Telos Corp (TLS) Exceeds Q3 Guidance with Expanded Gross Margin and Positive Cash Flow
Telos Corp (NASDAQ:TLS) reports third-quarter revenue of $36.2 million, surpassing the high end of its guidance range.
Gross margin expanded significantly by 303 basis points year-over-year to 36.0%, with non-GAAP gross margin reaching 41.5%.
Positive cash flow from operations achieved at $0.8 million, with a raised full-year outlook on all metrics.
On November 9, 2023, Telos Corp (NASDAQ:TLS), a leading provider of cyber, cloud, and enterprise security solutions, announced its financial results for the third quarter of 2023. The company outperformed expectations, delivering results that exceeded the high end of their guidance on all key metrics. A notable achievement this quarter was the significant expansion of the gross margin, which grew by 303 basis points compared to the same period last year, reaching 36.0%. When excluding stock-based compensation and depreciation and amortization, the non-GAAP gross margin expanded even further by 684 basis points to 41.5%.
Financial Performance Overview
Telos Corp (NASDAQ:TLS) reported a third-quarter revenue of $36.2 million, which reflects strong performance by Security Solutions and the official launch of the TSA PreCheck program. Despite a decrease in revenue from $63.6 million in Q3 2022, the company's strategic initiatives have led to improved profitability metrics. The gross profit for the quarter stood at $13.0 million, with a gross margin of 36.0%, showing a notable improvement from the previous year's 32.9%. The non-GAAP gross profit was $15.0 million, leading to a non-GAAP gross margin of 41.5%.
The company reported a GAAP net loss of $(8.7) million, slightly higher than the $(8.5) million loss in Q3 2022. The adjusted net loss was $(4.7) million, compared to an adjusted net income of $6.9 million in the previous year. EBITDA was reported at $(6.5) million, with adjusted EBITDA at $(1.3) million, which is a decrease from the $8.6 million adjusted EBITDA in Q3 2022. The adjusted EBITDA margin was (3.5%), compared to 13.5% in the same quarter last year.
Balance Sheet and Cash Flow Highlights
The balance sheet of Telos Corp (NASDAQ:TLS) as of September 30, 2023, shows cash and cash equivalents of $99.9 million, a decrease from $119.3 million at the end of 2022. Total assets were reported at $204.7 million, while total liabilities stood at $40.7 million, resulting in total stockholders' equity of $164.0 million.
For the third quarter, the company generated $0.8 million in cash flow from operations, a positive shift from the previous year's $12.0 million. However, free cash flow was negative at $(3.0) million, compared to $8.4 million in Q3 2022.
Business Highlights and Outlook
During the quarter, Telos Corp (NASDAQ:TLS) achieved the formal launch of the TSA PreCheck program and secured key renewals and new contracts across government and commercial sectors. The company's improved performance and outlook have led to an increased full-year revenue forecast, now expected to be between $134 and $138 million, with adjusted EBITDA projected to be between $(9) and $(7) million.
John B. Wood, chairman and CEO of Telos, expressed satisfaction with the quarter's performance, stating,
We executed well in the third quarter, delivering results above the high end of our guidance ranges on all key metrics, expanding gross margin 303 basis points compared to the third quarter of 2022 and returning to positive cash flow from operations."
He also highlighted the successful launch of the TSA PreCheck program and the company's ability to raise its full-year outlook.
For investors and readers seeking more detailed information, Telos Corp (NASDAQ:TLS) will be hosting a live webcast to discuss the third-quarter financial results, and related presentation materials will be available on the Investors section of the company's website.
Value investors interested in Telos Corp (NASDAQ:TLS) can find further insights and analysis on GuruFocus.com, where the company's financials, stock performance, and investment potential are comprehensively covered.
Explore the complete 8-K earnings release (here) from Telos Corp for further details.
This article first appeared on GuruFocus.
