Intrusion Inc.

Welcome to Intrusion Incorporated's first quarter 2022 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 your questions at the end of today's prepared comments. Please note that this conference 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. Now I'd like to turn the call over to Mr. Sam Cohen with Alpha IR Investor Relations. Please go ahead, Sarah.

Thank you and welcome. Joining me today are Tony Scott, Chief Executive Officer, and Franklin Byrd, Chief Financial Officer. The call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to Tony, I'd like to remind everyone that statements made during this conference call relating to the company's expected future performance, future business prospects, or 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 specific risk factors that could cause our actual results to differ materially from the projections described in today's conference call. Any forward-looking statements that we make on this call are based upon information that we believe as of today, and we undertake no obligation to update these statements. as a result of new information or future events. In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. During the call, we may use non-GAAP measures if we believe it is useful to investors or we believe it will help investors better understand our performance or business trends. With that, let me turn the call over to Tony for a few opening remarks.

Thank you, Sam. Good afternoon, and thank you all for joining us today. As you will recall from our previous calls, I outlined several operational and strategic initiatives we have undertaken that are critical to the long-term success of Intrusion. Those initiatives included expanding and strengthening our product offerings, realigning our sales and marketing resources, as well as focusing on the channel-enabled sales model and strengthening our strategic partnerships and finally improving our financial discipline, including making sure we have sufficient operating capital to support our research and development, marketing, and operating needs for FY22 and beyond. And by executing on these initiatives, we believe that we can and will create a bright future for Intrusion, its customers, and its shareholders. I want to take this opportunity to provide an update on each of those initiatives, starting with our products. We are on schedule with our plan to unveil new, innovative Intrusion Shield branded products that meet the ever-changing cybersecurity challenges that the world faces. During our last call, we talked a bit about the current market for the Intrusion Shield appliance. We spent much of the last quarter making product improvements including performance enhancements and adding several customer requested features and capabilities. For Shield Cloud, our product development efforts remain on track. And I'm pleased to announce that the cloud-based Shield product will be available for demo in the next few weeks. And full general availability release of the product remains on schedule for the second half of 2022. I also briefly mentioned a second new product, Intrusion Shield Endpoint. Again, our product development efforts are on track, and like Intrusion Shield Cloud, we expect to have customer demo capabilities in a few weeks with GA in the second half of the year as well. This product will support Windows, iOS, and Android clients upon release. I've been personally using early beta versions of this product, and I'm excited about its potential. Finally, I also mentioned a high availability, high throughput version of the Shield appliance. Development on this product is also proceeding on course, especially as it relates to the planned software improvements. But I do have some concerns as it relates to hardware supply chain issues. We are seeing continued chip shortages and longer lead times across the industry and many are predicting that this will continue for some time to come and may even become worse in the short run. I expect to know more about the full impact of this, if any, in the next few weeks. The release of these new products in the second half of the year will pave the way for Intrusion Shield to become our main source of revenue growth in the future. Now, turning to sales and marketing, As we have communicated, we are in the middle of a significant transition period for intrusion. Toward the end of last year, we took measures to realign our sales and marketing resources. We've hired a new channel director and made needed improvements to our Salesforce operations. We continue to enhance and improve our channel support, training, and enablement processes. As promised, we are clarifying our value proposition and have energized our channel partners with a renewed focus on making sure we can support their efforts as a force multiplier for our sales efforts. These actions are leading to more meaningful and fruitful customer discussions, POCs, and pipeline development. And we're already starting to see the results of these efforts with several new deals now being closed in Q2 already double what we did in Q1. and a significant increase in our qualified pipeline, which is three times greater than our ending Q1 pipeline. On the strategic partnerships front, our discussions have progressed with three major technology partners, but I don't have anything definitive to announce and will not announce anything until these have matured into a formal agreement. I remain optimistic that we will have something to announce on this front in Q3. As we continue to pursue these strategic initiatives, we do so with a commitment to exercising financial discipline. The realignment actions taken today, combined with our commitment to financial prudence and good stewardship, are providing more stability and savings. We continue to further strengthen our balance sheet and overall financial flexibility to meet our operational and strategic needs. We closed on the financing announced last quarter for the sale of 10 million in unsecured notes to Street of Real Capital. Our operating needs are being met, and we are confident that the capital markets remain open to us for additional rounds of funding in the near term. These capital raises will allow us to invest in the development of SHIELD and ensure its competitiveness in the global market. We are seeing the results of these efforts in our operations and strategy as we execute along these promises and expect the financial results to follow. We move forward with the same commitment to investing in our business in a responsible manner that is commensurate with our prospects for profitable growth. To further aid these efforts, we've strengthened our team in the quarter by bringing on Ross Mandel, Chief Strategy Officer, and Christopher Dusich, Chief Operating Officer. These are both industry veterans who will help us execute on our repositioning and drive growth. Before wrapping up, let me also address our legacy consulting business. This piece of our business showed some stability last year during the continuing resolution and remains a healthy part of our revenues. As we've previously discussed with you, the continuing resolution, or CR, has a significant impact on the amount of federal funding that is granted for cybersecurity. And while the CR ended late in the first quarter of this year, creating a tailwind for this business segment, it occurred too late in the quarter to yield any meaningful revenue for the period. Because of this, our revenue in Q1 in this piece of the business was flat, compared to the prior quarter. That said, this is a net positive event, and with the CR behind us, we can expect to generate revenue growth moving forward. We've seen increased levels of growth in Q1 and expect that this part of our business will remain healthy and grow in Q2 and Q3. Finally, while historically we've been focused on the Department of Defense side of this business, We're now making investments and exploring opportunities on the civilian side of the federal government to market Intrusion Shield not only to our longstanding customer base, but to expand our efforts to include more traditional administrative and civilian government entities. In conclusion, as we continue to set the stage for Intrusion's bright future, the demand for our solutions remains strong. and the core tenets of our strategy remain intact, with long-term growth drivers in the markets we serve. The Russia-Ukraine conflict has demonstrated that cybersecurity attacks are a very real global threat, as Western governments prepare for a potential increase in malicious cyber activity, either from state-sponsored actors in Russia or cybercrime groups aligned with Russia. This global conflict has increased the focus and the intensity of advanced cybersecurity solutions. As cybersecurity concerns increasingly spill over into daily life, and with the increasing sophistication of security breaches, the need for our network solutions is more critical than ever before. The cybersecurity landscape continues to change rapidly, with zero-day attacks becoming more prevalent. Our products are tested and proven to provide a critical protection layer in organizations' zero trust architecture, combining over 25 years of IP reputational behavior with advanced real-time network monitoring to protect entities from these very real threats. Overall, we feel intrusion is only getting stronger in our ability to meet this growing demand. as we expand our sales channels and partnerships, launch new high-demand products, and improve our overall financial position. With that said, I'd now like to turn the call over to Franklin for a detailed review of our first quarter financials. Franklin?