Telos Revenue Rises 7.3% to $55.2 Million in Third Quarter
Key Facts
Telos reported revenue of $55.2 million for the third quarter ended September 30, 2026, up 7.3% from $51.4 million in the year-earlier period. The company said growth in security solutions was the main revenue driver, with the segment posting a 16.6% year-over-year increase. Telos attributed the performance primarily to the expansion of large programs within Telos ID. Results showed an improvement in GAAP net income, while adjusted earnings per share remained at its year-earlier level. The company raised its full-year outlook range, citing new awards, strong TSA PreCheck volumes and improved margins in large programs.
Telos recorded GAAP net income of $4.4 million, compared with a net loss of $2.1 million in the third quarter of 2025. GAAP diluted earnings per share were $0.06, versus a loss of $0.03 per share a year earlier. Adjusted earnings per share were $0.09, the same result recorded in the year-earlier period. The comparison shows that the return to GAAP profitability was not accompanied by a year-over-year increase in adjusted earnings per share. The reported results did not include a verifiable figure comparing earnings per share or revenue with analyst estimates.
GAAP gross margin was 37.9%, while cash gross margin reached 43.1%. Telos said both margins exceeded the assumptions underlying its guidance, attributing this primarily to Telos ID performance. By segment, security solutions revenue grew 16.6% year over year, with the increase attributed to the expansion of large programs. That put the security business at the forefront of the factors accompanying revenue growth in the quarter. The company also cited margin outperformance in large programs as one reason for raising its full-year outlook.
GAAP operating expenses fell 26.8% from the same quarter a year earlier, which the company attributed to lower stock-based compensation expenses. Adjusted operating expenses, by contrast, rose 1.8% year over year. Adjusted earnings before interest, taxes, depreciation and amortization were $10.6 million, exceeding the company’s guidance, while its margin was 19.2%. The figures show a divergence between lower GAAP expenses and higher adjusted expenses, alongside adjusted earnings exceeding the guidance range. The results did not provide a figure for a direct year-over-year comparison of adjusted earnings before interest, taxes, depreciation and amortization or its margin.
Cash flow from operations was $9.4 million, equivalent to 17.1% of revenue. Free cash flow rose 11.9% year over year to $7.4 million. These measures provide a cash-based view alongside the profitability results, with free cash flow growing from the year-earlier period. The company also repurchased more than 1.2 million shares during the quarter, spending $5.7 million on the buybacks. The average repurchase price was $4.59 per share, according to the earnings release.
Telos said its information assurance business secured $58 million in net new orders for Xacta and professional services. The company expects the orders to generate about $20 million in revenue in 2027. The figure is an estimate of future revenue tied to these orders, not revenue recorded in the third quarter. The company also attributed its higher outlook to more than $58 million in new information assurance awards and strong TSA PreCheck volumes. It added that margin outperformance in large programs also contributed to its updated full-year financial outlook.
The company raised its 2026 revenue outlook to a range of $198.2 million to $200.7 million, from its previous range of $187 million to $195 million. It also increased its adjusted earnings before interest, taxes, depreciation and amortization outlook to $32.3 million–$34.1 million, from $23.6 million–$28.6 million. In its previous update, Telos had lowered its annual revenue outlook to $187 million–$195 million from $187 million–$200 million, while raising its adjusted earnings range at the time. The new guidance puts both the revenue and adjusted earnings ranges above their previous levels, following the third-quarter results and the awards announced by the company. Telos is scheduled to discuss the results on an earnings call on November 9, 2026, at 9:30 a.m. U.S. Eastern Time.