INTRUSION INC Q4 FY2025 earnings call

Product Milestones - Began year by fully eliminating then outstanding debt in Series A preferred stock. - Mid-year rolled out production of critical infrastructure solution for safeguarding essential assets. - Third and fourth quarter expanded access to Shield cloud solution by making two variations available on AWS marketplace. - End of year announced partnership with PortNexus for secure network protection of MyFlare safety technology and launched POSSE program with high adoption rate in pilot. - Ended year with unexpected delay in extension of critical infrastructure contract with Department of War due to U.S. government shutdown and Iran war events. ### Recent Developments - Launched Shield Cloud offering on AWS Marketplace and Microsoft's Azure platform. - Launched Shield Stratus, a cloud-native packet filtering solution. - Expanded partnership with PortNexus by launching POSSE program scaling across states, with two new hires to strengthen business development efforts

Total revenues for 2025 were 7.1 million, up 23% year-over-year. Fourth quarter revenue was 1.5 million, a decrease of 25% sequentially. Consulting revenues totaled $1.1 million in the fourth quarter. SHIELD revenues totaled $0.4 million in the fourth quarter. Fourth quarter gross profit margin was 74%, slightly down from prior year period. For full year, gross profit margin was 76%, down approximately 93 basis points versus 2024. Operating expenses in fourth quarter of 2025 totaled $4 million, increase of $0.3 million sequentially and $0.8 million year over year. For full year, operating expenses totaled $14.5 million, increase of $1.7 million compared to 2024. Net loss for fourth quarter of 2025 was $2.8 million, or 14 cents per share. Net loss for full year was $9.1 million, or 46 cents per share, a $1.3 million increase from prior year

Forward-looking Statements - Believe delayed revenue from critical infrastructure contract with Department of War will be recognized during first half of 2026 once procurement activity normalizes. - Plan to seek small debt financing in near term and provide additional update on debt financing during first quarter earnings call. - Will continue to invest in sales and marketing, with first quarter approximating run rate but expecting increases from there, and looking for cost efficiencies elsewhere to buttress sales and marketing capability

Risk Factors - Delayed timing of critical infrastructure contract extension affected by U.S. government shutdown and events related to war in Iran, which is a broader trend affecting companies with U.S. government contracts in defense sector. - Revenue recognition delay due to contract timing issues may impact financial results. - Increase in operating expenses due to strategic investments and other factors may affect profitability if revenue growth does not keep pace

Q: Can you provide a little more granularity on the unit economics of the POSSE program? What is the average contract value for a typical sheriff's department deployment? And what do the sales cycles look like with your partnership with Port Nexus?

A: The device price ranges from a few thousand dollars up to tens of thousands depending on sheriff's department size and bandwidth requirements. Pilots used lower end appliances at a few thousand dollars. Sales cycle is quick as showing blocked traffic vs traditional technologies leads to high adoption rate. They loan a unit for a week to 10 days, do a report, and it leads to quick sales.

Q: 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 the third quarter?

A: Yes, that is correct. We were expecting to report growth both for the quarter-on-quarter and year-on-year above and beyond what we reported on the year-on-year.

Q: 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, could we expect further investment in sales in 2026?

A: We will continue to invest in sales and marketing. What we saw in the first quarter approximates the run rate, but we will see some increases from here. We're looking for cost efficiencies elsewhere.

Q: Did I hear you right that you said for the, you know, delayed contract that some of your expenses has already flown through the P&L already?

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

Q: 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?

A: Beyond the government sector, no real change. The one concern is shorter dwell time for threats, which bodes well for our technology as we're focused on reputation and can stop things in real time.

Q: 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? Is this basically expandable for that particular customer?

A: This solution is protecting critical water infrastructure in the Asia Pac region, customer is happy, and there's tremendous opportunities for expansion beyond the region, including domestic facilities under Homeland Security jurisdiction.

Q: Talk about the kind of cost, is it per student, per classroom, per school?

A: It's per classroom. The Portnexus solution goes into the classroom, attaches to or becomes part of the smart whiteboard. Revenue comes from number of classrooms and schools within the district, and margins are high as we license our software.

Q: My question concerns the potential emerging technologies and the ability for your technology to interface with those things.

A: We can attach to the network in any form, whether wired, wireless, cloud, data center, or home. We're flexible and have R&D effort to handle increasing bandwidth. We monitor the network each and every packet all the time and from multiple places to detect untoward activity.

Q: In what quarter do you expect to have those breakeven operations?

A: It depends on new contracts. We think the critical infrastructure solution has big legs. It's all dependent on timing in 2026 of when we get those contracts. We're optimistic 2026 is our year to be break-even