Telos (TLS) Q2 2025 earnings summary

Executive summary

• Revenue grew 26% year-over-year in Q2 2025 to $36 million, led by Security Solutions, which contributed over 90% of total revenue and was driven by DMDC and TSA PreCheck program expansion.

• Adjusted EBITDA returned to profit at $0.4 million, a $3.3 million improvement year-over-year, while free cash flow was $4.6 million (12.9% margin) in Q2.

• Net loss widened to $9.5 million from $7.8 million in Q2 2024, mainly due to higher stock-based compensation and SG&A expenses.

• Share repurchases resumed in Q2, with $4 million used to buy back 1.5 million shares at an average price of $2.69.

• Major growth drivers included the DMDC program, TSA PreCheck, and confidential federal IT security work.

Financial highlights

• Q2 2025 revenue was $36 million, exceeding guidance, with Security Solutions revenue up 81.8%–82% year-over-year and Secure Networks down 67%.

• GAAP gross margin was 33.2%, and cash gross margin was 38.4%, both within guidance.

• Adjusted operating expenses were $900,000 lower than guidance due to cost discipline.

• Free cash flow margin reached 12.9% in Q2 and 12.6% for the first half of 2025.

• Adjusted EBITDA margin was 1.1% in Q2 2025, up from -10.3% in Q2 2024.

Outlook and guidance

• Q3 2025 revenue is forecasted at $44–$47 million, representing 85%–98% year-over-year growth, with Security Solutions expected to contribute ~90%.

• Adjusted EBITDA expected at $4–$5.7 million (9.1%–12.1% margin), with cash gross margin of 40%–41%.

• Management expects to recognize 95% of the $51.7 million funded backlog over the next 12 months.

• Liquidity remains strong, with $57 million in cash and a $30 million undrawn credit facility.

• Q4 expected to be similar to Q3, with acceleration in revenue and adjusted EBITDA growth in the second half.