Intrusion Inc (INTZ) 2012 Q1 法說會逐字稿

Good afternoon.

My name is Jay, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Intrusion, Inc.

first-quarter 2012 financial results conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions) Thank you.

Mr. Mike Paxton, Chief Financial Officer, you may begin your conference.

Okay.

Thanks.

Welcome to this afternoon's conference call to review our first-quarter 2012 financial results, and discuss our business.

Participating on the call today will be Ward Paxton, Chairman, Co-Founder, President and CEO; and Joe Head, Vice President and Co-Founder of the Company.

Ward will discuss Intrusion's financial results and business activities, and Joe will give an update on current activities and ongoing projects.

We will be glad to answer any questions after our prepared remarks.

We distributed the earnings result at approximately 3.05 PM Central Time today.

A replay of today's call will be available at approximately 6.30 PM tonight for a one-week period.

The replay conference call number is 855-859-2056.

At the replay prompt, enter the conference ID number 77584895.

In addition, a live and archived audio webcast of the call is available at our website, www.Intrusion.com.

Please be reminded that during this call, including the question-and-answer session, we may make forward-looking statements with respect to financial results, business strategies, industry trends, and certain other matters.

Forward-looking statements are based on management's current expectations, and are subject to risks and uncertainties.

We may be discussing our current outlook for the current quarter and fiscal-year 2012.

These discussions are based on our own internal projections.

These projections could change prior to the end of the period discussed.

Actual results may differ substantially from projections.

The information in this conference call related to financial results, projections, and other forward-looking statements is based on current expectations, and we expressly disclaim any responsibility to update forward-looking statements.

Many factors could cause our projections not to be achieved, including the uncertainties and lack of visibility caused by current economic and market conditions, and other factors, which can be found in our most recent filings with the SEC, including our most recent annual report on Form 10-K filed in March 2012.

Now, I will turn the call over to CEO and President Ward Paxton.

Thanks, Mike.

Welcome to Intrusion's first-quarter 2012 financial conference call.

It is good to be with you today to discuss Intrusion's progress, results, and future opportunities.

We have made outstanding progress in building our Company in the first quarter with several new significant programs being approved by the customers that we expect to engage with fairly soon.

The number of approved projects continues to grow, and we expect to see the results soon of these new projects.

After the federal budget was approved at the end of December last year, the next step was for the financial authorizations to reach the different government organizations for implementation.

This process takes from one to three months, and is now largely complete.

Even with the delays due to the implementation, we were able to book $1.45 million of new orders in the first quarter.

Now, we expect booking of new orders to increase.

Going forward, we should finally see the results of our expanded sales effort, and the results of that sales effort in getting new orders.

We expanded our sales effort about 50% in 2011 compared to 2010.

As you know, most of our revenue comes from our TraceCop family of products and services.

TraceCop is Intrusion's product family that provides abilities to trace the source of cyber-based attacks and other types of internet crime.

In addition to TraceCop, Intrusion is developing a family of data mining products, which we call Savant.

To-date, we have not been able to devote much selling resource to Savant, but that should change soon.

In a few minutes, my partner, Joe Head, will discuss some of the new projects that we are working on.

But now, let's review the financial results that were released about an hour ago.

In the first quarter of 2012, Intrusion lost $350,000 on revenues of $1.4 million, compared to a net loss of about $400,000 on revenues of $1.04 million for the first-quarter 2011.

Gross profit margin slid to 56% in Q1 of 2012, compared to 62% in Q1 2011.

The reduction in gross profit margin was the result of change of business mix consisting of several new projects, which will improve their gross profit margin in the future.

Intrusion's first quarter operating expense in 2012 increased to $1.11 million, from $1.04 million in the first-quarter 2011.

The increase in operating expense was due primarily to expansion in personnel in sales and engineering that we made in the last half of 2011.

At our last conference call, we indicated that we expected to add 10 additional new people during 2012.

We have not added any of these people yet, but we still plan on it.

Now, let's have Joe Head brief us about current activities in the marketplace.

Joe?

Thanks, Ward.

Well, we're expecting renewals of all existing customers, as their subscriptions and terms expire over the coming quarters, so, unlike last year when we had six large projects to replace with new business, new business now will push our revenues above the flattish results of late, and ensure profitability.

All but two of the customers have already confirmed that they have next year's funds already budget-approved, which is a lot earlier than usual.

We started new projects with two new customers, one small and one intermediate, a few months ago.

The small one has already increased our scope to intermediate with a follow-up order in less than six months, and is considering further expansion of the project.

We expect expansion of the small project to medium one.

We are optimistic also about three to four new large projects from new customers, and are awaiting news of funding these quoted projects.

We also expect one small new order for a new project this month.

We have one particularly interesting project to do joint research and development with a national lab towards cyber defense, and another project to do research into the (inaudible - technical difficulty) market for companies and state governments.

We are also continuing to work a number of good prospects that we have been working for six months to three years, which could produce additional orders for new projects.

One of those, by the way, is a Savant-based one.

One of our oldest customers is looking to re-engage in a big way that we last enjoyed in the mid-80s to mid-90s.

So, that is a good summary to start with.

Ward?

Okay.

Thanks, Joe.

A lot of exciting stuff going on there, and certainly a result of our expanded sales force.

The new projects are really exciting, and should produce growth in our revenue stream.

In the press release earlier today, we indicated that our current staffing and expense levels -- it takes about $1.7 million quarterly in revenue for us to break even.

Consequently, to make profit and drive growth in our revenue stream, we must increase our quarterly revenue.

Because of the past budget delays, we have not seen growth in revenue from our expansion of sales efforts.

We have increased the pipeline and expect growth to begin now.

We have an outstanding team that's performing well, and we expect to achieve our goals of growth in sales and profitability.

Thank you for your continued support.

We look forward to continuing to meet with you in the future.

Mike?

Operator, could you please remind the participants how to queue up to ask questions?

(Operator Instructions)

We'll pause for a moment to compile the Q&A roster.

There are no questions at this time.

Okay, Operator.

We'd like to go ahead and wrap up the call.

Thank you for participating in today's call.

If you did not receive a copy of the press release or if you have other questions, you can give me a call at (972)301-3658 or e-mail to impacts@intrusion.com.

Thanks a lot.

This concludes today's conference call.

You may now disconnect.