Q4 2025 Intrusion Inc Earnings Call

March 24, 2026

Speaker #3: 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.

Speaker #3: An audio replay of the 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.

Josh Carroll: Thank you, and welcome. Joining me today are Tony Scott, President and 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 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 the Private Securities 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 call.

Speaker #2: Thank you, and welcome. Joining me today are Tony Scott, President and Chief Executive Officer in Kimberly Pinson, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website.

Speaker #2: 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 forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.

Speaker #2: Please refer to our SEC filings for more information on the specific risk factors that could cause, or actually result in, different material from the projections described in today's conference call.

Josh Carroll: 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. 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. With that, let me now turn the call over to Tony for a few opening remarks.

Josh Carroll: 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 US GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. 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. With that, let me now turn the call over to Tony for a few opening remarks.

Speaker #2: 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.

Speaker #2: In addition to US GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. 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.

Speaker #2: With that, let me now turn the call over to Tony for a few opening remarks.

Tony Scott: Well, thank you, Josh, and good afternoon, and thank you all for joining us today. You know, fiscal year 2025 was a year that had an unexpected beginning and an unexpected ending, along with a number of significant product milestones along the way. At the beginning of the year, we improved our balance sheet by fully eliminating our then outstanding debt in Series A preferred stock. At mid-year, we rolled out production of our critical infrastructure solution to help safeguard essential assets like water, power, and telecom facilities. In Q3 and Q4, we expanded our access to our Shield Cloud solution by making two variations of the product available on the AWS Marketplace. Towards the end of the year, we announced our partnership with PortNexus to provide secure network protection for their MyFlare Safety technology, which is being deployed at schools in several states.

Speaker #3: Well, thank you, Josh, and good afternoon, and thank you all for joining us today. You know, fiscal year 2025 was a year that had an unexpected beginning.

Speaker #3: And an unexpected ending, along with a number of significant product milestones along the way. At the beginning of the year, we improved our balance sheet by fully eliminating our then outstanding debt in Series A preferred stock.

Speaker #3: At mid-year, we rolled out production of our critical infrastructure solution to help safeguard essential assets like water, power, and telecom facilities. In the third and fourth quarter, we expanded our access to our shield cloud solution by making two variations of the product available on the AWS marketplace.

Speaker #3: And towards the end of the year, we announced our partnership with Port Nexus to provide secure network protection for their MyFlare safety technology which is being deployed at schools in several states.

Tony Scott: In conjunction with PortNexus, we also launched the P.O.S.S.E. Program, which will give sheriffs and other law enforcement agencies critical network protection for their public safety networks. Our pilot experience with the P.O.S.S.E. Program is encouraging with a high adoption rate so far. Finally, we ended the year with an unexpected delay in the extension of the earlier mentioned critical infrastructure contract with the U.S. Department of Defense. I'll start my detailed remarks with some more insight about this unexpected end-of-year development. Kim will provide more details on the overall numbers shortly, but our Q4 revenues decreased by 12% compared to the prior year period as a result of the delayed timing of an expected contract extension for our critical infrastructure technology. For this delay, we had expected to show quarter-on-quarter increases in revenue and greater year-over-year increase in revenue overall.

Speaker #3: In conjunction with Port Nexus, we also launched the POSSE program, which will give sheriffs and other law enforcement agencies critical network protection for their public safety networks.

Speaker #3: And our pilot experience with the POSSE program is encouraging, with a high adoption rate so far. And finally, we ended the year with an unexpected delay in the extension of the earlier-mentioned critical infrastructure contract with the Department of War.

Speaker #3: And I'll start my detailed remarks with some more insight about this unexpected end-of-year development. Kim will provide more details on the overall numbers shortly, but our fourth quarter revenues decreased by 12% compared to the prior year period as a result of the delayed timing of an expected contract extension for our critical infrastructure technology.

Speaker #3: And but for this delay, we had expected to show revenue, and greater year-over-year increase in revenue overall. Now, to be clear, the cost of providing the services for this critical infrastructure solution are included in our operating expenses.

Tony Scott: Now, to be clear, the cost of providing the services for this critical infrastructure solution are included in our operating expenses, but the expected revenue is not and will show up in later periods when the contract is extended. The timing of this contract extension was and remains affected by the operational administrative constraints associated with the US government shutdown, which limited agencies' ability to initiate and process contract actions during that period. The situation is further impacted by the events related to the war in Ukraine unfolding currently. This delay in funding reflects a broader trend affecting companies with US government contracts, particularly those operating within the defense sector. While we're disappointed by this delay, we do believe that we will be able to recognize this revenue during the H1 of 2026 once procurement activity normalizes.

Speaker #3: But the expected revenue is not, and will show up in later periods when the contract is extended. The timing of this contract extension was and remains affected by the operational administrative constraints associated with the US government shutdown, which limited agencies' ability to initiate and process contract actions during that period.

Speaker #3: And the situation is further impacted by the events related to the war in Iran unfolding currently. This delay in funding reflects a broader trend affecting companies with US government contracts, particularly those operating within the defense sector.

Speaker #3: And while we're disappointed by this delay, we do believe that we will be able to recognize this revenue during the first half of 2026 once procurement activity normalizes.

Tony Scott: We are continuing to support and enhance the solution that we have provided, and we look for further expansion of this solution in other regions in 2026. We're proud of our partnership with the U.S. Department of Defense and the critical role we play in protecting national security through our advanced cyber capabilities. We continue to view the critical infrastructure solution that we have rolled out with the Department of Defense as one of the key drivers of future growth, especially as cyber threats become more frequent and more sophisticated. To convert this opportunity into future growth, we've recently taken targeted steps to enhance our sales efforts and go-to-market strategy. I'll discuss these initiatives in more detail shortly, but they are specifically designed to expand our customer base across the private sector as well as federal, state, and local government markets. Turning now to some Q4 developments.

Speaker #3: And we are continuing to support and enhance the solution that we have provided, and we look for further expansion of this solution in other regions in 2026.

Speaker #3: We're proud of our partnership with the US Department of War and the critical role we play in protecting national security through our advanced cyber capabilities.

Speaker #3: We continue to view the critical infrastructure solution that we have rolled out with the Department of War as one of the key drivers of future growth, especially as cyber threats become more frequent and more sophisticated.

Speaker #3: To convert this opportunity into future growth, we've recently taken targeted steps to enhance our sales efforts and go-to-market strategy. And I'll discuss these initiatives in more detail shortly.

Speaker #3: But they are specifically designed to expand our customer base across the private sector as well as federal, state, and local government markets. Turning now to some fourth quarter developments, during the quarter, we announced the launch of our shield cloud offering on the AWS marketplace.

Tony Scott: During the quarter, we announced the launch of our Shield Cloud offering on the AWS Marketplace, expanding the opportunity for customers to access our Shield technology. Additionally, we've launched our Shield Cloud offering on Microsoft's Azure platform, and it's now live. With availability across both leading cloud marketplaces, we've meaningfully expanded our sales reach, which will help enhance our customer pipeline and drive future revenue growth. On top of this customer access expansion effort, we've also continued to strategically invest in R&D to help provide enhanced offerings to our customers. This is evident by the recent launch of Shield Stratus, a cloud-native packet filtering solution that inspects every connection and blocks known threats immediately without the complexity or rearchitecture required by traditional firewalls. Shield Stratus integrates seamlessly with AWS Gateway Load Balancer and is a great addition to our Shield ecosystem.

Speaker #3: Expanding the opportunity for customers to access our shield technology. Additionally, we've launched our shield cloud offering on Microsoft's Azure platform and its now live.

Speaker #3: With availability across both leading cloud marketplaces, we've meaningfully expanded our sales reach which will help enhance our customer pipeline and drive future revenue growth.

Speaker #3: On top of this customer access expansion effort, we've also continued to strategically invest in R&D to help provide enhanced offerings to our customers. This is evident by the recent launch of shield stratus a cloud-native packet filtering solution that inspects every connection and blocks known threats immediately without the complexity or re-architecture required by traditional firewalls.

Speaker #3: Shield stratus integrates gateway load balancer and is a great addition to our shield ecosystem. Now onto some of the more recent developments during the first few months of 2026.

Tony Scott: Now on to some of the more recent developments during the first few months of 2026. As you may recall, we began a partnership with PortNexus in 2025, and who chose to embed our Shield Endpoint solution into their MyFlare solution that helps provide enhanced security for education and law enforcement customer endpoints. In February, we expanded our partnership with PortNexus by launching the P.O.S.S.E. Program that utilizes our Shield on-premise technology to help protect law enforcement from cyber threats. The program achieved high levels of adoption during the initial pilot, and in the pilot program, Intrusion Shield technology identified and stopped dozens of active threats. The program is now scaling across Texas, Missouri, Oklahoma, and Iowa through our partnership with PortNexus. This partnership provides distribution access to hundreds of sheriff's departments, schools, and government facilities.

Speaker #3: As you may recall, we began a partnership with Port Nexus in 2025. And who chose to embed our shield endpoint solution into their MyFlare solution that helps provide enhanced security for education and law enforcement customer endpoints.

Speaker #3: In February, we expanded our partnership with Port Nexus by launching the POSSE program that utilizes our Shield on-premise technology to help protect law enforcement from cyber threats.

Speaker #3: The program achieved high levels of adoption during the initial pilot. And in the pilot program, intrusion shield technology identified and stopped dozens of active threats.

Speaker #3: The program is now scaling across Texas, Missouri, Oklahoma, and Iowa through our partnership with Port Nexus. And this partnership provides distribution access to hundreds of sheriff's departments, schools, and government facilities.

Tony Scott: It's an exciting development, and we look forward to working closely with PortNexus to help expand this program and increase the adoption of our technology. We also recently took steps to expand our business development efforts with the hiring of Valencia Reeves as our Public Sector Vice President of Sales and Patrick Dugan as our Director of Channel Sales and Partnerships. These two additions to our team will help strengthen our US business development efforts across the government sector and our channel partners. Now, briefly onto our financials for the quarter and the year. Total revenues for 2025 were $7.1 million, up 23% year over year.

Speaker #3: It's an exciting development, and we look forward to working closely with Port Nexus to help expand this program and increase the adoption of our technology.

Speaker #3: We also recently took steps to expand our business development efforts with the hiring of Valencia Reeves as our Public Sector Vice President of Sales.

Speaker #3: And Patrick Dugan as our Director of Channel Sales and Partnerships. These two additions to our team will help strengthen our U.S. business development efforts across the government sector and our channel partners.

Speaker #3: Now, briefly, onto our financials for the quarter and the year. Total revenues for 2025 were $7.1 million, up 23% year over year. This top-line growth was largely driven by the contract expansion with the U.S. Department of War that I touched on earlier.

Tony Scott: This top-line growth was largely driven by the contract expansion with the U.S. Department of Defense that I touched on earlier. Q4 revenue was $1.5 million, a decrease of 25% sequentially, which was the result of the delay in the incremental funding of the Department of Defense contract that I previously referred to. Our operating expenses also saw a slight increase during both the quarter and the year. This increase in our expense reflects deliberate strategic investments to strengthen our business and position us to achieve our goal of creating sustainable growth and long-term profitability, as well as the costs associated with the critical infrastructure deployment and operation I mentioned before. We've made meaningful progress against our goals, and we believe we're on track to break even operations.

Speaker #3: Fourth quarter revenue was $1.5 million, a decrease of 25% sequentially, which was the result of the delay in the incremental funding of the Department of War contract that I previously referred to.

Speaker #3: Our operating expenses also saw a slight increase during both the quarter and the year. This increase in our expense reflects deliberate strategic investments to strengthen our business and position us to achieve our goal of creating sustainable growth and long-term profitability.

Speaker #3: As well as the costs associated with the critical infrastructure deployment and operation I mentioned before. We've made meaningful progress against our goals, and we believe we're on track to break-even operations.

Tony Scott: Finally, before I turn the call over to Kim, I'd like to wrap up by addressing some of the recent AI trends that we're seeing in the cybersecurity space. As I'm sure many of you are aware, the recent emergence of Claude Code Security has caused a bit of a shakeup in the cybersecurity space, as some fear this tool will change the industry by eliminating defects in software. However, I do not view this development as a threat to cybersecurity companies such as Intrusion, but more as a promising tailwind for the industry. While improved code quality is more than welcome, it's only one aspect of the landscape of cybersecurity vulnerabilities. In fact, the rapid adoption of AI has materially increased cybersecurity risk as it has significantly reduced the cost, the technical expertise, and the time required to develop and execute highly sophisticated and scalable attacks.

Speaker #3: Finally, before I turn the call over to Kim, I'd like to wrap up by addressing some of the recent AI trends that we're seeing in the cybersecurity space.

Speaker #3: As I'm sure many of you are aware, the recent emergence of Claude Code Security has caused a bit of a shakeup in the cybersecurity space.

Speaker #3: As some fear this tool will change the industry, by eliminating defects in software. However, I do not view this development as a threat to cybersecurity companies such as intrusion.

Speaker #3: But more as a promising tailwind for the industry. While improved code quality is more than welcome, it's only one aspect of the landscape of cybersecurity vulnerabilities.

Speaker #3: And, in fact, the rapid adoption of AI has materially increased cybersecurity risk, as it has significantly reduced the cost, the technical expertise, and the time required to develop and execute highly sophisticated and scalable attacks.

Tony Scott: As a result, this is only going to increase the need for cybersecurity solutions, such as the ones that we provide to our customers that help catch these malicious actors before they can cause harm. Now, with that, I'd like to turn the call over to Kim for a more detailed review of our Q4 and full year financial results. Kim?

Speaker #3: As a result, this is only going to increase the need for cybersecurity solutions, such as the ones that we provide to our customers. That help catch these malicious actors before they can cause harm.

Speaker #3: Now, with that, I'd like to turn the call over to Kim for a more detailed review of our fourth quarter and full-year financial results.

Speaker #3: Kim? Thanks, Tony, and good afternoon, everyone. Fourth quarter results totaled $1.5 million in revenue, a decrease of 25% compared to the prior quarter and 12% when compared to the prior year period, as noted earlier on the call.

Kimberly Pinson: Thanks, Tony, and good afternoon, everyone. Q4 results totaled $1.5 million in revenue, a decrease of 25% compared to the prior quarter, and 12% when compared to the prior year period, as noted earlier on the call. This was due to the delayed incremental funding of a major US government contract. The timing of this award was affected by funding and procurement constraints associated with the US government shutdown and continuing resolution, which affected agencies' ability to approve and initiate new contract actions during the period. We believe the delay in this contract award is primarily timing related and anticipate that a substantial portion of the delayed revenue associated with this contract will be recognized in future periods.

Speaker #3: This was due to the delayed incremental funding of a major U.S. government contract. The timing of this award was affected by funding and procurement constraints associated with the U.S. government shutdown and continuing resolution, which affected agencies' ability to approve and initiate new contract actions during the period.

Speaker #3: We believe the delay in this contract award is primarily timing related and anticipate that a substantial portion of the delayed revenue associated with this contract will be recognized in future periods.

Kimberly Pinson: Consulting revenues totaled $1.1 million in Q4 compared to $1.5 million in the prior quarter and $1.3 million in the prior-year quarter. Shield revenues totaled $0.4 million in Q4 compared to $0.5 million in the prior quarter and $0.3 million in Q4 of 2024. We anticipate that the sale of our OT Defender solution in other departments of the US government, as well as commercially, will contribute to future growth. Additionally, during 2025, we partnered with PortNexus to integrate our Shield technology into its MyFlare Alert school safety solution. Although sales to PortNexus did not materially impact 2025 revenues, the expanded pipeline for this offering is expected to support future Shield revenue growth. Q4 gross profit margin was 74%, which was slightly down from the prior-year period.

Speaker #3: Consulting revenues totaled $1.1 million in the fourth quarter compared to $1.5 million in the prior quarter and $1.3 million in the prior year quarter.

Speaker #3: Shield revenues totaled $0.4 million in the fourth quarter compared to $0.5 million in the prior quarter and $0.3 million in the fourth quarter of 2024.

Speaker #3: We anticipate that the sale of our OT Defender solution to other departments of the US government, as well as commercially, will contribute to future growth.

Speaker #3: Additionally, during 2025, we partnered with Port Nexus to integrate our Shield technology into its MyFlare alerts school safety solution. Although sales to Port Nexus did not materially impact 2025 revenues, the expanded pipeline for this offering is expected to support future Shield revenue growth.

Speaker #3: Fourth quarter gross profit margin was 74%, which was slightly down from the prior year period. For the full year, gross profit margin was 76%, down approximately 93 basis points versus 2024.

Kimberly Pinson: For the full year, gross profit margin was 76%, down approximately 93 basis points versus 2024. Operating expenses in the Q4 of 2025 totaled $4 million, an increase of $0.3 million sequentially and $0.8 million year over year. The Q4 increase, both sequentially and compared to prior year, was primarily driven by higher sales and marketing expenses, reflecting increased participation in trade shows, and expanded brand awareness and product marketing programs. For the full year, operating expenses totaled $14.5 million, an increase of $1.7 million compared to 2024. In addition to the increased sales and marketing expense, the full year increase primarily related to one-time savings realized in 2024 from the negotiation or cancellation of existing contracts, which contributed $0.5 million in savings in 2024.

Speaker #3: Operating expenses in the fourth quarter of 2025 totaled $4 million, an increase of $0.3 million sequentially and $0.8 million year over year. The fourth quarter increased both sequentially and compared to the prior year, primarily driven by higher sales and marketing expenses reflecting increased participation in trade shows and expanded brand awareness and product marketing programs.

Speaker #3: For the full year, operating expenses totaled $14.5 million, an increase of $1.7 million compared to 2024. In addition to the increased sales and marketing expense, the full-year increase was primarily related to one-time savings realized in 2024 from the negotiation or cancellation of existing contracts, which contributed $0.5 million in savings in 2024.

Kimberly Pinson: Increased share-based compensation of $0.8 million from equity grants made in Q1 2025, and cost of living and merit increases of $0.3 million. Net loss for Q4 2025 was $2.8 million or $0.14 per share, compared to the net loss of $2 million for Q4 2024. The increased fourth quarter net loss is the result of the reduction in revenues resulting from the delay in the incremental funding of government contract and increased operating expense. Net loss for the full year was $9.1 million or $0.46 per share, a $1.3 million increase from the prior year.

Speaker #3: Increased share-based compensation of 0.8 million from equity grants made in the first quarter of 2025, and cost of living and merit increases of 0.3 million.

Speaker #3: Net loss for the fourth quarter of 2025 was $2.8 million, or $0.14 per share, compared to the net loss of $2 million for the fourth quarter of 2024.

Speaker #3: The increased fourth quarter net loss is the result of the reduction in revenues resulting from the delay in the incremental funding of government contract and increased operating expense.

Speaker #3: Net loss for the full year was $9.1 million, or $0.46 per share, a $1.3 million increase from the prior year. Turning to the balance sheet from a liquidity perspective, on December 31, 2025, we had cash and cash equivalents of $3.6 million.

Kimberly Pinson: Turning to the balance sheet from a liquidity perspective, on December 31, 2025, we had cash and cash equivalents of $3.6 million. Looking ahead, we plan to seek a small debt financing in the near term to help further support our growth initiatives. We have already begun to have some initial discussions, and we'll provide an additional update on the debt financing during our Q1 earnings call. With that, I'd like to turn the call back over to Tony for a few closing comments. Tony?

Speaker #3: Looking ahead, we plan to seek a small debt financing in the near term to help further support our growth initiatives. We have already begun to have some initial discussions and will provide an additional update on the debt financing during our first quarter earnings call.

Speaker #3: With that, I'd like to turn the call back over to Tony for a few closing comments. Tony?

Tony Scott: Thank you, Kim. 2025 was a year of meaningful progress for Intrusion from a product development standpoint and was marked by several key improvements, including new products. While this progress was encouraging, we're not satisfied, and we realize that we have some significant work ahead of us. As we look to the remainder of 2026, we will be doubling down on our sales efforts to expand our customer base and to further improve our top line growth. We're confident that we have both the right people and the products in place that will help us achieve our goal of creating sustainable growth and long-term profitability. Before I wrap up, I want to extend my gratitude to our employees. The progress we've made this past year is a direct reflection of their dedication and hard work.

Speaker #4: Thank you, Kim. 2025 was a year of meaningful progress for Intrusion from a product development standpoint, and it was marked by several key improvements, including new products. While this progress was encouraging, we're not satisfied.

Speaker #4: And we realize that we have some significant work ahead of us. As we look to the remainder of '26, we will be doubling down on our sales efforts to expand our customer base and to further improve our top-line growth.

Speaker #4: We're confident that we have both the right people and the products in place that will help us achieve our goal of creating sustainable growth and long-term profitability.

Speaker #4: And before I wrap up, I want to extend my gratitude to our employees. The progress we've made this past year is a direct reflection of their dedication and hard work. And to our shareholders, we deeply appreciate your patience and steadfast support throughout this journey.

Tony Scott: To our shareholders, we deeply appreciate your patience and steadfast support throughout this journey. With that, I'll now turn the call over to the operator for Q&A.

Speaker #4: And with that, I'll now turn the call over to the operator for Q&A.

Operator: 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 one on your phone. Please hold while we poll for questions. Your first question is coming from Scott Buck from H.C. Wainwright & Co. Your line is live.

Speaker #5: 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.

Speaker #5: We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. And once again, if you have any questions or comments, please press star one on your phone.

Speaker #5: Please hold while I pull for questions. Your first question is coming from Scott Buck from HC Wainwright, your line is live.

Scott Buck: Hi. Good afternoon, guys. Thanks for the time. Tony, I'm curious, can you provide a little more granularity on the unit economics of the POSSE program? You know, like what is the average contract value for a typical sheriff's department deployment? And what do those sales cycles look like with your partnership with PortNexus?

Speaker #6: Hi, good afternoon, guys. Thanks for the time. Tony, I'm curious, can you provide a little more granularity on the unit economics of the POSSE program?

Speaker #6: What is the average contract value for a typical sheriff's department deployment? And what do those sales cycles look like with your partnership with Port Nexus?

Tony Scott: Sure. Well, the device that they select will depend a lot on the network bandwidth that they need at the sheriff's department. Those could range from a few thousand dollars up to, you know, tens of thousands of dollars, depending on the size and bandwidth requirements of the particular sheriff. In the case of the pilots, we use some of our lower-end appliances, so it's a few thousand dollars in terms of the units pricing on those.

Speaker #4: Sure. Well, the device that they select will depend a lot on the network bandwidth that they need at the sheriff's department. So those could range from a few thousand dollars up to tens of thousands of dollars, depending on the size and bandwidth requirements of the particular sheriff.

Speaker #4: In the case of the pilots, we use some of our lower-end appliances. So it's a few thousand dollars in terms of the unit. Pricing on those.

Tony Scott: What I'm encouraged by is as we've experienced everywhere else, you know, once we show the network traffic that's getting through the traditional firewalls and other technologies they have in place and also show the outbound traffic that should be blocked that's not currently being blocked, it makes the sale pretty quickly. We're seeing a high adoption rate, and we're gonna expand into these other states as I mentioned on the call. The way it works is we loan them a unit, it goes in for a week to 10 days. We do a report and show them the traffic that we see and would have blocked if we'd been in place, and they love it. We're doubling down on that.

Speaker #4: But what I'm encouraged by is when we as we've experienced everywhere else, once we show the network traffic that's getting through the traditional firewalls and other technologies, they have in place, and also show the outbound traffic that should be blocked that's not currently being blocked, it makes the sale pretty quickly.

Speaker #4: So we're seeing a high adoption rate, and we're going to expand into these other states, as I mentioned on the call. And the way it works is, we loan them a unit that goes in for a week to 10 days.

Speaker #4: We do a report and show them the traffic that we see, and would have blocked if we would—if we'd been in place.

Speaker #4: And they love it. So we're doubling down on that. We're increasing the number of POC units and we'll see where it takes us. So that's kind of the way it works.

Tony Scott: We're increasing the number of POC units and we'll see where it takes us. That's kind of the way it works.

Scott Buck: That's very helpful. Then I wanted to clarify something in your prepared remarks. Did you say that had you not had the delay from the government contract during the quarter that we would have seen sequential revenue growth from Q3?

Speaker #6: That's very helpful. And then I wanted to clarify something in your prepared remarks. Did you say that, had you not had the delay from the government contract during the quarter, we would have seen sequential revenue growth from the third quarter?

Tony Scott: Yes. That is correct.

Speaker #4: Yes. Yes. That is correct.

Scott Buck: Okay, perfect.

Speaker #6: Okay. Perfect.

Tony Scott: That is correct.

Scott Buck: Um, and then-

Tony Scott: Yeah, we were expecting to report, you know, growth both for the quarter and quarter on quarter, and year on year above and beyond what we reported on the year on year.

Speaker #4: That is correct. Yeah, yeah. We were expecting to report growth both for the quarter and quarter on quarter, and year on year—above and beyond what we reported on the year on year.

Tony Scott: Yeah, we were expecting to report, you know, growth both for the quarter and quarter on quarter, and year on year above and beyond what we reported on the year on year.

Scott Buck: Okay. Safe to assume that contract delay cost you at least half a million dollars in the quarter?

Speaker #6: Okay, so safe to assume that contract delay cost you at least half a million dollars in the quarter?

Tony Scott: Yes.

Scott Buck: Yeah. Perfect. Then, Kim, I wanted to ask about sales and marketing expense. I think it's the highest quarterly level of spend maybe ever. Is this the new run rate, or given some of the comments during the call, can we expect, you know, further investment in sales in 2026?

Speaker #4: Yes.

Speaker #6: Yeah. Perfect. And then, Kim, I wanted to ask about sales and marketing expense. I think it's the highest quarterly level of spend, maybe ever.

Speaker #6: Is this the new run rate, or given some of the comments during the call, could we expect further investment in sales in 2026?

Kimberly Pinson: We will continue to invest in sales and marketing. What we saw in Q1 approximates the run rate, but we will see some increases from here.

Speaker #7: We will continue to invest in sales and marketing. What we saw in the first quarter is approximates the run rate, but we will see some increases from here.

Scott Buck: Okay, perfect. That's all I had, guys.

Speaker #6: Okay, perfect. That's all I had, guys.

Tony Scott: I'd also.

Scott Buck: Appreciate the time. Thank you.

Tony Scott: I'd also add, Scott, we're looking for cost efficiencies elsewhere, so it's important for us now to improve that sales and marketing muscle, and we'll look for other efficiencies elsewhere, as we buttress up that capability.

Speaker #4: But I'd also I'd also Scott, I'd also add we're looking for cost efficiencies elsewhere. So it's important for us now to improve that sales and marketing muscle and we'll look for other efficiencies elsewhere as we buttress up that capability.

Scott Buck: Okay. We may not see as material an increase in total operating expense because some of those dollars will

Speaker #6: Okay. So we may not see as material an increase in total operating expense because some of those dollars will.

Tony Scott: Will be offset. I hope, yes.

Scott Buck: If they come from other buckets.

Speaker #4: Will be offset. I hope.

Speaker #6: Because they come from other buckets.

Tony Scott: Yes, exactly.

Speaker #4: Yes. Exactly.

Scott Buck: I appreciate it, guys. Thank you very much.

Speaker #6: Okay. I appreciate it, guys. Thank you very much.

Operator: Thank you. Your next question is coming from Edward M. Woo from Ascendiant Capital. Your line is live.

Operator: Thank you. Your next question is coming from Ed Woo from Ascendiant Capital. Your line is live.

Speaker #5: Thank you. Your next question is coming from Ed Wu from Ascendiant Capital. Your line is live.

Edward M. Woo: Yeah. Thank you for taking my question. Did I hear you right that you said for the, you know, delayed contract that some of your expenses has already flowed through the P&L already? Is that

Ed Woo: Yeah. Thank you for taking my question. Did I hear you right that you said for the, you know, delayed contract that some of your expenses has already flowed through the P&L already? Is that

Speaker #8: Yeah, thank you for taking my question. Did I hear you right that you said, for the delayed contracts, that some of your expenses have already flowed through the P&L already?

Tony Scott: That's correct. Yeah, we've taken all the expense associated with that. We just are not able to recognize the revenue at this point.

Speaker #4: That's correct. Yeah. We've taken all the expense associated with that. We just are not able to recognize the revenue at this point. So what that translates to I'm sorry?

Edward M. Woo: Okay.

Ed Woo: Okay.

Tony Scott: What that translates to.

Edward M. Woo: On a different topic.

Ed Woo: On a different topic.

Tony Scott: I'm sorry.

Edward M. Woo: All right.

Ed Woo: All right.

Speaker #8: All right.

Tony Scott: Yeah. What that means is.

Edward M. Woo: How did it-

Ed Woo: How did it-

Speaker #4: Yeah. What that means is, when the revenue does come, it'll show up in a subsequent quarter, but the expense will already have been recognized.

Tony Scott: When the revenue does come, it'll show up in a subsequent quarter, but the expense will already have been recognized.

Edward M. Woo: Okay. That will be 100% margin when it comes through?

Ed Woo: Okay. That will be 100% margin when it comes through?

Speaker #8: Okay. So that would be 100% margin when it comes through?

Tony Scott: Pretty nearly, yes.

Speaker #4: Pretty nearly. Yes.

Edward M. Woo: Okay. What about the sales cycle pipeline for commercial customers? Have you seen any delays, any lengthening of sales cycle? Any concerns that you're hearing from, you know, chief, you know, information officers out there?

Ed Woo: Okay. What about the sales cycle pipeline for commercial customers? Have you seen any delays, any lengthening of sales cycle? Any concerns that you're hearing from, you know, chief, you know, information officers out there?

Speaker #8: Okay. And then are you seeing any what about the sales cycle pipeline for commercial customers? Have you seen any delays, any lengthening of sales cycle, any concerns that you're hearing from chief information officers out there?

Tony Scott: Beyond the government sector, no real change. I think the one concern that we hear all the time is that the dwell time for threats is getting shorter and shorter and shorter, which means you have to react faster than ever, you know, once some suspicious activity is noted. I think that bodes well for Intrusion's technology because we don't rely on the presence of malware or other known signatures. We're heavily focused on reputation, which means that we can stop things in real time versus, you know, waiting for something bad to happen and then have to react to it and then remediate and so on.

Speaker #4: Beyond the government sector, no real change. I think the one concern that we hear all the time is that the dwell time for threats is getting shorter and shorter and shorter.

Speaker #4: Which means you have to react faster than ever once some suspicious activity is noted. And I think that bodes well for Intrusion's technology because we don't rely on the presence of malware or other known signatures.

Speaker #4: We're heavily focused on reputation, which means that we can stop things in real time versus waiting for something bad to happen, and then have to react to it and then remediate.

Tony Scott: We're currently having some discussions with MSSPs and so on, who are attracted to that kind of capability 'cause it helps get out in front of these attacks versus waiting for an attack to actually happen.

Speaker #4: And so on. So we're currently having some discussions with MSSPs and so on who are attracted to that kind of capability because it helps get out in front of these attacks versus waiting for an attack to actually happen.

Edward M. Woo: That sounds good. Well, thanks for answering my question, and I wish you good luck. Thank you.

Ed Woo: That sounds good. Well, thanks for answering my question, and I wish you good luck. Thank you.

Speaker #8: That sounds good. Well, thanks for answering my question. And I wish you good luck. Thank you.

Tony Scott: Thank you.

Speaker #4: Thank you.

Operator: Thank you. Your next question is coming from Howard Brouss from Wellington Shields. Your line is live.

Speaker #5: Thank you. Your next question is coming from Howard Browse from Wellington Shield. Your line is live.

Howard Brouss: Thank you. A couple of questions. Tony, critical infrastructure customer that you have, can you give us a general sense of what kind of customer it is? Is he happy with the work? Is this basically expandable to that particular customer?

Howard Brous: Thank you. A couple of questions. Tony, critical infrastructure customer that you have, can you give us a general sense of what kind of customer it is? Is he happy with the work? Is this basically expandable to that particular customer?

Speaker #9: Thank you. A couple of questions. Tony, critical infrastructure customer that you have, can you give us a general sense of what kind of customer it is and is he happy with the work?

Speaker #9: Is this basically expandable for that particular customer?

Tony Scott: Yeah. You know, this solution is protecting critical water infrastructure in the Asia Pacific region, and the customer's very happy with the solution. It's working as designed, and we continue to support it. I think there's tremendous opportunities for this to expand beyond the region where it is now. We're doing one island right now in Asia Pacific. As you know, there's a lot of islands that the Department of Defense has interest in that particular region. I think the revenue opportunity that comes from this is, you know, multiplied by the number of islands that still need this kind of protection. That's not to mention the domestic facilities as well, which fall under Homeland Security jurisdiction generally.

Speaker #4: Yeah, so this solution is protecting critical water infrastructure in the Asia-Pac region, and the customer is very happy with the solution. It's working as designed, and we continue to support it.

Speaker #4: And I think there's tremendous opportunities for this to expand beyond the region where it is now. We're doing one island right now in Asia-Pac.

Speaker #4: But as you know, there are a lot of islands that the Department of War has interest in, in that particular region. And so, I think the revenue opportunity that comes from this is multiplied by the number of islands that still need this kind of protection.

Speaker #4: And that's not to mention domestic facilities as well, which fall under Homeland Security jurisdiction, generally. And with our new sales capability that I mentioned on the call, we're targeting those places as well.

Tony Scott: With our new sales capability, that I mentioned on the call, we're targeting those places as well. We've got great customer reference, you know, from this initial deployment. We're pretty excited about the revenue opportunity in 2026 and going forward. There's a lot of this critical infrastructure around, whether it's water, telecom, or electrical grid kinds of things, and our solution is tailorable to each of those environments.

Speaker #4: And we've got great customer reference from this initial deployment. So we're pretty excited about the revenue opportunity and in 26 and going forward. There's a lot of this critical infrastructure around, whether it's water, telecom, or electrical grid kinds of things in our solution is tailorable to each of those environments.

Howard Brouss: Let me digress for a moment and talk about schools and children.

Howard Brous: Let me digress for a moment and talk about schools and children.

Speaker #9: So let me digress for a moment and talk about schools and children. You install this in a school, and my understanding is it's in every school room.

Tony Scott: Mm-hmm.

Howard Brouss: You install this in a school, and my understanding, it's in every school room, every classroom, and can be activated by a teacher if there's a potential event happening where somebody's coming into the school with a weapon. Is that a fair comment?

Howard Brous: You install this in a school, and my understanding, it's in every school room, every classroom, and can be activated by a teacher if there's a potential event happening where somebody's coming into the school with a weapon. Is that a fair comment?

Speaker #9: Every classroom—and can be activated by a teacher—if there's a potential event happening where somebody's coming into the school with a weapon. Is that a fair comment?

Tony Scott: Correct. Yeah. That's the PortNexus solution that we're partners with. Yes.

Speaker #4: Correct. Yeah, that's the Port Nexus solution that we're partners with. Yes.

Howard Brouss: Right. You've got thousands of school districts throughout the country. Why isn't everyone adopting this? It protects our children. There's nothing more important than that. How are you going about marketing this?

Howard Brous: Right. You've got thousands of school districts throughout the country. Why isn't everyone adopting this? It protects our children. There's nothing more important than that. How are you going about marketing this?

Speaker #9: Right. So you've got thousands of school districts throughout the country. Why isn't everyone adopting this? It protects our children—there's nothing more important than that.

Speaker #9: How are you going about marketing this?

Tony Scott: Well, with PortNexus, we're attending events where school administrators, you know, look for technology. We're also marketing, as we mentioned, to the sheriff's department, or whoever the local law enforcement agency is that's associated with a particular school district. It takes the combination of them to really adopt the solution. The good news is it's very inexpensive. I've mentioned to a couple people, it's the kind of thing that in many cases the local PTA could fund, even if the school couldn't afford to do it. But you're right. I think once you see the demo of this capability and the situational awareness that it brings to the law enforcement people within seconds of an event occurring, you know, it's why wouldn't we wanna have this kind of thing.

Speaker #4: Well, with Port Nexus, we're attending events. We're school administrators looking for technology. We're also marketing, as we mentioned, to the sheriff's department or whoever the local law enforcement agency is that's associated with a particular school district.

Speaker #4: Because it takes the combination of them to really adopt a solution. The good news is, it's very inexpensive. I've mentioned to a couple of people it's the kind of thing that, in many cases, the local PTA could fund even if the school couldn't afford to do it.

Speaker #4: But you’re right. I think once you see the demo of this capability and the situational awareness that it brings to law enforcement people within seconds of an event occurring, it’s a, 'Why wouldn’t we want to have this?'

Tony Scott: We're really looking forward to 2026 to expand this greatly across lots of markets in the US.

Speaker #4: Kind of thing. And so we're really looking forward to 2026, to expand this greatly across lots of markets in the US.

Tony Scott: We're really looking forward to 2026 to expand this greatly across lots of markets in the US.

Howard Brouss: Your reception so far has been?

Howard Brous: Your reception so far has been?

Speaker #9: And your reception so far has been?

Tony Scott: It's been outstanding, yeah. Again, you know, once you see it, you go, "Duh, you know, why would I ever wanna be without this kind of thing?" You know, parenthetically, I'll say it could apply to other public venues as well. It doesn't necessarily only get marketed to schools, but any place where people gather and there's a potential for, you know, disruptions, you know, whether it's, you know, active shooters or, you know, fire or any other kind of an event that might be disruptive, it's really important for law enforcement to get situational awareness as quickly as possible. This PortNexus solution allows for multiple perspectives to get that situational awareness, as well as alerting the authorities very quickly when an event happens.

Speaker #4: It's been outstanding. Yeah. Again, once you see it, you go, 'Duh.' Why would I ever want to be without this kind of thing? And, parenthetically, I'll say it could apply to other public venues as well.

Speaker #4: It doesn't necessarily only get marketed to schools, but any place where people gather and there's a potential for disruptions—whether it's active shooters, fire, or any other kind of event that might be disruptive. It's really important for law enforcement to get situational awareness as quickly as possible.

Speaker #4: And this Port Nexus solution allows for multiple perspectives to get that situational awareness, as well as alerting the authorities very quickly when an event happens.

Tony Scott: It shaves minutes off of that critical first few minutes when, you know, you have a potential to avert disaster. I don't know anybody who's ever seen it that doesn't think that's a good idea, so.

Speaker #4: It shaves minutes off of those critical first few minutes when you have the potential to avert disaster. And I don't know anybody who's ever seen it that doesn't think that's a good idea.

Howard Brouss: Anything to protect our children is a very good idea. Can you talk about?

Howard Brous: Anything to protect our children is a very good idea. Can you talk about?

Speaker #9: And I think to protect our children is a very good idea. Can you talk about—no doubt about it—what kind of cost is it per student, per classroom, per school?

Tony Scott: You got it.

Howard Brouss: No doubt about that. Talk about the kind of cost. Is it per student, per classroom, per school?

Howard Brous: No doubt about that. Talk about the kind of cost. Is it per student, per classroom, per school?

Tony Scott: It's per classroom. The PortNexus solution would go into the classroom in the case of a school, and attach to or become part of the smart whiteboard that's in the classroom.

Speaker #4: It's per classroom. The Port Nexus solution would go into the classroom in the case of a school, and attach to or become part of the smart whiteboard that's in the classroom.

Howard Brouss: Mm-hmm.

Howard Brous: Mm-hmm.

Tony Scott: School resource officers and teachers and anybody else that should be registered gets registered to that location. In the event of an incident, the panic button gets pushed, a text goes to all the pre-registered cell phones. It lights up the camera and the microphone, and the GPS signal, and all of that gets fed to the law enforcement authorities, along with video from the fixed cameras that usually are already installed in the school. When an event happens, the law enforcement authorities have great situational awareness and location information from multiple perspectives. It's invaluable. We license to PortNexus the network protection aspect of it.

Speaker #4: And then school resource officers and teachers, and anybody else that should be registered, gets registered to that location. And then, in the event of an incident, the panic button gets pushed.

Speaker #4: A text goes to all the pre-registered cell phones. It turns the cell phone on, lights up the camera and the microphone, and the GPS signal. All of that gets fed to the law enforcement authorities, along with video from the fixed cameras that are usually already installed in the school.

Speaker #4: So when an event happens, the law enforcement authorities have great situational awareness, and location information from multiple perspectives that's invaluable. And we license to Port Nexus the network protection aspect of it.

Speaker #4: So, the revenue we get comes from the number of classrooms and then the number of schools within the school district.

Tony Scott: The revenue we get comes from, you know, the number of classrooms and then the number of schools within the school district.

Howard Brouss: The margins on this are high margins?

Howard Brous: The margins on this are high margins?

Speaker #9: And the margins on this—are these high margins?

Tony Scott: Oh, for us, it's very high, yes. 'Cause we don't actually have to go do any install or anything. We just license our software. PortNexus team is responsible for the installs and first level support and so on. It's almost pure profit for us.

Speaker #4: Well, for us, it's very high. Yes. Because we don't actually have to go do any install or anything. We just license our software. Port Nexus team is responsible for the installs and first-level support and so on.

Speaker #4: So, it's almost pure profit for us.

Howard Brouss: This is a big deal. Anything to protect our children, that's a good thing.

Howard Brous: This is a big deal. Anything to protect our children, that's a good thing.

Speaker #9: This is a big deal. Anything to protect our children? That's a good thing. Tony, thank you. Good luck. Stay healthy.

Tony Scott: You got it.

Howard Brouss: Tony, thank you. Good luck. Stay safe.

Howard Brous: Tony, thank you. Good luck. Stay safe.

Tony Scott: You're welcome.

Speaker #4: You're welcome.

Howard Brouss: Thank you.

Howard Brous: Thank you.

Speaker #9: Thank you.

Operator: Thank you. Your next question comes from James Green. Your line is live.

Speaker #2: Thank you. Your next question comes from James Green. Your line is live.

James Green: Hi, Tony. My question concerns the potential emerging technologies and the ability for your technology to interface with those things. I'm specifically thinking about, you know, as we move forward into a day and an era where we have humanoid robots and we have autonomous cars, we have an eminent threat where if they're compromised, they can be, you know, an immediate danger. If someone compromises a-

[Analyst]: Hi, Tony. My question concerns the potential emerging technologies and the ability for your technology to interface with those things. I'm specifically thinking about, you know, as we move forward into a day and an era where we have humanoid robots and we have autonomous cars, we have an eminent threat where if they're compromised, they can be, you know, an immediate danger. If someone compromises a-

Speaker #10: Hi, Tony. My question concerns the potential emerging technologies and the ability for your technology to interface with those things. And I'm specifically thinking about, as we move forward into a day and an era where we have humanoid robots and we have autonomous cars, we have a threat where, if they're compromised, they can be an immediate danger.

Speaker #10: If someone compromises a.

Tony Scott: Hello. I think we may have lost you, or I couldn't hear the rest of your question. Hello? Can anyone hear me?

Speaker #4: Hello. I think we may have lost you. I couldn't hear the rest of your question. Hello? Can anyone hear me?

Operator: Apologies. James Green's line has disconnected.

Speaker #2: Apologies. James Green's line has disconnected.

Tony Scott: Oh, okay. Well, I think the question was. I'll try to answer as best I can. Yes, there's more and more software, more and more autonomous things, whether it's robots or everything in your house, you know, the emergence of AI and everything. I think that widens the aperture for cybersecurity risk significantly. Our fundamental belief is that if you're not monitoring the network that all of these things need to operate on, if you're not monitoring it in real time, packet by packet in multiple places in your network, you're likely to miss important things that would allow you to avert a disaster. That's what Intrusion Shield does. We look at every packet in near real-time, and we make a decision about whether that packet is likely good, likely bad, or unknown in some cases, and we make a decision.

Speaker #4: Oh, okay. Well, I think the question was—I'll try to answer as best I can. Yes, there's more and more software, more and more autonomous things, whether it's robots or everything in your house, the emergence of AI and everything.

Speaker #4: I think it widens the aperture for cybersecurity risks significantly. And our fundamental belief is that if you're not monitoring the network that all of these things need to operate on—if you're not monitoring it in real time, packet by packet, in multiple places in your network—you're likely to miss important things that would allow you to avert a disaster.

Speaker #4: And that's what Intrusion Shield does. We look at every packet, in near real time, and we make a decision about whether that packet is likely good, likely bad, or unknown in some cases.

Speaker #4: And we make a decision. And I have used the analogy: it's like having continuous blood monitoring in your body. Most people get their blood drawn once a year when they go to a physical exam, but some bad condition might have existed for almost a year and you wouldn't know it until you get your blood drawn and get it tested.

Tony Scott: I have used the analogy; it's like having continuous blood monitoring in your body. Most people get their blood drawn, you know, once a year when they go to a physical exam, but some bad condition might have existed for, you know, almost a year, and you wouldn't know it until you get your blood drawn and get it tested. In our case, we're doing the equivalent of looking at every single drop of blood in the body all the time, every time it moves through the body, and that allows us to very quickly detect when there's something untoward going on. I think that type of protection is what's gonna be more and more and more important as things move forward, specifically with AI and more and more software in our lives.

Speaker #4: In our case, we're doing the equivalent of looking at every single drop of blood in the body all the time, every time it moves through the body.

Speaker #4: And that allows us to very quickly detect when there's something untoward going on. And so I think that type of protection is what's going to be more and more important as things move forward, specifically with AI and more and more software in our lives.

Tony Scott: The threat landscape just got a whole lot bigger and needs to be monitored and managed.

Speaker #4: The threat landscape just got a whole lot bigger. And it needs to be monitored and managed.

Operator: James Green, your line is connected and live.

Speaker #2: And James Green, your line is connected and live.

James Green: Hi, Tony. Sorry, I accidentally got the line disconnected, so I missed the beginning of what you said. Since I missed the beginning, my question was, based off those, you know, emerging technologies, et cetera, is the current form factor or technology that you all utilize, is it easily interfaced with those potential technologies? Or, you know, is there some minor alteration necessary to be able to utilize them in that?

[Analyst]: Hi, Tony. Sorry, I accidentally got the line disconnected, so I missed the beginning of what you said. Since I missed the beginning, my question was, based off those, you know, emerging technologies, et cetera, is the current form factor or technology that you all utilize, is it easily interfaced with those potential technologies? Or, you know, is there some minor alteration necessary to be able to utilize them in that?

Speaker #10: Hi, Tony. Sorry, I accidentally got the line disconnected, so I missed the beginning of what you said. But since I missed the beginning, my question was—based off those emerging technologies, etc.—is the current form factor or technology that you all utilize easily interfaced with those potential technologies, or is there some minor alteration necessary to be able to utilize them in that?

Tony Scott: The answer to that is we can attach to the network in any form that it occurs, whether it's wired or wireless or in the cloud or in a data center or in a home, for that matter. The important thing, as I was saying in my earlier answer, is, to be really safe, you need to be monitoring the network, each and every packet, all the time, and monitoring from multiple places in your network, to be assured that everything that is going on in the network is desirable and necessary even in some cases. Yes, we're very flexible in that regard, and we have put the R&D effort into making sure we can handle increasingly large bandwidth as that becomes a necessity.

Speaker #4: Yeah, yeah. So the answer to that is we can attach to the network in any form that it occurs, whether it's wired or wireless, or in the cloud, or in a data center, or in a home, for that matter.

Speaker #4: And the important thing is, as I was saying in my earlier answer, to be really safe, you need to be monitoring the network—each and every packet, all the time.

Speaker #4: And monitoring from multiple places in your network, to be assured that everything that is going on in the network is desirable and necessary—even in some cases.

Speaker #4: So yes, we're very flexible in that regard. And we have put the R&D effort into making sure we can handle increasingly large bandwidth as that becomes a necessity.

Tony Scott: I think we're well prepared for the future in that regard.

Speaker #4: So, I think we're well prepared for the future in that regard.

Tony Scott: I think we're well prepared for the future in that regard.

James Green: Okay. One other question, which is, since we have all these scenarios where people are gonna have local agentic things running on their own, you know, potentially private networks working off a cloud, you know, the speculation that, you know, companies might be trying to have all their things working within their own system. Is there a way in which the technology deals with the, you know, agentic element even internally?

[Analyst]: Okay. One other question, which is, since we have all these scenarios where people are gonna have local agentic things running on their own, you know, potentially private networks working off a cloud, you know, the speculation that, you know, companies might be trying to have all their things working within their own system. Is there a way in which the technology deals with the, you know, agentic element even internally?

Speaker #10: Okay, and one other question, which is: since we have all these scenarios where people are going to have local, agentic things running on their own—potentially private networks—walking back off a cloud, there's speculation that companies might be trying to have all their things working within their own system.

Speaker #10: Is there a way in which the technology deals with the agentic element, even internally?

Tony Scott: Yeah, I think to the degree that all of these agentic tools will use the network, that allows us to monitor what that activity is. I think you're gonna see in 2026, I've made this prediction a number of times, you're gonna see some pretty big accidents caused by unrestrained AI, where people let loose something that you know got out of control somehow. Whether it's you know privacy violation or whether it's a violation of releasing intellectual property in an unwarranted way. You know who knows what it could be. I think it's easily predictable that that's gonna happen in 2026.

Speaker #4: Yeah, I think to the degree that all of these agentic tools will use the network, that allows us to monitor what that activity is.

Speaker #4: And I think you're going to see, in 2026—I've made this prediction a number of times—you're going to see some pretty big accidents caused by unrestrained AI, where people let loose something that got out of control somehow.

Speaker #4: Whether it's a privacy violation, or whether it's a violation of releasing intellectual property in an unwarranted way—who knows what it could be.

Speaker #4: But I think it's easily predictable that that's going to happen, and 2026. And for us, the only safeguard against that kind of thing is continuous real-time network monitoring, so that the nanosecond something bad happens, you can stop it and shut off its activities.

Tony Scott: For us, the only safeguard against that kind of thing is continuous real-time network monitoring so that, you know, the nanosecond something bad happens, that you can stop it and shut off its activities. You know, we think we're in a good spot as all of these things come to fruition.

Speaker #4: So, we think we're in a good spot as all of these things come to fruition.

James Green: Like within a local network, if there's a agentic misbehavior, it can be controlled from being able to infect ones outside connected potentially?

[Analyst]: Like within a local network, if there's a agentic misbehavior, it can be controlled from being able to infect ones outside connected potentially?

Speaker #10: So, within a local network, if there's agentic misbehavior, it can be controlled from being able to infect one's outside connection, potentially?

Tony Scott: One of the characteristics of malware already today, even without AI, is what's known as a call home. An infected device inside the network makes a call home to a command and control server externally, and looks for instructions in some cases or just reports its presence in the network where it finds itself resident, and then often waits for instruction on what to do next. You know, launch a phishing campaign or launch some sort of other kind of attack. Intrusion technology is particularly good at stopping those call homes that would otherwise be, you know, very dangerous. Now, I'll say what we don't do is we don't go fix the device that had the problem.

Speaker #4: Yeah, yeah. One of the characteristics of malware already today, even without AI, is what's known as a call home. An infected device inside the network makes a call home to a command-and-control server externally and looks for instructions.

Speaker #4: In some cases, it just reports its presence in the network where it finds itself resident, and then often waits for instruction on what to do next.

Speaker #4: Launch a phishing campaign, or launch some sort of other kind of attack. And Intrusion technology is particularly good at stopping those call-homes that would otherwise be very dangerous.

Speaker #4: Now, I'll say what we don't do is, we don't go fix the device that had the problem. We just point you to it and say, 'This device over here has apparently got a problem.'

Tony Scott: We just point you to it and say, "You know, this device over here has apparently got a problem. It's generating call homes to undesirable place." Most managed service providers and managed service security providers and institutions already have the tools to do remediation. What they lack is the early detection of that activity, and that's where Intrusion comes in.

Speaker #4: It's generating call homes to undesirable places. But most managed service providers, managed security service providers, and institutions already have the tools to do remediation.

Speaker #4: What they lack is the early detection of that activity. And that's where Intrusion comes in.

James Green: Okay. All right. That's all I have questions about. Thank you.

[Analyst]: Okay. All right. That's all I have questions about. Thank you.

Speaker #10: Okay. All right. That's all I have questions about. Thank you.

Tony Scott: Thank you.

Speaker #4: Thank you.

Operator: Thank you. Once again, everyone, if you have any questions or comments, please press star then one on your phone. Your next question's coming from Jerry Weinowicz from Yanco Limited. Your line is live.

Speaker #2: Thank you. And once again, everyone, if you have any questions or comments, please press star, then 1 on your phone. Your next question is coming from Jerry Wainowitz from Yanko Limited.

Speaker #2: Your line is live.

Jerry Weinowicz: Hey, Tony. Last quarter, you opened your comments by saying you're pleased to report that during Q3, we continue our path towards achieving our goal of creating sustainable growth and long-term profitability. Today, you opened by saying you're on the path to break-even operations. My question is, in what quarter do you expect to have those break-even operations?

Speaker #11: Last quarter, you opened your comments by saying you're pleased to report that during the third quarter, we continue our path towards achieving our goal of creating sustainable growth and long-term profitability.

Speaker #11: Today, you opened by saying you're on the path to breaking even on operations. My question is, in what quarter do you expect to have those breakeven operations?

Tony Scott: Well, can you tell me when we're gonna have another government shutdown?

Speaker #4: Well, can you tell me when we're going to have another government shutdown, or?

Jerry Weinowicz: Assuming no government

Tony Scott: -CR?

Speaker #11: Right. Assuming no government.

Jerry Weinowicz: Assuming no government shutdown.

Speaker #4: CR.

Speaker #11: Assuming no government shutdown and no CR, what quarter would you expect that breakeven operations?

Tony Scott: Yeah.

Jerry Weinowicz: No CR.

Tony Scott: Yeah.

Jerry Weinowicz: No CR.

Tony Scott: Yeah.

Jerry Weinowicz: What quarter would you expect to have break-even operations?

Tony Scott: Well, it depends on new contracts that we sign. As I mentioned, we think this critical infrastructure solution's got pretty big legs. Our first contract for that was a $3 million roughly annual contract, and it wouldn't take too many more of those to get us to that goal. It's all dependent on timing in 2026 of when we would get those. But we think we're in good position to land, you know, more of those in 2026 than we did in 2025. Whether it's two or three or whatever.

Speaker #4: I would—well, it depends on new contracts that we sign. As I mentioned, we think this critical infrastructure solution's got pretty big legs. Our first contract for that was a roughly $3 million annual contract, and it wouldn't take too many more of those to get us to that goal.

Speaker #4: So, it's all dependent on timing in 2026 of when we would get those, but we think we're in a good position to land more of those in 2026 than we did in 2025.

Speaker #4: And whether it’s two, or three, or whatever.

Jerry Weinowicz: Would you be extremely disappointed if you weren't breaking even in Q3 of this year?

Speaker #11: Would you be extremely disappointed if you weren't breakeven in the third quarter of this year?

Tony Scott: Yes is the answer. I was disappointed that we weren't breaking even right now, to be honest with you. We thought we were on a path to get there more quickly than we have been, and that's life. There's probably some mistakes that we made, in retrospect, you know, would do differently. You know, I still think we're on the right path, and I'm pretty optimistic that 2026 is our year.

Speaker #4: Yes, is the answer. I was disappointed that we weren't breakeven right now, to be honest with you. We thought we were on a path to get there more quickly than we have been.

Speaker #4: And that’s life. And there’s probably some mistakes that we made that we, in retrospect, would do differently. But I think—I still think—we’re on the right path, and I’m pretty optimistic that 2026 is our year.

Jerry Weinowicz: All right. By Q3, we should expect to see that as shareholders.

Speaker #11: All right. So by the third quarter, we should expect to see that as shareholders?

Tony Scott: I would hope so, yes. I'm a shareholder, so.

Speaker #4: I would hope so, yes. And I'm a shareholder, so.

Jerry Weinowicz: You have skin in the game, so I appreciate it.

Speaker #11: You have to get in the game, so I appreciate it.

Tony Scott: Yeah.

Speaker #4: Yeah.

Operator: Thank you. At this time, there are no other questions in the queue. I'll turn the call back over to our host, Mr. Tony Scott, for any closing remarks.

Speaker #2: Thank you. At this time, there are no other questions in the queue. I'll turn the call back over to our host, Mr. Tony Scott, for any closing remarks.

Tony Scott: Well, as I said before, I just wanna thank everybody for your interest in Intrusion. As I said at the beginning, it was a year that was unexpected in many respects. I look forward to the progress that we can make in 2026 with a little more stability and a little more predictability coming our way. We've made, I think, all the right investments in our tech. We've begun the strategic investments in our sales and marketing capability that frankly we've lacked over the last couple of years. If I had to look back, I probably was a little too slow in building up that muscle.

Speaker #4: Well, as I said before, I just want to thank everybody for your interest in Intrusion. As I said at the beginning, it was a year that was unexpected in many respects.

Speaker #4: And I look forward to the progress that we can make in 2026 with a little more stability and a little more predictability coming, all the right investments in our tech.

Speaker #4: We've begun the strategic investments in our sales and marketing capability that, frankly, we've lacked over the last couple of years. If I had to look back, I probably was a little too slow in building up that muscle.

Tony Scott: I'm very pleased with the team that we have now, and they're showing remarkable ability to get us into places that and talk to people that we hadn't been talking to over the last couple of years. That gives me hope. These are experienced, you know, sales and marketing people, and it's just a pleasure to work with them and see the progress every single day. I'm appreciative of everyone's patience. I know it's been a long, grueling road, but I remain optimistic and excited about what we can do together in 2026. Appreciate everybody's time today, and I look forward to speaking with you at the next earnings call or maybe some announcements even before then. Thanks.

Speaker #4: But I'm very pleased with the team that we have now, and they're showing remarkable ability to get us into places and talk to people that we hadn't been talking to over the last couple of years.

Speaker #4: So that gives me hope. These are experienced sales and marketing people, and it's just a pleasure to work with them and see the progress.

Operator: Thank you. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

Q4 2025 Intrusion Inc Earnings Call

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