Q1 2025 Intrusion Inc Earnings Call
Welcome to intrusion Inc's first quarter 2025 earnings conference call and webcast.
Operator: Welcome to Intrusion Inc.'s first quarter 2025 earnings conference call and webcast. At this time, all participant lines are in a listen-only mode. For those of you participating in the conference call, there will be an opportunity for questions at the end of today's prepared comment.
At this time all participant lines are in a listen only mode.
For those of you participating in the conference call there will be an opportunity for questions at the end of today's prepared comments. Please.
Operator: Please note, this conference call is being recorded. An audio replay of the conference call will be available on the company's website within a few hours after this call.
Please note. This conference call is being recorded and audio replay of the conference call will be available on the company's website within a few hours. After this call.
Josh Carroll: I would now like to turn the call over to Josh Carroll with Investor Relations. Thank you and welcome. Joining me today are Tony Scott, President and Chief Executive Officer, and Kimberly Pinson, Chief Financial Officer.
Speaker Change: I would now like to turn the call over to Josh Carroll with Investor Relations.
Speaker Change: Thank you and welcome joining me today are Tony Scott, President and Chief Executive Officer, and Kimberly Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website.
Josh Carroll: 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 the statements made during this conference call relate to the company's expected future performance. Future business prospects, future events, or plans may include forelooking statements as defined under the Private Security Litigation Reform Act of 1995. 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. Any forward-looking statements that we make on this call are based upon information that we believe, as of today, we undertake no obligation to update these statements as a result of the new information or future events.
Speaker Change: Before I turn the call over to Tony I'd like to remind everyone that the statements made during this conference call relating to the company's expected future performance future.
Business prospects future events or plans may include forward looking statements as defined under private Securities Litigation Reform Act.
Speaker Change: 95.
Speaker Change: 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.
Speaker Change: 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 the new information or future events.
Tony Scott: In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles.
Speaker Change: In addition to U S. GAAP reporting we report certain financial measures that do not conform to generally accepted accounting principles.
Speaker Change: 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 for business trends with that let me now turn the call over to Tony for a few opening remarks.
Tony Scott: 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.
Tony Scott: With that, let me now turn the call over to Tony for a few opening remarks. Thank you, Josh. Good afternoon, and thank you all for joining us.
Tony: Thank you Josh good afternoon, and thank you all for joining us.
Tony: The first quarter of 2025 marked another meaningful milestone for intrusion highlighted by our fourth consecutive quarter of sequential revenue growth.
Tony Scott: The first quarter of 2025 marked another meaningful milestone for intrusion, highlighted by our fourth consecutive quarter of sequential revenue growth and another quarter of near-zero churn. The piloting of promising new product in our Shield family of products, a new commercial go-to-market partnership, and accelerating awareness of intrusion's capabilities through our enhanced marketing and channel efforts. Now regarding our pipeline, we're continuing to experience strong demand for our products, both domestically and across the broader Asia-Pac region, driven by the growing positive reputation of our solution. Well, we've been making solid progress on the sales front over the past few quarters, we're still not satisfied with the level of growth that we've been experiencing.
Speaker Change: Another quarter of near zero churn.
Speaker Change: The priority of promising new product in our shield family of products.
Speaker Change: New commercial go to market partnership in accelerating awareness of intrusions capabilities through our enhanced marketing and channel efforts.
Speaker Change: Regarding our pipeline, we are continuing to experience strong demand for our products, both domestically and across the broader Asia Pac region, driven by the growing positive reputation of our solutions.
Speaker Change: Well, we've been making solid progress on the sales front over the past few quarters, we're still not satisfied with the level of growth that we've been experiencing and as mentioned during our fourth quarter earnings call. We identified several key initiatives to drive our growth and I'd like to provide an update on our progress.
Tony Scott: And as mentioned during our fourth quarter earnings call, we identified several key initiatives to drive our growth. And I'd like to provide an update on our progress on those initiatives. We're progressing according to plan to make our shield cloud product available on the AWS marketplace, which is I previously noted back in February is a high growth engine for many companies like ours. and it'll become available for potential customers during the second quarter. We believe that we will begin to see some positive contributions from this initiative to our revenue results during the second half of fiscal year 2025.
Speaker Change: On those initiatives.
Speaker Change: We're progressing according to plan to make our shield cloud product available in the AWS marketplace, which as I. Previously noted back in February is a high growth engine for many companies like ours.
Speaker Change: And then it'll become available for potential customers during the second quarter.
Speaker Change: We believe that we will begin to see some positive contributions from this initiative to our revenue results during the second half of fiscal year 2025.
Speaker Change: We're also on track with our efforts to increase our digital marketing to create better visibility and engagement on relevant social media platforms.
Tony Scott: We're also on track with our efforts to increase our digital marketing to create better visibility and engagement on relevant social media platforms. We're currently working with a consultant on these efforts. And while early we're encouraged by the reception and the response that we're seeing, all with the goal of increasing awareness in a very noisy cybersecurity market. We are making great progress with revamping our channel program to refine our messaging, our pricing, our go to market processes, and various other aspects that we have identified as gaps that we believe have inhibited our growth. And as we noted last quarter, while not always under our control, every quarter we've had significant deals slip into the next quarter, or we've experienced meaningful delays in onboarding, which impacts the timing of revenue and makes it hard to allocate resources properly.
Speaker Change: We're currently working with a consultant on these efforts and while early we are encouraged by the reception and the response that we're seeing all with the goal of increasing awareness in a very noisy cyber security market.
Speaker Change: We are making great progress with revamping our channel program to refine our messaging our pricing our go to market processes and various other aspects that we have identified as gaps that we believe have inhibited our growth.
Speaker Change: And as we noted last quarter, while not always under our control every quarter. We've had significant deals slip into the next quarter or we experienced meaningful delays in onboarding, which impacts the timing of revenue and makes it hard to allocate resources properly.
Tony Scott: These enhancements are progressing well and are expected to enable a more reliable and consistent cadence of bookings and revenue management.
Speaker Change: These enhancements are progressing well and are expected to enable a more reliable and consistent cadence of bookings and revenue management.
Tony Scott: Also, we intend to hire a channel sales leader to support these efforts within the next few months. On the R&D front, we're continuing to strategically invest at a relatively constant level to improve our portfolio to ensure that our products are able to address the ever evolving challenges of cybersecurity. One of the key areas that we're making product investments in is to help protect critical infrastructure assets, such as local utilities, power and water, communications and other critical services. We view this as a very promising market for intrusion, given the rise in ransomware, supply chain attacks, and other threats currently facing these critical infrastructure assets.
Speaker Change: Also we intend to hire chair or sales leader to support these efforts within the next few months.
Speaker Change: On the R&D front, we're continuing to strategically invest at a relatively constant level to improve our portfolio to ensure that our products are able to address the ever evolving challenges of cyber security.
Speaker Change: One of the key areas that we're making product investments in us to help protect critical infrastructure assets.
Speaker Change: Such as local utilities power and water communications and other critical services.
Speaker Change: We view this as a very promising market for intrusion given the rise in ransomware supply chain attacks and other threats currently facing these critical infrastructure assets.
Tony Scott: Our pilot projects in this area are going well, and we expect expanded deployments during the second quarter and throughout the remainder of the year. As a result of these pilots, we've identified additional capabilities that we can relatively quickly develop, which will further enhance our offerings in this space and should lead to additional revenue opportunities.
Speaker Change: Our pilot projects in this area are going well and we expect expanded deployments during the second quarter and throughout the remainder of the year.
Speaker Change: As a result of these pilots we've identified additional capabilities that we can relatively quickly develop which will further enhance our offerings in this space and should lead to additional revenue opportunities.
Speaker Change: On the partnership front I am pleased to announce a new partnership with Port Nexis, who has chosen to embed intrusion shield endpoint.
Tony Scott: On the partnership front, I'm pleased to announce a new partnership with PortNexus who has chosen to embed Intrusion Shield Endpoint into their MyFlare and PledgePlus solutions. According to Port Nexus, MyFlare helps first responders react more quickly to critical situations where every second of delay can mean the difference between life and death. Pledge Plus is a solution for fleet management operators that helps with minimizing problems caused by distracted driving. In both cases, intrusion technology will be integrated into the port nexus developed solutions to provide enhanced security for the endpoints used by port nexus customers.
Speaker Change: They're my flare and pledge plus solutions.
Speaker Change: According to board mixes.
Speaker Change: <unk> helps first responders react more quickly to critical situations, where every second of delay can mean, the difference between life and death.
Speaker Change: Pledged plus as a solution for fleet management operators that helps with minimizing problems caused by distracted driving.
Speaker Change: In both cases intrusion technology will be integrated into the port mixes develop solutions to provide enhanced security for the endpoints used by port mix as customers.
Tony Scott: And I'd like to thank the Port Nexus team for selecting Intrusion, and we look forward to a long-term partnership, as well as our mutual success in the marketplace.
Speaker Change: And I'd like to thank the port in excess team for selecting intrusion and we look forward to a long term partnership as well as our mutual success in the marketplace.
Speaker Change: Now briefly onto our financials for the quarter.
Tony Scott: Now briefly on to our financials for the quarter, total revenues for the first quarter were $1.8 million, representing a 6% increase compared to the previous quarter. Our operating expenses during the quarter were up slightly compared to the fourth quarter, driven primarily by increased professional fees related to the timing of our annual audit and a one-time settlement in the fourth quarter with our D&O carrier for reimbursement of legal support costs associated with the now-completed SEC investigation. While we have and will continue to make further investments in our business over the next few quarters, we still plan to do so in a very disciplined manner.
Speaker Change: Total revenues for the first quarter were $1 8 million, representing a 6% increase compared to the previous quarter.
Speaker Change: Our operating expenses during the quarter were up slightly compared to the fourth quarter, driven primarily by increased professional fees related to the timing of our annual audit and a onetime settlement in the fourth quarter with our D&O carrier for a reimbursement of legal support costs associated with the.
Speaker Change: Now completed SEC investigation.
Speaker Change: We have and will continue to make further investments in our business over the next few quarters, we still plan to do so in a very disciplined manner.
Speaker Change: As you're all aware, we were able to take meaningful steps during the end of the fourth quarter and the first few days of the first quarter to strengthen our balance sheet.
Tony Scott: As you're all aware, we were able to take meaningful steps during the end of the fourth quarter and the first few days of the first quarter to strengthen our balance sheet. which gave us a strong cash position to fund our business through fiscal year 2025 and beyond. fully eliminating our outstanding debt and removing the need for additional capital in 2025.
Speaker Change: Which gave us a strong cash position to fund our business through fiscal year 2025 and beyond.
Speaker Change: Fully eliminating our outstanding debt and removing the need for additional capital in 2025.
Tony Scott: We're excited about our improved financial health and the position we believe it puts us in to focus on growing our business.
Speaker Change: We're excited about our improved financial health and the position we believe it puts us in to focus on growing our business.
Speaker Change: Finally, before I wrap up and pass the call over to Kevin I'd like to address the environment. We're operating in many of you have asked during recent investor Roadshows and conferences, what if any impacts our business may be facing as a result of the recent efforts to cut costs by the federal government.
Tony Scott: Finally, before I wrap up and pass the call over to Kim, I'd like to address the environment we're operating in. Many of you have asked during recent investor roadshows and conferences, What, if any, impacts our business may be facing as a result of the recent efforts to cut costs by the federal government. While the situation is still very fluid, we're currently not experiencing any impacts to our government contracts as a result of the recent policy and priority changes. However, we are still waiting on Congress to pass a full budget for the current fiscal year and to agree on the contours of the budget for next year, which, as many of you know, is always filled with some degree of risk.
Speaker Change: While the situation is still very fluid. We're currently not experiencing any impacts to our government contracts as a result of the recent policy and priority changes.
Speaker Change: However, we are still waiting on Congress to pass a full budget for the current fiscal year and to agree on the contours of the budget for next year, which as many of you know has always filled with some degree of risk.
Tony Scott: Despite this uncertainty, we're confident that the strength of our non-government pipeline will continue to support our growth trajectory in the interim, as we wait further clarity on the federal budget. It's an exciting time for intrusion and the demand for our products continues to grow.
Speaker Change: Despite this uncertainty we are confident that the strength of our nongovernment pipeline will continue to support our growth trajectory in the interim as we await further clarity on the federal budget. So an exciting time for intrusion and the demand for our products continues to grow.
Kimberly Pinson: With that, I'd now like to turn the call over to Kim for a more detailed review of our first quarter financials. Kim? Thanks, Jeremy. In the first quarter of 2025, revenues were $1.8 million, an increase of 6% sequentially, and 57% when compared to the prior year period. The increase in revenue was driven by multiple new contracts and logos in recent quarters, most notably including the contract with the United States Department of Defense utilizing both shield technology and consulting services. Consulting revenues in the first quarter totaled $1.4 million, an increase of $0.1 million sequentially, and $0.7 million on a year-over-year basis.
Speaker Change: With that I'd now like to turn the call over to Kim for a more detailed review of our first quarter financials Kim.
Speaker Change: Yes.
Kim: In the first quarter of 2020 revenues worldwide.
Speaker Change: Great.
Speaker Change: Okay.
Speaker Change: <unk> grew 47%.
Speaker Change: The prior year period.
Speaker Change: The increase in revenue was driven by multiple contacts and logos in recent quarters.
Speaker Change: Guardedly, including a contract with United States Department of Defense.
Speaker Change: <unk> technology <unk> services.
Speaker Change: Consulting revenues in the first quarter totaled $1 $1 million an increase.
Speaker Change: Sequentially.
Speaker Change: $7 million on a year over year basis.
Kimberly Pinson: The continuing resolution and delay in the approval of a federal budget for the 2024 fiscal year impacted renewals and task orders received for longstanding contracts, which resulted in lower consulting revenues for the quarter ended March 31, 2024. Although there was similarly a delay in a final funding bill for the 2025 fiscal year, there has been no impact to revenues on our existing government contract. Shield revenues in the first quarter were $.4 million, an increase of $.1 million sequentially in flat year over year. You may recall, effective April 1, 2024, we lost a large shield customer that was utilizing a highly customized and non-standard configuration of the product.
Speaker Change: Continuing resolution and delay in approval.
Speaker Change: <unk> for fiscal year <unk>.
Speaker Change: And task orders received from our annual contracts, which resulted in lower consulting revenues for the quarter ended March 31 2024.
Speaker Change: Although that was similar to the delay in a final.
Speaker Change: Bringing down for the 'twenty fiscal.
Speaker Change: Fiscal year.
Speaker Change: There's been no impact to revenues.
Speaker Change: Government contracts.
Speaker Change: Sales revenue in the first quarter were 40.
$9, an increase of $1 million sequentially and flat year over year.
Speaker Change: You May recall effective April one 2024, we lost a large scale customer that was utilizing a highly customized and now.
Speaker Change: You're right.
Speaker Change: Right.
Speaker Change: The loss of revenue from this customer, which represented 78% of sales revenues.
Kimberly Pinson: The loss of revenues from this customer, which represented 78% of shield revenues in the first quarter of 2024, has now been fully backfilled with the addition of new customers. As a result of changes in our customer base, predominantly the loss of the large early shield adopter and the DoD award in the second half of 2024, sales to US government entities represented 92% of revenues in the first quarter of 2025. We are seeing strong demand for our shield and consulting services with both governmental and commercial customers and anticipate deeper penetration in both sectors, which will result in further changes to our customer mix.
Speaker Change: On April four.
Speaker Change: And believe that with the new.
Speaker Change: New customers.
Speaker Change: As a result of changes in our customer base predominantly the loss of the large <unk>, Gary and the Vod Award and the second capital.
Speaker Change: <unk> sales.
Speaker Change: Sales to U S government entities represented 92% of revenues in the first quarter of 2020.
Speaker Change: We are seeing strong demand for our scaled and consulting services with both governmental and commercial customers and anticipate deeper penetration in both sectors, which will result in further changes to our customer mix.
Speaker Change: Gross profit margin was 76% for the first quarter of <unk>.
Kimberly Pinson: Gross profit margin was 76% for the first quarter of 2025 compared to 80% in the first quarter of 2024. The main driver for the decrease in gross margin was our product mix, which will continue to vary from quarter to quarter. Operating expenses in the first quarter of 2025 totaled $3.4 million, an increase of $0.3 million on a sequential basis, and flat on a year-over-year basis. The sequential increase was largely driven by increased professional fees related to the timing of our annual audit and a one-time settlement in the fourth quarter of 2024 with our DNO carrier for reimbursement of legal support costs associated with the SEC investigation.
Speaker Change: Compared to 80% through the first quarter at 24.
Speaker Change: One driver for the decrease in gross margin with our product.
Speaker Change: Which will continue to vary from quarter to quarter.
Speaker Change: Operator.
Speaker Change: First quarter of 2025 totaled $3 4 million, an increase of $3 million on a sequential basis.
Speaker Change: Flat on a year over year basis.
Speaker Change: The sequential increase was largely driven by increased professional fees related to the timing of our annual audit.
Speaker Change: A one time settlement in the fourth quarter of 2024, with our DNR carrier for reimbursement of legal support costs.
Speaker Change: <unk> seen it with the SEC investigation.
Speaker Change: As Tony mentioned earlier, we have recently launched several new sales and marketing initiatives.
Kimberly Pinson: As Tony mentioned earlier, we have recently launched several new sales and marketing initiatives. We may elect to further increase our investment in both sales and marketing, as well as product development to accelerate the growth of our customer base, which will result in higher operating. With that said, we will continue to remain vigilant with our spending to ensure we maintain a strong liquidity position. Net loss for the first quarter of 2025 was $2.1 million or $0.11 per share compared to a net loss of $1.7 million or $0.94 per share for the first quarter of 2024. The increase in net loss for 2025 was a result of a net interest credit of $0.8 million recorded in the 2024 period from the exchange of $9.3 million in senior debt for Series A preferred stock and the associated reversal of interest accretion for the ability to stock settled principal redemptions on the debt.
Speaker Change: We may elect to further increase our investment in about sales and marketing as well as product development to accelerate the growth of our customer base, which will result in higher operating expenses.
Speaker Change: With that said, we will continue to remain vigilant with our spending to ensure we maintain our strong liquidity position.
Speaker Change: Net loss for the first quarter of 2012 by $2 1 million or 11 cents per share compared to a net loss of $1 $7 million or <unk> 94 per share in the first quarter of 2024.
Speaker Change: The increase in net loss for 2025 with the result of the net interest credit at $8 million recorded in the 2024 period.
Speaker Change: <unk> $9 3 million of senior debt our series a preferred stock and the associated reversal of interest accretion for the ability to start that our principal redemption on the gap.
Speaker Change: Turning to the balance sheet from a liquidity perspective, our March 31, 2020, we had cash and cash equivalents at $10 $7 million.
Kimberly Pinson: Turning to the balance sheet from a liquidity perspective, on March 31, 2025, we had cash and cash equivalents of $10.7 million, compared to $0.1 million in March of 2024. As Tony mentioned earlier, we were able to take advantage of the run up in our share price in late 2024 in the first week of 2025, that meaningfully improved our financial position with $14.5 million in proceeds to the company and the elimination of $10.1 million notional value of Series A preferred stock. As a result, we now have sufficient capital to fund our operations through the remainder of calendar year 2025 and into early 2026.
Speaker Change: Compared to $1 million in March of 2024.
Speaker Change: As Tony mentioned earlier, we were able to take advantage of that run up in our share price in late 2024 in the first week of 2025.
Speaker Change: And hopefully increase our financial position with $14 5 million and proceeds to the company and the elimination of <unk>.
Speaker Change: $1 million notional value of series a preferred stock.
Speaker Change: As a result, we now have sufficient capital to fund our operations through the remainder of calendar year 2020 and into early 2026.
Speaker Change: While we do not have plans to raise additional capital in 2025, we did file a $100 million replacement fee.
Kimberly Pinson: While we do not have plans to raise additional capital in 2025, we did file a hundred million dollar replacement S3 shelf registration that went effective on February 10, 2025. Because our public float, as calculated in accordance with General Instruction 1B1 of Form S3, was above $75 million, we are no longer subject to the capital raise limitations imposed by the Baby Shelf Rule. We believe this provides a great degree of financial flexibility to be able to respond to opportunities as they arise. Also, during the first quarter, we retired the remaining $0.5 million of our senior debt through an exchange of common stock, which further strengthened our balance sheet.
Speaker Change: Shelf registration that went effective on February 10, 2025.
Speaker Change: Because our public float as calculated in accordance with generally instruction <unk> Wang our form S. Three was above $75 million, we are no longer subject to the capital raise limitations in Congress and the Danish outflow.
Speaker Change: We believe this provides a great degree of financial flexibility to be able to respond to opportunities as they arise.
Speaker Change: Also during the first quarter, we retired the remaining $5 million of.
Speaker Change: Our senior debt through an exchange of common stock, which further strengthened our balance sheet.
Carol: With that I'd now like to turn the call back over to Carol for a few closing comments.
Tony Scott: With that, I'd now like to turn the call back over to Tony for a few closing comments. Tony? Thanks, Kim. As we discussed today, we're excited about the progress we've made over the past few months in positioning our business for sustainable growth and profitability. As many of you know, reaching this point has not been easy for intrusion. And while we still have a lot of work ahead of us, we believe we're at a key inflection point in our growth journey, thanks to our improved balance sheet and growing customer base and pipeline. Additionally, it's our belief that we will only see the demand for our solutions increase in the near term due to the continued rise of cybersecurity threats in the key regions that we operate in.
Carol: Thanks, Kim as we discussed today, we are excited about the progress we've made over the past few months and positioning our business for sustainable growth and profitability is.
Carol: As many of you know, reaching this point has not been easy for intrusion.
Carol: While we still have a lot of work ahead of US. We believe we're at a key inflection point in our growth journey, thanks to our improved balance sheet and growing customer base and pipeline.
Carol: Additionally, it's our belief that we will only see the demand for our solutions increase in the near term due to the continued rise of cyber security threats in the key regions that we operate in.
Carol: Now that concludes our prepared remarks, and I'll now turn the call over to the operator for Q&A.
Operator: Now that concludes our prepared remarks and I'll now turn the call over to the operator for Q&A. Certainly. Everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone.
Carol: Certainly.
At this time, we'll be conducting a question and answer session.
Carol: Have any questions or comments. Please press star one on your phone at this time.
Carol: We do ask the world posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Carol: Once again, if you have any questions or comments. Please press star one on your phone.
Carol: Your first question is coming from Scott Buck from H C. Wainwright Your line is live.
Scott Buck: Your first question is coming from Scott Buck from H.C. Wainwright. Your line is live. Hi, good afternoon, guys. Thanks for taking my questions. Tony, you mentioned in your prepared remarks potential changes to pricing. I was hoping you could give us just a little more color on what you guys are thinking there. Yeah, so, um, you know, we had a pretty simple portfolio of products, you know, a year and a half or so ago, but the shield family now includes, you know, several variations, including cloud and endpoint and, you know, we're also selling the managed service providers.
Scott Buck: Hi, Good afternoon, guys. Thanks for taking my questions.
Scott Buck: Tony You mentioned in your prepared remarks, a potential changes to pricing I was hoping you could give us just a little more color on what you guys are thinking there.
Scott Buck: Yes so.
Scott Buck: We had a pretty simple portfolio of products.
Scott Buck: You know a year and a half or so ago, but the shield family now includes.
Scott Buck: Several variations, including cloud and endpoint.
Scott Buck: And we're also selling to managed service providers. So part of the work that we're doing.
Tony Scott: So part of the work that we're doing, you know, in a total review of all this, Unknown Attendee, Unknown Speaker, Unknown Speaker, Unknown Attendee, Unknown Speaker, We used to express our pricing in terms of just monthly or, I'm sorry, yearly or, you know, multi-year contracts, but most managed service providers charge their customers by the month. And while we would still get paid in a quarterly or annual basis, they want to know, you know, what the monthly charge might be. So it's little nuances like that. We're not thinking about reducing prices. We've been told our pricing is pretty competitive in terms of what we actually charge for the services that we provide.
Scott Buck: In a total review of all business.
Scott Buck: Our pricing review to try to make sure we're competitive in the marketplace and that we can service.
Scott Buck: <unk> in MSS piece in particular, so one of the little nuances here as well.
Scott Buck: We used to express our pricing.
Scott Buck: Monthly or or I'm, sorry, a yearly or.
Scott Buck: Multiyear contracts, but most managed service providers.
Scott Buck: Charge their customers by the month.
Scott Buck: And while we would still get paid on a quarterly or annual basis.
Scott Buck: They want to know what the monthly.
Scott Buck: Charge might be so it's a little nuances like that we're not.
Scott Buck: Not thinking about reducing prices.
Scott Buck: Been told our pricing is pretty competitive in terms of.
Scott Buck: What we actually charge for the services that we provide.
Scott Buck: But.
Scott Buck: <unk>.
Tony Scott: slicing it up into different time periods makes it easier for our target market MSPs and MSSPs in particular. understand not only what the cost to them might be, but also, as they market up and charge their customers what they might be able to get in terms of an increase in revenue for themselves. So, it's a few things like that. When we get into the Amazon marketplace, we'll have pricing schemes there. And part of our discovery is that customers there are used to buying bundles of things. And so, we're working through the likely size of those bundles as well.
Scott Buck: Slicing it up into deferred.
Scott Buck: Time period makes it easier for our target market MSP and MSP that particular group.
Scott Buck: Understand not only what the cost of them might be but also as the market up in charge their customers, what they might be able to.
Scott Buck: Yeah in terms of an increase in revenue for themselves. So it's.
It's a few things like that.
Scott Buck: When we get into the Amazon marketplace will have.
Scott Buck: Pricing.
Scott Buck: Schemes there.
Scott Buck: And part of our discovery is that customers, they're used to buying bundles of.
Scott Buck: Things and so we're working through the likely size of those bundles.
Scott Buck: And we'll have pricing commensurate with that. So, it's a bunch of those, I'll say, more minor adjustments. On our government contracts, we've been able to get in annual increases when these contracts renew or come up for option years. And we'll continue that practice as well. So, that's kind of a broad look at it. Obviously, for the new products that we have coming, we'll, you know, have obviously new pricing for those things, but our intent is always to make them competitive in the market. Unknown AttendeeGreat.
Scott Buck: As well and then we will have pricing commensurate with that so it's a bunch of those I'll say more minor adjustments on our government contracts, we've been able to.
Scott Buck: Get in.
Scott Buck: Increases when.
Scott Buck: These contracts renew or come up for option years.
Scott Buck: We will continue that practice as well so.
Scott Buck: That's kind of a broad.
Scott Buck: Look at it obviously for the new products that we have coming will.
Scott Buck: You know.
Scott Buck: Obviously, new pricing for those things.
Scott Buck: Yes, our intent is always to make them competitive in the marketplace.
Scott Buck: Great that's very very helpful.
Scott Buck: That's that's very, very helpful.
Tony Scott: on your your entrance into the AWS marketplace. How will you be supporting that through marketing? How are you kind of getting the word out? And is Amazon helping you there as well? Well, once once we get there, there's a whole tiered set of capabilities that you can do to create awareness for your products in the in the marketplace. And our intent is to pursue all of those, you know, whether it's digital marketing with Amazon, or, you know, placement in various categories. But there's a whole, you know, fairly complex, I'll call it scheme or pattern of things that have proven to be pretty successful.
Scott Buck: And your your entrance into the AWS marketplace.
Speaker Change: How will you be supporting that through marketing how.
Speaker Change: How are you kind of getting the word out and is Amazon, helping you there as well.
Speaker Change: Well once once we get there there's a hole.
Speaker Change: <unk> set of.
Speaker Change: Capabilities that you can do to create awareness for your <unk>.
Speaker Change: <unk> in the marketplace and our intent is to pursue all of those are.
Speaker Change: Whether it's digital marketing.
Speaker Change: Amazon or.
Speaker Change: Placement in various.
Speaker Change: Categories, but as a whole.
Speaker Change: It's fairly complex.
Speaker Change: I'll call it scheme or pattern of things that have proven to be pretty successful.
Tony Scott: And we're going to follow all those best practices. as we debut in that pretty important forum. Yeah, okay, perfect.
Speaker Change: We're going to follow all of those best practices.
Speaker Change: As we debut in that.
Speaker Change: Pretty important forum.
Speaker Change: Yeah, Okay, perfect and then last one from me I am curious is there an opportunity to potentially expand the relationship with the D O D overtime.
Scott Buck: And then last one from me.
Tony Scott: I'm curious, you know, is there an opportunity to potentially expand the relationship with the DoD over time? Unknown Speaker Yeah, I believe there is. You know, we're we're constantly having conversations. And I would say recently, we've had some conversations in quarters that we hadn't been engaged with before.
Speaker Change: Yes, I believe there is.
Speaker Change: You know were.
Speaker Change: Our instantly having conversations and I would say recently we've had some.
Speaker Change: Conversations in quarters that we hadn't been.
Speaker Change: Engaged with before imap.
Scott Buck: I'm actually doing this call from a hotel room at the RSA conference in San Francisco and just you know today and tomorrow we have some great meetings either have happened or scheduled with a pretty broad array of customers including government customers. So The answer is yes, George. Perfect.
Speaker Change: I'm actually doing this call from a hotel room at the RSA conference in San Francisco and.
Speaker Change: Just.
Speaker Change: Today and tomorrow, we have some great meetings.
Speaker Change: Neither have happened or scheduled with.
Speaker Change: A pretty broad array of customers, including Gov.
Speaker Change: Government customers so.
Speaker Change: The answer's, yes enjoyed.
Speaker Change: Perfect and then sorry, Kim I think I missed it when you said in the call shield revenue in the quarter was what.
Scott Buck: And I'm sorry, Kim, I think I missed it. When you said in the call, shield revenue in the quarter was what? and it was $400,000. Okay, all right, that's basically flat with a quarter ago, right? And it was it was up from the fourth quarter and flat with previous quarters. Okay, so it has fully backfilled the loss of our large commercial contract from early in 2020. Yeah, okay. And you guys have completely anniversary that at April 1 marks the anniversary that everyone.
Speaker Change: And it was $400000.
Speaker Change: Okay, Alright, thats basically flat with a quarter ago right.
Speaker Change: And it was it was up from the fourth quarter and flat with previous quarters. Okay.
Speaker Change: Okay. So alright.
Speaker Change: It is fully and back out the loss of our large commercial contract early in 2024.
Speaker Change: Yep, Okay, and you guys are completely anniversary that at this point.
Speaker Change: And April and marks the anniversary that everywhere.
Scott Buck: Perfect.
Speaker Change: Perfect. Thanks, a lot guys I appreciate the time.
Scott Buck: Well, thanks a lot, guys. I appreciate the time. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question is coming from Ed Woo from <unk> capital. Your line is live.
Ed Woo: Your next question is coming from Ed Woo from Ascendant Capital. Your line is live. Yeah, congratulations on the progress this quarter. Thanks for giving us the information about, you know, the state of government contracts. But what are you seeing out there, especially you're at the RSA conference? What are you hearing about, you know, you know, CIOs and their ability and their budgets to spend on, you know, cybersecurity products like yours this year? Has there been any significant change in the last three months? I'm not detecting any significant change. It looks to me, just based on feel, that this conference has got even more attendees than what I remember in the past.
Speaker Change: Yeah, congratulations on the progress this quarter.
Speaker Change: Thanks for giving us the information about the state of government contract, but what are you seeing out there, especially you were at the RSA Conference what are you hearing about.
Speaker Change: Yes.
Speaker Change: <unk> and <unk>.
Speaker Change: Their ability and their budgets to spend on cyber security products like yours. This year has there been any significant change in the last three months.
Speaker Change: Im not detecting any significant change.
Speaker Change: It looks to me just based on feel that this conference is got even more attendees than what I remember in the past.
Tony Scott: Every hotel room is booked, the restaurants are full, and the Moscone Center is packed, both with, you know, customers seeking those things. So, based on the feel here, I would say it's as robust as ever, and if not, it's not an increase in some fashion in terms of interest and energy level and all the rest of it. Of course, AI is a big topic here. We incorporate AI in our products, and it appears that nearly every other cybersecurity vendor is doing that as well. Part of the thing that I do here when I come every year is look around for other technologies that might compete with us or be a threat to us from a technology perspective, and yet again, I can't find any.
Speaker Change: Every hotel room is booked.
Speaker Change: Restaurants are full and the.
Speaker Change: Mosconi Center as Pat.
Speaker Change: Both with.
Speaker Change: Suppliers of cyber security technology.
Speaker Change: Apparently customers seeking those things so based on the feel here I would say, it's as robust as ever and if not.
Speaker Change: It's not an increase in.
Speaker Change: That's and in terms of interest and energy level and all the rest of it.
Speaker Change: And of course AI is the big <unk>.
Speaker Change: Topic here, we incorporate AI and our products.
Speaker Change: Appears that nearly every other.
Speaker Change: Cyber security vendor is doing that as well.
Speaker Change: Part of the thing that I do here when I come every year's look around for.
Speaker Change: Other technologies.
Speaker Change: Might compete with us or.
Speaker Change: You know.
Be a threat to us from from a technology perspective, and yet again I can't find any.
Speaker Change: Admittedly I haven't looked at every single technology on the planet, but RSA is a good representation of what's available so.
Ed Woo: Admittedly, I haven't looked at every single technology on the planet, but RSA is a good representation of what's available. So I think it's, I think you can count on the bad guys still wanting to do bad stuff. And I think that means robust business for those that are in the, detect and defend. side of the business. Hopefully that's helpful. Yeah, that's very helpful.
Speaker Change: I think it's a I think you can count on the bad Guy is still wanting to do bad stuff.
Speaker Change: And I think that means robust business for those that are in the.
Speaker Change: Detected and defend.
Speaker Change: Side of the business so.
Speaker Change: Hopefully that's helpful.
Speaker Change: Yeah. That's very helpful. Thank you very much and I wish you guys.
Ed Woo: Thank you very much, and I wish you guys good luck. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Thank you. Your next question is coming from Walter Schenker from <unk> Partners. Your line is live.
Walter Schenker: Your next question is coming from Walter Schenker from Mays Partners. Your line is locked. Hi, Tony. Hi, Kim. In looking at the last couple of quarters and listening, I understand the magic of 6% compound interest, which is the sequential growth of revenues quarter over quarter. However, As we've discussed over a number of years now, intrusion needs to be 50, 75 percent. higher quarterly revenues to get to a sort of a breakeven or close to a cash breakeven level are the catalysts to get there. a big government contract? Is it AWS? Is it just some of a lot of little things?
Speaker Change: Hi, Tony Hi, Kevin.
Speaker Change: <unk>.
Speaker Change: In looking at the last couple of quarters and listening.
Speaker Change: I understand the magic of 6% compound interest, which is a sequential growth of revenues quarter over quarter.
Speaker Change: However.
Speaker Change: Okay.
Speaker Change: As we've discussed over a number of years now.
Speaker Change: Intrusion needs to be 50, 75%.
Speaker Change: Higher quarterly revenues to get to sort of a breakeven or close to cash breakeven level.
Speaker Change: Catalyst to get there.
Speaker Change: A big government contract is at AWS is it just the sum of a lot of little things.
Walter Schenker: Because you keep growing slowly.
Speaker Change: You keep growing slowly and I'm just trying to understand if there's sort of a breakout a breakthrough moment that youre looking forward to so that we can finally move.
Walter Schenker: And I'm just trying to understand if there's sort of a breakout or breakthrough moment that you're looking forward to, so that we can finally, you know, move this ahead at a much faster rate.
Speaker Change: Move this ahead at a much faster rate.
Tony Scott: Great question Walter. I think at this point from my perspective it's a combination of things. It's why we keep investing in our existing products but also we always keep an eye out for new things that we can do that are in demand from you know the customers that we have and our understanding of you know the potential in the marketplace. So this critical infrastructure thing I talked briefly about is an example of that. Existing customers said hey can you guys do something to help protect critical infrastructure and it needs to have kind of these set of capabilities and our team got together put together the you know initial product.
Speaker Change: Great question, Walter I think at this point from my perspective, it's a combination of things.
Speaker Change: Why do we keep investing in our existing products, but also we always keep an eye out for new things that we can do that.
Speaker Change: In demand from the customers that we have and our understanding of the potential in the marketplace. So this critical infrastructure thing I talked briefly about is an example of that.
Speaker Change: Existing customers said, Hey, can you guys do something to help protect critical infrastructure that needs to have kind of these set of capabilities and our team got together.
Speaker Change: Put together.
Speaker Change: Initial.
Speaker Change: <unk> product.
Tony Scott: We got it deployed, got some feedback, we've enhanced it and I think in short order we're going to have something that could be quite more widely deployed let's say. So we're not putting all our eggs in one basket but we're putting our eggs in a few baskets that we think hold process, hold not process but you know, are promising. I do think that the Amazon Web Services is one of those, if we do it right, easy to scale kinds of opportunities that are not, you know, chunking away one by one by one, like, like we've had to do with some of our other products.
Speaker Change: We've got it deployed got some feedback we've enhanced it.
Speaker Change: And I think <unk>.
Speaker Change: Short order, we're going to have something that.
Speaker Change: It could be quite.
Speaker Change: More widely deployed website.
Speaker Change: So we're not putting all our eggs in one basket, but we're putting our eggs and a few basket what we think.
Speaker Change: Old process, a whole home.
Speaker Change: That process, but.
Speaker Change: You know are promising.
Speaker Change: I do think that the Amazon Web services is one of those.
Speaker Change: Do it right easy to scale.
Speaker Change: Kinds of opportunities that.
Speaker Change: Or not.
Speaker Change: Chunking away one by one by one.
Speaker Change: Like we've had to do with some of our other products and.
Walter Schenker: And, and, you know, once we get the AWS thing done, we'll look at other digital marketplaces, like that again. have the potential to be, you know, bigger growth capabilities. The, you know, Microsoft ecosystem is a Another example that like AWS could be a pretty big growth engine for us. So we'll get to those over the course of the year. And, and hopefully, some combination of those are the things that, you know, propel us in the direction that you and we want us to go. Okay, and I'm pushing more, which but you would expect, and it's not a forecast.
And once we get the AWS thing done we'll look at other digital marketplaces.
Speaker Change: Like that again.
Speaker Change: Have the potential to be.
Speaker Change: Bigger growth.
Speaker Change: Capabilities.
Speaker Change: The micra.
Microsoft ecosystem.
Speaker Change: Another example.
Speaker Change: Like AWS could be a pretty big growth engine for us. So we will get to those over the course of the year.
Speaker Change: Hopefully some combination of those are the things that.
Propel us in the direction that <unk>.
Speaker Change: And we want us to go.
Okay.
Speaker Change: Wishing more which but.
Speaker Change: You would expect and it's not a forecast.
Walter Schenker: but maybe it's a goal that we should see a very significant acceleration in the sequential 6% growth rate over the next couple of quarters. Yeah, I mean, first comes bookings, then comes revenue. So, you know, we'll see it in terms of booking first and revenue recognition second, but I'm hopeful that, you know, in this second half of the year, we see significant increases in both. Okay. Well, it'd be nice to see some, again, you're making good progress. The balance sheet's a great success. Now we just got to grow the business, or you got to grow it, and I can then watch you.
Speaker Change: But maybe it's a goal that we should see a very significant acceleration in the sequential 6% growth rate over the next couple of quarters hopefully.
Speaker Change: Yeah, I mean first comes bookings then comes revenue so.
Speaker Change: We will see it in terms of bookings first of all.
Speaker Change: Revenue recognition second but.
Speaker Change: I am hopeful that in.
Speaker Change: In this second half of the year, we see significant increases in both.
Speaker Change: Okay, well nice to see some.
Speaker Change: Again, you're making good progress the balance sheets of great success.
Speaker Change: Now, we've just got to grow the business or you got to go with Nike.
Speaker Change: What's your okay. Thanks, Tony.
Operator: Okay. Thanks, Tony. Amen. Thanks, Walter. Thank you. Once again, everyone, if you have any questions or comments, please press star than one on your phone.
Speaker Change: A man thanks Walter.
Speaker Change: Thank you once again, everyone. If you have any questions or comments. Please press Star then one on your phone. Your next question is coming from Aaron Warwick from breakout investors. Your line is live.
Aaron Warwick: Your next question is coming from Aaron Warwick from Breakout Investors. Your line is live. Hey, Tony and Kim, I hope you're doing well. I wanted to ask about the PortNexus partnership and what do you see with that in terms of revenue potential? Is that something that could could reach the annual run rate of six figures or what are we looking at there? Unknown Speaker I think it's too early to tell. I mean, I think both of our companies have ambitious expectations for that. The, you know, the good news is Port Nexus has Experienced deploying their solution in a bunch of schools and other public institutions already.
Speaker Change: Hey, Tony and Ken.
Speaker Change: Hope Youre doing well.
Speaker Change: Wanted to ask about the port Nexus partnership and.
Speaker Change: What are you seeing with that in terms of revenue potential is that something that could reach a annual run rate of six figures or what are we looking at there.
Speaker Change: I think it's too early to tell I mean, I think both of our companies have ambitious expectations for that.
Speaker Change: The.
Speaker Change: No.
Speaker Change: The good news is port mixes has experience.
Speaker Change: Deploying their solution and a bunch of schools and other public institutions already and now with the addition of intrusion endpoint protection.
Tony Scott: And now with the addition of intrusion endpoint protection, there's an opportunity to expand both to their existing customers, but also any new customers that they bring online. And then the driver distraction product, I think, also has a lot of promise. So, while the unit economics are, you know, pretty small in terms of revenue, when you're talking about the... the number of potential deployments that adds up pretty quickly. So I don't want to make a projection at this particular point, but we're pretty excited about both their capability and you know, the potential for both of us.
Speaker Change: As an opportunity to expand both to their existing customers, but also any new customers that they were.
Speaker Change: Bring online.
Speaker Change: And then the the driver distraction product I think also has a lot of them.
Speaker Change: Promise so while the unit economics.
Speaker Change: Economics are.
Speaker Change: Pretty small in terms of revenue.
Speaker Change: When you when you're talking about.
Speaker Change: The number of potential deployments it adds up pretty quickly so I don't want to make a projection at this particular boy but.
Speaker Change: We're pretty excited about both their capability.
Speaker Change: The potential for both of those.
Tony Scott: as we go forward.
Speaker Change: As we as we go forward and they've been a great partner to work with.
Tony Scott: And they've been a great partner to work with.
Speaker Change: And when would you expect.
Tony Scott: And when would you expect deployment there and starting to earn revenue on it? Is that something that will happen yet this year, back half of the year? Oh, yeah, yeah. I expect, yeah, no, we'll, yeah, we'll see it in Q2 and probably and beyond. But we'll have our first revenue towards the end of Q2, most likely.
Speaker Change: Deployment, there and starting to earn revenue on that is that something that will happen yet this year back half of the year Oh, Yeah, Yeah, Yeah no.
Speaker Change: Yeah, we will see it in Q2 and probably the MBR, but we'll have our first revenue.
Speaker Change: Towards the end of Q2, most likely.
Speaker Change: Great.
Tony Scott: Great. And in terms of the pipeline, you know, of course, I appreciate that you don't want to put all your eggs in one basket. But at the same time, I'm just wondering, you know, do you have anything in the pipeline of the magnitude that would like, you know, put you towards a break even point or put you towards that 50%? Q over Q type of growth that Walter had mentioned. Unknown Speaker I think if you look at Well, both the existing work that we do, government consulting and so on, the new product. and then growth on existing products, I think the potential is there.
Speaker Change: And in terms of the pipeline.
Speaker Change: Of course I appreciate that you don't want to put all your eggs in one basket, but at the same time I'm. Just wondering do you have anything in the pipeline.
Speaker Change: Of the magnitude that would.
Speaker Change: Put you towards.
Speaker Change: Our breakeven point or put you towards that 50%.
Walter: Q over Q type of growth that Walter had mentioned.
Speaker Change:
Speaker Change: I think if you look at.
Speaker Change: Both the existing work that we do government consulting and so on the new products.
Speaker Change: <unk>.
Speaker Change: And then growth on existing.
Speaker Change: Products.
Speaker Change: I think the potential is there I wouldn't say, we're there yet from a pipeline perspective.
Tony Scott: I wouldn't say we're there yet from a pipeline perspective because we're really looking at right now the rest of Q2 and early Q3 in terms of solid pipeline, but I think the potential is there.
Speaker Change: We're really looking at.
Speaker Change: Right now the rest of Q2 and early Q3 in terms of solid pipeline, but I think the potential is there.
Speaker Change: Excellent. Thank you I appreciate your time.
Aaron Warwick: Excellent.
Aaron Warwick: Thank you. Appreciate your time.
Speaker Change: Thank you that concludes our Q&A session I'll now hand, the conference back to Tony Scott President and CEO for closing remarks. Please go ahead.
Operator: Thank you.
Tony Scott: That concludes our Q&A session.
Tony Scott: I'll now hand the conference back to Tony Scott, President and CEO, for closing remarks. Please go ahead. All right, well, thanks, everybody. I appreciate the time you spend with us and the questions. As I've said before, I'm really pleased with the progress our teams have been making. Our engineering team is excited and motivated and continues to deliver exciting capabilities for our products. As I mentioned in our prepared remarks, we're doing a lot of work on our go-to-market processes. And as we mentioned, pricing and messaging, and we're upping our social media game and so on. And I'm pleased with the progress we're making on all those fronts.
Speaker Change: All right well, thanks, everybody I appreciate the.
Speaker Change: Time, you spend with us and the questions.
Speaker Change: As I've said before I'm really pleased with the.
Speaker Change: Progress our teams have been made are or have progress.
Speaker Change: Progress our teams that are making our engineering team is excited and motivated and continues to deliver.
Speaker Change: Exciting capabilities for our products.
Speaker Change: As I mentioned in our prepared remarks.
Speaker Change: A lot of work on our go to market processes.
Speaker Change: And as we mentioned pricing and messaging.
Speaker Change: We are upping, our social media game and so on and.
Speaker Change: I am pleased with the progress we're making on all those fronts.
Tony Scott: And then You know, hopefully it all pays off. We're keeping our fingers crossed, but it feels to me like we're at this inflection point that I mentioned, and I'm pretty excited about what the next couple of quarters can bring. So, I appreciate everybody going on the ride with us. I think it's going to be a fun next half of the year and the next couple of quarters. So, appreciate all the support, and I'll look forward to talking to you shortly. Thanks so much. Thank you.
Speaker Change: And then.
Speaker Change: You know hopefully it all pays off or keeping our fingers crossed.
Speaker Change: But it feels.
Speaker Change: To me like we're at this inflection point that I mentioned and Im pretty excited about what the next couple of quarters can bring so I appreciate everybody going on the right with us.
Speaker Change: I think it's going to be fun.
Speaker Change: The next half of the year.
Speaker Change: In the next couple of quarters. So I appreciate all the support and I will report to talking to you.
Speaker Change: Shortly thanks, so much.
Speaker Change: Okay.
Speaker Change: Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.
Operator: Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.