Telos (TLS) Q4 2024 earnings summary

Executive summary

• Fourth quarter revenue reached $26.4 million, up 11% sequentially and at the top end of guidance, with Security Solutions contributing 83% and Secure Networks 17%.

• Adjusted EBITDA loss improved to $0.2 million in Q4, outperforming guidance and up $3.0 million year-over-year.

• Security Solutions drove growth, notably from TSA PreCheck and DMDC programs, with TSA PreCheck enrollment centers expanding from 26 to 218 locations in 2024.

• Positive cash flow is expected in Q1 2025, with significant improvements forecasted for revenue, profit, and cash flow in 2025.

• Full-year 2024 revenue was $108.3 million, down 26% year-over-year, with Security Solutions down 1% and Secure Networks down 54%.

Financial highlights

• Q4 GAAP gross margin was 40.3%, and cash gross margin reached 47%, both the highest since IPO.

• Full-year 2024 GAAP gross margin was 31.8% and cash gross margin was 43.7%, a company high since 2000.

• Q4 adjusted EPS was $(0.04); Q4 cash flow from operations was a $10.5 million outflow and free cash flow was a $14.8 million outflow due to working capital and one-time CapEx.

• Q4 revenue declined year-over-year from $41.1 million to $26.4 million.

• Weighted average share count for 2024 was approximately 72 million.

Outlook and guidance

• Q1 2025 revenue expected to grow 7%–15% sequentially to $28.2–$30.2 million, with positive cash flow anticipated.

• Adjusted EBITDA loss forecasted at $1.8 million–$800,000 for Q1 2025.

• Full-year 2025 revenue expected to return to year-over-year growth, with $70 million from existing business and $50–$75 million from DMDC and DHS programs.

• TSA PreCheck revenues to ramp as enrollment centers approach 500 locations by year-end.

• 2025 modeling assumes improved gross margins, lower operating expenses due to restructuring, and minimal capex.