Telos (TLS) Q3 2026 earnings summary

Executive summary

• Q3 revenue rose 7.3% YoY to $55.2M, exceeding guidance; GAAP net income was $4.4M versus a $2.1M loss a year earlier.

• Adjusted EBITDA was $10.6M and free cash flow was $7.4M; FY26 revenue and Adjusted EBITDA guidance increased.

Financial highlights

• Q3 operating income was $4.1M versus a $2.5M loss; GAAP operating expenses declined 26.8% YoY, primarily on lower stock-based compensation.

• Adjusted net income was $7.0M versus $6.8M; adjusted EBITDA rose to $10.6M from $10.1M.

• Nine-month revenue increased 27.7% to $150.7M, while net income was $7.1M versus a $20.2M loss.

• Nine-month free cash flow rose 36% to $20.4M, primarily on higher adjusted EBITDA.

Outlook and guidance

• FY26 revenue guidance rose to $198.2M-$200.7M, or 20%-22% YoY growth; Adjusted EBITDA guidance increased to $32.3M-$34.1M, with a 16.3%-17.0% margin.

• Q4 revenue guidance is $47.5M-$50.0M, up 2%-7% YoY; Adjusted EBITDA is $7.0M-$8.8M, with a 14.7%-17.6% margin.

• $58M of net new Xacta and professional-services bookings are expected to contribute $6M revenue in 2026 and $20M in 2027, at normalized margins.

• Third-party software phase-out is expected to create a $32M YoY revenue headwind in 2027 with modest profit impact; IT GEMS phase-out is expected to lift full-year run-rate gross margin by ~600 bps.

• Funded backlog was $84.0M at September 30; ~90% of remaining performance obligations are expected to be recognized over the next 12 months.