TELOS CORP
For the period ended Sep 30, 2026. Filed Nov 9, 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.
Sep 30, 2026 · Filed Nov 9, 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 Nine Months Ended | ||||||||
| September 30, 2026 · September 30, 2025 · Dollar Change · September 30, 2026 · September 30, 2025 · Dollar Change | ||||||||
| (dollars in thousands) | ||||||||
| Revenue | $55,198 | $51,444 | $3,754 | $150,685 | $118,028 | $32,657 | ||
| Cost of sales | 34,258 | 30,898 | 3,360 | 95,678 | 73,368 | 22,310 | ||
| Gross profit | 20,940 | 20,546 | 394 | 55,007 | 44,660 | 10,347 | ||
| Gross margin | 37.9% | 39.9% | 36.5% | 37.8% | ||||
| Operating expenses | 16,850 | 23,014 | (6,164) | 49,152 | 66,033 | (16,881) | ||
| Operating expenses as percentage of revenue | 30.5% | 44.7% | 32.6% | 55.9% | ||||
| Operating income (loss) | 4,090 | (2,468) | 6,558 | 5,855 | (21,373) | 27,228 | ||
| Other income | 464 | 511 | (47) | 1,662 | 1,625 | 37 | ||
| Interest expense | (100) | (136) | 36 | (318) | (424) | 106 | ||
| Income (loss) before income taxes | 4,454 | (2,093) | 6,547 | 7,199 | (20,172) | 27,371 | ||
| Provision for income taxes | (18) | (21) | 3 | (80) | (63) | (17) | ||
| Net income (loss) | $4,436 | $(2,114) | $6,550 | $7,119 | $(20,235) | $27,354 | ||
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 third quarter of 2026, operating expenses decreased by $6.2 million, or 26.8%, compared to the same quarter in 2025. Research and development ("R&D") expenses decreased by $0.4 million, or 23.5%, in the third quarter of 2026, compared to the same period in 2025. Selling, general and administrative ("SG&A") expenses decreased by $5.7 million, or 27.1%, in the third quarter of 2026, compared to the same period in 2025. These changes in operating expenses were due to lower stock-based compensation expenses. As a percentage of revenue, overall operating expenses were 30.5% and 44.7% for the three months ended September 30, 2026, and 2025, respectively.
For the nine months ended September 30, 2026, operating expenses decreased by $16.9 million, or 25.6%, compared to the same period in 2025. R&D expenses decreased by $0.8 million, or 16.6%, for the nine months ended September 30, 2026, compared to the same period in 2025. SG&A expenses decreased by $16.1 million, or 26.3%, for the nine months ended September 30, 2026, compared to the same period in 2025 primarily due to lower stock-based compensation costs. Reductions in operating expenses, other than stock-based compensation, were due to ongoing cost discipline and restructuring. As a percentage of revenue, overall operating expenses were 32.6% and 55.9% for the nine months ended September 30, 2026, and 2025, respectively.
Other Income
Other income decreased by 9.2% in the third 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 nine months ended September 30, 2026, increased by 2.3%, 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 Nine Months Ended | ||||||||
| September 30, 2026 · September 30, 2025 · Dollar Change · September 30, 2026 · September 30, 2025 · Dollar Change | ||||||||
| (dollars in thousands) | ||||||||
| Revenue | $54,184 | $46,478 | $7,706 | $146,816 | $104,770 | $42,046 | ||
| Cost of sales (excluding depreciation and amortization) | 30,787 | 24,838 | 5,949 | 84,952 | 57,557 | 27,395 | ||
| Depreciation and amortization | 2,636 | 2,354 | 282 | 7,740 | 5,569 | 2,171 | ||
| Total cost of sales | 33,423 | 27,192 | 6,231 | 92,692 | 63,126 | 29,566 | ||
| Gross profit | $20,761 | $19,286 | $1,475 | $54,124 | $41,644 | $12,480 | ||
| Gross margin | 38.3% | 41.5% | 36.9% | 39.7% | ||||
Three Months Ended September 30, 2026, Compared with Three Months Ended September 30, 2025
Security Solutions segment revenue for the third quarter of 2026 increased by $7.7 million, or 16.6%, compared to the same quarter in 2025, primarily due to the ongoing expansion of multiple large programs in Telos ID.
Security Solutions segment gross profit for the third quarter of 2026 increased by $1.5 million, or 7.6%, compared to the same quarter in 2025, due to higher segment revenue. By contrast, segment gross margin for the quarter decreased from 41.5% in 2025 to 38.3% in 2026, primarily due to revenue mix.
Nine Months Ended September 30, 2026, Compared with Nine Months Ended September 30, 2025
For the nine months ended September 30, 2026, Security Solutions segment revenue increased by $42.0 million, or 40.1%, compared to the same period in 2025, primarily due to the expansion of multiple large programs in Telos ID.
Security Solutions segment gross profit for the nine months ended September 30, 2026 increased by $12.5 million, or 30.0%, compared to the same period in 2025, due to higher segment revenues. By contrast, segment gross margin decreased from 39.7% in 2025 to 36.9% in 2026, due to revenue mix, higher non-cash infrastructure costs, and higher depreciation and amortization expenses.
| Table MD&A 3: Secure Networks Segment - Financial Results | ||||||||
|---|---|---|---|---|---|---|---|---|
| For the Three Months Ended · For the Nine Months Ended | ||||||||
| September 30, 2026 · September 30, 2025 · Dollar Change · September 30, 2026 · September 30, 2025 · Dollar Change | ||||||||
| (dollars in thousands) | ||||||||
| Revenue | $1,014 | $4,966 | $(3,952) | $3,869 | $13,258 | $(9,389) | ||
| Cost of sales (excluding depreciation and amortization) | 834 | 3,704 | (2,870) | 2,979 | 10,237 | (7,258) | ||
| Depreciation and amortization | 1 | 2 | (1) | 7 | 5 | 2 | ||
| Cost of sales | 835 | 3,706 | (2,871) | 2,986 | 10,242 | (7,256) | ||
| Gross profit | $179 | $1,260 | (1,081) | $883 | $3,016 | (2,133) | ||
| Gross margin | 17.7% | 25.4% | 22.8% | 22.7% | ||||
Three Months Ended September 30, 2026, Compared with Three Months Ended September 30, 2025
Secure Networks segment revenue for the third quarter of 2026 decreased by $4.0 million, or 79.6%, 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 Secure Networks for the third quarter of 2026 decreased by $1.1 million, or 85.8%, compared with the same period in 2025, due to lower segment revenues. Likewise, segment gross margin for the quarter decreased from 25.4% in 2025 to 17.7% in 2026.
Nine Months Ended September 30, 2026, Compared with Nine Months Ended September 30, 2025
Secure Networks segment revenue for the nine months ended September 30, 2026, decreased by $9.4 million, or 70.8%, 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 nine months ended September 30, 2026, decreased by $2.1 million, or 70.7%, compared to the same period in 2025, due to lower segment revenue. By contrast, year-to-date segment gross margin slightly increased from 22.7% in 2025 to 22.8% in 2026.
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