Q1 2021 Intrusion Inc Earnings Call
Okay.
Great.
Please go ahead.
Great.
[music].
Good afternoon, and welcome to <unk> first quarter 2021 results Financial conference call. At this time all participants are in listen only mode. At the conclusion of today's conference call instructions will be given for the question and answer session of the.
I'm on today's conference call is being recorded for replay purposes, I would now like to turn the call over to Joel Ackerman of <expletive> of Shelton Group Investor Relations.
Relations Joe. Please go ahead.
Good afternoon, and welcome to the intrusion first quarter 2021 earnings conference call I'm, Joel the Cromwell, its managing director of Shelton group.
The Investor relations firm, joining for Jack Blunt intrusion, President and CEO and Franklin of Bird intrusion CFO before we begin the call I want to remind you that todays conference call may contain forward looking statements regarding future events, including but not limited to.
The patient for intrusion for your business financial performance and both customer and industry. The adoption of shield technology successfully bringing to market intrusion design pipeline and executing on its business plan. These forward looking statements are based on estimates documents of current trends and market conditions and involve risks and then.
Certainties that could cause actual results to differ materially from those contained in the forward looking statements.
We encourage you to review the company's SEC filings, including the 2020 form 10-K filed with the SEC on March nine 2021, and other of T. SEC filings made from time to time in which we may discuss the risk factors associated with the testing and intrusion on.
All forward looking statements are made as of the day of this call Tuesday need for 2021, and except as required by law, we do not intend to update this information.
The conference call will be available for audio replay for at least 90 days in the Investor Relations section of intrusion website at Www intrusion Dot com.
Now we will start the call off with a review of the financial results by Franklin and the Jack will review of intrusion threats and operating development progress with shield and the Companys key objectives going forward.
Then we'll be happy to take the questions.
I'd like to turn the call over now the intrusion.
CFO, Frank Frank Lindbergh Franklin. Please go ahead.
Well, thanks, Joe and thanks to everyone, who is doing just per day.
So for the first quarter 2021 revenue was $1 9 million compared to $1 6 million from the fourth quarter of 2020, and $1 8 million in the first quarter of 2020.
Revenue for the first quarter continued to reflect the impact of extended government shutdowns related to the pandemic, but we're hoping to see positive signs of recovery as Washington begins to reopen in a more normal ordering patterns return throughout the course of the year.
Gross margin in the first quarter was 66% compared with 58% last year and 58% from the first quarter of 2020.
First quarter operating expenses of $5 1 million compared to $4 8 million last quarter, which included a $1 1 million noncash write off related to the prior office lease from Rachel.
This compares to operating expenses of $1 5 million from the same quarter a year ago.
And then the last quarter the increase of operating expenses is due to the additional hiring we've had.
To expand our sales and the leadership team combined with increased marketing focus on the development and launch of Shiel.
The drill down a little further on the additional employees since the first quarter of last year 2020, the company of higher 38 additional employees across the board for the development and launch of shield.
The breakdown of these new employees were as follows.
26 in sales and marketing and research and development and for in general and administrative areas.
In addition, the hiring of employees. We've also increased our use of kind of contract consultants for both research and development and our legacy consulting business.
As I previously stated we have continued to step up our marketing efforts in 2021, focusing on the launch of shield.
Additionally, we have expenses experienced general expense the increases, but you would normally expect the unemployed head count increases.
Net loss for the first quarter of 2021 of $3 9 million or minus 22 per share on $17 6 million weighted average shares.
Moving to a net loss of the same $3 9 million for them.
The minus 23 per share from the prior quarter.
On the net loss of <unk> 5 million from minus <unk> <unk> per share in the first quarter of 2020.
Cash and cash equivalents as of March 31, 2021 for $13 1 million compared to $16 7 million in the prior quarter.
We're getting working capital was $12 4 million and total outstanding debt at the end of the quarter the 635000.
The current portion.
In terms of guidance for continuing to sort of.
Current policy of not providing quarterly guidance at this time due to the fact that we are still in the early stages of ramping motors on shield as we've stated previously it's very difficult at this stage to accurately predict the exact nature and timing of the revenue ramp, but we will continue to reevaluate this on the quarters ahead.
With that I am pleased to pass the call over to Jack to review recent business developments with the shield and several other activities across the company.
Jack.
Thank you Franco.
So I'm going to start off by certainly commenting on I think the excellent progress that we've made in the first quarter.
The cause I'm, certainly very pleased by it and think it's a good indication of the direction. We're headed we've had are absolutely unprecedented interest in a very short period of time and the shield product. It's unique functionality industry unique plug and play technology that makes it so easy to implement and evaluate.
Of struck a number of contracts most of those.
The three year contracts.
Some significant companies two of those for example, Kimberly Clark, which we did a press release on it.
LCI, which was the press release on Kimberly parts of Fortune 500 business LTE I believe is of Fortune 2000 business. Both of them are international businesses with the international locations and they have signed.
International agreements for three years to be able to use the shield product and all of the international applications. So that's very very significant for the first quarter of of new launch of the new networking technology Cyber security product. We're very very pleased to have both companies on board we are working very.
Closely with both companies and very excited by the progress that we're seeing there.
Having well known brands like the US certainly increases the opportunities with other companies to make additional new sales in total we have licensed over 50000 seats to date with these companies.
That's an extraordinary success I think in a very short period of time.
Our pipeline continues to grow with prospects from the SMB market from the mid market and certainly from large enterprise and even government agencies.
D C. All last week for example, and was very encouraged to see the street's full of cars hotels full of patrons.
The business coming back to normal on the federal government as you know our reported last year. When I was up there I found at the very depressing place. So I was very encouraged to see business coming back to normal in the capital.
We have been performing multiple demonstrations on the shield technology, which is very easy to demonstrate true customer through our web session online every day of the week. We continue to have very positive feedback from those and very positive outlook for the year.
Revenues of course, we will grow slowly.
The SaaS model of our technology it takes a while for that to ramp up.
So from an update from the sales channel. We have 35 resellers now actively selling our product for us and I'm proud to say some of those already our international resellers, we have three Canadian resellers, one Mexican reseller, one of the United Kingdom reseller.
What Australia, and reseller and actually one robin of reseller. So seven international resellers signed up on the last four weeks alone and we're very excited about that because I believe the international market is very very ripe for new cyber security technology.
If you look at the international market for example, some people may be surprised but the for leading countries I think the.
That you see you are Mexico, Brazil.
Hum.
Well I'll just true Blake on the other two but anyway.
Not necessarily normal where you think of the coming from Brazil, and Mexico being the two largest outside of the U S for cyber crime aggressive attacks and hits on a daily basis. So we're excited to have the international reseller signing up as well we've expanded our leadership team by adding two key individuals.
For the team very very recently, we originally had not planned to hire a chief sales officer until 2021, because we originally thought it would take until 2021 'twenty 'twenty two to become international we got that done by the end of first quarter and with that change. We went ahead and made the move to higher.
The International Chief sales officer with tremendous international experience established known resellers and business of cities used to working with in addition, he brought on a new VP of direct sales.
Jeremy Mary, So Daryl Athens, and Jeremy Merrick, our two new executives in sales, we're very excited to have on both on the team. We had him here in Dallas recently for training and Theyre out actively selling the customers today.
On the traditional government business, we are seeing early signs of.
Of growth, although there are still delays.
Do the things that are going on on the government for example, while I know we all here daily on the news about the president of talking about massive spending increases sadly, we do not have an approved budget for the government and its not looking like the of budget is going to get approved until 2022.
Without an approved budget on the government must.
Revenue in resolutions, which we've seen before in the past.
The challenge with the continuing resolutions is starting up new business. So ongoing projects can continue would be funded but new projects are very hard to get approved and funded during continued resolutions. So that may still cause some delay as we move into 2021, although we expect to see near normal growth.
Continue closer to the end of the year.
In summary shield is on on early stage of ramping and we're very excited about how it looks our pipeline is extremely large for the early stage of the company.
It is significantly larger debt I would say it needs to be the accomplish the goal was in sales that we expect for 2021. So I believe we are of great pipeline in front of us the real executing against clearly will be driven to accomplish implement new sales, which bring on new revenues.
Our target for international is also on the exciting change that we did not think we would have at this time again, Brazil, India and Mexico being the three largest countries for the international market that are prime for ready growth. We have established resellers that were talking with the will be bringing on.
In Brazil, and India very shortly we've already brought on Mexican reseller and have others on the pipeline as well so we're continuing to build market visibility for shield.
Unique capability of real time, Kelly, all dangerous traffic incoming and outgoing tiered network for.
Normally I would say the two questions I get asked most frequently when I'm doing sales pitch is.
Why is shield, producing such dramatic higher kill rate than any other cyber security product on the market.
And the answer I give the that is shield has the advantage of using the trace cop database that we've had for 25 years. This is the largest and most of the unique in the world to train our AI on so therefore, our AI can be dramatically more enhanced and more significant.
On average, we're showing about 20 times the volume of traffic that we are identifying the J dress to your company compared to other cyber security products. So not only do we not generate any alerts the waste hundreds of hours of man hours by IHG teams Tracey them down we are killing.
Thousands more things than other products, even identify and generate of alerts on so the community is starting to readily adapt to the shields nature of understanding the broad breadth.
Of the cyber security brush the sweeping across the world that's impacting business with an attack reportedly every 39 seconds on the business.
With that I would like to turn it over and open it up for your questions and as always we'll do our best to answer all your questions. Operator, if you could open up the call up.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your kind of thank you Pat now if you change your mind staff of late by Tim.
How the first question comes from Zach Cummins of B Riley Securities. Your line is open. Please go ahead.
Yes, hi, good afternoon. Thanks, Thanks for taking my questions.
And I just wanted to start off by asking if you could.
Just give us a general sense of kind of accommodate the.
The contribution.
The contribution of the legacy business versus maybe the kind of minimal shield revenue that you were able to get in this this quarter is on a nice tick up in the gross margin line versus maybe what we saw over Q4 and Q1 of the last year.
Yeah, Hey, Zach business Franklin.
Yes, so in Q1.
The <unk>.
Chile, the majority of all of our revenue came from the legacy products.
As we expected and has always communicated.
Shield sales in Q1 was very minimal because we just launched in Q1, so but you'll see for Q1 revenues is largely.
And of predominantly the legacy business.
Understood understood and then I understand I guess I wanted to provide guidance just given how early you are in the stage of this but is there any way you can give us a sense of the number of shield. The seats that you have right now that are that are paying versus what's just signed up on the backlog.
Well.
We don't have the exact number of those that are paying.
Today versus our signed under contract so the 50000 seats.
<unk> under contract.
For shield, but because of the SaaS license they only pay revenue.
The online in a quarter.
So initially if you have 20000 seats youre not turn it on 20000 seats in one quarter, because you'd have to add.
People are alert or they have to know what's going on again.
I'm really proud of for example, actually has locations on 110 different countries and they plan to rollout worldwide. So we have not seen their implementation schedule of how theyre going to get 110 countries, but we know that they're working on it. So the revenues will come in as they bring on a territory or a region.
And then the revenue start paying so the the SaaS model is you pay as you use so as they ramp up and implement across the market. Then we will see more and more seats. So the 50000 seats is what's license, but it's not what's being paid for our daily.
Understood and then you kind of touched on this but with that 50000 feet.
Well, that's sort of the pace that we should anticipate for that rollout for the needs to go live I know you've taken kind of vary customer by customer, but I'm, just curious kind of how youre thinking about it internally is as you build out here of your plan and your model moving forward.
Well.
Again, I don't I don't we don't have enough track record to have history to understand how fast customers are going to be able to implement we've done everything humanly possible to make the product the easiest product to install and implement every Bennett again, its most customers and in fact, we had one customer that I traveled to New Orleans.
To sell a few weeks ago and their concern and fear of west from their it department of not having the resources to take time to learn of new products and implemented I literally showed up at the meeting locked into the data center, what the the CEO and his entire team.
All of the shield product and had an active and three minutes timed on the stopwatch it was in production and use.
So we've done everything humanly possible, but how fast customers rollout products is all about their their customers. So they don't have to give us the plan of when they are rolling out which ones. We know when they come on line and Thats when they start paying for them. So I would anticipate debt.
<unk>.
They will bring on.
And some number of seats each month, but I don't know at what rate and we don't know of history to look back and say they could turn it all on in three weeks they could turn it all on literally in a day if they wanted to but most companies don't operate that way. They go about location they roll things out in a physical location at a time now the.
<unk> will rollout.
On the entire location of the time, which could easily be a 1000 seats coming on at once it could be 300 seats. We just really don't have any data zack to be able to determine that we don't control of the customer controls.
So I'd like to give you answers, but I just don't have enough data that would be purely guessing and I don't know that.
I understood and then I guess just for.
Final question for me on in terms of Kimberly Clark.
How that contract is structured I mean, just depending on the number of seats or their requirements, whereas where they have to fill those seats of over a certain timeframe. I'm. Just curious is it just gives them the option to make a certain number of seats go live or are there some sort of contractual obligation that that requires them to roll this out.
And actually begin to pay for it.
Certainly there is the intent and the desire of debt debt.
Kimberly Clark will be rolled out.
Fully within 12 months from from the very first discussions I've had what's the I have not seen the schedule and there is not technically anything in our contract.
Of the requires them to implement it in a certain timeframe. So I know they have some seats implemented already packed day at some seats implemented at the time of the press release.
I know theyre rolling out more aggressively, but I haven't seen their schedule.
So.
I certainly anticipate that they will have all of their seats online within 12 months I would expect probably more like six months, but again I don't have the history to prove that.
Clearly they didn't buy that's just set it on the shelf they buy this because they're scared to death of cyber crime and it's the only helping New York you'd get a simple.
So they have every desire the implemented it's not a I don't want to spend the money because it's very inexpensive versus what they are the training for other products and the risk they have but they get hit so I know they plan to be very aggressive, but rolling it out and I think most customers wellbeing.
Understood and then I guess just final question for for me would be.
Around kind of of these all of the hiring that you've done over the past couple of quarters do you feel like you really have kind of the team in place right now for for the expected demand for shield or how should we think about the ramp with with the operating expenses over the next couple of quarters.
No. We we have said I think of couple of times of we think that we have filled.
The critical positions we have in the company of the sales force the technical support people on the quality assurance people all of the things that go along with shipping and the production product.
So we feel like our head count is largely stable right now.
Yeah.
I'm sure, we'll be hiring two or three people on a month or a quarter, but we don't have any aggressive hiring plans until we see what the implementation ramp is and where additional people are needed. So.
Absolutely said before we think we're pretty stable at about the head count we are right now to get us through second quarter, we'll evaluate right now we have plans for a board meeting right around the end of second quarter to evaluated with the board what we've accomplished in sales and revenues and whether it's time to re.
Engaging in new hires or whether we're going to stay stable for another quarter, so it'll be evaluated each quarter.
Understood well, thanks for taking my questions and the best.
Good luck going forward.
The very much the exact.
Our next question comes from Scott Buck of H C. Wainwright. Your line is items. Please go ahead.
Hi, Good afternoon, guys first of all from me kind of picking the piggybacking on <unk> question outside of personnel is there any other invest the need to make.
Like do you have the infrastructure in place to properly roll this out.
No we have no major infrastructure.
Enhancements planned.
Our data center of stable in place in the AD.
Adequate capacity.
So we don't have any anticipated expense.
That will drive the anything new right now.
Okay. That's great Jack. Thank you second one can you remind us the difference in economics between selling directly to your sales force and using the reseller channel.
Yes.
Well.
For the reseller channel makes 30% off of our product.
<unk> basically.
Most of.
These evaluate internal cost of direct sales versus channel sales. So while one day sound more expensive for more profitable on the other ones both of them basically cost you about 30% the closed sales whether youre doing it through a direct sales force or whether youre doing it through a channel sales force.
So that's pretty much an industry average number that that's how we get to us and that's how they compare.
Alright, thats perfect. Thanks, a lot guys.
I appreciate it thank you thanks Scott.
Our next question comes from Ross Taylor of Ari's investment Partners. Your line is open. Please go ahead.
Jack on the last call you talked about the number of large and potentially very large.
<unk> said you were in the demo stage of Trialing stage could you update us on where those potential of customer stand.
Well, certainly LCI and.
Kimberly Clark with two of those again both of those are very large.
Dollar.
The company's.
As I said I think a L.
<unk> is in the Fortune 2000 category I know Kimberly Clark is in the Fortune 500 debt I think the fortune 330 or something so those are certainly two of the company's debt had early access to the product in early evaluations.
What I was alluding to during that call.
Kimberly Clark Dean.
Certainly I mean, we've talked about a lot but to win of Fortune 500 company. At this early stage of a new technology is it's almost beyond my excitement.
For the work that they put in to evaluate technology. The impact it has on their company again looking at rolling it out in the 110 different countries. I mean this is a major major enterprise decision and they don't make those likely so we feel like this is about as good of a rubber stamp as you can get.
Certified ready for production. So we're very proud of that.
There are others in the works and it was not just true.
These moved the fastest fortune 500 fortune 100 companies government agencies generally take.
Nine to 12 months to make a decision on the new networking technology, I mean pretty much anybody in the industry will tell you that I've been selling enterprise solutions for 42 years I can tell you that as always.
In fact on the earlier days that we used to say it was 12 months to 18 months now we say nine to 12 months. So some of these big companies will take longer.
The both to make the decision to put it in evaluation mode, how long they want to evaluate it but.
We are in discussions with other fortune 100, Fortune 500, and government entities that are very large and very significant debt. We're very excited about and that I will continue with my team to work closely on.
With regard to the government agencies. They see this as something that they would be putting into place in replacement of the services. You currently sell them or would this be additional on for different uses and the work you're currently been or the historical acute done with them.
No, it's absolutely new and additional work. So this is really again I think I've said earlier in the call I was in D. C. All of last week.
Specifically to work with government agencies.
It was really by first time that I've been able to go up there and meet with them and give them demos of shield and talk about the new functionality and how it works and how I think it's again formally being the CIO and the federal government I know a lot about what their needs are and so I know a lot about how to sell to them. So this is additional it will not display.
<unk> any of the current work, we do for them, but it's an additional day would be rolling out the large agencies to all of their employees in their organizations to protect them. So I've got an incredibly warm reception all last week in D C.
Of the demos for is.
Well received by the government as they have been by any company have shown.
We have follow up meetings with every one of these agencies.
In the coming weeks and months so again.
Again extremely excited about how.
Rapidly how openly they accepted the shield technology day.
<unk>.
Absolutely love the concept of killing thing rather than generating the words, they all have their own military analogies to the fact that being protected instead of reporting that you had been hurt after the fact was a radical departure and something that they saw endless.
Value out of.
Okay and so in looking at all of this and you made the comment that kind of see Kimberly Clark was by you seen as effectively a proof of concept that the market Theres a lot of uncertainty clearly the recent price action in the stock market has indicated that there are a lot of people who don't have the confidence in this product.
You have that your team has.
So can you comment on.
Why this proof of concept was so important.
Because obviously the meal on getting a lot of action that indicates that people don't believe that it means anything.
Well I wouldn't agree with that state of I think everybody knows they need better cyber security I think everybody feels vulnerable every article I read every conference I go to I never hear anybody say, they don't need any day now not having the confidence in the intrusion shield given the fact that it's such a.
New product.
Out of a new company in the sense that we're turnaround because we've never had a commercial product I certainly understand their hesitancy on that front and I think it's normal but again.
Traditionally if you buy like a firewall youre going to spend weeks to months configuring. It then youre going to put it on your network and then you guys been months evaluating did it really helped me and how is it better and how do I know it's better.
So these are traditionally solutions that take long periods of time to evaluate.
On the other hand installs in two to three minutes and start.
Network immediately most of the time when I do a demo we kill from 10 to 20 to 30 malware attacks during the 15 or 20 or 30 minutes demo for the customer. So they real time can see the benefit of this product again, if they typically run a month long evaluation, they're going to find debt.
The killed over a million connections on their network that they didn't even know we're going on the warrant useful that warrant health on their employees that want constructive that could only have bad intentions that none of their other products were even generating alerts on.
The value of shield. The so dramatic that I believe the market is going to adapted very very quickly and I think that's why I'm. So excited by the company of the stature in size and speed generally lack of speed of of Fortune 100 company the.
For the mood step forward and step up to the plate and say we want this protection in all of our locations around the world I think debt really proves what I'm excited about and when I think every customer sees on our demo the product.
Can you give us a little bit more color about your database and what makes it so unique I know that there have been indications and some people on the non because they've indicated that they believe it's just.
Off the shelf data our efforts indicated to us that it's actually almost what I would call forensic data not being of technical specialists, but can you go into.
More of your database why no one else has that capability.
Sure so.
You have to attribute this back to reward Paxton ph D. The founded this company 37 years ago.
Launch several unique products in several markets fiber optics firewalls et cetera.
The brilliant man.
When the Internet launched he envision the fact that.
Tracking internet traffic would be the forensics that you need to really know what's going on in the world, but he set up and started the database 25 years ago.
Correct.
International traffic connections from all points eight of the around the world on the Internet real time, the forensics who's talking to what what kind of data are they sending what is their IP address water through the U R. L et cetera, et cetera et cetera. So they started tracking this information.
And for a long time.
I don't think they really had a plan of what they were tracking the far but except of the warhead of vision that it was the VAT date of what could become valuable.
After a few years and they started getting all of these government contracts. The do forensics work. They found that the only way they could solve these problems. The government was bringing on what to do research in this trade Scott database that they had been building that nobody else in the world had because nobody realised the tracking the information was important.
So we spent the last 2025 years doing forensic work for the D. O D on cyber breaches that they can't figure out on their own that's why they hire us as consultants.
The engineer them and figure them out and the all the way we can figure them out.
Using the trade scarp database and so much of that is actually done based on historical relationships and connections. So while you may think something that happened 15 years ago on the Internet is irrelevant.
Our research shows that about 70% of the time that we determined something to be equal or malware in nature. It's based on historical information. That's in the trade scarp database because all of these sites are constantly changing their IP addresses the constantly changing their euros theyre constantly.
The disguise themselves as innocent of new and say and claim and its only two haven't met historical information that you can trace back and so no. This is really China, Joe doing this evil thing again, so the reason that our database of so much valuable is because one it's huge it's petabytes upon.
Petabytes of data to its 25 years of all connectivity history on the Internet I do not believe another database exist in the world like it.
When I was in the government of the CIO I put a bid out to buy a database that had more than 10 years of history and no vendor could providing such a database. So they never could collect on the money. So I believe this database is truly unique.
Again, if you have to understand how AI works to understand why that's so valuable and most people really don't understand AI much at all if you give the AI of small amount of data, it's kind of either tell you nothing or it is going to tell you something wrong.
I can only learn out of massive amounts of data.
So I worked on a project to solve diabetic blindness for example of few years back the.
The doctors from all over the world that we're involved on that project didn't have a clue what cause diabetic blindness, but we had data from hospitals all around the world that we created the massive data like and then we heard from AI algorithms that looked at the data and the data came back and said this is what causes diabetic blindness 30 years of research couldn't be.
For it out a few weeks of research with AI came back and said this is what causes that and this is how the procure America analysis diabetic blindness is 98% sure that's.
That's because you have to have the massive history of data look at of Tesla car will talk to anybody of tests of about how the your Tesla car could make the decision of whether the change lanes of whether its churn or whether the how does how does how the.
How you have driverless taxi in Phoenix right now I just wrote one of few weeks ago it's of.
A little bit scary, but driverless taxi.
It has to make millions of decisions every second of the day and it does debt off of studying this critical data about driving pattern.
So that's why the trace cop database is so incredible.
You look at the rest of the World. They will tell you. There's about 500000 known malware active sites on the Internet today.
When we reported our.
If the trade Scott database, we felt like everybody else was 500000.
Well the AI came back and said there is $3 4 billion Act the malware sites on the Internet today, that's one third of all Internet connection.
And it can tell you the IP address of every one of them.
So we're not just protect you from 500000 signatures. We're protecting you from $3 4 billion bad actors every second of every day, we could only know that theres no way to know that there's nobody on the planet. The can prove that number because nobody else has our database, but that's a documented database of dangerous identified.
The address it that's what makes shields of different that's why our trade scarp database is so proprietary and valuable to this company.
Does that answer it.
Yes, I think it actually does I'm going to leave you with one last it's not a question, but it's a request for <unk>.
Our calculations that when you get the kind of full run with respect each 50000 feet you generate is probably worth about four of $5 of share in value.
I don't need you to come out and tell me every time you win the big contract, but what I'd love visits from these early days to showed of the market that you are getting traction you'd let us know at various important benchmarks like when you you've talked about being over 50000 feet. When you when you get to a 100000 seats.
You can let us know when you get to 150 200, because it seems to take now that this is something I've learned long ago was that I don't necessarily have to know how.
The product works, but I know that if the right people in the smart people that are buying it and using it then it probably does work and it seems to me that right now of the proof of concept here is really going to be showing the market debt. There are people out there who actually no more than they do about these issues.
Making the choice to use this product and as I've said, the the leveraged by our model is huge and I would welcome on.
Of information as affirmation.
Thank you for that comment I agree with the completely we will absolutely keep the market appraised of.
Our seat count as it grows as I've said, we won't be able to do every product every release every customer because of lot of them won't allow it.
But again, we had two large ones, which were huge we certainly can give you a seat count even if we can't give you the customer name and I guess, the let the market in the every time, we add another 50000 seats at the very reasonable thing and we will be delighted to do that.
And.
I'm gonna be excited as you are to watch that number grow.
Because again that proves the value that I'm break into the market to help stop the horrendous cyber crime problems of the world of spacing.
Yes, I would agree with you and I. Thank you very much for the great response to take care.
Thanks Ross.
Our next question comes from Howard <unk> of Wellington Chen Your line is open. Please go ahead.
The Jack <unk>.
Yeah.
The calls you've talked about the shield preventing solar winds.
Can you describe how that's possible.
Certainly on how do you find that out.
Please go ahead.
You have to understand how shield works a little bit so.
Unlike most cyber security products, we don't use signatures.
Let's back up a little bit solar winds with what's called a zero day attack.
Of that really means is it's a new attack with the unknown signature. So therefore, no cyber security products can identify and stop it and therefore, it is going to breach networks until somebody identifies it starts knowing how to look for it that's what the zero day attack means.
On the solar ones attack was being launched it wasn't known thing. So there for it appeared as harmless to everybody's network security and therefore, it got on the lot of networks the.
The way we work as we identify even zero day attacks by using artificial intelligence. This massive traced cop database to understand patterns related to traffic the so.
Just it's malware even without knowing what it is.
So how do we identify and kill solar wind.
Because of our AI identified the patterns of these attacks and said this looks like evil stuff for us we're gonna kill it not let it happen, but we write that in our database. So at the time, we were doing this last.
August September we did.
No that was solar winds for solar ones hadn't even been identified yet.
But we were seeing things we thought were evil that we were killing once solar winds became public they identified the signatures they publish them on the Internet and everybody could go start looking for.
On the network and trying to clean the Doctor network.
We went back and looked at our day to day database.
Yes, we were killing those attacks back in June September August before anybody knew what they were so we didn't know that we were killing solar winds, but we knew we were killing of new unknown attack.
That's how we start off exchange attack recently after solar wins again, we were killing that attack when it came in as the zero day attacks because our AI can identify the patterns to say this is not good therefore, we're going to kill it because it's not good killing it didn't hurt anybody because nobody knew it ever been killed.
And it's in our database we didn't know is the Microsoft exchange thing because we didn't know what the Microsoft Exchange thing was.
Last year, but in March once it became public what it was we could look at our database and say, yes, we killed thousands of times of the Microsoft Exchange attack the solar winds attack. So that's all we can kill even zero day attacks before anybody knows what they are and we can prove we did it because it's recorded on our database of the time in <unk>.
Date, and the number of times the occurrences that it was attacking does that makes sense.
It makes a lot of sense.
So I know that was the marine continuing.
No question the exam.
The <unk>.
For years intrusion for train stop in <unk>.
<unk> is the.
So sort of a supplier to the.
The department of defense.
As indicated on this call and others.
Business slowly.
The legacy business is getting better.
And I want to address.
Certainly the department of defense and one of that is going through.
Talk with me about the opportunity the one in terms of number of seats.
Where you stand in terms of testing.
Well.
Yes.
Was busy with.
Organizations on the Doj I was visiting with organizations of the USDA I was visiting with organizations of Treasury I was visiting with a number of organizations of the United States Government last week I was very busy again. It was good to see the government back to work Trust me.
The reception I had was a fab.
Fabulous so there was incredibly positive a lot of.
Questions a lot of.
Doubt and uncertainty because what we do is radically different to what other products too.
But.
I believe that they are more aware than ever that they are exposed and vulnerable and that the products. They have arent working solar winds and the exchange breach just to name two of them that the publics aware of true.
<unk> to the federal government that they are not secure.
Both of those attacks breached multiple government agencies and hundreds of thousands of employees. So they are very upset about it.
President by the <unk>, just announced that he is working on a new bill to dramatically change the requirements on the federal government for their cyber security defenses, because he believes what they've been doing is inadequate.
We met with people who are aware of that bill.
That we wanted to make them aware of what shield is how it would make the government state and we are trying constantly to get more exposure in the federal government. The understand how shield works and how we can help them solve the problem.
So the government is very very serious and aware of the cyber crime threat and that they are not doing enough to stop it and the current cyber security products are not protecting them. So we believe that create a absolutely gardened the opportunity for shield to come in.
Unique.
Patented AI technology that can add a new level of safety for their network.
U S on India for example.
USDA has the 110000 seats.
The note when you ask about seats since I used to be the CIO I can answer that question there of 110000 seats the.
The pretty big implementation.
Okay.
You said that <unk> talked about the public aware of specifically from some of the wins and Microsoft Exchange.
The others at the.
Public is not aware of that you can comment on.
Well there are certainly others.
That I could comment on if I had the lesson from the on their major breaches announced every day I get repaid.
Different countries to get hit with different breaches at different times I get reports from around the world right now.
I have a a lady on India, that's working on that part of the World and gives me reports every day. So there are of breaches every day, we're gonna add of section to our website very soon where we kind of are the centralized site for learning about more breaches readily.
We're going to be promoting that very heavily.
Can tell you that I talked with government agencies, because I do have top secret security clearance when I was in D. C last week.
The other breaches that have occurred that I can't tell you about on this call. So there are more than just the solar wind and the exchange that have hit government agencies in the past few months alone again, the government is very seriously concerned when the President's starts talking about the bill specific.
Really for cyber crime I think it tells you how alarm the federal government is right now.
Okay. Thank you best of luck.
Thank you very much appreciate it.
Pleasure.
Our next question comes from Russell Cleveland Renn Capital. Your line is open. Please go ahead.
Thanks for the call appreciate all of the information.
My question is around the beta testing it seemed like debt.
You know our plug in service.
No it doesn't.
It doesn't take months of the testing.
Testing. So can you tell me more about the beta testing.
And.
Again, the characteristics of the companies you mentioned earlier that there were companies similar to Kimberly Clark and that kind of size and of course. The government is very exciting for telling me about the test they have to do here.
And the timing on all of this any thoughts there.
Certainly well just to be clear terminology very day.
It means the median generally for the industry of pre released product.
Our beta testing was only being done prior to to shield.
<unk> going into launch in general production now, we do evaluation system, so they're not technically beta systems, but it sounded like youre really talking about evaluation system. So we are seeing evaluations come down.
Out every week to various customers of various sizes.
Again, the product is remarkable one of the things on it.
Normally most proud of because of all of the pain in the agony I've had the it professional in the industry for 40 years learning and installing new security products on networks is the horrible horrible task.
So when when I helped the team here of design Shield I told them this had to be a revolutionary plug and play product.
It is already overwhelm they don't have the time to evaluate technology.
So we have patented the process of how we do plug and play on such complex software.
There's normally hundreds of parameters you have to set in the network type of clients the even get it to become active share.
Plugged in identifies its network and begins protecting your two minutes. After you turn it on so we can do very rapid implementation and evaluation.
One example, probably the best I have so far.
Yes, I spoke of the one I mentioned I flew to New Orleans, the meet with the company, where I was friends with the CEO, but is it staff did not believe they needed shield. They thought they had the basis covered they didn't need yet another layer of cyber security and they didn't have the time and they didn't want to evaluate it.
But he was worried enough about ransomware and breaches of other companies like us that he invited me out to try and convince the department. We had a meeting in a conference room with all of the is it professionals and the CEO of the company. We installed shield. It took three minutes, we turned it on and we set the.
As a group in the meeting watching shield kill things that were living on this network that he didn't know were there.
They bought the product the same day, it's in production at the company now.
Yeah.
They had a loner I told him as the valuation product I came down when I got ready to leave a kind of jokingly said you know I can take the system back with me, we don't have to leave it here. If you don't want to do an evaluation and the CIO looked at me and said you're never getting net appliance out of my network. He says all signed the contract today.
So that is how fast it can go it typically what I'm, saying is about 30 days.
So not the six to nine months of companies of traditional products, but about 30 days they want to put the product on their network they want to evaluate it and when they it seems like most of them call me. After they get net first 30 day report so shield prints out of reported at the end of 30 day, telling you how many connections.
It killed the keep your networks safe and that number is typically over a million connections in one month.
At that point no CFO.
That's all.
So in a month they know it has on interfere with any of the work their employees for doing so it is not kill on things that they need.
Not slowing them down.
I don't even see it happening, but it is killing of the median thing and that tells them Theres a million things that were on their network that could only have ill intention.
Something doesn't live on your network because it doesn't have any place else. The lift is there for a reason it's there to find a way to hurt you. So it's very very compelling.
<unk> a prospect can go to becoming a customer because of how quickly shiel proves its value to a customer does that answer your question.
Yeah. So the challenge here is not so much.
On time, because it's it's proven very quickly is just the legal and.
The board approvals and corporate.
Bureaucracy non.
Not testing and getting the product ends of the market.
Youre right I would say, we spend more time upfront with the CFO of the CIO around administrative and legal things than we do around actually evaluated the product the product for our cruise itself of course.
Automatically.
Okay. That's the answer to my question I appreciate it thanks again for the call.
Thank you very much that was of great question I appreciate that.
Our next question comes from Jay <unk>.
Private Investor Your line is items. Please go ahead.
Thank you for taking my call.
My history with your.
The company goes back to believe it was $19 95, possibly 96 long time ago.
<unk> discovered the company, while doing research and.
As far as the technical research and.
Then I learned about the technology and kind of had me hooked I ended up investing quite a bit of my clients portfolios into Oh DSI.
<unk>.
And I had very good relationships with.
At the time with ward.
Joe had the.
The Investor Relations Man I think of Shameless, the Gordon anyway.
Finally, something that I heard 25 years ago from more directly when he told me he was building a database.
I just heard the results of it.
Five years later and.
I'm looking at after market trading in markets, just a wonderful place the.
The way it does debt they look at numbers and they don't look at the future.
Anyway, I am of new Investor and I N T Z.
And.
Anyway, I just wanted to kind of affirm the fact debt.
Things I heard 25 years ago now have the 25 year track record.
We had traced comp I believe it was called Protos comp in the beginning.
Right.
Yeah, and I mean I was brought there.
Yeah.
Go ahead. Thank you I wasn't I wasn't here that long ago. So I can attest to that only you can Joe had mentioned was words founder Joe head is still here the senior Vice President of the company. He is my most valued ally and resource from the company his knowledge on cyber crime and for <unk>.
<unk> activity is some of the top in the World and Joe is just a pleasure to work with I I've enjoyed in ever since the first day on letting Pierre and certainly he is the person that can talk to on the test.
Why he awards started the trade scarp database and how valuable he has watched the grow to be over the past 25 years. So thank you. So much for that debt very kind comments that was very kind of.
One on one other one other thing of I just want the people listening to understand I believe this company is one of the if not the pioneer and cyber security.
You were looking.
At hackers.
Back before there was the cyber security law.
And I believe this company had something to do with that law the.
<unk>.
Going into effect.
And I'm sure Joe has a lot of it really stories.
But Joe Joe.
The company has had.
Has been a pioneer in cyber security forensics work for for 25 years, there is no doubt about it.
I heard firsthand from a couple of very senior in fact, one of the guys where is retiring next month.
Share old he is so he knows Joe back from when Joe first called on in 25 years ago, and he was commenting from of the.
Amazing things that the intrusion has done for them over the years. So they believe that we are of pioneer and they certainly believe and we're excited in the new intrusion shield product.
A revolutionary game changer, and Thats the way I feel about it I'm very very proud to be here working on this product.
And I really believe we can we can help businesses around the world. Thank you.
Thank you very much for your time of change.
We have nice on the questions at this time I will hand, the call back over to Jack.
Well. Thank you very much for coordinating that for US was very good set of questions. We appreciate those very much we always like talking to our investors and I just like to make a couple of last comments.
This company is the closest thing to a family of I've seen out of any business I've ever worked at I really enjoy working here.
And I want to put a shout out to all of the employees of intrusion for their hard work dedication and the excitement.
And the zealots about stopping cyber crime I think they're doing a great job for America, and I'm really really proud to be here to be working with them.
We are doing some upcoming things that you may want to be aware of there is on annual shareholders' meeting may 18th there as the Needham TMT conference on May 19th that I'll be participating in.
And very exciting black hat security <unk>.
July 31 through August.
Is going to be live and in person this year.
And we are a senior sponsor in that event and we are very excited about the exposure, we're going to get the exposure of the market is going to get to watch yield really has to offer and that set of highly technical audience. So I know you're going to want to participate in that if you can.
Thank you so much payroll wonderful evening.
Goodbye.
Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
[noise].