TELOS CORP

For the period ended Mar 31, 2025. Filed May 9, 2025.

About this filing

A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Mar 31, 2025 · Filed May 9, 2025

TLS$7.17+48.8%Stored close · as of Nov 9, 2026

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Contents

Item 2. Results of Operations

Results of Operations

Table MD&A 1: Consolidated Results of Operations
	For the Three Months Ended
	March 31, 2025	March 31, 2024	Dollar Change
(dollars in thousands)
Revenue	$30,616	$29,619	$997
Cost of sales	18,434	18,658	(224)
Gross profit	12,182	10,961	1,221
Gross margin	39.8%	37.0%
Operating expenses	21,204	19,399	1,805
Operating expenses as percentage of revenue	69.3%	65.5%
Operating loss	(9,022)	(8,438)	(584)
Other income	561	1,252	(691)
Interest expense	(147)	(175)	28
Loss before income taxes	(8,608)	(7,361)	(1,247)
Provision for income taxes	4	(17)	21
Net loss	$(8,604)	$(7,378)	$(1,226)

Consolidated Results

Our business segments have different factors driving revenue fluctuations and profitability. The discussion of the changes in our revenue and profitability are covered in greater detail in the following section, "Segment Results." We generate revenue from the delivery of products and services to our customers. Cost of sales, for both products and services, consists of labor, materials, subcontracting costs and an allocation of indirect costs.

Operating expenses increased by $1.8 million, or 9.3%, in the first quarter of 2025, compared to the same period in 2024. Selling, general and administrative expenses increased by $3.4 million, or 21.0%, in the first quarter of 2025, compared to the same period in 2024, due to higher stock-based compensation costs. Research and development expenses declined by $1.6 million, or 50.4%, in the first quarter of 2025, compared to the same period in 2024, due to lower amortization costs and stock-based compensation expenses, coupled with the discontinued development of selected solutions.

Other income decreased by 55.2% in the first quarter of 2025, compared to the same period in 2024, primarily due to a decrease in dividend income from money market placements.

Segment Results

The accounting policies of each business segment are the same as those followed by the Company as a whole. Management evaluates business segment performance based on gross profit.

Table MD&A 2: Security Solutions Segment - Financial Results
	For the Three Months Ended
	March 31, 2025	March 31, 2024	Dollar Change
(dollars in thousands)
Revenue	$25,818	$18,640	$7,178
Cost of sales (excluding depreciation and amortization)	13,257	8,739	4,518
Depreciation and amortization	1,501	1,275	226
Total cost of sales	14,758	10,014	4,744
Gross profit	$11,060	$8,626	$2,434
Gross margin	42.8%	46.3%

For the quarter ended March 31, 2025, Security Solutions segment revenue increased by 38.5%, compared to the same period in 2024, primarily due to the successful ramp towards the full operational capacity of a significant program and increased volume of product sales.

For the quarter ended March 31, 2025, Security Solutions segment gross profit increased by 28.2%, compared with the same period in 2024, due to higher segment revenues. Segment gross margin decreased from 46.3% in 2024 to 42.8% in 2025, primarily due to the result of the unfavorable program mix within the segment and increased costs on a specific program.

Table MD&A 3: Secure Networks Segment - Financial Results
	For the Three Months Ended
	March 31, 2025	March 31, 2024	Dollar Change
(dollars in thousands)
Revenue	$4,798	$10,979	$(6,181)
Cost of sales (excluding depreciation and amortization)	3,674	8,641	(4,967)
Depreciation and amortization	2	3	(1)
Cost of sales	3,676	8,644	(4,968)
Gross profit	$1,122	$2,335	$(1,213)
Gross margin	23.4%	21.3%

For the quarter ended March 31, 2025, Secure Networks segment revenue decreased by 56.3%, compared to the same period in 2024, primarily due to the ramp down of several programs within the portfolio.

For the quarter ended March 31, 2025, Secure Networks segment gross profit decreased by 51.9%, compared with the same period in 2024, due to lower revenue. Segment gross margin expanded to 23.4% for the first quarter of 2025, from 21.3% for the same period in 2024, primarily due to the impact of indirect costs allocation on revenue.

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