Q1 2024 Intrusion Inc Earnings Call
Operator: Welcome to Intrusion, Inc.'s first quarter 2024 earnings conference call and webcast. At this time, all participants are in a listen-only mode.
Welcome to intrusion, Inc. 's first quarter 2024 earnings conference call and webcast.
Speaker Change: At this time all participants are in a listen only mode.
Operator: For those of you participating in the conference call, there will be an opportunity for your questions at the end of today's prepared comments. Please note this conference call is being recorded. An audio replay of this conference call will be available on the company's website within a few hours after this call. I would now like to turn the call over to Josh Carroll with Investor Relations.
Speaker Change: For those of you participating in the conference call there will be an opportunity for your questions at the end of today's prepared comments.
Speaker Change: Please note this conference is being recorded and.
Speaker Change: An audio replay of this conference call will be available on the company's website within a few hours. After this call.
Speaker Change: I'd now like to turn the call over to Josh Carroll with Investor Relations.
Josh Carroll: Thank you and welcome. Joining me today are Tony Scott, Chief Executive Officer, and Kimberly Pinson, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to Tony, I'd like to remind everyone that statements made during this conference call related to the company's expected future performance, future business prospects, future events, or plans may include forward-looking statements as defined under the Private Security Litigation Reform Act of 1995.
Josh Carroll: Thank you and welcome joining me today are Tony Scott Chief Executive Officer Kimberly.
Josh Carroll: Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website.
Josh Carroll: Please refer to our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today's conference call. Any forward-looking statements that we make on this call are based upon information that we believe as of today, and we undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles.
Josh Carroll: Before I turn the call over to Tony I'd like to remind everyone that statements made during this conference call related to the company's expected future performance future business prospects future events or plans may include forward looking statements.
Josh Carroll: In terms of the private Securities Litigation Reform Act of 1985.
Josh Carroll: Please refer to our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in todays conference call.
Josh Carroll: Any forward looking statements that we make on this call.
Josh Carroll: Upon information that we believe as of today and we undertake no obligation to update these statements as a result of new information or future events.
Josh Carroll: In addition to U S GAAP reporting.
Josh Carroll: Certain financial measures that do not conform to generally accepted accounting principles.
Josh Carroll: During the call we may use non-GAAP measures. If we believe it is useful to investors or if we believe it will help investors better understand our performance or business trends.
Josh Carroll: During the call, we may use non-GAAP measures if we believe they are useful to investors or if we believe they will help investors better understand a performance or business trend. With that, let me now turn the call over to Tony for a few opening remarks.
Speaker Change: With that let me now turn the call over to Tony for a few opening remarks.
Anthony E. Scott: Thank you, Josh, and good afternoon, and thank you all for joining us today. As I think many of you know, the first quarter and the first few weeks of the second quarter have been filled with multiple milestones as we've worked through the many challenges presented to us. I'll cover many of the specifics in greater detail shortly, but I'd like to first begin by discussing our current stock price and market cap, which I believe are grossly undervalued and are not reflective of the true comparative value of our company and our technology. This issue remains top of mind for me, and I'm sure for all of you.
Anthony E. Scott: Thank you, Josh and good afternoon, and thank you all for joining us today.
Anthony E. Scott: Because I think many of you know the first quarter and the first few weeks of the second quarter have been filled with multiple milestones as we work through the many challenges presented to us.
Josh Carroll: I'll cover many of the specifics in greater detail shortly but I'd like to first begin by discussing our current stock price and market cap, which I believe are grossly undervalued and are not reflective of the true comparative value of our company and our technology.
Josh Carroll: This issue remains top of mind for me and I'm sure for all of you.
Anthony E. Scott: Multiple members of our executive team, including myself, and many of our existing long-term shareholders have continued to increase their investments in intrusion stock, for which I am grateful. You've heard from me on multiple occasions about my optimism for the future of intrusion based on our unique core technology and based on our continued investment in and development of our unparalleled technology to ensure that we can address the most challenging cybersecurity issues of our time.
Josh Carroll: Multiple members of our executive team, including myself and many of our existing long term shareholders have continued to increase their investments and intrusion stock for which I am grateful.
Josh Carroll: You've heard from me on multiple occasions about my optimism for the future of intrusion based on our unique core technology and based on our continued investment in and development of our unparalleled technology to ensure that we can address the most challenging side.
Speaker Change: For security issues of our time.
Anthony E. Scott: And we've recently announced some important customer wins, which validate that optimism. And I want you to know that my optimism for our future is only increasing. Turning now to our sales activity, during the last call, we discussed the addition of seven new logos, and we continue to build off this strong bookings momentum with the addition of five new logos. These new customers operate in a variety of different sectors, including natural gas exploration and development, water utilities, and the government sector.
Speaker Change: And we've recently announced some important customer wins, which validate that optimism and I want you to know that my optimism for our future is only increasing.
Speaker Change: Turning now to our sales activity during the last call. We discussed. The addition of seven new logos and we continue to build off the strong bookings momentum with the addition of five new logos.
Speaker Change: These new customers operate in a variety of different sectors, including natural gas exploration and development water utilities and the government sector.
Anthony E. Scott: The deployment of our technology and the revenue associated with these deployments will ramp up over the next few quarters. This is a pattern we expect to see more of with respect to the larger enterprises that we're engaged with. Now for an update on some of our recent partnership activity. As you may recall from our fourth quarter earnings call, we were notified that, through our partner, I-1 Resources in the Philippines, our technology had been selected to be a part of an award that would help protect the cybersecurity and integrity of the national elections in the Philippines.
Speaker Change: The deployment of our technology and the revenue associated with these deployments will ramp up over the next few quarters. This is a pattern we expect to see more of with respect to the larger enterprises that were engaged with.
Anthony E. Scott: We're happy to announce that a few weeks ago, we received confirmation that our partner I-1 Resources was awarded the final contract to supply secure electronic transmission services for the 2025 midterm elections in the Philippines. This is an important contract for both I-1 and intrusion and has a total bid price of approximately $25 million.
Speaker Change: Now for an update on some of our recent partnership activity.
Speaker Change: As you may recall from our fourth quarter earnings call. We were notified that through our partner I wasn't resources in the Philippines. Our technology had been down selected to be a part of an award that would help protect the cyber security and integrity of the national elections in the Philippines.
Speaker Change: We're happy to announce that we've received confirmation a few weeks ago that our partner I wasn't resources was awarded the final contract to supply secure electronic transmission services for the 2025 mid term elections in the Philippines.
Speaker Change: This is an important contract for both I won and intrusion.
Speaker Change: As a total bid price of approximately $25 million.
Speaker Change: The secure electronic transmission services are scheduled to be fully operational by November 2024, and will begin contributing to our earnings in the second half of this year.
Anthony E. Scott: The Secure Electronic Transmission Services are scheduled to be fully operational by November 2024 and will begin contributing to our earnings in the second half of this year. We are working with all the relevant parties to determine the optimal deployment architecture for this solution, and we will know much more about the specific quantities and deployment timeline for our solutions shortly. We anticipate the revenue from this one contract will be a minimum of $1 million ARR, with the likelihood that it will become greater over time.
Speaker Change: We are working with all the relevant parties to determine the optimal deployment architecture for this solution and we will know much more about the specific quantities and deployment timeline for our solutions shortly.
Speaker Change: We anticipate the revenue from this one contract will be a minimum of 1 million a R. R.
Speaker Change: The likelihood that it will become greater over time.
Anthony E. Scott: We are continuing to see additional momentum from some of our other partnerships as well, which is evident from our announcement last week with our partner, Total Information Management, with whom we announced an agreement to enhance the supply chain security for their customer, Orca Cold Chain Solutions. Under the terms of the agreement, TIM will provide Intrusion's advanced threat detection and prevention solutions to ORCA cold chain solutions to help protect their sensitive data and prevent disruption to the cold chain, ensuring the integrity and safety of perishable goods.
Speaker Change: We are continuing to see additional momentum from some of our other partnerships as well, which is evidenced by our announcement last week with our partner total information management, with whom we announced an agreement to enhance the supply chain security for their customer org.
Speaker Change: Cold chain solutions.
Speaker Change: Under the terms of the agreement Tim will provide intrusions advanced threat detection.
Speaker Change: In prevention solutions to work a cold chain solutions to help protect their sensitive data and prevent disruption to the cold chain, ensuring the integrity and safety of perishable goods.
Anthony E. Scott: This new agreement comes after a successful pilot program with Orca Cold Chain Solutions and resulted in the company deciding to purchase Intrusion's applied threat intelligence for three years. This agreement is already in effect, and we will begin to see the revenue benefits of this agreement begin in our second quarter. We've also been awarded a new order for Intrusion Seal from our traditional government customer base.
Speaker Change: This new agreement comes after a successful pilot program with Orca Cold chain solutions and resulted in the company deciding to purchase intrusions applied threat intelligence for three years.
Speaker Change: This agreement is already in effect and we will begin to see the revenue benefits of this agreement beginning in our second quarter.
Speaker Change: We've also been awarded a new order for intrusion seal from our traditional government customer base.
Anthony E. Scott: We began servicing this in Q2, and the revenue from this new order is expected to more than offset the lost SHIELD revenue we discussed in last quarter's call, but it also marks a milestone in terms of government adoption of SHIELD technology above and beyond the traditional consulting business we've long enjoyed. To wrap up on the partnership front, we also announced back in April that we'd agreed to acquire a minority stake in Clever AI, a Houston, Texas-based artificial intelligence company, in an all-stock transaction.
Speaker Change: We began servicing this in Q2 and the revenue from this new order is expected to more than offset the lost shield revenue, we discussed in last quarters call.
Speaker Change: But it also marks a milestone in terms of government adoption of shield technology.
Speaker Change: And beyond the traditional consulting business, we have long enjoyed.
Speaker Change: To wrap up on the partnership front, we also announced back in April that we had agreed to acquire a minority stake in clever AI, a Houston, Texas based artificial intelligence company in an all stock transaction.
Anthony E. Scott: Clever AI is a cutting-edge technology company at the forefront of the artificial intelligence revolution and has been helping organizations thrive in the digital age by developing innovative and practical AI and machine learning solutions that assist in transforming businesses generally. Clever AI currently operates in a wide range of industries, such as healthcare, security, finance, and IoT. Over the past two years, Clever AI has been both a partner and a customer of Intrusion, assisting with both the design and development of Shield endpoint and cloud solutions, as well as incorporating Shield technology as part of its customer solution.
Speaker Change: Clever AI is a cutting edge technology company at the forefront of the artificial intelligence Revolution and has been helping organizations thrive in the digital age by developing innovative and practical AI and machine learning solutions that assist in transforming <unk>.
Speaker Change: <unk> generally.
Speaker Change: Clever AI currently operates in a wide range of industries, such as health care Security Finance and Iot.
Speaker Change: Over the past two years clever AI has been both a partner and a customer of intrusion assisting with both the design and development of shield endpoint and cloud solutions as well as incorporating shield technology as a part of its customer solutions.
Anthony E. Scott: We are excited to make this investment in Clever AI, which will not only continue to help improve our shield technology in our evolving marketplace but will also help broaden our customer penetration into multiple industries. Last week at the RSA conference, every supplier of cybersecurity technology in attendance was touting its AI capabilities, and we will not be left behind in this important area.
Speaker Change: We are excited to make this investment and collaborate.
Speaker Change: Which will not only continue to help improve our shield technology in our evolving marketplace.
Speaker Change: But will also help broaden our customer penetration into multiple industries.
Speaker Change: Last week at the RSA Conference every supplier of cyber security technology in attendance was touting its AI capabilities and we will not be left behind in this important area.
Anthony E. Scott: With respect to our product development efforts, we're continuing to invest in our SHIELD technology overall and specifically in our efforts to strengthen the multi-instance management aspects of SHIELD, as well as additional capabilities in our endpoint and cloud solutions, including continuing to enhance our AI and machine learning capabilities. All of this development is driven by customer input and market demands and, as I've said before, gives me confidence that we can be relevant for a long time in the future.
Speaker Change: With respect to our product development efforts, we're continuing to invest in our shield technology overall and specifically in our efforts to strengthen the multi instance management aspects of shield as well as additional capabilities in our endpoint and cloud.
Speaker Change: <unk>, including continuing to enhance our AI and machine learning capabilities.
Speaker Change: All of this development is driven by customer input and market demands and as I've said before gives me confidence that we can be relevant for a long time in the future.
Anthony E. Scott: Now, briefly on to our financials. As you'll hear from Kim later in greater detail, total revenue for the first quarter was $1.1 million, representing a $0.2 million decrease on a sequential basis. The decline in revenue during the first quarter of 2024 was driven by a decrease in consulting revenue. It was primarily the result of the continuing resolution with the federal budget not being approved until the last week of the first quarter. This hindered the timing of task awards on existing contracts and the issuance of new contract awards.
Speaker Change: Now briefly onto our financials as Youll hear from Kim later in greater detail total revenue for the first quarter was $1 1 million, representing a <unk> 2 million decrease on a sequential basis.
Speaker Change: The decline in revenue during the first quarter of 2024 was driven by a decrease in consulting revenue. It was primarily the result of the continuing resolution with the federal budget not being approved until the last week of the first quarter.
Speaker Change: That hindered the timing of task awards on existing contracts and the issuance of new contract Awards.
Anthony E. Scott: With the recent awards I've mentioned, we expect that we will see meaningful growth in the second half of 2024. And finally, before I turn the call over to Kim to cover our financial results in greater detail, I would first like to spend a few minutes discussing the recent steps that we've taken to regain compliance with NASDAQ for continued listing on the NASDAQ capital markets as it relates to the minimum bid price of $1 and the equity standard.
Speaker Change: With the recent awards I've mentioned, we expect that we will see meaningful growth in the second half of 'twenty 'twenty four.
Speaker Change: And finally before I turn the call over to Jim to cover our financial results in greater detail I would first like to spend a few minutes discussing the recent steps that we've taken to regain compliance with NASDAQ for continued listing on the NASDAQ capital markets as it relates to the minimum.
Speaker Change: Bid price of one dollar and the equity standard.
Anthony E. Scott: On April 22nd, we announced that we had closed on a private offering pursuant to which we sold an aggregate of 1.3 million shares of our common stock, each of which is coupled with a warrant to purchase two shares of common stock at an aggregate offering price of $1.95 per share. The private offering resulted in net proceeds to intrusion of $2.6 million, and we intend to use the net proceeds from the private offering for working capital and general corporate purposes.
Speaker Change: On April 22nd we announced that we had closed on a private offering pursuant to which we sold an aggregate of $1 3 million shares of our common stock each of which is coupled with a warrant to purchase two shares of common stock at an aggregate offering price of $1 95.
Speaker Change: <unk> per share.
Speaker Change: The private offering resulted in net proceeds to intrusion of $2.6 million and we intend to use the net proceeds from the private offering for working capital and general corporate purposes.
Anthony E. Scott: This offering was the final step in our plan to achieve compliance with the NASDAQ Minimum Equity Standards. And as a result of this private offering, our recently effectuated one for 20 reverse stock split, and our exchange agreement of debt to preferred stock with Streeterville Capital, we received notice from NASDAQ on May 1st, notifying us that we had regained compliance with the minimum bid price and the equity requirements for continued listing on the NASDAQ capital market.
Speaker Change: This offering was the final step in our plan to achieve compliance with the NASDAQ minimum equity standard.
Speaker Change: And as a result of this private offering our recently effectuate a one for 20 reverse stock split and our exchange agreement of debt to preferred stock with Street, a real capital.
Speaker Change: We received notice from NASDAQ on May 1st Notifying us that we had regained compliance with the minimum bid price and the equity requirements for continued listing on the NASDAQ capital market.
Anthony E. Scott: I would like to thank our staff, our partners, and our long-term shareholders for helping us execute our plan to regain compliance. With that, I'd like to turn the call over to Kim for a more detailed review of our first quarter financials. Kim?
Speaker Change: I would like to thank our staff, our partners and our long term shareholders for helping us execute our plan to regain compliance.
Speaker Change: With that I'd like to turn the call over to Kim for a more detailed review of our first quarter financials Jim.
Anthony E. Scott: Thanks, Tony.
Kimberly Pinson: Revenues for the first quarter of 2024 were $1.1 million, a decrease of $0.2 million on both a sequential and year-over-year basis. Consulting revenue in the first quarter totaled $0.7 million, a decrease of $0.2 million sequentially and $0.3 million year-over-year.
Kim: Revenues for the first quarter of 2024 were $1 1 million a decrease of <unk> 2 million.
Jim: And year over year basis.
Kim: Consulting revenue in the first quarter totaled <unk> 7 million, a decrease of <unk> 2 million sequentially, and <unk> 3 million year over year.
Kimberly Pinson: Shield revenue for the first quarter was $0.4 million, which was flat sequentially and up $0.1 million on a year-over-year basis. On our last earnings call, we announced that a large Shield customer had decided not to renew their contract, that would impact revenues beginning in Q2. As a result of the recent government order, we expect shield revenues to remain flat or increase in Q2.
Jim: <unk> revenue for the first quarter was <unk> 4 million, which was flat sequentially and up <unk> 1 million on a year over year basis.
Jim: On our last earnings call, we announced that a large scale customer have decided not to renew their contract.
Jim: That would impact revenues beginning in Q2.
Speaker Change: As a result of the recent government order, we expect share revenues remain flat or increase in Q2.
Kimberly Pinson: We anticipate that the recent closed deals and new awards, inclusive of the I-1 Resources Award to supply secure electronic transmission services for the 2025 midterm elections in the Philippines, will help drive SHIELD revenue growth in 2024. Gross profit was 80% for the first quarter of 2024 compared to 76% in the first quarter of 2023. The increase in gross profit margin in the current quarter is the result of product mix, with shield revenues representing a higher percentage of revenues. Field revenues now represent 39% of revenues in Q1.
Anthony E. Scott: We anticipate that the recent close deals and New awards inclusive of the Iran Resources Award to supply the secure electronic transmission services for the 2025 mid term elections in the Philippines.
Anthony E. Scott: Drive showed revenue growth in 2024.
Anthony E. Scott: Gross profit was 80% for the first quarter of 2024.
Speaker Change: <unk>, 276% in the first quarter of 2023.
Anthony E. Scott: The increase in gross profit margin in the current quarter as a result of product mix, which showed revenues representing a higher percentage of revenues.
Anthony E. Scott: Build revenues now represent 39% of revenues in Q1.
Kimberly Pinson: Operating expenses in the first quarter of 2024 totaled $3.4 million, a decrease of $0.1 million sequentially from the fourth quarter of 2023. As a result of the cost reduction measures that we implemented in March of last year and the savings initiatives that we continued to implement throughout 2023, we have now seen over $7 million in cost savings over the past 12 months. As we have noted on previous calls, as we grow our customer base and increase revenues, we may choose to accelerate our product development in future periods or increase marketing spend to increase brand awareness, which will result in increased spending. We will, however, continue to evaluate each spending decision while also making prudent investments in our long-term profitable growth.
Anthony E. Scott: Operating expenses in the first quarter of 2024 totaled $3 4 million a decrease of point 1 million sequentially from the fourth quarter of 2023.
Anthony E. Scott: As a result of the cost reduction measures that we implemented in March of last year and the savings initiatives that we continue to implement throughout 2023, we have now seen over $7 million in cost savings over the past 12 months.
Anthony E. Scott: As we have noted on previous calls as we grow our customer base and increase revenues, we may choose to accelerate our product development and future periods, our marketing spend to increase brand awareness, which will result in increased spending.
Anthony E. Scott: Well, however continue to evaluate each spending discretion, while also making prudent investments in our long term profitable growth.
Kimberly Pinson: The net loss for the first quarter of 2024 was $1.7 million, an improvement of $1.1 million from our loss of $2.8 million for the fourth quarter of 2023. The improved net loss in Q1 is the result of interest savings. During the quarter, we converted $9.5 million in Streeterville debt to $9.3 million of newly created Series A preferred stock and $0.2 million to common stock. As a result of this conversion, we reversed the interest accretion associated with the ability to stock settle principal reductions. When comparing the net loss to the same period in 2023, the net loss improved by $3 million from a loss of $4.7 million for the 2023 quarter.
Anthony E. Scott: The net loss for the first quarter of 2024 with $1 7 million an improvement of $1 1 million from a loss of $2 8 million for the fourth quarter of 2023.
Anthony E. Scott: The improved net loss in Q1 as a result of interest savings during the quarter, we converted $9 5 million in state of real debt to $9 3 million of newly created series, a preferred stock and point 2 million to common stock.
Anthony E. Scott: As a result of this conversion we reversed the interest accretion associated with the ability to stock settled principal reductions.
Anthony E. Scott: When comparing the net loss for the same period in 2023 net loss improved by 3 million from a loss of $4 7 million for the for 2023 quarter.
Kimberly Pinson: Turning to the balance sheet, on March 31st, we had cash and cash equivalents of $0.1 million. Our principal source for funding operations in the March 2024 quarter was through the issuance of two notes payable to Tony Scott totaling $1.3 million and the issuance of common stock using our at-the-market program of $0.5 million. Subsequent to March 31st, as Tony mentioned earlier, we closed on a private offering which provided net proceeds of $2.6 million.
Anthony E. Scott: Turning to the balance sheet on March 31, we had cash and cash equivalents of <unk> 1 million.
Speaker Change: Our principal source for funding operations in the March 2024 quarter with through the issuance of two notes payable attorney Scott totaling $1 3 million and the issuance of common stock using our at the market program.
Speaker Change: Five nine.
Speaker Change: Subsequent to March 31st as Tony mentioned earlier, we closed on a private offering which provided net proceeds of $2 $6 million.
Kimberly Pinson: We also generated approximately $0.6 million in proceeds through the sale of common stock using a warrant inducement program which temporarily lowered the warrant exercise price and included a reload warrant. In addition, we have and will continue to utilize our ATM facility to fund our operations in the near term. All of these steps have improved our liquidity, provided the necessary funding to execute our growth plan, and strengthened our balance sheet. I'd like to now turn the call back over to Tony for a few closing comments. Tony?
Speaker Change: Also generated approximately $6 million in proceeds through the sale of common stock using our warrant inducement program, which temporarily lowered the warrant exercise price and included a reload right.
Speaker Change: In addition, we have and will continue to utilize our ATM facility to fund our operations in the near term.
Speaker Change: All of these steps have improved our liquidity, providing the necessary funding to execute our growth plan and strengthened our balance sheet.
Speaker Change: I'd like to now turn the call back over to Tony for a few closing comments Tony.
Anthony E. Scott: Thanks Kim.
Anthony E. Scott: We've made tremendous progress over the past few months, overcoming many of the challenges that we faced during the past year, which has now positioned us to focus solely on our vision of driving growth through our compelling products and innovative strategies that provide our customers with the tools they need to better identify, deflect, and eliminate any cyber threats they may encounter. I look forward to sharing the next steps in our journey with all of you, and I want to personally thank all of our investors and financial partners for their continued patience and support as we execute our strategy. Now this concludes our prepared remarks, and I'll now turn the call over to the operator for Q&A.
Anthony E. Scott: We've made tremendous progress over the past few months overcoming many of the challenges that we've faced during the past year, which have now positioned us to focus solely on our vision of driving growth through our compelling products and innovative strategies that provide our customers with the tools they need.
Anthony E. Scott: Need to better identify deflect and eliminate any cyber threats they may encounter.
Anthony E. Scott: I look forward to sharing the next steps in our journey with all of you.
Anthony E. Scott: I want to personally thank all of our investors and financial partners for their continued patience and support as we execute our strategy.
Anthony E. Scott: Now this concludes our prepared remarks, and I'll now turn the call over to the operator for Q&A.
Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Scott Buck with H.C. Wainwright.
Speaker Change: Thank you at this time, we will be conducting a question and answer session.
Speaker Change: You would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from the queue for.
Speaker Change: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Your first question for today is from Scott Buck with H C. Wainwright.
Scott Christian Buck: Hi, good afternoon, guys. Thanks for taking my questions. Tony, I was hoping you could help clear something up for me. The I-1 resources agreement in the Philippines gets described as potentially a million dollars of ARR beginning in the second half of this year, but it's for a singular election, right? So what carries into 2025 that makes it, you know, annual recurring revenue?
Scott Christian Buck: Hi, good afternoon.
Scott Christian Buck: Afternoon, guys. Thanks for taking my questions. Tony I was hoping you could help clear something up for me.
Speaker Change: <unk> resources agreement in the Philippines, just described as being potentially a million of <unk> beginning in the second half of this year, but as far as seeing your election right. So what what carries into 2025 that that makes it.
Speaker Change: Annual recurring revenue.
Anthony E. Scott: Yeah, so the structure of the program and the bid that we were a part of had us putting in the equipment and having it all fully tested and ready to go by October, although the elections don't actually occur until the spring of the following year. And then following that, everything stands down, but a bunch of reconfiguration and testing and additional capabilities will get deployed because, as you know, threats continue to evolve over time.
Speaker Change: Yes, so the structure of the.
Speaker Change: Program and the bid that we were a part of has a stand up the equipment.
Speaker Change: And have it all fully tested and ready to go by October the elections don't actually occur until the spring of the following year and then following that.
Speaker Change: Everything stands down but.
Speaker Change: A bunch of reconfiguration and testing and.
Speaker Change: Additional.
Speaker Change: Capabilities will get deployed because as you know threats continue to.
Anthony E. Scott: So during that downtime, we'll be preparing and getting ready for the next set of elections, and then we'll stand up the gear again. So, you know, from an operations perspective, it has an ebb and flow, but the work that we'll be doing with them will continue, you know, in different waves over the period of time. So that's kind of the reason it looks to us like ARR. It'll be, our revenue will be smoothed over the life of the contract.
Speaker Change: Evolve over time, so during that downtime will be preparing and getting ready for the next set of elections and then we will stand up the the gear yeah and so.
Speaker Change: From an operations perspective, it has a ebb and flow, but the work that we'll be doing.
Speaker Change: With them will continue.
Speaker Change: You know in different waves over the period of time so.
Speaker Change: That's kind of the reason it looks to us like a R.
Speaker Change: Our our it'll be our revenue will be smoothed over the life of the contract.
Scott Christian Buck: That makes sense and that's great to hear. Second, I want to ask about the new logos this quarter and, really, the new logos last quarter. Is there a particular size that you're seeing the most traction in? And could you give us any kind of indication of what the average is, I guess, what the duration of the contracts is and what the size is in terms of potential revenue?
Speaker Change: No that makes sense and that's great to hear a.
Speaker Change: Second I wanted to ask about the new logos this quarter and really do use new logos last quarter is there a particular size that youre seeing the most traction in and could you give us any kind of indication of what the average.
Speaker Change: You know both duration I get to the contracts are in.
Speaker Change: What the size is in terms of potential revenue.
Anthony E. Scott: There's no average at this point that makes any sense, so, and there are a couple of reasons for that, Scott. Probably the biggest reason is that, by their very structure, many of these start small and, you know, might be, you know, $100,000 or $200,000 or whatever, but then expand over some period of time. And so it's hard to, you know, create an average on deals like that.
Speaker Change: There is no average at this point that makes any sense.
Speaker Change: So and there's a couple of reasons for it.
Speaker Change: Scott.
Scott Christian Buck: The biggest reason is that.
Scott Christian Buck: By their very structure many of these.
Speaker Change: Start small.
Speaker Change: Yeah.
Speaker Change: Might be.
Speaker Change: No.
Speaker Change: $100000 or $200000 or whatever.
Speaker Change: But then.
Speaker Change: Expand over some period of time.
Speaker Change: And so it's hard to create an average on <unk>.
Speaker Change: Deals like that and I mentioned in the call. This is a pattern, we're starting to see with some of the larger customers.
Anthony E. Scott: And I mentioned in the call that this is a pattern we're starting to see with some of the larger customers. So you'll see us announce these deals from time to time that might be pretty small initially, but then six months later are double, triple, quadruple, you know, the initial contract. And then the second thing I'd say is that we continue to win some deals that are relatively small in nature, meaning under $100,000, let's just say, for example, but are in industries that we want to be present in and serve as sort of, you know, pivot points for us to demonstrate our value in those industries.
Speaker Change: So you'll see us announce these deals from time to time, there might be pretty small initially, but then six months later or double triple quadruple the initial.
Speaker Change: The initial contract.
Speaker Change: And then the second thing I'd say is.
Speaker Change: We continue to win some deals that are relatively small in nature, meaning under $100000. Let's just say for example, but are in industries that we wanted to be present in and serve as sort of.
Speaker Change: Pivot points for us to demonstrate our value in those industries. So we're not turning any customers away at this particular point.
Anthony E. Scott: So we're not turning any customers away at this particular point. But just as an example, one of the managed service providers that we signed last year now has expanded our presence to two more customers, and that's not, you know, trivial for us. It's a proof point that that customer, meaning the managed service provider and their customers, are excited about our technology.
Speaker Change: But just as an example, one of the managed service providers that we.
Speaker Change: Signed last year.
Speaker Change: <unk> has expanded.
Speaker Change: Our presence into to more customers.
Speaker Change: And that's not.
Speaker Change: Okay.
Speaker Change: Trivial for us.
Speaker Change: It's a proof point that.
Speaker Change: That customer, meaning the managed service provider and their customers.
Speaker Change: And are excited about our technology.
Anthony E. Scott: Got it. That's helpful. And then last one for me, Tony, just the mechanics of new customer onboarding. You guys are reliant on them in terms of timing, or are they reliant on you in terms of timing?
Speaker Change: Got it that's helpful. And then last one for me Tony just the mechanics of new customer Onboarding.
Speaker Change: You guys are reliant on them.
Speaker Change: In terms of timing or.
Anthony E. Scott: Are they reliant on you in terms of timing.
Scott Christian Buck: Every deal is kind of different at this point. You know, the Commission on Elections deal has a fixed deadline. We've got to be up and running, and, you know, we're working with those teams on the actual stand-up plan. Some of the others that we have don't have a fixed date in time like the Commission on Elections one, but, you know, in I think all of those other cases that I can think of, it's a discussion that we have with the customer about what makes sense.
Anthony E. Scott: Every deal is different at this point.
Speaker Change: You know the commission on elections, one has a fixed deadline, we've gotta be up and running and we're working with those teams on the the actual standup plan.
Speaker Change: Some of the others that we have don't have a.
Speaker Change: Fixed date and time.
The commission on elections, one but you.
Speaker Change:
Speaker Change: I think all of those other cases that I can think of I'd say.
Speaker Change: A discussion that we have with the customer about what makes sense and I think as we've mentioned before in some cases, we have to do site surveys with the customer which involves.
Scott Christian Buck: And I think, as we've mentioned before, in some cases, we have to do site surveys with the customer, which involves, you know, potentially a few weeks of work before we actually install. And the other thing that we're seeing in some cases is, depending on the age and the nature of the network equipment that a customer might have in their environment, we may need to do some additional work with those customers to either reconfigure their network slightly or, you know, in some cases, install our equipment in a different way than we initially anticipated. So we've seen all those cases, and we're fully prepared to deal with them as new customers come along. Great
Speaker Change: Potentially a few weeks of <unk>.
Speaker Change: Work before we actually install.
Speaker Change: And the other thing that we're seeing in some cases is dip.
Speaker Change: Depending on the age and the nature of the network equipment debt.
Speaker Change: Our customer might have in their environment, we may need to.
Speaker Change: Do some additional work with those customers either reconfigure their network's slightly or.
Speaker Change: You know in some cases install our equipment in a different way then.
Speaker Change: We initially anticipated.
Speaker Change: We anticipated so we have seen all of those cases.
Speaker Change: We're fully prepared to deal with those as as new customers come along.
Operator: Great. I appreciate the time, guys. Thank you very much. Thank you. Your next question is from Ed Woo with Ascendian Capital.
Speaker Change: Great I appreciate the time guys. Thank you very much.
Speaker Change: Thank you.
Speaker Change: Your next question is from Ed Woo with <unk> capital.
Edward Moon Woo: Yeah, congratulations on the Philippine I-1 resources.
Edward Moon Woo: Yes, congratulations on Philippine <unk> resource that deal. My question is shall we expect more opportunities in Asia or just international in general.
Edward Moon Woo: With the Philippines deal.
Anthony E. Scott: I think you can anticipate more in Asia Pacific as I think everybody realizes we've sort of underperformed in the U.S. over the last year or so, but we now see some signs where we think we're going to correct that with some of the more recent wins and so on. So, you know, proportionally, I think we expect to have a little more balance. Um, a set of wins over time, but in the short run, Asia-Pac is a great opportunity for us and one that we expect will be really good for the company.
Speaker Change: I think you can anticipate more in Asia Pac.
Speaker Change: As I think everybody realizes we've.
Speaker Change: Sort of underperformed in the U S.
Speaker Change: Over the last year or so, but we now see some signs were.
Speaker Change: We think we're going to.
Speaker Change: Correct that.
Speaker Change: Some of the more recent wins and so on so.
Speaker Change: Proportionately I think.
Speaker Change:
Speaker Change: We expect to have a little more balanced.
Set of wins over time, but in the short run Asia Pac is a great opportunity for us and one that we <unk>.
Speaker Change: I expect it will be really good for the for the company.
Speaker Change:
Anthony E. Scott: One of the interesting things there is it's a little easier for us to get attention in that region because cybersecurity isn't being so over marketed in that region as it is here. So it's a little easier for us to get attention, and word of mouth goes really well there.
Speaker Change: One of the interesting things there is.
Speaker Change: It's a little easier for us to get attention in that region because the.
Speaker Change: The cyber security isn't being so over marketed in that region as it is here.
Speaker Change: So it's a little easier for us to get attention and word of mouth goes.
Operator: In the U.S., there's just a cacophony of cybersecurity companies. I was at RSA this last week, and, you know, the noise level was just deafening. It was like the cicadas coming out of the ground that you're probably reading about in the newspaper, you know. It's a deafening, you know, bunch of noise coming from our industry. So we'll take advantage of it wherever we can.
Speaker Change: Really well there.
Speaker Change: U S. Theres just to cap any of cyber security companies I was at RSA. This last weekend.
Speaker Change: The noise level was just deafening it was like the Takeda is coming out of the ground.
Speaker Change: You're probably reading about in the newspaper.
Speaker Change: A deafening.
Speaker Change: In a bunch of noise coming from our industry. So.
Speaker Change: We will take advantage of it wherever we can.
Speaker Change: Great well, congratulations again and I wish you guys. Good luck. Thank you.
Edward Moon Woo: Thanks, Ed.
Paul Rodriguez: Your next question for today is from Paul Rodriguez with West Park Capital.
Edward Moon Woo: Your next question for today is from Paul Rodriguez with West Park capital.
Paul Rodriguez: Yeah, thanks for your time. I had a question I wanted to ask you about your comments on federal. I wanted to see what you've seen in terms of visibility improvements for the June quarter in federal, if you have any thoughts about that, and then I have a follow-up.
Edward Moon Woo: Yes.
Paul Rodriguez: Thanks for your time I had a question I wanted to ask you about your comments et cetera.
Edward Moon Woo:
Speaker Change: I wanted to see what you've seen in terms of visibility improvements.
Speaker Change: For the June quarter in federal if you have any thoughts about that.
Speaker Change: And then I have a follow up.
Anthony E. Scott: Yeah, so we have, as I think Kim mentioned, already booked some contracts in federal that we expect will make up for the gap that we had from the lost contract from last year. And then we're in the process of doing some additional work that we haven't secured yet. But I would say overall the opportunity looks pretty good for us for the rest of the year. We're not giving up. And I would expect and hope that we get some additional on top of what we've already landed. In an election year, as you can imagine, everybody's quite sensitive to problems that can be created by both criminals and political adversaries and all those kinds of things, nation states, and our solutions are well suited to help address some of those kinds of challenges. So we expect to do really well for the rest of the year. And we hope there's not another long continuing resolution at the beginning of the fiscal year this next year.
Speaker Change: Yeah. So.
Speaker Change: We.
Speaker Change: We have.
Tim: I think Tim mentioned.
Speaker Change: <unk> already.
Speaker Change: Book.
Speaker Change: Some contracts in federal that we expect will make up for the for the gap that we had from the lost contract from last year.
Speaker Change: And then we're in process on some additional work that we haven't secured yet, but I would say overall the opportunity looks.
Speaker Change: Pretty good for us for the rest of the year we're.
Speaker Change: We're not giving up.
Speaker Change: And I would expect and hope that we get some.
Speaker Change: Additional on top of what we've already we've already landed.
Speaker Change: The.
Speaker Change: In an election year as you can imagine.
Speaker Change: Everybody's quite sensitive to.
Speaker Change: Problems that can be created by.
Speaker Change: Both criminals.
Speaker Change: Political adversaries and all those kinds of things nation States.
Speaker Change: Our solutions are well suited to help address some of those kinds of challenges so.
Speaker Change: We expect to do.
Speaker Change: Really well for the.
Speaker Change: Rest of the year and we hope there's not another wrong continuing resolution at the.
Speaker Change: Beginning of the fiscal here this next year.
Paul Rodriguez: Okay, helpful. One last question on the Clever AI announcement. Have you guys discussed any sort of roadmap for the endpoint and cloud products yet?
Speaker Change: Okay helpful. One last question on the clever AI.
Speaker Change: <unk> have you guys discussed any sort of roadmap on.
Speaker Change: The endpoint and cloud products yet.
Anthony E. Scott: Yeah, we have a multi-year roadmap for those, and I expect that Clever will play a pretty important role in our continuing advancement of those products. Okay, great.
Speaker Change: Yes, we have a multiyear roadmap actually for those.
Speaker Change: Spectrum clever all player.
Speaker Change: Pretty important role in.
Speaker Change: Our continuing advancement of those products.
Paul Rodriguez: Okay, great. Thanks. Thanks for the update. I appreciate it. Thank you. Thanks, Paul.
Speaker Change: Okay, great. Thanks.
Speaker Change: Thanks for the update appreciate it thank you.
Speaker Change: Thanks, Paul.
Speaker Change: Okay.
Operator: At this time, there are no other questions in queue. I'll turn the call back over to our host, Mr. Tony Scott.
Speaker Change: At this time there are no other questions in queue I'll turn.
Speaker Change: There are no call back over to our host Mr. Tony Scott.
Anthony E. Scott: Well, thank you, everyone. Again, as I said earlier, I really appreciate your patience.
Anthony E. Scott: Well, thank you everyone.
Anthony E. Scott: Again, as I said earlier I really appreciate the patience.
Anthony E. Scott: But I do want you to know that my enthusiasm for our future is, as I said earlier, greater than ever. You know, we've put a lot of hard work in over the last couple of years, I and the rest of the management team have had our fair share of issues to deal with in addition to just running the company and we have a lot of that, I'll call it, non-productive work behind us now and we're fully focused now on just growing our business, increasing sales, and we don't have the distraction of lawsuits and investigations and all of those other things to deal with and nor do I want any of those things back ever, ever again, so we're fully focused, we know what we've got to do, we've got, you know, clear vision of our future and we see some great signs that customers are ready to adopt our solutions, so one of the things I've said to a number of people is that in addition to sales with some of these big contracts like the Commission on Elections and some of these other ones, some of our challenges are going to be now on the execution side, supply chain issues, you know, making sure we can fully avail ourselves of these deals that we want.
But I do want you to know that my enthusiasm for our future is as I said earlier greater than ever.
Anthony E. Scott: We've put a lot of hard work in.
Anthony E. Scott: Over the last couple of years I and the rest of the management team have had.
Anthony E. Scott: Our fair share of issues to deal with in addition to just running the company in.
Speaker Change: And we have a lot of that I'll call. It you know nonproductive work behind US now and we're fully focused now on just growing our business increasing sales and we don't have the distraction of lawsuits and investigations and all of them.
Speaker Change: Those other things.
Speaker Change: To deal with and nor do I want any of those things back ever ever again so.
Speaker Change: We're fully focused we know what we've got to do.
Speaker Change: We've got.
Speaker Change: Clear vision of our future.
Speaker Change: And we see some great signs that.
Speaker Change: Customers are ready to adopt our.
Speaker Change: Solutions so.
Speaker Change: One of the things I've said to a number of people is that.
Speaker Change: In addition to sales with some of these big contracts like the commission on elections and some of these other ones.
Speaker Change: Some of our challenges are going to be now on the execution side supply chain is.
Speaker Change: Use.
Anthony E. Scott: I'm a pilot, I think, as many of you know, and one of the truisms that I learned a long time ago is that almost anybody can learn very quickly to take a plane off, but landing the plane is the hard part. And I've used this analogy before, but we've got a lot of plane landings to do in the next six months, and I really look forward to it. It's a good problem to have and I think our team is ready to take on the challenge, so I just want to say thanks to everyone and look forward to next quarter's call with lots of enthusiasm.
Speaker Change: Making sure we can.
Speaker Change: Fully avail ourselves of.
Speaker Change: These deals that we won.
Speaker Change: I'm a pilot I think as many of you know and one of the Truisms that I learned a long time ago as almost anybody can learn very quickly to take a plane off the landing the plane is the hard part.
Speaker Change: And I've used this analogy before but we've got a lot of plain landings to do.
Speaker Change: In the next six months and.
Speaker Change: I really look forward to it it's a good problem to have and I think our team is ready to take on the challenge. So I just wanted to say thanks to everyone.
Speaker Change: Look forward to next quarter's call with lots of enthusiasm.
Speaker Change: Thanks, so much.
Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.