Telos Corporation Common Stock 2026 Q2 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- Telos Corporation reported second quarter 2026 revenue of $47.7 million, a 33% increase year over year, exceeding guidance of $44 million to $46 million, driven by strong performance in Telos ID.
- GAAP gross margin was 35% and cash gross margin was 40.6%, both above expectations due to disciplined execution on large programs.
- Adjusted operating expenses declined by over $800,000 year over year but were about $500,000 above guidance due to higher TSA PreCheck marketing and incentive compensation.
- Adjusted EBITDA was $6.9 million, exceeding guidance of $5 million to $6 million, with margin expanding to 14.4% from 1.1% the prior year.
- Operating cash flow was $8.8 million and free cash flow was $6.6 million, representing a 13.9% free cash flow margin, marking six consecutive quarters above 12%.
- Telos repurchased over 1 million shares for $4.7 million at an average price of $4.50 per share during the quarter.
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Transcript
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Good day, and thank you for standing by. Welcome to the Telos Corporation's second quarter 2026 earnings conference call. At this time, all participants are under listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. If you would like to remove yourself from the queue, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Allison Phillipp, Director of Corporate Communications. Please go ahead. Good morning.
Thank you for joining us to discuss Telos Corporation's second quarter 2026 financial results. With me today is John Wood, Chairman and CEO of Telos, Mark Bendza, Executive Vice President and CFO of Telos, and Mark Griffin, Executive Vice President of Security Solutions. Let me quickly review the format of today's presentation. Mark Bendza will begin with remarks on our second quarter results and full year outlook. We will then open the line for Q&A, where John Wood and Mark Griffin will also join us. The second quarter financial results were issued earlier today and are posted on the Telos Investor Relations website, where this call is being simultaneously webcast. Additionally, we have provided presentation slides on our investor relations website.
Before we begin, we want to emphasize that some of our statements on this call, including all of those relating to 2026 company performance, plans, and operations, are forward-looking statements and are made under the safe harbor provisions of the Federal Securities Laws. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ for various reasons, including the factors described in today's financial results summary, in the comments made during this conference call, and in our SEC filings. We do not undertake any duty to update any forward-looking statement. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental and clarifying measures to help investors understand Telos's financial performance. These non-GAAP financial measures should be considered in addition to, and not as a substitute for or in isolation from, GAAP results.
You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our second quarter results summary and on the investor relations portion of our website. Please also note that financial comparisons are year-over-year unless otherwise specified. The webcast replay of this call will be available on our company website under the investor relations link. With that, I will turn the call over to Mark Bendza.
Thank you, Allison, and good morning, everyone. We are pleased to report another strong quarter, highlighted by results that exceeded the high end of our guidance range, strong cash flow generation, accelerated share repurchases, and a meaningful increase in our full-year profitability outlook. These results reflect the strength of our business and our continued ability to solve complex mission-critical challenges for our customers. Telos helps the world's most security-conscious organizations solve those challenges by combining proven cybersecurity, digital identity, and secure networking solutions, combined with deep mission expertise and a flexible approach to addressing unique customer requirements. Our solutions strengthen security, improve operational efficiency, accelerate compliance, and help customers adapt to an evolving threat landscape. Let's turn to slide 3.
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