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SEGMENT INFORMATION
 12 Months Ended
Dec. 31, 2024
Segment Reporting [Abstract]  
SEGMENT INFORMATION SEGMENT INFORMATION
As noted in Note 2 – Significant Accounting Policies, we conduct our operations through two reportable and operating segments: Security Solutions and Secure Networks.
•Our Security Solutions segment is primarily focused on cybersecurity, cloud and identity solutions, and secure messaging through Xacta, Telos Automated Message Handling System ("AMHS") and Telos ID offerings. We recognize revenue on contracts from providing various system platforms in the cloud, on-premises, and in hybrid cloud environments, as well as software sales or software-as-a-service. Revenue associated with the segment's custom solutions is recognized as work progresses or upon delivery of services and products. Fluctuation in revenue from period to period is the result of the volume of software sales, and the progress or completion of cloud and/or cybersecurity solutions during the period. Other segment expenses relate to labor, material, and overhead costs. Software sales generally yield higher margins. Gross profit and margin are a function of operational efficiency on security solutions and changes in the volume of software sales.
•Our Secure Networks segment provides secure networking architectures and solutions to our customers through secure mobility solutions, and network management and defense services. Revenue is recognized over time as the work progresses on contracts related to managing network services and information delivery. Contract costs include labor, material, and overhead costs. Variances in costs recognized from period to period primarily reflect increases and decreases in activity levels on individual contracts.
Table 18.1: Results of Operations by Business Segment
For the Year Ended December 31,
20242023
Security SolutionsSecure NetworksTotalSecurity SolutionsSecure NetworksTotal
(in thousands)
Revenues$76,760 $31,512 $108,272 $77,416 $67,962 $145,378 
Cost of sales
Impairment loss on intangible assets (1)
5,333 — 5,333 — — — 
Depreciation and amortization (1)
6,396 8 6,404 3,532 12 3,544 
Stock-based compensation expense (1)
667 161 828 668 232 900 
Other segment items (2)
36,685 24,593 61,278 33,602 54,390 87,992 
Total cost of sales49,081 24,762 73,843 37,802 54,634 92,436 
Gross profit27,679 6,750 34,429 39,614 13,328 52,942 
Operating expenses
Research and development expenses8,442 11,760 
Selling, general and administrative expenses75,487 81,010 
Impairment loss on intangible assets6,373 487 
Total operating expenses90,302 93,257 
Operating loss(55,873)(40,315)
Other income4,023 6,715 
Interest expense(644)(786)
Loss before income taxes(52,494)(34,386)
Provision for income taxes(26)(36)
Net loss$(52,520)$(34,422)
(1) The significant segment expense categories and amounts align with the segment-level information regularly provided to the CODM.
(2) Other segment items for each reportable segment include direct labor, direct subcontractor costs, direct materials and inventory, other direct non-labor costs, fringes, overhead, and facility costs.
We measure each segment's profitability based on gross profit. The CODM evaluates the segment's performance based on metrics, such as segment revenues and gross profit, to align with our strategies and objectives, and provide a framework to allocate resources between the segments.
We account for inter-segment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices, if any. There were no inter-segment sales and transfers during fiscal years 2024 and 2023. Interest income, interest expense, other income and expense items, and income taxes, as reported in the consolidated financial statements, are not part of the segment profitability measure and are primarily recorded at the corporate level.
Management does not utilize total assets by segment, nor provide segment asset information to the CODM, to evaluate segment performance or allocate resources. As a result, assets are not tracked by segment, and therefore, total assets by segment are not disclosed.