half and potentially into the fourth quarter if budget timing allows; they also clarified that the $33 million of phased-out software revenue is separate from the Q3 2025 nonrecurring startup revenue and began around Q2 2025.