INTRUSION INC Q1 FY2026 earnings call

• Contract Wins and Partnership Progress • Signed a new $4 million annual contract to deliver cyber threat intelligence and critical infrastructure protection to the state of Texas, with a 12-month performance period. Management expects this engagement to serve as a replicable framework for expansion to other U.S. states and territories. • The POSSE partnership program with Port Nexus, launched in February 2026 to protect law enforcement and public facilities using Intrusion's SHIELD on-premise technology, is progressing well with ongoing deployments across Texas, Missouri, Oklahoma, and Iowa. Early revenue traction from the partnership is already visible in early Q2 2026 results.
• Product and Market Expansion • Shield Cloud solution has been launched on AWS Marketplace and Microsoft Azure; early expansion efforts have shown promising pipeline growth, with expected revenue contribution increases over coming quarters. • The company has strengthened federal, state, and local sales teams and updated its go-to-market strategy, with early signs of these efforts delivering results. It has built a new experienced team to target underpenetrated areas of the U.S. federal government, including the Department of Defense.
• AI and Technology Leadership • Management emphasizes that AI is reshaping cybersecurity by lowering the barrier for sophisticated, scalable attacks, increasing customer demand for advanced threat detection solutions. Intrusion's AI-assisted cybersecurity platform is positioned to address this demand and support commercial customer expansion and top-line growth.
• Financing Update • In early April 2026, the company closed a $3 million secured financing agreement to strengthen liquidity and support near-term strategic initiatives.

Intrusion Inc. operates two core product segments for revenue:

1. Consulting: Generated $0.8 million in revenue in Q1 2026, accounting for 88.9% of total Q1 revenue. This represented a sequential decrease of $0.3 million from Q4 2025, and a year-over-year decrease of $0.6 million from Q1 2025.
2. Shield: Generated $0.1 million in revenue in Q1 2026, accounting for 11.1% of total Q1 revenue. This represented a sequential decrease of $0.3 million from Q4 2025, and a year-over-year decrease of $0.3 million from Q1 2025.

Overall company Q1 2026 total revenue was $0.9 million, a 40% sequential decrease from Q4 2025 and a 50% year-over-year decrease from Q1 2025. Gross profit margin for Q1 2026 was 74%, a slight decline from the prior year period. Operating expenses totaled $4.2 million, a $0.3 million sequential increase and a $0.8 million year-over-year increase. Net loss for Q1 2026 was $3.6 million, or $0.18 per share, compared to a net loss of $2.1 million in Q1 2025. As of March 31, 2026, cash and cash equivalents totaled $1.4 million.

• Management expects financial performance to improve sequentially throughout the remainder of 2026, following two quarters of short-term headwinds from delayed government contract funding. • The company maintains its target of reaching profitability and cash flow positive operations by the end of fiscal 2026. • Management expects POSSE program growth to drive sequential quarterly revenue improvements over the next several quarters, supported by growing word-of-mouth adoption among target customers. • Revenue contribution from Shield Cloud available on AWS and Azure is expected to increase over the next several quarters as market adoption grows.

• Delays in the expected contract extension with the Department of War have negatively impacted Q1 2026 revenue, driven by U.S. government shutdown-related administrative constraints and geopolitical instability from the Iran conflict. • Local public sector customers (counties, school districts) participating in the Port Nexus POSSE program face tight budget constraints, which may delay or prevent approval of adoption of the solution, even when end users support the product. • The company had limited liquidity ($1.4 million cash) at the end of Q1 2026, prior to closing the April 2026 $3 million secured financing. • Forward-looking results are subject to material risk factors outlined in the company's SEC filings that could cause actual outcomes to differ from projections.

Q: Ed Fu (Ascendant Capital) asked if Intrusion is still providing services for the delayed Department of War contract, and how revenue will be recognized once the contract is approved. / A: Management confirmed the company continues to provide ongoing support for the already deployed solution. U.S. government rules do not allow retroactive payment for services provided before contract finalization, so revenue will be billed and recognized prospectively from the approval date. Management added the customer is satisfied with the solution and expects the delay to be resolved shortly.

Q: Ed Fu (Ascendant Capital) asked if there has been any recent change in cybersecurity spending trends for enterprise and government customers, particularly amid geopolitical headwinds. / A: Management reported that cybersecurity spending is still increasing slightly. AI has increased concern about the ease of launching sophisticated attacks, driving additional customer demand for advanced cybersecurity solutions like Intrusion's. Management expects this trend to continue through the rest of 2026.

Q: Howard Brouse (Wellington Shields) asked about the size of the Port Nexus POSSE opportunity, deployment timelines, and margin structure. / A: The program is currently active in four Iowa counties with more deployments scheduled, and the sales motion is expanding to other priority states. Deployment takes one to two days maximum for most facilities. For licensed technology, margins are nearly 100% for Intrusion since Port Nexus handles installation; when hardware appliances are included for sheriffs, margins are in the mid-70% range, consistent with other Shield business. Budget constraints are the primary barrier to adoption, but management is pursuing state and federal grant funding to help customers access the solution.

Q: Howard Brouse (Wellington Shields) asked if sequential quarterly growth is expected for POSSE, and whether this growth will lead to overall company profitability. / A: Management expects sequential quarterly growth for the POSSE program over coming quarters, supported by growing word-of-mouth demand. The company reaffirmed its target of achieving overall cash flow positive operations by the end of 2026, with POSSE contributing to this goal.