Intrusion Inc.

We're also preparing for the launch of our Shield cloud offering on Microsoft's Azure cloud platform later this quarter or early in the first quarter of 2026. This launch will further expand our ability to reach new potential customers. Next, I wanted to mention that we're continuing to make progress with the rollout and adoption of our Shield critical infrastructure offerings. And at the end of the third quarter, we shipped over 230 units of this critical infrastructure device as a part of our previously announced contract with the Department of Defense. And as we previously noted, this represents a promising opportunity for intrusion driven by the growing need to protect critical infrastructure from evolving cyber threats. We're actively pursuing additional contracts in the private sector as well at both the federal, state, and local government levels. And we remain optimistic about closing new agreements in the near future. As for our partnership with Port Nexus, we're continuing to see strong demand for Shield Endpoint that's embedded within their MyFlare solution. And that solution provides enhanced security for education, and law enforcement customer endpoints. As some of you may have heard me say during recent discussions, the sales cycle for this solution has been one of the shortest I've ever seen. The demand for this solution, especially among school districts, is strong, and we anticipate that we will see further adoption of this offering in coming quarters. Now, briefly onto our financials for the quarter. Total revenues for the third quarter were $2.0 million, representing a 5 percent increase compared to the previous quarter and a 31 percent increase on a year-over-year basis. This was largely driven by the contract expansion with the Department of Defense that we previously discussed. And our operating expenses increased modestly this quarter, primarily reflecting the continued strategic investments that we're making in the business to drive growth. As we've noted in the past, we remain committed to disciplined spending as we invest to support our growth over the coming quarters. Now, before I turn the call over to Kim, I'd like to address the current government shutdown. You all know the current government shutdown has impacted businesses across the board. For intrusion, we've not, yet seen any meaningful effect on our business. And it looks like the situation is on a path to resolution, thankfully. But most of the government contract conversations are still occurring, and we expect that we will be able to see additional government contracts once this situation has been resolved in Washington. In the meantime, we're continuing to see our pipeline of non-government opportunities expand. And we remain excited about the future here at Intrusion as the demand for our products continues to grow. And with that, I'd now like to turn the call over to Kim for a more detailed review of our third quarter financials. Kim?

Thanks, Tony, and good afternoon, everyone. Third quarter 2025 revenue was $2 million, up 5% sequentially and 31% year over year. Growth was driven by expansion of work performed under the contract with the U.S. Department of Defense, which utilizes both SHIELD technology and consulting services. Consulting revenue of $1.5 million is up $0.1 million sequentially and $0.4 million year over year. Shield revenues in the third quarter totaled $0.5 million, which was relatively flat sequentially, but up approximately $0.1 million year over year. The increase in shield revenue primarily reflects the work performed under the previously noted DOD contract award. As Tony mentioned, we are continuing to see strong demand for our services with both governmental and commercial customers and anticipate a deeper penetration in both sectors, which will result in further changes to our customer mix. Third quarter gross profit margin was 77%, down 58 basis points year over year, which is consistent with expected variability based on product and service mix. Operating expenses in the third quarter of 2025 totaled $3.6 million, an increase of $0.1 million sequentially and $0.4 million year over year. The increase sequentially was largely driven by an increase in sales and marketing expense related to increased participation in trade shows and programs to generate brand awareness and concise product marketing messaging. We may continue to further increase our investment in both product development and sales and marketing to accelerate the growth of our customer base, which will result in higher operating expenses. The increase over the prior year period of $.4 million is primarily due to higher share-based compensation from equity grants made in the first quarter, timing of merit increases, and minor changes to staffing. Net loss for the third quarter of 2025 was $2.1 million, or 10 cents per share, compared to a net loss of $2.1 million for the third quarter of 2024. Turning to the balance sheet from a liquidity perspective, on September 30, 2025, we had cash and cash equivalents of $2.5 million and short-term investments in U.S. Treasuries of $2 million. Subsequent to quarter end, we received $3 million in cash related to the DOD contract extension, which increased our cash position, inclusive of short-term investments, to $7.5 million, which we believe is sufficient to fund operations through the remainder of 2025 and into early 2026. With that, I'd now like to turn the call back over to Tony for a few closing comments. Tony?

Thank you, Kim. And I think the third quarter was another step in the right direction for Intrusion as we are continuing to make great progress towards achieving our goal of generating sustainable growth and long-term profitability. And while we're proud of the progress we've made, we're not satisfied with our overall financial results. We know there's still more work to do, and we're confident that we can and will deliver stronger performance over time. Achieving this will require continued discipline and time, but we believe our ongoing investments in the business, the strength of our expanding pipeline, and the improved engagement we're seeing with both customers and partners has positioned us well to drive enhanced financial results. Now, this concludes our prepared remarks, and I'll now turn the call over to the operator for Q&A.