Telos (TLS) investor relations material

Executive summary

• Revenue increased 33% year-over-year to $47.7 million in Q2 2026, surpassing guidance, driven by 44% growth in Security Solutions, especially from Telos ID program expansion.

• GAAP Net Income reached $0.7 million, a turnaround from a $9.5 million loss in the prior year quarter, with operating expenses falling 24.9% due to cost discipline.

• Adjusted EBITDA was $6.9 million, with margin expanding to 14.4% from 1.1% year-over-year.

• Free Cash Flow rose 43% year-over-year to $6.6 million, marking the sixth consecutive quarter above 12% margin.

• $4.7 million was used to repurchase over 1 million shares at an average price of $4.50 per share.

Financial highlights

• Gross Margin improved to 35.0% from 33.2% year-over-year; Cash Gross Margin rose to 40.6% from 38.4%.

• Adjusted Net Income was $3.4 million, up from a $2.3 million loss year-over-year.

• Cash Flow from Operations was $8.8 million, up from $7.0 million year-over-year.

• GAAP EPS was $0.01, compared to $(0.13) in the prior year quarter; Adjusted EPS was $0.04, up from $(0.03).

• Security Solutions comprised 98% of Q2 revenue, up from 90% in Q2 2025.

Outlook and guidance

• Q3 2026 revenue guidance: $49.2M–$50.6M, with Adjusted EBITDA of $6.0–$6.8M and margin of 12.2–13.4%.

• Full-year 2026 revenue guidance: $187M–$195M (14–18% growth), Adjusted EBITDA $23.6M–$28.6M (12.6–14.7% margin), and cash gross margin outlook raised to 39–40%.

• Full-year profit outlook raised despite slightly lower revenue guidance.

• Phasing out low-margin third-party software revenue, expected to lower revenue by $2.5M at midpoint but improve gross margin by 600+ basis points.

• 98% of $56.5 million in funded backlog expected to be recognized in the next 12 months.