On August 9, 2024, Telos Corp (TLS, Financial) released its 8-K filing for the second quarter of 2024. Telos Corp, a provider of advanced software-based security solutions, reported financial results that fell short of analyst expectations.
Company Overview
Telos Corp offers technologically advanced, software-based security solutions that empower and protect the world's security-conscious organizations against rapidly evolving, sophisticated, and pervasive threats. The company operates through two segments: Security Solutions and Secure Networks. The Security Solutions segment focuses on cybersecurity, cloud, and identity solutions, while the Secure Networks segment focuses on enterprise security. The majority of the company's revenue is derived from the Security Solutions segment.
Performance and Challenges
Telos Corp reported revenue of $28.5 million for Q2 2024, which is below the analyst estimate of $29.41 million. The company also reported a GAAP net loss of $7.8 million, translating to a GAAP EPS of -$0.11, which is better than the analyst estimate of -$0.21 per share. The revenue shortfall and continued losses highlight the challenges Telos faces in a competitive and rapidly evolving industry.
Financial Achievements
Despite the challenges, Telos Corp achieved a GAAP gross margin of 34.1% and a cash gross margin of 42.0%, reflecting an improvement of 326 basis points from the previous year. This improvement in cash gross margin is significant as it indicates better operational efficiency and cost management.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Revenue | $28.5 million | $32.9 million |
| Gross Profit | $9.7 million | $12.4 million |
| GAAP Net Loss | $(7.8) million | $(8.0) million |
| Adjusted Net Loss | $(6.6) million | $(1.9) million |
| EBITDA | $(5.2) million | $(7.8) million |
| Adjusted EBITDA | $(2.9) million | $(0.1) million |
| GAAP EPS | $(0.11) | $(0.12) |
| Adjusted EPS | $(0.09) | $(0.03) |
Income Statement Highlights
Telos Corp's total revenue for Q2 2024 was $28.5 million, down from $32.9 million in Q2 2023. The company's gross profit also declined to $9.7 million from $12.4 million in the same period last year. The GAAP net loss was $7.8 million, slightly better than the $8.0 million loss reported in Q2 2023. Adjusted net loss widened to $6.6 million from $1.9 million in the previous year.
Balance Sheet and Cash Flow
As of June 30, 2024, Telos Corp reported cash and cash equivalents of $80.1 million, down from $99.3 million at the end of 2023. Accounts receivable also decreased to $17.2 million from $30.4 million. The company's total assets stood at $182.4 million, compared to $208.7 million at the end of 2023. Net cash used in operating activities was $8.0 million for Q2 2024, compared to $4.1 million in Q2 2023.
Commentary and Outlook
"Telos exceeded the high end of our guidance range for the second quarter on key financial metrics including total company revenue, margin, and profit. While GAAP gross margin contracted 349 basis points compared to the second quarter of 2023 primarily due to higher amortization, we expanded cash gross margin 326 basis points to 42.0%," said John B. Wood, chairman and CEO, Telos.
Looking ahead, Telos Corp expects Q3 2024 revenue to be in the range of $22 million to $24 million, representing a year-over-year decline of 34% to 39%. The company also anticipates an adjusted EBITDA loss of $6.5 million to $8.0 million for the next quarter.
For more detailed information, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from Telos Corp for further details.
