SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2025

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

We operate our business in 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.

•Our Secure Networks segment provides secure networking architectures and solutions to our customers through secure mobility solutions, and network management and defense services.

We measure each segment's profitability based on gross profit. Our Chief Executive Officer, as the chief operating decision maker ("CODM"), evaluates the segment's performance based on metrics, such as segment revenue and gross profit, that align with our strategies and objectives, and provide a framework for the timely and rational allocation of resources between the segments.

Table 15.1: Results of Operations by Business Segment (Quarter)
	For the Three Months Ended
	June 30, 2025						June 30, 2024
	Security Solutions		Secure Networks		Total		Security Solutions		Secure Networks		Total
	(in thousands)
Revenues	$	32,474	$	3,494	$	35,968	$	17,867	$	10,631	$	28,498
Cost of Sales
Depreciation and amortization (1)	1,714		1		1,715		2,037		2		2,039
Stock-based compensation expense (1)	139		10		149		162		66		228
Other segment items (2)	19,323		2,849		22,172		8,403		8,121		16,524
Total cost of sales	21,176		2,860		24,036		10,602		8,189		18,791
Gross profit	$	11,298	$	634	11,932		$	7,265	$	2,442	9,707
Operating expenses
Research and development expenses					1,512						1,459
Selling, general and administrative expenses					20,303						16,892
Total operating expenses					21,815						18,351
Operating loss					(9,883)						(8,644)
Other income					553						1,064
Interest expense					(141)						(160)
Loss before income taxes					(9,471)						(7,740)
Provision for income taxes					(46)						(17)
Net loss					$	(9,517)					$	(7,757)

Table 15.2: Results of Operations by Business Segment (Year-to-Date)
	For the Six Months Ended
	June 30, 2025						June 30, 2024
	Security Solutions		Secure Networks		Total		Security Solutions		Secure Networks		Total
	(in thousands)
Revenues	$	58,292	$	8,292	$	66,584	$	36,507	$	21,610	$	58,117
Cost of Sales
Depreciation and amortization (1)	3,215		3		3,218		3,312		5		3,317
Stock-based compensation expense (1)	308		31		339		338		147		485
Other segment items (2)	32,411		6,502		38,913		16,966		16,681		33,647
Total cost of sales	35,934		6,536		42,470		20,616		16,833		37,449
Gross profit	$	22,358	$	1,756	24,114		$	15,891	$	4,777	20,668
Operating expenses
Research and development expenses					3,083						4,629
Selling, general and administrative expenses					39,936						33,121
Total operating expenses					43,019						37,750
Operating loss					(18,905)						(17,082)
Other income					1,114						2,316
Interest expense					(288)						(335)
Loss before income taxes					(18,079)						(15,101)
Provision for income taxes					(42)						(34)
Net loss					$	(18,121)					$	(15,135)

(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 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 the three and six months ended June 30, 2025, and 2024. 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 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.