Telos Q1 2025: Unpacking Contradictions in TSA PreCheck Rollout, Cash Flow, and Market Expectations

TSA PreCheck revenue and rollout expectations, cash flow and working capital dynamics, DMDC revenue and margin profile, TSA PreCheck rollout and market share, and TSA PreCheck market share targets and enrollment ramps are the key contradictions discussed in Telos's latest 2025Q1 earnings call.



Strong Sequential Revenue Growth:
- Telos Corporation reported total company revenue growth of 16% sequentially to $30.6 million, with Security Solutions and Secure Networks contributing to this increase.
- The growth was driven by better-than-guided performance across revenue, gross margin, operating expenses, and adjusted EBITDA.

Security Solutions Performance:
- Security Solutions revenue grew 18% sequentially to $25.8 million, exceeding guidance, primarily due to outperformance on high-growth programs.
- The ramp of TSA PreCheck enrollment volume and the successful transition of the Defense Manpower Data Center (DMDC) program were key factors contributing to this growth.

Profitability and Cash Flow Improvement:
- Telos Corporation reported a positive adjusted EBITDA of $362,000 compared to guidance of a $1.8 million loss to an $800,000 loss.
- Cash flow from operations was a positive $6.1 million, and free cash flow was a positive $3.8 million, driven by lower-than-forecasted nonlabor costs and favorable working capital dynamics.

TSA PreCheck Expansion:
- Telos added 73 new locations for TSA PreCheck, expanding its national network to 291 locations.
- The expansion is part of a strategy to increase enrollment market share and drive future cash generation.

DMDC Program Ramp-up:
- The Defense Manpower Data Center program is ramping on schedule and is expected to be a major source of revenue growth over the next several quarters.
- This program is a key contributor to Telos' financial performance, with expected revenue ranging from $50 million to $75 million in 2025.