Telos (TLS) Q1 2025 earnings summary

Executive summary

• Achieved $30.6 million in Q1 2025 revenue, up 16% sequentially and 3.4% year-over-year, exceeding guidance, with Security Solutions contributing 84% and Secure Networks 16%.

• Security Solutions revenue grew 39% year-over-year and 18% sequentially, driven by DMDC and TSA PreCheck® expansion to 291 locations, targeting 500 by year-end.

• Secure Networks revenue declined 56% year-over-year but rose 8% sequentially, outperforming guidance due to program mix.

• Delivered positive adjusted EBITDA of $0.4 million, positive cash flow from operations of $6.1 million, and free cash flow of $3.8 million.

• GAAP net loss was $8.6 million, with higher operating expenses offsetting gross margin gains.

Financial highlights

• Q1 2025 revenue: $30.6 million (up from $29.6 million year-over-year); Security Solutions: $25.8 million, Secure Networks: $4.8 million.

• GAAP gross margin: 39.8% (up 278 bps year-over-year); cash gross margin: 45.3% (up 313 bps year-over-year).

• Adjusted EBITDA: $0.4 million (up $2.7 million year-over-year); free cash flow: $3.8 million (up $7.4 million year-over-year).

• Adjusted net loss: $2.1 million, or $(0.03) per share; GAAP net loss: $8.6 million.

• Cash and cash equivalents: $57.8 million as of March 31, 2025.

Outlook and guidance

• Q2 2025 revenue guidance: $32.5M–$34.5M, up 14%–21% year-over-year; adjusted EBITDA expected loss of $2.1M–$0.6M.

• Security Solutions revenue forecast to grow low 60% to low 70% year-over-year; Secure Networks to contract low 70% to mid-60%.

• GAAP gross margin expected at 32%–33.5%; cash gross margin at 38%–39.5%.

• Full-year outlook reaffirmed; growth in revenue, adjusted EBITDA, and cash flow expected to accelerate in H2 2025.

• Approximately $51.4 million in remaining performance obligations, with 95% expected to be recognized in the next 12 months.