Telos(TLS 60.08%) reported second quarter 2025 results on August 11, 2025, delivering revenue of $36 million (up 26% year-over-year), adjusted EBITDA of $400,000 profit (versus loss guidance), and positive free cash flow of $4.6 million. Management announced expanded TSA PreCheck presence, a FedRAMP High certification for Xacta, and reinitiated share repurchases, setting expectations for continued acceleration in growth and margin improvement in the second half of 2025. Key insights below highlight execution on large federal programs, cash generation, and a strong growth pipeline.

Security solutions fuel Telos revenue and profit resurgence

Security solutions accounted for approximately 90% of revenue, with significant year-over-year growth—82% in this segment—driven by rapid scale-up of major federal programs such as DMDC and TSA PreCheck. The return to positive adjusted EBITDA was especially pronounced, with a $3.3 million year-over-year improvement on $7.5 million revenue growth, pointing to strong incremental margins.

"Year-over-year revenue growth was primarily driven by 82% growth in security solutions, partially offset by contraction in secure networks. Growth in security solutions was primarily driven by the successful transition of the DMDC program in 2024 and the ramp of TSA PreCheck enrollment volume. GAAP gross profit grew 23%, and adjusted EBITDA improved $3.3 million, returning to a profit."
— Mark Benza, Executive Vice President and CFO

This amplifies revenue visibility and margin leverage as program ramps mature.

Telos resumes share repurchases amid robust cash flow

Operating cash flow reached $7 million and free cash flow was $4.6 million, producing a free cash flow margin of 12.9% and enabling the repurchase of 1.5 million shares at a weighted average of $2.69 per share. First-half 2025 free cash flow totaled $8.4 million (12.6% margin).

"As a result of our strong cash generation in the first half and our confidence in the outlook for the business, we resumed share repurchases in the second quarter. We deployed $4 million to repurchase approximately 1.5 million shares at a weighted average price of $2.69 per share."
— Mark Benza, Executive Vice President and CFO

The decision to return capital to shareholders highlights management’s conviction in the company’s improving fundamentals and capital allocation discipline as operational momentum accelerates.

Growth pipeline for Telos underpinned by federal demand

The opportunity pipeline includes 200 unique deals representing $4 billion in estimated contract value, with 69 new prospects added, primarily concentrated in security solutions, which delivered approximately 90% of total company revenue. Award activity is expected to be weighted towards Q4 2025 and Q1 2026, aligning with ongoing federal demand for cybersecurity, digital modernization, and infrastructure protection.

"Telos has a strong pipeline with over 200 unique opportunities representing an estimated contract value of over $4 billion. Sixty-nine of these opportunities are new within the last quarter, and we feel award pace will be weighted toward Q4 this year and Q1 of next for many of the more significant opportunities. Our growth opportunities are driven by strategic positioning and well-funded national security priorities,"
— Mark Griffin, Executive Vice President Security Solutions

Diversification, size, and renewal momentum in the pipeline position the company to sustain double-digit year-over-year top-line growth and expanding cash margins, as evidenced by 26% revenue growth and a 38.4% cash gross margin.

Looking Ahead

Management forecasts revenue of $44 million to $47 million for the third quarter of 2025 (up 85%-98% year-over-year), adjusted EBITDA of $4 million to $5.7 million (9.1%-12.1% margin), and a sequentially higher cash gross margin (non-GAAP) of 40%-41% is forecast. Security solutions are expected to continue comprising approximately 90% of total revenue, with Q4 performance similar to Q3.