Intrusion Inc.

Welcome to Intrusion's Inc. Second Quarter 2023 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 this conference has been recorded. And now your replay of the conference call will be available to 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. Please proceed.

Thank you, and welcome, everyone. Joining me today are Tony Scott, Chief Executive Officer, and Kimberly Pinson, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to Tony, I'd like to remind everyone of the statements made during this conference call relating to the company's expected future performance Future business prospects and 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 as our actual results 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 the 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, I'll now turn the call over to Tony for a few opening remarks.

Well, thank you, Josh. Good afternoon, and thank you all for joining us today. In today's call, I'll cover our high-level Q2 financial results and provide an update on our product offerings, our traction in the market, our pipeline. I'll talk about our recent S-1 filing, another highlight from Q2, as well as provide some early visibility into Q3 and beyond. When I joined Intrusion in November of 2021, I knew that we were facing an uphill battle for some period of time as we reoriented our products, dealt with several daunting legal battles, changed our sales and marketing approach, and raised capital and took on debt in order to survive as a company. I joined Intrusion because of my firm belief that Intrusion possessed unique intellectual property, had the right talent to continue to innovate and grow that valuable base, and that there was a need in the marketplace for the kind of solutions that Intrusion could offer. As I've said on previous calls, those fundamental beliefs remain true today and have strengthened as we march down the path towards our future. Clearly, it's not been easy, nor has everything gone as hoped or as planned. But I believe that this quarter should be viewed as an early indicator of the turnaround in Intrusion's business and a reflection of the hard work that we've been doing for more than a year. As you will hear from Kim later and in more detail, total revenue for the second quarter was $1.5 million, an increase of $0.2 million sequentially. And as we announced in our preliminary results press release last month, Shield revenues for the second quarter were 0.4 million. We anticipate that we will see additional growth in Intrusion Shield revenue during the second half of the year as a result of our existing sales efforts and our robust pipeline, which gives us confidence that our Shield family of products is and will continue to gain traction in the highly competitive cybersecurity marketplace. Having said that, I'd like to add a little more color and some context regarding sales, bookings, and the current pipeline for Shield. As you've heard me describe on previous calls, we sensed a pretty significant and growing level of interest in our Shield offerings early in the year, which, by the way, continues. but we were not seeing that interest translate into signed contracts. Many potential customers told us that they were highly interested in our solutions but were cautiously watching their budgets and holding back on much of their new cybersecurity and IT project spending in anticipation of potential business downturns and the threat of unplanned budget cuts. I know from my own experience as a CIO that the IT and cybersecurity context is not independent from the overall business environment. And I always wanted to have some padding in my budget if the CFO were to call and demand a 10% or 20% budget cut. And I sensed that our customers were acting in a similar way. Mid to late Q2, we began to sense a moderation of this cautious approach. And we were able to finally close on opportunities had been in the pipeline for more than two quarters. Continuing into Q3, we've been informed that we won on several relatively long-standing quotes and RFP responses, which date back to Q4 2022 and Q1 of 2023. We've now finalized some of these, and others are in the last stages of the formal contract process, which, when complete, will lead to increased SHIELD revenue in Q3 and beyond. I'm not going to provide specific guidance relative to revenue and the timing associated with these contracts because we do not have complete clarity in terms of the delivery schedules and operational timing of at least one large contract. And there are others that have closed or will close shortly that are planned to start small in Q3 and then are expected to grow in Q4 and beyond. Our consulting business experienced a 5% increase in Q2 quarter over quarter and is showing steady continued growth thus far in Q3. Of note, in late Q2, we signed a well-known customer in the travel and leisure industry, and revenue from that contract will show up in Q3 and beyond. As you hear almost every day in the news, cyber attacks on our nation and our critical infrastructure are continuing at an unprecedented pace. And rest assured, intrusion is engaging with our government and critical infrastructure institutions to provide the needed tools to identify, deflect, and eliminate these cyber threats. So we do expect to see increased revenue from these efforts as well. Kim will cover all of our financial highlights in a lot more detail in a few minutes, but I wanted to address a few more topics before we go to Kim. On Friday, August 11, 2023, we filed an initial S-1 registration with the SEC to sell up to $8.5 million in stock and warrants. The intended use of the proceeds from this public offering will be for general corporate purposes, potential acquisitions, and may include the reduction of up to $1 million of our outstanding debt. Coupled with the recent restructuring of our outstanding debt, Intusion will have the necessary financial resources to execute our business plans for the remainder of 2023 and the first half of 2024 at a minimum and longer as increases in revenue occur. Our product development efforts have continued even in the face of reduced levels of engineering resources. In particular, this month we will go to general availability on version 9.1 of our Shield software which has many improvements over prior versions, including enhancements to reporting, additional threat monitoring capabilities, improvements to our renderer software, and significant changes to Shield's management interface. We are also nearing completion of our integration of Shield technology into the PSM firewall for NetGate, and we will shortly introduce a cloud dashboard, which will allow customers to consolidate reporting across multiple Shield and PFS instances. Our previously announced partnerships with SEIC, NetGate, and others remain strong and are leading to new opportunities to showcase our technology and generate new business. One of our newer partners, First Advisory Health Services, has been including intrusion in their RFP responses and consulting proposals, one of which we've recently won. with multiple others in the queue for a decision. As many of you know, the healthcare sector has been particularly hard hit, and we believe that partnerships with leading cybersecurity organizations like First Advisory Health Services will provide great growth opportunities for intrusion. Finally, with some growing evidence in hand of traction in the marketplace for intrusion shield technology, we will once again explore more strategic technology partner relationships. We've heard over and over again that intrusion technology is unique, but the big technology players have routinely looked for evidence of customer adoption. We believe that in the next two quarters we can begin to show those proof points that the larger technology players have been looking for. With that said, I'd now like to turn the call over to Kim for a detailed review of our second quarter financials. Kim?