TELOS CORP
For the period ended Jun 30, 2026. Filed Aug 10, 2026.
View on SEC.govAbout 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.
Jun 30, 2026 · Filed Aug 10, 2026
Extracted filing text, with the paragraph anchors used by the comparison.
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Item 2. Results of Operations
Results of Operations
| Table MD&A 1: Consolidated Results of Operations | ||||||||
|---|---|---|---|---|---|---|---|---|
| For the Three Months Ended · For the Six Months Ended | ||||||||
| June 30, 2026 · June 30, 2025 · Dollar Change · June 30, 2026 · June 30, 2025 · Dollar Change | ||||||||
| (dollars in thousands) | ||||||||
| Revenue | $47,745 | $35,968 | $11,777 | $95,487 | $66,584 | $28,903 | ||
| Cost of sales | 31,053 | 24,036 | 7,017 | 61,420 | 42,470 | 18,950 | ||
| Gross profit | 16,692 | 11,932 | 4,760 | 34,067 | 24,114 | 9,953 | ||
| Gross margin | 35.0% | 33.2% | 35.7% | 36.2% | ||||
| Operating expenses | 16,382 | 21,815 | (5,433) | 32,302 | 43,019 | (10,717) | ||
| Operating expenses as percentage of revenue | 34.3% | 60.7% | 33.8% | 64.6% | ||||
| Operating income (loss) | 310 | (9,883) | 10,193 | 1,765 | (18,905) | 20,670 | ||
| Other income | 501 | 553 | (52) | 1,198 | 1,114 | 84 | ||
| Interest expense | (107) | (141) | 34 | (218) | (288) | 70 | ||
| Income (loss) before income taxes | 704 | (9,471) | 10,175 | 2,745 | (18,079) | 20,824 | ||
| Provision for income taxes | (44) | (46) | 2 | (62) | (42) | (20) | ||
| Net income (loss) | $660 | $(9,517) | $10,177 | $2,683 | $(18,121) | $20,804 | ||
Consolidated Results
Our business segments have different factors driving revenue fluctuations and profitability. The changes in our revenue and profitability are discussed 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
In the second quarter of 2026, operating expenses decreased by $5.4 million, or 24.9%, compared to the same quarter in 2025. Research and development ("R&D") expenses slightly decreased by $0.2 million, or 11.0%, in the second quarter of 2026, compared to the same period in 2025. Selling, general and administrative ("SG&A") expenses decreased by $5.3 million, or 25.9%, in the second quarter of 2026, compared to the same period in 2025, primarily due to lower stock-based compensation expenses. Reductions in SG&A expenses, other than stock-based compensation, were due to ongoing cost discipline and restructuring. As a percentage of revenue, overall operating expenses were 34.3% and 60.7% for the three months ended June 30, 2026, and 2025, respectively.
For the six months ended June 30, 2026, operating expenses decreased by $10.7 million, or 24.9%, compared with the same period in 2025. R&D expenses slightly declined by $0.4 million, or 12.4%, in the first half of 2026, compared to the same period in 2025. SG&A expenses decreased by $10.3 million, or 25.9%, in the first half of 2026, compared to the same period in 2025, primarily due to lower stock-based compensation expenses. Reductions in SG&A expenses, other than stock-based compensation, were due to ongoing cost discipline and restructuring. As a percentage of revenue, overall operating expenses were 33.8% and 64.6% for the six months ended June 30, 2026, and 2025, respectively.
Other income
Other income decreased by 9.4% in the second quarter of 2026, compared to the same period in 2025, primarily due to changes in dividend income from money market placements. However, other income for the six months ended June 30, 2026, increased by 7.5%, compared to the same period in 2025, primarily due to the refund in 2026 of a prior-year VAT claim that was previously determined to be uncollectible.
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 · For the Six Months Ended | ||||||||
| June 30, 2026 · June 30, 2025 · Dollar Change · June 30, 2026 · June 30, 2025 · Dollar Change | ||||||||
| (dollars in thousands) | ||||||||
| Revenue | $46,662 | $32,474 | $14,188 | $92,632 | $58,292 | $34,340 | ||
| Cost of sales (excluding depreciation and amortization) | 27,651 | 19,462 | 8,189 | 54,165 | 32,719 | 21,446 | ||
| Depreciation and amortization | 2,511 | 1,714 | 797 | 5,104 | 3,215 | 1,889 | ||
| Total cost of sales | 30,162 | 21,176 | 8,986 | 59,269 | 35,934 | 23,335 | ||
| Gross profit | $16,500 | $11,298 | $5,202 | $33,363 | $22,358 | $11,005 | ||
| Gross margin | 35.4% | 34.8% | 36.0% | 38.4% | ||||
Three Months Ended June 30, 2026, Compared with Three Months Ended June 30, 2025
Security Solutions segment revenue for the second quarter of 2026 increased by 43.7%, compared to the same period in 2025, primarily due to the expansion of multiple large programs in Telos ID.
Security Solutions gross profit for the second quarter of 2026 increased by 46.0%, compared with the same period in 2025, primarily due to higher segment revenues. Likewise, segment gross margin increased from 34.8% to 35.4% for the second quarter of 2026, compared with the same period in 2025.
Six Months Ended June 30, 2026, Compared with Six Months Ended June 30, 2025
Security Solutions segment revenue for the six months ended June 30, 2026, increased by 58.9%, compared to the same period in 2025, primarily due to the expansion of multiple large programs in Telos ID.
Segment gross profit for the six months ended June 30, 2026, increased by 49.2%, compared to the same period in 2025, due to higher segment revenues. By contrast, segment gross margin decreased from 38.4% in 2025 to 36.0% in 2026, primarily due to higher non-cash infrastructure costs.
| Table MD&A 3: Secure Networks Segment - Financial Results | ||||||||
|---|---|---|---|---|---|---|---|---|
| For the Three Months Ended · For the Six Months Ended | ||||||||
| June 30, 2026 · June 30, 2025 · Dollar Change · June 30, 2026 · June 30, 2025 · Dollar Change | ||||||||
| (dollars in thousands) | ||||||||
| Revenue | $1,083 | $3,494 | $(2,411) | $2,855 | $8,292 | $(5,437) | ||
| Cost of sales (excluding depreciation and amortization) | 888 | 2,859 | (1,971) | 2,145 | 6,533 | (4,388) | ||
| Depreciation and amortization | 3 | 1 | 2 | 6 | 3 | 3 | ||
| Cost of sales | 891 | 2,860 | (1,969) | 2,151 | 6,536 | (4,385) | ||
| Gross profit | $192 | $634 | $(442) | $704 | $1,756 | $(1,052) | ||
| Gross margin | 17.7% | 18.1% | 24.7% | 21.2% | ||||
Three Months Ended June 30, 2026, Compared with Three Months Ended June 30, 2025
Secure Networks segment revenue for the three months ended June 30, 2026, decreased by 69.0%, compared to the same period in 2025, primarily due to the continued ramp down of several programs within the portfolio without corresponding new business wins to backfill completed programs.
Segment gross profit for Secure Networks for the second quarter of 2026, decreased by 69.7%, compared with the same period in 2025, primarily due to lower segment revenues. Likewise, segment gross margin decreased from 18.1% to 17.7% for the second quarter of 2026, compared with the same period in 2025.
Six Months Ended June 30, 2026, Compared with Six Months Ended June 30, 2025
Secure Networks segment revenue for the six months ended June 30, 2026, decreased by 65.6%, compared to the same period in 2025, primarily due to the continued ramp down of several programs within the portfolio without corresponding new business wins to backfill completed programs.
Segment gross profit for the six months ended June 30, 2026, decreased by 59.9%, compared to the same period in 2025, due to lower segment revenues. By contrast, segment gross margin expanded from 21.2% in 2025 to 24.7% in 2026, primarily due to program mix.
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