Telos Corp (TLSRP.PFD) Q2 2025 Earnings Call Highlights: Strong Revenue Growth and Strategic ...
Security Solutions Revenue: Approximately 90% of total company revenue.
GAAP Gross Margin: 33.2%.
Cash Gross Margin: 38.4%.
Adjusted Operating Expenses: Approximately $900,000, better than guidance.
Adjusted EBITDA: $400,000 profit, exceeding guidance range of a $2.1 million loss to a $600,000 loss.
Operating Cash Flow: $7 million.
Free Cash Flow: $4.6 million, or a 12.9% margin.
Share Repurchases: $4 million deployed to repurchase approximately 1.5 million shares at $2.69 per share.
Enrollment Centers: Expanded to 415 locations, a 43% increase since last earnings call.
Warning! GuruFocus has detected 4 Warning Signs with TLSRP.PFD.
Release Date: August 11, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Revenue grew 26% in the second quarter to $36 million, exceeding guidance.
Security solutions delivered approximately 90% of total company revenue, driving outperformance.
Adjusted EBITDA improved significantly, returning to a profit with a $400,000 gain.
Free cash flow was robust, improving by $16 million year over year to $4.6 million.
The company resumed share repurchases, deploying $4 million to buy back shares.
Negative Points
Gross margins were lower year over year due to revenue mix changes.
Secure networks segment experienced contraction, partially offsetting growth in security solutions.
The company faces variability in gross margins due to fluctuating revenue streams.
The TSA PreCheck program's renewals are down due to the five-year anniversary of COVID.
Confidential IT security work details are limited, providing less transparency on growth drivers.
Q & A Highlights
Q: Can you discuss the progress of TSA PreCheck enrollments and the target for market share? A: Mark Bendza, CFO, stated that they are on track to reach 500 locations by the end of the year, with enrollments increasing alongside the number of locations. Despite a decline in renewals due to the five-year anniversary of COVID, new enrollments are driving year-over-year performance.
Q: What is driving the sequential increase in gross margin? A: Mark Bendza explained that the increase is due to the mix of revenue streams, each with different margin profiles. The third quarter is expected to see higher margins due to growth drivers in Telos ID and the mix within those programs.
Q: Can you provide more details on the confidential IT security work for the federal government? A: Mark Bendza mentioned that while they cannot disclose specifics, the work is a meaningful addition to their revenue stream. Mark Griffin added that Telos has a strong pipeline with over 200 opportunities, valued at over $4 billion, with significant awards expected in Q4 and Q1 next year.
Q: How will the changes in DHS security lines affect TSA PreCheck enrollments? A: Mark Griffin stated that the changes are not expected to negatively impact enrollments. In fact, they may increase program visibility, with speed through the line remaining a critical component of TSA PreCheck.
Q: What is the capital allocation strategy given the strong free cash flow? A: Mark Bendza indicated that the priority is to use free cash flow for share buybacks. They will consider opportunistic tuck-in acquisitions and transformational M&A opportunities if they provide clear value for shareholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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