Earnings call transcript: Telos Q3 2025 sees robust growth, stock surges

Telos Corporation reported a significant increase in Q3 2025 revenue, reaching $51.4 million, a 116% year-over-year growth, surpassing its guidance range of $44-$47 million. The company's stock surged 13.64% in pre-market trading, reflecting investor confidence in its performance and future prospects.

Key Takeaways

• Telos reported Q3 2025 revenue of $51.4 million, exceeding expectations.
• The stock rose 13.64% in pre-market trading, reaching $7.25.
• The launch of Xacta AI is expected to drive efficiency in cyber governance.
• Telos has a $5 billion pipeline of new business opportunities.
• Continued cost discipline led to operational expenses being $500,000 better than guidance.

Company Performance

Telos Corporation showed strong performance in Q3 2025, with revenue significantly exceeding its guidance. The company achieved a 116% year-over-year growth, highlighting its robust business momentum. This performance positions Telos favorably in the cybersecurity and identity management sectors, where it leverages over 25 years of expertise.

Financial Highlights

• Revenue: $51.4 million, a 116% increase year-over-year.
• GAAP Gross Margin: 39.9%.
• Cash Gross Margin: 44.8%.
• Adjusted EBITDA: $10.1 million, with a 19.6% margin.
• Operating Cash Flow: $9.1 million.
• Free Cash Flow: $6.6 million, with a 12.8% margin.

Earnings vs. Forecast

Telos exceeded its revenue forecast of $44-$47 million with actual revenue of $51.4 million. This significant beat underscores the company's strong market position and growth trajectory.

Market Reaction

Following the earnings announcement, Telos's stock surged 13.64% in pre-market trading, reflecting investor optimism. The stock's rise to $7.25 brings it closer to its 52-week high of $8.333, indicating strong market confidence in the company's future prospects.

Outlook & Guidance

Looking forward, Telos forecasts Q4 2025 revenue between $44-$46.3 million, representing 67-76% year-over-year growth. The company targets a cash gross margin of 40-41% and an adjusted EBITDA of $4-$5.7 million. For 2026, Telos expects baseline revenue of $180 million with a 10-11% adjusted EBITDA margin.

Executive Commentary

CEO John Wood highlighted the potential improvements in efficiencies up to 93% with the Xacta AI product, emphasizing its transformative impact on cyber governance. CFO Mark Bendza noted the $5 billion pipeline and projected another strong year of free cash flow in 2026.

Risks and Challenges

• The recent government shutdown temporarily paused some awards, posing a potential risk to revenue.
• Execution of ambitious growth plans requires careful management of resources and costs.
• Market competition in cybersecurity and identity management remains intense.
• Macroeconomic factors could impact the company's ability to secure new business.
• Dependence on technology development and innovation to maintain competitive advantage.

Q&A

During the earnings call, analysts inquired about the impact of the government shutdown on operations and the rollout strategy for Xacta AI. The company reassured stakeholders of its strong pipeline and focus on targeting existing customers for the new product.

Full transcript - Telos Corp (TLS) Q3 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Telos Corporation Third Quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message inviting you to hand this raise. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Allison Phillipp, Director of Communications. Please go ahead.

Allison Phillipp, Director of Communications, Telos Corporation: Good morning. Thank you for joining us to discuss Telos Corporation's Third Quarter 2025 financial results. With me today is John Wood, Chairman and CEO of Telos, and Mark Bendza, Executive Vice President and CFO of Telos. Let me quickly review the format of today's presentation. Mark will begin with remarks on our Third Quarter 2025 results. Next, John will discuss business highlights from the quarter. Then, Mark will follow up with fourth quarter guidance before turning back to John to wrap up. We will then open the line for Q&A, where Mark Griffin, Executive Vice President of Security Solutions, will also join us. The third quarter financial results were issued earlier today and are posted on the Telos Investor Relations website, where this call is being simultaneously webcast. Additionally, we have provided presentation slides on our Investor Relations website.

Before we begin, we want to emphasize that some of our statements on this call, including all of those relating to 2025 and 2026 company performance, plans, and operations, are forward-looking statements and are made under the safe harbor provisions of the federal securities laws. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ for various reasons, including the factors described in today's financial results summary, in the comments made during this conference call, and in our SEC filings. We do not undertake any duty to update any forward-looking statement. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental and clarifying measures to help investors understand Telos's financial performance.

These non-GAAP financial measures should be considered in addition to, and not as a substitute for, or in isolation from, GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our Third Quarter Results Summary and on the Investor Relations portion of our website. Please also note that financial comparisons are year-over-year unless otherwise specified. The webcast replay of this call will be available on our company website under the Investor Relations link. With that, I'll turn the call over to Mark.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Thank you, Allison. Good morning, everyone. I'm pleased to say that we have a lot of good news to share again this quarter. Before we get into the details on the slides, let's run through the main points upfront. Our business has been scaling in a very meaningful way this year. Leading the way are major programs in Telos ID, layered on top of a strong base of recurring revenue streams with high renewal rates from sophisticated government and commercial customers throughout our information assurance and secure communications portfolio. Our operational and financial performance inflected in a very positive way in the first quarter of this year, with a return to revenue growth, profitable adjusted EBITDA, and strong cash flow. That trend accelerated in the second quarter and then stepped up significantly in the third quarter.

Our third quarter results significantly exceeded expectations and we are raising our outlook for the second half of 2025. Our updated outlook for the second half reflects higher revenue, adjusted EBITDA, and adjusted EBITDA margin than previously indicated, as well as a more favorable weighting of second half revenue to the third quarter. In addition, cash flow remains very strong, and we continue to share repurchases in the third quarter. Lastly, we have a robust portfolio of existing programs that we forecast will deliver double-digit growth in revenue and adjusted EBITDA again next year, even before the addition of any new business wins through the end of 2026. With that introduction, let's get into more detail beginning on slide three. Telos has again overdelivered on key financial metrics in the third quarter, exceeding both revenue and profit guidance.

Revenue grew 116% in the quarter to $51.4 million, above our guidance range of $44-$47 million. Telos ID drove the outperformance above the top end of the guidance range. GAAP gross margin was 39.9%, and cash gross margin was 44.8%, both above our guidance range due to outperformance in all lines of business and also well above the gross margins that we reported in the second quarter. As I said last quarter, given the breadth of revenue streams in our portfolio, gross margins will naturally fluctuate within our historical range from quarter to quarter based on revenue mix. As you'll see in our fourth quarter guidance, we expect margins to mix lower sequentially next quarter. Adjusted operating expenses in the third quarter were approximately $500,000 better than guidance due to ongoing cost discipline throughout the company.

As a result of better than forecasted revenue, gross margin, and operating expenses, adjusted EBITDA also exceeded the top end of our guidance range. Adjusted EBITDA was $10.1 million, above our guidance range of $4-$5.7 million. Adjusted EBITDA margin was 19.6%, and incremental adjusted EBITDA margin was 51.5%. Or put differently, for each dollar of revenue growth, 51 cents converted to adjusted EBITDA. Lastly, in part as a result of our company-wide working capital initiatives, we delivered another quarter of robust cash flow. Operating cash flow in the quarter was $9.1 million. Free cash flow was $6.6 million, or a 12.8% free cash flow margin. We deployed approximately $3.6 million to repurchase over 584,000 shares at a weighted average price of $6.23 per share.

Since our fourth quarter 2024 earnings call, we've been saying that we expect significant year-over-year improvements in revenue, profit, and cash flow for the full year 2025. Let's turn to slide four for a brief review of our year-over-year performance in the first nine months of the year. We've discussed the business and programmatic drivers behind our year-over-year performance for the first nine months in each of our quarterly narratives. I won't repeat them here. I do think it's worthwhile to quantify the pronounced step-up in our financial performance during that time period on a cumulative basis. Specifically, revenue grew 44%. Cash gross margin, although fluctuating quarter to quarter, expanded 30 basis points to 43%. Incremental adjusted EBITDA margin was 56.1%. Or, again, put differently, for every dollar of revenue growth, 56 cents converted to adjusted EBITDA.

Adjusted EBITDA grew by $20.3 million and moved from a loss in 2024 to a 9.2% positive margin in 2025. Free cash flow improved by nearly $40 million and moved from a cash burn position in 2024 to a 12.7% positive free cash flow margin in 2025. Lastly, we've deployed $7.6 million to repurchase 2.1 million shares at a weighted average price of $3.69 per share. I will now turn it over to John for an overview of recent business highlights. John?

John Wood, Chairman and CEO, Telos Corporation: Thanks, Mark. Good morning, everyone. Let's turn to slide five. First, I'm thrilled to report that we launched our new Xacta AI product in early October, and I have already secured our first enterprise customer. The Telos team is extremely excited about this new technology and the opportunities it presents for our company, as well as for our customers. Xacta AI is a powerful enterprise AI software capability added to our Xacta platform, which has already proved the proven solution for cyber risk management compliance for some of the world's most security-conscious organizations. The foundation of our unique approach to AI is our ability to seed our solution with over 25 years of cybersecurity expertise. The result is a solution with the capabilities to create a true force multiplier for organizations that strive to do more challenging security work with fewer resources.

Xacta AI has the ability to provide users with smart insights that enable quick identification and resolution of potential compliance gaps. It also supports enhanced decision-making with actionable data to accelerate compliance initiatives. Finally, in real-world testing, we've documented potential improvements in efficiencies up to 93% across cyber governance, risk, and compliance, or GRC tasks, in addition to savings already realized from previous Xacta versions. Again, a true force multiplier for organizations that strive to do more with less in an increasingly complex cybersecurity environment. We plan to continue to evolve our platform and our AI capabilities with increased automation, as well as the expected addition of new agentic features to further enhance effectiveness and efficiency. We're very excited about the future for our Xacta platform, given this recent leap forward in the development of our product. Second, I'll provide a quick update on our TSA PreCheck program.

I'm pleased to report that we have now achieved our stated objective of reaching 500 enrollment locations this year. We currently have 504 locations across 41 states and Puerto Rico. We're pleased with this progress that we've made on this rollout as we strive to provide a convenient solution for travelers across the country and to be a trusted partner on this important national security program. Going forward, we will continue to evaluate our enrollment location network for improvements in market coverage while working with the TSA to ensure we are offering an attractive option for our customers. I'm now going to turn the call back to Mark, who's going to discuss fourth quarter guidance. Mark?

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Thanks, John. Let's turn to slide six. For the fourth quarter, we forecast revenue to grow 67%-76% year-over-year to a range of $44-$46.3 million. We forecast cash gross margin to be approximately 40%-41%, lower sequentially due to normal quarterly fluctuations in revenue mix, as described earlier. We forecast adjusted EBITDA of $4-$5.7 million, or an adjusted EBITDA margin of 9.1%-12.3%. Overall, fourth quarter guidance reflects a stronger than previously forecasted second half, a more favorable weighting of second half revenue to the third quarter, and potential for short-term administrative delays due to the federal government shutdown. Compared to our commentary on our last earnings call, at the midpoint of guidance, second half revenue is now forecasted to be higher by $5.6 million, or 6%.

Adjusted EBITDA is forecasted to be higher by $5.2 million, or 54%, and adjusted EBITDA margin is forecasted to be approximately 470 basis points higher. Lastly, we will provide further detail about our 2026 outlook on our fourth quarter earnings call in March. In the meantime, we currently forecast that our portfolio of existing programs will deliver double-digit growth in revenue and adjusted EBITDA again next year, even before the addition of any new business wins through the end of 2026. We forecast existing programs will generate approximately $180 million of revenue, primarily driven by growth in Telos ID, partially offset by contraction in secure networks. Additional upside revenue in 2026 would come from sales of our newly released Xacta AI software and new program wins from our multi-billion dollar pipeline of new business opportunities. With that, I will turn it back to John.

John Wood, Chairman and CEO, Telos Corporation: Thanks, Mark. Let's turn to slide seven. To recap, our business has continued to scale in a very meaningful way this year, largely due to programs in Telos ID. We achieved a 116% year-over-year revenue growth in the third quarter and significantly exceeded revenue and adjusted EBITDA guidance. We continue to produce robust cash flow, which funded additional share repurchases in the quarter. We are very excited about the opportunities that our new Xacta AI solution presents for our company and for our customers. We expect that year-over-year growth will continue into the fourth quarter and are pleased to report an improved second half outlook versus the outlook provided on our last earnings call in August. Finally, we look forward to another year of double-digit growth in 2026. With that, we're happy to take questions.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Operator, please open the line for Q&A. Thank you.

Conference Operator: Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question concerns the line of Zach Cummins of BY Securities. Your line is now open.

Various, Analysts, Various: Yep. Hi, good morning, Mark and John. Congrats on the strong results here. I appreciate you taking my questions. Just starting with the outlook, Mark, I think you mentioned a little bit of a headwind potentially from the government shutdown in Q4. As that pertains to potential award decisions going into 2026, any impact to some of those decisions getting pushed a little further to the right?

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Yeah. So a couple of things, Zach. In the fourth quarter, the impact of the government shutdown, I'd say, is at this point appropriately captured in our range on both the revenue and adjusted EBITDA line. I'd say what we're seeing in terms of government shutdown is a few things. First, awards are essentially stalled for the time being and generally sliding to the right. Then there's been various other administrative delays, things around things like collections on invoices or getting renewals executed or option years executed. Impact on the P&L has been relatively modest, but it's been more administrative delays, like I described in the script. Like I said, on the award side, generally awards being delayed for the time being. John and Mark, I don't know if there's anything you want to add to that.

John Wood, Chairman and CEO, Telos Corporation: No, I think that's a fair way of capturing it. They will hold off on awards until the government's turned back on, but nothing's been taken off the table.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Yeah. Pipeline into 2026 is still substantial. There's a lot of opportunity in there. It's still a multi-billion dollar pipeline with a good chunk of that expected to be awarded, say, over the next six months, with several tens of millions of dollars of revenue opportunity in 2026 on top of the $180 million from pre-existing programs.

Various, Analysts, Various: Understood. That's really helpful. John, I just wanted to ask you a question about your new Xacta AI product. It seems like it's getting pretty solid traction out the gate with one major enterprise-wide deployment. I believe you press released that a few weeks ago. Can you just give us a sense of maybe the initial feedback that you've been getting from the product? What are the plans in terms of trying to scale that as we move forward into 2026?

John Wood, Chairman and CEO, Telos Corporation: The first thing we're going to do is, and we've been doing this, is really offer it into our installed base. Customers already see value out of Xacta by itself. When you include a RAG, which allows you to reduce the hallucinations, if you will, within the large language model, it really makes it very, very simple or much more simple for a customer to implement their needs for security and compliance because, essentially, the language model itself and the RAG together generate it for the customer. It generates it very, very quickly. I think our test results are something like up to 93% improvement in time.

Various, Analysts, Various: Understood. Thanks for taking my questions and congrats again on the strong results.

John Wood, Chairman and CEO, Telos Corporation: Thank you.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Thanks, Zach.

Conference Operator: Thank you. One moment for our next question. Our next question comes from the line of Matthew Kalidji of Needham & Company. Your line is now open.

Matthew Kalidji, Analyst, Needham & Company: Hey, guys. This is Matthew Kalidji over at Needham. Thanks for taking our questions and congrats on the strong results. Speaking on Xacta, what is the specific impact of the shutdown and broader pressure from continuing resolution? Been on conversations there. How are you communicating the value proposition of the offering amidst the uncertainty?

John Wood, Chairman and CEO, Telos Corporation: This shutdown will be behind us soon. I think the issue is during a shutdown, sometimes your customer is just not there because they've been furloughed. I think there's a piece of that that's there. The good news is that previously, we had been out in front of this before we even announced Xacta AI, showing our customer base or installed customer base, getting their feedback. I think people are really excited about it, honestly, because it also means that when you use Xacta AI, you don't need the same level of professional services as you have to have used in the past.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Yeah. Maybe what I'll add to that is we had a first enterprise sale to a customer before the shutdown straight out of the gate when we launched the product. Several other large customers have been very interested. Those conversations have pushed it right a little bit as a result of the shutdown. Good traction straight out of the gate.

John Wood, Chairman and CEO, Telos Corporation: Yep. That's great to hear. Are there any other hurdles to adoption there, or do you think we can see an inflection of sorts once budgets open up? I don't see anything that's going to hold back from people wanting to use Xacta AI.

Matthew Kalidji, Analyst, Needham & Company: Awesome. That's great to hear. Thank you.

John Wood, Chairman and CEO, Telos Corporation: You're welcome. Thank you.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Thanks, Zach.

Conference Operator: Thank you. One moment for our next question. Our next question comes from the line of Bradley Kark of BMO Capital Markets. Your line is now open.

Bradley Kark, Analyst, BMO Capital Markets: Hi. Thanks for taking my question. Congrats on the results. On the TSA PreCheck program, you've reached your 500 location goals for 2025. I really want to understand a little bit more, sort of the plan for going forward 2026 in terms of growth of this program through other new locations. You mentioned sort of evaluating your market positioning. I just want to take a step back. Now that we've reached our enrollment location target, how are we thinking about growth of this program going forward? Thank you.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Hey, Brad. Thanks for the question. We are now operating at scale in that program. We've been working towards our 500 locations for some time now. We've actually now exceeded that target. In terms of our physical location and our IT infrastructure, we are now at scale nationwide. Now that we're up and running, we will continue to evolve that network of locations, continue to develop new partnerships, continue to find new and innovative ways to reach travelers and serve travelers. This is really just the beginning. We're really excited to be at scale. I think there's a lot of upside over the next few years in that program. Maybe Mark Griffin might have something to add.

Various, Analysts, Various: Hey, Bradley. Yes. As a TSA expansion program, as Mark indicated, we'll continue to look for those areas that are underserved, both from a location point of view, but also those customer bases. As indicated in the script, we will continue to look for expansion in those areas to serve not only TSA, but serve the community of enrollment and renewal populations as well. We're very excited about the expansion capabilities. It was a great achievement, we feel, to get to our 500 locations. We'll continue to look for enhancements and expansion from there.

Conference Operator: Thank you. One moment for our next question. Our next question comes from the line of Rudy Kessinger of Baird. Your line is now open.

Matthew Kalidji, Analyst, Needham & Company: Hey, guys. Thanks for the questions and congrats on another nice quarter here. I'm trying to think the $180 million baseline for existing programs for next year. I'm just trying to size up how much you could potentially add on top of that because if you look at 2025 and the revenue you're going to do and they take out the $70 million from existing programs, the $50 million-$75 million from DMDC and then PreCheck, it seems like the actual revenue you've got this year from new business programs was pretty minimal. And I think I heard you say several tens of million potential revenue for next year. Just when will you know that by? Should those be wins that will be awarded within the next few months after the shutdown is over? How much visibility do you have to that, likelihood of those deals being awarded to you, etc.?

Various, Analysts, Various: Hey, Rudy, Mark Griffin. Yes, the pipeline that we have is still robust and growing. We have seen even during the government shutdown, the pipeline is increasing, and nothing is getting canceled at this point. As Mark indicated earlier, broadly speaking, awards are just paused and kind of moving to the right. The portfolio in the pipeline between identity and some of the projects that we feel very confident on potentially can drop in the next few months, but more likely are probably positioned more into 2026 on the first half. We will see some activity there that would add to that baseline that Mark talked about earlier.

John Wood, Chairman and CEO, Telos Corporation: Plus additional Xacta AI software sales.

Various, Analysts, Various: Right.

Matthew Kalidji, Analyst, Needham & Company: Okay. Got it. My second question was on Xacta AI. I guess, is there an upsell potential to existing Xacta customers on Xacta AI? If so, what would be the uplifting for you to get adoption of it?

John Wood, Chairman and CEO, Telos Corporation: Yeah. I don't know if you heard me say earlier, Rudy, our primary target to start is our existing installed base. In general, I would say there was a great deal of excitement by our customers on the release of Xacta AI. Unfortunately, when the government shut down temporarily, it put things on pause a little bit. Now that we're seeing our way to the end of that pause and the end of the shutdown, I think it'll come at breakneck for us.

Matthew Kalidji, Analyst, Needham & Company: Great. Thank you. Thanks for taking my questions again.

John Wood, Chairman and CEO, Telos Corporation: Yep.

Conference Operator: Thank you. One moment for our next question. Our next question comes from the line of Nihad Joxhi of Northland Capital Markets. Your line is now open.

Various, Analysts, Various: Thank you. Congrats on the strong results.

John Wood, Chairman and CEO, Telos Corporation: Thank you.

Various, Analysts, Various: Absolutely. The $180 million baseline for calendar 2026 implies what % of the annualized full run rates for your DMDC program and PreCheck?

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Nihal, I'm not going to get into programmatic detail, but what I can tell you is that 180—so just do the math—that 180 implies $17 million of growth at the midpoint of our 2025 guide. That $17 million is comprised roughly of $28 million of growth at security solutions, net of $11 million of contraction at secure networks. And substantially, all of that $28 million growth at solutions is coming from Telos ID, which, as you know, is the business that contains those programs.

Various, Analysts, Various: Okay. All right. Thank you. You also stated that the pipeline can bring tens of millions of revenue for calendar 2026 above the $180 million baseline. Can you walk us through how you come to that range there?

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Yeah. So pipeline is roughly $5 billion right now. Mark Griffin, we're talking about a third of that is over the next, say, six months.

Various, Analysts, Various: Yes.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: It's going to be awarded over the next six months. At that level of award opportunity, certainly several tens of millions of that represents revenue opportunity in 2026.

Various, Analysts, Various: Okay. When you say tens of millions, that includes the pro rating of the awards being pushed out to the right from 4Q 2025 to 1Q 2026 and 2Q 2026?

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Yes.

John Wood, Chairman and CEO, Telos Corporation: Nihal, it's several tens of millions.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Yeah. That's the total opportunity set, right? So the point is there's ample opportunity above that $180 million between Xacta AI and our traditional pipeline. It's just a matter of what comes in the door and when.

Various, Analysts, Various: Can you remind us what has been your historical win rate of what's in your pipeline?

Mark Bendza, Executive Vice President and CFO, Telos Corporation: No.

Various, Analysts, Various: Understood.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: We don't disclose that externally.

Various, Analysts, Various: Okay. All right. And then last question for me is that given the 60% incremental EBITDA margin of the current quarter and 20% EBITDA margin and 13% free cash flow margin, care to share any perspective on what's the sustainable free cash flow margin for Telos then?

Mark Bendza, Executive Vice President and CFO, Telos Corporation: It's probably a little too early to forecast free cash flow margins. What I think I'll say is at that base $180 million of revenue, again, before any new business wins, that base $180 million of revenue, we're targeting managing our OpEx to kind of low double-digit adjusted EBITDA margin. Call it 10%-11% or so adjusted EBITDA margin. As additional growth comes in above that $180 million, that adjusted EBITDA margin will run higher. We'll toggle between additional growth investments and higher adjusted EBITDA margin depending on what that additional revenue is, what the margin profile is of that additional revenue. That adjusted EBITDA margin can start to give you an indication of where free cash flow can trend. We expect another good year of free cash flow in 2026.

Various, Analysts, Various: Okay. That's really helpful. Maybe just to further what you're sort of giving color around with calendar 2026 in terms of EBITDA margin. And then the potential, if you win the tens of millions of opportunity from the pipeline, would drive you would expect incremental EBITDA margin to be above that sort of 10-11% baseline EBITDA margin. But it doesn't sound like you would expect 60% incremental EBITDA margins. But it sounds like you would expect somewhere like what, in the 20-30% range?

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Yeah. It's a little premature to commit to that for two reasons. One, it depends on what that additional revenue is and what the incremental gross margins are on that revenue. Also, how much of that we decide to commit to additional growth investments. My point simply is there is upside to that kind of 10-11% base adjusted EBITDA margin. It's just going to depend on, again, the margin profile, that additional revenue, and then how much of that we hold back for some growth investment.

Various, Analysts, Various: Got it. Okay. Thank you very much.

Mark Bendza, Executive Vice President and CFO, Telos Corporation: Yep. Thank you, Nehal.

Conference Operator: Thank you. I'm showing no further questions at this time. I'll now turn it back to John Wood for some remarks.

John Wood, Chairman and CEO, Telos Corporation: Thank you very much, operator. First, I just want to say thank you to everybody for your ongoing support of the company. As shareholders, we certainly appreciate your staying behind the company. Obviously, we're going to continue to be intensely focused on executing our growth plans and continuing the same trend of year-over-year growth in the fourth quarter and into 2026. Finally, with our robust and recession-resistant end markets, well-funded customers, and a decades-long track record of serving the world's most security-conscious organizations, Telos has a strong foundation for the future. Thanks a lot.

Conference Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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