INTRUSION INC Q1 FY2025 earnings call

• Fourth consecutive quarter of sequential revenue growth and near-zero churn in the first quarter of 2025.
• Shield Cloud product is on track to be available on the AWS marketplace in the second quarter and is expected to contribute positively to revenue in the second-half of fiscal year 2025.
• Working with a consultant to increase digital marketing on relevant social media platforms to enhance visibility in the cybersecurity market.
• Progressing with revamping the channel program to refine messaging, pricing, go-to-market processes, etc., and planning to hire a channel sales leader within the next few months.
• Continued strategic investment in R&D, particularly in protecting critical infrastructure assets, with pilot projects going well and expected expanded deployments in the second quarter and remainder of the year.
• Announced a new partnership with PortNexus, embedding Intrusion Shield Endpoint into their MyFlare and PledgePlus solutions.

In the first quarter of 2025, total revenues were $1.8 million, a 6% increase sequentially. Consulting revenues totaled $1.4 million in the first quarter, an increase of $0.1 million sequentially and $0.7 million year-over-year. Shield revenues were $0.4 million, an increase of $0.1 million sequentially and flat year-over-year. The loss of a large Shield customer in April 2024, which accounted for 78% of Shield revenues in the first quarter of 2024, has been backfilled by new customers. Sales to U.S. government entities represented 92% of revenues in the first quarter of 2025. Consulting revenues contributed about 77.78% of total revenue ($1.4 million / $1.8 million), and Shield revenues contributed about 22.22% ($0.4 million / $1.8 million).

• Shield Cloud product to be available on AWS marketplace in second quarter, with positive revenue contributions expected in the second-half of fiscal year 2025.
• Intends to further increase investment in sales, marketing, and product development to accelerate customer base growth.
• Pilot projects in protecting critical infrastructure assets expected to expand in second quarter and throughout the year.
• Channel program revamp efforts ongoing to enable more reliable booking and revenue management cadence.

• Uncertainty in government budget which could potentially impact business, though no current impact on existing government contracts.
• Significant deals slipping into next quarter or delays in onboarding affecting revenue timing and resource allocation.
• Product mix variation leading to fluctuations in gross profit margin.

Q: Tony, you mentioned potential changes to pricing. Can you give more color?

A: We're doing a pricing review to be competitive. For managed service providers, adjusting to monthly breakdowns for easier understanding. When entering Amazon marketplace, working on pricing schemes for bundles. Also making minor adjustments for government contracts to get annual increases on renewals.

Q: Ed Woo asked about CIOs' ability and budgets to spend on cybersecurity products. What's your take?

A: Based on feel at RSA Conference, interest and energy level for cybersecurity products are as robust as ever, maybe even more so. AI is a big topic, and we incorporate AI in our products with no significant change detected in CIO budgets.

Q: Unidentified Analyst asked about catalysts for faster growth. What's your view?

A: It's a combination of things. Critical infrastructure work, AWS marketplace entry, and other digital marketplaces like Microsoft ecosystem are promising. Critical infrastructure pilot projects expected to be more widely deployed. AWS marketplace could be a big growth engine if done right.

Q: Aaron Warwick asked about PortNexus partnership revenue potential and pipeline. What's your response?

A: Too early to project exact revenue, but excited about the partnership. First revenue from it likely towards end of Q2. Potential exists in pipeline from existing work, new products, and growth on existing products, though not at break-even point yet from pipeline perspective but potential is there.