Telos Corporation (TLS): A Turnaround Story Gaining Momentum in National Security Tech

In the high-stakes arena of national security technology, Telos Corporation (TLS) has emerged as a compelling case study in strategic reinvention. With a recent surge in revenue, a return to EBITDA profitability, and a robust pipeline of government contracts, the company is positioning itself as a critical player in the defense and cybersecurity sectors. For investors seeking long-term value in a market increasingly shaped by geopolitical uncertainty and digital threats, Telos offers a rare combination of operational discipline and high-margin growth.

A Financial Turnaround Driven by Strategic Focus

Telos' Q2 2025 results underscore a dramatic reversal of fortune. Revenue hit $36 million, a 26% year-over-year increase, with the Security Solutions segment accounting for 90% of total sales. This segment's 82% YoY growth was fueled by large federal programs like the Defense Manpower Data Center (DMDC) and the TSA PreCheck initiative. Adjusted EBITDA turned positive at $400,000, far exceeding expectations of a $2.1 million to $600,000 loss. Free cash flow of $4.6 million, with a 12.9% margin, highlights the company's improving efficiency.

The TSA PreCheck program, a cornerstone of Telos' strategy, has expanded to 415 enrollment centers across 40 states and Puerto Rico—a 43% increase since May 2025. With a target of 500 locations by year-end, this network not only drives recurring revenue but also cements Telos' role in U.S. border security. Meanwhile, the FedRAMP "High" authorization for its Xacta software—a first in the industry—positions the platform as a gold standard for securing sensitive government data in cloud environments.

High-Margin Contracts and Shareholder Returns

Telos' ability to secure high-margin government contracts is a key differentiator. The FedRAMP certification, for instance, opens doors to lucrative cloud-based cybersecurity contracts with agencies prioritizing data protection. New orders from the U.S. Treasury, Air Force, and Defense Intelligence Agency further diversify revenue streams. Notably, a Fortune 100 tech client's engagement signals Telos' growing credibility beyond traditional government circles.

Financial discipline has also translated into shareholder returns. In Q2, Telos repurchased 1.5 million shares at $2.69 apiece, deploying $4 million in operating cash flow. This aggressive buyback, combined with a 38.4% cash gross margin, reflects management's commitment to maximizing equity value.

A Pathway to Sustained Growth

Looking ahead, Telos' Q3 2025 guidance projects revenue of $44–47 million (85–98% YoY growth) and adjusted EBITDA of $4–5.7 million. These figures suggest a trajectory toward consistent profitability, supported by disciplined expense management and strategic investments in R&D. The company's focus on TSA PreCheck expansion and Xacta's adoption in federal agencies creates a flywheel effect: scale in high-margin services drives cash flow, which funds further growth and shareholder returns.

For investors, the case for Telos is clear. The company's alignment with secular trends—rising defense budgets, cloud migration in government, and heightened cybersecurity demands—provides a durable growth foundation. At current valuations, TLS offers a compelling risk-reward profile, particularly for those with a 3–5 year horizon.

Final Verdict: A High-Conviction Buy

Telos Corporation's turnaround is no accident—it's the result of targeted execution in a sector where demand is only accelerating. With a strong balance sheet, a pipeline of high-margin contracts, and a management team focused on both top-line growth and bottom-line discipline, TLS is well-positioned to outperform in the defense and cybersecurity space. For investors seeking exposure to national security tech with a clear path to EBITDA recovery and shareholder value creation, Telos represents a high-conviction opportunity.