Welcome to Intrusion, Inc.’s Fourth Quarter 2024 Earnings Conference Call and Webcast. Please note this conference call is being recorded. An audio replay of the conference call will be available on 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.

Thank you and welcome. 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 that the statements made during this conference call relate to the company’s expected future performance, future business prospects, 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 that could cause our actual results to 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 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 if we believe it will help investors better understand our performance or business trends. With that, let me now turn the call over to Tony for a few opening remarks.

Thank you, Josh. Good afternoon and thank you all for joining us today. We closed out 2024 with another quarter of sequential growth, marking our third consecutive quarter of revenue improvement as our recent efforts to position our business for sustainable growth and profitability continue to come to fruition. During the year, we signed a total of 20 new Shield logos, and we have continued to experience near zero churn with our Shield customers. Furthermore, our pipeline has continued to expand with high-quality opportunities driven by increasing demand for our products in the U.S. and in the broader Asia Pacific region. I’m delighted to report that as a result of a series of events late in December 2024 and early January 2025, we’re in the best financial position the company has been in since I joined. As we’ve previously disclosed in a recent 8-K filing, we are virtually debt-free, have eliminated the Series A preferred stock and have enough cash in the bank to fund our operations through fiscal year 2025 and beyond. Now this is a significant achievement for Intrusion for a few reasons. First, and probably most importantly, it eliminates any need for us to further raise capital in 2025, and we have no intention of doing so absent some compelling inorganic opportunity. I understand that many shareholders, including myself, have been concerned about continued dilution, but I’m happy to say that with the elimination of the preferred Series A and our improved cash position, this concern should be eliminated. Second, the recent activities have eliminated the prior baby shelf limitations on capital raises. And should a compelling inorganic opportunity become available, we will have increased flexibility to engage in such an activity. Now again, currently, there is no specific transaction being considered, but we now have options that, frankly, weren’t available to us before. Third, our cash position has eliminated the going concern opinion that has been an issue with our 10-K for the last 2 years. And while it may seem a small thing, potential customers do look at such things when considering doing business with us. With this sales barrier now gone, we’ve been having different and better conversations with potential customers. And finally, as many of you know, our management team for the last 3 years has, out of necessity, been consumed with raising capital, controlling costs, adding needed capability to our products and managing various legal issues. And while we will continue to manage our costs diligently, we are pleased that many of these prior hurdles are now behind us, and we can now shift our focus entirely towards our main priority of growing our business, which is a welcome opportunity for all of us. While we have continued to make progress on the sales front, I’m not satisfied with the rate of increase we are currently making, and we are taking some additional measures to help accelerate our growth. We are in the process of making our Shield Cloud product available in the AWS marketplace, which is a high-growth engine for many companies like ours. We are increasing our digital marketing to include better visibility and engagement on relevant social media platforms. Additionally, we’ve also started revamping our channel program to refine our messaging, pricing, go-to-market processes, and various other aspects where we’ve identified some gaps that have inhibited our growth. I’m confident that the changes we are making will help us accelerate our growth and will provide for better engagement with our partners as well as improved discipline in our sales and marketing processes. And while not always under our control, every quarter, we’ve had significant deals slip into the next quarter or we’ve experienced meaningful delays in onboarding, which impacts the timing of revenue and makes it hard to allocate resources properly. These changes should help accelerate our time to revenue and provide a more reliable and consistent set of bookings and revenue forecasts. To ensure that we can continue to attract new customers and meet the needs of our growing customer base, we’ve continued to invest in R&D at a relatively constant level to improve our portfolio, all with the goal of helping organizations address the constantly changing cybersecurity challenges that they face. One of the 2024 improvements to our portfolio was the launch of the Intrusion Shield Command Hub, which is a centralized hub that gives MSPs and network administrators a way to view, manage, and report on an entire fleet of Shield products, including Endpoint, On-Prem, and Cloud. The latest feature of the Command Hub is the addition of an AI-driven insights engine that analyzes vast quantities of network activity and improves administrator security posture by providing them with a prioritized list of actionable items based on its analysis. In addition to the Command Hub, we also recently announced the introduction of Intrusion Shield Sentinel, a high-performance, 100-gigabit monitoring appliance built for large enterprises and telecom providers, allowing for comprehensive visibility across the largest and most complex of network environments. Shield Sentinel delivers a scalable and data-rich monitoring appliance for our customers that will help simplify threat hunting, streamline compliance, and enhance overall security. Early customer feedback has been promising, and we are shipping additional units in the first quarter for our initial paying customer. We are also pleased to announce that we’ve developed and have piloted with a paying customer a new product offering to support the cybersecurity and resilience posture of critical infrastructure assets. This work, while in its early stages of deployment, has great promise and ultimately will be available to critical infrastructure providers, which are high-value targets for nation-state and criminal enterprises. More work is needed before we broadly market this new product, but I wanted to share it as it will be an important addition to our portfolio of products. Now briefly on to our financials. Total revenues for the fourth quarter were $1.7 million, representing an 11% increase on a sequential basis. For fiscal 2024, revenues were $5.8 million, a 3% increase compared to fiscal year 2023. As for our operating expenses, we’ve continued to maintain disciplined cost controls to help keep our expenses low, which have remained relatively flat on a sequential basis and are down approximately 21% for 2024 compared to the previous year. Before I turn the call over to Kim, I would like to provide an update on our current share price. As many of you are aware, we received a written notice from the NASDAQ stock market back in October, indicating that Intrusion was not in compliance with the $1 minimum bid price requirement for continued listing. However, as a result of the recent improvement in our share price over the past couple of months, we were informed by the listing qualification staff of NASDAQ that Intrusion had successfully regained compliance. While we are pleased with this outcome, we are not satisfied with the current share price, and our focus will continue to remain on increasing revenue and achieving profitability, which in turn, we hope will drive our stock price higher in a sustainable fashion. With that, I would now like to turn the call over to Kim for a more detailed review of our fourth-quarter financials.

Thanks, Tony. In the fourth quarter of 2024, revenues were $1.7 million, an increase of 11% sequentially and 23% when compared to the prior year period. Revenue for the full year ended December 31, 2024, was $5.8 million, an increase of $0.2 million or 3% compared to 2023. Consulting revenue in the fourth quarter totaled $1.3 million, an increase of $0.3 million sequentially and $0.4 million on a year-over-year basis. For the full year, consulting revenues totaled $4.2 million, an increase of $0.2 million from last year. Shield revenue in the fourth quarter was $0.4 million, a decrease of $0.1 million, both sequentially and year-over-year. For the full year, Shield revenue was $1.6 million, a decrease of $0.1 million or 5% from 2023 full-year revenue. The decline in Shield revenue was due to the loss of a large early Intrusion Shield customer that had implemented a highly customized and nonstandard configuration of the product. The loss of revenue from this customer has now been fully offset by revenues from new customers signed in recent quarters and to a large degree, from the recent $2 million contract with the U.S. Department of Defense that was previously announced. Gross profit margin was 75% for the fourth quarter of 2024 compared to 79% in the fourth quarter of 2023. Our gross profit margin will continue to vary depending on product mix, which was the main driver for the decrease during the fourth quarter. Gross profit margin was 77% for the full fiscal year 2024 compared to 78% in fiscal 2023. Operating expenses in the fourth quarter of 2024 totaled $3.2 million, flat on a sequential basis and a decrease of $0.3 million when compared to the fourth quarter of 2023. The decrease on a year-over-year basis was primarily driven by a one-time settlement with our D&O carrier for reimbursement of legal support costs associated with the SEC investigation, which was settled in 2023. Operating expenses totaled $12.9 million in 2024, representing a $3.5 million or 21% decrease from 2023. You may recall, in March 2023, we implemented cost reduction measures that resulted in the reduction of 16 permanent positions, reduced our use of contractors, and renegotiated or replaced spending on certain sales support and marketing services with less costly programs. As part of our efforts to retain talent during this period, we granted equity awards to employees in March 2023 with a 1-year vesting. The combination of reduced non-cash, share-based compensation in 2024, alongside one-time negotiated contract savings and the insurance settlement mentioned above has contributed $1.4 million in savings over 2023. As Tony mentioned earlier, we have also recently initiated several sales and marketing programs to accelerate revenue growth. As we grow our revenue base and increase our revenues, we may choose to increase our investment in sales and marketing and accelerate our product development in future periods. Both will increase costs. We will, however, continue to remain vigilant in all spending decisions. The net loss from operating activities for the fourth quarter of 2024 was a loss of $1.9 million, a $0.1 million improvement from the third quarter and a $0.5 million or 20% improvement on a year-over-year basis. The improvement over the prior year was driven principally by reduced operating expenses. The net loss from operating activities for the full year 2024 was a loss of $8.4 million, a $3.6 million or 30% improvement from the full year 2023. The net loss for the fourth quarter of 2024 was a loss of $2 million or $0.36 per share. On a year-over-year basis, net loss improved by $0.9 million from a loss of $2.8 million in the fourth quarter of 2023. The improved net loss relates to reduced operating losses resulting principally from lower operating expenses and reduced interest expense as a result of eliminating the majority of the Streeterville debt. The net loss for the full year of 2024 was a loss of $7.8 million or $1.63 per share, a $6.1 million or 44% improvement from the prior year. Turning to the balance sheet. From a liquidity perspective, on December 31, we had cash and cash equivalents of $4.9 million compared to $0.1 million in 2023. However, as you are all likely aware, the recent run-up in our share price in December and the first week of January allowed us to take several financial actions that resulted in $14.5 million in proceeds to the company and the elimination of $10.1 million notional value of all Series A preferred stock. To provide some more color, these actions included the sale of $0.3 million of the company’s common stock from the company’s warrant inducement plan on December 27, 2024; the receipt of $1.7 million from draws on the previously announced standby equity purchase agreement with Streeterville Capital; the sale of approximately $5 million of common stock pursuant to the ATM program during the fourth quarter of 2024; the closing of a registered direct offering on January 7, 2025, resulting in gross proceeds of approximately $7.5 million; and finally, the execution of a series of transactions exchanging 9,025 shares of Series A preferred stock with a notional value of $9.9 million for 3.5 million shares of common stock. These actions helped to strengthen our financial position and ensure that we have sufficient capital to fund operations in calendar year 2025. While we do not currently have plans to raise additional capital in 2025, we filed a $100 million replacement S-3 shelf registration on January 30, 2025, which went effective on February 10. Because our public float, as calculated in accordance with General Instruction I.B.1 of Form S-3, is above $75 million, we are no longer subject to the capital raise limitations imposed by the Baby Shelf Rule. We believe this provides a great degree of financial flexibility to be able to respond to opportunities as they arise or should we have the need for additional capital. With that, I’d now like to turn the call back over to Tony for a few closing comments.

Thanks, Kim. As we look to 2025 and beyond, we’re excited about the opportunities that lie ahead, and our focus continues to remain on improving our financial performance and to drive sustainable growth. Even despite the challenging environment that we faced over the past year, we’ve continued to invest in innovation, as I talked about earlier today, because this is the engine that will help us grow our business globally. It’s our belief that we have only scratched the surface of our potential as a customer base, and our pipeline continues to grow amid the rising demand for cybersecurity solutions. It’s an exciting time for Intrusion, and we look forward to providing all of our stakeholders with additional updates on our first-quarter earnings call. This concludes our prepared remarks. And I’ll now turn the call over to the operator for Q&A.

Thank you. And the first question today is coming from Scott Buck from H.C. Wainwright. Scott, your line is open.

Hi, good afternoon guys. Congratulations on the balance sheet progress. First question, Tony, you mentioned you could potentially raise capital if an interesting inorganic opportunity came about. What would be compelling to you guys?

Well, I mean, there is a whole wide range of things. But primarily, it would be either an acquisition or some arrangement that significantly added to our product portfolio that would make us even more attractive to potential customers. As I think we’ve talked about many times, people often confuse us with other cybersecurity technologies. And the more we round out our capabilities, potentially there’s less confusion about what we specifically do. Today, we fit in a pretty narrow niche of capabilities. When we talk to customers, quite often, they ask us about things that they would like to see in cybersecurity products that they just can’t find anywhere. These are all opportunities for us to either develop something or potentially acquire specific technology that might fill some of those gaps. But I want to reiterate, we don’t have anything specific in mind at this point. But a couple of years ago, there would have been a few things that we might have been interested in. We didn’t have the ability to do anything about it. The world moves on. But we will keep our eyes open. If the right thing comes along, then we would consider making a move. But again, right now, there is nothing on the agenda.

Yes, nothing imminent. No, I get that. I appreciate the added color there. And then second, I was wondering if you could just give a little more color on what you guys are thinking in terms of some of these new promotional programs. What are you kind of looking at here? And it sounds like we could see a little bit of increase in the marketing spend to push things along.

Yes. The biggest problem I think we have is hardly anybody knows about us. We’ve just not been able to make much noise in the marketplace. So you are going to see a pretty significant increase in our visibility in the form of relevant social media platforms, engagement with influencers and folks like that. The good news is it doesn’t cost a lot of money, but it’s money we weren’t spending before. Now we have a little bit of flexibility to do more, so I am pretty excited about the potential for that.

Okay, perfect. And then last one for me, you mentioned the 20 new Shield clients signed during the quarter. What is the size of the typical Shield contract these days? Just trying to understand what 20 new customers means and understanding that maybe what that means today is not what it means 12 months from now?

Right, exactly. Well, this wasn’t 20 in the quarter; this was 20 for the year. But I just want to be accurate here. They are all over the map, Scott. That’s one of the challenges that we’ve had is how do we characterize what industries we are in and what’s the size of deals. They have literally been all over the map. They go as big as a couple of hundred thousand dollars annually down to $5,000 or $10,000. So we just don’t have enough volume at this particular point to really fully characterize that. I will say we focused the sales team on exclusively larger deals going forward. Our pipeline now reflects a significant increase in total deal size that’s much larger than it historically has been when we were just trying to find any customer we could with what I’d call meager sales efforts. We now have an opportunity to go much bigger. We’ve also got the products to support it now. So between the two, I expect a significant improvement.

Okay, perfect. Well, I appreciate the time guys. Thank you very much.

Thanks.

Thank you. The next question is coming from Ed Woo from Ascendiant Capital. Ed, your line is live.

Yes, congratulations on all the progress you are making. My question is, what are you seeing and what are you hearing out there in terms of the sales cycle for cybersecurity software, especially on the federal side with – it seems there is quite a new administration making some big changes over there?

Yes. I think it’s a fluid environment at this point. It’s the best word I can use to describe it. We’ve heard over and over again that cyber is one of the focus areas and isn’t going to be subject to the same sort of reductions that you might see in some of the other areas. Fortunately, most of our contracts and good customers are not in a renewal cycle period right at this particular point, so we don’t think there’s any short-term impact. What I will tell you is, and I’ve learned this during my time in the federal government, whenever there’s change, it takes a while for new leadership to make decisions about what they are going to prioritize or change in terms of their spend, and career staff that are in those agencies often wait for direction in terms of initiating any new stuff. For us, what that means is it’s steady as she goes for the stuff that we have, and there might be a slightly elongated cycle for new stuff. But once that kicks into gear, I suspect that we’re going to see an uptrend. This administration does look like it’s moving faster than others may have in the past in terms of the areas they want to focus on. Overall, I read it as good for our company, and – but at the end of the day, we’ll have to wait and see.

That sounds great. But what about the environment for your enterprise customers, do you – has there really been any change in the last 3 months? Are people a little bit more concerned or about the same as they were?

Well, I think concerns are increasing as they have been for several years. I mean, if you look at the rate and the frequency of cyberattacks, it just continues to go up. The core factors that have been impacting that are the imbalance between the resources available to those who want to launch attacks getting less and less expensive and easier to acquire. Then the cost of defending; there’s still a tremendous imbalance. It’s like fighting with one arm tied behind your back, so the attackers have an advantage. Most organizations are realizing that they are going to have to continue to improve their efficiency, effectiveness, and probably their spend in order to maintain quality defenses. Again, I think it portends well for our industry as a whole. Lastly, I do see a lot of consolidation that will occur in the space. I’m in touch with a lot of PE firms, and they seem to believe that same thing.

Great. Well, thanks for answering my questions and wish you guys good luck.

Thanks, Ed.

Thank you. The next question will be from Harold Zirkin from HZ Investments. Harold, your line is live.

Thank you. Congratulations, Tony, for striking while the iron is hot and being able to raise the $15 million when it was possible. The question is, $15 million in cash is an asset in and of itself invested in treasury bills could be earning over 4%, $600,000 a year. Could you tell us where that $15 million is today and if it is, in fact, being productive?

It will be productive. It’s a little less than $15 million at this point because we’ve paid off some accounts payable and other kinds of things and we do have an ongoing deficit. But Kim is hard at work and we are going to invest it wisely. I think your desire for us or your advice is spot on, and it’s exactly what we’re going to do.

Can you tell us if you are going to use any of that money to hire additional salespeople to help us goose up the sales process?

Yes. We have a couple of positions in the budget for this year, so it is likely that we’ll do that. Right now, we’re working with a team on our whole, as I mentioned on the call, channel sales process. One of the deliverables for that work is helping us find the right person to lead our channel sales efforts. That person will have a big say in terms of additional hiring that we may choose to do to build out that capability. Some of it will involve employees, and some of it will require hiring contract-type resources, so it won’t all be employees.

Okay, good. And the last question is, you have 20 Shield clients who have – many of them have been with you now for over a year. Can you give us a rough idea of how many of those 20 have increased their participation in revenue obligations over the past year? Thank you.

Yes. What we announced on the call was 20 new Shield logos in 2024, so we had a small number before that. I’d say roughly a third of them have increased their commitment to us. About a third, it’s too early to tell, but we think there is some expansion capability or likelihood. Then a third that I think are probably going to stay pretty close to where they are right now. But that would be my rough estimate in terms of how those play out.

Thank you very much. Good luck for the coming quarters.

Thanks.

Thank you. And the next question is coming from Howard Brous from Wellington Shields. Howard, your line is live.

Thank you. Tony, I appreciate your optimism on the call; certainly, it’s well warranted. When you talk about opportunities, can you discuss the size of the opportunities you are talking about, one, and two, the geographic areas?

Sure. As I think you know, we’ve been very active in Asia-Pac, the Philippines in particular. Now we’re also increasing our focus in the U.S. I’ve refocused the sales team’s efforts on deals that are $100,000 or more. Everything else below that should come through our resale partners. We now have calls every other week with those resale partners on those lesser deals, and our team is focused on $100,000 up. When I look at our pipeline, I see a change in the mix. We were spending a lot of time on a lot of small deals prior to this. Obviously, that doesn’t make sense. So the ones that we are really focused on and putting our energy into are those that are $100,000 plus. We have several that are multiples of that in the pipeline. That’s kind of where our focus is.

That’s all I have for now. Thank you.

Great. Thanks, Howard.

Thank you. And there were no other questions in the queue at this time. I would now like to hand the call back over to your host, Mr. Tony Scott.

Alright. Well, thanks, everyone. Again, I appreciate the support and the questions. I really am looking forward to the next few months. I think it’s a breakout period for us. We have got way more flexibility and room to maneuver than we’ve ever had since I’ve joined the company. I think if you talk to any of our staff, you’ll see a renewed and reinvigorated esprit de corps for the work that we can do in the future in front of us. I’m really excited about it. The team is excited. We do think that a lot of the things that we’ve been working hard on for the last 2 years, in particular, now have a chance to blossom and grow. So looking forward to talking to you all soon, and thanks for all of your help. Take care.

Thank you. This does conclude today’s conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.